### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 1

U.S. DEPARTMENT OF ENERGY OFFICE OF ENERGY EFFICIENCY AND RENEWABLE ENERGY

APPLIANCE STANDARDS AND RULEMAKING FEDERAL ADVISORY COMMITTEE COMMERCIAL AND INDUSTRIAL PUMPS WORKING GROUP

U.S. Department of Energy Forrestal Building 1000 Independence Avenue, S.W. Washington, D.C. 20585

Tuesday, April 29, 2014 9:11 a.m.

Reported by: Chaz Bennett, Capital Reporting Company

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 2 1 A P P E A R A N C E S 2 FACILITATOR: 3 DOUG BROOKMAN Public Solutions 4 PARTICIPANTS: 5 LUCAS ADIN 6 DOE 7 JEFF ALASCIO ABB 8 ROBERT BARBOUR 9 TACO 10 ALEX BOSENBERG NEMA 11 ROB BOTELER 12 Nidec Motor Company 13 CHARLES CAPPELLINO ITT Corporation 14 BRIAN CARLSON 15 Eaton Corporation 16 GREG CASE Hydraulic Institute 17 KATIE COUGHLIN 18 Lawrence Berkeley National Laboratory 19 DAN DELANEY Regal Beloit 20 TOM ECKMAN 21 Northwest Power and Conservation Council 22

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 3 1 A P P E A R A N C E S (Cont.) 2 PARTICIPANTS (Cont.): 3 GARY FERNSTROM representing California investor-owned 4 utilities 5 MARK HANDZEL Xylem 6 JIANGANG HU 7 Rockwell Automation 8 ALBERT HUBER Patterson Pump 9 BETSY KOHL 10 DOE General Counsel 11 CHRISTOPHER LAU Navigant 12 EMILY MARCHETTI 13 Energetics Incorporated 14 HARRY MASSIE NEMA 15 JOANNA MAUER 16 Appliance Standards Awareness Project 17 BRENT McMANIS Baldor Electric 18 LAURA PETRILLO-GROH 19 AHRI 20 DOUGLAS POTTS American Water 21 CHARLES POWERS 22 Flowserve Corporation

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 4 1 A P P E A R A N C E S (Cont.) 2 PARTICIPANTS (Cont.): 3 CALLIE REIS Navigant 4 ARNIE SDANO 5 Pentair 6 LOUIS STARR Northwest Energy Efficiency Alliance (NEEA) 7 STEVE THOMPSON 8 TACO 9 GREG TOWSLEY Grundfos USA 10 MEG WALTNER 11 Natural Resources Defense Council 12 DAN WEINTRAUB Navigant 13 SARAH WIDDER 14 Pacific Northwest National Laboratory 15 ALISON WILLIAMS Lawrence Berkeley National Laboratory 16 * * * * * 17 18 19 20 21 22

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 5 1 P R O C E E D I N G S 2 MR. BROOKMAN: Good morning, everyone. 3 Welcome. This is the fifth meeting of the 4 commercial and Industrial Pumps Negotiated 5 Rulemaking Working Group. Today is April 29th, 6 2014, here in Washington, D.C., in the Forrestal 7 Building. My name is Doug Brookman from Public 8 Solutions of Baltimore. 9 So nice to see you here this morning. 10 We're eager to launch straight into it. A few 11 members are going to be late based on weather and 12 other kind of travel delays, but we expect them to 13 be joining us here shortly. 14 Maybe we'll just start with doing 15 introductions around the room. To my immediate 16 left? 17 MR. ECKMAN: Tom Eckman, Northwest Power 18 and Conservation Council. 19 MR. FERNSTROM: Gary Fernstrom 20 representing the California investor-owned 21 utilities, which are Pacific Gas and Electric, 22 Southern California Edison, San Diego Gas and

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 6 1 Electric, and the Southern California Gas Company. 2 MR. CAPPELLINO: Charlie Cappellino, ITT 3 Corporation. 4 MR. CASE: Greg Case, Hydraulic 5 Institute. 6 MR. HANDZEL: Mark Handzel from Xylem. 7 MR. HUBER: Al Huber, Patterson Pump. 8 MR. BARBOUR: Bob Barbour, TACO. 9 MR. DELANEY: Dan Delaney. I'm sitting 10 in for Howard Richardson and Paul Lin from Regal 11 Beloit. 12 MR. BROOKMAN: Dan, this is the first 13 time you've joined us, I believe. 14 MR. DELANEY: Yes, first time, first 15 time joining you, yes. 16 MR. BROOKMAN: Give us a 20-second bio? 17 MR. DELANEY: Sure. So I sit on the 18 NEMA MG1, both the section and the TC groups. Just 19 recently I'm part of the working group that is 20 sitting on the extended product approach, the IEC 21 version, very similar to this, that is dealing 22 with drives and motors and, of course, the motor-

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 7 1 driven extended product. 2 MR. BROOKMAN: Thank you. Glad you 3 could join us. 4 MR. DELANEY: Thank you. 5 MR. STARR: Louis Starr, Northwest 6 Energy Efficiency Alliance. 7 MS. MAUER: Joanna Mauer, Appliance 8 Standards Awareness Project. 9 MS. WALTNER: Meg Waltner, Natural 10 Resources Defense Council. 11 MS. KOHL: Betsy Kohl, DOE general 12 counsel. 13 MR. ADIN: Lucas Adin, DOE. 14 MR. BROOKMAN: Please stand up. 15 MR. LAU: Christopher Lau with Navigant 16 Consulting. 17 MS. COUGHLIN: Katie Coughlin, Lawrence 18 Berkeley Laboratory. 19 MS. WIDDER: Sarah Widder, Pacific 20 Northwest National Laboratory. 21 MR. WEINTRAUB: Dan Weintraub, Navigant. 22 MS. WILLIAMS: Alison Williams, Lawrence

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 8 1 Berkeley National Laboratory. 2 MR. BROOKMAN: Please stand up, Arnie. 3 These won't all be on the mike. We'll just -- 4 MR. SDANO: Arnie Sdano, Pentair. 5 MR. BROOKMAN: Thank you. 6 MR. CARLSON: Brian Carlson, Eaton 7 Corporation. 8 MR. ALASCIO: Jeff Alascio, ABB. 9 MR. McMANIS: Brent McManis, Baldor 10 Electric. 11 MR. BOTELER: Rob Boteler, Nidec Motor 12 Company. 13 MS. PETRILLO-GROH: Laura Petrillo-Groh, 14 AHRI. 15 MR. HU: Jiangang Hu from Rockwell 16 Automation. 17 MR. BOSENBERG: Alex Bosenberg, NEMA. 18 MR. MASSIE: Harry Massie with NEMA. 19 MS. REIS: Callie Reis, Navigant 20 Consulting. 21 MR. THOMPSON: Steve Thompson with TACO. 22 MR. BROOKMAN: Again, welcome, all of

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 9 1 you. Thanks so much for being here so we can get 2 an early start on the meeting today. We didn't 3 prepare in advance sort of a written-up formal 4 agenda, but I've got a list of items that I know 5 we are going to cover or need to cover. And I'm 6 just going to read through these. And then Lucas 7 Adin is going to start us off with some overview 8 comments and maybe some more detailed ideas about 9 the workload that is ahead, scheduling, a variety 10 of things like that. 11 So we made really good progress at our 12 last meeting. 13 Alex Bosenberg? 14 MR. BOSENBERG: I'm sorry. Could we get 15 the volume raised a little on the AV? 16 MR. BROOKMAN: Okay. 17 MR. BOSENBERG: It's hard to hear you 18 guys in the back. 19 MR. BROOKMAN: Is that better? 20 MR. BOSENBERG: Everybody was pretty 21 quiet. 22 MR. BROOKMAN: Wow. Okay. Thanks,

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 10 1 Alex. 2 MR. BOSENBERG: Not as loud as usual. 3 MR. BROOKMAN: Okay. We made really 4 good progress at our last meeting, a lot of back 5 and forth on metrics that I think yielded a lot 6 more understanding, a lot more recognition about 7 the way that might go. I've had a few 8 conversations this morning with folks. I continue 9 to hope we'll make big progress on that in the 10 next two days. We clearly established scope. And 11 that was a big, big step for the Working Group. 12 And so I think we're well-positioned, but, 13 consulting with Lucas, we have a lot to do in the 14 remaining meetings. And -- what? 15 MR. HANDZEL: I don't think your mike is 16 on. 17 MR. BROOKMAN: I think I'm talking right 18 into it. 19 A lot to do in the next several 20 meetings. So I would like to encourage all of us 21 to see if we could stay really focused and 22 productive in these two days.

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 11 1 On my list, based on consultations with 2 Lucas, here are the beginnings of what 3 we would try and cover in the next two days: an 4 overview of the items to cover; the pathway to 5 finalizing the term sheet; an overview on progress 6 to date; and potentially a report, an interim 7 report, to ASRAC; the process for establishing a 8 test procedure; and related to the schedule, any 9 additional things that we might do to meet the 10 schedule and to succeed in finishing this work; 11 the process to establish and set the energy 12 efficiency levels and a variety of analyses, which 13 can be quite detailed and complicated - market and 14 technology, a screening analysis, engineering 15 analysis, and the like. And we'll have 16 presentations on those elements today. 17 And then if we get through all of that 18 today, which would be quite a lot, there are more 19 items for us to take up tomorrow but just try and 20 finish on these items as well. But that's all I 21 wanted to say here at the outset. 22 Before I turn it over to Lucas, any

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 12 1 other member of the Working Group that wishes to 2 make an opening remark? 3 (No response.) 4 MR. BROOKMAN: Okay. Seeing none, Lucas 5 Adin? 6 MR. ADIN: Thanks, Doug. So -- 7 MR. BROOKMAN: One more thing. We would 8 welcome, we want to welcome, everyone who has 9 joined us via the web. We have individuals who 10 have done that. And also I would remind everyone, 11 please turn your devices on silent mode, if you 12 would, if you haven't done that already. 13 Lucas? 14 MR. ADIN: Alright. Thanks again, Doug, 15 for getting us started off. 16 I just wanted to briefly go over what we 17 are planning to cover today. And what we had in 18 mind is the general pathway from here towards a 19 prospective term sheet. 20 As I think we are all acutely aware, 21 there are only two in-person meetings left after 22 this one. So there is still a lot of ground to

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 13 1 cover. And we have done a lot since the last 2 meeting. We have performed a lot of analysis. And 3 we're going to present that today and explain 4 everything that we have managed to find out as far 5 as the potential energy savings related to these 6 pumps and some preliminary estimates and those 7 kinds of things. And we'll explain that all 8 coming up in a little bit. But, you know, 9 obviously we still have to figure out things like 10 test procedure and metric and that kind of stuff. 11 So there's still a lot of ground to cover. And I 12 think, really, what I wanted to do in bringing all 13 of these up at the outset was to make sure that 14 the way that we're going to present this today 15 makes logical sense, that it will be in an order 16 that is useful to everyone here and that we can 17 make sure that we're making some progress towards 18 answering some of these big questions that we have 19 been moving towards answering over the last 20 several meetings. Maybe in some cases, the 21 context has been a little bit unclear. It is just 22 hard because there isn't really concrete

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 14 1 information yet to make a decision upon. 2 So what we were planning to do was start 3 out with some slides that discuss in more 4 specificity the process for setting standards for 5 these pumps that we're considering standards for. 6 And in a more precise way than we have in the 7 past, we have given some general overview of how 8 the standard-setting process works for a typical 9 DOE standard for any type of product. And maybe 10 that was useful. Maybe it wasn't. I don't know. 11 It was very general. 12 But we're going to talk a little more in 13 terms that I think should be familiar to the 14 people in this room, so things like MEIs and C15 values and that kind of thing. And so hopefully 16 that will kind of put all of this in context and 17 we can step away from the complex issues 18 associated with measurement and metric and those 19 kinds of things because they're obviously 20 important and they'll become vital to making this 21 all work once we have decided on standard levels, 22 but we can explain how the standard setting itself

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 15 1 would work outside of this discussion about 2 metric. And our hope was that that would provide 3 some better context for the meaning of the metric 4 and where that will come into play a little bit 5 later on. 6 So we are planning to revisit the whole 7 metric thing. We were just figuring we would do 8 it tomorrow after we have had some more time to 9 present information about the standard, how it 10 will be set, and some of the work that we have 11 done since the last meeting related to the 12 standard. 13 So that is kind of the up-front stuff. 14 We have done a substantial amount of work on some 15 of the general area that we refer to as the 16 engineering analysis. So this is our market and 17 technology assessment. What the market looks like 18 now, the kinds of technologies that are out there, 19 we do a screening analysis. So we'll look at the 20 technologies that have been screened in or out 21 from improving the efficiency of a pump. And then 22 we'll talk about basically how we arrived at what

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 16 1 we call the efficiency cost curve, so how much it 2 costs to get each additional increment of 3 efficiency improvement for a given pump. 4 So that alone is actually quite a lot of 5 material. I am hoping we can cover all of it 6 today. Assuming that we do, we might get into or 7 cover as much as we can of the preliminary 8 lifecycle cost analysis. We have had an 9 opportunity to do that for most of the pump 10 classes that we have established scope for for 11 this rulemaking. There are a couple that we don't 12 have enough data on yet to go that far in the 13 analysis with yet. We're hoping to be able to do 14 that pretty soon once we get a little bit more 15 data. 16 And I'll emphasize up front that these 17 are preliminary numbers. They still need some 18 refinement. In all likelihood, there are things 19 that may be adjusted in the engineering analysis 20 based on your input or other things that we 21 learned in the coming months that will affect the 22 lifecycle cost and some of these other downstream

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 17 1 things. 2 So just keep in mind that, you know, 3 this is all very preliminary, but we want to start 4 getting feedback as soon as possible. It's very 5 important that we know which assumptions are 6 correct; which data could be better; which 7 calculations, if any, could be improved, that kind 8 of thing. So we are looking for and are very 9 interested in your responses to these as we go 10 through them. 11 So to the extent you have questions or 12 feedback as we go along, I really, of course, 13 encourage you to let us know. And then, you know, 14 of course, after this meeting and the meeting 15 tomorrow, continue to provide us with feedback. 16 There is a lot, as I mentioned before, a 17 lot of information. So it may take a little while 18 to kind of digest it all. So, you know, I don't 19 necessarily expect that we're going to have 20 everything we need to know today. 21 So that kind of gets into the next item 22 I wanted to cover, which was our general sense of

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 18 1 how things will proceed from here towards our term 2 sheet. And it's kind of hard for us to know 3 exactly since it obviously depends a lot on what 4 we decide in the next couple of days. We still 5 have to decide a metric. I didn't really talk 6 about that again, but that's what we're planning 7 to do tomorrow, is to revisit the whole metric 8 discussions. Hopefully we can come to some 9 agreement on what we're going to do there. We do 10 have some more slides to show. It will really 11 just be kind of a rehash of what we talked about 12 last time with some additional points. So 13 hopefully we can get that wrapped up in the next 14 couple of days. 15 So, going from there, I mean, once we 16 have that established, I mean, we still do need to 17 formalize all of these things in a test procedure. 18 And as of right now, that's more on DOE's side. 19 I'll talk about that in a little bit. But we do 20 have a lot of analysis to do still for the 21 standard. So we'll present a lot today. It is 22 preliminary. There will be refinements to that.

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 19 1 But there are several stages that go beyond that. 2 There's manufacturer impact analysis and national 3 impact analysis and a number of other things that 4 are important to deciding whether a particular 5 standard level is economically justified. 6 So there's still more to go. And we're 7 going to start presenting things as we're done 8 with them and as we're ready to receive feedback 9 from you all on them. So that may happen between 10 meetings. And things will probably start 11 happening at a more rapid pace. And so it's 12 possible we might need to think about having some 13 kind of -- I don't know whether it's an actual 14 face-to-face meeting in between our scheduled 15 meetings. I'm not sure whether logistically that 16 will be feasible, but, at the very least, we might 17 consider doing webinars or something that allows 18 everyone to see what we have, provide input, that 19 kind of thing. 20 It's been done before for some of our 21 other negotiated rules. And given how much we 22 have to cover in the next couple of months, in all

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 20 1 likelihood, that is going to be probably the best 2 way for us to bring in some of that feedback and 3 to present information to you all. But we don't 4 necessarily have to talk about that now. We can 5 talk about that towards the end of the meeting 6 when we're thinking about, you know, some of the 7 downstream logistics. 8 So the only other item I had up front 9 was regarding -- oh, I'm sorry. I'll go back to 10 one other item Doug had mentioned earlier, which 11 was the possibility of doing an interim progress 12 report to the ASRAC. This is something that some 13 of the other negotiated rulemaking working groups 14 have done. And basically all it is is a summary 15 report of what the group has done so far and what 16 we think we need to do to get to the term sheet 17 that we have agreed to do through our ground rules 18 and essentially just giving the ASRAC an update 19 and an opportunity for them to comment on what we 20 have done and provide us with any comments or 21 feedback, as I understand it. 22 Tom, I don't know if you have any

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 21 1 thoughts on that. 2 MR. ECKMAN: That's it. 3 MR. ADIN: That's it? Okay. So that 4 might be helpful. Doug has agreed to prepare one 5 of those for us. So it might be something that -- 6 I don't know what -- we haven't really talked 7 specifically about what kind of timeline in which 8 we do that, but I guess that depends somewhat on 9 when the ASRAC is planning to meet next. 10 MR. ECKMAN: Right. 11 MR. BROOKMAN: Tom Eckman, please? 12 MR. ECKMAN: So, as far as I know, that 13 hasn't been tied down yet. 14 MR. ADIN: Okay. 15 MR. ECKMAN: We've made several attempts 16 at getting a date, but -- 17 MR. ADIN: Right. 18 MR. ECKMAN: -- none of those worked 19 out. 20 MR. BROOKMAN: But just to clarify one 21 thing, Tom, you said previously that ASRAC has the 22 capacity to meet informally. Maybe that's the

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 22 1 wrong word but to find ways to consider issues as 2 they need to. 3 MR. ECKMAN: Yes. 4 MR. BROOKMAN: Yes. So as needed, then, 5 we know we can get to ASRAC? 6 MR. ECKMAN: Right. They can arrange 7 for a webinar teleconference. They just need a 8 quorum, which is what has been difficult to 9 process. 10 MR. BROOKMAN: Okay. Got it. 11 MR. ADIN: Okay. Thanks. 12 So the other item related to that is 13 actually getting back to the test procedure. And 14 so, as I understand it, the authorization given to 15 us by the ASRAC is related really more to 16 standards. And so, I mean, obviously there are 17 certain elements of the test procedure, like the 18 metric that we have to talk about and agree upon 19 in the course of getting to an agreed-upon 20 standard. 21 But we don't necessarily negotiate the 22 test procedure itself. Really, I mean, I guess it

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 23 1 depends on how you look at it. The metric is 2 inherent to the test procedure. But the way that 3 that otherwise would have worked is DOE would have 4 -- at least as it is right now, DOE will write up 5 a proposed rule. And certainly it will 6 incorporate the decisions made by this working 7 group, but it's not specifically in the term sheet 8 that the test procedure will be this or that. 9 So I don't know that that's something 10 that the ASRAC could give us authorization for, if 11 it would be worthwhile to consider that. 12 MR. ECKMAN: If that's something the 13 Workgroup thinks would benefit the negotiations, 14 I'm sure ASRAC would consider it. If that's a 15 point of contention or needs consensus, then 16 certainly ASRAC would consider that to move the 17 process forward. 18 MR. ADIN: Yes. So just another item to 19 mention, I'm sure we could mention in our progress 20 report that that is something that if the Working 21 Group thought that was worthwhile of asking of the 22 ASRAC, we could put that in there as well.

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 24 1 So those are the main items. I mean, I 2 guess before we start into actual substance here, 3 the only thing I wanted to ask one more time is 4 whether anyone had any particular items that they 5 wanted to see from us today, questions they wanted 6 answered. I mean, I'm sure a lot of it after the 7 last few meetings is probably more related to the 8 metrics since that is the last thing we talked 9 about. And, you know, we do have stuff to cover 10 for that, probably tomorrow. But, I mean, at 11 least as far as general items or sequence of 12 things we're going to cover, if that all sounds 13 reasonable, I mean, I'm open to any further 14 comments or, otherwise, we'll get right into it. 15 (No response.) 16 MR. ADIN: Okay. All right. So if the 17 team is ready, I guess we can start with our 18 material. 19 MR. BROOKMAN: Dan Weintraub is going to 20 present. 21 MS. WALTNER: Just a question. 22 MR. BROOKMAN: Meg Waltner, please?

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 25 1 MS. WALTNER: Do we have printed copies 2 of the slides today? 3 MR. ADIN: They're coming. 4 MS. WALTNER: Okay. 5 MR. ADIN: Yes. I'm sorry. 6 MS. WALTNER: That's okay. 7 MR. ADIN: A little bit of a logistical 8 issue this morning, but they should be here soon, 9 within the hour. Yes. 10 MR. BROOKMAN: Let me welcome Chuck 11 Powers. Glad you could join us, Chuck. 12 MR. ADIN: Right. So we are having 13 copies of these slides printed, and they should be 14 here soon. Yes. We don't have copies of all of 15 the slides today because not all of them were 16 ready as of this morning. But we do have these, 17 and they are on their way. 18 MR. WEINTRAUB: All right. Thank you, 19 Lucas. With that, I think we'll get started. So 20 Dan Weintraub, Navigant, here. 21 So, as Lucas said, we're going to start 22 by talking about the general process of how we set

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 26 1 efficiency levels. So I'll remind you. So we're 2 going to be going through a lot of information. 3 And, as Lucas said, this is the time to ask 4 questions. We're going to go through slow. We 5 want to make sure everyone understands the 6 process, how it relates to the equipment that 7 we're dealing with so that we can move forward 8 after this into the analyses and see how that all 9 plays out. So questions are welcome. If I'm 10 going too fast, let me know. We'll slow down. 11 MR. BROOKMAN: Say it again. 12 MR. HANDZEL: Is there anybody on the 13 webinar? 14 MR. BROOKMAN: There were five 15 individuals when we started. 16 MS. MARCHETTI: Still five. 17 MR. BROOKMAN: It's still five. 18 MS. MARCHETTI: Yes. 19 MR. WEINTRAUB: All right. All right. 20 So first we'll talk about efficiency levels. So, 21 as an introduction, so efficiency levels can be 22 described as a possible standard level. And these

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 27 1 are levels that can be evaluated and analyzed to 2 determine if they're economically justified. 3 That's what we're looking at right now. 4 In a typical rulemaking, DOE establishes 5 and evaluates multiple efficiency levels for each 6 equipment class under consideration. In this 7 case, it's a little different. The Working Group 8 may participate in establishing these levels. And 9 the Working Group will eventually give 10 recommendations on what levels we should be 11 setting. And that will be so we will review the 12 economic analysis and the energy savings. And 13 that's where you will be able to make your 14 decision off of. 15 All right. So, to get started, to use 16 concrete examples and set a baseline, we're going 17 to go through the EU methodology, so what was done 18 under Lot 11 in the EU. And we'll show the 19 parallels between that and our process because 20 these are things that have been done before, 21 levels that have been set, should put things in 22 perspective.

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 28 1 Just so you know, this is not what we're 2 pursuing right now per se, but this will serve as 3 an example. So the metric that they are using, so 4 they use the MEI. And, to make sure everyone is 5 clear on it, so it's a market-based index that 6 simply represents how well a pump's efficiency 7 compares to the marketplace as a whole. For 8 example, MEI-10 indicates that a pump is better 9 than the bottom 10 percent of the market. Forty 10 indicates that you're better than the bottom 40 11 percent of the market. So, in other words, a 12 standard set at MEI-10 cuts off 10 percent of the 13 pumps. Forty cuts off 40 percent of the pumps in 14 any given equipment class. So the question is, 15 for one, how do we determine how a given pump 16 compares to the market using this method? 17 So here we get into some of the more 18 complicated material. So step one of this 19 process, defining the efficiency surface. So due 20 to the size and geometry differences, every pump 21 in the marketplace has a different maximum 22 attainable efficiency. So based on extensive

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 29 1 research, the EU concluded that attainable 2 efficiency is a strong function of flow and 3 specific speed. The research defined an 4 efficiency surface by the average efficiency seen 5 in the EU marketplace for all pumps within the 6 scope. And this was set as a function of flow and 7 specific speed because those were the factors that 8 were defined. 9 So all pumps falling on this MEI surface 10 are, therefore, of equal relative efficiency. 11 They're on the surface. They all compare 12 similarly in the marketplace. So this allows 13 pumps of varying flows and specific speeds to be 14 compared on an even playing field. 15 So the next step -- here we're going to 16 get a little more complicated. 17 Yes, Gary? 18 MR. FERNSTROM: This is Gary. So could 19 you go back to the -- 20 MR. WEINTRAUB: Sure. 21 MR. FERNSTROM: -- prior slide for a 22 moment? You're saying, thus, all pumps following

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 30 1 on the surface are of equal relative efficiency. 2 Do you mean they're capable of equal relative 3 efficiency and, therefore, small differences in 4 performance can be identified or do you mean that 5 they are of equal relative efficiency precisely? 6 I'm just a little confused with that. 7 MR. WEINTRAUB: So it's equal relative 8 to the marketplace. So let's say a very large 9 pump, physically large, has a higher attainable 10 efficiency than a very small pump because of 11 factors that come from its geometry. That very 12 large pump will have an efficient -- there is an 13 efficiency out there that is the middle of the 14 market for that very large pump. And there is an 15 efficiency out there that is middle of the market 16 for very small pumps. Those levels are -- one may 17 be at 80 percent efficiency. The other one might 18 be at 50 percent. 19 MR. FERNSTROM: Okay. So, just so I am 20 clear, the surface, then, would be different for 21 different types of pumps. 22 MR. WEINTRAUB: No. The surface itself

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 31 1 -- we'll get in -- yes. So they only use ones -- 2 Gary, we'll get there. They only use one surface, 3 but they varied a factor called the C-factor, 4 which we'll get to, to move the surface to a level 5 that represented each individual equipment class. 6 MR. FERNSTROM: Thank you. I'll hold my 7 questions until you finish. 8 MR. WEINTRAUB: Yes. When we get to C9 values, hopefully I will be able to answer it. If 10 not -- hopefully it will answer itself. If not, 11 we'll talk about it some more. Okay. All right. 12 So the next step -- and this is where we 13 are going to introduce the C-values. So using the 14 surface to define MEI levels, so you can translate 15 the efficiency surface up and down to create 16 efficiency levels that remove or cut off pumps 17 from the marketplace. So you have the surface. 18 You move it up. You cut off more pumps. You move 19 it down. You cut off less pumps. The equation 20 that we have right there, that is the equation for 21 minimum efficiency. That's the equation of that 22 surface. And on the end, almost covered by the

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 32 1 toolbar but thankfully not, we have a red C. 2 That's C-value. That just allows you to translate 3 that surface up and down. And in the EU, that's 4 what they used. I'll get into this in a little 5 more detail. 6 MR. BROOKMAN: I want you to slow down. 7 MR. WEINTRAUB: Sure. Thank you, Doug. 8 So trying to visualize this because it 9 is complex, so we have our graphics down at the 10 bottom. And on the left, we have the surface. And 11 I have drawn what would be an intersecting plane 12 to try and move this into the 2-D. So on this 13 graph on the bottom, on the left, we have two x14 axes, I guess. On the left, you have your Q, 15 which is flow. On the right, you have Ns, which 16 is specific speed. So the plane that I have drawn 17 there, that represents one specific speed. So 18 there the data that I pulled over is specific 19 speed of 1,500. To represent that visually, I 20 pulled data from a specific speed of 1,300 to 21 1,700 within a close range to try and put it up 22 there.

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 33 1 So now we take that over to the chart on 2 the right. And now on your x-axis, you're 3 plotting flow, which was Q over there, and gpm. 4 And on the left, on the y-axis, we have pump 5 efficiency, which was the y-axis on that chart. 6 And the blue dots you have there are pumps within 7 the population. And here we're using end suction 8 close-couple and frame-mounted pumps at 1,800 rpm. 9 They have been combined just so we can get a lot 10 of data points. They are very similar in the 11 marketplace. 12 And what you see is if you -- each one 13 of those colored lines is the surface shifted up 14 and down. And you see that at MEI-10, that green 15 line, you're cutting off very few of those blue 16 dots. You move up. You're cutting off more of 17 those dots. You move up again. You're cutting 18 off even more of those dots, up to MEI-85. 19 To answer Gary's question before about 20 how this works for different product classes, if 21 we were to switch over to an inline pump, these 22 dots would be skewed in a different direction, but

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 34 1 you would have a similar shape. You would then 2 draw your lines so that you were cutting off the 3 proper amount of pumps for each one using that 4 same surface. And that's how the EU only used one 5 surface, different levels. 6 Any questions on this? Yes? 7 MR. BROOKMAN: Charlie Cappellino? 8 MR. CAPPELLINO: Charlie Cappellino, 9 ITT. I think just a comment. My opinion is that 10 I think the surface works well as a single surface 11 you raise up and down for clean water pumps. If 12 you start getting into other odd-type product, -- 13 MR. WEINTRAUB: Yes. 14 MR. CAPPELLINO: -- you may actually 15 have to come up with a new surface, but that is 16 kind of immaterial to the discussion here because 17 we're focused on clean water pumps. I don't know 18 if that helps -- 19 MR. WEINTRAUB: Yes. 20 MR. CAPPELLINO: -- me enlighten your 21 questions, like a slurry pump with very think 22 heavy vanes that's completely designed differently

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 35 1 might have a different shape. 2 MR. WEINTRAUB: Correct, yes. That is, 3 yes. And the EU study that was done was focused 4 on water pumps, clean water pumps. 5 MR. BROOKMAN: Thanks, Charlie. 6 MS. WALTNER: Yes. This is sort of 7 another question really -- 8 MR. BROOKMAN: Meg Waltner? 9 MS. WALTNER: Sorry. Meg Waltner from 10 NRDC. 11 MR. BROOKMAN: Get close. Get that. 12 Thanks. Yes. 13 MS. WALTNER: -- related to Gary's 14 question. So am I understanding correctly? So 15 the surface stays the same, but sort of the 16 population of data underneath the surface changes 17 depending on what product of pump you're looking 18 at? 19 MR. WEINTRAUB: Correct, yes. 20 MS. WALTNER: Okay. 21 MR. WEINTRAUB: So yes. The shape of 22 the surface is the key. And then the population

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 36 1 will sit in relation to that surface. The surface 2 is then moved up and down with that C-value so 3 that you're cutting off as many pumps as you are 4 targeting to cut off. 5 Okay. Any other questions? 6 MR. BROOKMAN: Louis Starr? 7 MR. STARR: So Louis Starr with NEEA. So 8 the specific efficiency here is actually from or 9 specific speed is 1,500 to 1,700. Is that right? 10 MR. WEINTRAUB: Yes, yes. 11 MR. STARR: So that is so you could have 12 enough population -- 13 MR. WEINTRAUB: Yes, yes. 14 MR. STARR: Ideally, it would just be 15 right at 1,500 or a given speed? 16 MR. WEINTRAUB: Yes. Ideally, when the 17 analysis is done, it's done on the 3-D surface. 18 MR. STARR: Okay. 19 MR. WEINTRAUB: And it's just 20 continuous, and they plot it. But yes, I wanted 21 to visualize the data. 22 MR. STARR: Okay.

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 37 1 MR. WEINTRAUB: The slope between there 2 is very little. 3 MR. STARR: So you're just doing this so 4 that it provides enough dots that we could see it 5 and kind of make sense of it. 6 MR. WEINTRAUB: Yes. 7 MR. STARR: Okay. 8 MR. FERNSTROM: So this is Gary. The 9 dots that you have extracted from the graph on the 10 left, do they lie on the surface or are they below 11 or above the surface? 12 MR. WEINTRAUB: So the surface itself 13 does not have a location until you define a C14 value. That's the key to it. So those colored 15 lines that we have on the right, green, red, blue, 16 that is the surface. So you set it with a level. 17 The key to the EU's analysis was that you set the 18 shape of the attainable, and then you move it up 19 and down. 20 MR. FERNSTROM: Well, the way I'm 21 understanding it, the shape of the curve is fixed. 22 Its level on a vertical axis is variable depending

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 38 1 upon the C-factor. 2 MR. WEINTRAUB: That's correct, yes. 3 MR. FERNSTROM: So, as we vary the 4 level, then, is each one of those blue dots on the 5 curve? Just depending upon what level we set it 6 at? I don't understand where the blue dots 7 emanate from in the graph on the left. 8 MR. WEINTRAUB: Oh. So yes. So there 9 are no blue dots on the graph on the left. The 10 graph on the left is just the surface. You 11 wouldn't be able to visualize anything with those 12 dots on that left surface because it's a 3-D plot. 13 MR. ADIN: Well -- 14 MR. WEINTRAUB: Yes. 15 MR. ADIN: Just to clarify, -- 16 MR. WEINTRAUB: Yes. 17 MR. ADIN: -- there would be dots all 18 over that. 19 MR. WEINTRAUB: Yes. They would be all 20 over. It would be a cloud. 21 MR. ADIN: Above, below. 22 MR. WEINTRAUB: Yes.

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 39 1 MR. ADIN: All over the whole thing. 2 MR. FERNSTROM: Okay. That answers my 3 question. I was feeling it as a membrane, rather 4 than a cloud. 5 MR. WEINTRAUB: Okay. 6 MR. FERNSTROM: Thank you. 7 MR. WEINTRAUB: Okay. Anyone else? 8 MR. BROOKMAN: And say it again, Dan, 9 simply. The C-value is what? 10 MR. WEINTRAUB: C-value is a translation 11 factor that allows you to move up and down the y12 axis, allows that surface to move up and down the 13 y-axis, and determine how many pumps you want to 14 cut off at a given efficiency level. 15 Any other questions? 16 (No response.) 17 MR. WEINTRAUB: Okay. We'll move 18 forward. Okay. So now looking at the EU Lot 11 19 efficiency level results, so this is how the EU 20 did what we were just explaining. So each 21 efficiency level in the EU targeted a constant 22 failure rate for each equipment class. So that

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 40 1 meant they looked in their analysis. Eventually 2 they set levels in their original analysis. Down 3 at the bottom, you see they targeted 5 percent of 4 the pumps cut off, 10 percent, 15, and so on. And 5 for each one of those in each equipment class, 6 they found the C-value that would cut off the 7 appropriate number of pumps. And that C-value is 8 different for each equipment class and each speed 9 because they looked at them as being independent 10 and having their own kind of properties as a pump. 11 Okay. So this is how the EU did it. And 12 you can see if we were to mimic our process, I 13 drew in EL-1, EL-2, EL-3 above those. That's how 14 it would be done, we would say. We have all of 15 these levels. Now we know we're going to 16 determine what the cost is to get there. And then 17 we're going to see whether it's economically 18 feasible and so on. 19 Any questions here? 20 (No response.) 21 MR. WEINTRAUB: All right. 22 MR. BROOKMAN: Meg Waltner?

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 41 1 MR. WEINTRAUB: Oh, sorry. 2 MS. WALTNER: These are the EU C-values 3 here? 4 MR. WEINTRAUB: Yes. 5 MS. WALTNER: Okay. 6 MR. WEINTRAUB: This is. 7 MS. WALTNER: Thank you. 8 MR. WEINTRAUB: So these were. 9 Specifically, this is what was published in their 10 analysis document that supported their findings. 11 They only published in the regulation MEI-10 and 12 MEI-40, I believe, is what the standards that were 13 set were. Okay. 14 So now, now that we have our baseline 15 for what the EU did -- 16 MR. BROOKMAN: Wait a second. 17 MR. WEINTRAUB: Yes? 18 MR. BROOKMAN: Please go back one. 19 MR. WEINTRAUB: Sure. 20 MR. BROOKMAN: So maybe I missed it. 21 What are all the values on the left-hand side of 22 this matrix?

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 42 1 MR. WEINTRAUB: Where it says, in 2 yellow, where it says, "See ESOB"? 3 MR. BROOKMAN: Yes. 4 MR. WEINTRAUB: Yes. Those are the 5 equipment classes. 6 MR. BROOKMAN: Okay. 7 MR. WEINTRAUB: So those are the EU's 8 equipment classes. 9 MR. BROOKMAN: And these are all the 10 ones they established standards for? 11 MR. WEINTRAUB: Correct, yes. 12 MR. BROOKMAN: Okay. 13 MR. WEINTRAUB: And speed, yes, 14 equipment class and speed. 15 MR. BROOKMAN: Al Huber? 16 MR. HUBER: Al Huber, Patterson. Did I 17 understand you correctly that you're not proposing 18 to use the MEI, the European method? Is that 19 right? 20 MR. WEINTRAUB: This is not what we're 21 proposing right now. Yes. We are just going 22 through this as a reference point to understand

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 43 1 how efficiency levels can be established. In the 2 next slides, we're going to move on to the methods 3 that we have discussed so far and what we're 4 proposing. 5 MR. HUBER: And I suppose you're going 6 to enlighten us as to why you didn't use it. 7 MR. WEINTRAUB: Based on the discussions 8 on metric that were done last meeting, I believe. 9 Lucas? 10 MR. ADIN: Well, I think there are kind 11 of two different issues related to that question. 12 One is, how do you get to a particular standard 13 level outside of the metric, -- 14 MR. WEINTRAUB: Yes. 15 MR. ADIN: -- which is the whole C-value 16 part of it, which we'll talk about, which is not 17 really all that different from this and then the 18 metric, which is really just kind of that 19 translated into a number that would be measured 20 value for that pump. But we'll explain that. I 21 mean, obviously to the extent -- that's not the 22 way that you're seeing it, you know, we can --

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 44 1 MR. HUBER: Well, you know, I'm curious. 2 Is there something inherently flawed with this 3 system that you would want to change it or -- 4 MS. WILLIAMS: So, this is Alison; 5 right? I mean, this all stems back from the 6 discussion that this Working Group is so far 7 trying to do a metric that covers pumps along with 8 motors and controls. This scheme only covers 9 pumps, bare pumps. And so what Dan is going to 10 talk about next -- and so I think maybe if he goes 11 through that, it will clarify these things -- will 12 just be about trends, how we are proposing to use 13 the EU's method but include motors and controls 14 also. 15 So I think if he goes through it, it 16 will be more clear. And then ask questions along 17 the way maybe. We'll see. 18 MR. HUBER: Well, it's Al Huber, 19 Patterson again. You know, I'm not sure that at 20 least our side of the table agrees with you that 21 you can use one metric for both cases. In fact, 22 we don't. We don't agree with it. And we think

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 45 1 it's a problem. We think it will be confusing in 2 the marketplace, and we don't think it will yield 3 what you are looking for. 4 So I realize we're going to talk about 5 metric later. That's why we didn't bring up our 6 idea about it earlier in this discussion but wait 7 until tomorrow. But, you know, I am at a loss as 8 to why you are going through this if you don't 9 intend to use it anyway. 10 MR. ADIN: Well, I mean, what we're 11 planning to do with respect to standards 12 ultimately is based on this. So it's really how 13 you get to -- and I think we had talked about this 14 in previous meetings in a more abstract way, but 15 ultimately what we're proposing to do is set the 16 actual efficiency level for all the pumps we are 17 considering, whether it's bare pump all the way to 18 pump plus a VSD, really, just based on the bare 19 pump. So we're not including design improvements 20 in the motor and all of that other stuff. It's 21 based on design improvements to the bare pump. And 22 so you have to start with this. Right?

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 46 1 MS. WIDDER: This is Sarah. I think, 2 actually, when Dan goes through the slides, the 3 methodology that he's going to present is actually 4 very similar and based off of what was done in the 5 EU. So it's not that we're trying to do something 6 completely different. Just as Alison discussed 7 and, you know, as the metric we have been 8 discussing has some different characteristics, in 9 addition to the whole drive motor thing, we're 10 weighting all of the load points, as opposed to 11 having the three separate ones. So there are a 12 few things that we had to change to adapt to sort 13 of the constructs that we have been discussing 14 over the past couple of meetings. We're not 15 trying to change things unnecessarily. 16 MR. BROOKMAN: Let's do this. Let's let 17 Dan proceed. Take a few more slides. And let's 18 agree also, though, if at the end of this 19 presentation pack, if it seems as though the 20 proposal is totally contrary to any caucus' view 21 on how we might proceed, let's begin that 22 discussion before we go to lunch, just see where

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 47 1 we end up. 2 MR. ADIN: I'll just point, Doug, before 3 we start again, I mean, these slides were intended 4 to explain exactly the issue that Al brought up. 5 So hopefully it will be a little clearer. I 6 understand that this is a major point of 7 contention potentially, but we want to try and get 8 to some resolution on that. And so that is what 9 this discussion is for. 10 MR. BROOKMAN: And, just to continue on 11 -- thank you, Lucas. 12 I had a few conversations with folks 13 this morning before we started. I know we made 14 big progress on the issue of metrics last time. I 15 think, at least the manufacturers' caucus has 16 clarified where they are coming from on the 17 metrics. And so I think we should begin to 18 discuss that sooner, rather than later. Okay. 19 So let's proceed, Dan. 20 MR. WEINTRAUB: Okay. So we'll proceed. 21 Yes. So looking at it high level, there are going 22 to be two parts to this. So there's how do you

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 48 1 choose an efficiency level, what are the 2 efficiency levels we're targeting, and then how do 3 you define that with a metric. So the metric part 4 is what we're in contention with, but how are we 5 going to choose them? That's a little more 6 straightforward. 7 Okay. So potential efficiency levels. 8 So, similar to the EU, we're going to do what they 9 did. And we're targeting failure rates at each 10 equipment class, just like they targeted -- in 11 their analysis, they looked at 5, 10, 25, and so 12 on. 13 So we discussed this at the end of last 14 meeting. It was a quick discussion, but we said 15 we're going to look at 10 percent, 25 percent, 40 16 percent, 55 percent, 70 percent, and 85 percent of 17 pumps failing at each individual equipment class. 18 So that's what our efficiency levels are right now 19 for each equipment class, there will be a 20 different -- depending on the metric we choose or 21 regardless of the metric we choose, there will be 22 an independent level for each equipment class. But

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 49 1 the key is next we must determine the C-values for 2 each equipment class at each efficiency level. So 3 this is where we are going to get into this 4 metric. And we'll take it slow. 5 So we're looking at the PER metric that 6 was discussed last meeting and the one that we 7 decided we are going to go forward for analysis 8 with and come back and discuss further at this 9 meeting. So the PER. So to determine C-values 10 using this metric, we're going to need to do some 11 equation work here. So bear with me. I'm going 12 to try and go slow. So the PER up top equals -- 13 your omega there is your weighting value. So we 14 have omega 75, omega BEP and 1.1. What that means 15 is right now we decided we are going to equally 16 weight for the analysis so far. So that can be 17 changed later, but right now we're equally 18 weighting. So each one of those is one-third. 19 Inside of the parentheses, at each load 20 point, you have your hydraulic power of the pump 21 divided by the pump's efficiency times the motor 22 efficiency, which gets you the input power to the

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 50 1 pump. 2 Hydraulic power, that's a function of 3 flow and head. That's it. So for each pump, 4 there is a hydraulic power that is defined because 5 each pump is going to have a different attainable 6 efficiency. So that goes in there. So hydraulic 7 power is fixed for each pump. 8 Motor efficiency for each pump is also 9 fixed because it is going to be a function of what 10 we choose as the minimum motor efficiency 11 allowable in this metric. And that was discussed 12 last meeting. 13 So when we look at this, the only 14 variable in this equation when you're looking to 15 set an efficiency level is the pump efficiency at 16 each level, the pump efficiency at 75 percent, 17 BEP, and 110 percent. And that's highlighted in 18 red. 19 Are there any questions on that? 20 (No response.) 21 MR. WEINTRAUB: Okay. So, moving down, 22 so now we're looking at how would you define that

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 51 1 pump efficiency in red? So I've changed the 2 nomenclature to make it a little clearer. And we 3 go to minimum required pump efficiency at BEP. And 4 we come back to this surface equation, which we 5 just went over before. 6 So the minimum required pump efficiency 7 equals this function of flow and specific speed 8 minus C. So for a given pump, flow and specific 9 speed are fixed. Those are not variables in that 10 equation. Over to the right, C-value is the only 11 thing you can change to change the minimum 12 required pump efficiency. So minimum required 13 pump efficiency is purely a function of C in this 14 instance. 15 Now, also looking at how the EU 16 regulation works -- we didn't go through this in 17 detail before, but the EU used the house of 18 efficiency. They said you had to meet efficiency 19 at 100 percent of BEP and you had to meet a 20 requirement also at 75 percent of BEP and 110 21 percent of BEP. Those did not have their own 22 independent surfaces. It just said you looked up

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 52 1 your value for efficiency at BEP. You multiplied 2 it by .947. And you had to be better than that at 3 75 percent flow. And then the same for 110 4 percent. You had to be better than .985. So it's 5 just a function of that original surface. 6 Gary? 7 MR. BROOKMAN: Gary? 8 MR. FERNSTROM: Dan, this is Gary. Where 9 did the .947 and .985 come from? 10 MR. WEINTRAUB: Great question. So that 11 was part of the EU's research. And they took the 12 population of -- I believe they ended up using all 13 pumps in the marketplace. And they looked at what 14 the efficiency of those pumps was at 75 percent as 15 a percentage of BEP. And they plotted it out. And 16 they looked at the mean. And it did vary from 17 equipment type to equipment type. But they 18 concluded that we're going to take the median. I 19 don't remember if it was the median or the mean, 20 but they're going to take one of those. And 21 that's what those values represent. 22 And I can tell you. So we did the

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 53 1 research on our own database that we have right 2 now. And in the U.S. market, looking at end 3 suction pumps and inline pumps, they are extremely 4 close to this. Within, we'll say, .002 or so, 5 they vary. So pumps pretty much function the same 6 way here as they do there. 7 But those values are values that are up 8 for discussion eventually for it to go this way. 9 We can shift them if we wanted to to the U.S. 10 market. I can tell you that it's not 11 going to be a big change, but we could. So for 12 now, we'll go forward with those into the 13 analysis. 14 So, looking at it with the value set, so 15 now we're going to do some substitution into the 16 equation down at the bottom. So when you put it 17 all together -- sorry it's so small -- the PER 18 efficiency level and you substitute in, you have 19 your omega. You have P hydraulic. Now you 20 substitute in .947 times minimum required 21 efficiency, where you had your minimum required 22 efficiency at .75. Now here we have in this PER

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 54 1 equation the only variable left is minimum 2 required efficiency at BEP, which is a function of 3 C. So the PER relies directly on the C-value that 4 you want to set, the PER that you have to meet. 5 Okay. So here we have that equation, 6 same equation up at the top, because we're going 7 to continue to talk about it, as I just mentioned. 8 So now we have this equation. Varying the C-value 9 will output a PER value that can be compared 10 against the calculated PER value of the pumps. So 11 that's the metric discussion that we had last 12 meeting and we will continue to have. 13 You can calculate how your pump 14 performs. You set a C-value. You plug it into 15 this equation. And it will tell you how your 16 performance compares against an efficiency level 17 and whether you meet that efficiency level or you 18 do not meet that efficiency level. And that 19 single C-value will set an equivalent standard for 20 all pumps out there, sets that level. And you can 21 look at how many pump models will pass or fail 22 within the industry.

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 55 1 Questions on here? 2 (No response.) 3 MR. WEINTRAUB: Okay. We're still in 4 the weeds here. We're not out yet. We're going 5 to go through some more equations because this is 6 another way. This will lead us to a visual 7 representation, which I think will be useful to 8 see how this works. 9 So here we're continuing on with these 10 same equations. So now determining C-values, so 11 we can also rearrange that equation that we 12 started with to determine the C-value at which any 13 given pump model would actually fail. So that's 14 what is its C-value for failure. So, starting 15 with the premise that a pump model approaches 16 failure when the PER of the efficiency level that 17 we're trying to set equals the PER of the pump, 18 how the pump performed. Right now, again, this is 19 all open for interpretation with the metric later 20 on, but right now, a higher value is worse. So if 21 the pump exceeds that efficiency level, it fails. 22 So we substitute in our PER pump into

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 56 1 this equation. So that's the PER calculated for 2 the pump on the left. And we rearrange. And we 3 move efficiency, which is a function of BEP, which 4 is a function of C, over to the left, where 5 efficiency as a function of C is this equation, 6 the surface equation that we have gone through 7 before. You substitute that in and rearrange. And 8 you get that you can calculate the C-value of a 9 failing pump with this equation on the right. 10 What this does for us, we can then look 11 at the population of all the pumps in the 12 marketplace. Right now we have a database 13 representing approximately 50 percent of shipments 14 in the marketplace based on confidential research 15 that we can show aggregated. 16 We can plot the histogram of what the C17 values are for all the pumps in the marketplace. 18 And now we don't need to look at a 3-D surface or 19 flow versus specific speed. It's just the 20 efficiency performance of a pump represented by 21 its C-value. 22 On the x-axis, you have failing C, C-

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 57 1 value. On the y-axis, you have the percentage of 2 models failing. Here we're looking at, for 3 example, end suction close-couple pumps at 1,800 4 rpm. And you can find that C-value that's going 5 to cut off 10 percent of the pumps, 40 percent of 6 the pumps, 70 percent of the pumps, and any number 7 in between. So this is the method that we used to 8 find these efficiency levels using this metric. We 9 can find any other numbers in between. 10 But are there any questions on this 11 before I go on? Yes? 12 MR. HUBER: You have 1,800 up there. Are 13 you using the data that was provided to you by the 14 Hydraulic Institute or are you using the European 15 data? 16 MR. WEINTRAUB: This is data that was 17 collected under confidentiality agreements through 18 the manufacturers to be presented in aggregate. So 19 we have our own data set. It represents the U.S. 20 market. Right now, based on what HI had given us, 21 what you have given us at the last meeting, this 22 represents about 50 percent of shipments in the

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 58 1 market. 2 MR. BROOKMAN: It includes the HI data? 3 MR. WEINTRAUB: No, no. We can just use 4 the HI data as a baseline for what was given to us 5 to analyze directly. So the HI data, if the HI 6 data said that there were 100,000 shipments, we 7 have 50,000 shipments. And that's not real. Those 8 are not real numbers, just an example. 9 Yes? 10 MR. BROOKMAN: Charlie Cappellino? 11 MR. CAPPELLINO: Charlie Cappellino, 12 ITT. Are you going to compare the C-values that 13 you have developed here to the values that the EU 14 uses? 15 MR. WEINTRAUB: Yes. So we have those. 16 These are PER C-values. So they are different 17 than an MEI C-value. So the difference there, to 18 step back for a second, so MEI C-values versus PER 19 C-values. Really, the only effective difference 20 here, for an MEI, your failing C-value is the 21 worst of the three, the one that you fail at, 22 because you have to pass independently at 75

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 59 1 percent flow, 100 percent, and 110. So the worst 2 value you have is the one that fails. 3 With the PER, it's effectively right now 4 a weighted average. Three points. Take your 5 weighted average. That's what you're going to 6 compare against the metric. So all pumps are then 7 shifted. All pumps are affected the same way. But 8 the end effect is that the C-values under a PER 9 are going to show themselves to be a little more 10 efficient, a little better-performing but a little 11 better-performing all across the board because 12 you're taking a weighted average, rather than 13 taking the worst performing number. 14 MR. CAPPELLINO: Charlie Cappellino, 15 ITT. So if a manufacturer is selling product into 16 the U.S. and also selling product into the EU, the 17 way it's set up right now, you basically have to 18 run two separate analyses to determine whether or 19 not the product is sellable in each market? 20 MR. WEINTRAUB: That's correct. These 21 are two separate metrics. And that's the basis of 22 the metric discussions that we went into last

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 60 1 time. Now, just -- 2 MR. CAPPELLINO: So -- 3 MR. WEINTRAUB: Yes? 4 MR. CAPPELLINO: So, even for bare pump, 5 set aside motor efficiency and everything else, 6 because the averaging is different, you still have 7 different C-values. Is that correct? 8 MR. WEINTRAUB: Yes, yes. And based on 9 the way that we were looking at it earlier, from 10 the start based on HI's proposal, we were looking 11 at different C-values to start because HI had 12 proposed that the C-values be changed to represent 13 the U.S. market and cutting off ten percent of the 14 U.S. market is a different C-value than cutting 15 off ten percent of the European market. So we 16 were always dealing with a different cutoff level, 17 but this is dealing with a different cutoff level 18 plus a different calculation but based on 19 effectively the same load points. 20 MR. BROOKMAN: Louis Starr? 21 MR. STARR: This is Louis Starr with 22 NEEA. So would there be a way to actually

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 61 1 translate from the PER with an MEI version? Would 2 you be able to translate it if I had a European 3 pump and now a U.S. pump and I just want to know 4 how do these things actually perform based on an 5 MEI. Would there be an easy way to do that? Would 6 I be able to have a crosswalk between those two so 7 that I can take a pump that was manufactured for 8 the European market and U.S. 9 market and just know in straight-out 10 performance how these things are going to do on an 11 MEI basis that, you know, it's -- 12 MR. WEINTRAUB: Yes. 13 MR. STARR: It's difficult for people 14 that make pumps in both markets. They know if 15 they have to sell to multiple markets, they have 16 to be able to translate that information across. 17 And so I'm wondering, is there going to be an easy 18 way to do that or not? 19 MR. WEINTRAUB: So there would be no 20 mathematical crosswalk. And the reason being is 21 because under the MEI, you could have one bad load 22 point that fails, and everything else could be

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 62 1 really good and you fail or it skews your number, 2 really skews your number. Under the PER, your 3 number is not skewed as far. So it depends on 4 each pump's curve. 5 MR. BROOKMAN: Al Huber? 6 MR. HUBER: The reason that the house of 7 efficiency was built the way it was is so that we 8 know as manufacturers in the usage out in the 9 field that they're just as likely not to be at 10 BEP. They may operate over to the left, 11 over to the right, which is why the Europeans went 12 with a pass/fail on each individual point: 75, 13 100, and 110. If you average it, then you're 14 favoring those who try to get a higher BEP level. 15 And maybe they're not as good out here in 75, but 16 that may be where you're operating the equipment. 17 MR. WEINTRAUB: So, Al, we definitely 18 understand that. And that has been known from the 19 start. And one thing I can tell you, we did do 20 some analyses along the way of the data we have in 21 hand right now. And the ranked ordering of which 22 pumps fail and which pumps don't, it doesn't

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 63 1 change very much going from MEI to PER. There are 2 changes. Some pumps on the borderline switch 3 sides. A pump that was failing turns to passing. 4 A pump that was passing turns to failing. But 5 there's no wholesale change in how the pumps are 6 performing by using a weighted average versus 7 using a yes/no criteria. 8 MR. BROOKMAN: Al Huber? 9 MR. HUBER: Al Huber, Patterson. Well, 10 the problem is whoever has to redesign again, 11 depending on where we fall here, knowing that, 12 they're going to redesign. They're not going to 13 be as concerned because it's weighted a third, a 14 third, a third. And they don't have to pass out 15 here. They'll design in a different way. They'll 16 look at it in a different method. And in the end, 17 you may get more falling out or you would have 18 gotten more falling out. Do you understand what 19 I'm trying to say? 20 MR. WEINTRAUB: I'm not sure what you 21 mean by more pumps "falling out." 22 MR. HUBER: Well, you said that there

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 64 1 wasn't a lot of difference between the two, 2 although we have not seen that analysis. What I 3 am suggesting to you is that whatever you invent 4 as a system, somebody is going to design to that. 5 Okay? 6 MR. WEINTRAUB: Yes. 7 MR. HUBER: So you might not get as good 8 performance at 75 and 110, but they still may have 9 a pump that's passing. 10 MR. WEINTRAUB: Yes. 11 MR. HUBER: And they will design that 12 way because they know that's how it's going to be 13 judged. Do you understand what I'm trying to say? 14 MR. WEINTRAUB: Yes, I do understand. 15 Yes. 16 MR. HUBER: Okay. 17 MR. BROOKMAN: So -- 18 MR. WEINTRAUB: Charlie? 19 MR. BROOKMAN: Let's let Lucas -- 20 MR. ADIN: Lucas, DOE. The way I 21 understand your comment, Al, you're basically 22 talking about the way the market would respond to

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 65 1 an arrangement like this. And it sounds like it 2 would be advantageous for certain manufacturers to 3 design their pump focused on a particular point in 4 the curve or -- 5 MR. HUBER: You have to be careful how 6 you set parameters or in this case goals, for 7 instance, or regulations because people will 8 design to that. And the results might not be what 9 you expect or what you want. That's all I'm 10 saying. 11 We know the market doesn't operate 12 generally at BEP. We wish they did. You know, we 13 want them to. You know, we ask them to. But it 14 doesn't necessarily happen. And the reason that 15 the EU weighted all those three is so that you get 16 a higher overall curve so that when the pump is 17 not operating there at BEP, at least it's 18 operating more efficiently than it might have. So 19 if you design it as an average, you might not get 20 what you're looking for. That's all I'm trying to 21 point out here. 22 MR. BROOKMAN: Charlie Cappellino?

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 66 1 MR. CAPPELLINO: Charlie Cappellino, 2 ITT. So, Dan, I think what you said is whether 3 you use the EU method for the three points or the 4 proposed method here for the three points, it 5 really didn't make a lot of difference in terms of 6 the number of pumps dropping out or not. 7 MR. WEINTRAUB: Yes. 8 MR. CAPPELLINO: I guess my question is, 9 as somebody who is representing a company that 10 manufactures and sells internationally -- and a 11 lot of people do -- is it worth the additional 12 administrative overhead of having two different 13 methods that have to be dealt with on a global 14 basis if there really isn't that much of a 15 difference in terms of the pass/fail rate? 16 So, I mean, when you step back as a 17 company that sells product around the world and 18 trying to wrap your head around all of this stuff, 19 the more we can keep it simple as long as there 20 isn't a huge either benefit or disbenefit, one way 21 or the other, I think having consistency would be 22 a preferred way to go, just throw that on the

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 67 1 table. 2 MR. WEINTRAUB: Thank you, Charlie. So 3 I think from that comment, that is definitely 4 addressed towards the test procedure and the 5 metric discussion that we are going to have at a 6 later time, but this was meant to evoke those 7 questions, put this all together. So keep those 8 questions in mind when we get back to metric 9 specifically. They've got their points. 10 MR. BROOKMAN: Louis Starr? 11 MR. STARR: So this is a question. Is 12 there a way to kind of mimic what they're doing? 13 Is there a way to have a failure point at just 14 basically copying the same thing over? I mean, I 15 understand why you're doing the average. I think 16 part of the problem is the reason that none of it 17 -- it didn't change the market when you looked. 18 You basically did a sensitivity analysis to see 19 how your new metric would match up with existing 20 market, but one of the things with the current 21 market is adhering to the EU practice. 22 And that might change. When you change

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 68 1 the new rules to the U.S. market, you may have 2 people cherry-picking to the top, getting really 3 great efficiency at the 100 percent. And it may 4 not drop off much. So, in other words, you won't 5 see that until you change the market. 6 So it would be better, it seems to me, 7 if you could keep some kind of version of kicking 8 stuff out. And it looks like you're basically 9 held to some kind of mathematical thing. But is 10 there a way to just mimic the same thing that is 11 happening in the European market or did you think 12 about that? 13 MR. WEINTRAUB: So Louis, I think I have 14 two things to respond to there. First, again, 15 it's a metric. That's a metric question. But, as 16 you remember from last month's discussion, the 17 idea of the metric as it has been set up right now 18 is to allow us to look at controlled pumps and 19 uncontrolled pumps under the same metric. And 20 that's where the weighted average comes in. That's 21 why it was necessary. 22 Sarah, do you have something to say?

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 69 1 MS. WIDDER: And I won't add too much 2 because I think we will talk about this at length 3 at another time, but the other thing to keep in 4 mind is we can address that a little bit in the 5 weighting, how we weight the different load 6 points, whether or not you give equal weighting to 7 all the points, which is what we're assuming now 8 based on our discussions from last meeting, or you 9 more heavily weight different points. 10 So we can account for -- it's difficult 11 to account for all the things that we had wanted 12 to account for in our scope discussion, which 13 include pumps and motors and drives with the three 14 load points and one metric. So that's why we got 15 here. And we're weighting them. And they could 16 be weighted differently. If we wanted to maybe 17 ensure a broader curve, you could weight the 100 18 percent point less, something like that. 19 MR. BROOKMAN: Let me welcome Doug 20 Potts. Glad you could join us, Doug. 21 MR. POTTS: Thank you. 22 MS. WILLIAMS: Can I just recommend that

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 70 1 -- I mean, sort of the point of these slides is 2 just to talk about setting efficiency levels and 3 what we're going to do with them after, in the 4 analyses. So I think, again, let's try to finish 5 it. And we will certainly go through all of these 6 concerns later, but I think this will help just to 7 set up how the standards process works, no matter 8 what the metric is, actually. 9 MR. WEINTRAUB: Yes. Thank you, Alison. 10 And, Louis, one other, the second point 11 I wanted to make, so your thoughts on the current 12 data representing what the EU had regulated, so 13 based on our research and our discussions and what 14 we found, so there are many pumps that are sold in 15 both markets, but there are also many pumps that 16 are not sold in the EU market, significant enough 17 that the U.S. market is an independent market 18 data-wise. I mean, you are not just representing 19 what is done in the EU. It is a mix of both U.S. 20 only and sold in the EU. 21 Okay. So this pretty much concludes the 22 discussion on setting efficiency levels. So if we

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 71 1 were to go through with this metric and this 2 process in setting these target levels, here we 3 have what the C-values come out to, what the C4 values come out to for each equipment class. 5 And, as you'll notice, -- this will be a 6 theme throughout the rest of the day -- we're only 7 presenting data on end suction close-couple, end 8 suction frame-mounted, and inline pumps. Radial 9 split vertical, and vertical turbine submersible, 10 we do not have adequate data at this time. We're 11 still waiting on data from the HI and NEMA biz 12 survey to complete our data set. And we're hoping 13 that will come in shortly and we can present the 14 same type of results for those additional two 15 equipment classes. So there will be nothing on 16 those going forward. 17 Yes? 18 MR. HUBER: Al Huber, Patterson Pump. If 19 I'm not mistaken, that was sent to you last night 20 about 5:00 o'clock. I realize that it's -- I was 21 notified by HI that they sent it. 22 MR. WEINTRAUB: So, Al, I did not -- I

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 72 1 don't know if anyone in this room did. 2 MR. HUBER: You did not receive -- 3 MR. WEINTRAUB: No, we did not. 4 MR. HUBER: You didn't? Nobody got it? 5 MR. WEINTRAUB: No. 6 MR. HUBER: I don't know what happened 7

-- 8 MR. WEINTRAUB: Okay. 9 MR. HUBER: -- because I got a notice 10 that you got it. 11 MR. WEINTRAUB: Well, that's great to 12 hear that it will be coming, though. 13 MR. ADIN: I'm not aware that we 14 received anything new last night. 15 MR. WEINTRAUB: Yes. 16 MS. WILLIAMS: And, just to be clear, 17 even if we do, we're going to proceed the rest of 18 this meeting with the data we currently have. 19 MR. HUBER: I understand it. 20 MS. WILLIAMS: And we'll update it. Yes, 21 but we'll -- 22 MR. HUBER: It worries me --

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 73 1 MS. WILLIAMS: Let's check on that. 2 MR. HUBER: -- that you don't have it. 3 MS. WILLIAMS: Yes. We'll follow up on 4 that. 5 MR. HUBER: Okay? I understand that. I 6 understand that. As soon as we have a break, we 7 will call HI and find out what happened and make 8 sure that you get it. You want it sent to you, 9 Lucas? 10 MR. ADIN: That's fine. I can certainly 11

-- 12 MR. HUBER: Distribute it. 13 MR. ADIN: -- distribute it as 14 necessary. So that would be good. Thank you. 15 MR. BROOKMAN: Okay. Let's keep going. 16 MR. WEINTRAUB: Yes. So just a couple 17 of things to note, to keep in mind on -- 18 MR. BROOKMAN: Let me also -- pardon me 19 for jumping in -- welcome Greg Towsley. 20 MR. WEINTRAUB: Thanks, Doug. 21 So, just to continue, just a few things 22 to point out because we're going to be looking at

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 74 1 these equipment classes all day. And I think we 2 have a laser around here somewhere. There it is. 3 No, not making it. All right. End suction close4 couple and end suction frame-mounted. If you look 5 at their respective speed classes, you can see 6 that their C-values are very similar all the way 7 down. So a lot of the analysis these groups have 8 been -- have been grouped together for analysis. 9 And we can decide later on what we're going to do 10 with actually setting standards and efficiency 11 levels, but the C-values and what their 12 efficiencies are, attainable efficiencies, for 13 frame-mounted and close-couple are very similar 14 within their respective speeds, nominal speeds. So 15 just keep that in mind as we go through because 16 you will see them grouped together for analysis 17 purposes. 18 Okay. So, wrapping this all up, so 19 selecting a standard level, so now we have shown 20 how the efficiency levels are going to be set, how 21 if we were to use this metric, which C-values 22 would be used. So now for each efficiency level

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 75 1 going forward, regardless of what metric would be 2 used, we would perform an average lifecycle cost 3 savings. And we would look at incremental 4 equipment costs and operational cost savings that 5 gets you. Yes. 6 MR. BROOKMAN: So just pause for -- 7 MR. WEINTRAUB: I think we should, yes. 8 MR. BROOKMAN: Yes. 9 MR. WEINTRAUB: Take a little pause. 10 MR. BROOKMAN: Yes. 11 MS. WILLIAMS: Can we just finish these 12 last two slides maybe? 13 MR. BROOKMAN: Alison, it's not 14 happening yet. Hang on. Sorry. 15 Let me note that we have had virtually 16 all of our members join us. And some were delayed 17 via the weather. I guess Amtrak was 18 malfunctioning this morning, for one. But I'm so 19 glad that you all made it. So far I guess 20 virtually all but one of our meetings has been 21 affected by adverse weather. So hopefully that 22 will get better going forward.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 76 1 This next slide that Dan is about to 2 present, I think that trying to describe the 3 European system and kind of compare it to what is 4 being proposed here has been a little bit of a 5 distraction. This next slide, beginning on 15, is 6 really quite important because it really builds 7 off that, what was previously presented. So I'm 8 just going to check with a few of the members who 9 left the room. And I'll be right back. 10 MR. HANDZEL: I'll go check. 11 MR. BROOKMAN: Yes. Do that. Let's get 12 them back in here. 13 Do we have additional questions or 14 comments at this point? Are you able to follow 15 what we're doing, Doug and Greg? You're kind of 16 behind on the presentation side of this. Do you 17 have questions, Greg? 18 MR. TOWSLEY: Greg Towsley, Grundfos. I 19 don't think I had any questions on this part or 20 any comments on this part of the presentation. 21 MR. HANDZEL: Five minutes. 22 MR. BROOKMAN: How many slides do you

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 77 1 have left? 2 MR. WEINTRAUB: We have two more on this 3 topic and then -- 4 MR. BROOKMAN: I don't want to go any 5 further -- 6 MR. WEINTRAUB: Yes. 7 MR. BROOKMAN: -- without these other 8 folks in the room. 9 MR. WEINTRAUB: Yes. These are 10 important. 11 MR. BROOKMAN: I'll be right back. 12 (Pause.) 13 MR. BROOKMAN: Okay. Dan, let's 14 proceed. Okay. So let me note for the record 15 that we have had a little bit of productive 16 consultation here. And Dan is going to proceed. 17 And we're going to take a break in about ten 18 minutes. 19 MR. WEINTRAUB: Yes. 20 MR. BROOKMAN: So then we can proceed 21 with caucuses meeting and further clarification, 22 that sort of thing. And I would welcome when Dan

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 78 1 is finished any sort of interpretive comments from 2 individuals in this room who have a lot more 3 familiarity with what he is describing here, the 4 rulemaking process. Go ahead. The efficiency5 setting process. 6 MR. WEINTRAUB: Thank you, Doug. 7 So yes. This is wrapping up this 8 section. And so now we're looking at, regardless 9 of what metric we choose or how we do it, for each 10 efficiency level, we're going to perform a set of 11 analyses to determine whether those efficiency 12 levels are something that you would like to go 13 forward with. So the analyses that we're going to 14 look at, average lifecycle cost savings, so that 15 takes into account incremental equipment costs, 16 operational savings, define the lifecycle costs, 17 percent of population with net cost, net benefit, 18 and no impact, national energy savings, national 19 net present value, change in industry net present 20 value. So that's where we focus on the impact to 21 the manufacturers and additional downstream 22 analyses, such as emissions, monetization, and a

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 79 1 few others. 2 So after all these analyses are 3 complete, the team will review these analyses or 4 the Working Group will review these analyses. And 5 you'll be able to propose the standard levels that 6 the group sees fit going forward. And that's what 7 will be presented and recommended to ASRAC. So 8 that's this whole high-level process. Now we're 9 out of the weeds here. 10 So are there any questions on this high11 level process? 12 (No response.) 13 MR. WEINTRAUB: Okay. So, finally, here 14 we're back into just a little bit more detail and 15 when we're talking about comparing your pump to 16 the standard levels. So I have given you a table 17 on the previous slides that had C-values. And you 18 have been given the PER calculator. You can 19 calculate how your pump performs. 20 So this is going to go through the 21 methodology that you can put those two things 22 together and see whether your pump would pass or

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 80 1 fail at an efficiency level. 2 So the steps in detail. All right. So 3 you calculate your PER pump according to the 4 methodology described in the test procedure. Right 5 now you have a calculator spreadsheet that you can 6 use. Then use the energy conservation standard 7 formula to determine the PER standard specific to 8 the pump model's hydraulic characteristics at a 9 given efficiency level. 10 So what we have here in this equation, 11 we're using an example here: end suction close12 couple, 1,800 rpm. And the example, EL, is three, 13 so EL-3, off of the table that we had before. So 14 that C-value is 126.86. So this equation we have 15 here, PER standard equals, this big bracket right 16 here is one over BEP pump, required BEP pump 17 efficiency. And that can be pulled out because we 18 knew that that was the only variable. You 19 multiply that times all of these factors, which 20 are static and determined by the pump itself, your 21 hydraulic power, the factor of .947 or .985, and 22 the motor efficiencies, which would be pulled off

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 81 1 a table, as we have discussed thus far. You 2 calculate that out, and you find out what the 3 standard is for your pump. And then you compare 4 what you have calculated for your pump itself 5 versus the standard, and you see whether you pass 6 or fail. 7 In the end, it's a spreadsheet 8 calculation, even fairly simpler than the PER 9 calculator, because there is only one equation 10 that varies. So each pump, you can look at 11 efficiency level 1, 2, 3, 4, 5, 6 and see where 12 you pass and see where you fail for every pump. 13 Okay. Are there questions on this? 14 (No response.) 15 MR. WEINTRAUB: Okay. So that's the end 16 of this section. We've gone through a lot. I 17 think we're ready for a break. 18 MR. BROOKMAN: Yes. Let's take a break. 19 And is 15 minutes going to be sufficient? Is that 20 going to work? Okay. So it's 25 minutes after 21 10:00. We'll resume at 10:40 here in this room. 22 Please make sure and wear your badge. The

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 82 1 restrooms are on both ends of the hall. You know 2 where the coffee shop is. We'll resume at 10:40. 3 (Off the record.) 4 (On the record.) 5 MR. BROOKMAN: Let's resume. Please 6 take your seats. Alison is getting impatient. So 7 during that break, several members had a chance to 8 consult with their colleagues. Before we proceed 9 and move on, does anybody want to say anything 10 about the slide deck that we just reviewed with 11 Dan? 12 (No response.) 13 MR. BROOKMAN: Okay. So now we're going 14 to move to the engineering analysis. 15 MR. WEINTRAUB: Correct, yes. 16 MR. BROOKMAN: Okay. Dan's going to 17 proceed, talking about engineering analysis. 18 Please go ahead. 19 MR. WEINTRAUB: All right. Thank you, 20 Doug. 21 So now we're moving on to a new topic. 22 We're going to be taking you through the steps of

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 83 1 the analyses. And this is the market and tech 2 screening and engineering analysis. 3 And, again -- so this is not in the 4 slides that you have right now. Those next slides 5 on max tech we're going to come back to after we 6 discuss the metric. So we're shifting gears. 7 Again, this is going to be very detailed 8 and very process-oriented. 9 And I think we have a sidebar that -- we 10 are going to take a break until they have 11 concluded. 12 MR. BROOKMAN: Let's focus up here. 13 Okay. Now we're starting. 14 MR. WEINTRAUB: All right. So, just 15 like before, very process-oriented. We are going 16 to get to some results here, preliminary results. 17 But there's a lot of analysis, a lot of process, 18 and I want to go slow and make sure everyone 19 understands it. And we are soliciting feedback 20 throughout this whole thing on the assumptions and 21 the data that we have used and any questions you 22 have along the way. So we'll be going slow.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 84 1 All right. So, to get started, so we're 2 starting with the flowchart here. 3 MR. BOTELER: Full screen. 4 MR. WEINTRAUB: I'm sorry. Thank you. 5 All right. So we're starting with a 6 flowchart of everything we're going to move 7 through today in this slide, so, again, market and 8 tech screening and engineering analysis. 9 So, starting at the top, this all starts 10 with the research that was performed by Navigant 11 and LBNL. So we performed manufacturer 12 interviews. We also did independent industry 13 research. This was the main source of all of our 14 data going through these analyses. 15 The next step through, we will select 16 design options, which is the market and tech and 17 screening analysis. And we'll walk through that 18 in detail. 19 MR. BROOKMAN: We do not have these 20 slides printed off. 21 MR. WEINTRAUB: No. I'm sorry. You do 22 not have those slides.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 85 1 From there, it splits. And we look at 2 two separate factors. We determine the available 3 efficiency improvements. And we also determine 4 the cost of applying these available efficiency 5 improvements or design options, as we call them. 6 From there, we model industry-wide implementation 7 of these design options. So how would these 8 design options be used in the marketplace? From 9 there, we will find the average incremental MPC, 10 so manufacturer's production cost, per unit sold. 11 So how much more would a unit cost? 12 Thank you, Doug. 13 And on the right side there, alongside 14 it, we'll find the aggregate conversion cost to 15 industry, so how much is the industry going to be 16 having to pay to implement these changes. 17 Off to the right in a parallel path, we 18 will also be modeling the MPC, manufacturer's 19 production cost, and the baseline markup. So 20 we'll get to those in detail. So I'll just leave 21 it at the high level now. You take those three 22 factors, and you put them together. And we model

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 86 1 industry market pricing and economics, which then 2 allows us to find the average incremental MSP, 3 which is manufacturer's selling price. So how 4 much would a product go up in price to the first 5 purchaser at a given efficiency level? And that's 6 the key inputs going forward. 7 So are there questions on this high 8 level? Doug? Charlie? Sorry. 9 MR. POWERS: Chuck at Flowserve. 10 MR. BROOKMAN: Chuck, you're not coming 11 through. Sorry. Please. 12 MR. POWERS: Hello? One, two, three. 13 MR. BROOKMAN: Okay. Yes? 14 MR. POWERS: Test. I haven't paid my 15 taxes yet. Maybe that's why. 16 MR. BROOKMAN: Thank you. 17 MR. POWERS: Okay. So a question I have 18 is I think we spoke about this in detail that one 19 day we were talking about manufacturing costs and 20 all. I think it's a good chart, but it isn't so 21 succinct; right? There are a lot of variables 22 that go into each one of these; right, by

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 87 1 different manufacturers. And larger companies 2 look at, you know, MSPs different than others; 3 right? So we just have to make sure we balance 4 those. In other words, it's not, you know, the 5 dictation of what we think it's going to be. It's 6 each company is going to -- you know, their 7 markups and all are going to be different; right? 8 MR. WEINTRAUB: Yes. So thank you, 9 Chuck. I definitely understand that. And we have 10 done our best to -- when looking at the factors 11 and the inputs into the model to take into account 12 both the large manufacturers and the small 13 manufacturers. But, as you'll see, the way we go 14 through, we do an industry-wide analysis. And we 15 try to choose our factors that were our inputs 16 based on blending both how the large manufacturers 17 and the small manufacturers would respond. 18 MR. POWERS: That's good. And I think 19 it's important also to know that if we're trying 20 to achieve a lower cost due to this development 21 for a manufacturer and that lower cost is 22 offshore, then that further decays any foundry

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 88 1 work here in the States and development work here 2 in the States. It may take that work offshore. We 3 have to make sure we look at that factor and the 4 type of technology and where it's located. 5 MR. WEINTRAUB: And things like that are 6 taken into account. Chris, I believe that's not 7 in the MIA, manufacturer impact analysis, which 8 comes downstream. So we don't be dealing with 9 those discussions right now. 10 MR. POWERS: Right. 11 MR. WEINTRAUB: But they will be 12 factored into the decision-making analyses -- 13 MR. POWERS: Right. 14 MR. WEINTRAUB: -- that you guys will 15 then be able to consider. Okay? All right. 16 Any other questions on the high-level 17 flowchart? We're going to walk through each box 18 in painstaking detail. 19 (No response.) 20 MR. WEINTRAUB: All right. Okay. So 21 we're starting with selecting design options, 22 market and tech and screening analysis.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 89 1 So the way this works, we start with an 2 initial list of technology options to improve 3 efficiency. These are basically we're reposting 4 what was posted in the framework because this is 5 what was first discussed. These have not been 6 screened yet. We're going to get to the screening 7 very shortly, but it's the process. So we started 8 with improved surface finish, improved hydraulic 9 design, reducing running clearances, reduced 10 mechanical friction and seal, and reduced 11 volumetric losses. So these were investigated 12 throughout the analysis. And we'll get to the 13 conclusions. 14 So the details on each of the design 15 options. So we'll start with improved surface 16 finish. So to improve your surface finish, you 17 can improve your casting techniques moving from a 18 sand casting to an investment casting, a die 19 casting, a lost foam-type casting, and other 20 processes. You could hand polish or machine 21 polish to come to a smoother surface or you could 22 coat or plate.

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 90 1 Next, improved hydraulic design. So the 2 impeller and/or volute may be redesigned to a 3 higher efficiency using modern design and analysis 4 methods. 5 Reducing running clearances, reducing 6 clearances may reduce the backflow. 7 Mechanical friction and seals. So seal 8 friction is a parasitic load. Reducing it could 9 theoretically improve efficiency. 10 Reducing volumetric losses. Here this 11 was narrowed down to removal of thrust balance 12 holes. Thrust balance holes are used to ensure 13 that the pump is dynamically balanced. But 14 reducing the losses from these holes could 15 theoretically improve efficiency. So we'll get to 16 how these are screened out next. 17 Okay. So the screening analysis. And 18 here the purpose: to screen out technology 19 options that DOE will not consider in the 20 engineering analysis for commercial and industrial 21 pumps. So the method here, DOE evaluates the 22 technology options presented based on the

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 91 1 following criteria. So we have technological 2 feasibility; practicability to manufacture, 3 install, and service on a commercial scale at the 4 time of compliance with any final standard would 5 be required; impact on product utility or 6 availability to the consumer; or impact on health 7 and safety. 8 So what we have screened out, so reduced 9 running clearances. So any significant reduction 10 in running clearances will directly reduce the 11 reliability of the pump. We found that the market 12 as a whole is running at the clearances that are 13 tightest, the tightest clearances possible, for 14 the reliability demanded by the consumer. So we 15 don't see that as a viable option. 16 Reducing mechanical friction in seals. 17 So friction is required for the seals to work 18 properly. Reducing friction in seals can result 19 in impaired seal performance or leaks. And 20 higher-end lower-friction material combinations 21 are available, but the potential gains are not 22 significant on the scale with the other design

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 92 1 options. 2 Reducing volumetric losses. Thrust 3 balance holes are used to reduce wear on rub 4 surfaces and bearings. Removal of these holes 5 would require the pump to be redesigned in a less 6 reliable form. So they would incur redesign 7 anyway to do that. 8 Finally, surface coating and plating. 9 The industry has voiced concerns over the 10 reliability and durability of coatings when used 11 in clean water applications. So yes, they do have 12 uses in industry to protect the impellers, but 13 they have some issues on clean water. And there 14 are other options available. 15 MR. POTTS: Doug Potts, American Water. 16 I have a question about the seals. Did your 17 analysis include a comparison of packing to 18 mechanical seals and if there is a difference in 19 efficiency with going with one or the other? 20 MR. WEINTRAUB: So we asked these along 21 the way throughout our manufacturer interviews, 22 discussing if there are improvements available.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 93 1 The general consensus was that it was below the 2 order of magnitude that you would get from even a 3 polish on a pump that could take a polish or going 4 to hydraulic redesign. But I'll let them -- Mark, 5 do you have something to say? 6 MR. HANDZEL: No. Mark Handzel from 7 Xylem. Doug, I mean, the biggest problem is just 8 we waste a lot of water if we're using packing. 9 You know, that's why you just don't see us doing 10 that in the marketplace because most, you know, 11 mechanical rooms, other applications, they don't 12 want to be leaking fluid all over, which is what 13 happens with packing. So, you know, that's why 14 it's just not commonly used anymore. You know, 15 Chuck, Charlie, you guys can comment on -- 16 MR. BROOKMAN: Mark, thank you. And now 17 to Chuck. 18 MR. POWERS: Yes, I would agree. And in 19 today's world, containment is everything, whether 20 it's pumping water or not, because you never know 21 what could be in there, chlorines or others and 22 chemicals. It's leakage. You know, things get on

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 94 1 the floor, people slip, safety and all. 2 I think it's also important, too, Doug, 3 to make sure that the sustainability, which is 4 what you're leaning to, which is you so far are 5 doing the right thing. It's one thing for us to 6 come up with a rule, spend a lot of time in the 7 MEIs and all of that. And another thing, the MEI 8 goes out the door a week later once clearance has 9 opened up, once the seal does. So I think it's 10 important to look at what polishing does and how 11 long will that last. Right. And some of these 12 other things, we're not back to the roughness 13 coefficient that you originally had before you 14 polished it; right? 15 MR. WEINTRAUB: Yes. 16 MR. POWERS: Because I think the users 17 in the world don't want something that is only 18 going to be there for a week at that higher level. 19 And then we're right back to where we were because 20 we made some inappropriate decisions. So I think 21 the sustainability definition needs to come into 22 this as you're trying; right?

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 95 1 MR. WEINTRAUB: Yes. Thank you. 2 MR. POWERS: And then the efficiency 3 gain, it's important when we look at different 4 products that if the overall efficiency gain we 5 already know in bare pumps is very small variance, 6 that what is that when you save potential 7 efficiency gains on seals is not significant. 8 Well, if the insignificance of the overall pump is 9 only X, you know, very small, and then that's only 10 Y, we have to look at that overall potential; 11 right? 12 MR. WEINTRAUB: Yes. And we do. And 13 the ones that are screened in, -- 14 MR. POWERS: Yes. 15 MR. WEINTRAUB: -- we'll be going 16 through those in detail. 17 MR. POWERS: And then the other one is 18 safety. There are new rules on NSF. There are 19 rules on a lot of other factors coming out. We 20 may not be able to use certain kinds of materials 21 and other things that may be very viable for 22 manufacturability and others.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 96 1 And then a last point is if we have 2 thousands of a certain pump going out the door, 3 versus the engineered, which is not part of this 4 study at this point, thousands of pumps are being 5 polished and every one can be significantly -- you 6 know, in other words, -- 7 MR. WEINTRAUB: Yes. 8 MR. POWERS: -- simple fixes may not be 9 economically feasible to be in the market. 10 MR. WEINTRAUB: Yes. We understand. 11 MR. BROOKMAN: That will be accounted 12 for. 13 MR. WEINTRAUB: Yes. It will be. 14 MR. BROOKMAN: Dan, keep presenting. 15 MR. WEINTRAUB: Thank you. All right. 16 So now we're moving into the design 17 options that have been screened in. So the 18 remaining design options -- 19 MR. BROOKMAN: You said, "screened in." 20 MR. WEINTRAUB: Screened in. 21 MR. BROOKMAN: Thank you. 22 MR. WEINTRAUB: Remaining design options

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 97 1 that we're going to go forward with and we're 2 going to go into detailed analysis on. 3 So hydraulic design, redesign options. 4 So you have your hydraulic redesign as a base. And 5 then there will also be hydraulic redesigns with a 6 change to advanced casting techniques. And we'll 7 get to the applicability of this. Obviously if 8 you're there, you can't switch to it already. And 9 that would be changes to investment die or lost 10 foam, et cetera. And then surface finish 11 improvement options, so surface polishing of the 12 impeller and/or volute. And we'll get to the 13 applicability of these. 14 So we're going to go through them in 15 detail again. And here we're highlighting the 16 applicability restrictions. So where do these 17 design options apply to in the marketplace? 18 Because not every design option applies to every 19 pump in the marketplace. 20 So hydraulic redesign. So here again 21 the impeller and/or volute geometry may be 22 redesigned to a higher efficiency. Any pump can

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 98 1 be redesigned. So that's a design option that's 2 open to any pump in the market. Hydraulic 3 redesign would change to advanced casting 4 techniques. So here we would redesign, but the 5 impeller could also be cast using advanced 6 techniques, which would give it an improved 7 surface finish. We'll get to this more in the 8 future, but a lot of pumps are already there 9 already. They're using these improved techniques. 10 So the applicability restrictions are 11 the pump must be currently sand cast. So it must 12 be at the lower casting level, quality level, to 13 be brought up. And only bronze and stainless 14 steel impellers can be investment or die cast. You 15 can't bring a cast iron impeller into that 16 technology. 17 So, finally, surface finish improvement 18 options. So surface polishing of impellers or 19 volutes. So here they would be hand or machine20 polished to a smooth finish, which would reduce 21 friction. So there are more applicability 22 restrictions on this design option. So, first,

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 99 1 cast bronze or stainless steel only. We have seen 2 if you're going -- polishing cast iron just is not 3 an effective solution. In the long run, it is 4 going to be pursuing any of that. 5 And since it's likely to only be used 6 for small efficiency gaps -- and we'll get into 7 what types of efficiency gains you can get -- this 8 is only an option for pumps that can get to an 9 efficiency level by using polishing. If a pump is 10 failing by a large amount, it would need to use a 11 hydraulic redesign to get there. There's just no 12 way that polishing can get you there. 13 And we'll go through the applicability 14 in detail on how it falls out in the marketplace, 15 what percentage of pumps could actually benefit 16 from these design options. 17 Are there any questions before we go 18 forward? 19 MR. BROOKMAN: Chuck Powers? And get 20 close, real close, Chuck. 21 MR. POWERS: The composite materials 22 will be addressed?

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 100 1 MR. WEINTRAUB: We have not focused on 2 composite materials. The main focus of the types 3 of models that we have been analyzing has been 4 stainless steel and bronze impellers because we 5 have seen that as making up the vast majority of 6 the covered products in the marketplace. We know 7 that a hydraulic redesign would apply to any other 8 type of pump that's out there. 9 So additional considerations: models 10 dropped from the market. So we're going to get 11 into this in more detail later, too, but 12 manufacturers have indicated that many low13 performing, low sales volume pumps may be dropped 14 from the marketplace if they do not pass. And 15 some may be replaced with existing models that are 16 already owned by the manufacturer or some may just 17 be dropped altogether. We'll get into where this 18 may apply later on. 19 Okay. So that was the market and tech 20 and screening. And now we're looking at what 21 we'll call the engineering analysis. So here the 22 purpose is to determine the incremental changes in

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 101 1 manufacturer selling price at each proposed 2 efficiency level, so those efficiency levels that 3 we looked at earlier. 4 The cost-efficiency relationship, it's a 5 key input to the downstream rulemaking analyses 6 that we've discussed before, such as lifecycle 7 costs and payback period, the manufacturer impact 8 analysis -- this will be a direct input there that 9 we'll go through later -- and employment impact 10 analyses. So this helps set up these downstream 11 analyses. 12 Okay. So here we're going to move on to 13 determining available efficiency improvements. So 14 hydraulic redesign. So we have a lot of text 15 here. I'll walk you through it slow. So 16 hydraulic redesign is the main driver in the 17 marketplace when it comes to determining a pump's 18 efficiency. Differing hydraulic redesigns are 19 what differentiate the most efficient products on 20 the marketplace from their low-efficiency 21 counterparts. 22 Theoretically, given enough time and

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 102 1 money, which we'll discuss in the next section, 2 any pump can be brought to the max tech. If there 3 is a pump on the market that is the same flow and 4 specific speed and is at a very high efficiency, 5 then we can assume that any other pump in the 6 market, you spend enough money, you can get there. 7 For the analysis, the industry consensus 8 is that manufacturers would target an efficiency 9 level of MEI or PER-40. We haven't chosen where. 10 From now on, we're just going to keep those, dual 11 nomenclature but they will target an efficiency 12 level of MEI/PER-40 for any proposed standard that 13 is less to or equal to MEI or PER-40. And what 14 that means is that if we are looking at an 15 efficiency level of PER-25, then the manufacturers 16 are going to just do their redesigns up to PER-40. 17 The resulting product would be as good as PER-40. 18 And that has to do with the cost structure of 19 doing a redesign, which we'll get into, but it's a 20 large fixed cost you have to put in. So you're 21 not going to just take a baby step. You're going 22 to target higher.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 103 1 For standard levels above that baseline, 2 40, we believe they would target the actual 3 standard level. You wouldn't per se overshoot, 4 but you would go for -- if you're at a PER of 55, 5 you would target PER-55. You'd try to meet that 6 standard and not spend more money than you need 7 to. 8 Doug? 9 MR. POTTS: Doug Potts. I just have a 10 quick question. Could you define max tech? Is 11 that max, the currently available in the market or 12

-- 13 MR. WEINTRAUB: Yes. 14 MR. POTTS: -- max that's physically 15 possible? 16 MR. WEINTRAUB: So that was a set of 17 slides that we had before. We decided to forego 18 for a bit, but I'll give you a little bit of an 19 explanation. So max tech is max available right 20 now -- sorry -- is the highest level of efficiency 21 that could be attained. It doesn't have to be in 22 the marketplace right now. It could be a product

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 104 1 or component that could be added to your current 2 product to make it more efficient but isn't 3 necessarily in any products on the marketplace. 4 Max available is the highest efficiency 5 in the marketplace right now. And we do analyze 6 max tech and max available. And sometimes max 7 tech just will not be available in the 8 marketplace. You can't bring it in cost9 effectively. Sometimes it will. In this case -- 10 and this is on the slides that we did not go 11 through -- max tech equals max available. The 12 consensus in the marketplace is these are mature 13 products. Any technology that is out there that 14 could be used to improve the bare pump efficiency 15 has been done already. And there are no new 16 technologies in the pipeline to improve the 17 efficiency. So basically we're saying your 18 highest target is what is out there right now. You 19 can reach for what is out there, but there is 20 nothing beyond what is out there efficiency-wise. 21 MR. POTTS: So, just to clarify, so in 22 general, you're saying for most pumps, max tech is

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 105 1 max available? 2 MR. WEINTRAUB: That's correct, yes. 3 MR. POTTS: Okay. 4 MR. WEINTRAUB: Okay. All right. We're 5 going to move forward. Okay. So surface finish 6 improvement. So here we're looking at a chart 7 from HI 20.3, which discusses efficiency gains. 8 And so this chart provides guidance on the 9 efficiency that can be gained by improving surface 10 finish. And these improvements are defined as a 11 function of a pump's specific speed. So this 12 chart here, we have specific speed in U.S. units. 13 And we have points of efficiency improvement. And 14 you see that these high specific speed pumps 15 cannot -- they're gained from an improvement in 16 surface finish from 500 RA to 200 RA, which 17 equivalently would be approximately a sand cast 18 pump, so a fairly rough pump, versus an investment 19 cast smooth finish pump or a hand-polished pump. 20 The gain in efficiency points that you would get 21 is very small up at these high specific speeds. 22 You see here less than one percent of efficiency

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 106 1 points improvements when you're over 1,500 2 specific speed. And that's because high specific 3 speed generally has wider passages, higher flow 4 pump, and the relationship of flow to the boundary 5 area or to the walls of the pump there's high. 6 There's more flow. And you're getting less 7 friction per unit of flow. It's going through. So 8 it doesn't have that much of an effect. 9 MR. BROOKMAN: Charlie Cappellino? 10 MR. CAPPELLINO: Charlie Cappellino with 11 ITT. Dan, could you just comment on the 12 population of pumps that you have surveyed, where 13 they kind of fall as far as specific speed? 14 MR. WEINTRAUB: Oh, yes. 15 MR. CAPPELLINO: In other words, the 16 majority of the population is -- 17 MR. WEINTRAUB: Yes. 18 MR. CAPPELLINO: -- I'm guessing 19 somewhere between 1,500 and 2,500, maybe 1,000 to 20 2,500? 21 MR. WEINTRAUB: Actually, so I don't 22 have it offhand, but we can check later. But it's

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 107 1 actually probably around 1,500 is the median for 2 end suction and for inline pumps that we were 3 looking at in our database. So the median is 4 where, somewhere around this range, so a small 5 improvement, very few pumps up here. This is not 6 common. Even 1,000 is still pretty low. But most 7 of the pumps are around here, very few all the way 8 here, very few all the way here. 9 MR. POWERS: And, Dan, this is Chuck 10 again, too. I think it's also important when you 11 -- you probably have it. We agreed on a certain 12 amount of head for analysis; right? 13 MR. WEINTRAUB: Yes. 14 MR. POWERS: You know, of head for stage 15 or, I should say, total head. 16 MR. WEINTRAUB: Yes. 17 MR. POWERS: And if you drew a line on 18 that, the specific speed can almost be a 19 correlation. So I think you'll find anything 20 below a certain value on what we've given data on 21

-- 22 MR. WEINTRAUB: Yes.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 108 1 MR. POWERS: -- for that size pumps 2 would also be in that further out; right? 3 MR. WEINTRAUB: Yes. Thank you, Chuck. 4 That's correct. And in the analysis coming up, we 5 actually applied it to the real population of 6 pumps. So we looked at what the real population 7 of pumps had to gain. So we'll get there. 8 Okay. So I think we've -- are there any 9 other questions on this chart? Yes? 10 MR. POWERS: Yes. The chart doesn't do 11 a good job of it, but, actually, when you get out 12 around four and you go to five and seven thousand 13 specific speed, that chart goes the other way. 14 MR. WEINTRAUB: Okay. Yes. We just 15 don't have -- there are no pumps in the population 16 there. And the HI data doesn't address it. So 17 this is HI data out of their document. It's based 18 on tests. 19 So all right. So for those design 20 options, those are the efficiency improvements you 21 can get. It's pretty straightforward. 22 Now to the costs. So costs are going to

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 109 1 get a little more complicated. So I'll try to go 2 slow. Okay. I'm going to walk through this 3 slowly. Costs of hydraulically redesigning up to 4 MEI or PER-40. So this is at the first level that 5 we're talking about. So HI conducted a survey on 6 the all-inclusive conversion costs required to 7 redesign a pump to meet a standard level of MEI8 40. Costs were specified for generic 150 and 200 9 horsepower pumps as generic size classes. And 10 costs were applicable to end suction close-couple, 11 end suction frame-mounted, inline, radial split 12 vertical, and vertical turbine submersible 13 equipment classes. 14 And just a quick look. This was the 15 survey provided by HI. And they looked at 16 redesign and prototype costs and initial tests, 17 pattern in tooling, testing, working capital, and 18 marketing costs, split them out, gave costs for 19 different horsepower groupings, and surveyed a 20 large number of manufacturers. I believe it was 21 17 and was aggregated. 22 So we worked with HI. We tried to

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 110 1 understand these costs as best we could. And so 2 we're trying to use these costs, use that data, to 3 understand what the actual costs in the 4 marketplace would be. 5 So what we're seeing here on this chart, 6 so hydraulic, cost of hydraulically redesigning 7 one model. This is the aggregate cost. So these 8 are this cost, this cost, and this cost. So you 9 can see visually how it trends with horsepower. 10 Down here we have shaft horsepower at 11 BEP. Here we have average model cost to redesign. 12 And you see so we're starting at 160,000, ending 13 at 280,000. There's not a huge difference here. 14 It does go up, but, you see, you go from 188,752 15 to 268,203. We fit it to a polynomial. 16 When you look at all of the pumps in our 17 database -- we, as I said, we have 50 percent of 18 the shipments in the market right now, pumps. And 19 we have the performance of all of those pump 20 models. We correlate. For each pump, we look on 21 this curve. And we find how much it is going to 22 cost to redesign at a given horsepower. If it's a

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 111 1 100-horsepower pump, it costs around $260,000 to 2 redesign. Each pump gets that. 3 Then we take the average for those 4 pumps, those pumps over the whole market for each 5 equipment class, to find out, what does that 6 average unit cost to redesign? And it's pretty 7 well-related to what the average horsepower is. So 8 the average end suction, close-couple and end 9 suction frame-mounted pump cost $209,000 to 10 redesign. You multiply that times all the models 11 in the marketplace, and you can kind of make your 12 way up. Inline, $206,000 or almost $207,000. 13 So that gives you an idea of the average 14 horsepower, also where these pumps are on average. 15 So, on average, they're smaller than this whole 16 range. And the costs are right over there. 17 So are there questions on this? 18 MR. POWERS: Yes. Dan, two questions. 19 Good points, by the way. First -- it's Chuck 20 Powers, by the way -- on the second bullet of the 21 first major category, -- 22 MR. WEINTRAUB: Yes.

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 112 1 MR. POWERS: -- you say costs are 2 applicable to all of the different sizes. I would 3 say there might be a minor change to that. 4 MR. WEINTRAUB: Okay. 5 MR. POWERS: On verticals, the bowl 6 assembly; -- 7 MR. WEINTRAUB: Yes. 8 MR. POWERS: -- right, is the working 9 element, -- 10 MR. WEINTRAUB: Yes. 11 MR. POWERS: -- similar to horizontal. 12 So your horizontal picture up there before, -- 13 MR. WEINTRAUB: Yes. 14 MR. POWERS: -- that's the working 15 hydraulic element. The difference is on 16 verticals, based on customers, they'll sometimes 17 say wire to water. And then that really is a bowl 18 assembly performance. But if they say at the 19 discharge head, -- 20 MR. WEINTRAUB: Yes. 21 MR. POWERS: -- the columns and the 22 heads can have a big factor in their design on the

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 113 1 efficiency of the product and the costs associated 2 with that. So that statement where you say costs 3 are applicable to all, when you get over to the 4 verticals and all, it may not be the case. Okay? 5 Just for your awareness. 6 MR. WEINTRAUB: Yes. And I think so. 7 What we are trying to represent with these costs 8 is before you are getting to customer, specific 9 customer, specifications, we're talking about when 10 you are redesigning your catalog of pumps, to get 11 them to the catalog that the customer can pick 12 out. We need these bowls. And we're going to 13 need these columns. Those column costs that are 14 specific to their application don't come into play 15 here because they would have costs for you to 16 treat that column anyway. 17 MR. POWERS: But they go hand in hand -- 18 MR. WEINTRAUB: Yes. 19 MR. POWERS: -- when somebody is looking 20 at it on the shaft timer or the friction of the 21 bearing, losses, and things like that. Shaft, I 22 mean, the vertical thrust load, because it's

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 114 1 carried by the motor and that pump and all. So it 2 could be a factor, where the thrust bearing is, et 3 cetera. 4 The second one, can you explain the 5 second green bullet? 6 MR. WEINTRAUB: Sure. 7 MR. POWERS: Hydraulic redesign is not 8 expected to impact what you call the MPC, the 9 manufacturer production cost? 10 MR. WEINTRAUB: Yes. So I was going to 11 get to that. 12 MR. POWERS: Yes. 13 MR. WEINTRAUB: That's an important 14 point. 15 MR. POWERS: Yes. Explain that one. 16 MR. WEINTRAUB: So MPC is the cost of 17 your materials and labor, how much it costs to put 18 that pump together before you mark it up. And the 19 idea is for most of these pumps, from what we have 20 learned through our research and through our 21 discussions, is that if you have a pump at MEI-20 22 and you redesign it and you go through the cost to

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 115 1 redesign it, that bronze is going to cost about 2 the same, that bronze impeller is going to cost 3 you about the same, per piece after as it is 4 before. Sometimes they could cost less. Sometimes 5 they could cost more. You can make design 6 improvements that reduce your cost. You can make 7 design improvements that increase your cost. But 8 the general consensus was that you are not going 9 to see a significant increase in your parts price. 10 Okay. Going to move forward. All 11 right. We looked through this. Okay. So the 12 next step, we just discussed hydraulic redesign 13 below an MEI or PER-40. Now we're going to look 14 at what happens when you need to go beyond there 15 to a higher efficiency level. 16 So sorry the text is so small. I'll 17 read through it slowly. Due to increases in 18 design and test labor costs, redesigns beyond MEI19 40 level will cost the manufacturers more to 20 complete. We're expecting it to cost more. 21 Manufacturers were surveyed on those costs of 22 redesigns, but we did not receive sufficient data

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 116 1 to aggregate or just sufficient data to 2 characterize the market. But, instead, we did 3 some other research. 4 We looked in the EU Lot 11 preparatory 5 study on the cost of redesign to manufacturers. 6 And they provided costs by those manufacturers to 7 go beyond MEI-40. So the EU manufacturers 8 submitted data indicating that it would cost 1.6X 9 more to design a model to MEI-80 versus MEI-50. 10 Those were the increments that they provided their 11 data in. So per model, if you're going to go 12 there, go to 80 from 50, it is going to cost you 13 1.6 times more. 14 We spoke with HI. And we discussed 15 these numbers. And we understood, took into 16 account the ideas of small manufacturers in the 17 marketplace and the U.S. marketplace, and came to 18 a consensus on 1.8X to account for the increased 19 cost that the many small manufacturers in the U.S. 20 marketplace may face. 21 Yes? 22 MS. MAUER: Joanna Mauer. Can you just

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 117 1 give a little more information about kind of what 2 is driving the higher costs to meet the higher 3 levels? 4 MR. WEINTRAUB: Yes. As far as I 5 understand -- and manufacturers may be able to 6 speak to it also -- when you are designing a 7 product, it is generally an iterative process. And 8 it takes time to get to where you want to be. 9 Getting to MEI-40 takes a certain amount of time 10 and will likely take on average a certain amount 11 of iterations to get there. To continue down the 12 line, to get even better and better takes more 13 time and labor, more work to get there. So just 14 the design labor of the design engineers working 15 to design this product, the test labor of the 16 people testing each iteration of the product and 17 all of that continues to build up as you try to 18 basically perfect your pump because right now 19 according to what we are seeing in the 20 marketplace, getting up towards MEI-70 or 85, 21 that's a perfect pump. That's as good as it's 22 going to get right now given current technology.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 118 1 It just takes more labor to get there. 2 MR. BROOKMAN: Meg Waltner, follow-on? 3 Okay. Charlie, go ahead. 4 MR. CAPPELLINO: I agree with everything 5 you said, Dan. I think there is another factor 6 there. And that is as the MEI gets higher, the 7 efficiency gets higher, the path to get there gets 8 less and less clear. 9 MR. WEINTRAUB: Yes, yes. 10 MR. CAPPELLINO: And that's the reason 11 there are iterations. It's not like we know how 12 to get there. 13 MR. WEINTRAUB: Yes. 14 MR. CAPPELLINO: In some cases, you are 15 redesigning. And you don't know what you are 16 going to get. And you fail. And you try again. 17 And you fail. And you try again. So the risk 18 gets higher as you raise the bar; right? 19 MR. WEINTRAUB: Yes. 20 MR. CAPPELLINO: So it will be more 21 uncertain. 22 MR. BROOKMAN: Thank you, Charlie.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 119 1 Meg? 2 MS. WALTNER: Yes. I have an additional 3 question. Would you talk in more detail about the 4 differences between the U.S. and the EU markets 5 and why the multiplier is higher in the U.S. for 6 40 to 70 versus 50 to 80? 7 MR. WEINTRAUB: So this basically came 8 about through discussions with Greg Case at HI. We 9 don't have a lot of data on this. We just have 10 what the EU said. We didn't have the U.S. 11 manufacturers. But we know that there 12 is a significant number of small manufacturers 13 here. And I really can't speak to the EU small 14 manufacturer, what there is there, but we know 15 that there is a significant amount of small 16 manufacturers. And those are not represented at 17 this table. And we know that they're going to 18 face a burden. So we know that their redesign 19 costs will be higher than the larger manufacturers 20 because they'll likely have to hire outside 21 consultants to redesign these for them versus 22 larger companies have internal resources to do so.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 120 1 This was our best estimate. And that's 2 what it is. It's an estimate. So yes. 3 Yes? 4 MR. POWERS: I think what you are trying 5 to show here is -- 6 MR. BROOKMAN: Chuck Powers? 7 MR. POWERS: -- is very good, but there 8 are other factors like we recently -- and I think 9 the other manufacturers say the same. If you take 10 a standard sand casting; right, from the way you 11 make the pattern and the cope and the drag and all 12 the processes in the green sand and then you go to 13 lost foam, the cost of the variances of those 14 patterns will be a lot higher. In order to get 15 the lost foam, you might need to use that to get 16 to these better efficiencies; right? 17 MR. WEINTRAUB: Yes. So, Chuck, we 18 actually will go through that in detail. 19 MR. POWERS: Good. Good. 20 MR. WEINTRAUB: Yes. 21 MR. BROOKMAN: Keep going, Dan. 22 MR. WEINTRAUB: Yes. Okay. We're going

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 121 1 to move. So we will go through that in detail: 2 the cost of those new technologies. All 3 right. 4 So are there any other questions on 5 these, these factors here? 6 (No response.) 7 MR. WEINTRAUB: Okay. All right. So 8 this is the next section that Chuck was alluding 9 to. Hydraulic redesign with change to advanced 10 casting. And here we're going to quantify how 11 much more it costs when you have to incorporate an 12 advanced casting technique to get to where you 13 need to be. So I'll go through this slow again 14 because it's so small. 15 So the HI redesign survey specifically 16 categorized costs related to pattern and tooling. 17 That was one of the categories we looked at 18 earlier. And that was at 150 and 200 horsepower. 19 The costs represented a blend of all the casting 20 methods used in the marketplace because it was the 21 costs of the manufacturers that were surveyed. 22 Industry research -- this was the

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 122 1 research that Navigant and LBNL did -- indicates 2 that advanced casting tooling costs 2.4 times more 3 than sand casting tooling and advanced casting 4 methods currently make up 60 percent of the 5 market. And this is based on our research. This 6 is based on our discussions with various 7 manufacturers. And the costs come from talking 8 with manufacturers and talking with industry 9 resources in the casting industry. It varies. The 10 different methods vary. But we average to a 2.4 11 times more factor for those advanced methods. 12 So we had to do a little math on the 13 data that we had. So this is what HI gave us: 14 $44,000 for one-horsepower, $51,000 for 50 15 horsepower, $72,000 for 200 horsepower. Knowing 16 that advanced casting makes up 60 percent of that 17 cost and costs 2.4 times more and sand casting is 18 40 percent of the market and costs less, you can 19 do some math and figure out what the cost of a 20 sand cast, the average cost of a sand cast, 21 tooling in that population is. You can figure out 22 the average cost of sand cast here and advanced

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 123 1 casting here. Basically what you have is if this 2 is the number, 50,800, that is 60 percent of the 3 market and this is 40 percent of the market, you 4 take a weighted average. And you'd get the number 5 that HI gave us. We just backed it out. 6 MR. BROOKMAN: Gary Fernstrom? 7 MR. FERNSTROM: This is Gary. So it 8 seems reasonable that the cost of advanced casting 9 tooling would be higher than sand casting, but 10 would the labor cost not be lower with advanced 11 casting than it would be with what I believe would 12 be more labor-intensive sand casting? 13 MR. WEINTRAUB: So that's a very good 14 question, Gary. Currently the vast majority of 15 the industry purchases their castings out of house 16 from suppliers. So there are no direct labor 17 costs involved. There is only the material cost 18 as they buy it from their manufacturers at a cost. 19 MR. FERNSTROM: Well, if most of the 20 manufacturers buy their castings, the costs are 21 reflected in the price they pay their supplier. 22 MR. WEINTRAUB: Yes.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 124 1 MR. FERNSTROM: And included in the 2 supplier price would be the cost of tooling and 3 the cost of labor. So I would just like to 4 understand how the cost of labor may or may not 5 have been -- 6 MR. WEINTRAUB: That's a very good 7 question. Al, let me address first. And then if 8 I'm wrong, you can follow. 9 So the tooling aspect, Gary, of casting, 10 the manufacturers actually own their tooling. They 11 pay for it. So when they come up with a new 12 design, they pay the casting house to develop this 13 tooling. And they own that tooling. If they want 14 to pull it from them, they can. It's their own 15 property. So they're not paying for the tooling. 16 They are paying for the labor at the casting 17 house. 18 But that labor, our research has also 19 shown us that it is a wash between sand casting 20 and advanced casting. The costs are about the 21 same. You have to pay a lot up front to get into 22 these other technologies. But once you are, these

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 125 1 costs are about the same per piece. 2 MR. BROOKMAN: Charlie Cappellino? 3 MR. CAPPELLINO: Charlie Cappellino, 4 ITT. I'm not sure that's my experience that an 5 investment cast component generally tends to be 6 more expensive than a sand cast component on a 7 price per pound basis. So I don't know if you 8 guys have any data where you have gone to 9 foundries and said, "Quote this part in investment 10 cast," "Quote this part in sand cast" because many 11 of the investment casting processes can be fairly 12 labor-intensive because there are lots of steps 13 involved and depending on how much automation they 14 have. 15 So my reflection is cost per pound or 16 cost per the same casting would be higher for 17 investment than sand in all cases. I mean, I 18 think -- 19 MR. WEINTRAUB: Yes. So, Charlie, we 20 asked this question across the board to many 21 manufacturers. And the overall average that came 22 back, the numbers came out very close to the same.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 126 1 Some specified -- 2 MR. POWERS: It just doesn't make any 3 sense. 4 MR. WEINTRAUB: -- higher. Some 5 specified lower. 6 MR. POWERS: It doesn't make any sense 7 to me either. And I'll tell you one avenue that's 8 a proof. Al runs a plant. So he sees all 9 aspects; right? I'll ask him to verify it. Sand 10 castings, the scrap rate is X. Whether it's lost 11 foam precision, it's Y. So, in other words, if Al 12 were to get in 100 sand castings, my guess is when 13 he starts machining them, flanges, different 14 pieces, he starts to find porosities and issues 15 that are inherent into sand casting, and the scrap 16 rate, so to speak, is more. Right? And he has to 17 account for that in his whole form of the cost; 18 right; whereas, like with Charlie, -- and I agree 19 with Charlie -- the investment in cost into the 20 precision, lost foam, all these things, is much 21 higher. But the scrap rate in a general sense 22 because you're going to a little bit better

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 127 1 technology and all of that is much less. You 2 don't find let's call it the porosities; right? 3 MR. BROOKMAN: Lucas wishes to comment 4 here. No? Not now. Okay. Yes, Gary? 5 MR. FERNSTROM: So this is Gary. 6 Speaking from having done casting myself, I would 7 agree with the industry that generally investment 8 cast products are more expensive. However, 9 generally when you buy the investment cast 10 product, you are not supplying the tooling to the 11 casting house. 12 MR. WEINTRAUB: No. They are. 13 MR. FERNSTROM: I understand in this 14 case. Sand casting is more labor-intensive on 15 account of the fact it's less precise and you have 16 a greater waste as a result of the process. 17 Anyway, I would just ask you to reevaluate your 18 findings with regard to this one particular issue. 19 MR. WEINTRAUB: So as a resolution to 20 this issue, to move forward, I would like to see 21 if we could enlist HI's help or just the group out 22 there. Let's put together, let's get together,

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 128 1 some information that the group, that the 2 individual manufacturers, can submit to LBNL and 3 Navigant under NDA. And we can see how those 4 compare to the answers that we have received 5 previously under NDA. 6 MR. BROOKMAN: This kind of feedback is 7 very helpful. Al Huber? 8 MR. HUBER: I think that one reason the 9 manufacturers said it was almost a wash, Gary is 10 right. You have to spend more time cleaning the 11 sand casting in-house, that you don't have to do 12 with the vacuum die cast or investment cast. So 13 if you look at the costs you're having to put into 14 the sand casting -- and I'm talking about 15 impellers here. I'm not talking about casings 16 now, -- 17 MR. WEINTRAUB: Yes. 18 MR. HUBER: -- talking about impellers. 19 What we find is that when you combine those two, 20 it's almost a wash. But you do -- you don't have 21 the scrap rate with die cast or investment cast 22 that you have with sand cast either. However, we

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 129 1 do charge back the foundry for the bad casting. 2 So, I mean, we're not necessarily eating it, but, 3 I mean, we have wasted some labor which we can't 4 recover from them. We don't lose that. 5 MR. WEINTRAUB: Yes. 6 MR. HUBER: But I think you are correct. 7 And I think that is probably why the industry told 8 you that. 9 MR. WEINTRAUB: Yes. And if anyone who 10 has not responded to me in the past wants to 11 submit information, we can work it into our 12 aggregated data. And we can see how that pans out 13 for the analysis. 14 MR. BROOKMAN: Lucas Adin? 15 MR. ADIN: This is actually just a 16 clarifying question related to the points that 17 have been just brought up. These costs are 18 related only to the production of the casting or 19 do they include the downstream -- once you receive 20 the casting, machining, cleaning, or whatever is 21 done on the manufacturing side -- 22 MR. WEINTRAUB: Okay.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 130 1 MR. ADIN: -- that's something that we 2 should try to resolve. 3 MR. WEINTRAUB: Yes. We've moved away 4 from the original topic. 5 MR. ADIN: Right. 6 MR. WEINTRAUB: What we have up here on 7 the screen is tooling costs, which is a one-time 8 investment to the manufacturer. What we have just 9 been discussing is incremental MPC, how much more 10 do those pieces cost after the redesign. Our 11 initial assertion was that incremental MPC was 12 zero, the cost did not go up per unit. 13 Now, we have heard some opinions in the 14 opposite direction. And I think if we can get 15 input from people who have not provided input thus 16 far, we would love to and we can incorporate into 17 the analysis and move forward. 18 MR. ADIN: Well, and I think my point 19 was we just want to make sure it's clear that, you 20 know, exactly which costs we're asking for. 21 MR. WEINTRAUB: Yes. So it is the -- it 22 would be the cost change to your product based on

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 131 1 going from a sand cast impeller to an advanced 2 casting. And that would be the impact on to get - 3 - I'm sorry; let me start again -- to get to the 4 finished part, get to the finished impeller. Does 5 it cost more to go to an investment casting than a 6 sand casting? 7 MR. POWERS: Dan? 8 MR. BROOKMAN: Chuck Powers? 9 MR. POWERS: Sorry. Chuck Powers. Sorry 10 about that. And I asked before. The reason -- 11 well, let me back up. The product range we talked 12 about that we already voted on all involves a lot 13 of smaller pumps; right, and all of that? 14 MR. WEINTRAUB: Yes. 15 MR. POWERS: Are any of those pumps at 16 all composite materials? I mean, wear rings, 17 bearings I get. You know, they're given. But 18 casings, impellers, are any of those composite 19 materials? 20 MR. WEINTRAUB: I can't tell you an 21 answer right now. We can look into our database. 22 But I know it's not common for the ranges that we

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 132 1 have. 2 MR. POWERS: Okay. The reason I said 3 it, because the other option if some of these 4 manufacturers go that way -- and some of them may 5 do it. Some of the ones we haven't talked to may 6 not be represented here. If they are in composite 7 materials, those costs, you know, the first cost 8 impact to those molds and that kind of stuff, it's 9 pretty high. 10 MR. WEINTRAUB: Yes. 11 MR. POWERS: Then the actual finished 12 product after those parts is lower. 13 MR. WEINTRAUB: Yes. 14 MR. POWERS: So and there are efficiency 15 gains and all that stuff. I just didn't know if 16 that's an option we'll ever touch. That's all. 17 MR. WEINTRAUB: Yes. So that is a good 18 point, but we're not addressing it in the analysis 19 because we're trying to represent the greater 20 industry. And small segments of that that may 21 choose to go their own way doing that, it's not 22 going to impact the overall cost to the industry

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 133 1 significantly because we're dealing with such a 2 large volume of the industry is bronze, cast iron, 3 and stainless steel. So their percentage would 4 not have an impact, would not have a large impact. 5 Now, later on down the line, 6 manufacturing impact analysis, if we did conclude 7 that there is a specific subset of pumps in the 8 marketplace that are using a specific method and 9 that we need to take into account their 10 disproportionate burden, we can look at that down 11 the line. 12 Okay. So I am going to hit the 13 conclusion on this, and we are going to move 14 forward. Here our conclusion is advanced casting 15 tooling is 130 percent of what was quoted in the 16 HI survey. So the HI survey was a composite of 17 both advanced casting and sand casting. If you 18 want to just identify what advanced casting 19 tooling costs, it's 30 percent higher than each 20 one of these numbers. 21 So more numbers. How does this play 22 out? If we're going to say that some percentage

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 134 1 of the population will need to go to advanced 2 casting and a hydraulic redesign, rather than just 3 a hydraulic redesign, to get where they need to go 4 -- let's walk through these charts. So hydraulic 5 redesign costs, which I have abbreviated as HRD, 6 this is the survey cost. So this is the HI cost 7 all in. This is the additional 30 percent, so the 8 difference between here and here that a pump would 9 incur to go to advanced tooling. So you add those 10 two up and -- 11 PARTICIPANT: Dan, we can't see. Do you 12 have a darker color or -- 13 MR. WEINTRAUB: No. This is all we've 14 got. 15 MR. HUBER: Dan, this is Al Huber. 16 MR. WEINTRAUB: Yes? 17 MR. HUBER: How do you get 30 percent? 18 MR. WEINTRAUB: Yes. So I will go back 19 here again. 20 MR. HUBER: Yes. Go back -- 21 MR. WEINTRAUB: Yes. 22 MR. HUBER: -- because that doesn't look

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 135 1 like 30 percent. 2 MR. WEINTRAUB: Okay. So we had to back 3 it out, so 30 percent of the tooling cost. It is 4 a bit confusing, but let me walk it through now. 5 Okay. This is what HI's survey was. It 6 represents 60 percent advanced casting and 40 7 percent sand casting. I had to back these numbers 8 out using an equation x/y. 9 MR. HUBER: So yes. So you're not 10 putting that whole additional cost difference -- 11 MR. WEINTRAUB: Yes. 12 MR. HUBER: -- in there because it's 13 already in, some of it is already in the -- 14 MR. WEINTRAUB: Yes. This is the 15 median. 16 MR. HUBER: Yes. Gotcha. 17 MR. WEINTRAUB: So got it. Okay? 18 MR. HUBER: Okay. 19 MR. WEINTRAUB: And so that's 30 percent 20 of tooling. When you move up the line and you 21 say, "Well, 30 percent of tooling," that ends up 22 only being 7 percent of total redesign cost. It's

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 136 1 only a 7 percent increase of all those costs that 2 HI gave us, the marketing, the testing, and all of 3 that. 4 And we're really worried about the total 5 redesign cost. So here you have -- that's that 6 extra cost from tooling. You add that to your 7 baseline cost, and you get your new cost. And up 8 here we have the chart. This was the chart that 9 we looked at originally, the HI, HI's survey. And 10 this is the chart with the additional costs due to 11 advanced tooling, advanced casting tooling. And, 12 again, we see where the end suction and inline 13 product classes lie. Their average unit cost is 14 here around 25 horsepower pump. 15 Down here, we have it broken out by 16 equipment class just so you can see what these 17 costs were. The average cost for the end suction 18 pump is $223,000. The average cost for the inline 19 pump is $221,000. 20 Questions on this? 21 (No response.) 22 MR. WEINTRAUB: Okay. Now we're going

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 137 1 to move a little more straightforward, moving on 2 to surface polishing. All right. So through our 3 manufacturer interviews and research, surface 4 polishing was determined to cost approximately 45 5 percent on average of the finished impeller cost 6 for the end suction and inline pumps. So it would 7 add 45 percent to the cost of the impeller if you 8 were to hand polish or machine polish or whichever 9 method manufacturers would choose to use. 10 These would either be purchased part 11 costs if they were to do that polishing out-of12 house at the foundry or it could be labor costs if 13 they were to do it in-house. But they would 14 affect the MPC. The cost of the impeller itself 15 would go up. 16 So we found finished -- yes? Yes. You 17 want to go back? All right. 18 MR. BROOKMAN: Greg Case? 19 MR. CASE: Greg Case, HI. I think it's 20 interesting that the inline costs are less than 21 the end suction costs. Is that from the HI data 22 that they were less?

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 138 1 MR. WEINTRAUB: Yes. This is average 2 pump in the marketplace. This is purely a product 3 of the average horsepower model in the 4 marketplace. 5 MR. CASE: I mean, they're very close. 6 MR. WEINTRAUB: Yes. 7 MR. CASE: But I would have thought 8 those two would have been reversed. 9 MR. WEINTRAUB: Yes. There ended up 10 being because -- Greg, as we discussed, we used 11 BEP horsepower. 12 MR. CASE: Yes. 13 MR. WEINTRAUB: And the average BEP 14 horsepower of a pump in the marketplace for an 15 inline pump ended up being -- 16 MR. CASE: Is lower. 17 MR. WEINTRAUB: -- a few decimals lower. 18 MR. CASE: Okay. 19 MR. WEINTRAUB: Yes. 20 MR. CASE: I get it. 21 MR. WEINTRAUB: But the costs are just 22 applied to every pump individually.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 139 1 MR. CASE: Thank you. 2 MR. WEINTRAUB: Yes. 3 MR. BROOKMAN: Joanna Mauer? 4 MS. MAUER: I just want to make sure I 5 understand what the chart is showing. So that's 6 the average cost to redesign a pump to meet an MEI 7 of 40? 8 MR. WEINTRAUB: Correct, yes. Yes. This 9 is the cost for all of the pumps in the 10 marketplace right now. On average, if you pick 11 the average pump, it is going to cost you this 12 much to redesign to MEI-40. 13 MS. MAUER: And you're saying a pump 14 that you produce with an advanced casting costs 15 more to redesign to meet an MEI-40 than the 16 average pump? 17 MR. WEINTRAUB: So if a pump needs to go 18 from sand-casting to investment casting or advance 19 casting, it is going to incur a higher level of 20 conversion costs to get there because they have to 21 invest in the better tooling. 22 MS. MAUER: Okay. So the blue line is

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 140 1 what the cost is to redesign, for the hydraulic 2 redesign, without considering going to advanced 3 casting. 4 MR. WEINTRAUB: Yes. 5 MS. MAUER: And then the green is the 6 hydraulic redesign plus the advanced casting. 7 MR. WEINTRAUB: Yes. 8 MS. MAUER: Okay. 9 MR. WEINTRAUB: All right. 10 MR. BROOKMAN: Meg? 11 MR. WEINTRAUB: Excuse me. No. Alison, 12 both equipment classes -- 13 MS. WILLIAMS: Okay. Sorry. 14 MR. WEINTRAUB: -- end up falling on the 15 same point because they are so close. 16 MS. WALTNER: This is Meg Waltner. The 17 60/40 number you used, that's based on what the 18 castings put is in the market today? 19 MR. WEINTRAUB: Yes. Yes. So yes. 20 Sixty/40 split based on our research and 21 interviews with manufacturers and then looking at 22 the database that we had for how many pumps each

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 141 1 manufacturer has and such and looking at what 2 small manufacturers might do also, we came up with 3 60 percent of the market having advanced casts, 4 using currently employing advanced casting 5 techniques. They've gone there on their own, 40 6 percent not employing advanced casting. 7 MS. WALTNER: Okay. I guess I'm a 8 little confused as to why that number is 9 applicable to the HI costs because you would think 10 that that number already -- 11 MR. WEINTRAUB: So the reason -- 12 MS. WALTNER: Why is the split the same? 13 MR. WEINTRAUB: The reason it's 14 applicable, so the HI data that they gave us, the 15 HI data that they gave us, is this. So we have 16 cost at each horsepower. And that represents the 17 weighted average. It's just it's what the 18 industry is doing. 19 MS. WALTNER: I thought that was their 20 weighted average to move to MEI-40. 21 MR. WEINTRAUB: So yes. It's the 22 weighted average to move to an MEI-40, but,

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 142 1 regardless of what their efficiency is now, you 2 can have a low-efficiency pump that's investment 3 cast. You can have a high-efficiency pump that's 4 investment cast. So the investment casting, yes, 5 it does give you a benefit, but it's out there in 6 the marketplace at all efficiency levels right 7 now. 8 MR. BROOKMAN: We have a question from 9 someone who is joining us online. I believe it's 10 Al Iseppon. I don't think it's Hal. I think it's 11 Al writes, "Has anyone considered the fact that 12 the advanced casting methods tend to be labor13 intensive and is only cost-effective if sourced 14 from low-cost countries?" 15 MR. WEINTRAUB: So those are discussions 16 we've had. Actually, based on our research, the 17 majority of the investment casting is done onshore 18 because the quality offshore is not there yet. 19 That's what we've found so far. 20 MR. BROOKMAN: Okay. 21 MR. WEINTRAUB: But yes, it is labor22 intensive. And I am sure that if manufacturers

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 143 1 could find low-cost suppliers overseas that could 2 provide them their quality, they would go that 3 way. But, based on what we have seen, it's 4 onshore investment casting right now. 5 MR. BROOKMAN: Chuck? 6 MR. POWERS: Dan, there are too, the 7 lost foam processes, that are not licensed in the 8 United States. 9 MR. WEINTRAUB: Okay. 10 MR. POWERS: They only are offshore, 11 just for your note. 12 MR. WEINTRAUB: Okay. Yes. 13 MR. POWERS: So there's a mix there. But 14 be careful because there's -- 15 MR. WEINTRAUB: Yes. 16 MR. BROOKMAN: Okay. 17 MR. POWERS: You know, we can't get it 18 domestically. We can only get it offshore. 19 MR. BROOKMAN: Thanks, Chuck. 20 MR. WEINTRAUB: Okay. Yes. And these 21 are things that will be considered. 22 MS. WIDDER: I just wanted to revisit

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 144 1 the -- 2 MR. WEINTRAUB: Yes. 3 MS. WIDDER: -- 60/40 split again. And 4 correct me if I am saying this wrong, Dan, but 5 just clarifying one thing. Really, the relevance 6 of that is only establishing the cost of advanced 7 casting versus sand casting. And there weren't 8 exact direct costs of that. And so using the HI 9 aggregate tooling cost and then knowing how much 10 advanced casting and sand casting is in the market 11 today, both of those represent what is occurring 12 today. And so the only -- those are just used to 13 establish a cost for each of the relative 14 technologies and then carry that forward. The 15 60/40 split is not carried forward. 16 So in the future, to get to 40 percent, 17 hypothetically, you might see more advanced 18 casting. And so the percentage advanced casting 19 would increase. And, actually, probably the HI 20 tooling costs would then increase commensurately. 21 MR. BROOKMAN: That was Sarah. 22 MS. WIDDER: Was that helpful or that

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 145 1 seemed unhelpful? 2 MS. WALTNER: So I guess my question -- 3 MR. BROOKMAN: Meg Waltner? 4 MS. WALTNER: Meg Waltner. Sorry. So 5 the HI survey data -- 6 MR. BROOKMAN: Just a second. Hey, 7 Sarah, that seems to be a dead spot. Step out of 8 there. Find a -- 9 MS. WIDDER: A dead spot? 10 MR. BROOKMAN: Yes. The mike never 11 works there. 12 MS. WIDDER: Oh, okay. 13 MR. BROOKMAN: Meg, keep going. Meg 14 Waltner? 15 MS. WALTNER: Meg Waltner. So the HI 16 tooling data, does that not represent a different 17 split than 60/40 since that is the tooling cost to 18 move to an MEI of 40? Would the tooling for MEI19 40 not be different than the current split of 20 tooling? 21 MR. WEINTRAUB: We believe it represents 22 -- and so there are no details, consensus on where

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 146 1 it is, but we believe through discussions with 2 Greg that that represents manufacturers sticking 3 with the methods that they're using. That is the 4 assumption we're making. That is a very good 5 question. 6 MS. WALTNER: Okay. 7 MR. WEINTRAUB: We believe the HI costs 8 represent manufacturers staying with those methods 9 that they were already using. If they're using 10 sand, they were quoting cost to redesign using 11 their sand tooling. If they're using investment, 12 it's the cost to redesign using their investment 13 tooling. That is a very good question. 14 MS. WALTNER: Okay. 15 MR. WEINTRAUB: That's an assumption 16 that we had to make. 17 MS. WALTNER: Okay. 18 MR. BROOKMAN: Okay? Yes? Okay. 19 MR. WEINTRAUB: Okay. 20 MR. BROOKMAN: Okay. We're about to 21 move on here. Okay. Keep going. 22 MR. WEINTRAUB: Going forward, so we're

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 147 1 going to move back to polishing. So with 2 polishing, just to recap, we found a cost. We 3 found based on surveys that cost to polish is 4 about 45 percent of the impeller cost, the cost 5 that for the manufacturer a finished impeller 6 would go up 45 percent if they had to polish. 7 We were able to trend out impeller costs 8 based on data we collected from manufacturers in 9 our interviews. And we were able to trend those 10 out. We're using a factor down here, which I'll 11 get into more detail later, but it's based on the 12 specifics being divided by the flow, normalized to 13 the physical speed. We'll get into that in more 14 detail, but it's a good trending factor for these 15 types, for the impellers. 16 It ends up being, over the range of the 17 pumps that we're looking at, the cost could be 18 lower than $30 per product up to $230 per product. 19 But, on average, the shipment-weighted cost of the 20 average pump out the door, its impeller would go 21 up $46 for an end suction or $50 for an inline 22 pump.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 148 1 Yes, Charlie? 2 MR. CAPPELLINO: Charlie Cappellino, 3 ITT. So the cost for polishing, is that assuming 4 that work is done domestically? 5 MR. WEINTRAUB: It's based on what each 6 -- so it's based on our surveys of the 7 manufacturer. So it's based on whatever each 8 manufacturer said that they would do. Some would 9 do it out-of-house. Some would do it in-house. 10 Some would do it overseas. Some would have the 11 foundries do it. 12 MR. CAPPELLINO: So it's just kind of an 13 overall average? 14 MR. WEINTRAUB: It's a representative 15 average of what would take place in the industry. 16 Okay. And these costs would apply to the 17 manufacturer's production costs. It's a cost of 18 labor or material. Okay. 19 If there are no other questions, we'll 20 move forward. 21 (No response.) 22 MR. WEINTRAUB: So this just summarizes

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 149 1 the costs. There's nothing new here. On the 2 right, we have the polishing costs that we just 3 discussed. Over here, we have costs below MEI-40, 4 hydraulic redesign costs that we went through 5 first, hydraulic redesign costs with that added 6 advanced casting. Then we have the hydraulic 7 redesign -- this should say, "above." I'm sorry. 8 This is at MEI-70 as a reference. So these two 9 columns are just these two columns multiplied by 10 the 1.8 factor that we discussed earlier, to put 11 it in perspective. Okay. 12 Yes? 13 MR. BROOKMAN: Hey, Mark, thank you. 14 MR. HANDZEL: Mark Handzel from Xylem. 15 Just for reference for people looking at that 16 outside of the meeting, you really should explain 17

-- 18 MR. WEINTRAUB: Yes. 19 MR. HANDZEL: -- what you expect would 20 have to be done to get to 70, what would have to 21 be done to get to 40, like, you know, if you are 22 using advanced casting and polishing to get to 70.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 150 1 You know, just explain it on the slide, just 2 because people are going to look at this outside 3 of the meeting. 4 MR. WEINTRAUB: That's a good point. 5 Part of the premise that we're going through here 6 is that at 70, some pumps don't need to go to 7 advanced casting. It's up to the manufacturer how 8 they're going to get there, especially the higher 9 specific speed pumps that aren't going to benefit 10 from the smoother surface finish. 11 And the way we looked at it was you're 12 only -- we'll get to how we choose kind of what 13 percentage of the populations might benefit from 14 something. We're not going to assign a cost of 15 hydraulic redesign with investment casting to a 16 1,000 specific speed pump that wouldn't really 17 benefit from that because that's an added cost 18 that you economically wouldn't choose to do 19 because you could get there with a design. 20 MR. HANDZEL: Mark Handzel again. That's 21 kind of the problem with this, is you're trying to 22 make it black or white and it's never black or

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 151 1 white until -- 2 MR. WEINTRAUB: Well, we know it's not 3 black or white, but we do -- in the following 4 slides going forward, we are going to go through 5 the distribution of the industry because we have 6 this pump database. And we try to make decisions 7 of what is going to happen based on the database, 8 the distribution of flows, head, specific speeds, 9 and all of that is. Okay. 10 MR. BROOKMAN: Louis Starr? 11 MR. STARR: So Louis Starr with NEEA. 12 Just kind of to frame some of these things, so the 13 efficiency increase in general of the weighted 14 average increase in efficiency of going from MEI15 40 to 70, how much of a percent is that? 16 MR. WEINTRAUB: How many points? 17 MR. STARR: It's less than one; right? 18 MR. WEINTRAUB: No. It's more than one. 19 Does anyone have the C-value charts? I can 20 probably pull them up. Yes. There's a C-value 21 chart in your slides from earlier. Thank you, 22 Doug. Let's see. Those C-values are actually

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 152 1 efficiency points, three percent, so three 2 efficiency points. Okay. So that would be 3 3 efficiency points going from 40 to 70. 4 Louis, does that answer your question? 5 MR. BROOKMAN: Just hang on a second. 6 MR. STARR: I was just trying to 7 understand. Normally a pump efficiency is about 8 60 percent. And so with these new levels, what 9 would be the new efficiency level? Sixty-one 10 percent? 11 MR. WEINTRAUB: So, unfortunately, there 12 is no normal pump efficiency, which is the result 13 of why we're using the MEI curve. And that's why 14 we're keeping things in terms of C-values because 15 C-values are the incremental gain. They're not an 16 absolute gain. And I think we're going to move 17 forward. 18 MR. BROOKMAN: Yes. 19 MR. WEINTRAUB: Okay. New section. Now 20 we're going to move on to modeling the industry21 wide implementation of design options at each 22 efficiency level. So this is what I have been

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 153 1 alluding to. We are going to look at how the 2 industry breaks down and how these design options 3 could be applied and what the cost of them would 4 be across the industry. All right. 5 So I'm going to walk you through the 6 methodology. For each equipment class, the 7 engineering analysis will attempt to model the 8 redesign choices that will be made by the industry 9 when faced with various efficiency levels. A cost 10 model will start with the total number of pumps 11 failing at a given level. That's what we have 12 here. And then we'll assign design options to 13 each failure based on market data and direct 14 industry research. So here we have our database 15 with all models and an equipment class. 16 You choose an efficiency level. So we 17 analyze all the efficiency levels, but you choose 18 one at a time. And at each efficiency level, you 19 have pumps that are failing and pumps that are 20 passing. 21 We're going to get into this: direct 22 industry research and model distribution. That's

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 154 1 what we're going through next. And you output the 2 number of models that are -- estimate the number 3 of models that are going to be dropped and not 4 redesigned, the number of models that would be 5 hydraulically redesigned, the number that would be 6 hydraulically redesigned and changed to investment 7 casting, the number of models that would be 8 polished. We're going to go through how we get 9 there. 10 Are there questions on the high level 11 here? This is what we're going to focus on. Okay. 12 Al? 13 MR. BROOKMAN: Al Huber? 14 MR. HUBER: Al Huber, Patterson. How 15 did you determine which one you would use? In 16 other words, I guess if it's close, you would use 17 polishing, but, I mean, if you had to do redesign 18

-- 19 MR. WEINTRAUB: Al? 20 MR. HUBER: -- where you had to change 21 to advanced design tooling, unless you know what 22 the manufacturer already has, how do you decide --

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 155 1 MR. WEINTRAUB: We're going to go 2 through that assumption right now, Al. Thank you. 3 MR. HUBER: All right. Go. 4 MR. WEINTRAUB: Good question. That is 5 exactly what we're going to walk through. 6 Okay. So this is another high-level 7 chart. Well, it's more detailed than before. I'm 8 going to walk you through it. Okay. Number of 9 failing models. That's the top of that circle 10 that we were just at from the survey. Right now 11 we're using Navigant and LBNL's database. We hope 12 to be using data from the HI-NEMA BIS database to 13 update this after this meeting. 14 You take out your models that are 15 dropped and not redesigned. We're going to get 16 into that detail also. From there, you get models 17 requiring redesign, number of models. Based on 18 our research, we looked at the breakdown in the 19 industry of number of pumps that are investment 20 cast, so advanced casting, percentage. We applied 21 them, sand cast and the percentage that are other 22 type, fabricated stainless steel models.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 156 1 Then you look at them and say, "Well, 2 what can happen to each one of these?" So a 3 fabricated stainless steel model can only be 4 hydraulically redesigned. It's the only option. 5 Investment cast and die cast models can only be 6 hydraulically redesigned because you can't polish 7 it to get it any smoother. It's not worth that. 8 And you can't change your casting process because 9 you're already at the better casting process. 10 The only models that had any variability 11 in them were the ones that were sand cast. So we 12 got the percentage of the market that is sand 13 cast. So we have the number of models that are 14 sand cast. 15 Of these pumps, not all pumps are even 16 eligible to be polished. If you're failing and 17 you're really failing, you can't be polished. It's 18 not going to happen or you can do it, but it's not 19 going to get you anywhere. So it's not worth the 20 cost. 21 The definition of eligible down here, 22 you need to be sand cast. So we got that. We

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 157 1 determined a specific speed under 1,200. Through 2 discussions with Greg Case, we came up with a 3 cutoff saying beyond there, if your specific speed 4 is above there, you're probably not going to do 5 this anyway because your benefits just aren't 6 there. And you need to be able to meet the given 7 efficiency level just by being polished. So 8 you've got to be close to it. And we have those. 9 We have those distributions because we have a 10 database. 11 So from there, you get a small chunk, 12 you know, that are even eligible to be polished. 13 Then of those ones that are eligible to be 14 polished, not every manufacturer is going to 15 choose to take that path. They may just redesign 16 it anyway. So we made the assumption here that of 17 the ones that could even could be polished, 50 18 percent would be polished, 50 percent would be 19 hydraulically redesigned. That's that split. And 20 that was an assumption. The ones not eligible to 21 be polished, they could either be hydraulically 22 redesigned or hydraulically redesigned with a

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 158 1 change to investment casting. 2 The way we determined how many would be 3 changed to investment casting, this is an 4 assumption of the level. We talked with Greg Case 5 of HI, talked about where the market is right now 6 -- 60 percent is what we have -- thinking that 7 maybe 10 percent would go there over time, that 8 it's never going to be 100 percent of the market 9 investment casting. And, you know, that is open 10 for discussion. That is the way we get this 11 percentage. So saying 60 percent are advanced 12 cast right now; after, maybe 70 percent will be 13 advanced cast. 14 Okay. So are there questions on how we 15 slow this down? 16 MR. BROOKMAN: Chuck Powers? 17 MR. POWERS: Hi, Dan. 18 MR. WEINTRAUB: Yes? 19 MR. POWERS: Chuck Powers, Flowserve. So 20 somehow in this equation in a high level, you did 21 a nice job laying that out, you and Greg and the 22 world, to pumps. But I think what we have to

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 159 1 consider is my view and the people I've spoken to 2 and corporate level, if they're going to spend the 3 200,000 or 300,000 per pump -- okay? -- and just 4 going by the numbers and let's say a particular 5 product line on one of those end suctions that our 6 consumers buy is, you know, 50 to 100 models. 7 We're talking a huge investment; right, which is 8 good. 9 MR. WEINTRAUB: Yes. 10 MR. POWERS: Right? And you're moving 11 the needle. But for them to get done with all of 12 that and still have to deliver to the customer 13 base a lead time of X, which is for some of these 14 products same day or less and in some cases a 15 little bit longer, the polishing won't come into 16 play. 17 They're not going to spend that kind of 18 money is my take to then put a lot of people on 19 the shop floor polishing impellers because -- I'm 20 assuming. You don't give enough detail here. 21 You've got volutes versus impellers. And certain 22 things you'll be doing on either one of them. And

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 160 1 probably the volutes will be more of the iron and 2 the impellers would be more the stainless or 3 bronzes, so to speak, but there are other things 4 being done. I think we have to just get a little 5 more realistic as we can in getting close to that. 6 I don't know the right answer; right? 7 MR. WEINTRAUB: Yes. So -- 8 MR. POWERS: We have to be careful with 9 this because my guess is there is 10 manufacturability. There's what the market -- 11 it's not just efficiency; right? 12 MR. WEINTRAUB: Yes. 13 MR. POWERS: It's lead times. It's a 14 lot of other factors; right? 15 MR. WEINTRAUB: Yes. 16 MR. POWERS: And the other thing is, 17 just to help you on this thing, as best I can 18 tell, -- you talk to Charlie and others -- when 19 you go from 40 to 70, efficiency is not the only 20 answer because, all of a sudden, if Doug says, 21 "Chuck, I need on certain products a range from X 22 of BEP to Y beyond that," when you start pushing

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 161 1 efficiency, you can get the efficiency you need. 2 But the NPSH range on the curve, -- 3 MR. WEINTRAUB: Yes. 4 MR. POWERS: -- other factors, having a 5 healthy pump, rather than what we call a peaking 6 pump will come into play big time. 7 MR. WEINTRAUB: Yes. 8 MR. POWERS: So you may make your 70-80 9 percent MEI, as you want to play it, or however, 10 but you're going to lose out on other factors; 11 right? 12 MR. WEINTRAUB: Yes. But, Chuck -- yes. 13 MR. POWERS: Do you know what I mean? So 14 I'm just saying -- 15 MR. WEINTRAUB: Yes. Yes. 16 MR. POWERS: I threw a lot out there. 17 I'm not trying -- 18 MR. WEINTRAUB: Yes. Chuck -- 19 MR. POWERS: There's a lot here that we 20 don't walk down a path and just make some high21 level assumptions thinking things are going to be 22 a certain way. Like when you say 50/50 on that

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 162 1 polished versus hydro, I think when you've got a 2 million pumps going to the field, having -- I 3 know, you know, people like to employ people, but 4 having a bunch of guys in the shop polishing 5 impellers is not the answer. 6 MR. WEINTRAUB: Yes. So, Chuck, let me 7 first address the polishing comment that you made. 8 So the first comment that you made was incurring a 9 redesign cost and then spending time and money 10 polishing. So, first of all, we're going to see 11 that the polishing percentage is very small. But 12 the idea is that if we're choosing the design 13 option of polishing, that pump is not incurring 14 the cost of a redesign. Someone has chosen that 15 they have decided to use their resources to 16 hydraulically redesign a large chunk of their 17 pumps. And this one or two pumps that are left 18 they decided to polish because it is going to save 19 them money this year and next year. 20 MR. POWERS: Well, then just I'm going 21 to interrupt. 22 MR. WEINTRAUB: Yes.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 163 1 MR. POWERS: Your chart doesn't seem to 2 lean there because you start at the top "Models 3 requiring redesign." 4 MR. WEINTRAUB: Okay. 5 MR. POWERS: From there -- 6 MR. WEINTRAUB: That is a good point. 7 Yes. 8 MR. POWERS: From there, you lead to 9 polishing. 10 MR. WEINTRAUB: So that's the 11 difference. 12 MR. POWERS: So I assumed they're being 13 redesigned. 14 MR. WEINTRAUB: That is a good point. 15 And that is a wording issue. 16 MR. POWERS: No problem. No problem. 17 MR. WEINTRAUB: And I agree. The word 18 "redesign" means it needs something done to it to 19 pass. And that is a good point. It does not mean 20 the same as hydraulically redesigned. 21 MR. POWERS: Okay. 22 MR. WEINTRAUB: And that is a good

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 164 1 point. 2 MR. POWERS: And there is one more 3 factor that the world out there deals with, not 4 what we're theoretically putting together here. 5 MR. WEINTRAUB: Yes. 6 MR. POWERS: A customer is going to say, 7 "Chuck, I need to replace that impeller" -- just 8 bear with me -- five years down the road, two 9 years down the road, whatever. When you polish, 10 it's not an exact science. Joe in the shop 11 polished it the day it was built. You know, he 12 had a good day, and he did a good job. Right? 13 Five years later, Doug calls up and said, "Man, 14 that pump is worn out, Chuck. I'm going to go to 15 your distributor and buy a replacement." It won't 16 be the same. Then they buy the building material, 17 then identify it and the degree in polishing and 18 where it's trimmed and all of that. 19 MR. WEINTRAUB: Yes. 20 MR. POWERS: But my point is polishing 21 leads to complications; right? It's a good thing, 22 but it's not sustainable.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 165 1 MR. WEINTRAUB: Yes. 2 MR. POWERS: That's my take. I mean, if 3 you guys want to speak up? I can tell you it's a 4 nightmare. 5 MR. BROOKMAN: Mark Handzel? 6 MR. HANDZEL: Yes. Mark Handzel from 7 Xylem. I would fully agree with Chuck. I mean, 8 you know, the polishing is a thing that the 9 manufacturer keeps in his back pocket. If 10 somebody asks us to certify performance of tests 11 and we're not reading published efficiency, we can 12 go in and do some polishing to get to the number. 13 So, you know, patterns change over time. Patterns 14 wear over time. So it's kind of used as a safety 15 factor that the manufacturer uses. 16 MR. POWERS: And I think, Dan, the buy17 in from -- forget the manufacturer for a minute. 18 The buy-in from the public, from the users is 19 sustainability. Polishing is way over. It's not 20 even the same game; right? 21 MR. BROOKMAN: Okay. So that would -- 22 MR. POWERS: And sand castings is not

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 166 1 sustainability. It's a life, but it's not there. 2 MR. BROOKMAN: Chuck Powers. Now to 3 Greg Case. 4 MR. CASE: Dan, one of the things that 5 we discussed -- 6 MR. POWERS: Yes. 7 MR. CASE: -- when we were talking about 8 this is that polishing is probably a short-term 9 answer for people as they are trying to hit this 10 new target efficiency. And maybe they'll do that 11 for a short period of time until they get the 12 redesign they wanted. 13 MR. WEINTRAUB: Yes, yes. So let me 14 fast-forward a little bit. That's where it gets 15

-- 16 MR. BROOKMAN: Lucas has a point here, 17 Dan. Lucas? 18 MR. WEINTRAUB: And when we get to the 19 results, you're going to see what we have modeled 20 here: less than three percent of failing pumps to 21 be polished. And we're trying to model the 22 industry. And we know that not everybody is at

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 167 1 this table. And we know that there are small 2 companies that do not have the resources to invest 3 right now in a hydraulic redesign all around. But 4 if they can get away with polishing to get over 5 that hump as long as they can, it may happen. It's 6 supposed to be representative of a small portion 7 of the industry. 8 MR. ADIN: Right. So I just had -- 9 MR. WEINTRAUB: Yes. 10 MR. ADIN: -- a kind of a higher-level 11 point along the lines of what Dan has been 12 alluding to. I mean, all of this is leading up to 13 something; right? We came up with some estimates. 14 And we had to make some assumptions along the way. 15 So we certainly don't expect to be able to make 16 decisions based upon what we are going to present 17 today. It would be great if we could. 18 I mean, we are right. And you guys all 19 agree with everything we have done. But we 20 understand that some of the assumptions probably 21 aren't exactly right. And to the extent we have 22 shown something up there that you don't -- I mean,

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 168 1 the feedback you provide so far is great. I mean, 2 this is exactly what presenting this information 3 does, is gives you a chance to react. But 4 obviously to the extent you have more specific 5 ideas about what numbers like this could be, 6 that's, you know, what we need to know as soon as 7 we can so that we can give you refined analysis 8 that makes more sense. So just to kind of -- 9 MR. WEINTRAUB: All right. So thank you 10 guys for the input on that. So we'll move 11 forward. 12 MR. BROOKMAN: Forging ahead, yes. 13 MR. WEINTRAUB: Yes. So now we're going 14 to get into some other assumptions that we will 15 definitely like to hear your input on. So removed 16 models that are dropped and not redesigned, so 17 we're making the assumption that not every pump is 18 redesigned. Okay. So I am going to walk through 19 this slow, and then we're going to talk about it. 20 For many failing models in our database, 21 manufacturers may choose not to redesign the pump 22 and drop that model from the market. Common

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 169 1 reasons that we have encountered through our 2 discussions would be low sales leading to a poor 3 business decision for a redesign. Many pumps in 4 our database actually have zero sales. We know 5 they exist, but no one is buying them currently or 6 at least in 2012. 7 A company may already have a 8 hydraulically overlapping passing model that it 9 can leverage. Oftentimes with the large 10 manufacturers, there are multiple brands. They 11 can pull that brand in and use that pump to cover 12 the space that the failing pump was covering and 13 not incur costs. 14 Based on our direct industry research, 15 this was the research we performed when we 16 interviewed manufacturers and discussed what would 17 happen at different MEI levels. We estimate that 18 at the lowest level of a PER-10, 60 percent of the 19 failing models would be dropped and not 20 redesigned. These are a lot of pumps that have 21 zero sales. These are a lot of pumps that have 22 overlapping models in other brands. We can

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 170 1 discuss this assumption in a second. 2 Going up the line, we also discussed 3 MEI-40 and what would happen at MEI-40. There we 4 saw on average 40 percent of those pumps would not 5 be redesigned. And that level we saw going 6 forward up to 70. I will give you our reasoning 7 behind this first, and then you can discuss. 8 At the lower levels, we are looking at 9 what the market is doing right now. And we saw 10 that many manufacturers have overlapping brands 11 and indicated -- this is not every individual 12 manufacturer. This is the industry as a whole. 13 Certain manufacturers have overlapping brands that 14 make up a large percentage of pumps that would 15 fail. You can look at the data and see what 16 people have indicated would happen. And on 17 aggregate, 60 percent of those models would not be 18 redesigned. It doesn't mean that you as a 19 manufacturer wouldn't do that, but we are modeling 20 the industry as a whole. 21 So I'll open it up for questions on 22 this.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 171 1 MR. BROOKMAN: Al Huber? 2 MR. HUBER: Al Huber, Patterson. One of 3 the reasons that they may have low sales is 4 because it's not competitive. So, I mean, they 5 would have to make a -- you would have to go to 6 the market and see if in every case -- I mean, I 7 would agree with you if there were no sales for 8 the 60 percent of those models, but I don't think 9 that's the case. 10 MR. WEINTRAUB: No, that's not the case. 11 It's not the case. 12 MR. HUBER: And I don't know that 13 because of overlapping brands -- it depends on how 14 they want to do their business. I mean, I really 15 don't -- I can't say. I don't have any 16 overlapping brands. So I wouldn't know. 17 MR. WEINTRAUB: Yes. So we're trying to 18 represent the ones that make a decision not to and 19 the ones that don't. That's what we're trying to 20

-- 21 MR. BROOKMAN: Chuck Powers? 22 MR. HUBER: It just seems extremely high

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 172 1 to us, Dan, -- 2 MR. POWERS: Yes. 3 MR. HUBER: -- extremely high. We just 4

-- 5 MR. POWERS: Yes, it does seem high, 6 but, Dan, I -- 7 MR. BROOKMAN: Chuck Powers? 8 MR. POWERS: I guess the question -- 9 Chuck Powers, Flowserve. The question I'd like to 10 ask is -- how should I say it? A model versus a 11 product line. In other words, if somebody had a 12 two-inch up to a ten-inch -- I'm just picking 13 something here. Okay? And they say that was 40 14 products. If you were to say to me, "Chuck, 15 they're going to drop 60 percent of that range of 16 that product," I highly doubt that. Now, if 17 somebody were to say to me that they're going to 18 drop a product line because it's a loss leader, 19 you know, it could be. But there are 20 manufacturers out there that have loss leaders but 21 they supply it because it's a part of a bigger 22 chain of product lines, like, you know, the

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 173 1 chemical industry, standard end suctions and 2 other. They'll have loss leaders, but they have 3 to have them so that they can keep that in the 4 envelope for all the rest; right? 5 MR. WEINTRAUB: Yes. 6 MR. POWERS: So you have to be careful. 7 MR. WEINTRAUB: Yes. 8 MR. POWERS: The other factor on the 9 second major green box up there is you've got to 10 consider they may drop it because they'll just 11 take everything offshore now that they know 12 they've got to redo the line, manufacture 13 offshore, and forget about the U.S.; right? So 14 there are going to be product lines that are going 15 to go offshore or they'll find a company that 16 they're going to do inorganic activity with and 17 they're not going to worry about the U.S. 18 MR. WEINTRAUB: Yes. 19 MR. POWERS: So that there are factors 20 here beyond just those two smaller bullets you 21 have up there; right? 22 MR. WEINTRAUB: And, Chuck, to address

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 174 1 your first question, so the idea of low sales does 2 not indicate that they'll just drop. That's 3 correct. So we didn't use that as the deciding 4 factor. 5 MR. POWERS: Yes. 6 MR. WEINTRAUB: We used our research 7 data -- 8 MR. POWERS: Sure. 9 MR. WEINTRAUB: -- that said what 10 manufacturers were saying would happen, how many 11 they would redesign versus how many they wouldn't 12 even touch and say -- 13 MR. POWERS: But it was clear on the 14 product range versus a product type? 15 MR. WEINTRAUB: Okay. And so that is 16 based on as submitted to our original survey by 17 manufacturers and by the current form of the 18 survey that we have, a model was a single line in 19 the NEMA, in the HI survey. 20 MR. POWERS: Yes. I think the first 21 survey had questions on the depth of those 22 questions.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 175 1 MR. WEINTRAUB: Yes, yes. 2 MR. POWERS: But, you know, you have 3 your survey. I'm not arguing. 4 MR. WEINTRAUB: Yes. So the current 5 survey -- 6 MR. POWERS: It just seems strange. 7 MR. WEINTRAUB: The current survey is a 8 single line in that survey is a model. However, 9 each manufacturer wants to define their breakup of 10 their sales, their shipments, and their 11 performance. Those are models. 12 MR. BROOKMAN: Tom Eckman? 13 MR. ECKMAN: So that's 60 percent of the 14 failing models. What fraction of the total sales 15 volume is that? 16 MR. WEINTRAUB: Yes, exactly. Yes. 17 We'll get there. Actually, at the lower level, 18 PER-10 -- I think it's for end suction -- you're 19 below 7 percent of sales, but I think since we 20 never went through the max tech slides -- everyone 21 has their packet from earlier? If we flip, I just 22 want to give an example here so you can see what

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 176 1 we're talking about this low end. Flip to slide - 2 - let's see, yes, 19. There we go. Here -- all 3 right. I'm just going to describe it to you. On 4 your y-axis, you have the failing C-value. Pumps 5 at the top, blue dots, those are more efficient. 6 Pumps at the bottom, blue dots, those are less 7 efficient. 8 Your red line there is PER-10. That's 9 anything below there fails at PER-10. You can see 10 where those pumps are sitting in the marketplace 11 compared to everything else. There are a lot of 12 pumps better than them in the marketplace. And 13 these are not representative of the massive 14 marketplace. And it kind of follows that these 15 are the stragglers down there at the very below 16 PER-10. They're not part of the bulk. So if you 17 want to look at it that way, it makes sense that 18 these guys could possibly be dropped. As you move 19 further down the line, that 40 percent, I 20 understand that could be for contention. But 21 you're still going to be losing those models at 22 the low end. They're carrying over. It's

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 177 1 cumulative. But they're not a large percentage of 2 sales, and they're not a large percentage of 3 models overall. We'll actually look at the 4 numbers of models failing. 5 MR. POWERS: Dan? 6 MR. WEINTRAUB: Yes? 7 MR. POWERS: And it's a good chart, and 8 it shows the specific speed has a big play in this 9 thing; right? 10 MR. WEINTRAUB: Yes. That's a 11 discussion for another time, yes. 12 MR. POWERS: Which we had talked about 13 earlier. 14 MR. WEINTRAUB: Yes. 15 MR. POWERS: But the question is, when I 16 go out to the field, I ask a customer, what is the 17 application? And what do you need it for? And 18 Gary might say, "Hey, Chuck, I'm okay with that" - 19 - it doesn't mean he is, but "I'm okay with that 20 because that pump is designed a certain way with 21 the nozzle location and, you know, a little bit 22 higher head and this factor and that factor." Do

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 178 1 you follow what I'm saying? 2 MR. WEINTRAUB: Yes, yes. 3 MR. POWERS: So there are loss leaders 4 in every product line. But the loss leaders are 5 needed because of the pumping applications the 6 customers had and what they need to use them for; 7 right? 8 MR. WEINTRAUB: Yes. 9 MR. POWERS: Some are what we call, you 10 know, peaking pumps, where they just run them once 11 a day. 12 MR. WEINTRAUB: Yes. 13 MR. POWERS: And sometimes they're run 14 24/7. It depends on the application. So there 15 may be some loss leaders that are only going to 16 run for an hour, but it's doing a certain role for 17 a certain factor. I think manufacturers, you 18 know, when you say it won't meet this, there's a 19 big issue here as far as what gets taken off the 20 marketplace and not. When you say there's a bunch 21 more up above that meet it, you've got to be 22 careful what that really says. You know, flow-

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 179 1 wise isn't the only answer. 2 MR. WEINTRAUB: Right. And so what you 3 are saying is completely correct. I keep 4 reiterating on this. That is not, the idea that 5 they're loss leaders or there are low sales is not 6 driving our estimates of 60 percent. Our estimate 7 of 60 percent comers from what we have been told 8 from the industry under NDA interviews of what 9 percentage of pumps would be dropped of their 10 lines. It's an aggregate. 11 MR. BROOKMAN: Dan, as a process 12 point, 13

-- 14 MR. WEINTRAUB: Yes. 15 MR. BROOKMAN: -- I'm thinking before 16 too much longer, we should break for lunch. 17 MR. WEINTRAUB: Okay. 18 MR. BROOKMAN: So you should be looking 19 for a natural break point. 20 MR. WEINTRAUB: Yes. We'll look for a 21 place to break here. 22 MR. BROOKMAN: Okay.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 180 1 MR. WEINTRAUB: But we can continue to 2 discuss this point -- 3 MR. BROOKMAN: Yes. 4 MR. WEINTRAUB: -- as needed if anyone 5 has any other thoughts. I think this can be a 6 point for discussion in between meetings, too, of 7 trying to come up with a number that everyone is 8 happy with. This is what our data tells us, and 9 we can work off it. All we can do is work off 10 data. 11 MR. BROOKMAN: Tom Eckman? 12 MR. ECKMAN: Tom Eckman. I mean, it 13 just seems not out of the question that if Europe 14 went to 40 percent of the market standard that a 15 fair fraction of the existing market would fail. 16 If we're trying to cut out 40 percent of the least 17 efficient, it seems to me that just is a function 18 of where we decide to cut the standard at. The 19 higher efficiency, the more get removed. 20 MR. POWERS: Right. 21 MR. ECKMAN: So it shouldn't be a 22 surprise. It will be some that don't make it.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 181 1 MR. POWERS: Yes. We all agree. I 2 think we all agree. 3 MR. HUBER: They won't be redesigned. 4 MR. ECKMAN: Yes. It's just like it's 5 not worth doing it. 6 MR. POWERS: Or if the costs are 7 offshore, manufacturers go offshore for 8 manufacturing. There are other factors. 9 MR. ECKMAN: Whatever the solution is, 10

-- 11 MR. POWERS: Yes. 12 MR. ECKMAN: -- they won't be in the 13 market anymore because they don't cut the mustard. 14 MR. BROOKMAN: So, Dan, keep going. 15 MR. WEINTRAUB: Yes. So I want to put 16 this in perspective of actual numbers now. So 17 we're talking about 60 percent. So what does the 18 60 percent mean? What does the 40 percent mean? 19 Right now we're looking at end suction close20 couple and end suction frame-mounted pumps 21 together. I must have had another slide with the 22 total number, but the total number of models that

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 182 1 we have currently, 2,050. I think that's going to 2 go up when we get the HI data, but we had to base 3 it on what we have right now. So we're saying 4 industry has 2,050 pumps, saying at PER-10, 250 of 5 those fail by definition. It's 250 models over 6 those 2 equipment classes. Now, if we're saying 7 60 percent of the models are dropped, that's 123 8 dropped. That's 82 models requiring redesign. 9 That's the breakdown. 10 So, to put this into perspective, to let 11 you guys -- so you can think about what those 12 numbers mean for models across the industry. And 13 it goes up from there. You can just see the math. 14 So 25, 40. And we're going down. So we say 60. 15 We go down linearly to 50 percent being dropped at 16 PER-25, where it settles at 40 percent being 17 dropped at PER-40, where it goes out. 18 Again, I think this is a discussion 19 topic to have that we can work through and you 20 guys can put forward recommendations for where you 21 think and with justification and the advocates, 22 the manufacturers, can kind of try and settle on

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 183 1 something. This is we presented the data we have. 2 That's the best we can do. 3 MR. POWERS: Dan, this is Chuck Powers. 4 It's a great chart. It's also a nightmare. That's 5 a scary chart up there. 6 MR. WEINTRAUB: Yes. 7 MR. POWERS: You're talking a number of 8 models dropped as a correlation to number of 9 manufacturers, you know, on their percentages. 10 What is unique here is if my company were to lose 11 328 out of the 820 there, -- okay? -- I might 12 survive. But if you've got a manufacturer that 13 that's 90 percent of this product, that 328 14 number; right -- and, you know, you're showing 15 total numbers; right? 16 MR. WEINTRAUB: Yes. So, Chuck -- 17 MR. POWERS: He's in trouble. 18 MR. WEINTRAUB: We're not trying to 19 represent individual manufacturers. 20 MR. POWERS: No. I know you aren't, but 21 I'm saying it's -- 22 MR. WEINTRAUB: Some manufacturers may

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 184 1 decide that the status of their manufacturing and 2 their brand, say, we're just getting rid of this. 3 We don't need them. And then there are some that 4 are not going to get rid of any because they say 5 all of these are making money for us or we want to 6 be in the game on all of them. They're going to 7 stay there. We're trying to come up with a number 8 that represents the industry. It can't be applied 9 to an individual manufacturer because it won't 10 make sense that way. But we have to model the 11 industry as a whole. 12 And, regardless of what that number is, 13 whether that's 60, 40, 50, 30, it's going to be a 14 number. We know it is going to happen. And we 15 have to come up with a number that makes sense. 16 MR. POWERS: So the question would be 17 for the standards -- Chuck Powers, Flowserve -- 18 standard product that we're talking about here, 19 then having products offshore for the standard 20 stuff because the cost would be -- you know, 21 possibly would not be part of it and brought into 22 the states, that might be the final answer here.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 185 1 MR. WEINTRAUB: Could you explain what 2 you mean by that? 3 MR. POWERS: If the costs are not -- 4 diminishing returns do not pay; right, and a lot 5 of issues, sand castings, you name it. You know, 6 we start listing a lot. You had some great slides 7 there. We may say to ourselves for these standard 8 smaller products, it may behoove us just to -- you 9 know, we may start to recognize some of the 10 manufacturers say, "Look, it's better and more 11 efficient and less costly to go offshore to 12 manufacture this." They'll ship everything in. 13 MR. WEINTRAUB: so if you're saying 14 you're going offshore to manufacturer but then 15 selling them in the U.S. or not selling them? 16 MR. POWERS: Sure, to meet the standard. 17 Sure. 18 MR. WEINTRAUB: Those costs are still 19 costs to you. We're going to account for those 20 costs. 21 MR. POWERS: Yes, but less cost; right, 22 to go offshore.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 186 1 MR. WEINTRAUB: Yes. But, again, in our 2 analysis, the costs that we're using are the costs 3 supplied by the manufacturers. And that's 4 assuming that some people have already factored in 5 those going offshore costs because they know that 6 getting to MEI-40 is going to cost money. And 7 they want to try and save money by going offshore. 8 MR. ADIN: Can I try and just resolve -- 9 MR. BROOKMAN: Yes. Lucas Adin? 10 MR. ADIN: Lucas Adin, DOE. I don't 11 want to speak for you, Chuck, but I think it seems 12 like the crux of your question is more about the 13 job impacts aspect of this. And that is part of 14 the analysis. It's not part of this analysis. But 15 there is a separate part in which we consider all 16 of that and will look at which manufacturers will 17 be likely to move jobs overseas and that kind of 18 stuff. 19 MR. POWERS: No. He's doing a good job 20 with this; right? It's good mind thought and good 21 process information. But earlier on, he did talk 22 about the impact of all of these things, the

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 187 1 costs. So it is impacting that indirectly; right? 2 MR. BROOKMAN: Alex Bosenberg? 3 MR. BOSENBERG: I want a follow-on 4 question for Chuck. So what's your point of your 5 last statement? In every rulemaking I have been 6 in, there has been a loss of U.S. manufacturing 7 jobs. It's a given. 8 MR. POWERS: But I think those kind of 9 numbers, if you say 50 percent -- if it's 10 10 percent, 20 percent, yes, but 50 percent products 11 dropped, that's pretty significant. 12 MR. BOSENBERG: I've seen much worse. 13 MR. BROOKMAN: Okay. 14 MR. WEINTRAUB: Fifty percent of the 15 failing. 16 MR. POWERS: Which industry are you 17 with? 18 MR. BOSENBERG: Lighting. 19 MR. BROOKMAN: Louis Starr? 20 MR. STARR: So I think we're making a 21 point it is 50 percent of the failed models or 40 22 percent of the failed models. The other part,

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 188 1 too, is that, you know, if you drop 328 models, it 2 doesn't mean -- you could still make those models 3 and sell them outside of the U.S. You just 4 couldn't sell them inside of the U.S. So you 5 could continue to sell them wherever you wanted 6 to, just not into the U.S. market. 7 MR. WEINTRAUB: That's a valid point. 8 MR. BROOKMAN: Al Huber? 9 MR. WEINTRAUB: Outside of our scope. 10 MR. HUBER: This assumption on model, 11 percentage of model, drops is going to have a 12 significant impact on any decisions on what we 13 finally decide on is the appropriate level -- 14 MR. BROOKMAN: Efficiency level. 15 MR. HUBER: -- of efficiency. 16 MR. WEINTRAUB: Yes, yes. 17 MR. HUBER: And, therefore, we've got to 18 have a better handle on this because I can tell 19 you the industry believes nowhere near that 20 number, at least the folks sitting here. I don't 21 know who you talked to or who said what. And 22 somebody may have been trying to impress you that

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 189 1 they were just going to drop it all and go. I 2 don't know if anybody was thinking about what they 3 were saying, but I can tell you the industry does 4 not believe that 60 percent of the models would be 5 dropped. You know, we just don't. 6 MR. WEINTRAUB: Well, Al, like I said, 7 we've gone off of our data. And we -- 8 MR. HUBER: I understand that. 9 MR. WEINTRAUB: This was worked out 10 fast. 11 MR. HUBER: We just don't believe it. 12 And, therefore -- 13 MR. WEINTRAUB: You guys need to caucus, 14 put forward something. 15 MR. HUBER: Well, I don't think our 16 caucus is going to do it. I think we're going to 17 have to come up with some data. 18 MR. ADIN: Al? 19 MR. HUBER: It's such a huge impact on 20 the overall analysis. To make these assumptions 21 that high that you're not getting -- that 60 22 percent of the product would not be redesigned is

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 190 1 kind of mindboggling to this group. 2 MR. BROOKMAN: Tom, follow-on? 3 MS. WILLIAMS: Wait. 4 MR. ECKMAN: Yes. Wait. I just want to 5 make sure, Al, that we're talking about start to 6 top line, total number of models failing at a PER7 10 -- 8 MR. HUBER: Yes. I understand. 9 MR. ECKMAN: There's 205 models, so 60 10 percent of those, not -- 11 MR. HUBER: Yes. I know exactly what 12 he's saying. I'm still telling you it has a huge 13 impact on the end analysis -- 14 MR. ECKMAN: I agree with that. 15 MR. HUBER: -- for something that I 16 think there is not much data for. 17 MR. BROOKMAN: Charlie Cappellino? 18 MR. CAPPELLINO: Charlie Cappellino, 19 ITT. I just want to make a point to support Al's 20 position here. If you are in a business and 21 you've got two products and those products are 22 overlapping and one of those products is lower

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 191 1 efficiency, it doesn't make any sense to me that 2 anybody would maintain those to begin with in the 3 marketplace today. So it's kind of 4 counterintuitive that that actually would be the 5 state of industry today because everybody is 6 always trying to reduce inventory, reduce the 7 number of model lines, and everything else. So, 8 you know, unless there was a really good reason 9 for somebody to have both of those lines, it just 10 seems odd that you would be able to eliminate that 11 high of a percentage of something that is already 12 in the marketplace that is being pressured by 13 market forces that tend to kind of create a 14 certain level of efficiency and product offerings 15 today anyway. So it just seems kind of odd. 16 MR. POWERS: And Dan, this is Chuck. 17 It's interesting. And, again, good data. This is 18 where we have to take this and understand it and 19 help you, give you feedback like you're asking; 20 right? But if you take the 492, if I'm reading 21 this right, number of models of redesign, just 22 that number there in the middle at the 40 PER;

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 192 1 right, that's on just a quick calculation, it 2 would be average 200,000 a model. 3 MR. WEINTRAUB: Yes. 4 MR. POWERS: That's $100 million. 5 MR. WEINTRAUB: Yes. Yes. And we're 6 going to get there. We're going to sum it all up. 7 MR. POWERS: Well -- 8 MR. BROOKMAN: It's now 12:27. What do 9 you think -- 10 MR. WEINTRAUB: So, Doug, this 11 discussion of models, that's a breaking point. 12 MR. BROOKMAN: Okay. 13 MR. WEINTRAUB: We don't need to go 14 beyond this right now. 15 MR. BROOKMAN: Okay. Let's take final 16 questions on this slide. We've already noted that 17 many in the manufacturers' caucus really question 18 the number of models that would fall off based on 19 this analysis. Dan has said he built this off the 20 data he has. The manufacturer said earlier today 21 the new data coming from NEMA BIS apparently now 22 has been sent? Greg, I'm looking at you.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 193 1 MR. WEINTRAUB: That's not going to give 2 us any more insight. 3 MR. CASE: We'll find out shortly. 4 MR. BROOKMAN: It's not going to be -- 5 but I think the analysis we haven't had is what 6 we're going to use today, of course; right? 7 MS. WILLIAMS: It's not relevant. 8 MR. HANDZEL: Just to qualify it, 9 though, I mean, it's not going to have -- 10 MR. BROOKMAN: Mark Handzel? 11 MR. HANDZEL: -- information -- 12 MR. WEINTRAUB: No. 13 MR. HANDZEL: -- like this -- 14 MR. WEINTRAUB: No. 15 MR. HANDZEL: -- because this came from 16 the manufacturers' survey that Navigant did last 17 summer. So, I mean, the stuff we're sending is 18 nothing along these lines. 19 MR. BROOKMAN: Okay. 20 MR. HANDZEL: It's more the performance 21 data update. 22 MR. WEINTRAUB: Yes.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 194 1 MR. BROOKMAN: Lucas? 2 MR. WEINTRAUB: The stuff we're getting 3 does not apply to this. 4 MR. BROOKMAN: Lucas Adin? 5 MR. ADIN: And I'll reiterate the point 6 I made earlier. We are giving you this now to 7 give you a chance to react to it. 8 MR. WEINTRAUB: Yes. 9 MR. ADIN: So, I mean, we do ask, 10 especially where you think things are clearly 11 wrong, give us whatever you can that helps us 12 justify a different assumption. 13 MR. BROOKMAN: Mark Handzel? 14 MR. HANDZEL: And Mark Handzel from 15 Xylem again. I think, you know, we have all said 16 we need to talk. 17 MR. BROOKMAN: Yes. 18 MR. ADIN: Yes. 19 MR. HANDZEL: You know, we're going 20 through our head who was interviewed, who would 21 have impacts where they might be selling multiple 22 families, serving, you know, multiple end suction

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 195 1 frame-mount pumps, for example. Would they get 2 rid of one and just redesign into one platform, 3 things like that? So we just need to do some 4 talking and compare those notes and see if we can 5 come up with something. 6 MR. BROOKMAN: Maybe when we return from 7 lunch, we can have more detail from you all. But 8 Greg Case? 9 MR. CASE: Greg Case, HI. We're going 10 to get these slides at some point? 11 MR. WEINTRAUB: Yes, a copy of them. 12 MR. CASE: Okay. I mean, that will just 13 kind of push this. We'll be able to send this out 14 to market and see. 15 MR. ADIN: Yes. I would have sent them 16 earlier if I could. We just didn't have 17 everything quite ready to go until just before the 18 meeting, but -- 19 MR. CASE: I completely understand. 20 MR. ADIN: -- yes, we'll provide them 21 very, very soon. 22 MR. BROOKMAN: Gary Fernstrom?

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 196 1 MR. FERNSTROM: Dan, this is Gary. I 2 just would like to make the observation that 3 you're presenting one of the most complicated and 4 broad-ranging, if not the most complicated and 5 broad-ranging, presentations I've ever seen. 6 (Laughter.) 7 MR. FERNSTROM: And I think you have 8 done an excellent job. We may not agree with 9 everything you have shown, but you have been 10 totally clear about what you did, why you did it, 11 and how you did it. So I really appreciate how 12 thorough and well-prepared you are. 13 MR. BROOKMAN: Mark Handzel? 14 MR. HANDZEL: Mark Handzel from Xylem. 15 Dan, I was going to make the same observation. You 16 have done a great job summarizing this data that 17 was provided to you guys. I mean, obviously it 18 raises questions for us. So we're not personally 19 challenging anything you did. 20 MR. WEINTRAUB: Yes. 21 MR. HANDZEL: You explained it well. You 22 obviously know it. So I just want to compliment

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 197 1 you on a great presentation. And, you know, it 2 gives us a lot to talk about and follow up on. 3 MR. WEINTRAUB: Okay. Thank you. 4 MR. BROOKMAN: Do you all think that 5 when we return from lunch or tomorrow morning or 6 sometime you can comment more thoroughly on this 7 in the span of this two-day meeting? 8 MR. HANDZEL: This is Mark. I don't 9 think so. We can try, but I don't think we'll be 10 able to give you -- you know, we don't want to 11 just make comments without having data behind it. 12 MR. BROOKMAN: Yes. 13 MR. HANDZEL: So I think we have got to 14 pull some data together. 15 MR. WEINTRAUB: Yes. Doug, I think this 16 may also be Navigant-LBNL reaching out 17 individually -- 18 MR. BROOKMAN: Okay. 19 MR. WEINTRAUB: -- under confidentiality 20 agreements -- 21 MR. HANDZEL: Yes. Because I think you 22 know --

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 198 1 MR. WEINTRAUB: -- to kind of freshen up 2 our data and -- 3 MR. HANDZEL: Right. 4 MR. WEINTRAUB: -- see what people are 5 thinking right now. 6 MR. HANDZEL: Right. Because I think 7 you have the data on the models dropped, which 8 obviously we all -- we know what we reported. We 9 can all go look at our surveys. 10 MR. WEINTRAUB: Yes. 11 MR. HANDZEL: But I think you are going 12 to have to go to those guys and question them 13 harder exactly on that information. 14 MR. BROOKMAN: Louis Starr? 15 MR. STARR: I just kind of wondered. In 16 the EU, since they are moving up this MEI-40, what 17 was the -- can you use that as a comparison to 18 sort of give you a prediction of what might happen 19 here? 20 MR. WEINTRAUB: That would be a very 21 good thing to do. We don't have that data, but we 22 could see if it exists.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 199 1 MR. BROOKMAN: Okay. Al Huber? 2 MR. HUBER: I think one of the things 3 that you -- you know, the problem with the models 4 dropped is it really depends on which level you 5 end up going to. In other words, if you go to a 6 higher level -- and I've got so many that I have 7 got to redesign. And then I've got to make a 8 decision, what can I do to stay in the market? 9 Okay? So, you know, it's a tough question. 10 The person making the final decision has 11 to have a lot of data. And one of them is, how 12 are my pumps performing? And what is the 13 government going to ask me to do? If they're only 14 going to ask me ten, then, you know, I've only got 15 a couple of pumps I've got to do. It's no big 16 deal. I'll just go ahead and do them. You may 17 think they're not selling many now. And they may 18 not be, but they may not be because it's a poor 19 product. And they may not, but they may have to 20 keep them in their line because a lot of these 21 jobs that we go to and that we sell to are 20 or 22 30-pump jobs. And if you don't have one pump,

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 200 1 then you don't get to play. And it's a problem. 2 And that's one we all manufacturers have to face. 3 So yes, we probably end up redesigning it because 4 if our line gets so poor, then we can't go attract 5 distribution because -- 6 MS. WILLIAMS: Sorry. We totally agree 7 with you. I would just like to make one point, 8 which is that some manufacturers, even at ten 9 percent, will have a much larger percentage of 10 their models failing. And so their decision 11 points at ten might be different from what you're 12 thinking about your own product. So it's hard. I 13 realize -- 14 MR. POWERS: I think it's -- 15 MR. HUBER: I'm looking. That's a fair 16 statement. 17 MS. WILLIAMS: Yes. 18 MR. HUBER: But I'm looking at the 19 industry as a whole -- 20 MS. WILLIAMS: It's hard to like see it 21 all. 22 MR. POWERS: Yes.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 201 1 MR. HUBER: -- because I know how the 2 market works. 3 MS. WILLIAMS: Yes. 4 MR. HUBER: And if you don't have a full 5 complement -- 6 MR. POWERS: Yes. 7 MR. HUBER: -- you're done for. 8 MR. POWERS: And I think it's good, I 9 mean -- 10 MR. BROOKMAN: That was Alison -- 11 MR. POWERS: Yes. 12 MR. BROOKMAN: -- and then Al. And now 13 back to Chuck. 14 MR. POWERS: I think it's good, Alison, 15 because I think it's case by case by manufacturer; 16 right? You're right on. What else is compelling 17 here, though, is whether you're at 10 percent, 25, 18 40, 55, the number of models dropped is almost 50 19 percent on all of them. So, even the first one, 20 10 percent, it says, "Total failing is 205," but 21 123, about half; right? 22 MR. WEINTRAUB: Yes. This is --

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 202 1 MR. POWERS: 512 to 256. You keep going 2 down. It's almost 50 percent. That's just -- 3 MR. WEINTRAUB: So, Chuck, those were 4 the numbers that we discussed, the 60 to 50 to 40, 5 40, 40. And those are the numbers at discussion 6 right now. 7 MR. BROOKMAN: Mark Handzel? 8 MR. HANDZEL: So this is Mark. So, 9 Alison, the only thing I would challenge you with 10 on that is that, you know, you guys -- I mean, the 11 people here at the table, we're the industry 12 leaders. You know, I mean, that's why we're here. 13 There are a lot of small companies. I don't think 14 you guys interviewed them. And so their data 15 wouldn't be reflected here in terms of the models 16 dropped. And I think that's what you were saying 17 is a lot of those companies could be the guys 18 dropping. So -- 19 MS. WILLIAMS: We, I mean -- 20 MR. HANDZEL: And we don't know who you 21 interviewed, but -- 22 MS. WILLIAMS: We interviewed a range of

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 203 1 manufacturers; right, but -- 2 MR. HANDZEL: Okay. 3 MS. WILLIAMS: -- not everybody is in 4 the same place. Are you suggesting that smaller 5 manufacturers would be likely to drop fewer or 6 more models? 7 MR. HANDZEL: I would think they're 8 going to have to drop more -- 9 MS. WILLIAMS: Yes. Okay. 10 MR. HANDZEL: -- because they typically 11 have not invested in their product lines. You 12 know, so they are going to be way off where the 13 rest of the industry is. 14 MS. WILLIAMS: So you are thinking that 15 the models -- 16 MR. HANDZEL: Yes. That's right. 17 MS. WILLIAMS: -- are too high for you 18 guys but low for people who are maybe not at this 19 table? 20 MR. HANDZEL: Correct. 21 MS. WILLIAMS: So perhaps it would -- 22 MR. HANDZEL: And, again, not knowing

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 204 1 who you interviewed, I mean, I am just surmising. 2 Okay? 3 MR. POWERS: So, Doug, this is Chuck 4 again, just to summarize this. So let me get my 5 head around this. So a year ago, you did the 6 first survey; right? And it was somewhat limited. 7 We talked about that already. I mean, it was a 8 little more ambiguous with some of the questions, 9 but you fine-tuned that. You did a good job. You 10 had another survey; right? And that was later on. 11 We have a set of formulas that Sarah and your team 12 and others and Callie in the back and others have 13 spent a lot of good time on and good stuff. You've 14 gotten some feedback on that. And that's still in 15 flux trying to look at the formulas, how you're 16 going to evaluate it to spread across even, you 17 know, et cetera. 18 We have data that Greg is threatening 19 people to get to you today which might give you 20 more and better information; right? So I think 21 the compilation and all of that, you know, we've 22 got to try to make sure we have a little more

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 205 1 solidity before we start jumping to conclusions 2 because if the MEI formulas and all of that good 3 stuff are still in flux and this is still in flux 4 and there's data that Greg's, you know, spent a 5 lifetime on trying to get people to send to you, 6 you know, -- you know what I mean? 7 MR. WEINTRAUB: Yes. 8 MR. POWERS: This is a good first pass. 9 MR. WEINTRAUB: Yes. 10 MR. POWERS: And I think everybody 11 already said it, Dan. It's great. It's just that 12 we need to make sure that we don't, you know, send 13 the wrong -- 14 MR. BROOKMAN: Lucas? Lucas Adin? 15 MR. ADIN: So, as I've alluded to 16 previously, there's still a lot more to come today 17 and a lot of it which isn't necessarily this 18 overall aggregate view that requires us to think 19 about how any given manufacturer might be 20 different. It's like on a per-model basis. So 21 how a particular manufacturer be impacted on its 22 costs to get to a given efficiency level? I mean,

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 206 1 we're going to go down that whole pathway. 2 MR. POWERS: Yes. 3 MR. ADIN: So there's still a lot more 4 to come that will help put this in other -- help 5 you view it through other perspectives that might 6 be useful. 7 MR. BROOKMAN: Chuck, were you asking 8 about -- 9 MR. POWERS: We received the other 10 handouts -- 11 MR. BROOKMAN: Yes. 12 MR. POWERS: -- this morning, which is 13 excellent. 14 MR. BROOKMAN: Yes. 15 MR. POWERS: And it was actually beyond 16 page 16, which was only up to an email. And 17 today's handout went past, which is great, but, 18 again, talking about and reading it at the same 19 time, you need more time to digest. 20 MR. BROOKMAN: Yes. 21 MR. POWERS: Will we be able to get a 22 copy of this today, hard copies, so we could study

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 207 1 it better tonight or do you want to email it to us 2 or -- 3 MR. ADIN: At the very least, we'll 4 email it to you. 5 MR. POWERS: Okay. 6 MR. ADIN: And we'll see if we can 7 provide hard copies. 8 MR. BROOKMAN: That would be great if we 9 could. 10 Alison? 11 MS. WILLIAMS: I just wanted to sort of 12 complete this discussion and say that, I mean, I 13 think Dan and I will look at the manufacturer data 14 that we have under NDA, review it again. If any 15 of you review your own data that you provided to 16 us and think, "Oh, maybe since I learned more 17 about this, like maybe we underestimated the first 18 point," like, you know, let us know and we 19 certainly -- point taken that we'll review this 20 number. I don't think we're going to resolve 21 anything more on it today, though. 22 MR. BROOKMAN: Gary?

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 208 1 MS. WILLIAMS: Thank you. 2 MR. FERNSTROM: This is Gary. I'd like 3 to make another observation. I've been doing this 4 kind of standards work for 20 years now. I'm sure 5 there are others around the table that have more 6 experience than I do. But a common theme 7 throughout all that time has been we don't have 8 enough current data. So, you know, no sooner do 9 you get something than there is probably some 10 better, more current data that could be utilized. 11 And I'm anxious about where we are now relative to 12 our schedule. So at some point, we're going to 13 have to recognize within the group that we'll have 14 to lock down the data and do the best we can with 15 what we have. We can't continually be looking for 16 newer and better data. 17 MR. BROOKMAN: Okay. And scheduling, 18 and looking ahead, thinking about scheduling, is 19 perhaps another issue that we might take up during 20 this two-day span. 21 I'm going to suggest we break for lunch. 22 It's now 12:40.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 209 1 Dan, I was told you have in the range of 2 60 slides. 3 MR. WEINTRAUB: Yes. 4 MR. BROOKMAN: So we're now at slide 33. 5 MR. WEINTRAUB: Yes. 6 MR. BROOKMAN: Slide 33. So there is a 7 lot of presentation -- 8 MR. WEINTRAUB: A lot more. 9 MR. BROOKMAN: -- material in this 10 cluster. And then there's more to follow from 11 there. We have a lot of -- get some carbohydrates 12 over lunch. And we'll resume here at 1:40. And 13 thanks for all the good discussion. Make sure to 14 wear this badge. You might need an ID to get 15 through the security portal. This room will be 16 secure. 17 (Off the record.) 18 (On the record.) 19 MR. BROOKMAN: Prior to lunch, Dan was 20 presenting a lot of rather detailed information. I 21 thought the last slide was useful because it gives 22 you a sense of the sort of detailed analysis that

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 210 1 the Department would be doing based on your 2 comments, based on the data that is available, and 3 how that would begin to translate to provide 4 insight into how that you all would try and set an 5 efficiency level. 6 So we are going to continue with what 7 Dan has started. And there is quite a bit of 8 content here. So, as best we can, let's let him 9 present and only punctuate with questions. We'll 10 try and let him carry the stream of this content. 11 MR. WEINTRAUB: All right. So I'm going 12 to recap where we are so we get our footing again. 13 So we're looking at numbers of failing models from 14 our survey. The point of discussion was how many 15 were dropped, and we're going to move on from that 16 for now. And we're saying we're going to get into 17 the assumptions. Next we're just going to go 18 through the assumptions that were made to get us 19 to these flowcharts, how we broke up the 20 percentages. So we'll move past dropped. And I'm 21 going to go through the inputs and what they were 22 to the model that got us to where we are.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 211 1 So I broke out the inputs to statistical 2 and general industry research. Our statistical 3 inputs are inputs based on primary data sources, 4 such as the Navigant-LBNL survey and what will 5 soon be the HI-NEMA BIS survey. And these were 6 numbers that we pulled out statistically, you 7 know, looking at the distribution of those pumps. 8 So total number of models, total number 9 of shipments, number of shipments failing, 10 statistical distributions of horsepower, flow, 11 specific speed, and other pump parameters. Those 12 represent the market as we know it right now. 13 General industry research inputs. Those 14 come from inputs based on manufacturer interviews, 15 market data, independent discussions with 16 manufacturers, estimates provided by HI and other 17 industry experts. So we have gathered data and 18 synthesized an input from that data. And those 19 types of inputs that are of that category would be 20 percent of models dropped and not redesigned, as 21 we just discussed; current breakdown of sand cast 22 impellers versus advanced cast impellers-- we went

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 212 1 through that already; number of models that are 2 fabricated stainless steel -- I discussed that 3 briefly before; percent of market that would 4 switch from sand casting to investment in die 5 casting -- we touched on that; and percent of 6 eligible pumps that would be polished, rather than 7 redesigned. We touched on those earlier. 8 I'm going to go through and show you. 9 These are the assumptions that we made for these 10 markets that will lead to our conclusions. So 11 total models. Right here we have 2,050 for end 12 suction close-couple and end suction frame-mount. 13 That is based on we had our survey and our data. 14 And then we had HI's survey, which all we had 15 released to us at this time were total shipments, 16 total revenues. We looked at our total shipments 17 and their total shipments. We scaled up our 18 models by the same scale as our total shipment. So 19 if we had approximately 100,000 shipments, that's 20 approximately 2 times more shipments than what our 21 data represented. Then we scaled up the number of 22 models in our database by two. We're going to get

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 213 1 clarity on this from the survey data that we just 2 got back. And we will be able to match this. 3 This number will change based on the data that 4 we're getting from HI. 5 MR. BROOKMAN: Which number will change? 6 MR. WEINTRAUB: The total models. 7 MR. BROOKMAN: Yes. 8 MR. WEINTRAUB: Total shipments. That 9 is from the HI survey, which we have already. So 10 that represents what they believe the industry 11 total shipments are. 12 Going down the line, models dropped. 13 We've discussed this. Percent cast, casting using 14 investment, or die cast or advanced casting. 15 Sorry. I wasn't consistent on that. That we 16 discussed earlier. So 60 percent and 50 percent 17 of the industry using sand casting. 18 Percent that would switch. We discussed 19 this also a little bit. And we're saying ten 20 percent of the remaining pumps would be eligible 21 to switch over to a new casting method. 22 Models fabricated stainless steel. This

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 214 1 was based on market estimates, 7.4 percent in the 2 end suction category; we put it at zero for inline 3 because we haven't come across many there. 4 Percent of pumps eligible to be 5 polished. That's not right. That should be 6.0. 6 I apologize. We'll correct that before we send 7 these out. 6.0 in end suction close-couple and 8 6.5 in inline. So we discussed this earlier. They 9 need to be sand cast to begin with. They had to 10 be of a low specific speed. And they had to be 11 able to even meet an efficiency level by just 12 being polished. They had to be really close to 13 the line to begin with. So it's a small 14 percentage. 15 This is the assumption we brought up a 16 little bit earlier. So of that six and a half or 17 six percent, how many of those would actually be 18 polished? So we said 50 percent. And that was a 19 rough estimation. We can change that, too. But 20 you'll see this ends up being a very small 21 percentage of pumps that show themselves to be 22 polished.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 215 1 Okay. So the results that we were 2 looking through before, we talked about the top 3 part. So we start with number of models failing. 4 And we said of those models that are failing, we 5 talked about dropped. So we'll go with what we 6 have now. Now, of those that will be redesigned, 7 so the ones that are not dropped, what is going to 8 happen to them based on that flowchart model that 9 we worked out? 10 PER-10. It has two models being 11 polished. That's the small percentage of the 12 market that we are talking about. It's not going 13 to be a common theme, but it's something that 14 could happen. You move up. You get 8, 15, 20. 15 It's still a very small amount. The bulk of the 16 actions that would be taken would be hydraulic 17 redesign only and some additional ones would be 18 hydraulically redesigned with changes to advanced 19 casting. So the general conclusion here is that 20 hydraulic redesign of some sort is what is going 21 to happen to the pumps to meet a standard level at 22 all efficiency levels. But there are some pumps

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 216 1 that we believe will be polished based on the 2 data. 3 Are there questions here? 4 MR. POWERS: Chuck. Yes, Dan. 5 MR. BROOKMAN: Hey, Chuck, we had the AV 6 guy in here at lunch. And he's advising all of us 7 we need to get these things close to our face. 8 Okay? 9 MR. POWERS: Okay. Can you hear me now? 10 MR. BROOKMAN: Yes. 11 MR. POWERS: All right. Is that how it 12 goes? Can you hear me now? Verizon. 13 Question, Dan. We're just kicking 14 around. The PER you're representing there, ten, 15 is not the same as the MEI-10, MEI. So I'm just 16 trying to scale. 17 MR. WEINTRAUB: Yes. So -- 18 MR. POWERS: If we go on an MEI-type 19 relationship to compare the EUs we're talking, we 20 probably want to have some because you know what I 21 mean? We're looking -- 22 MR. WEINTRAUB: Yes. So, actually, put

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 217 1 this in perspective. This analysis is independent 2 of the metric that is used. And that is because 3 each efficiency level represents a percentage of 4 the market failing. So whatever metric you use, 5 we're still going to target. You get that metric 6 to cause 10 percent of the market to fail, 25 7 percent, 40 percent. It's the same way that the 8 EU did it. They chose their levels where we're 9 going to look at what happens when five percent 10 fails, look at what happens when ten percent fail. 11 So it actually is independent. And so this is 12 independent of what happens later on. 13 And some of the other assumptions that 14 are made that the data backs up are that the 15 distribution of those failing pumps, you know, 16 those ten percent pumps that fail, they represent 17 the distribution of the industry as a whole. It's 18 spread out among, you know, spread out amongst 19 flow and spread out amongst head. They're fairly 20 representative. So you change the metric. It 21 doesn't change the analysis, this analysis. 22 MR. POWERS: Okay.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 218 1 MR. WEINTRAUB: Okay. Continue on. Same 2 story for inline pumps. We'll just go through it 3 quick. But there are less models of inline pumps 4 overall. We looked at those earlier. And you see 5 it's the same, similar percentages. You know, very 6 few models are actually polished. The bulk of them 7 are hydraulically redesigned. Okay. 8 Now we're looking at results that have 9 to do with polishing, so shipments-weighted 10 results. So I'll walk you through these charts. 11 On the top, we have end suction pumps. On the 12 bottom we have inline pumps. And so the first row 13 here, at each efficiency level, I have the number 14 of shipments failing and what that represents of 15 total shipments. So here we're saying, at PER-10, 16 7 percent for end suction pumps. Ten percent of 17 the models, of the bottom models, represent seven 18 percent of the shipments according to our data. So 19 there are pumps that are not selling as well 20 there. It's actually the converse is true down on 21 inline. And it's a function of the data. That's 22 just what's happening in the marketplace.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 219 1 So this gives you the idea of what 2 percentage of shipments each PER level cuts off. 3 When we look at the percent of failing shipments 4 polished, so if we said earlier three percent of 5 models would be polished, we made the assumption 6 that that meant three percent of the failing 7 shipments would be polished. You end up with at 8 the lower levels fairly low levels of units being 9 polished, so 465 across the whole industry. That's 10 unit shipments out the door. 11 Yes, Al? 12 MR. HUBER: How much gain did you use? 13 MR. WEINTRAUB: For polishing? 14 MR. HUBER: Yes. 15 MR. WEINTRAUB: We used -- 16 MR. HUBER: Did you use the chart? 17 MR. WEINTRAUB: -- the HI 20.3 chart, 18 yes. 19 MR. HUBER: So it's about a percent? 20 MR. WEINTRAUB: About a percent on 21 average, yes. 22 MR. HUBER: Yes.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 220 1 MR. WEINTRAUB: And that's why there's 2 so few of them, because a percent doesn't get you 3 anywhere for most pumps. It's only the pumps that 4 are on the line. So you have so very few; for 5 inline, similar, 3.2 percent versus 3 percent. So 6 we'll move forward. 7 Okay. So now we're into the next 8 section. Here we're going to talk about average 9 incremental MPC per unit sold. So this is 10 effectively what is the change in cost due to 11 polishing across the industry. And we saw very 12 few units are polished. So, as you can imagine, 13 the costs are not going to be large. 14 So for each equipment class and 15 efficiency level, the industry shipments-weighted 16 average cost to polish, to polish an impeller, is 17 multiplied by the number of shipments that will 18 feature a polished impeller. This creates the 19 aggregate incremental cost. 20 So we talked about the cost to do it 21 earlier. That was about $45 on average. We 22 talked about the number of models that would need

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 221 1 it. So when you multiply those, what we get -- so 2 we talked about with $45 per unit, we had 400 3 units or 600 units that would need polishing. 4 The aggregate that was up -- so you do 5 your -- you do the cost per unit times total 6 units, multiply it. If we want to spread it 7 across the industry to find out what it is on 8 average per unit, you take that. You divide it by 9 the number of failing shipments that we looked at 10 at the previous slide. And it comes out to be on 11 average less than two dollars per pump if you're 12 spreading it across. And, again, the pump that's 13 polished isn't less than $2, but if you're looking 14 on the industry-weighted average, it ends up being 15 an average increase of less than a half of a 16 percent, so .2, .3. 17 So I know this isn't completely 18 straightforward. So if you have questions, we can 19 talk about it. All right. 20 So the conclusion is a small cost across 21 the industry from polishing because very few units 22 would be polished. Now we get into the larger

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 222 1 costs, aggregate conversion costs to industry. So 2 this is what we were building up to before. This 3 is what would be impacted by the number of pumps 4 dropped: all these numbers that we were talking 5 about earlier. 6 So to flowchart it out again, for each 7 equipment class and efficiency level, the adjusted 8 industry average redesign costs are multiplied by 9 the number of models requiring each redesign. This 10 creates an aggregate conversion cost. So we have 11 costs per model to hydraulically redesign. We 12 talked about this. We're going to talk about cost 13 sharing between models. And I'm sure this will 14 not be a short discussion. 15 You end up getting an adjusted cost per 16 model to hydraulically redesign. You multiply 17 that times the number of models that are going to 18 be hydraulically redesigned. And you get an 19 aggregate cost for the industry. It's a bottoms20 up approach to see how much it is going to cost 21 the industry as a whole to meet an efficiency 22 level. Okay.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 223 1 So now we're going to talk about this 2 specific feature here: accounting for cost 3 sharing between shared model platforms. Okay. So, 4 to preface it, because end suction close- couple 5 and frame-mounted pumps and two-pole and four-pole 6 models share significant hydraulics and hardware, 7 we don't expect every model in the database that 8 we have to incur the cost of a full hydraulic 9 redesign. They will incur costs, but we don't 10 expect them to incur the full cost that was given 11 to us by HI. 12 So, to account for these shared costs, 13 we quantified the statistics on shared platforms. 14 So we have our database again. And we looked at 15 the number of hydraulically identical end suction 16 close-couple and end suction frame-mounted models. 17 We had this data. We looked at flow, head power, 18 at BEP. And you can find how many pumps have the 19 exact same numbers. 20 We also looked at the number of two- and 21 four-pole pumps sharing the same model name, which 22 would indicate that they are the same or a similar

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 224 1 model run at a low speed and a high speed. They 2 may have different structures associated with 3 them, different features, but in the end, they 4 have very similar hydraulics. 5 We then looked at allocation of shared 6 redesign costs. And that's what we are going to 7 get into the details on also. And I worked 8 through that with HI, through Greg Case, trying to 9 come up with estimates that make sense for the 10 industry. Okay. 11 So here we want to go through the 12 statistics that we found in the database. And I 13 used some terminology because I couldn't think of 14 anything better. We're going to have to get 15 accustomed to it. So left side here, end suction 16 and frame-mounted combined; and the right side, 17 inline. A unique model is defined as the model, 18 so is a model of a given hydraulic performance. 19 The duplicate is let's say you have -- in my 20 database, we have end suction pump with the unique 21 hydraulics. You have 46 percent of the total 22 models match up to some other model and have

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 225 1 shared hydraulics. So if we're talking about 2 costs, this would be the unique one. And then 54 3 percent of the pumps are unique. Forty-six 4 percent of them match up to one of those, to those 5 54 percent. So that's kind of hard to visualize. 6 So do people get this? I can kind of try and walk 7 through it. Okay. 8 The same thing for two-pole and four9 pole, it ends up being there are more independent 10 pumps for two-pole and four-pole. So there's less 11 overlap. Seventy-seven percent are unique, and 23 12 percent overlap or are duplicates. 13 So these are the statistics out of our 14 database. Now we talk about allocation for shared 15 redesign costs. So this is where we went through 16 and we discussed with HI about where we thought 17 these costs would be shared and where we thought 18 they might be independent. 19 So, to be clear, the unique model is 20 always going to have 100 percent of the cost. 21 That's the full redesign. It's this duplicate 22 model that would have a percentage of the original

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 226 1 cost. 2 So redesign prototype and initial test. 3 We said 50 percent of the costs would be incurred 4 by that duplicate model for -- over here. I'm 5 sorry. On the left, we have type. So close6 coupled versus frame-mounted. On the right, we 7 have two-pole versus four-pole. Both of them, we 8 said 50 percent for redesigned prototype and 9 initial test, mostly because hydraulics would be 10 very similar much of the time and it would be 11 other features in the prototypes that would need 12 to be different. 13 Pattern and tooling. For the most part, 14 we said for a close-couple and frame-mounted, 15 they're going to share an impeller. For the most 16 part, they are going to share a volute, the main 17 volute structure. Other structures added on there 18 are going to add additional cost: your base 19 plates, your mounts, all of that. That's what 20 we're accounting for in this extra 34 percent. 21 Two-pole, four-pole, we said there's a 22 significant portion of the market where those

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 227 1 models, although they have the same number 2 designation, they may actually have different 3 hydraulics. And that's why we're accounting for 4 higher costs on that end. 5 Testing, we said 75 percent of that cost 6 because they're going to need to go on the test 7 stand themselves. In the end, we're assuming that 8 the close-couple pump is going to need to be put 9 on the test stand and run and the frame-mounted 10 pump is going to need to be put on the test stand 11 and run independently, regardless of similar 12 hydraulics, to prove -- 13 MR. CAPPELLINO: Charlie Cappellino. Why 14 wouldn't that be 100 percent, then? 15 MR. WEINTRAUB: Because we were assuming 16 that some of the initial testing, done earlier on 17 in the game, would be shared. It would be once 18 the design is coming to a finalization and a final 19 point. 20 Yes, Al? 21 MR. BROOKMAN: Al, turn your microphone 22 on, please.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 228 1 MR. HUBER: You already have the initial 2 testing, which is the one you say they would 3 share, in the first line. And then the next line 4 down is pattern/tooling. And then you have 5 testing again, which is the testing that we're 6 going to, the other testing we're going to, have 7 to do. And that would be 100 percent, not 75. 8 MR. WEINTRAUB: Yes. That's actually a 9 very good point. I think when Greg and I were 10 discussing, we did not take into account that 11 initial test was up there. So I think I would 12 make the recommendation that I would go forward 13 and bring that up to 100 because our discussions 14 were based along those lines. 15 MR. HUBER: And I have another question. 16 If you have got pattern and tooling at 34 percent 17 under common end suction close-couple and end 18 suction frame mount and then you've got 2-pole/4- 19 pole, how are you going to reconcile that? Because 20 you've got to have -- both of them are two21 pole/four-pole. 22 MR. WEINTRAUB: Oh, I know. Yes, yes.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 229 1 So -- 2 MR. HUBER: So you're going to have to 3 go with a larger percentage, aren't you? 4 MR. WEINTRAUB: We're going to get on 5 the next slide how -- 6 MR. HUBER: I'm sorry. 7 MR. WEINTRAUB: No. And that's a bit 8 complicated how to reconcile that, but we're going 9 to try and see what we can do there. I have a 10 method. And we can talk about which way we want 11 to go with it. So I'm going to take a note to up 12 testing to 100 percent. Okay. 13 Marketing. We came to the conclusion of 14 independent costs. So then we have our total. 15 This is not an average of these numbers. If you 16 remember, in the survey sheet, in the cost of 17 redesign survey that I showed earlier, each one of 18 these categories had a different dollar value, did 19 a weighted average on that dollar value. And it 20 comes up to here. I just didn't want to include 21 them because we're already cluttered enough. 22 So it ends up being for close-couple

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 230 1 versus frame-mounted, the duplicate pump is at 59 2 percent. That will jump a little bit with 3 testing. And we up that. And then 68 percent of 4 the costs, and that will jump a little bit with 5 testing increased. Okay. 6 So bear with me here. We've got a lot 7 of boxes. So this is where we are trying to deal 8 with that overlap between pumps are end suction 9 close-couple two-pole and four-pole. So there's a 10 lot of overlap. So on top, I have population 11 statistics, and on the bottom, I have cost 12 sharing, trying to drill down here. We'll start 13 with number of failing models at each efficiency 14 level. 15 You can split that off by close-couple 16 versus frame-mounted. How many are unique in 17 that? How many are the unique models that have a 18 full cost, and how many are those duplicate 19 models? That's the 54 percent, 46 percent. 20 Then we're assuming that when you drill 21 down again, of these unique models that you're 22 paying your full cost for, how many of those have

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 231 1 unique two/four-pole designs? And how many of 2 them are a duplicate to a two-pole/four-pole 3 design? You're applying percentages down. And 4 here you multiply 54 percent by 77 percent. You 5 get that 42 percent of the population falls into 6 this level of having the cost of a unique close7 couple/frame-mounted design and a unique speed 8 design. Some of those pumps are duplicate models 9 within the speed realm. So that's 12 percent of 10 the population. 11 Same thing over here. You drill down 12 46and seventy-seven gets you to 35 percent of the 13 population has started with a duplicate cost of 14 end suction close-couple versus frame-mounted and 15 had a unique cost associated with it on 2-pole/4- 16 pole. 17 Same thing over here. Now you have a 18 duplicate and a duplicate, and it's 23 percent of 19 the population represents those pumps that are 20 technically already represented somewhere else. 21 So you take these. So you have a 22 population of the pumps that fall into each

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 232 1 category. We have the costs for each one of these 2 categories, cost sharing. So your first bucket is 3 unique model costs, unique models, 100 percent. So 4 they get 100 percent of the cost. Your next 5 bucket is models that have duplicate speed only. 6 That's 68 percent of the cost. The next one is 7 duplicate type only. It's 59 percent of the cost. 8 And then you get to the pumps that are double 9 duplicates. And here I simply multiplied 68 10 percent by 59 percent to get 40 percent and 11 applied those to a small percentage that are 12 representing duplicates on both speed and type. 13 You take the sum of the product, so multiply this, 14 multiply this, multiply this. You add them up. 15 You get a weighted average. And right now it's 75 16 percent. That will go up a little bit with the 17 adjustments. But what that 75 percent means is 18 that you can say that of all the models that are 19 going to be redesigned, you apply 75 percent of 20 the cost that we had discussed earlier or you 21 could take 75 percent of the models times a full 22 cost. It will get you the same thing. But it's

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 233 1 to account for the sharing in costs between 2 similar architectures. 3 I know that was a lot. Questions? Okay. 4 All right. 5 MR. POTTS: I have a question. 6 MR. WEINTRAUB: Yes? 7 MR. POTTS: Doug Potts, American Water. 8 Just for the math, could you explain the weighting 9 of the bottom, how you got from the -- 10 MR. WEINTRAUB: These? 11 MR. POTTS: -- the second to bottom row 12 to the 75 percent? 13 MR. WEINTRAUB: Sure. Sum of the 14 product of each category. So 42 percent of the 15 population incurs, we'll say, $100; 12 percent of 16 the population incurs $68; 35 percent of the 17 population incurs $59; 11 percent of the 18 population incurs 40. So you just add those 19 numbers up. I'm sorry. That was not a good 20 example. Start again. 21 If you multiply this times this, you get 22 a number. We're basically creating a weighted

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 234 1 average. Okay. Oh, you can't see that? Okay. 2 Multiply this times this, you get a number. 3 Multiply this times this, you get a number. You 4 multiply this times this, you get a number. You 5 sum it up. And it's a weighted average because 6 this equals 100 percent of the population. And so 7 you are taking a weighted average of cost per 8 model in the industry. And that gets you to the 9 75. 10 MR. POTTS: Thank you. 11 MR. WEINTRAUB: All right. Any other 12 questions? 13 MR. POWERS: Yes, Dan. 14 MR. WEINTRAUB: Yes? 15 MR. POWERS: This is Chuck Powers. So 16 in the consideration, Charlie and I were kicking 17 it around at lunch, trying to get through this in 18 our heads. In the consideration of the 19 efficiency; right, the ones we want to redesign, 20

-- 21 MR. WEINTRAUB: Yes. 22 MR. POWERS: -- we may do a redesign

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 235 1 also that you may not be aware of that has nothing 2 to do with efficiency but because of other 3 factors, like NPSH or other things, -- 4 MR. WEINTRAUB: Yes. 5 MR. POWERS: -- like Doug -- and I keep 6 using Doug as an example, but if he's a customer, 7 end user, he may have a specific need on a low8 NPSH impeller application; right, -- 9 MR. WEINTRAUB: Yes. 10 MR. POWERS: -- that we need to meet 11 this efficiency, but we have to do other design 12 work in opening up the eye of the impeller, doing 13 other things to the volute; right, to make sure 14 that the -- because, again, it isn't just 15 efficiency. There are other factors. 16 MR. WEINTRAUB: Yes. 17 MR. POWERS: So I think there may be 18 another factor here that says there are other 19 pumps that we would have to do some work on, you 20 know, that isn't just related to efficiency that 21 adds to the redesign. 22 MR. WEINTRAUB: So just to put that in

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 236 1 perspective -- 2 MR. POWERS: I don't know what that 3 number is. 4 MR. WEINTRAUB: Yes. 5 MR. POWERS: But there's probably a 6 range; right? 7 MR. WEINTRAUB: So put our numbers in 8 perspective, Chuck. The costs that we're using, 9 the HI costs, are meant to represent from the 10 industry what it would take to bring you back to 11 the place that you were. You had a competitive 12 product before the regulation. Now you need to 13 redesign it to the same level of competitiveness 14 that you're at after the regulation. So to meet 15 all of those other factors, that is that cost. 16 It's not just to get the efficiency. It's that if 17 you had to bring up your efficiency, but now 18 because you had to bring up your efficiency, you 19 have to adjust your inlet, that is the whole 20 redesign. So our cost that HI had given to us is 21 meant to represent all in, everything you need to 22 do to get there.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 237 1 MR. POWERS: Really? 2 MR. WEINTRAUB: That's -- 3 MR. POWERS: You think it's that simple? 4 MR. WEINTRAUB: Well, that's what we 5 were given by the industry. 6 MR. POWERS: Really? 7 MR. BROOKMAN: Just say your name for 8 the record. 9 MR. CARLSON: Yes. Brian Carlson, Eaton 10 Corporation. 11 MR. WEINTRAUB: Yes? 12 MR. CARLSON: So just a level up, the 13 distribution you're using for this model is based 14 on the original makeup of the pump product lines 15 prior to saying you are going to consolidate, 16 bring them down to do redesign? 17 MR. WEINTRAUB: The distribution where 18 this comes from is the industry as it stands in 19 2012, all the models, or we have approximately 50 20 percent of the models that are out there. So it 21 just represents the industry as it stands. 22 MR. CARLSON: I guess where my question

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 238 1 goes, if you were going to -- this would be 2 basically a product line rationalization effort by 3 the industry; right? So just as you do your 4 split, it seems to me like you're basing it on the 5 prior distribution of models versus if you were to 6 redesign, you might not use that distribution in 7 terms of cost sharing. I don't know, but -- 8 MR. WEINTRAUB: Yes. 9 MR. CARLSON: -- in exercises like this 10 that we have done, typically we would look at it 11 different if we had to do a redesign. So we might 12 choose different portions to share. 13 MR. WEINTRAUB: Okay. I see what you're 14 saying. Yes, that -- 15 MR. CARLSON: Right. Because you're 16 kind of looking at -- 17 MR. WEINTRAUB: -- the shared product 18 lines might be different. 19 MR. CARLSON: -- it the way it was; 20 right? I've got a redesign. Now how do I go at 21 that; right? 22 MR. WEINTRAUB: Yes. And, to put it in

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 239 1 perspective, I get exactly what you're saying. So 2 we're saying that those overlapping pumps end up 3 costing 75 percent on average -- 4 MR. CARLSON: Yes. 5 MR. WEINTRAUB: -- or sorry -- every 6 model. There's small room to grow there. There 7 still would be cost sharing. I understand that 8 the distributions might change in the new market. 9 MR. CARLSON: Right. 10 MR. WEINTRAUB: But we can't predict how 11 that is going to change, but we can see that it's 12 not -- we're already saying they're taking up a 13 lot of costs. We're not discounting it too much. 14 So we could look at different scenarios, but 15 there's not that much more room up to go aside 16 from saying that every pump would incur the full 17 cost. 18 MR. CARLSON: Yes. 19 MR. BROOKMAN: Chuck? 20 MR. POWERS: Yes. So I have a question, 21 Dan, and really for Lucas. This is supposed to be 22 a negotiating or/and discussion back and forth.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 240 1 When I ask questions of Dan, you know, he's saying 2 it's from the industry and it's pretty much this 3 is the way it's going to be. So just bear with 4 me. That's the way I am hearing it. Right? And 5 I get that. No problem. And today is the first 6 time we have seen this. So it doesn't sound like 7 you want feedback. It's like this is what we're 8 getting. This is the way we're leaving it. And 9 I'm just wondering, is there going to be a chance 10 for communication and potential improvement and 11 change or other views or is survey number one a 12 year ago going to be it and we're going to live 13 with it? 14 MR. ADIN: No. This is Lucas. I think 15 that the -- I mean, the reason we are presenting 16 all of this is exactly because we want feedback. 17 We want all assumptions that we're using and all 18 methodology that lies behind the numbers that 19 we're going to present for the lifecycle costs and 20 all the engineering costs and all of that to be 21 known to you as soon as possible in the process 22 exactly so that you can provide us with feedback

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 241 1 on whether you think things seem reasonable or 2 not. I mean, we do want to know if these things 3 are wrong. And if you think they're wrong, just 4 tell us and tell us why. I mean, it isn't 5 intended to be a one-way communication. 6 So, I mean -- and we have heard some 7 feedback already, which is just great. And we 8 made some notes to ourselves that things need to 9 be adjusted. 10 And so procedurally, I mean, 11 understanding that you're just seeing this for the 12 first time and maybe you might not be able to 13 provide a specific response on any one thing or 14 another, I mean, we're not going to march forward 15 with this whole thing. I mean, we won't be able 16 to come to an agreement if there are fundamental 17 disagreements about the methodology underlying the 18 analysis, I would expect. So if you have issues 19 with how it is done, you need to tell us. And we 20 hope you would. I mean, you can do it either at 21 these meetings or in the periods in between. It 22 doesn't matter as long as we are getting feedback

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 242 1 on how this is being done. 2 Does that answer your question at all or 3 -- okay. 4 MR. BROOKMAN: This seems one-sided to 5 you? 6 MR. POWERS: No. What I'm trying to get 7 to is what Dan has put together is very good, no 8 argument; right, a lot of good data, a lot of 9 stuff. I think it needs to be validated. 10 The only thing I can do is stick it in 11 my throat. Can you hear me now? Okay. No. 12 Good data. My point is when I hear 13 others and I ask the questions myself, the answer 14 that I'm hearing from Dan -- and I understand it - 15 - is this was what the industry told us, this is 16 it. I don't get the feeling that if there is an 17 idea from somebody or if there are some views and 18 other perspectives, like he mentioned 60 percent 19 failure; right? -- I forget. It's on the other 20 sheets and all. You know, we're struggling with 21 some of this data; right? And, you know, I just 22 want to make sure, you know, that we are looking

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 243 1 at this as, you know, trying to get the right 2 feedback. 3 And I appreciate it's shown one day, we 4 don't have it in advance. And I get all of that. 5 We'll look at this. But I'm just concerned that 6 we stick to one path and then, all of a sudden, 7 you know, we start running into issues. Right? 8 MR. ADIN: Right. I understand your 9 point. And in making statements like "This came 10 from industry," all we're trying to do is point 11 out the origin of the data that we're using. And 12 we had to start somewhere. 13 MR. POWERS: Sure, sure. 14 MR. ADIN: And we were provided with 15 data. And maybe it's outdated. You know, maybe 16 there was something about the original data that 17 was provided to us. Maybe it was the way that we 18 interpreted it. I don't know. I mean, we are 19 looking for feedback on that. We're not saying 20 this is definitive, we know for certain that this 21 is the way it is because this is what you told us. 22 I mean, certainly there is room for adjustment

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 244 1 here based on what you think reality is. And we 2 want to know what you think it is. 3 So it helps us a lot more if we have 4 something to base that off of. I mean, we can't 5 make changes necessarily based purely on, you 6 know, a rough idea of what you think it might be, 7 but we do want to make it better if we can. 8 So does that help a little more? 9 MR. BROOKMAN: Alison? 10 MS. WILLIAMS: Yes. So Lucas said some 11 of what I was going to say, but, I mean, I think 12 to some extent to make changes, we would like more 13 -- and we appreciate your initial feedback. And I 14 think we need to follow up more specific feedback 15 in order to make changes. And it is a little 16 difficult because this is industry average and not 17 specific to a manufacturer. Getting feedback from 18 one manufacturer is a little hard to make changes 19 because we would have to compare it to other 20 things we have. So I think that's what makes it a 21 little difficult to here and now. But I agree. I 22 mean, I think if you guys want to follow up with -

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 245 1 - you know, we're interested. We just can't make 2 the changes right now. So anything you can follow 3 up with specific data we can pursue. 4 MR. BROOKMAN: Mark Handzel? 5 MR. HANDZEL: Mark Handzel from Xylem. 6 You know, I was just going to say that, you know, 7 I hate to call our products complex, but clearly 8 we share parts and components. And, you know, 9 when I look at this, I am going to say, "Yes." You 10 know, I can kind of see this kind of analysis 11 coming together based on the way our product lines 12 are structured and the way we answer some of the 13 questions that were asked. So, you know, I get 14 it. I don't think it's perfect, but it's not 15 going to be perfect because we are all different 16 and we all do things a little bit differently. 17 But, you know, I think in the sense of 18 some of the sharing, I know Greg talked to some of 19 our guys as he was helping Dan put this 20 information together. And it does kind of reflect 21 the way that we are structured. 22 MR. BROOKMAN: Okay. That's helpful.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 246 1 Thank you. 2 MR. WEINTRAUB: Okay. I'll continue on. 3 Okay. It's a lot simpler for inlines, 4 same theory except for there is only overlapping 5 on speeds: 6 two-pole/four-pole. And there are a lot 7 less products that overlap on speed identically. 8 So only 20 percent of the products are duplicate. 9 So you end up getting a factor of 94 percent. So 10 much of the costs are not shared across the inline 11 product lines according to the data, same theory. 12 Move forward. 13 Okay. So now this is to remind us of 14 where we are before we look at the aggregates. So 15 we had our cost per model to hydraulically 16 redesign. We just came up with our cost-sharing 17 factors. So, then, that will give us the adjusted 18 costs. So for end suction, it's 75 percent of the 19 original. For inline, it's 94 percent. We have 20 number of models hydraulically redesigned. You 21 multiply those out. You get your aggregate 22 conversion costs. We're going to get there. Okay.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 247 1 So here we go. 2 From left to right, PERs, top chart, 3 total conversion costs. These numbers are in 4 millions. Bottom chart since you're going to look 5 there, too, we have percentage of revenues. And 6 these are pump-only revenues. We backed out motor 7 costs from the survey. So end suction, you're 8 seeing at a PER-10, a $12.6 million conversion 9 cost aggregate. That's your hydraulic redesign 10 and hydraulic redesign with change to investment 11 casting; inline, 5.6. Total for these 2 product 12 classes, 8.2 million. And, see, you move up the 13 line quicker when you get away from PER-10, 56 14 million, 109 million, and so on. This is, again, 15 building up from the bottoms up. 16 Down here, we look at percent of 17 revenues. Inline grows a little faster, but 18 overall end suction and inline are not too far off 19 in what those conversion costs are as percentage 20 of revenues. 21 You look at the -- down here, we're 22 taking -- this isn't just an average. It's total.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 248 1 So you take the total costs divided by the total 2 revenues for those product classes. You divide it 3 out. So you're looking at for these 2 product 4 classes 10 percent of revenues, 1-year revenues, 5 2012 revenues, 30 percent of revenues at PER-25, 6 58 percent at PER-40, 112 percent at PER-55, 184 7 percent at PER-70, and so on. So this is where 8 this rolls up to right now. And this is exactly 9 where you would see if we change our percentage of 10 dropped models, these numbers go up; you change it 11 one way, they go down. It's a linear 12 relationship. All this work that we just worked 13 through, this is where it kind of falls to. 14 MR. BROOKMAN: Charlie Cappellino? 15 MR. CAPPELLINO: Charlie Cappellino. 16 Dan, could you just explain the bottom table 17 again? 18 MR. WEINTRAUB: Sure. 19 MR. CAPPELLINO: I think I get it, but 20 I'm not exactly sure. 21 MR. WEINTRAUB: Okay. So this is $12.6 22 million worth of conversion costs. I took the

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 249 1 total industry revenues minus motors because this 2 whole analysis is not taking into account motors 3 as a design option. We're not taking it into 4 account as a revenue stream either. And that's a 5 discussion -- yes. It was in the surveys, but we 6 backed it out because we have data on motor costs. 7 So we backed it out. You get a number. You get a 8 total revenues that doesn't include motors. And 9 so this number, 12.6, is 9 percent of that total 10 revenues. 11 I could have shown that number. I 12 apologize. I have it somewhere for end suction. 13 It's 11 percent for inline. It's ten percent 14 total when you add it together. Does that answer 15 that? 16 MR. CAPPELLINO: This is Charlie 17 Cappellino again. My question was, where do the 9 18 percent and the 11 percent come from? 19 MR. WEINTRAUB: Yes. So 9 percent is 20 12.6 divided by the total industry revenues. 21 MR. CAPPELLINO: Okay. 22 MR. WEINTRAUB: And that will get you --

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 250 1 and this is to put it and the whole reason is to 2 put it into perspective because we need to know. 3 We can just talk about costs and say they're big, 4 but we need to know how those compare to how much 5 the industry is taking in annually, how much cash 6 is coming in. All right? 7 MR. POWERS: So, Dan, Chuck Powers. So 8 if I am trying to understand the math, so 58 9 percent for the PER-40 -- 10 MR. WEINTRAUB: Yes. 11 MR. POWERS: -- is revenue. 12 MR. WEINTRAUB: Yes. 13 MR. POWERS: And if you think about how 14 some companies look, like Al's and others, 15 Charlie's and others, it's the payback; right? 16 MR. WEINTRAUB: Yes. 17 MR. POWERS: So the payback would be 18 operating income. And sometimes that's not the 19 whole. 20 MR. WEINTRAUB: Yes. 21 MR. POWERS: They want a portion of it. 22 So some of these could be ten or greater years of

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 251 1 payback. 2 MR. WEINTRAUB: Yes. We're going to 3 discuss that. That comes up next on how this 4 impacts. So there are going to be a few parts to 5 that. The key part is that is what the 6 manufacturer impact analysis looks at. It is 7 going to look at what is it going to do, what is 8 this cost going to do, to the industry. How long 9 will it take for that money to come back? What 10 are the impacts? Yes. 11 MR. CAPPELLINO: Charlie again. I think 12 where it says, "aggregate conversion," -- 13 MR. WEINTRAUB: Yes. 14 MR. CAPPELLINO: -- if you just put in 15 the word "cost" in there, "aggregate conversion 16 cost," up top -- 17 MR. WEINTRAUB: Oh, I see. Yes. I 18 apologize. 19 MR. CAPPELLINO: -- I think it would be 20 clearer -- 21 MR. WEINTRAUB: Yes. 22 MR. CAPPELLINO: -- going forward.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 252 1 That's kind of a piece I missed there. 2 MR. WEINTRAUB: Oh, the bottom part 3 here? 4 MR. CAPPELLINO: Yes, right there. 5 MR. WEINTRAUB: Yes. You're right. 6 Thank you. Yes. Sorry about that. Yes. That 7 was just a missing word. I apologize. Okay. All 8 right. Yes. So we'll get into what you do with 9 these numbers. That will be in a little bit. 10 Okay. 11 So I'm going to summarize this so we're 12 through this section. So the proceeding analysis 13 clearly indicated that the conversion costs, they 14 significantly outweigh any of those costs 15 associated with polishing. As such, those 16 polishing costs, they're not going to impact the 17 analysis as it stands. So we're not going to be 18 passing those off to the LCC. It's added 19 computational complexity for no gain because the 20 conversion costs are going to run the show. So 21 just these conversion costs are moving down the 22 line.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 253 1 And we have another section first, but 2 then later on, Chris is going to talk about how 3 these may impact pricing. And then much later on, 4 at another meeting, we'll talk about the MIA and 5 what that means to the industry. So before we get 6 there, there's a whole other section we get to go 7 through. And that's where we're going to discuss 8 the baseline MPC, so manufacturer's production 9 costs, so how we derived what the average unit 10 coming out your door costs so that we can work 11 that into the LCC analysis. So we'll work through 12 that. And we'll also look at the markups 13 associated with that. 14 So, moving on, model MPC and baseline 15 markups. 16 MR. BROOKMAN: Hang on a second. 17 MR. WEINTRAUB: Yes. 18 MR. BROOKMAN: Anybody that wishes to 19 stand may do so. I'm serious. Just don't make 20 any noise. 21 MR. WEINTRAUB: All right. 22 MR. BROOKMAN: We need to keep going

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 254 1 here. 2 MR. WEINTRAUB: Yes. Okay. So the 3 introduction. So this section of the efficiency 4 analysis takes a market-based approach. So we're 5 using market data to model the base case. So it's 6 as it stands right now. That's what base case 7 means. The manufacturer's production price, 8 that's the cost to make your product. 9 Manufacturer's selling price, that's what you sell 10 it to your first customer at and the cost 11 efficiency relationship in the marketplace. 12 This market-based approach relies on 13 data, on detailed manufacturer-supplied sales and 14 performance data. That was provided to us. It's 15 very similar to the data that went to the HI 16 survey. And this data represents approximately 17 half of the end suction and inline market by 18 shipments. We've talked about that. And the data 19 was collected under nondisclosure confidentiality 20 agreements. So we're only sharing it in aggregate 21 in the forms presented in this analysis. Okay. 22 So the source data, this is the type of

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 255 1 stuff we're going to be looking at. I'll go 2 through it quick, but model name and number is 3 what we received. So we're not sharing that with 4 anyone. But we have DOE pump type. We have ANSI 5 HI pump type. We have number of stages. We have 6 motor speed. We have net sales, revenues. We 7 have unit volumes. We have flow, head, and shaft 8 horsepower at a variety of load points. We have 9 motor costs. We have markups. We have percentage 10 of shipments sold with motors. We have a lot of 11 data on this data set. Okay. 12 The first thing I am going to discuss, 13 so to talk about what is the cost of a pump across 14 an equipment class, there are a lot of different 15 sizes of pumps across the equipment class. Just 16 like the efficiency surface worked out specific 17 speed and flow, you have to look at these things 18 over multiple parameters. 19 So the efficiency surface worked with 20 flow and specific speed. We were looking for a 21 single parameter, a normalized parameter, that may 22 describe how cost trends well. And we wanted --

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 256 1 our first place to start was to work with the 2 parameters that we're using to describe 3 efficiency. And that's specific speed and flow. 4 It turns out that if you divide specific 5 speed by flow, the cost trend is very strong. They 6 go together. The parameter is very similar to 7 looking at one over horsepower, actually, except 8 for that we wanted to -- and it works very similar 9 to that, but we wanted to look at this. This was 10 the parameter we chose to use. I'll show you 11 illustrations of how it works. 12 To normalize, we bring every pump back 13 down to its 1,800 rpm equivalent because when 14 we're talking about costs, we know that cost to 15 make a pump -- we're not talking about motor -- 16 really has to do with the cost of the material 17 sitting there, the metal that you had to buy, and 18 the labor you had to put into it to assemble it. 19 So we need to bring all of those pumps down to the 20 equivalent at one selected rpm speed. So 21 everything is normalized to the 1,800 rpm pump 22 when we're talking about a factor that describes

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 257 1 the physical size of the pump. 2 For analysis purposes, so this factor, 3 we took the log of it, and we added one. It 4 allows for better regressions. It's just the log 5 allows the power series to fit it better. The 6 plus one allows the power series to fit it better. 7 You're just scrunching the data and moving it. But 8 it doesn't change the data. We'll get into what 9 it looks like. 10 The first thing to show you here is the 11 relationship between horsepower and this factor 12 that we're using. So we have log of Ns/Q. And 13 this is the normalization factor to 1,800 rpm plus 14 one. It's a strong relationship to shaft 15 horsepower. So you can pretty much say if you 16 have a pump that's here at 1.5 of this factor, 17 it's going to equal 18 horsepower approximately. 18 But the model, you can't model it using 19 traditional regressions. If we try to put 20 horsepower at the bottom, we're never going to get 21 trends that work out because we'd have to get into 22 really complex regressions.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 258 1 You use this factor, which is factor of 2 the terms that we're using in our efficiency 3 surface. And everything works a little better. 4 And you'll get to see some graphs on this. 5 Okay. So this is the data, some of the 6 data, to give you a picture, per unit cost versus 7 the log Ns/Q. And this is vertical inline pumps. 8 This is the manufacturer selling price with motor 9 cost included. So this is the data we got from 10 manufacturers, 1,800 rpm pumps. And you can see 11 that they turned out pretty well. You're going to 12 get a lot of variability. And I expect there to 13 be a lot of variability in the market because of 14 the motor costs and markups that the different 15 manufacturers have and pricing strategies and just 16 other features that are out there. But it trends 17 very strongly. 18 You can see down here. This will be 19 carried through. To give you an idea of what this 20 term means, I have the equivalent horsepower at 21 1,800 rpm as a secondary axis down here when 22 you're looking at this data and trying to see what

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 259 1 a pump costs. So here we see a 1.5. The average 2 pump costs about $2,000 at MSP with a motor. 3 That's a 13-horsepower pump approximately. That's 4 what that means. So it is going to be presented 5 with the dual x-axes the whole way through. So 6 this is to get you familiar. All right. 7 So now the first step, modeling pump 8 costs without the motor. So the data that HI 9 survey, our survey, collected, revenues with 10 motors, we have to back out the motor cost. Walk 11 through how we did that. So first you calculate 12 the per-unit manufacturer's selling price, which 13 is simply for each model, divide total revenues by 14 total units. Then for each model, we estimate the 15 actual motor cost for each model in the database. 16 And so that's estimated. 17 We're assuming the motor horsepower for 18 this analysis was 120 percent of BEP required 19 shaft horsepower on average. So obviously they 20 would go to specific increments, but on average, 21 it should wash out. 22 Then we use manufacturer-specific motor

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 260 1 cost curves for each to estimate the actual motor 2 cost. So when we went through our manufacturer 3 interviews, we collected data on motors from each 4 manufacturer. And we have an idea of what each 5 manufacturer is paying. We can apply those costs 6 to each pump because we know where the pumps in 7 the database are attributed. Okay. 8 Next, here we start having to make some 9 assumptions, but we create the adjusted motor cost 10 here by taking into account the markup and the 11 percent of pumps not sold with a motor. So for 12 this analysis, we start with inline pumps which 13 are -- according to the data we have, over 93 14 percent of the pumps are sold with motors, which 15 makes this a lot easier to deal with. So we have 16 over 93 percent of the models being sold with 17 motors. So for each pump, you have your motor 18 cost according to what the manufacturer's cost 19 curves were. You multiply that by their markups, 20 specific markup, to get what the customer is 21 paying for that motor. Then, to account for the 22 fact that not every pump was sold with a motor,

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 261 1 you multiply the marked-up motor costs by the 2 manufacturer's specific percent of shipment sold 3 with a motor. So if the manufacturer was selling 4 95 percent of their shipments with a motor, then 5 that cost that we calculated, it's only 95 percent 6 of that cost that you have on the aggregate. And 7 that outputs what we believe would be a 8 representation of pump-only cost per unit without 9 the motor. 10 And yes, some will be overstated. Some 11 will be understated because one model may have 12 been sold 100 percent with motors and another 13 model may have been sold 70 percent with motors. 14 But in the end, we're looking at a lot of data 15 points. And we're trying to look at the 16 regression and see how a lot of data points act. 17 We know that there are going to be errors in 18 individual ones. 19 So we have pump-only MSP. Then we take 20 that. So now for every pump in our database, we 21 have the pump-only cost. We can now start looking 22 at this over discrete ranges or, say, buckets,

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 262 1 just like a histogram of scaling parameter Ns/Q. 2 And we regressed these averages for pump-only 3 costs. And we'll show you how we do that. 4 Model results. So inline MSP model 5 results, two and four-pole were evaluated together 6 in one population because we needed to keep the 7 population of data points larger. They should be 8 fairly similar in their costs. And the scaling 9 factor corrects to represent physical size. Okay? 10 So here are the numbers that are going 11 to be on the next chart. But on the left, we have 12 the factor, which obviously doesn't mean that much 13 yet, but we'll have a chart on the next page on 14 the left. On the right, we have MSP per model 15 with no motor. And the population average for all 16 pumps was $1,383. 17 Now here is the chart. So pump-only 18 MSP, average cost per model, vertical inline. Here 19 you have your scaling factor, your secondary axis, 20 .5 horsepower, 2.2 horsepower, 13 horsepower, 75 21 horsepower, 180 horsepower. This 75 horsepower is 22 about $2,000 before a motor. This 2.2 is about

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 263 1 $900 before a motor. You can see the curve. You 2 can fit regression to it pretty strongly. 3 So we put these in the buckets and took 4 the average because you would see a big spread 5 like you did before. And you can't regress a big 6 spread like that. If we tried to regress that 7 whole scatter chart of data, we have a lot more 8 pumps here than we do out there. And you wouldn't 9 get -- the regression would be influenced by 10 those. And you wouldn't get a representative 11 regression. So that's why we did it this way. 12 Are there any questions here? 13 (No response.) 14 MR. WEINTRAUB: Okay. So how well did 15 we do? All right. So obviously we're fitting a 16 regression. We're looking at R squared value to 17 see how well we did. Well, what does it mean? So 18 obviously a lot of pumps do better than others 19 compared to the regression. Some are high. Some 20 are low. On average, the trend that you just 21 looked at on the last page, the average percent 22 error for all the models is .5 percent. So, on

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 264 1 average, we're representing the models. 2 The average error is $12 from the actual 3 average cost. So it's pretty close; right? You're 4 still going to have your variability because it's 5 a regression. Pumps move in and out. But as far 6 as fitting a curve to the data, it fits pretty 7 well. 8 Are there questions on this? I know 9 it's a lot. 10 (No response.) 11 MR. WEINTRAUB: Okay. So, I mean, this 12 is the kind of stuff that you take back. And if 13 you're reading through it in detail when we get 14 you the slides, come back with questions. And 15 we'll work on them. 16 Oh, and just for reference, 287 models 17 in this cost model. That's how many pumps we had, 18 pumps that actually had shipment. So obviously we 19 couldn't cost out a pump that didn't have 20 shipments because it had zero revenues. 21 Okay. So now let's look at how the 22 model re-creates the sample. So here we're

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 265 1 looking at MSP with motors. So I added the motor 2 cost back so we could look at the original data in 3 red. So red is actual cost per unit with motor. 4 Divide the manufacturer's revenues by the 5 manufacturer's units sold. Blue is what the model 6 predicted. You see you get a lot of spread. A 7 lot of that is coming from the motor. Otherwise, 8 we would have a straight line without motor costs, 9 but different manufacturers have different average 10 motor costs. 11 Charlie? 12 MR. CAPPELLINO: Charlie Cappellino, 13 ITT. Dan, did you just say revenue divided by 14 units shipped? 15 MR. WEINTRAUB: Yes. 16 MR. CAPPELLINO: So that would be more 17 like sale price. 18 MR. WEINTRAUB: Yes. 19 MR. CAPPELLINO: So is this sale price 20 or is this manufacturing cost? 21 MR. WEINTRAUB: You're right. That is a 22 bad -- it's MSP. So I did not represent that

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 266 1 well. Manufacturer's selling price. 2 MR. CAPPELLINO: These are all selling 3 prices -- 4 MR. WEINTRAUB: Selling price, yes. 5 MR. CAPPELLINO: -- as opposed to cost. 6 MR. WEINTRAUB: I apologize. That is 7 not correct. 8 MR. CAPPELLINO: All right. 9 MR. WEINTRAUB: Yes. I apologize. 10 Manufacturer's selling price, what the first 11 customer is purchasing. 12 MR. CAPPELLINO: We should fix those 13 slides so it's clear. 14 MR. WEINTRAUB: Yes. I can't. These 15 are pasted in. But we'll update. Actually, I'll 16 change that text up at the top for you there. Per 17 unit MSP. Okay. All right. So you see we catch 18 a lot of this spread. We can re-create the cost 19 pretty well. And most of the variability comes 20 from those different motor costs that each 21 manufacturer has. 22 So this line, what's interesting is

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 267 1 you'll see two kind of trends here. There's a 2 trend here and a trend here. These are the 3,600 3 2-pole pumps, and these are the 4-pole pumps. So 4 the model takes into account that. 5 Brief review. So we did the same thing 6 for end suction pumps. I'll run through these. So 7 we did one population again. Obviously, it looks 8 very similar to before with the inline. 9 This is the data spread. We have a lot 10 more data points. There are just more end suction 11 models that exist in the marketplace. Yes. So 12 it's a similar idea. All right. It's very clear 13 that there are outliers. Those are things that, 14 you know, they're in the model: really high-cost 15 pumps, really low-cost pumps. My guess is that 16 they're probably, you know, specialized for 17 certain reasons, but we don't know why given the 18 data that we have. All we know is the power and 19 efficiency of them, but someone probably wanted a 20 specialized pump that cost a lot more. But it's 21 in the regression. 22 Okay. So now we have established kind

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 268 1 of the baseline cost. Now we're going to talk 2 about the baseline cost-efficiency relationship. 3 And here we're going to get into even more math. 4 All right. Baseline cost-efficiency relationship. 5 So based on industry research -- we have talked 6 about this before. MPC, so manufacturer's 7 production cost, really does not change 8 appreciably with efficiency is what we have seen 9 based on talking with the industry, that the very 10 efficient pump or the medium efficient pump or the 11 low-efficiency pump have the same components 12 inside of them. It's just a matter of the 13 engineering design. How well was this thing 14 designed? And what effort was put in? There are 15 some levels, certain factors that may break from 16 that, but on average, there is a weak 17 relationship. 18 So we're saying, as we discussed through 19 the previous section on design options, hydraulic 20 design is the prime factor in determining a pump's 21 efficiency. Hydraulic design does not appreciably 22 affect the material and labor. We talked about

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 269 1 this earlier. And if we do want to address those 2 questions -- I know we have people who talked 3 about that -- those are things that can be brought 4 up by the group to discuss. Okay. 5 So we have also found that for 6 individual manufacturers, MSP does not change with 7 efficiency. So we have not seen individual 8 manufacturers carrying tiered product lines, 9 carrying a high-efficiency pump and a low10 efficiency pump. There's just one product line 11 that serves a purpose. Nor do they target any 12 higher markups for the more efficient products. So 13 they're not targeting the higher markup for a 14 premium product. There's just the products that 15 are offered. And they're targeting a markup on 16 that. 17 Many other design factors significantly 18 influence MPC and MSP. These are things that are 19 not taken into account in our analysis: 20 durability and reliability and all of 21 the other design factors that we have not been 22 able to look at because we are looking at just

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 270 1 efficiency. 2 So when you put this all together, a 3 cost-efficiency relationship may exist in the 4 overall market between manufacturers where one 5 manufacturer's pricing correlates to their 6 relative efficiency in the market compared to 7 another manufacturing pricing, where there is a 8 premium manufacturer and a lower efficiency 9 manufacturer, creating a cost-efficiency 10 relationship. So we tried to investigate this. 11 But if we looked at it on a per-manufacturer 12 basis, there's no correlation between MSP and 13 efficiency. 14 Okay. So how do we find this? 15 MR. POTTS: Dan, I have a question. 16 MR. WEINTRAUB: Sure. 17 MR. POTTS: Doug Potts, American Water. 18 Yes. Could you just back up again? 19 MR. WEINTRAUB: Where are we? This one? 20 MR. POTTS: Yes. I'm just trying to 21 understand. MPC does not change appreciably with 22 efficiency. So I guess you're saying exclusive of

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 271 1 polishing because we know that polishing adds 2 extra cost. But you're saying for a standard pump 3 construction and design, 82 percent pump or 60 4 percent pump or a 70 percent efficiency pump, the 5 production cost is very similar. 6 MR. WEINTRAUB: Yes. Yes. 7 MR. POTTS: But if you get into 8 polishing, it will be more expensive, you're 9 saying? 10 MR. WEINTRAUB: Yes. 11 MR. POTTS: Okay. 12 MR. WEINTRAUB: Yes. That's what we're 13 getting at. 14 MR. POTTS: Thank you. 15 MR. BROOKMAN: Charlie Cappellino? 16 MR. WEINTRAUB: Yes. 17 MR. CAPPELLINO: I think the other thing 18 that it actually says is a market, given the 19 current state of the market, it may not value a 20 difference between an 82 percent pump and an 84 21 percent pump in certain applications. 22 MR. WEINTRAUB: Yes. That is exactly

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 272 1 what the market is. 2 MR. CAPPELLINO: Either way, the cost -- 3 MR. WEINTRAUB: Yes. 4 MR. CAPPELLINO: -- isn't significantly 5 different and/or the market doesn't value -- 6 MR. WEINTRAUB: Yes. Yes. There are 7 other features defining what the customer wants 8 beyond a certain point. 9 MR. CAPPELLINO: Right. 10 MR. WEINTRAUB: Right, yes. Yes. That's 11 what we're seeing. 12 MR. CAPPELLINO: Okay. So now we're 13 going to try and find that relationship if it 14 exists. So the cost model developed on the 15 previous slide represents an average per model MSP 16 of a pump at a given log Ns/Q, as we're calling 17 it. So the model that I showed you, that 18 regression, that was independent of efficiency. So 19 any pump in the market, the average cost is this 20 curve. That can actually be translated to MPC, 21 the production cost, by backing out the industry 22 average markup that we're using, which is for end

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 273 1 suction pumps, 1.34. You back that out. You get 2 the average cost for a manufacturer to produce the 3 pump. 4 In this cost model, we'll evaluate how 5 each pump -- so we have all of these individual 6 pumps -- how each one of the pumps see how much 7 more or less than the average at cost and then 8 compare that to what its efficiency is, so see how 9 each pump is to the average and then see if there 10 is a correlation between its efficiency. Yes. 11 MR. STARR: So this is Louis Starr. 12 I think you had shown earlier you had the two 13 graphs. One was the manufacturer's production 14 cost. And you had the ones, the manufacturer's 15 selling price. So what you're saying across all 16 of those size horsepower pumps, it was 1. What 17 was it? Was it 74 you said or what was the last 18

-- 19 MR. WEINTRAUB: Oh, the -- no. I'm not 20 sure what you're -- 21 MR. STARR: Well, just -- 22 MR. WEINTRAUB: Yes.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 274 1 MR. STARR: -- the difference between 2 the markup, as opposed to production. 3 MR. WEINTRAUB: Oh. Yes, yes. The 4 markup -- no. The markup I just mentioned was -- 5 I haven't shown MPC, a chart of MPC. I only 6 showed -- this is MSP. So that's MSP, selling 7 price. If you were to draw MPC, -- this is end 8 suction pumps -- the markup is 1.34. So you just 9 draw a curve. That's this number divided by 1.34, 10 just merit coming down. 11 MR. STARR: So it does seem across the 12 horsepower range, it's a constant markup all the 13 way. 14 MR. WEINTRAUB: Yes, yes. And that was 15 the point we were making earlier on, is that 16 according to what we have learned from industry, 17 they target a markup across the product line. A 18 big pump doesn't get significantly different than 19 a smaller pump. It's the target. Okay. Where 20 were we? Okay. All right. 21 So, continuing on, we had that curve of 22 the average cost. And we know what each pump is,

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 275 1 individual pump is. So we can see how far each 2 individual pump is from the average. We also know 3 what the efficiency of each individual pump is. So 4 we can try and see if there is a correlation. 5 Let's see. So for this analysis, as we 6 have done before, efficiency is represented by the 7 C-value because that equates all pumps. All 8 right. So we can group shipments by C-value and 9 see how their price premium varies. Okay. 10 So baseline cost-efficiency 11 relationship, inline results. Okay. Let me walk 12 us through here. Two charts here that are fairly 13 equivalent but showing different things. C-value 14 down here, this is for inline pumps. We have cost 15 premium. So you see it goes from 10 percent down 16 to -30. That is how far from that median line the 17 average pump was. Cost premium here means the 18 same thing, but here we have percentage of models 19 failing, so basically translated C-values into 20 PERs or MEIs, whatever you want to call them. 21 What we have on the table is showing the 22 data. So percentage of pumps failing, the C-value

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 276 1 under the PER metrics, the C-value that would 2 cause that number of pumps failing. And, 3 remember, that incremental PERs from here to here, 4 those are efficiency points. So this is three 5 efficiency points. This is three points, three 6 efficiencies. Then the average per model cost 7 premiums. 8 So, again, we group them into buckets, 9 just like a histogram, took all your data points 10 within this range here, centered around a C-value 11 of 139, and saw how much more expensive or cheaper 12 they are than that regression line. Where do they 13 sit? You see that for the really inefficient 14 pumps down here, they were all -- their cost was 15 much lower than the median. Once you start to 16 move up, things kind of flattened out. And there 17 wasn't much of a premium at the higher prices. 18 This puts it into perspective because C-values can 19 string out, saying this is ten percent of the 20 models right here. So the bottom ten percent of 21 the models, there's a steep drop off in price, 22 saying the bottom ten percent of the models in the

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 277 1 marketplace, those tails we were looking at on 2 that chart earlier, those are pretty cheap to 3 purchase. They, for whatever reason, make sense, 4 lower efficiency. They're probably going to be 5 lower durability, lower reliability. There's 6 probably a lot going into that cost, but they're 7 cheaper. 8 Once you get up there, costs are pretty 9 flat, say above 20 percent, that, like we talked 10 about earlier, the market is not valuing that 11 efficiency. They're valuing other things. There 12 are cheap pumps out there, but after that, the 13 market is not valuing efficiency. 14 So this is the conclusion from the data. 15 The next chart, the overlaps we have here are for 16 analysis. So we tried to come up with a smooth 17 result to make the analyses make sense and be a 18 little less strange, honestly, because if you 19 start putting in the wavy lines, we're going to 20 get strange results in the LCC. 21 It is fairly arbitrary. The way that it 22 was developed was we wanted these data points, the

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 278 1 average of this, to equal this, and then get 2 ourselves up there. That's the best way that we 3 can come up with coming up with a smoothed-out 4 curve that would represent what we think the data 5 is saying. This is the best way that we can come 6 up with to try and explain what we are seeing in 7 the marketplace. It's definitely open for 8 discussion, but the general conclusion is that 9 there is a very weak cost-efficiency relationship 10 or none at these higher efficiencies than there is 11 down at the very low efficiencies. 12 So does anyone have comments, thoughts? 13 MR. BROOKMAN: Tom Eckman? 14 MR. ECKMAN: So this is a question for 15 the manufacturers as much as anything, but it 16 looks sort of like we've got a fixed cost of 17 conversion to get the higher levels. And once 18 that's done, there's not a huge difference in 19 product cost. But when you look at the economics 20 of making those, I'm assuming that the 21 amortization of that conversion cost is going to 22 be on the remaining product. So if there is some

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 279 1 incremental cost, it has to be covered or -- 2 MR. WEINTRAUB: Yes. So -- 3 MR. ECKMAN: -- isn't so that this 4 relationship doesn't reflect the cost of 5 conversion. It's just what the products are. 6 MR. WEINTRAUB: Yes. You are way ahead 7 of us here; right, Tom. So this is going to be a 8 major point that we are going to discuss. This is 9 the market now. The market later may not 10 represent this; right? Costs have to come into 11 play. And we're going to get there. 12 MR. BROOKMAN: But maybe we could just 13 confirm the basic finding that you're not getting 14 much of a price premium that goes with increased 15 efficiency in these markets. Right? That's one 16 of the principal conclusions here. 17 Al Huber? 18 MR. HUBER: Yes. I want to make sure 19 that I understood what Tom was trying to say about 20 cost and once you pass that cost, it doesn't cost 21 anymore. I don't think that's what this is 22 telling us. What this is telling us, I think, is

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 280 1 that the market does not value efficiency. And 2 that's pretty much what we -- to a certain extent, 3 if you hit a minimum level within two or three 4 points or four points, the market says I've got to 5 have so many people bidding this job, everybody's 6 efficiency is not the same. It's going to be, you 7 know, a range. I'm willing to live with it. And 8 that's what happens. And what's what you see. 9 MR. BROOKMAN: You might also interpret, 10 if I understood this correctly, that part of your 11 business model might be since you're selling into 12 a market where you've got a variety of pump types, 13 models, that your markups are fairly consistent 14 across a range of product you're selling into the 15 market, then that's part of your business model. 16 MR. HUBER: Well, I can't discuss how we 17 mark up. 18 (Laughter.) 19 MR. HUBER: We're not allowed to do 20 that. There's another department called Justice 21 that would come and see us. 22 MR. BROOKMAN: Sorry.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 281 1 MR. POWERS: Here. Do you want to write 2 it down and I'll -- 3 MR. HUBER: But I want to make sure I 4 understood what Tom was saying because I don't see 5 -- I mean, after you pass a certain point -- 6 MR. ECKMAN: What I was trying to get at 7 is that given the prior portion of this 8 presentation on the cost of conversion to bring 9 noncompliant pumps into some level of compliance 10 at MEIs or whatever tiers, ELs we want to pick up, 11 that you've got to, you know, say the 40 percent 12 failed mark was 58 percent of annual revenues have 13 got to be dedicated to conversion costs. That's a 14 fairly significant piece of cash. 15 MR. HUBER: That's huge. 16 MR. ECKMAN: And I presume that if you 17 want to stay in business, somehow you've got to 18 recover that in the price of the pumps. That will 19 change -- 20 MR. HUBER: And if you look at this 21 chart -- 22 MR. ECKMAN: That will change this line.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 282 1 MR. HUBER: Well, I don't know. If you 2 look at this chart, what it's telling you is that 3 all I've got to do is hit the minimum. Getting 4 any more than the minimum is going to be a 5 problem, is not going to gain me much market 6 share. That's what that's telling you. And I 7 don't know that we're going to be able to get 8 price. 9 MR. ECKMAN: That's part of the 10 analysis, to see how much -- 11 MR. HUBER: Part of the issue in this 12 industry or our -- 13 MR. ECKMAN: Trade-off. 14 MR. HUBER: -- industry, which is still 15 consolidating, which has consolidated a lot, is 16 there are a lot of manufacturers. Granted, a lot 17 of them are small, but there are a lot of 18 manufacturers out there. And, therefore -- and 19 getting pricing in this market is extremely 20 difficult. Okay? 21 MR. POWERS: Tom, this is Chuck. All of 22 our companies have done a series of studies,

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 283 1 analysis, and whether it's consultants or 2 internal; right? And, you know, Dan is starting 3 to hit on the edge of some of this. We also are 4 not sure, but we don't think we're going to get 5 any price advantage; right, increase in price. The 6 Europeans so far -- some of their legislation is 7 already in place. There's nothing showing up on 8 any price increases to the marketplace that they 9 have seen; right? 10 Now, one risk we run, not you, not the 11 consultants, and not the government, is that when 12 you have some falloff of manufacturers, which we 13 agree there might be some -- we don't know what. 14 There will be some. What we do know and has 15 happened in the chemical industry, it has happened 16 in the power industry, and a few others, when that 17 starts to happen, the bated breath -- I'll use 18 that term loosely -- of competition offshore, 19 they're going to look at this now and say, "Wow. 20 Our designs aren't 40-50 years old," which some of 21 this is. "Now we can break in and hit this one 22 little niche, that these other two guys have

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 284 1 fallen to the wayside or they're falling behind or 2 because of the ruling, within five years, they may 3 not be ready if it's" -- you know, Lucas was 4 saying, I think, five years is when you are ready 5 to do this. And then policy change may be, you 6 know, five years again before you make a change. 7 We're going to see offshore competition. 8 And now what that will do will make it 9 tougher for us. Right? That influx will be a lot 10 bigger than you may think. And that's okay. 11 Right? Because it makes it more competitive. But 12 it will become a problem. 13 MR. BROOKMAN: Charlie Cappellino? 14 MR. CAPPELLINO: Charlie Cappellino, 15 ITT. I don't want to beat a dead horse here, but, 16 again, the chart here should say, "Price premium"; 17 right -- 18 MR. WEINTRAUB: Yes, correct. 19 MR. CAPPELLINO: -- as opposed to "Cost 20 premium." 21 MR. WEINTRAUB: Yes. You are correct. 22 MR. CAPPELLINO: I'm not trying to make

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 285 1 a fine point, but -- 2 MR. WEINTRAUB: You're not. No. 3 Charlie, you are 100 percent correct. And we'll 4 go through and -- 5 MR. CAPPELLINO: We're kind of 6 interchanging "cost" and "price." And we've got 7 to be careful that we keep those two separated 8 because to some of the discussion here, you know, 9 price in a lot of cases is dictated by the market 10

-- 11 MR. WEINTRAUB: Yes. 12 MR. CAPPELLINO: -- where cost kind of 13 gets back to Tom's comment. That's dictated by 14 your cost of doing business. So capital 15 investment does get amortized over a period of 16 time depending on the nature of the capital 17 investment. That gets cost built into your cost 18 of doing business. So you've got to figure out 19 how to, you know, make that up. So whether 20 companies go in and can raise prices to address 21 that or not, it's a market question that, frankly, 22 only the market can answer at some point in time.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 286 1 We can conjecture, but it's a tough one to 2 forecast. 3 MR. BROOKMAN: Tim Eckman? 4 MR. WEINTRAUB: Yes? 5 MR. BROOKMAN: Follow-on? 6 MR. ECKMAN: Well, in all the other 7 proceedings, DOE -- and I assume they will in this 8 one -- does look at whether you can maintain your 9 margins or whether you can or don't. So that's 10 part of the manufacturer impact analysis to see 11 whether you can recapture that conversion cost in 12 the marketplace. So I think it will be of 13 interest to all of us about how those things turn 14 out because it's a fairly sizeable piece of cash 15 once you get above even the ten percent level. 16 MR. BROOKMAN: Al Huber? 17 MR. HUBER: Al Huber, Patterson. Having 18 experienced the motor regulations that were 19 produced, they increased their price. But, unlike 20 capital costs that we're having to spend, rather 21 than putting it in the machine because there's 22 nothing much we can do to it, they could always

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 287 1 say, "Well, we're having to put more copper in. 2 We're having to do this. We're having to do 3 that." And there were only three or four of them 4 anyway. So it was real odd. They all came out. 5 Their pricing was pretty similar. I'm not saying 6 they colluded. I'm just saying it was pretty 7 similar, which you will not -- all I'm trying to 8 caution DOE on is you will not see that happening 9 in this industry. That will not happen. 10 MR. POWERS: And I think also -- this is 11 Chuck, Tom. I'm just telling you you're bringing 12 up some good points. We're all concerned; right, 13 in how would we go about this. And taking the 14 stuff that Dan's done and look at it, there's tons 15 of people that do marketing analysis in our own 16 companies; right, but on a global basis. But so 17 the line would be "Okay. Mr. Customer, you're 18 going to get some erg of" -- you know what an erg 19 is, about as much power as a fly to do a pushup; 20 right? "So you're going to get some erg to 21 improve pump efficiency." And I hear three 22 percent, but maybe it's a half. It's going to

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 288 1 vary on the range of products. Right? And it's 2 not going to be much over time. And then you say, 3 "Well, you can buy a more efficient motor at a 4 higher cost." 5 He's going to look at that and say, 6 "Okay. Well, it's important I get the motor 7 because I have to have a motor. And the 8 regulations are they have to buy more efficiency. 9 So I'm going to take that out of the pump maybe" 10 because the pump is the dog, the motor tail 11 sometimes, even though it isn't; right? 12 Then we're going to come up with a wild 13 idea of ten percent industry is going to be 14 interested in a VFD. And in a VFD; right, costs 15 are a lot more if they haven't got one at all or 16 they haven't been proven. 17 But what I think companies are going to 18 do is they are going to look at that cost. We saw 19 58 percent revenue; right? So you just configure 20 Wall Street. What does Wall Street expect? When 21 you listen to the analysts and you go through all 22 of this stuff, they talk every day of if you say

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 289 1 anything more than two years of payback, you might 2 as well go dig a hole and go away. You're done; 3 right? 4 So we're seeing numbers here a lot -- 5 again, it's Dan's summary; I'm not saying he's 6 right -- seen numbers a lot bigger than that. 7 We're talking some of these more than ten years on 8 that payback; right, not revenue but the operating 9 income from the gross margin, however you want to 10 play it; right? You do the math; right? 11 So this is a challenge. So if it's flat 12 on market; right, and they're not getting any gain 13 or the marketplace, contractors and all, say, "Hit 14 the pump guy," you know, he's got the bigger share 15 and he takes it out of this pocket and we've got 16 to pay more in these other things; right, which is 17 what happens sometimes; right, and then the 18 payback, this -- you know, this is a serious 19 consideration we've got to think about; right? 20 They're pump guys. 21 MR. BROOKMAN: Lucas Adin? 22 MR. ADIN: No. I think just the general

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 290 1 point I was going to make -- and, I mean, this is 2 related to, I think, Tom's point, but 3 understanding that there are significant 4 conversion costs with any one of these particular 5 levels we're going to pick and they have to be 6 recovered somehow, we need as much information as 7 we can reasonably get about how that might happen 8 and what manufacturers are likely to be able to 9 cover what price could be sustained by the market 10 because the other thing to think about is that 11 there are a lot of pumps -- I mean, all this data 12 comes from pumps that are already out there on the 13 market that are at these higher efficiency levels. 14 They're already out there. And, realistically, 15 with some of these higher levels of conversion 16 costs, those costs will be distributed to models 17 that are already meeting efficiency levels higher 18 than the standard that this group might pick. So 19 people who are paying for, you know, a higher 20 efficiency level are also going to pay more in the 21 cost. And so that it will become more of it when 22 we get to the lifecycle cost and all of that, what

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 291 1 it is justified for the individual consumers, but 2 those things matter a lot when we talk about what 3 is a justifiable level for consumers, for 4 manufacturers, for all those things. These 5 assumptions are really important. So that's why 6 we're presenting this stuff. And we need to know 7 what you guys think. 8 MR. BROOKMAN: Gary Fernstrom? 9 MR. FERNSTROM: This is Gary. The 10 things we're discussing here go to the root of the 11 very reason why we do standards. So we have 12 learned that customers probably won't pay extra 13 and aren't interested in a few additional points 14 of efficiency. Manufacturers because of the 15 investment required probably aren't going to 16 voluntarily change their product lines to get a 17 few additional points of efficiency. Yet, there's 18 a public good associated with the energy savings 19 that would result from that improvement. Yes, 20 recovering the cost of this conversion is subject 21 to competitive forces, but if everybody in the 22 industry has to incur those costs, then it seems

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 292 1 reasonable that competition would support the 2 commensurate increase because everyone is faced 3 with the same circumstance. 4 Again, I empathize with you because, you 5 know, if you are looking at a cost that you're not 6 absolutely certain you are going to recover, 7 that's pretty scary. 8 MR. BROOKMAN: Dan tells me he's got a 9 couple of more slides. Let's do those. And then 10 we're going to take a break. 11 MR. WEINTRAUB: Yes, same topic and 12 nothing new and groundbreaking. And then we can 13 take a break. 14 So this is just showing that same chart 15 we saw before with the cost-efficiency 16 relationship applied to it. We don't need to look 17 at this too long. These charts were the key. 18 Okay. The one last thing to talk about: 19 end suction close-couple/end suction 20 frame-mounted costs versus efficiency. So the 21 data we have on these pumps, it's not suitable to 22 regress one of those analyses that we just did for

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 293 1 the inline. That's because the inline pumps, 95 2 percent of the market were sold with motors. So 3 we had fairly good certainty that the majority of 4 the costs included a motor. End suction close5 couple, 70 percent include a motor. So when you 6 start to try and back out motor costs off of the 7 individual models, you are going to get some 8 models that end up -- if they were never sold with 9 a motor, they end up coming with a negative cost. 10 And things just don't work out that way. It works 11 out on the average, but it doesn't work out on the 12 individual pump basis. 13 So we couldn't do the same analysis, but 14 what we decided to do was map that same 15 relationship onto the inline pumps, taking the 16 idea that the curve shape should be the same. But 17 it's going to start at a different efficiency 18 location because inline and end suction pumps have 19 different attainable efficiencies. 20 What we did, so here we're looking at 21 the same shape curve. Here the baseline inline 22 pumps, the lower inline pumps, so here it's three

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 294 1 percent of the pumps failing. Was that a C-value 2 of 134.5. And inline pumps were around 139, which 3 is significantly less efficient. So it shows that 4 end suction pumps on average are more efficient, 5 which we understand already because they don't 6 have the additional piping attached to them, which 7 caused losses and additional complication of 8 design that come with that. So it was a matter of 9 where we are going to start this curve. 10 We started the curve here at an 11 equivalent -- what we would call an equivalent C12 value. And you see it get flat. Translating it 13 to MEI or percentage of models failing, you see 14 the curve is a little less sharp because of the 15 distribution of C-values in the marketplace. So 16 it happened to be that before for the inline 17 pumps, this whole slope was contained within ten 18 percent of the marketplace. Now this whole slope 19 is contained within 30 to 40 percent of the 20 marketplace. This is the best we could do to 21 translate that analysis over because the data we 22 have will not work for end suction pumps, the same

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 295 1 general relationship. 2 Any questions? 3 MR. BROOKMAN: Maybe we would just take 4 very brief general comments on this detailed 5 presentation before we go to break? 6 MR. WEINTRAUB: Yes. That's what we've 7 got. 8 MR. BROOKMAN: Nothing additional? 9 (No response.) 10 MR. BROOKMAN: Let's go to break. 11 Lucas? 12 MR. ADIN: Just one quick question. So, 13 as I stated earlier, we are going to email these 14 slides out to everyone after today's presentation. 15 Do I hear that it would be useful to have them 16 printed as well? Yes? It's big. So if we want 17 to do that, I have to get the print order in now 18 so that we'll it by the end of the day. 19 MR. HUBER: We would appreciate it if 20 possible. 21 MR. ADIN: I'll check, but I think we 22 can probably do it.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 296 1 MR. BROOKMAN: That would be great. 2 MR. ADIN: Yes. We will definitely 3 email it out, no matter what. 4 MR. BROOKMAN: Yes. So it's now almost 5 a quarter after 3:00. Let's resume at 3:30. We're 6 going today until 5:00 o'clock. There's a Coke 7 machine on the ground floor. I think the coffee 8 shop is now closed. 9 (Off the record.) 10 (On the record.) 11 MR. BROOKMAN: We are going to proceed 12 with this presentation content. And next we're 13 going to hear from Chris. Chris, it's all yours. 14 MR. LAU: Thank you, Doug. 15 Hi. My name is Chris Lau. I am also 16 with Navigant. Dan is a tough act to follow, but 17 I will do my best. You have to excuse me. I have 18 got a cough drop in my mouth because I am 19 recovering from a cold. So if I'm not being clear 20 enunciating enough, please let me know. 21 My goal here today -- well, generally 22 when I'm up here at one of these pump meetings,

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 297 1 I'm talking about the impact, manufacturer impact, 2 analysis, which is an analysis that DOE performs 3 to help industry and stakeholders to understand 4 the impact of various standard levels on the 5 industry as a whole. Today we're going to scale 6 back the discussions, just pricing and markups. 7 The reason for that is we're actually trying to 8 get to a conversation about consumer impacts. 9 Hopefully by the next negotiating meeting, we'll 10 have a more robust manufacturer impact analysis 11 available. 12 Let's see here. So before the break, 13 Dan had walked us through a really robust 14 discussion of what I would call base case MPCs and 15 MSPs. Okay. So Dan has taken us through a very 16 robust discussion of where DOE believes 17 manufacturer production costs and manufacturer 18 selling prices are today. I think we believe that 19 it's likely that after standards go into place, 20 those manufacturer selling prices will change, 21 what we call standards case pricing. 22 So that new MSP will likely depend on

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 298 1 two things: one, the conversion costs that Dan 2 walked us through; and, two, manufacturer's 3 ability to pass on costs through their sales 4 chain. 5 Just to be clear, MSP, manufacturer 6 sales price, in our world, we call it MPC times 7 the manufacturer markup. So you have your 8 manufacturer production costs. And then the 9 markup covers any nonproduction costs as well as 10 what you need to make a profit. 11 Now, that markup, what we're going to do 12 is it's very difficult to forecast market forces. 13 But what we do is we consider a range of markups. 14 We try to establish our lower bounds and our upper 15 bound scenario. 16 A few other ground rules, sort of side 17 note items. So markup is MSP divided by MPC. 18 Typically sometimes we get confused with gross 19 margin. Gross margin is a little bit different. 20 It's actually your sales price minus your 21 production costs divided by your sales price. And 22 if you'd like to, want to do the math, there's the

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 299 1 conversion from gross margin to markup formula, 2 for example. Okay. 3 So, as I said before, we're going to 4 model multiple markup scenarios to reflect varying 5 manufacturer ability to pass on their, well, in 6 this case not price increases but recover 7 conversion costs. 8 We're going to establish two scenarios. 9 And I'm going to walk you through what they are in 10 a moment, what we're thinking. At a lower bound, 11 it would be something that is a minimal cost 12 recovery. It will reflect a manufacturer's 13 inability to raise prices due to market factors. 14 And it would result in sort of minimal change in 15 end user pricing. At the upper bound, what we 16 would like to see is something that actually 17 represents high cost recovery, reflects an 18 increasing ability for manufacturers to pass on 19 costs and increase their selling price. And it 20 would likely be whatever represents the highest 21 change in end user pricing. 22 So today for the lower bound, at this

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 300 1 point, what we're thinking about is what we 2 generally call minimum cost recovery or flat 3 markup. In other words, -- and this is very low - 4 - it would be whatever you are selling it today, 5 that's what you sell at after the standard. Right? 6 That indicates you have no ability to pass on 7 costs to your customers. 8 At the upper bound, I think there was a 9 question. We don't know where we're going to go 10 yet. We have heard two possible options to date. 11 One is that manufacturers when they upgrade 12 equipment, when they upgrade designs, when they do 13 these redesigns, they spread out the costs over 14 all of their existing models so that no single 15 model increases dramatically in price. We don't 16 know if that is realistic. We would love to hear 17 feedback on it. The other option is the 18 conversion costs recovered over just the 19 redesigned units. So if you have 20 models out of 20 50 that get redesigned, then those 20 models would 21 see some sort of increase in markup and a 22 resultant increase in selling price.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 301 1 I see some nods. I see some heads 2 shaking. 3 MR. HUBER: Are you looking for 4 feedback? 5 MR. LAU: I am. I am. 6 MR. BROOKMAN: Al Huber? 7 MR. HUBER: The marketplace is not going 8 to let you do that. I mean, if you try to recover 9 all that cost on that model, then you won't sell 10 any because your competitor is just not going to 11 let you do that. 12 MR. LAU: Right. You won't sell a 13 marginal unit. 14 MR. HUBER: They're just not going to 15 let you do that. I think if you want our opinion, 16 we're going to be lucky to hit your lower bound 17 that we don't end up having to eat some of this. 18 MR. LAU: Well, the lower bound would 19 mean that you don't recover any conversion costs. 20 MR. HUBER: Not any. Well, we might 21 not. We very well may not. 22 MR. POWERS: What if we said -- Chuck

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 302 1 Powers -- offshore competition, one? Number two, 2 how do you go to market? You seem to have a 3 conviction with this. And it's okay. I'm going 4 to finish listening, but is it a bare pump to a 5 distributor? Is it three bids and the best 6 winner? Right? There's a competition. I mean, 7 the customers out there say, "I have to get three 8 bids to check the most"; right, if you're on an 9 acceptable bidders' list? And as soon as they 10 throw theirs in, what is the net advantage 11 customers are looking for, features and stuff like 12 that? Yeah, efficiency in argument can be one, no 13 argument, because there are jobs where they will 14 have efficiency evaluations. I don't see it on 15 the little stuff. I just don't see it on the 16 little stuff. 17 If you look at Doug, I mean, over 1,000 18 horsepower, some of the bigger stuff, fine, but I 19 don't see it on the little stuff; right? And at 20 the end of the day, is it being sold as a package? 21 Is it being sold? You know, when I say, 22 "package," I'm talking the base plate and a motor

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 303 1 and a coupling and all of that or is it a bare 2 pump? 3 We ship. And I'm talking about Charlie 4 and I. We ship a lot of bare pumps. I heard Dan 5 brought up -- and it was a good point -- that he 6 felt that survey way back when, the 70 percent, I 7 think it was -- it was a pump and motor 8 combination. We don't see that conversion. We 9 are lucky to see 30 percent. So we ship a lot of 10 bare pumps. So our bare unit is going to a 11 package that somebody else is putting the market 12 price on. Right? 13 And then there's one other problem, that 14 in the efficiency evaluations, they'll state, "You 15 must have a minimum wire to water of" X. If 16 you're over that, nobody cares. So maybe you take 17 one of these lines of C's and draw a line there 18 and say, "What do we see across the board on the 19 marketplace as a minimum efficiency for that site 20 or that plant to be effective?" And once you get 21 to that point, it doesn't matter if you're two 22 points better than that or half a point better.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 304 1 They don't care. 2 MR. BROOKMAN: Gary Fernstrom? 3 MR. FERNSTROM: This is Gary. So I have 4 a response back to Al. Your suggestion was that 5 your competitor was not going to let you raise the 6 price. Well, if your competitor already has a 7 compliant pump that passes, he's probably not 8 seeing any investment needed. He's probably not 9 going to raise his price. And you're in a bind. 10 On the other hand, if he's faced with 11 the same challenge, too, and maybe not on a 12 product-specific basis but on a fleet average 13 basis, needs to make some investment, he'll be 14 needing to improve products, make some 15 investments. And he'll be needing to recover some 16 investment cost as well. So, you know, it doesn't 17 seem to me that we can assume that competition is 18 going to allow no price increase at all. 19 MR. BROOKMAN: Louis? 20 MR. STARR: This is Louis Starr, NEEA. 21 There's another thing to consider, too, that based 22 upon how we're defining extended product and how

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 305 1 it might be tested, some of this stuff that is 2 going out past the manufacturer might be coming 3 back for the manufacturer when they have to start 4 meeting efficiency requirements and stuff. It may 5 make more sense, rather than just sending out or 6 taking a bare pump and sticking at the motor. The 7 person that's maybe doing that now may be shipping 8 that work back downstream or I guess upstream 9 depending on how you look at it. So there may be 10 market share increase in extended products that 11 you're making now. I mean, we don't know because 12 we haven't done it before, but there is that 13 potential. 14 MR. BROOKMAN: Okay. Keep going, Chris. 15 MR. LAU: So I'm just extending opinion. 16 And this is exactly why we tried to establish a 17 lower bound as well as an upper bound. And 18 neither scenario tends to be the most realistic 19 with the attempt that the realistics are a decimal 20 somewhere in between them. All right. 21 So we're trying to get to what are those 22 markups going to be so that we understand what the

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 306 1 new MSPs will be. And so the key drivers here 2 are, what are the MPCs, you know, where are we 3 starting at, what are the conversion cost levels - 4 - you know, we have covered that -- where are the 5 markups today, and where is MSP today, markup MSP 6 for MPC. 7 So here is what we do. We say this is 8 the conversion cost industry basis. What is the 9 annual payment? What is the annual amount the 10 industry will have -- what is the additional 11 revenue the industry will have to make per year 12 over the analysis period to recover that 13 conversion cost? In other words, how much would 14 the manufacturer need to make per year to make the 15 industry whole after conversion costs? We treat 16 this as annuity payments. We figure out what that 17 annual amount is. We divide that by annual 18 shipments to figure out how much they're going to 19 have to increase the cost per unit per year. And 20 we add that additional cost to the base case MSP. 21 So baseline MSP plus the increased cost divided by 22 MPC is your revised markup. These are to say, how

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 307 1 much more are you going to have to charge your 2 customers to make your conversion costs back? 3 This is where our MSP is today. I think 4 it's a little bit different. It's pretty close to 5 what you -- actually, no. This is what you showed 6 before. I just have TBDs for a couple of 7 equipment classes. 8 This is the markup we believe is the 9 industry average today. It was initially based 10 off of as much public information as we could 11 find. We came up with some estimates that were 12 somewhat in the ballpark. And then we adjust 13 those estimates based on feedback from industry. 14 So where does that take us after the 15 standard occurs? As I said before, we had 16 considered two different upper bound markup 17 scenarios. One is where you do cost recovery over 18 redesign shipments. The other is where you do 19 cost recovery over all shipments. You could see 20 for the two equipment classes or -- sorry -- for 21 end suction close-couple and ESFM up at the top 22 and Inline down at the bottom, the standards

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 308 1 markup, not surprisingly, increases as PER 2 increases because conversion costs are going up. 3 And you can see the new MSP as well as what we 4 think the percent MSP increase will be. 5 MR. CAPPELLINO: Charlie Cappellino, 6 ITT. To perform this math, did you have to assume 7 a number of years? 8 MR. LAU: We did. 9 MR. CAPPELLINO: What number did you use 10 for the number of years? 11 MR. LAU: And so for us, what we assumed 12 was that we wanted to make what would make 13 industry whole over the analysis period. So the 14 analysis period was 30 years. 15 MR. BROOKMAN: Al Huber? 16 MR. HUBER: I've been in this business 17 for now 40 years. And I have never -- and I've 18 been through the Carter years. I have never seen 19 a 12 percent price increase in my lifetime, ever, 20 ever. 21 MR. BROOKMAN: In the span of 40 years. 22 MR. HUBER: In the span of 40 years, in

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 309 1 this industry. I've seen it in other industries, 2 but in this industry, I have never seen it. And I 3 don't think anybody else here is expecting to see 4 anywhere near 12 percent. 5 MR. BROOKMAN: Thanks, Al. That's 6 helpful. 7 MR. CAPPELLINO: And this is -- 8 MR. BROOKMAN: Charlie Cappellino? 9 MR. CAPPELLINO: Charlie Cappellino, 10 ITT. I just want to make sure I understood the 30 11 years. So that's assuming that the investment 12 that's made is going to basically be spread over a 13 30-year time period? 14 MR. LAU: No. 15 MR. CAPPELLINO: No? 16 MR. LAU: So typically what we do, when 17 we do the full MIA, we'll assume that 18 manufacturers are making that investment ahead of 19 the standard, so over a five-year time period. 20 MR. CAPPELLINO: Okay. 21 MR. LAU: And that's recovered over the 22 full analysis period, over --

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 310 1 MR. CAPPELLINO: But what I'm trying to 2 understand is the tooling that you're investing in 3 here -- 4 MR. LAU: That's up front. 5 MR. CAPPELLINO: -- has some limited 6 lifetime; ten years, for example. So in order to 7 make the conversion, there would be a ten-year 8 lifecycle for that tooling. I'm trying to figure 9 out how that -- 10 MR. LAU: So I guess the way I would 11 look at it is today your tooling lasts seven to 12 ten years. Let's say ten years. And so that ten13 year periodic replacement is sort of what's in the 14 baseline. However, to get from where you are 15 today to where the standard will be will be this 16 one-time investment. That's necessitated by the 17 regulation. 18 MR. BROOKMAN: Chuck? 19 MR. POWERS: I've been at it 38 years. 20 I'm not as good looking as Al. A couple of years 21 he's got over me. 22 (Laughter.)

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 311 1 MR. POWERS: I'm trying to put my head 2 to math that you and Dan have shown. And, again, 3 I give you a lot of credit for getting up and, you 4 know, trying to help and trying a perspective, no 5 argument; right? So if I do the math, it's a $100 6 million cost from what I remember, Dan, 109, 104, 7 whatever it was. He indicated -- what was the 8 percentage of that? It wouldn't be all of it. 9 Seventy-five percent? Is that the number? Oh, 10 100 million. Okay. Okay. So you take 100 11 million. And most companies are looking at two12 year payback for investment on things. But we 13 understand it's for the better, better 14 efficiencies, technologies, and all of that. So 15 maybe we can convince the people longer than that. 16 But if you take 100 million and divide it into 5 17 years and you take 677 to 782, the 15 percent, 18 which is your -- well, actually, you would have to 19 go higher than that, to 16 percent, which is your 20 PER-40, which is not the same as MEI-40; right? 21 But it's $100 a unit roughly. That's a lot of 22 units. I don't know if we ship that many a year

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 312 1 to make even that up. You know, I'm trying to put 2 the relative to the -- 3 MR. LAU: I understand. And part of the 4 reason why we present the information like this is 5 not only to inform the stakeholders but also 6 inform the Department; right, because there's got 7 to be a discussion about what levels make sense -- 8 MR. POWERS: Right 9 MR. LAU: -- and what investments make 10 sense. 11 MR. POWERS: Right. Now, what will help 12 you that's not part of this right now is a few 13 things. One is if you consider cast iron bronze14 fitted, which is what we have been kicking around, 15 but you go to stainless, the price of stainless is 16 more; right? So there is some help there, not a 17 lot. So the different materials will help it, but 18 I think the majority of this grouping of pumps is 19 pretty basic materials, not probably. I don't 20 remember if I saw Dan's breakdown of irons versus 21 stainless. I don't remember. But if you looked 22 at that, the stainless will help you a little bit

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 313 1 because there is more money for those. And the 2 hydraulics are similar when you do it other than 3 the fact the patterns will be different because of 4 the shrinkage rates. And then the other factor 5 that you have to consider is the amount of time 6 that goes into the work and how long is it going 7 to take until you get it done. So it may not be 8 the full 30 years; right? And then the other 9 factor is rationalization goes on every ten years 10 probably; right, consolidation of companies, 11 combination of lines, improvement of technologies, 12 changes in customers' requirements on pressures, 13 and things like that. So 30 years is not even 14 reasonable because the life of the product, 15 lifecycle, as we call it, you know, the obsolete 16 products to the active, and all is much, much 17 shorter than that; right? 18 And then the only other thing is you 19 need to look at the applications and the lifecycle 20 of an application. How long -- I keep using Doug, 21 but how long is the life of a pump that we sell 22 Doug going to be in that plant? Is it five years?

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 314 1 It four years based on the application? So you're 2 going to be replacing that pump. So that impacts 3 the payback; right? 4 MR. POTTS: Your pumps had better last 5 more than five years. 6 (Laughter.) 7 MR. POWERS: Al, I'll give you his phone 8 number. Okay? 9 MR. BROOKMAN: I want to make sure we 10 captured that for the record. 11 Okay. Well, keep going, Chris. 12 MR. LAU: That's it. That sets up our 13 standards case selling price for the next 14 discussion. 15 MR. HUBER: Are we going to get copies 16 of those, Chris? 17 MR. LAU: Yes. 18 MR. ADIN: Of which? 19 MR. HUBER: These slides. 20 MR. ADIN: You're getting copies of this 21 entire -- 22 MR. HUBER: Oh, the entire presentation?

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 315 1 MR. ADIN: All the stuff you've just 2 seen. 3 MR. HUBER: Great. 4 MR. ADIN: Yes. That's coming. 5 MR. HUBER: Okay. 6 MR. POWERS: This is Chuck again. So, 7 Lucas, help me out here. Let's go on the 8 assumption we don't get a price increase; right, 9 because we're trying to be realists. Let's go on 10 the assumption we can get a price increase. How 11 is the government going to manage that? Because 12 we're not allowed to talk numbers and costs 13 amongst ourselves. 14 MR. ADIN: I'm not sure if I understand 15 your question. 16 MR. POWERS: How do we go about 17 precipitating that we will get a price increase? 18 MR. HANDZEL: Lucas said that we can -- 19 MR. ADIN: That's not usually how this 20 works, not that kind of negotiation. Yes. So, I 21 mean, this is one of the terms on which we're 22 negotiating and one of the dimensions that has to

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 316 1 be considered, obviously. Certainly it's probably 2 the one of most interest from your side, is what 3 this will cost. And so if you have decided -- 4 now, understanding that what's up there might be 5 wrong, I mean, you have a much better sense 6 probably of what that number should be than us 7 perhaps. We don't know. That's what we're trying 8 to get feedback on. But coming into this 9 negotiation, I mean, I think it was our 10 expectation that, a reasonable expectation that, 11 somewhere in there there's a level that your side 12 of the table is comfortable with. And that has 13 certain costs that are associated with it. And, 14 you know, at some point, we have to try and figure 15 out how to compare that to what that savings are 16 on the other side because the other number that 17 matters here is what all of these consumers are 18 going to get energy savings, what all that amounts 19 to. But, in any case -- 20 MR. POWERS: I used the word "maybe." 21 I'm not trying to be facetious. 22 MR. ADIN: Right.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 317 1 MR. POWERS: Can we convince them to use 2 a high efficiency motor in a VFD? Maybe. Can we 3 say to them, "This pump is going to be a little 4 more efficient"? Sure. We can say we will tout 5 that. And every one of these gentlemen and ladies 6 in the room will promote, you know, our products 7 and do our normal marketing thing and all of that. 8 But we can't dictate to a customer. We can't tell 9 them what to do. We can't tell them what to buy, 10 can't tell them to go to Wal-Mart, instead of K11 mart." 12 MR. ADIN: Right. Understood. 13 MR. BROOKMAN: Tom Eckman? 14 MR. ECKMAN: But we will tell them that 15 they can't buy some things they used to buy, much 16 less efficient. That's what the standard does. It 17 cuts off -- 18 MR. POWERS: I don't think you're going 19 to regulate them. I think -- 20 MR. ECKMAN: We're not regulating them, 21 but -- 22 MR. POWERS: I think what you're going

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 318 1 to say is to -- 2 MR. ECKMAN: -- if they were going to 3 misapply it before -- 4 MR. POWERS: -- the pump guys, we can't 5

-- 6 MR. ECKMAN: -- they'll misapply it now. 7 MR. POWERS: Yes. We can't ship a pump 8 out of our facility unless it meets a certain 9 efficiency. 10 MR. ECKMAN: Right. That's what I'm 11 saying. 12 MR. POWERS: That's who you're 13 regulating -- 14 MR. ECKMAN: Yes. 15 MR. POWERS: -- not the consumer. 16 MR. ECKMAN: I understand that. And to 17 the extent that they misapply them today, they 18 will misapply them tomorrow except they will have 19 a higher pump efficiency to start with. 20 MR. BROOKMAN: Gary? 21 MR. FERNSTROM: Well, this is Gary. What 22 we're saying, Chuck, is the less efficient pump

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 319 1 may no longer be offered for sale. So if nobody 2 can sell it in the United States, it's the same 3 thing as saying the customer can't buy that 4 product anymore. So they're going to have to buy 5 a slightly better product. 6 MR. BROOKMAN: Chuck? 7 MR. POWERS: That's okay except for the 8 self-insured or the companies that it doesn't 9 apply to. 10 MR. FERNSTROM: What? 11 MR. POWERS: If they control a site or a 12 location, an offshore facility, things like that, 13 it won't be the same. 14 MR. FERNSTROM: Well, if it's not sold 15 for use in this country, then it isn't subject to 16 the regulation. 17 MR. BROOKMAN: We have received a 18 comment from Al Iseppon. Again, I hope, Al, I am 19 pronouncing your name correctly. His comment is 20 "This is not realistic that we can achieve these 21 increases, let alone sustain for 30 years. 22 Competition will drive us down. The only hope is

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 320 1 to incentivize the buyers to pay premiums to save 2 energy." 3 MR. BROOKMAN: Is someone presenting 4 next? 5 MR. LAU: Yes. 6 MR. BROOKMAN: Who is presenting next? 7 MS. WILLIAMS: This is Alison. I just 8 wanted to comment on that real quick. I mean, I 9 think a lot of the things you're talking about are 10 why DOE is interested in setting standards; right, 11 because it does force buyers to buy higher 12 efficient pumps. The pricing is another story. 13 MR. FERNSTROM: Go this is Gary. Let me 14 respond to the comment that we received over the 15 web. Many utilities through various energy 16 efficiency programs do offer incentives and ways 17 to subsidize the cost of higher efficiency 18 products. The problem is that not everyone in the 19 market is interested in participating in those 20 programs. So there's a segment of buyers in the 21 market that, regardless of whether there may be an 22 incentive or not, won't buy the more efficient

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 321 1 product. And that is the very reason for 2 standards. 3 So, in my view, having worked on both 4 sides of this fence, both standards and incentives 5 are an important element of trying to realize the 6 best efficiency improvements we can get. 7 MR. BROOKMAN: Okay. Alison, I propped 8 that mike up because the -- 9 MS. WILLIAMS: Yes. So I'm just going 10 to do a couple of slides real quick. I know there 11 is a lot of concern over these issues of pricing 12 and that kind of thing. But I'm just going to 13 sort of lead into the lifecycle cost analysis. 14 So, basically, the analysis that Chris 15 is going to look at in the manufacturer markups 16 and the manufacturer impact analyses, we haven't 17 had time to fully incorporate those into the 18 downstream analyses yet because we're a little bit 19 behind. So we looked at a specific scenario in 20 the LCC just so we could have some results right 21 now. It's based on the 30 year amortization 22 period with the discount rate of 10 percent that's

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 322 1 -- and then those conversion costs are distributed 2 among failing pumps only. So I know there are 3 concerns with that scenario. I'm just setting it 4 up. 5 This is what we're doing for this 6 iteration. And so what I want to focus on when 7 Katie presents the LCC is more the methodology of 8 the LCC and all the assumptions that go into the 9 energy use and that kind of thing in the LCC. And 10 as discussions are made going further about the 11 engineering and the manufacturer impact analysis, 12 there will be changes to the kind of assumptions 13 we make about what kind of costs are being passed 14 on to the consumer or not. 15 So I just want to set it up that we want 16 to focus on the methodology. All the results we 17 present and the LCC are going to be sort of draft 18 illustrative results, more to just like get you 19 guys familiar with how the LCC works and that kind 20 of thing. 21 Since we only have an hour left, the 22 only things we'll probably have time to present if

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 323 1 we start are distributor markups and energy use 2 analysis. And we won't have time to fully do the 3 LCC today. So is that okay that it will be sort 4 of broken up and we'll just finish it tomorrow or 5 we just wanted to -- 6 MR. BROOKMAN: I would like to preserve 7 5, 10, 15 minutes at the end of the day for us to 8 evaluate where we are and be clear on what we are 9 going to try and accomplish tomorrow. So at 4:45, 10 we're going to take a hard break. 11 MS. WILLIAMS: Okay. So my colleague 12 Katie Coughlin is going to do the LCC. You guys 13 can still direct your hate mail to me, as per 14 usual. Thank you. 15 MS. COUGHLIN: Sorry. I need to get 16 this loaded up. 17 Okay. So today, first of all, I'm going 18 to show this diagram. I'm not sure that you have 19 seen it before. Have you guys seen this before? 20 So this is the larger context of all these 21 different analyses that go into the rulemaking 22 process.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 324 1 So, again, we just want to emphasize 2 there are many pieces of the puzzle that we try to 3 assemble in some reasonably finite amount of time. 4 And most of these are either -- we realize these 5 are just calculations. They are just for 6 information purposes. They are not predictions 7 about the future. But they are meant to create 8 the awareness of potential impacts of the standard 9 on different aspects of the economy and various 10 users. 11 So my work is focused on these middle 12 pieces. So we're going to start with talking 13 about markups, which is a relatively 14 straightforward subject. And then I will move on 15 to the energy use analysis. And I think tomorrow 16 is when we will get into the lifecycle cost. 17 The markups analysis is to look at what 18 happens to the pump when it leaves the 19 manufacturer on its way to the user. So we're 20 looking for the markup on the manufacturer selling 21 price. And we introduce a complication into the 22 analysis because we have a baseline markup and an

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 325 1 incremental markup. And the baseline markup is 2 the markup on the baseline unit full price. And 3 then the incremental markup is the markup on the 4 change in price that is due to the standard. 5 So think of it as something like if you 6 go buy a cup of coffee at Starbucks for $3 or 7 something. If the price of coffee doubles, you're 8 not going to be paying $6 for a cup of coffee 9 because that component of the price is only a 10 small piece of it. So it's that piece that we're 11 trying to find with the incremental markup. 12 Other than that, the analysis is 13 straightforward. We try to identify the 14 distribution channels, figure out how the various 15 parties make their profit in that business, and 16 assemble that incremental markup. 17 So these are our estimates of the four 18 primary distribution channels for pumps. We have 19 from the OEM to the distributor and then to the 20 end user, which is the bulk of the shipments; and 21 OEM to OEM to end user. I guess there's an 22 intermediary manufacturing step where the pump

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 326 1 goes into something that someone sells. Direct to 2 end user is only a couple of percent or OEM to 3 contractors is also a relatively small part of the 4 market. 5 So this data is based on the 6 manufacturer interviews, I think. Yes. And, 7 again, I mean, these numbers are easy to change if 8 we get better data. So, again, this is mostly to 9 inform you about what our current assumptions are. 10 And if you'd like to provide comment on that, that 11 would be great. 12 So one of the things is, are we missing 13 any of a major channel for distribution of these 14 products? Another thing that we can consider is a 15 shift in the distribution chain due to the 16 standard if something very different would happen 17 under a high standard and that sort of thing. And 18 then if you have any way to try to validate these 19 shares? 20 MR. BROOKMAN: Mark Handzel? 21 MR. HANDZEL: Mark Handzel from Xylem. 22 This is complicated again. You know, like in the

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 327 1 first one, I would just say, you know, you're kind 2 of missing the contractor portion. A lot of -- I 3 won't say all, but a lot of end users don't 4 install their own pumps. They hire a contractor 5 to do it. 6 MS. COUGHLIN: So we have an OEM to 7 contractor. So you're saying we should have OEM 8 to distributor to contractor? Is that the -- 9 MR. HANDZEL: So typically most of us 10 sell to either what you would call either a 11 representative who earns a commission or a 12 distributor who buys and resells our product. And 13 then they sell it to a contractor, -- 14 MS. COUGHLIN: Okay. 15 MR. HANDZEL: -- who may sell it to 16 another contractor who does business with the end 17 -- you know, I mean, like in the construction, 18 like building construction, you know, we sell it 19 to our distributor. He sells it to a mechanical 20 contractor. The mechanical contractor is paid by 21 a general contractor, -- 22 MS. COUGHLIN: Okay.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 328 1 MR. HANDZEL: -- who typically is 2 working for the owner. 3 MS. COUGHLIN: Okay. Now, I mean, we do 4 handle that type of situation with a lot of 5 equipment. So we can introduce those distribution 6 channels. We need some sense maybe of what those 7 fractions are so that we can bound these things. 8 MS. WILLIAMS: Yes. This is Alison. So, 9 just to follow up on that, most manufacturers 10 didn't report to us the split from distributor to 11 end user/distributor to contractor/end user. And 12 so that's why we have up there that we thought 13 that was another channel. So if you guys, yes, as 14 Katie said, have any estimates of like we should 15 just split this in half and like, you know, half 16 of the 87 percent goes to their contractor and 17 half doesn't or something -- 18 MS. COUGHLIN: Right. 19 MS. WILLIAMS: -- some estimate like 20 that -- 21 MS. COUGHLIN: Or goes through both or - 22 - so, yes. Like I said, this is easy to deal with

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 329 1 relative to what we have already been talking 2 about. So we're quite happy to take your input 3 and just run it through. 4 MR. BROOKMAN: Doug Potts? 5 MR. POTTS: Doug Potts, American Water. 6 Just speaking for the water industry, 7 for any new facility, the channel that you have in 8 the first bullet point would be the most common 9 one from, let's see, OEM to distributor to 10 contractor to us: 11 the end user. That would be the most 12 common one for us. 13 Actually, there would be two scenarios 14 for us. There would be that one for a new 15 facility. If it's an existing facility where 16 we're replacing a pump, I would say the most 17 common channel is OEM to distributor to end user. 18 MS. COUGHLIN: Okay. 19 MR. POTTS: Yes. 20 MR. BROOKMAN: Louis? 21 MR. STARR: So one thought is you might 22 look at your split between new pumps and

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 330 1 replacement pumps and use that, then, to shape 2 your distribution channels, which then will change 3 that percentage. 4 MR. BROOKMAN: Okay. Thanks. 5 Chuck? 6 MR. POWERS: Yes. This is Chuck. We 7 also look at when we analyze a new product or a 8 rationalization, is the after-market piece. So, 9 you know, the after-market is a P&L line item that 10 can help. In other words, the loss leader is the 11 OE side of the business, original equipment, but 12 you might make more money because you get the 13 after-market in the parts business from it; right? 14 So you've got to look at that and how that is 15 approached. And those channels will vary from 16 this also. 17 And on top of that, I know it's kind of 18 goofy, but -- and I believe some of the 19 manufacturers do it. We have what is called kit 20 programs. So you will have a manufacturer out 21 there, like Doug, that will have the wet end, the 22 casing, the bulk of it, which generally doesn't

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 331 1 wear out and is heavy duty and bolted to and the 2 whole back end is a kit. It's sold as a kit. 3 Now, those channels will still follow 4 through some of these, but there's also depending 5 upon the industry a specialized group of kit, go 6 out, you know, and replace and repair and put -- 7 MR. BROOKMAN: How is that distribution 8 model different, Chuck? 9 MR. POWERS: It's very similar to the 10 top one. 11 MR. BROOKMAN: Okay. 12 MR. POWERS: But my point is it is not a 13 complete pump. It's the kit in the after-market 14 how they trade it; right? 15 MR. BROOKMAN: Okay. 16 MS. COUGHLIN: Again, we do have a very 17 limited need for the markups because we are really 18 in the end only looking for the incremental markup 19 on the efficiency, the additional costs due to 20 efficiency. So some of these complications may 21 not affect that incremental markup. And they 22 wouldn't actually affect the analysis, but --

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 332 1 okay. 2 So this is just to give you an idea of 3 what we started with for the markups themselves. 4 So we have census data. We have business 5 expenditures. We have the RS means electrical 6 cost data. So all of these things are source 7 books on data for different types of costs 8 associated with distribution businesses and 9 contracting businesses and then sales tax rates. 10 And, as I said, the output is two 11 numbers: the markup on the baseline product and 12 the markup on the incremental cost of efficiency. 13 So the baseline markups would cover 14 everything associated with running, say, a 15 distribution business, including your rent and 16 paying your accountant and all that kind of stuff. 17 And a lot of those things have nothing to do with 18 the products you purchase and resell. 19 So, essentially, going through the 20 detail of how we define those costs which are 21 incremental and those costs which are not is not 22 going to be in these slides. That information is

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 333 1 available. And we can give it to you if you are 2 interested. But ultimately the two numbers that 3 we come up with at the end are 1.5 for the 4 baseline markup and 1.24 for the incremental 5 markup. 6 So if a baseline pump costs $1,000, $500 7 gets added between the manufacturer and the user, 8 but if that price increases by $100 due to the 9 standard, then the price increase that would go to 10 the final user is only $124. That's how these two 11 numbers enter into the calculation. 12 MR. BROOKMAN: Why don't you repeat that 13 again? 14 MS. COUGHLIN: So the 1.5 is the markup 15 on the whole unit. So if the manufacturer's 16 selling price is $1,000, then the distributor 17 would sell it for, say, 1,500. Then the 18 incremental markup is only applied to the price 19 increase that results from a higher standard, 20 which is an unknown quantity at this point, but 21 say that that price increase was $100. So the 22 pump that used to cost $1,000 now costs $1,100 to

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 334 1 the distributor. Well, they would mark up the 2 $1,000 by 50 percent as before, and they mark up 3 the additional $100 by 24 percent. 4 MR. BROOKMAN: That was well-said, I 5 think. 6 Gary Fernstrom? 7 MR. FERNSTROM: This is Gary. So my 8 question is, why would they do it that way? It 9 seems to me if the price of the product they're 10 buying increases, they would want to keep the same 11 markups. 12 MS. COUGHLIN: I think, again, it's a 13 balance between increasing your revenues and 14 remaining competitive. So the assumption -- 15 again, DOE makes simplifying assumptions because 16 it doesn't want to get too involved in all of the 17 things that people do in the market. So this 18 simply represents recovering your cost of doing 19 business without losing any profitability. You 20 could think of it that way. 21 MR. BROOKMAN: Okay. 22 MS. COUGHLIN: And that is essentially

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 335 1 all there is to the markup analysis. So we'll 2 move on to the energy use. And I guess I'll try 3 to get through this by 4:45. I don't think that 4 will be a problem. 5 So, essentially, the energy use 6 calculation is an attempt to understand the way 7 the products are used in the field to try to get a 8 good estimate of what the actual value of the 9 energy savings might be to the pump user. So, 10 essentially, the task is to try to characterize 11 the operating conditions and represent the actual 12 energy use, again in a somewhat simplified manner 13 so that we can come up with a reasonable estimate 14 of the benefit side of the standard. 15 So the actual energy use calculation, 16 once you have fully specified the details of an 17 installation, is not complicated. You take the 18 pump shaft power. So we're not concerning 19 ourselves with what happens with the motor in this 20 rule. So we take the pump shaft power 21 theoretically at each hour and just calculate the 22 energy input, multiply by hours per year, and then

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 336 1 that gives us an annual energy consumption. 2 So we are including motor losses in the 3 energy calculation because this is to be 4 consistent with the consumer perspective. They're 5 paying electricity for the whole setup. And we're 6 using in this calculation the methodology outlined 7 in the test procedure. And in general, as the 8 test procedure evolves, the energy use calculation 9 is very likely to continue to try to be consistent 10 with the test procedure. 11 MR. BROOKMAN: Please, Charlie? 12 MR. CAPPELLINO: Charlie Cappellino. So 13 what is piece of -- 14 MS. COUGHLIN: Yes. So what we have 15 done, since we have very limited information on 16 load profiles, we have created a kind of average 17 annual load profile based on percentiles. So the 18 fraction of time while the unit is running that it 19 expends at a given load point. And we're only 20 using 4 load points currently: 50 percent, 75 21 percent, 100 percent, and 110 percent of the 22 nominal duty point. So we have an hours per year

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 337 1 at each load point. The power is the pump power 2 at that load point. And then we are adding in the 3 motor losses into the overall energy consumption. 4 We're not considering at this point that 5 variable loads would be met with a drive, with a 6 variable speed drive. We're just looking at 7 throttling. So everything is calculated on the 8 pump curve. And we will do a subgroup analysis 9 for those consumers that are using variable speed 10 drives to see if that would severely impact their 11 energy savings. 12 MR. HUBER: Al Huber, Patterson. There 13 are pumps that are out there operating without 14 being throttled and without variable speed drives. 15 Are you going to consider that? 16 MS. COUGHLIN: You mean just operating a 17 flat load? 18 MR. HUBER: Yes. 19 MS. COUGHLIN: Yes. That's essentially 20 one load profile with just -- you're just at one 21 point 100 percent all the time. So I'll get to 22 that. Yes.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 338 1 MR. BROOKMAN: Louis Starr? 2 MR. STARR: So let me see if I got this. 3 So it looks like you figure out the pump shaft 4 power. And then you figure out what the motor 5 loss is. And that determines how much energy is 6 being used. And then you just add that up over 7 the course of a year. Is that what you are doing? 8 MS. COUGHLIN: That's right. 9 MR. STARR: And so there is one other 10 thing. And maybe you can't allow for it. But a 11 lot of times the pumps are miss-sized because they 12 overestimated it. But it ends up, and the motor 13 is operating more inefficiently. And the best 14 efficiency point, they're even further off of it. 15 So it almost seems like there should be another 16 scaler -- 17 MS. COUGHLIN: Yes. 18 MR. STARR: -- in there to bump up those 19 numbers as well. 20 MS. COUGHLIN: Yes. Yes. So we have 21 tried to account for that. So there we are. 22 Energy use variability. So the annual energy use

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 339 1 depends on a number of factors, as people have 2 said, that depend on how the pump is installed and 3 used. So there's the actual duty point, which is 4 essentially what the user is thinking about when 5 they buy the pump. And then there's a load 6 profile, which gives you the fraction of time the 7 pump spends operating at different load point. 8 Then we have separated the load profile into two 9 pieces. One, it's just a shape parameter. And 10 the other is the annual hours of operation. 11 And, finally, there is a sizing issue. 12 So what we have done -- and hopefully this will 13 become clearer as I go through the detail, but, 14 essentially, on the pump side, we have the best 15 efficiency point. And on the user side, we have a 16 duty point. And so when we match the user and the 17 pump, we assume that those two numbers are 18 relatively close but not perfectly coincident. So 19 we're using what we call a BEP offset, which says 20 the duty point flow is sort of one plus X times 21 the BEP flow. And X for now is just chosen from a 22 flat distribution within these 2 limits -.25 to

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 340 1 +.1. And this just represents, again, sort of 2 hearsay that says users typically operate in the 3 range of 75 to 110 percent of BEP. 4 So, once again, we are not wedded to any 5 of these assumptions. They were all put into 6 place just to allow us to crunch through the 7 numbers and get an answer to begin with. And we 8 can very easily modify this assumption if we need 9 to. Now, I'm mentioning that we're sort of 10 ignoring for the moment the whole question of 11 impeller trimming. So there is a limit to how far 12 away from BEP you'll go before you'll do something 13 besides run the pump at low power. 14 So it may be reasonable to think that 15 you would operate within this range and otherwise 16 you would trim the impeller. And when we get into 17 the next stage of the analysis, where we talk 18 about the national impacts, we'll try to come up 19 in a kind of -- we'll address impeller trimming in 20 a more kind of high-level way, but for now we're 21 just ignoring it, essentially. 22 MR. BROOKMAN: Gary Fernstrom?

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 341 1 MR. FERNSTROM: This is Gary. So, 2 Katie, in the prior slide, you showed us making an 3 adjustment for the motor efficiency. And, sure 4 enough, that accurately reflects the energy that 5 would be used. However, the quality of the motor 6 determines the power factor. And that, in turn, 7 results in building distribution and utility 8 distribution system losses. 9 So the way our rate structure works is 10 there is a tenth a percent penalty for each 11 percent the power factor is below 85 and a tenth a 12 percent credit for each percent the power factor 13 is above 85. So I would suggest when you look at 14 the motor efficiency and make that conversion, you 15 give some consideration to the power factor and 16 how that relates to the character of what the 17 customer is paying for. 18 They pay for real power and oftentimes 19 in cases where these motors are used, they pay for 20 reactive power as well. And that's another -- or 21 reactive energy. And that's another form of 22 energy that contributes to energy use.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 342 1 MS. COUGHLIN: Okay. 2 MR. BROOKMAN: Louis? 3 MR. STARR: So Louis Starr with NEEA. So 4 it looks like you adjust the flow for people who 5 may have undersized the pump or people who may 6 have oversized the pump. But that doesn't seem 7 like it accounts for the change in efficiency 8 necessarily. 9 MS. COUGHLIN: Yes. So we have the pump 10 curve and the efficiency curve in the database. 11 MR. STARR: Okay. 12 MS. COUGHLIN: So if we're operating 13 away from BEP, we just sort of shift the power 14 calculation down the efficiency curve. 15 MR. STARR: And change the efficiency 16 number; right? 17 MS. COUGHLIN: That's right, yes. 18 MR. STARR: Okay. 19 MS. COUGHLIN: Head and efficiency. 20 MR. STARR: So your equation from your 21 last slide, it does include efficiency in there 22 somewhere if you switch back to the previous page?

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 343 1 MS. COUGHLIN: Yes. P is the power; 2 right? 3 MR. STARR: Okay. 4 MS. COUGHLIN: Everything goes into 5 that. We just sort of -- yes. 6 MR. STARR: Okay. So it does efficiency 7 in that number? Okay. 8 MS. COUGHLIN: It does include 9 efficiency, yes. 10 MR. BROOKMAN: Chuck Powers? 11 MR. POWERS: Yes. I think this is 12 excellent. What I would love to see come out of 13 this -- it sounds like you are on the right path - 14 - to help us is to put together some kind of 15 message that we can share in our instruction 16 manuals or something that the government, you 17 know, could generate to say, "By the way, you 18 know, we're going to do it, but if you all were to 19 do it" -- if you go buy a refrigerator, you have 20 that yellow stamp on there. And everybody gets up 21 real close and takes their glasses off and reads 22 the small print on running a refrigerator and how

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 344 1 efficient it is. I'm saying some type of a 2 program that would educate and communicate, you 3 know, running a pump and its sweet spot, which 4 means a lot, VFD drives. If this is what this is 5 getting to, that's fantastic because it will help 6 us all get there. Right? 7 MR. BROOKMAN: Lucas? 8 MR. ADIN: So that's kind of a real9 world use of the product. The point of this 10 exercise, really, is just to come up with an 11 estimate of what's the difference between a 12 standards case and a non-standards case for the 13 standards that we're looking to set for the 14 typical consumers. We're trying to come up with 15 some across-the-board way of looking at what is 16 the typical consumer likely to save based on a 17 pump that achieves the energy efficiency 18 improvements that we might look at at these 19 different standard levels. 20 So I completely understand what you're 21 talking about. And there's value in that, I'm 22 sure. That's just a different part of this whole

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 345 1 effort. 2 MR. BROOKMAN: Louis? 3 MR. STARR: There was one other thing. I 4 understand why they didn't consider trying to 5 figure out the efficiency of the pump by trimming 6 the impellers, but most of the time to meet a duty 7 point, you trim the impeller to get to the 8 customer's desired flow point and duty point. So 9 what your equation doesn't have in there is the 10 fact that probably half of the pumps are trimmed. 11 So, actually, your energy use -- 12 MS. COUGHLIN: Right. 13 MR. STARR: -- is going to go up because 14 of that. So that sort of needs to be included in 15 there as well or do you have a place for it? 16 MR. BROOKMAN: Al Huber? 17 MS. COUGHLIN: We'll be doing that in -- 18 yes. So, as I said, we have to include that in 19 the national impacts analysis. And you can kind 20 of put it in in a rough way at the end of the LCC 21 by just saying, you know, on the operating cost 22 side, you know, if your power was down 20 percent,

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 346 1 everything would just go down 20 percent. So it's 2 not explicitly included in the LCC. It's not 3 really needed in the LCC, but it's fairly easy to 4 figure out at the end how that would factor in. 5 MR. BROOKMAN: Al, do you want to 6 comment? 7 MR. HUBER: I think Louis understood 8 what we were signaling. If you trim it, the 9 power, the horsepower, is going down. 10 MS. COUGHLIN: Yes. Yes. 11 MR. HUBER: So the power usage is going 12 down. 13 MS. COUGHLIN: That's right. 14 MR. HUBER: So if you believe that 50 15 percent of them are trimmed, then you certainly 16 need to reflect that in this formula. And it's 17 probably not reflected. 18 MS. COUGHLIN: Right. As I said, when 19 we get to the end, we can revisit this issue and 20 bring it in. 21 MR. BROOKMAN: Gary has a brief comment. 22 MR. FERNSTROM: This is Gary again. So

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 347 1 I'd like to ask a follow-up question because I 2 think my comment may have gone under the table so 3 far as some of the participants are concerned. My 4 question is, would you in DOE be interested in 5 considering or open to considering all the forms 6 of energy utilized by the motor, which would 7 include kilowatt hours and reactive kilovolt 8 ampere hours because both of these are forms of 9 energy which are significant in terms of 10 understanding the total energy use? 11 MS. COUGHLIN: Well, for this rule, 12 motors are not in the design options. So, 13 essentially, we're using the motors rule to 14 determine what type of motor would be matched with 15 a pump. So I think that we can't really introduce 16 things that are not in the current motors rule. 17 MR. ADIN: Gary, can I ask a clarifying 18 question? Are you really just asking about how 19 we're going to account for that element of the 20 quality of the motor in the cost aspect of the 21 electricity, like with respect to the reactive 22 power element?

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 348 1 MR. FERNSTROM: It doesn't matter to me 2 whether it's considered in the cost of the 3 electricity or whether it's considered in the 4 characterization of energy used by the motor. But 5 I think that it ought to be in one place or the 6 other. 7 MR. ADIN: Okay. I understand your 8 comment. 9 MR. BROOKMAN: Okay. Thank you. 10 MR. ADIN: We'll definitely think about 11 that. 12 MR. BROOKMAN: Thank you. 13 Katie? 14 MS. COUGHLIN: Okay. So the other 15 important factor for understanding the actual 16 energy consumption of the stock of pumps in the 17 field is the duty points. What's the actual 18 distribution of duty points? 19 So here I'm just going to give you an 20 overview of the data sources that we have access 21 to. There are essentially three databases that 22 we're working with apart from the shipments data

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 349 1 that was turned in by the manufacturer. One is 2 there's a farm and ranch irrigation survey 3 conducted by the Department of Agriculture, which 4 gives, actually, quite highly resolved information 5 on irrigation pumps, although that is a fairly 6 small share of the market. 7 The second one is there is a database 8 compiled by Washington State University for motors 9 that contains energy audit data, but many of those 10 motors are attached to pumps. So we ended up with 11 about several thousand motors that are used with 12 pumps that we could use to understand a little bit 13 more about things like hours of operation and 14 applications. 15 We are aware that this data may be 16 biased towards motors that are operated heavily 17 because it's people doing energy audits. So 18 they're already concerned somewhat about 19 efficiency. 20 And then the third source currently that 21 we have is a pump test data set that came from 22 PG&E, which again gives us some distributions of

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 350 1 duty points for different types of users. 2 Now, the problem with the second two is 3 that they are not statistical samples. So it's 4 not like they went out and they decided they want 5 to sample the population and find out how big 6 people's pumps are. So, to get around that 7 problem, we use the manufacturer shipment data to 8 determine the actual distribution of pump sizes in 9 the field. 10 And, for load data, we essentially don't 11 have any information on load profiles. We had a 12 little bit of commercial building simulation done, 13 but we're not really convinced that it's a 14 noncircular process. You sort of make some 15 assumptions, and you get them back out again at 16 the end. 17 So, to get around this problem, we have 18 just defined four load shapes. And we're using 19 them. You can think of this as more of a 20 sensitivity or a scenario-type analysis. Let me 21 skip that for now. 22 So these are our four canonical load

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 351 1 profiles. And, again, this is all very easy to 2 change if it's complete crackpot. So we have a 3 flat load, which is 100 percent of the time you're 4 at the duty point. That's the blue bar. And then 5 we have kind of flat, slightly oversized, meaning 6 you split between operating at 100 percent, 75 7 percent. We have what we call variable load, 8 oversized, meaning the load profile never goes 9 above 100 percent, but there is also a significant 10 amount of time at 75 and 50. So that's the green 11 bars in the chart. And then, finally, the 12 variable load undersized is similar. You have 13 some weighted at all four points, but you're also 14 spending in this case 20 percent of time at 110 15 percent. 16 And currently we simply distribute these 17 load profiles randomly across all the pumps 18 without paying any attention to application or 19 anything else. So, again, that's something that 20 if we have information that we can use to make 21 that more systematic, we would be very happy to 22 use it.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 352 1 The other big component of this is 2 annual operating hours. 3 MR. ECKMAN: On that last point, I think 4 random distribution probably isn't what you want 5 to do because you've got different rate schedules 6 between the commercial and industrial sectors. And 7 they will probably have -- in one case, you've got 8 an HVAC load profile. In the other case, you 9 probably have process loads for the pump. So that 10 they may have different -- 11 MS. COUGHLIN: Yes. 12 MR. ECKMAN: -- different revenue per 13 kilowatt hour associated with a load profile. So 14 I think there probably is some correlation between 15 load profile and retail prices of electricity. 16 MS. COUGHLIN: Right. 17 MR. ECKMAN: So probably not random. 18 MS. COUGHLIN: One of the things that 19 we're not clear on, though, is if you're using 20 multiple pumps to meet an end use, then you may 21 have very different load profiles, even on the 22 pumps that are all serving that end use. So

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 353 1 that's another piece of the puzzle that we don't 2 have information on at the moment. 3 MR. BROOKMAN: Any comments from -- 4 MS. COUGHLIN: I'll just mention, too, 5 though, that if you look at the output of the 6 analysis, generally things are not very sensitive 7 to these differences. They're far more sensitive 8 to just overall hours per year, which is probably 9 obvious. 10 MR. BROOKMAN: Rob? 11 MR. BOTELER: Yes. I would just mention 12 that you should talk to Sanaee because we have 13 done hours of operation and usage for pumps. She 14 did that for the motor TSD. 15 MS. COUGHLIN: Right. We have looked at 16 the hours for the motors, yes. 17 MR. BOTELER: Just to be consistent. 18 MS. COUGHLIN: Yes, yes. 19 MR. BROOKMAN: Thank you. 20 MS. COUGHLIN: So, moving on to 21 operating hours, we have a consultant report that 22 we requested. And he provided a distribution of

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 354 1 operating hours by application. And these are 2 essentially five point values. There's 20 percent 3 of the time. And then we've got several 4 applications. Again, these are sort of aggregated 5 over many different sub applications. 6 So, for example, the first row, the 7 application is cooling water, so for buildings. 8 Twenty percent of the time, it is 2,500. Twenty 9 percent of the time, it is 3,500 and on up. 10 And so, again, this is just for 11 information. If there is some reason why you 12 think these are inappropriate, we can very easily 13 change them. 14 So, to address the comment that was just 15 made, we did compare the averages that you get 16 from the consultant report with the averages that 17 come out of the motors database. And here are the 18 comparisons. They're reasonable. Again, the 19 motors database may be overstating the average 20 because it's people who go get energy audits. The 21 one difficulty here with the last two is that we 22 are finding that these buckets that contain a lot

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 355 1 of random applications are not -- our consultant 2 report suggested that they don't have a lot of 3 operating hours; whereas, the motors database 4 suggests that they do. 5 Okay. So that is actually it for the 6 energy use. So, essentially, once you've got 7 operating hours, you have got a duty point, you 8 have got a pump curve, and you have got this 9 offset that tells you how far away you are from 10 BEP, you just plug in this equation for energy use 11 for the pump, which I guess I could have put up 12 here, but I didn't, flow times head divided by 13 efficiency. And that gives you the annual energy 14 consumption. So I think we'll leave until 15 tomorrow the discussion of how this then goes into 16 the lifecycle costs. 17 MR. BROOKMAN: Charlie? 18 MR. CAPPELLINO: Charlie Cappellino, 19 ITT. So as far as where the equipment tends to 20 operate relative to duty point, I think it's 21 fairly well-known that pumps generally operate to 22 the left of the BEP point, the duty point, as

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 356 1 opposed to beyond the BEP point -- 2 MS. COUGHLIN: Right. 3 MR. CAPPELLINO: -- or duty point. 4 MS. COUGHLIN: Right. So -- 5 MR. CAPPELLINO: So if you're going to 6 weight it, I would weight more towards the fact 7 that they would operate at a lower duty point than 8 the higher one. 9 MS. COUGHLIN: Yes. We have kind of 10 done that already. So there's only one out of the 11 four profiles that has any weight at 110, which 12 means that would be 25 percent of pumps have any 13 weight at all above 100 percent. 14 MR. CAPPELLINO: Even 25 percent above 15 the load point seems high to me. 16 MS. COUGHLIN: Okay. 17 MR. BROOKMAN: Tom? 18 MR. ECKMAN: There may be some data on 19 motor loading. I know the DOE's industrial 20 assessment centers that are all across the 21 country. There's one at OSU in Oregon. There are 22 a variety of them across. They all do audits,

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 357 1 student audits, but that's much more focused on 2 small and medium-sized industrial facilities, 3 rather than the large ones that WSU did. So there 4 may be more diversity there that could be -- 5 MS. WILLIAMS: This is Alison. On that 6 note, we do have some data on motor loading, but 7 there are two assumptions to get from duty point 8 to motor loading because you have to know how you 9 sized your pump off the duty point -- 10 MR. ECKMAN: Right. 11 MS. WILLIAMS: -- and then how you sized 12 your motor. And so it's actually pretty difficult 13 to use motor load data without having other 14 assumptions nailed down. But we have looked at 15 some of that data. We can look back at it. 16 MR. ECKMAN: Yes. I don't know whether 17 there's anything there. I just note that we have 18 used quite a bit of that data in the Northwest to 19 just get a sense on what the small and medium20 sized industrial loads look like. 21 MR. BROOKMAN: Okay. 22 MS. COUGHLIN: All right. That's it.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 358 1 MR. BROOKMAN: You're finished with this 2 segment. Is this where you think we should pause? 3 MS. COUGHLIN: Yes. 4 MR. BROOKMAN: Okay. Let's move to -- 5 we're a little ahead of our 4:45 hard stop. Well, 6 let's move to that. I'm interested in us as a 7 negotiating working group talking about what we 8 feel we need to accomplish tomorrow and how to 9 queue up a productive discussion on metrics, which 10 will be one of the main things to discuss 11 tomorrow, and maybe talk a little bit about 12 workload, scheduling, looking ahead for the next 13 several meetings. 14 I've spoken with Lucas about this 15 briefly. I've spoken about this with a few of the 16 other members on the Working Group. I just 17 thought I would queue Lucas to get this going. 18 MR. ADIN: Okay. Thanks, Doug. 19 So we presented a lot today. So I 20 imagine you guys have a lot to think about before 21 tomorrow. We did send the slides. We are having 22 them printed. We will provide those before we

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 359 1 leave today hopefully. So I think coming in 2 tomorrow, there are a couple of main items that we 3 would like to try and address. 4 One, as Doug mentioned, is the metric 5 since we really still haven't gotten too much 6 resolution on that. And, as we have shown, I 7 mean, we can do a lot of analysis without having 8 that completely nailed down. You know, we do 9 still yet have to figure that out. And so one 10 thing we were hoping for is since it does sound 11 like the manufacturers might have an idea of what 12 they think might work, to the extent there's 13 something that, you think there is something that 14 would work better than what we have proposed, I 15 mean, that might be useful for us to hear about 16 that. I don't know if there is something specific 17 that you wanted to talk about or -- 18 MR. BROOKMAN: Yes. Well, and, Al, just 19

-- 20 MR. HUBER: I can if you want. Do you 21 want to wait until tomorrow? Do you want me to 22 briefly speak about it now?

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 360 1 MR. BROOKMAN: We may have time now, but 2 my expectation since I have talked this over with 3 Lucas and some of the analytic team is that you 4 might in describing your proposal and describing 5 what you think would be beneficial from a 6 manufacturers' caucus point of view, to go into 7 some detail, to provide some -- I think you have 8 generally described what you would like to see 9 happen. We had a brief conversation this morning. 10 But maybe you could do some whys and wherefores 11 and all that sort of thing in a more complete 12 fashion because there is a proposal from DOE that 13 is on the table with a considerable amount of 14 support, backup. And the more rationale that you 15 had for your proposal, I think the better it would 16 be. 17 MR. ADIN: Just to be a little more 18 specific, Doug -- 19 MR. BROOKMAN: I was trying to be 20 general there. 21 MR. ADIN: So I'll be a little more 22 specific.

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 361 1 MR. BROOKMAN: I was. 2 MR. ADIN: You covered the general part. 3 I'll get the specific part. 4 We had put up, I think, in the last time 5 we talked about metrics a slide that had some 6 criteria that DOE uses to assess whether a 7 particular metric is appropriate, you know, the 8 things that we try and accomplish through the use 9 of a metric. We can put those up again. And I 10 think we're going to be talking essentially in 11 those terms. So, essentially, the question will 12 be, you know, how does either our proposal or 13 yours accomplish those things better or what might 14 we be missing or what about our metric doesn't 15 necessarily achieve what it is that we're hoping 16 to achieve based on your understanding of the 17 market, like, you know, accurately representing 18 the energy use of these products or providing a 19 reasonable and representative measurement that 20 consumers can use to make a good purchasing 21 decision, things like that? I mean, those are the 22 kinds of things that we're thinking about. You

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 362 1 know, so how does one necessarily work better than 2 the other? And I think we're trying to get to a 3 better understanding of if ours isn't the best 4 one, why that might be. So I think that's kind of 5 the gist of it. 6 MR. HUBER: Well, you had several 7 options, I think, or you nailed it down to one? 8 MS. WIDDER: You mean several options 9 for how to calculate? This is Sarah from PNNL. Is 10 it working? Oh, I have to move apparently. I'm 11 like in a black hole. Oh, keep it close? Anyways, 12 do you mean several options about how we might 13 calculate the PER? 14 MR. HUBER: What we would like to see is 15 if you want us to go back and compare what we are 16 thinking with what you're doing, then why don't 17 you give us the formulas that you want to use and 18 the metric you want. And they're behind the 19 metric and what you think it is going to achieve. 20 And then we'll analyze ours in the same basis and 21 bring it back to you. I don't know that we'll -- 22 you know, we'll try to do it tonight, but this is

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 363 1 not -- I'm getting -- well, my engineering 2 consultant is telling me no, but -- 3 MS. WIDDER: Okay. 4 MR. BROOKMAN: I thought what we were 5 describing wasn't that level of detail. I thought 6 we were talking about your idea for a metric, your 7

-- 8 MR. HUBER: Well, ours is more -- 9 MR. BROOKMAN: Conceptually. 10 MR. HUBER: Conceptually? 11 MR. BROOKMAN: Well-described. 12 MR. HUBER: I could do that in a few 13 minutes if you'd like. 14 MS. WIDDER: And I think we can also. I 15 mean, essentially, I think there are two main 16 issues. Do we capture the performance of motors 17 and controls or do we just stick to the pump, bare 18 shaft pump, and do we weight the load points or do 19 we analyze them and compare them individually 20 against some standard? Those are the two main 21 issues I see. 22 MR. HUBER: Yes. I think what we need

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 364 1 to understand is, do you have to have one metric? 2 MS. WIDDER: Betsy just left. 3 MR. HUBER: Well, apparently she did. 4 But, you know, our reasoning is to try -- and I 5 believe some of the NGOs feel the same way -- to 6 try to move the marketplace. Since we can't 7 control the marketplace, we need a metric that the 8 marketplace is going to understand and is going to 9 want to utilize to not drive them. I don't like 10 to use that word but try to incentivize them to 11 move more to the variable speed applications. 12 So what we had in mind is one metric for 13 the pump, which is basically the MEI/PER, whatever 14 you what to call it. I mean, we're very close on 15 that, whether you average the three or whether you 16 do the other. I mean, we're very -- 17 MS. WIDDER: Right. 18 MR. HUBER: They call that fixed load. 19 MS. WIDDER: Fixed load. 20 MR. HUBER: Or whatever you want to come 21 up with, but -- 22 MS. WIDDER: Uncontrolled.

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 365 1 MR. HUBER: -- that's what it is. It's 2 fixed load or uncontrolled, however you want to 3 put it. And then you have variable load. And 4 under variable load, on the numerator, you would 5 have the load profile broken across using the BEP 6 of the pump all the way across -- 7 MS. WIDDER: Yes. 8 MR. HUBER: -- because you are trying to 9 keep it at BEP. So you understand what I am 10 trying to get at. 11 MS. WIDDER: Yes. I've got you. 12 MR. HUBER: And then your motor, the 13 same way across; and then your control. We're 14 suggesting you ought to use .98, instead of 1, on 15 the control because we know the control is not 100 16 percent efficient. 17 MS. WIDDER: Okay. 18 MR. HUBER: And generally .98 is 19 probably pretty close at full load. 20 MS. WIDDER: Yes. 21 MR. HUBER: Yes. And -- 22 MS. WIDDER: We redid it, and we assumed

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 366 1 .96. But we could do -- 2 MR. HUBER: And you vary the efficiency 3 of the motor with a load because we know the motor 4 will go down. We know the motor efficiency will 5 go down. 6 MS. WIDDER: Yes, yes. And we have been 7 -- yes. Okay. 8 MR. HUBER: So that's the numerator. The 9 denominator, then, becomes in our opinion whatever 10 MEI -- and this is based on an MEI that you pick; 11 right? I mean, if it's a 40 or a 10 or whatever 12 it happens to be, you go in there. And you pick 13 out the pump as a denominator. 14 MS. WIDDER: The uncontrolled pump. 15 MR. HUBER: The uncontrolled pump at all 16 those flows, its efficiency at all those flows, 17 the motor loads at all those flows. And that's it 18 because there is no control. It's like being 19 throttled. 20 MS. WIDDER: Yes. 21 MR. HUBER: And that is your 22 denominator. And when you divide that in there,

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 367 1 you're going to get something like 1.2, 1.3, or 2 whatever you get. And as you improve the top by 3 adding a more efficient motor, a more efficient 4 control, or more efficient pump, that number will 5 rise. 6 MS. WIDDER: Rise. 7 MR. HUBER: Well, your numerator is 8 going to get larger. 9 MS. WIDDER: Okay. Yes. 10 MR. HUBER: And your denominator is 11 staying fixed. 12 MS. WIDDER: Okay. Yes. 13 MR. HUBER: So it's going to go up. So 14 I look at my pump under variable load. 15 MS. WIDDER: Yes. No. I'm with you. 16 And, actually, I think we are very close together. 17 I think that proposal and something that -- one of 18 the options -- 19 MR. HUBER: Well, let's -- 20 MS. WIDDER: -- that we were discussing 21

-- 22 MR. HUBER: You've got one option. It's

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 368 1 close. 2 MS. WIDDER: -- are very, very, very 3 similar. Yes. 4 MR. HUBER: It's close. It's similar. 5 But ours lets you compare. You're basically using 6 a throttle condition, which is what exists in the 7 field today at a lot of places, to a controlled 8 condition -- 9 MS. WIDDER: Yes. 10 MR. HUBER: -- and allows you to get an 11 index, -- 12 MS. WIDDER: Right. 13 MR. HUBER: -- for lack of a better 14 phrase. 15 MS. WIDDER: Right. 16 MR. HUBER: And as you improve that 17 efficiency at the top line or at the numerator, 18 your point or your scale is going to go up. So 19 the consumer can look and say, "If I have a fixed 20 load, I can compare all fixed loads of all pumps 21 with this number. And if I have a variable load, 22 I can compare all of those with this." We can't

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 369 1 help the consumer decide which load he has. I 2 mean, we would like to in many cases, but, you 3 know, really, he has to decide that. 4 MS. WIDDER: Right. 5 MR. HUBER: But he will have a method of 6 judging that and a method of, I think a real 7 practical method of, he can look down and see what 8 the efficiency is on a throttle one if you show it 9 to him. And then he looks at his control. And 10 he's going to see right away that he's much better 11 off using controlled. 12 MS. WIDDER: So I have a question for 13 you just to follow up on that. And I think we are 14 agreeing on 99 percent of the things. Is it 15 important -- and this is for everyone, actually. 16 Is it important that for the fixed-load case or 17 the uncontrolled case and the controlled case or 18 the variable speed case, that the metric be 19 different? So just let me like add onto that just 20 to flush out the discussion because that's what we 21 were discussing last meeting with the PER. It was 22 only one metric, but we had different load points

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 370 1 for the fixed case and the controlled case. And 2 you saw the singular metric greatly improved in 3 the controlled case. And so you're demonstrating 4 that better performance. 5 MR. HUBER: You did. But I think by 6 trying to put it into one metric, you're going to 7 confuse the consumer -- 8 MS. WIDDER: Okay. 9 MR. HUBER: -- because he's going to 10 look at efficiency for a fixed pump and maybe -- 11 he's got to know which application he has. Okay? 12 But we're afraid he's going to get confused 13 looking at the same metric for a fixed pump 14 application when he really needs a variable speed 15 application or he needs -- you understand what I'm 16 saying? How is he going to decide that from what 17 we're giving him? 18 MS. WIDDER: Yes, yes. I see what 19 you're saying. 20 MR. HUBER: I mean, if I'm trying to 21 give him something, all right. Well, there are 22 two metrics. I need to go figure out which one

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 371 1 I've got. If I have one metric, I may not go 2 figure that out. I may go look at the highest 3 number. And it may not be the right one. 4 MS. WIDDER: Right. 5 MR. HUBER: It may not be the right one 6 for my application. And I may go use it. 7 MS. WIDDER: Okay. That makes sense. So 8 along those lines at that high level -- I mean, 9 that was a really good discussion. Thank you for 10 those comments, Al. I think that is the exact 11 kind of discussion we want to start off with 12 tomorrow reviewing the goals of the metric and 13 then maybe see what the rest of the Working Group 14 feels with regards to the way the metric is 15 calculated or constructed for a fixed versus a 16 variable load case. And if we could reach a 17 consensus among the Working Group, whatever it is, 18 similarly to the discussion we heard, either we're 19 not especially wedded to the proposal we have been 20 presenting. It's just the best thing we could 21 come up with to try and accomplish all of the 22 metrics. And then to the extent that the Working

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 372 1 Group has other suggestions, hopefully we can get 2 somewhere tomorrow. 3 MR. BROOKMAN: I thought this was 4 illuminating. That's very useful. Since they 5 have put their proposal on the table here 6 conceptually, is there more information you would 7 request they give or is that sufficient for now? 8 MS. WIDDER: I think the one other thing 9 that would be useful to consider for tomorrow -- 10 and we can talk about what I'll present to start 11 with tomorrow. I think we might change the way we 12 have been talking about the PER to only present 13 the example that's most similar to what, Al, you 14 just discussed because I think that makes sense to 15 use. That makes sense to you. So we might as 16 well just take the other options off the table. So 17 we'll do that. But also just consider the issue 18 of weighting the load points versus accounting for 19 the efficiency or the PER at each load point. 20 MR. ADIN: I think you mean the house of 21 efficiency compared to the -- 22 MS. WIDDER: The house of efficiency

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 373 1 approach compared to the weighting. 2 MR. HUBER: You're talking about using 3 an average, -- 4 MS. WIDDER: Yes. 5 MR. HUBER: -- rather than using each 6 point. 7 MS. WIDDER: Yes. 8 MR. HUBER: You know, other than we 9 would like to keep it the same as Europe, you 10 know, it's not going to make a lot of difference. 11 I think that you may get some consequences from 12 that that you don't realize yet. And we might not 13 know either, but I don't think we're so hard and 14 fast on that. 15 MS. WIDDER: Okay. 16 MR. HUBER: But we honestly believe that 17 we need a metrics out there that will inform the 18 consumer that he had two options or he has two 19 things he had to consider and will lead him in the 20 right direction because we can't regulate the 21 market. 22 MS. WIDDER: Okay.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 374 1 MR. HUBER: We've got to try to find a 2 way to do that. And that's the reason we thought 3 this was a better way. 4 MR. ADIN: Right. 5 MS. WIDDER: Right. 6 MR. ADIN: And I think that's exactly 7 the kind of feedback we're interested in. 8 MS. WIDDER: Yes. That was very 9 constructive. 10 MR. ADIN: Right. What information are 11 we providing to the consumer? How are they going 12 to use it? 13 MR. HUBER: Yes. 14 MR. ADIN: And we want to know 15 realistically what your expectations are. 16 MR. HUBER: If you give him one, we 17 don't know that he's going to pick the right 18 choice. He doesn't know he needs to. He might 19 not even realize he needs to. 20 MR. ADIN: Yes. 21 MR. HUBER: That's the point here. 22 MR. ADIN: Yes.

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 375 1 MR. HUBER: The other thing from our 2 side quickly -- I know Doug is trying to get us 3 out of there, but -- 4 MR. BROOKMAN: No. I'm fine with this. 5 We're doing well. 6 MR. HUBER: But we would like to know as 7 our group, what are you thinking about or what MEI 8 level or PER level are you guys -- you have run 9 all the analysis and you've done this. Where are 10 you coming down? Where are you close so we can go 11 take a look at that? 12 MR. ADIN: So it's simplest to say 13 that's not something that we predetermined. I 14 mean, we have done analysis. And we have come up 15 with some numbers. Literally we have just 16 finished this in the last week or so. I mean, 17 it's -- 18 MR. HUBER: We understand. 19 MR. ADIN: Right. 20 MR. HUBER: We would just like to know 21 where it looks to you like it's coming down. 22 MR. ADIN: I think that's going to start

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 376 1 coming into focus in the next day or so. And 2 we're going to put up the LCC numbers, which are a 3 very important element in understanding where the 4 cost-justified level might be. I mean, some of 5 what we have shown today gives you a sense of how 6 things look. 7 Now, understanding that a lot of the 8 assumptions might need to be adjusted -- 9 MR. HUBER: They do. 10 MR. ADIN: Yes. So -- 11 MR. HUBER: I agree with that. 12 MR. ADIN: It's hard for us to say -- 13 MR. HUBER: Well, what I'm saying is, 14 Lucas, -- 15 MR. ADIN: Right. 16 MR. HUBER: -- you don't need the hold 17 this to yourself. If you know what it is, tell 18 us. If you know what you believe it is -- 19 MR. ADIN: We don't. 20 MS. WILLIAMS: We don't. We don't know 21 the answer yet. 22 MR. HUBER: So you don't know?

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 377 1 MS. WILLIAMS: We can show some 2 preliminary results, but it's a very tiny part of 3 the picture. Right? It's just all we have right 4 now is LCC impacts to the consumer. It's based on 5 engineering costs that aren't finalized yet. It 6 doesn't address manufacturer impact analysis. It 7 doesn't address a whole bunch of things. So we'll 8 go through the LCC tomorrow, and we'll show it, 9 but it's probably not at a point where you want to 10 start like making decisions on it yet. 11 MS. WIDDER: And the other thing I'll 12 add to that just to sort of get us ready for 13 tomorrow is that, as has been presented earlier, 14 the construct of the metric actually has very 15 little impact on what standard is set and how you 16 compare to it. It's just the relative magnitude. 17 So if we could get that, sort of try to constrain 18 our metric discussion to just the metric when we 19 get there tomorrow and get some things settled on 20 that, I think that would be really helpful. 21 MR. BROOKMAN: Okay. So that was very 22 constructive. We gained ground in that exchange,

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 378 1 very, very helpful. Maybe we should applaud right 2 now. 3 (Applause.) 4 MR. BROOKMAN: So queuing other things 5 for tomorrow, LCC analysis presentation, which 6 always adds some significant information. Lucas, 7 do you want to follow on? And then I would like 8 for us as a working group to have a sense of the 9 several things, the many things that lie ahead for 10 us to try and accomplish in the meetings we have 11 left because, as Lucas said at the outset, it may 12 be that we're going to need to have a webinar 13 every two weeks or a conference call in the 14 interim or maybe we need to establish backup dates 15 in August and September. I'm not sure where we're 16 going, but we need to realistically look. We have 17 been keeping our nose right at this grindstone, I 18 think. And right now I'm not envisioning how 19 we're going to get this done by the middle of 20 July. And maybe I'm wrong or maybe we can pick up 21 the pace. 22 But, Lucas, it seems like you want to

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 379 1 say something. 2 MR. ADIN: Well, I was going to say -- 3 MR. BROOKMAN: So rescue me here. 4 MR. ADIN: I'll try. No promises. But 5 it's maybe depending a little on how much progress 6 we make tomorrow, but, I mean, there is still a 7 lot of analysis to do. 8 And we have just got a bunch of new 9 data. We did get it. So thank you for that, 10 which we'll put to good use very soon. And we are 11 going to start distributing analysis to everyone 12 here on a more frequent basis, as Doug said. So 13 at each meeting from here on out, you know, we're 14 going to have a lot of substantive stuff to talk 15 about. 16 MR. BROOKMAN: And I think looking 17 ahead, in the consultation between a few of us 18 that are trying to structure this, I think we can 19 do a better job of making sure we come to each 20 meeting with a set of "Here is what we want to 21 accomplish." 22 MR. ADIN: Well --

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Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 380 1 MR. BROOKMAN: We have mentioned that 2 previously. 3 MR. ADIN: And honestly what would help 4 us a lot is between meeting periods, if we could 5 get your feedback on what you think will be 6 helpful to you? I mean, you have heard a lot of 7 stuff. I mean, especially after today and 8 tomorrow's meeting after we present a lot of 9 substantive things that are relevant to making 10 decisions about the standard, I mean, you know, we 11 hope we will get feedback from you on what we have 12 presented, but we also are interested in feedback 13 on what you think should be next, I mean, what is 14 going to help, what you think will help us get 15 towards that goal. 16 MR. BROOKMAN: Yes. And I am curious 17 about the form of that because I think that you 18 told me, Lucas, that you sent out a query. You 19 invited comments. And, basically, you received 20 nothing back. So I'm wondering whether the form 21 of that worked or how -- I'm wondering how to 22 improve that.

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 381 1 MR. ADIN: I mean, it was a pretty 2 general question. Maybe it was hard for those 3 here at the table to say for sure what would be 4 most helpful to them since -- 5 MR. BROOKMAN: Tom Eckman? 6 MR. ADIN: -- we have only talked about 7 things like metric and scope so far. 8 MR. BROOKMAN: Yes. 9 MR. ECKMAN: Yes. I think from 10 experience in prior negotiations, if we have a 11 good sense of the lifecycle cost analysis results 12 laid side by side with the manufacturer impact, 13 then it's time for us to get together and talk 14 because no amount of analysis is going to figure 15 out what the actual forecast of either of those is 16 going to be long-term. We just have to figure out 17 the timeframe and where we can land. And until we 18 see what -- here is as far as the analysis can go, 19 but the rest is just theoretical because we have 20 no idea. There is no data about the future. It's 21 all forecast. So we will have data, but it will 22 not be a forecast of the future. It will be our

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 382 1 assumptions. 2 MR. ADIN: Right. So we'll have some of 3 that tomorrow. We'll have some of the LCCs for 4 some of the product classes we're going to talk 5 about, preliminary, though, understanding that we 6 still need time to refine these based on whatever 7 input we're going to get. 8 MR. ECKMAN: But once you have a sense 9 of what those are, we've got to get our heads 10 together and talk about what the tolerance is and 11 the tradeoff between benefits and cost. And until 12 we know what the individual benefits to the 13 consumer are and what the costs of transition are 14 for the manufacturers, it's hard to get across the 15 table and look steely eyed at each other and say, 16 "Where are we going to land?" 17 MR. BROOKMAN: Yes? 18 MS. WILLIAMS: So this is Alison. Just 19 to follow up on that, our plan analytically is to 20 revise engineering and LCC following this meeting. 21 Hopefully we can have something interim for you 22 depending on how soon we get constructive feedback

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 383 1 on revising those. Of course, we'll upload the 2 new data. 3 We're also hoping to have done for the 4 May 28th-29th meeting shipments, national impact 5 analysis, and MIA, so like none of the downstream 6 stuff, but probably most of the stuff that you 7 need to start thinking about the different levels. 8 So that is our goal for the May meeting. 9 PARTICIPANT: MIA? 10 MS. WILLIAMS: I'm sorry. Manufacturer 11 impact analysis. And, again, those will all be 12 preliminary. And we'll want feedback on those. 13 And maybe those will be revised before you want to 14 actually talk more about the levels. But we are 15 hoping to have the main set of preliminary results 16 ready for the next meeting. 17 MR. BROOKMAN: So, then, if all that 18 analysis is sent out prior to the next meeting, as 19 we hope, then maybe we could schedule something 20 that's organized to receive feedback. 21 MS. WILLIAMS: Yes. So, on that note, I 22 mean, we can hopefully do revised engineering and

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 384 1 LCC at interim meetings. Honestly I have not 2 started NIA yet. So that is not going to happen 3 until the May meeting. 4 MR. BROOKMAN: Okay. 5 MS. WILLIAMS: Yes. 6 MR. BROOKMAN: So I guess maybe what 7 you're saying is we have additional time to 8 organize this. But I am thinking that if we have 9 good analysis and it's available, then what's to 10 stop us from getting on the telephone for an hour 11 or so and listening to a presentation on what is 12 there. And then individuals, members of the 13 Working Group, can respond, make their comments as 14 they wish, or caucuses can even meet to describe 15 what they found there. 16 Al, it seems like you want to say 17 something? 18 MR. HUBER: Well, I think one of the 19 things we could do tomorrow after you finish the 20 metric is go back through these assumptions that 21 we have been presented today, which we totally 22 disagree with and that also have a huge impact on

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 385 1 what the outcome is. And if we could get 2 agreement on those, then she can go forward and do 3 her analysis. And we can move on. Otherwise, 4 we're going to be back in here. I'm telling you. 5 We're going to be back in here arguing with you 6 about this analysis because of the assumptions you 7 are making. So if we can get an agreement on 8 those elements that you have heard today that we 9 disagree with and try to get that worked out 10 tomorrow after we hopefully get our metric solved, 11 then I think you can move on a lot faster than 12 wait and have us argue about it after you have 13 done all of your work. 14 MR. ADIN: So let me revisit the whole 15 question about priorities for a moment. I mean, 16 metric is important. We have established that. 17 But, contrary to what I might have thought a week 18 ago or so, it sounds like getting questions like 19 those resolved regarding this analysis and the 20 assumptions are actually more important to the 21 outcome of this than getting the metric resolved 22 because we didn't do this analysis independently

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 386 1 of the metric. We have already done a lot of it. 2 So we would really much prefer, I think, to get 3 some resolution on what these underlying 4 assumptions should be, even if that means we don't 5 get metric completely solved tomorrow. 6 MR. HUBER: Well, Al Huber, Patterson. I 7 honestly believe that as close as I think we are, 8 you could probably have the metric done in an hour 9 or so in the morning. 10 MR. BROOKMAN: That would be my hope and 11 expectation. 12 MR. HUBER: I mean, I really do, Lucas. 13 MR. BROOKMAN: I'd extend it to a full 14 hour and a half. 15 MR. HUBER: And I think to a formal 16 resolution. There weren't that many assumptions 17 up there that we disagreed with. And, again, I 18 think they've done an excellent job with this 19 presentation. I mean, really, there are just a 20 few assumptions we just don't agree with. And I 21 think we need to get agreement on them. And 22 there's no use having your consultant, you know,

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 387 1 go through all of the calculations and all the 2 work and then have us come back and disagree and 3 then come up with something else so they can go 4 all the way back through it again. 5 MR. ADIN: Right. 6 MR. HUBER: I think we could do that 7 tomorrow also. 8 MR. ADIN: Okay. And that's all I 9 meant, is, you know, to ensure that we're making 10 productive use of the time -- 11 MR. HUBER: Yes. 12 MR. ADIN: -- that we're together so 13 that the time when we're not at a meeting and 14 they're doing analysis, they're doing it on the 15 basis of things that you think are reasonable. 16 MR. HUBER: Yes. Yes. Okay. 17 MR. BROOKMAN: So, then, for tomorrow, 18 we'll start with metrics and hope to move through 19 that rapidly. And each caucus, to the extent that 20 it is beneficial, tonight can do a consultation 21 with your members, among your members. And then 22 we'll proceed. Well, we'll assess first thing in

### Capital Reporting Company

Commercal and Industrial Pumps Working Group 04-29-2014

(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 388 1 the morning the additional elements, but I like 2 going back to the assumptions part, as Al just 3 referenced. 4 It's now 5:00 o'clock. We covered a lot 5 of ground today, a lot of presentation again. I 6 think all of you are getting a pretty good sense 7 of the detailed analysis that lies ahead before 8 everybody has got the information they need to 9 actually negotiate surrounding the standard 10 levels. 11 Let's call it a day. We're going to 12 reconvene tomorrow at 8:00 a.m., not 9:00 a.m., 13 8:00 a.m., I believe here in this room. Have a 14 nice evening. We accomplished a lot today, 15 looking forward to seeing you tomorrow. 16 (Whereupon, at 4:58 p.m., 17 the Commercial and Industrial 18 Pumps Working Group was 19 recessed.) 20 21 22

### Capital Reporting Company Commercal and Industrial Pumps Working Group 04-29-2014

1 CERTIFICATE OF COURT REPORTER 2 3 I, CHAZ BENNETT, the reporter before whom the 4 foregoing hearing was taken, do hereby certify 5 that the witness whose testimony appears in the 6 foregoing deposition was duly sworn by me; that 7 the testimony of said witness was recorded by me 8 and thereafter reduced to typewriting under my 9 direction; that said deposition is a true record 10 of the testimony given by said witness; that I am 11 neither counsel for, related to, nor employed by 12 any of the parties to the action in which this 13 deposition was taken; and, further, that I am not --rzi: a re lat.l. ve o r e mpl oyee of a ny c b u nse! or at or ey

15 employed by the parties hereto, nor financially or 16 otherwise interested in the outcome of this 17 action. 18 19 20 21 22

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### 2014 389

### Capital Reporting Company Commercal and Industrial Pumps Working Group 04-29-2014

1 CERTIFICATE OF TRANSCRIBER 2 3 I, SARAH VEACH, do hereby certify that this 4 transcript was prepared from audio to the best of 5 my ability. 6 I am neither counsel for, nor party to this 7 8 9 10 11 12 13 I4 15 16 17 

### 18 19 20 21 22 action nor action. am I interested in the outcome of this

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 $ $1,000 333:6,16,22 334:2 $1,100 333:22 $1,383 262:16 $100 192:4 233:15 311:5,21 333:8,21 334:3 $12 264:2 $12.6 247:8 248:21 $124 333:10 $2 221:13 $2,000 259:2 262:22 $206,000 111:12 $207,000 111:12 $209,000 111:9 $221,000 136:19 $223,000 136:18 $230 147:18 $260,000 111:1 $3 325:6 $30 147:18 $44,000 122:14 $45 220:21 221:2 $46 147:21 $50 147:21 $500 333:6 $51,000 122:14 $59 233:17 $6 325:8 $68 233:16 $72,000 122:15 $900 263:1 + +.1 340:1 0 002 53:4 1 1 81:11 273:16 365:14 1,000 106:19 107:6 150:16 302:17 1,200 157:1 1,300 32:20 1,500 32:19 36:9,15 106:1,19 107:1 333:17 1,700 32:21 36:9 1,800 33:8 57:3,12 80:12 256:13,21 257:13 258:10,21 1.1 49:14 1.2 367:1 1.24 333:4 1.3 367:1 1.34 273:1 274:8,9 1.5 257:16 259:1 333:3,14 1.6 116:13 1.6X116:8 1.8 149:10 1.8X116:18 1:40 209:12 10 28:9,12 40:4 48:11,15 57:5 158:7 187:9 190:7 201:17,20 217:6 248:4

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 345:22 346:1 351:14 354:2 20.3 105:7 219:17 200 105:16 109:8 121:18 122:15 200,000 159:3 192:2 2012 169:6 237:19 248:5 2014 1:15 5:6 205 190:9 201:20 20585 1:13 20-second6:16 23 225:11 231:18 24 334:3 24/7 178:14 25 48:11,15 81:20 136:14 182:14 201:17 217:6 339:22 356:12,14 250 182:4,5 256 202:1 268,203 110:15 280,000 110:13 287 264:16 28th-29th 383:4 29 1:15 29th 5:5 2-D 32:12 2-pole267:3 2-pole/4 228:18 231:15 3 3 81:11 152:2 220:5 221:16 3,500 354:9 3,600 267:2 3.2 220:5 3:00 296:5 3:30 296:5 30 133:19 134:7,17 135:1,3,19,21 184:13 248:5 275:16 294:19 303:9 308:14 309:10 313:8,13 319:21 321:21 300,000 159:3 30-pump 199:22 30-year 309:13 328 183:11,13 188:1 33 209:4,6 34 226:20 228:16 35 231:12 233:16 38 310:19 3-D 36:17 38:12 56:18 4 4 81:11 336:20 4:45 323:9 335:3 358:5 4:58 388:16 40 28:10,13 48:15 57:5 103:2 109:8 115:19 119:6 122:18 123:3 135:6 139:7 141:5 144:16 145:18,19 149:21 151:15 152:3 160:19

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 7 7 135:22 136:1 175:19 218:16 7.4 214:1 70 48:16 57:6 119:6 149:20,22 150:6 151:15 152:3 158:12 160:19 170:6 261:13 271:4 293:5 303:6 70-80 161:8 74 273:17 75 49:14 50:16 51:20 52:3,14 53:22 58:22 62:12,15 64:8 227:5 228:7 232:15,17,19,21 233:12 234:9 239:3 246:18 262:20,21 336:20 340:3 351:6,10 77 231:4 782 311:17 8 8 215:14 8.2 247:12 8:00 388:12,13 80 30:17 116:12 119:6 82 182:8 271:3,20 820 183:11 84 271:20 85 48:16 117:20 341:11,13 87 328:16 9 9 249:9,17,19 9:00 388:12 9:11 1:16 90 183:13 93 260:13,16 94 246:9,19 947 52:2,9 53:20 80:21 95 261:4,5 293:1 96 366:1 98 365:14,18 985 52:4,9 80:21 99 369:14 A a.m1:16 388:12,13 ABB 2:7 8:8 abbreviated134:5 ability298:3 299:5,18 300:6 390:5 able 16:13 27:13 31:9 38:11 61:2,6,16 76:14 79:5 88:15 95:20 117:5 147:7,9 157:6 167:15 191:10 195:13 197:10 206:21 213:2 214:11 241:12,15 269:22 282:7 290:8 absolute 152:16 absolutely292:6

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 124:10 129:15 142:16 144:19 151:22 169:4 175:17 177:3 191:4 206:15 214:17 216:22 217:11 218:6,20 227:2 228:8 256:7 264:18 266:15 271:18 272:20 297:7 298:20 299:16 307:5 311:18 329:13 331:22 345:11 349:4 355:5 357:12 367:16 369:15 377:14 383:14 385:20 388:9 acutely12:20 adapt46:12 add 69:1 134:9 136:6 137:7 226:18 232:14 233:18 249:14 306:20 338:6 369:19 377:12 added 104:1 149:5 150:17 226:17 252:18 257:3 265:1 333:7 adding 337:2 367:3 addition 46:9 additional11:9 16:2 18:12 66:11 71:14 76:13 78:21 100:9 119:2 134:7 135:10 136:10 215:17 226:18 291:13,17 294:6,7 295:8 306:10,20 331:19 334:3 384:7 388:1 address 69:4 108:16 124:7 162:7 173:22 269:1 285:20 340:19 354:14 359:3 377:6,7 addressed67:4 99:22 addressing 132:18 adds 235:21 271:1 378:6 adequate71:10 adhering 67:21 Adin 2:5 7:13 9:7 12:5,6,14 21:3,14,17 22:11 23:18 24:16 25:3,5,7,12 38:13,15,17,21 39:1 43:10,15 45:10 47:2 64:20 72:13 73:10,13 129:14,15 130:1,5,18 167:8,10 186:8,9,10 189:18 194:4,5,9,18 195:15,20 205:14,15 206:3 207:3,6 240:14 243:8,14 289:21,22 295:12,21 296:2 314:18,20 315:1,4,14,19 316:22 317:12 344:8 347:17 348:7,10 358:18

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 agreeing369:14 agreement18:9 241:16 385:2,7 386:21 agreements 57:17 197:20 254:20 Agriculture349:3 ahead 9:9 78:4 82:18 118:3 168:12 199:16 208:18 279:6 309:18 358:5,12 378:9 379:17 388:7 AHRI3:19 8:14 Al6:7 42:15,16 44:18 47:4 62:5,17 63:8,9 64:21 71:18,22 124:7 126:8,11 128:7 134:15 142:10,11 154:12,13,14,19 155:2 171:1,2 188:8 189:6,18 190:5 199:1 201:12 219:11 227:20,21 279:17 286:16,17 301:6 304:4 308:15 309:5 310:20 314:7 319:18 337:12 345:16 346:5 359:18 371:10 372:13 384:16 386:6 388:2 Alascio 2:7 8:8 ALBERT 3:8 Alex2:10 8:17 9:13 10:1 187:2 Alison 4:15 7:22 44:4 46:6 70:9 75:13 82:6 140:11 201:10,14 202:9 207:10 244:9 320:7 321:7 328:8 357:5 382:18 Alliance 4:6 7:6 all-inclusive 109:6 allocation 224:5 225:14 allow 68:18 304:18 338:10 340:6 allowable 50:11 allowed 280:19 315:12 allows 19:17 29:12 32:2 39:11,12 86:2 257:4,5,6 368:10 alluded 205:15 alluding 121:8 153:1 167:12 alone 16:4 319:21 alongside 85:13 already12:12 95:5 97:8 98:8,9 100:16 104:15 131:12 135:13 141:10 146:9 154:22 156:9 169:7 186:4 191:11 192:16 204:7 205:11 212:1 213:9 228:1 229:21 231:20 239:12 241:7 283:7

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### Capital Reporting Company

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 40:5,8 42:14 48:10,17,19,22 49:2 71:4 111:5 136:16 153:6,15 220:14 222:7 255:14,15 classes 16:10 33:20 42:5,8 71:15 74:1,5 109:9,13 136:13 140:12 182:6 247:12 248:2,4 307:7,20 382:4 clean 34:11,17 35:4 92:11,13 cleaning128:10 129:20 clear28:5 30:20 44:16 72:16 118:8 130:19 174:13 196:10 225:19 266:13 267:12 296:19 298:5 323:8 352:19 clearance94:8 clearances89:9 90:5,6 91:9,10,12,13 clearer 47:5 51:2 251:20 339:13 clearly10:10 194:10 245:7 252:13 close32:21 35:11 53:4 74:3 80:11 99:20 125:22 138:5 140:15 154:16 157:8 160:5 181:19 214:12 216:7 223:4 226:5 231:6 264:3 293:4 307:4 339:18 343:21 362:11 364:14 365:19 367:16 368:1,4 375:10 386:7 close-couple33:8 57:3 71:7 74:13 109:10 111:8 212:12 214:7 223:16 226:14 227:8 228:17 229:22 230:9,15 231:14 307:21 close-couple/end 292:19 closed296:8 cloud 38:20 39:4 cluster209:10 cluttered229:21 coat89:22 coating92:8 coatings 92:10 coefficient94:13 coffee 82:2 296:7 325:6,7,8 coincident339:18 Coke296:6 cold 296:19 colleague323:11 colleagues 82:8 collected57:17 147:8 254:19 259:9 260:3 colluded 287:6 color134:12 colored33:13 37:14

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### Capital Reporting Company

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### Capital Reporting Company

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### Capital Reporting Company

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### Capital Reporting Company

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### Capital Reporting Company

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### Capital Reporting Company

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### Capital Reporting Company

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### Capital Reporting Company

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### Capital Reporting Company

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### Capital Reporting Company

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### Capital Reporting Company

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### Capital Reporting Company

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### Capital Reporting Company

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### Capital Reporting Company

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### Capital Reporting Company

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### Capital Reporting Company

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### Capital Reporting Company

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 M machine 89:20 98:19 137:8 286:21 296:7 machining 126:13 129:20 magnitude93:2 377:16 mail 323:13 main24:1 84:13 100:2 101:16 226:16 358:10 359:2 363:15,20 383:15 maintain 191:2 286:8 major47:6 111:21 173:9 279:8 326:13 majority100:5 106:16 123:14 142:17 293:3 312:18 makeup 237:14 malfunctioning 75:18 Man 164:13 manage315:11 managed13:4 manner 335:12 manuals 343:16 manufacturability 95:22 160:10 manufacture91:2 173:12 185:12 manufactured 61:7 manufacturer 19:2 59:15 84:11 87:21 88:7 92:21 100:16 101:1,7 114:9 119:14 130:8 137:3 141:1 147:5 148:7,8 150:7 154:22 157:14 165:9,15,17 170:12,19 175:9 183:12 184:9 185:14 192:20 201:15 205:19,21 207:13 211:14 244:17,18 251:6 258:8 260:2,4,5 261:3 266:21 270:8,9 273:2 286:10 297:1,10,17,20 298:5,7,8 299:5 305:2,3 306:14 321:15,16 322:11 324:19,20 326:6 330:20 333:7 349:1 350:7 377:6 381:12 383:10 manufacturers 47:15 57:18 62:8 65:2 78:21 87:1,12,13,16,17 100:12 102:8,15 109:20 115:19 116:5,6,7,16,19 117:5 119:11,12,16,19 120:9 121:21 122:7,8 123:18,20 124:10 125:21 128:2,9 132:4

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### Capital Reporting Company

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 98:2 100:10,19 102:3,6 103:11 110:18 111:4 116:2 122:5,18 123:3 140:18 141:3 144:10 153:13 156:12 158:5,8 160:10 168:22 170:9 171:6 180:14,15 181:13 188:6 191:13 195:14 199:8 201:2 211:12,15 212:3 214:1 215:12 217:4,6 226:22 239:8 254:5,17 258:13 270:4,6 271:18,19 272:1,5,19 277:10,13 279:9 280:1,4,12,15 282:5,19 285:9,21,22 289:12 290:9,13 293:2 298:12 299:13 302:2 303:11 305:10 320:19,21 326:4 334:17 349:6 361:17 373:21 market-based 28:5 254:4,12 marketing109:18 136:2 229:13 287:15 317:7 marketplace 28:7,21 29:5,12 30:8 31:17 33:11 45:2 52:13 56:12,14,17 85:8 93:10 97:17,19 99:14 100:6,14 101:17,20 103:22 104:3,5,8,12 110:4 111:11 116:17,20 117:20 121:20 133:8 138:2,4,14 139:10 142:6 176:10,12,14 178:20 191:3,12 218:22 254:11 267:11 277:1 278:7 283:8 286:12 289:13 294:15,18,20 301:7 303:19 364:6,7,8 markets 61:14,15 70:15 119:4 212:10 279:15 markup 85:19 260:10,20 269:13,15 272:22 274:2,4,8,12,17 298:7,9,11,17 299:1,4 300:3,21 306:5,22 307:8,16 308:1 324:20,22 325:1,2,3,11,16 331:18,21 332:11,12 333:4,5,14,18 335:1 markups 87:7 253:12,15 255:9 258:14 260:19 269:12 280:13 297:6 298:13 305:22 306:5 321:15 323:1 324:13,17 331:17 332:3,13 334:11

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### Capital Reporting Company

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 13:20 14:9,10 21:22 41:20 44:10,17 62:15 69:16 75:12 86:15 106:19 158:7,12 166:10 195:6 203:18 207:16,17 241:12 243:15,17 279:12 287:22 288:9 295:3 303:16 304:11 305:7 311:15 316:20 317:2 328:6 338:10 358:11 360:10 370:10 371:13 378:1,14,20 379:5 381:2 383:13,19 384:6 mcmanis 3:17 8:9 McManis 8:9 mean 18:15,16 22:16,22 24:1,6,10,13 30:2,4 43:21 44:5 45:10 47:3 52:16,19 63:21 66:16 67:14 70:1,18 93:7 113:22 125:17 129:2,3 131:16 138:5 154:17 161:13 163:19 165:2,7 167:12,18,22 168:1 170:18 171:4,6,14 177:19 180:12 181:18 182:12 185:2 188:2 193:9,17 194:9 195:12 196:17 201:9 202:10,12,19 204:1,7 205:6,22 207:12 216:21 240:15 241:2,4,6,10,14, 15,20 243:18,22 244:4,11,22 262:12 263:17 264:11 281:5 290:1,11 301:8,19 302:6,17 305:11 315:21 316:5,9 320:8 326:7 327:17 328:3 337:16 359:7,15 361:21 362:8,12 363:15 364:14,16 366:11 369:2 370:20 371:8 372:20 375:14,16 376:4 379:6 380:6,7,10,13 381:1 383:22 385:15 386:12,19 meaning 15:3 351:5,8 means 49:14 102:14 163:18 232:17 253:5 254:7 258:20 259:4 275:17 332:5 344:4 356:12 386:4 meant40:1 67:6 219:6 236:9,21 324:7 387:9 measured 43:19 measurement 14:18 361:19

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### Capital Reporting Company

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(866) 448 - DEPO www.CapitalReportingCompany.com © 2014 MEI-85 33:18 MEIs 14:14 94:7 275:20 281:10 MEI-type216:18 member12:1 members 5:11 75:16 76:8 82:7 358:16 384:12 387:21 membrane 39:3 mention 23:19 353:4,11 mentioned 17:16 20:10 54:7 242:18 274:4 359:4 380:1 mentioning 340:9 merit274:10 message343:15 met 337:5 metal256:17 method 28:16 42:18 44:13 57:7 63:16 66:3,4 90:21 133:8 137:9 213:21 229:10 369:5,6,7 methodology 27:17 46:3 79:21 80:4 153:6 240:18 241:17 322:7,16 336:6 methods 43:2 66:13 90:4 121:20 122:4,10,11 142:12 146:3,8 metric13:10 14:18 15:2,3,7 18:5,7 22:18 23:1 28:3 43:8,13,18 44:7,21 45:5 46:7 48:3,20,21 49:4,5,10 50:11 54:11 55:19 57:8 59:6,22 67:5,8,19 68:15,17,19 69:14 70:8 71:1 74:21 75:1 78:9 83:6 217:2,4,5,20 359:4 361:7,9,14 362:18,19 363:6 364:1,7,12 369:18,22 370:2,6,13 371:1,12,14 377:14,18 381:7 384:20 385:10,16,21 386:1,5,8 metrics 10:5 24:8 47:14,17 59:21 276:1 358:9 361:5 370:22 371:22 373:17 387:18 MG1 6:18 MIA88:7 253:4 309:17 383:5,9 microphone 227:21 middle30:13,15 191:22 324:11 378:19 mike8:3 10:15 145:10 321:8 million 162:2 192:4 247:8,12,14 248:22

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### Capital Reporting Company

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### Capital Reporting Company

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### Capital Reporting Company

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### Capital Reporting Company

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### Capital Reporting Company

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### Capital Reporting Company

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### Capital Reporting Company

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### Capital Reporting Company

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### Capital Reporting Company

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### Capital Reporting Company

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### Capital Reporting Company

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### Capital Reporting Company

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### Capital Reporting Company

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### Capital Reporting Company

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### Capital Reporting Company

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### Capital Reporting Company

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