1 UNITED STATES DEPARTMENT OF ENERGY **PUBLIC MEETING ON PROPOSED ENERGY CONSERVATION STANDARDS FOR PACKAGED TERMINAL AIR CONDITIONERS AND**  **HEAT PUMPS** U.S. Department of Energy Room 1E-245 1000 Independence Avenue, Southwest Washington, D.C. Thursday, May 1, 2008 9:00 a.m. Participants DOUG BROOKMAN, Facilitator RON LEWIS Department of Energy WES ANDERSON Department of Energy ASHLEY ARMSTRONG Navigant Consulting, Inc. Constantin von Wentzel Navigant Consulting, Inc. Matt O’hare Navigant Consulting, Inc. BING LIU Pacific Northwest National Laboratory MICHAEL SCOTT Pacific Northwest National Laboratory SRIRAM SOMASUNDARAM Pacific Northwest National Laboratory Marylynn Placet Pacific Northwest National Laboratory

JIM BENZ GE

**EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**2 Participants (Continued) SCOTT TOUKATLY ECR International HARVEY SACHS American Council for an Energy Efficient Economy KARIM AMRANE The Air Conditioning, Heating, and Refrigeration Institute FRANCINE PINTO Department of Energy ERIC STAS Department of Energy MICHAEL KIDO Department of Energy DAVE MARKUSZ Carrier TOM GUFFEY Goodman - Amana MARY ANN STOJKOVSKI McQuay International Patrick Schoof McQuay International

Lane Burt Natural Resources Defense Council JOE MATTINGLY The Air Conditioning, Heating, and Refrigeration Institute TED KINGSBURY Goodman – Amana Dan Vo Friedrich Air Conditioning Company

**EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**3 Participants (Continued) JIM RABA Department of Energy MICHAEL MCCABE Department of Energy MICHAEL RAYMOND Department of Energy MAUREEN MURPHY Public Participant Tatiana Delorm Public Participant

**EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**4 A G E N D A AGENDA ITEM : PAGE : Welcome 6 Wes Anderson Introductions and Agenda Review 8 Doug Brookman Rulemaking Overview 10 Wes Anderson Brief Opening Remarks from Interested Parties Jim Benz 14 General Electric Scott Toukatly 19 ECR International Harvey Sachs 21 American Council for an Energy Efficient Economy Karim Amrane 21 The Air Conditioning, Heating, and Refrigeration Institute Market and Technology Assessment, Screening 24 Analysis, and Engineering Analysis Ashley Armstrong Energy Use Analysis and Life-Cycle Cost Analysis Bing Liu 76 Michael Scott 85 Afternoon Session National Impact Analysis 120 Michael Scott

**EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5 A G E N D A AGENDA ITEM : PAGE : Trial Standard Level Development and 157 Manufacturing Impact Analysis Ashley Armstrong Utility Impact Analysis, Employment Impact 188 Analysis, Environmental Assessment, and Regulatory Impact Analysis Bing Liu Discussion of Issues 199 Doug Brookman Closing Remarks 211 Wes Anderson

**EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 6

1 P R O C E E D I N G S 2 9:06 a.m. 3 MR. BROOKMAN: Good morning. Welcome to the 4 Department of Energy's Public Meeting on Proposed Energy Conservation Standards for Packaged Terminal Air 6 Conditioners and Heat Pumps. Welcome. Glad you could 7 be here. 8 As a way of starting us off this morning, 9 we're pleased to have Ron Lewis from the Department of Energy joining us. Ron Lewis. 11 Welcome 12 Ron Lewis 13 MR. LEWIS: Good morning, everyone. I'm just 14 interested in knowing, since PTACs is not one of the rulemakings that we've had a lot of meetings on before, 16 how many people are new to the rulemaking process, have 17 not been involved in one of these before? 18 (Show of hands.) 19 MR. LEWIS: Okay. Well, welcome. One of the things I want to encourage you early on in the day is 21 this process of presenting the information that we've 22 got in the Notice of Proposed Rulemaking and getting 23 feedback from you, comments from you, on the approach 24 and the data that we've got in here and proposed levels, now is the time to speak up.

**EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 7

1 We have a very, very aggressive schedule with 2 a lot of rulemakings going on simultaneously, and we 3 don't have a lot of time to go backwards or redo 4 things. So it's really important that if you've got something that you've got a concern with, you've got 6 some data to submit, you've got something that you need 7 us to know, we need to know it now and we need to know 8 it by the end of the comment period. I want to 9 encourage you to be quick with that, and to take part in the discussions if there's something that you want 11 to contribute today, because we need to keep moving 12 forward with this and bring this to the final rule. 13 So, I don't want anybody that hasn't been 14 involved in these to think that this is just a presentation, a monologue or something that you don't 16 participate in. If there are things that you want to 17 contribute, please feel free to do that. 18 And, welcome again. Appreciate you taking 19 the time out of your schedules to be here. We hope it's a productive day for you. We do this to get your 21 input and to make sure that you understand the contents 22 and discuss that with you, and we're real pleased that 23 you're here. So, thank you very much. 24 Wes Anderson is the lead person on this project for DOE, and he'll be moderating or be the **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 8

1 person in charge of the day here. So, thanks again. 2 Introductions and Agenda Review 3 Doug Brookman 4 MR. BROOKMAN: Okay. Thank you, Ron. It's our tradition to provide everyone a chance to introduce 6 him- or herself. Please say your name and 7 organizational affiliation. I'm going to work my way 8 around the room this way and start with you, please. 9 (Introductions.) MR. BROOKMAN: Again, let me welcome you. 11 Thank you for being here on time so we can get going. 12 We have a full agenda for you today. All of you, when 13 you registered at the door, received a packet of 14 information. In there, there is an agenda. There's also a packet full of colorful slides. I'm going to 16 review the agenda here in just a moment. 17 The general format for today, as Ron 18 mentioned, is that there is a lot of detailed meeting 19 content in these slides. They're going to be shown one by one up here on the screen. There's plenty of 21 opportunity for you to ask questions, get answers, and 22 provide comment. This is your opportunity to do that. 23 The Department seriously wants you to provide all 24 kinds of useful comment to them so they can proceed. So that's the general format. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 9

1 Questions about that? 2 (No response.) 3 MR. BROOKMAN: I'm going to review the agenda 4 briefly. We're doing the first element here, which is Introductions and Agenda Review. Following that, Wes 6 Anderson, the lead on this project, is going to provide 7 a rulemaking overview. Following the overview, there's 8 an opportunity for any of you that wish to do so to 9 make brief opening remarks. That is, anything that you wish to call attention to here at the outset, that's an 11 opportunity for you to do that. 12 Following that, Market Technology Assessment, 13 Screening Analysis, and Engineering Analysis. All of 14 the slides will be in your packet. We'll take a break mid-morning, round about 11:15 or so. At 11:30, when 16 we return, Energy Use Analysis and Life-Cycle Cost 17 Analysis. Lunch today on your own, and we'll talk 18 about, for those of you that are not familiar with this 19 building, where you can get lunch and how to navigate here in the Forrestal Building when we break. 21 Following lunch, we'll have a review of the 22 National Impact Analysis and, following that, Trial 23 Standard Level Development and Manufacturing Impact 24 Analysis. Round about 2:30 or so, Utility Impact Analysis, Employment Impact Analysis, Environmental **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 0

1 Impact Analysis, Regulatory Impact Analysis, detailed, 2 analytical frameworks for you to take a look at and 3 comment on. We'll take a break mid-afternoon. 4 There's a final opportunity following the afternoon break, round about 3:15 or so, for anybody 6 here present that wishes to raise any other issues or 7 say anything else that hasn't been said yet. And then 8 we'll have closing remarks somewhere around 4:15 or so, 9 and then we intend to adjourn today by 4:30. That's our plan. 11 Questions, comments here at the outset? And 12 particularly, are there any issues that people wish to 13 raise that you don't feel will fit their way into this 14 agenda? (No response.) 16 MR. BROOKMAN: Okay. I see none. Then, 17 let's proceed. Wes Anderson. 18 Rulemaking Overview 19 Wes Anderson (PowerPoint presentation.) 21 MR. ANDERSON: Good morning, everyone. 22 Again, my name is Wes Anderson. I'm with DOE. We're 23 here today to present the Department of Energy's 24 thinking behind the choosing of a particular set of trial standard levels for packaged terminal air **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 1

1 conditioners and packaged terminal heat pumps. We will 2 discuss our particular issues and give our perspective 3 on the relevance of these issues. We will also ask for 4 your input. This is a conversation. We'll ask for your input on our perspectives, on our methodologies, 6 assumptions, and data. 7 DOE will also present our results based on 8 these methodologies, assumptions and data, and also ask 9 for your input on that as well. At the end of the presentation, I will come 11 back and tell you what the next steps will be. One big 12 thing I want to point out on this slide; May 31st is 13 the close of the comment period. 14 Can everyone see this picture? This slide just basically explains our statutory authority behind 16 why we have to do what we're going to do today. Once 17 ASHRAE raises the efficiency level on PTACs and PTHPs, 18 DOE is required to review that change and do one of two 19 things. We can accept ASHRAE's levels or DOE will determine, through clear, convincing evidence, that 21 there needs to be a higher standard and this standard 22 would result in a significant additional conservation 23 of energy and is technologically feasible and 24 economically justified. Then DOE will take a higher level. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 2

1 This is basically a history of what's 2 happened with packaged terminal air conditioners and 3 heat pumps. The big thing to take away here is the 4 final rule will be published in September 2008. Everyone is familiar with this, but for the 6 new people, this is -- on the left are the seven 7 factors that EPCA has required DOE to consider in our 8 rulemakings. On the right is a list of the analyses 9 that will be presented today. This is our proposed amended energy 11 conservation standard, and it's TSL4. Here it is 12 broken down by 12 equipment classes, which is -- large 13 group with the PTACs and PTHPs, packaged terminal air 14 conditioners and packaged terminal heat pumps. Then they're further broken down by category standard, which 16 is a function of sleeve size, standard size and 17 nonstandard, and within those groups there are three 18 cooling capacities for each category. 19 We will get to the hows and whys throughout this conversation, and I want to reiterate this is a 21 conversation, and to ask for your input and guidance on 22 our methodologies, analyses, and results. 23 At this time, I would like to turn it over to 24 Doug to go through the opening remarks. MR. BROOKMAN: Great. So this is the **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 3

1 opportunity I referenced earlier where any of you can 2 make opening remarks briefly to emphasize a point or 3 two, or perhaps several. And also, it's probably 4 useful to note, for those of you that are new, that we have accepted norms here for these meetings. I think 6 they're not much more than common courtesy. I'd ask 7 simply that you speak one at a time. Please say your 8 name for the record. These microphones are very old. 9 You need to stick your face right in them in order to be heard. 11 Also, there is a court reporter over here. 12 There's an actual recording. There'll be a record of 13 this meeting, a complete transcript available to 14 anybody that wishes to get it. But please keep the focus here. If you'd 16 turn off your cell phones or put them on silent. And 17 if you need to have a conversation with someone that's 18 going to last for more than about 20 seconds, it's okay 19 to take it out of the room. We'll understand. Also, I would emphasize what the Department 21 said earlier. This is your opportunity to comment, so 22 I do hope that you'll seize the day, that you'll really 23 make this opportunity work for you today. Okay? 24 So, how many of you would like to make opening remarks? Please raise your hands. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 4

1 (Show of hands.) 2 MR. BROOKMAN: A few might. Yeah, okay. So 3 let's start over here. And please say -- get us 4 started. Get close to the microphone and say your name for the record. 6 Brief Opening Remarks from Interested Parties 7 Jim Benz, GE 8 MR. BENZ: Typically in a room this size I 9 don't need a microphone. Jim Benz. I'm with GE Consumer and Industrial Products. And, just consistent 11 with the prepared statement we put forth, GE is pleased 12 to submit the following comments concerning the energy 13 conservation standards for packaged terminal air 14 conditioners. GE is a strong supporter of defining energy 16 standards for appliance products that provide energy 17 savings and economic benefit to customers and also 18 benefit the nation as a whole. We believe that the 19 appliance products should perform the function for which they are designed and that appliance standards 21 should be defined so as not to negatively impact that 22 performance. 23 GE first introduced the Zone Line packaged 24 terminal air conditioner 47 years ago and has been an active participant in the market ever since. I'm **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 5

1 especially proud of the fact that we recently replaced 2 a number of 42-year-old Zone Lines that were still 3 working. Unfortunately, the lack of replacement parts 4 finally resulted in the customer having to replace the units with current product. The good news is, the Zone 6 Lines recently delivered to the customer are 7 significantly more efficient than the 1960 products 8 being replaced. 9 I do not recommend the DOE change their cost benefit analysis to reflect a 40-year life-cycle, but 11 it does give one pause to reflect on the total impact 12 the decisions you make can have on our nation's long

13 term energy consumption and environment. 14 Consistent with GE's overall commitment to improve the efficiency of our products, as evidenced by 16 our Ecoimagination initiative, we agree with the DOE's 17 proposed energy conservation standards for PTACs and 18 heat pumps. Although the higher efficiency using 410A 19 provides a challenge, GE foresees no significant problem in meeting the new standards. 21 Currently, 70 percent of the AHRI registered 22 active PTACs meet the proposed standard, and 45 percent 23 of them exceed the standard by 3 percent. 410A has 24 been in use for years, and even though switching to it will have a negative impact on efficiency, the **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 6

1 difference can be made up with a combination of higher

2 efficiency compressors, motors, as well as increased 3 heat exchange. 4 With respect to the particular issues about which you requested input, Addendum T, which proposes 6 changes to nonstandard delineations in ASHRAE's 90.1, 7 we do not believe it is the intent of this change to 8 encourage the use of less efficient, nonstandard PTACs. 9 The wording of the change, however, may encourage the design of new products that are only slightly smaller 11 than the 42-by-16 in size. For example, somebody could 12 come out with a 41 3/4-by-15 3/4-inch product in order 13 to circumvent the intent. 14 We recommend the definition of the nonstandard unit be set significantly below that which 16 is proposed, consistent with the product that is 17 currently available on the market. 18 Number two, we agree that DOE -- with DOE 19 that extrapolating engineering analysis to cooling capacities for which complete analysis was not 21 performed is reasonable. We agree with the EER and COP 22 pairings for PTHPs based on current ARI directory 23 information. We expect no rebound effect for the PTAC 24 and PTHP industry. We do not expect any increase in the installation or maintenance cost of 410A product. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 7

1 We do, however, expect repair costs to increase in 2 order to recoup the cost of new equipment to hand 410A. 3 We would expect there to be some increase in 4 efficiency over the next 30 years even without the new regulation. However, the extent of the savings would 6 be significantly less and the relative economic impact 7 on manufacturing and life-cycle cost would be the same. 8 Without the proposed standard, we would 9 expect the overall industry efficiency of PTACs and PTHPs to be significantly lower and improvements to be 11 implemented later. 12 We agree with the NES forecasted base case 13 distribution of efficiencies after the introduction of 14 410A and implementation of proposed energy conservation standards. We do not expect PTAC and PTHP customers 16 switching to other, less efficient equipment if the 17 proposed standard is implemented. 18 GE agrees with the proposed standard level 19 TSL4 for standard-size PTACs and PTHPs. We are confident the higher efficiency levels can be obtained 21 with 410A. We agree that TCL4 is the most appropriate 22 energy standard for 2012 implementation. 23 Although we do recognize the potential for 24 customers to switch to PTACs because of the higher proposed PTHP standards, we do not expect this will be **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 8

1 significant. Contrary to what DOE concluded from their 2 research, we have found our customers to be very 3 concerned about the efficiency of their PTACs and PTHPs 4 because the energy costs of these products comprise such a large percentage of their operating expenses. 6 For the vast majority of customers, the 7 savings realized by using heat pumps is significantly 8 greater than projected savings from the proposed 9 standard alone. Increasing the premium on a PTHP versus a PTAC because of a higher standard would not 11 significantly change the cost benefit analysis to the 12 customer. 13 GE is not in the nonstandard-size PTAC and 14 PTHP market. We do caution that nothing be done to encourage the use of nonstandard-size, less efficient 16 product in new construction. We would support the 17 implementation of energy guides similar to the ones 18 currently used on window air conditioners, and GE 19 continues to be a strong supporter of the Department's efforts to improve the efficiency of the nation's 21 appliances. 22 We believe that the standard revisions should 23 be appropriate for the product, practical, and of real 24 value to the American consumer. We urge the Department of Energy to adopt TSL4 for packaged terminal air **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 9

1 conditioners. 2 MR. BROOKMAN: Thank you. Thanks, Jim. 3 Other comments here at the outset? Please. Is it 4 Scott? Comments by Scott Toukatly 6 ECR International 7 MR. TOUKATLY: Yes. I guess I'm not sure if 8 I agree with -- 9 MR. BROOKMAN: Scott, please say your name for the record, and get real close to that mic. 11 MR. TOUKATLY: Scott Toukatly. 12 MR. BROOKMAN: Thank you. Keep close. 13 MR. TOUKATLY: I'm not sure if I agree. I 14 know we went through that very quickly, but I'm not sure, coming from the nonstandard PTAC industry, if I 16 agree with much or all of that that the gentleman from 17 General Electric went through. I know we've got these 18 14 comments here, and that was going to be my next 19 question, was whether or not we were going to go through those one by one or that was just something 21 that had to be given to the DOE by May 31st, or if we 22 were actually on the agenda today to go through each 23 one of those questions that the DOE was seeking comment 24 for. MR. BROOKMAN: Yeah, it's on the agenda to be **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 2 0

1 covered today, and it's going to be -- they will be 2 covered in sequence in the slide presentations. So 3 there will be opportunity to comment one by one. 4 MR. TOUKATLY: I would just say this. I don't believe that nonstandard PTACs and new 6 construction PTACs cross paths hardly at all. So 7 talking about more stringent and less stringent, as a 8 matter of fact the DOE is proposing more stringent 9 standard increases on nonstandard than they are on standard. 11 So I don't believe that people have the 12 ability to go from a standard PTAC to a nonstandard 13 just because it meets a lesser efficiency. That's not 14 what generates the need to buy a nonstandard. It's the given hole in the wall, if you will, that's already 16 there. So people don't buy nonstandard PTACs in new 17 construction applications, so they don't cross paths. 18 Again, I would just say that the proposed 19 increases that the DOE is proposing are much more stringent on nonstandard, so we have concerns. 21 MR. BROOKMAN: Okay. Thank you. And you'll 22 get a chance to say much more about that as the day 23 progresses. 24 Other opening remarks here? Harvey Sachs.

**EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 2 1

1 Comments by Harvey Sachs 2 American Council for an Energy Efficiency Economy 3 MR. SACHS: I think this is on. This is 4 Harvey Sachs, ACEEE. Just as follow-up on the nonstandard, one of the issue that sort of surprised us 6 that we did not see treated as a possibility is a 7 phase-out of this equipment class, perhaps in 10 years, 8 that we handle the problems that have been brought out 9 by simply sunsetting that equipment category and its availability 10 years from now, or 10 years from the 11 adoption of the standard. It seems to be an item worth 12 discussing. 13 MR. BROOKMAN: Okay. 14 MR. SACHS: Let me just finish with that. The present market is very small. I believe DOE 16 estimates 40,000 units a year total, spread among 17 several manufacturers. We believe that there will be 18 substitutes available with comparable or better 19 efficiency. MR. BROOKMAN: Karim. 21 Comments by Karim Amrane 22 The Air Conditioning, Heating, and Refrigeration 23 Institute 24 MR. AMRANE: I was not planning to make a statement, but since we are now going to the **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 2 2

1 discussion, I believe -- 2 MR. BROOKMAN: Thank you. 3 MR. AMRANE: We got into the replacement 4 market PTAC -- this is not new. I mean, some people are coming up with a statement that we're just seeing 6 that part of that. It has been around in ASHRAE -- for 7 almost 10 years, so this is not new. And there is a 8 need for it. As Scott just mentioned, it's not a 9 question of phasing out the product, it's a question of providing a need to customers who don't have in their 11 wall a standard-size slot. So you have to provide this 12 product just to provide it for customers who have 13 certain situations and that don't really -- can be met 14 by the standard-size PTACs. So that's the point on replacements. 16 MR. BROOKMAN: Okay. Thank you. Please, 17 Scott. 18 MR. TOUKATLY: Just one more issue on that. 19 I'm a little concerned that the DOE actually has accurate shipment data for non-standard PTACs and 21 PTHPs. There's only two companies that even 22 participate with ARI. There's certainly one large 23 company that doesn't report numbers, and there are many 24 others -- I shouldn't say "many." There are some small, other companies that are out there. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 2 3

1 So I guess I'm not quite clear, and I don't 2 know if that will come out, where ARI is getting -- or, 3 I'm sorry, the DOE is getting their shipment 4 information from and if it's accurate. MR. BROOKMAN: Can you suggest how the 6 Department would obtain that shipment information? 7 MR. TOUKATLY: Well, I guess I'm thinking 8 back to the manufacturer's interviews. I'm not quite 9 clear if Navigant visited all of these manufacturers, especially one that is a major player that is not 11 affiliated with ARI but is probably the leader in the 12 industry. So they account for many PTAC and PTHP 13 shipments. I don't know if they were visited, if they 14 shared shipment information, if that information was good information. 16 So I guess I would just say that I'm 17 concerned about shipment data. 18 MR. BROOKMAN: Do you want to do that now or 19 do you want to do it in the course of the presentation? MS. ARMSTRONG: It doesn't matter. 21 MR. BROOKMAN: The shipments forecast will be 22 covered in detail as we go along here, so that will be 23 the time to discuss that. 24 Other questions or particularly comments here at the outset? **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 2 4

1 (No response.) 2 MR. BROOKMAN: Okay. Then let's proceed, 3 then, with the slide presentation, followed by question 4 and comment. And first up is Ashley Armstrong. Market and Technology Assessment, Screening Analysis, 6 and Engineering Analysis 7 Ashley Armstrong 8 (PowerPoint presentation.) 9 MS. ARMSTRONG: Okay. Good morning, everyone. My name is Ashley Armstrong, and I will be 11 discussing the market impact, the screening, and the 12 engineering analysis efforts. These three analyses 13 represent the foundation of all subsequent analyses DOE 14 has conducted for this rulemaking. We'll cover the rest of the rulemaking analyses throughout the day. I 16 invite you to comment on anything that's presented 17 today. 18 There's additional information found in the 19 Notice of Proposed Rulemaking, as well as the Technical Support Document. Both can be found on DOE's website. 21 Chapter 3 corresponds to the MTA, Chapter 4 22 corresponds to the screening, and Chapter 5 corresponds 23 to the engineering. 24 Okay. So let's begin with the market and tech assessment, as I call it, the MTA. The purpose of **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 2 5

1 the MTA is to characterize the PTAC and PTHP markets, 2 to determine available equipment efficiencies and 3 shipments by equipment class. Some of the topics that 4 are covered in the MTA include equipment definitions, equipment classes, manufacturers, unit shipments, 6 market shares, regulatory and non-regulatory incentives 7 and initiatives, as well as technologies that can be 8 used to reduce energy consumption. 9 Next is the screening analysis. The purpose of the screening analysis is to identify technology 11 options which can increase the efficiency and to apply 12 the screening criteria established by DOE to determine 13 which design options to evaluate and which of those to 14 screen out. Once the screening analysis is complete, DOE 16 takes the remaining technologies and calls those design 17 options. DOE then reviews these design options in the 18 engineering analysis. 19 The engineering analysis is conducted to characterize the relationships between manufacturing 21 costs and energy efficiency. For PTACs and PTHPs, 22 we've evaluated the design options that improve the 23 efficiency of the equipment relative to the baseline 24 unit. So let's start off with the market **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 2 6

1 characteristics. As part of the market and tech 2 assessment, as I just said, we address different 3 topics, such as the industry characteristics, 4 manufacturers, market shares, equipment classes, units shipped. 6 DOE found that the standard size industry is 7 comprised primarily of five major manufacturers which 8 account for approximately 90 percent of the market 9 share. There are approximately 380,000 units shipped per year, and most of the standard-size equipment is 11 made overseas. There is only one major manufacturer 12 manufacturing in the U.S. 13 DOE found that there are three major 14 manufacturers of nonstandard size equipment. The nonstandard-size market is much smaller, and DOE 16 estimated that there's about 70,000 units per year. 17 DOE obtained their shipment information from 18 AHRI, and the way it's broken down between standard 19 size and nonstandard size, just to answer your question, Scott; we assume that 85 percent of the total 21 shipments is standard size and 15 percent of that, or 22 the rest of the shipments, is nonstandard. So, 15 23 percent equals around 70,000 units per year. 24 MR. TOUKATLY: So it's just an estimation? MS. ARMSTRONG: We got total shipment data **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 2 7

1 from three, and we worked out what the rates are. 2 MR. BROOKMAN: Karim, do you want to just 3 qualify that? 4 MR. AMRANE: Yes. You got shipment data from us, but we made it clear that the shipment data 6 contained some of the replacement market, not all of 7 it. 8 MS. ARMSTRONG: Yeah, yeah. So it's 15 9 percent. MR. TOUKATLY: And I would say that if it's 11 missing a major manufacturer, it's missing quite a bit. 12 MS. ARMSTRONG: I can't tell you which ones 13 it is and which ones we talked to as far as, you know, 14 interviews to get this information. But if you have a better idea of what it should be or a difference, we 16 welcome your comment. 17 MR. BROOKMAN: Ashley, did you have the 18 chance to interview all of the manufacturers? 19 MS. ARMSTRONG: I can say that I contacted -- I tried to contact everyone. I can't say who I exactly 21 talked to. 22 MR. BROOKMAN: Ron Lewis. 23 MR. LEWIS: Okay. You might have just 24 noticed the court reporter strolling down the room. You need to say your name and your affiliation so she **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 2 8

1 can get it on the transcript, please, before you talk. 2 MR. BROOKMAN: Okay, okay. We'll do that 3 again. That was Scott who last spoke. 4 So, Ashley, will you answer that question again? 6 MS. ARMSTRONG: Sure. I'm Ashley from 7 Navigant. 8 (Laughter.) 9 MS. ARMSTRONG: Scott, I can't tell you exactly who I talked to. But I can tell you that I 11 tried to contact everyone in the industry. 12 MR. BROOKMAN: I see. Okay. 13 MS. ARMSTRONG: Major and minor. 14 MR. BROOKMAN: Just to be clear, Wendy, usually when I call someone by name, then they -- you 16 know that that's the acknowledgment of who's going to 17 speak next. And then they'll say their name, and 18 that's all I need to do, I think, okay? Okay. 19 Okay. Does that answer that question? Scott. 21 MR. TOUKATLY: Scott Toukatly. If those -- 22 if there are particular manufacturers that weren't 23 contacted, did you estimate numbers for them or did you 24 not take it into account? MS. ARMSTRONG: We estimated that that 70,000 **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 2 9

1 unit number is for the entire industry, across the 2 board. 3 MR. TOUKATLY: I'll just go on record as 4 saying I don't know what the number is. MS. ARMSTRONG: Okay. 6 MR. TOUKATLY: I'm just concerned that it's 7 all taken into account. That's all. 8 MS. ARMSTRONG: Okay. Thank you. 9 MR. BROOKMAN: Okay. MS. ARMSTRONG: So, additional information 11 that's not presented on the slide is also found in 12 Chapter 3 of the TSD as well as the Notice of Proposed 13 Rulemaking. 14 When evaluating and establishing energy conservation standards, DOE generally divides covered 16 equipment into equipment classes by the type of energy 17 used, the capacity or other performance-related 18 features that affect the energy efficiency of the 19 equipment. So for PTACs, DOE proposed 12 equipment 21 classes in the NOPR. These equipment classes are 22 differentiated by equipment type -- that is, air 23 conditioner or heat pump -- as well as the wall space 24 dimensions, which DOE is referring to as standard and nonstandard, and then the cooling capacity. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 3 0

1 For differentiating nonstandard equipment, 2 DOE proposed two alternative methods in the NOPR. The 3 first is to make the equipment classes consistent with 4 the ASHRAE Standard 90.1 (1999), their definitions of new construction and replacement. And then the second 6 is -- the alternative one is to make the equipment 7 class definition consistent with Addendum T to ASHRAE 8 Standard 90.1 (2007). 9 DOE stated specifically in the NOPR that DOE understands that Addendum T to ASHRAE Standard 90.1 11 (2007) is out for public review and comments are being 12 addressed currently by ASHRAE. If ASHRAE is able to 13 adopt Addendum T by -- prior to September 2008, the 14 final rule date, DOE proposes to incorporate the definitions within Addendum T in the final rule. 16 At this time I'm going to pass the 17 presentation to Doug to facilitate a discussion on 18 DOE's selected equipment classes. In particular, we'd 19 like to seek your comment on the delineations within ASHRAE Standard 90.1 (1999) and Addendum T to ASHRAE 21 Standard 90.1 (2007) for nonstandard size equipment. 22 MR. BROOKMAN: Okay. Thank you. Ashley, 23 Slide 7, is it a complete picture of the way the 24 product classes have been -- MS. ARMSTRONG: That's only one method. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 3 1

1 That's only ASHRAE 90.1 (1999). 2 MR. BROOKMAN: I see. Okay. So then, 3 comments related to how these equipment classes are 4 organized? Karim. Scott. MR. TOUKATLY: I was just going to say -- 6 Scott Toukatly -- I don't have further comment other 7 than I think it was a couple of the ARI companies that 8 helped address that language. So obviously, I'm all 9 for it. MR. BROOKMAN: Okay. Thank you. Yes, Mary 11 Ann. 12 MS. STOJKOVSKI: Mary Ann Stojkovski, McQuay. 13 We are definitely in agreement with ECR on the new -- 14 on the definition and believe strongly we need to adopt it. 16 MS. ARMSTRONG: And just to clarify, that's 17 the Addendum T definition. 18 MS. STOJKOVSKI: That's correct. 19 MR. BROOKMAN: Okay. Thank you. MR. AMRANE: Karim Amrane with AHRI. We were 21 the main proponent of this addendum, and it went 22 through public review. There were a couple of comments 23 received which have certainly nothing to do with the 24 addendum itself. Those were addressed by the committee. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 3 2

1 So I guess -- I mean, I'm kind of surprised 2 to hear the comment made by GE on that product class -- 3 on the replacement product class, but I have to remind 4 GE and others that ASHRAE had these product classes established in 1999. And I've never heard of GE 6 complaining about it until today. 7 So what we've done as far as Addendum T is 8 really to clarify the designation. Before, ASHRAE used 9 to call product classes as new construction versus replacement, and it was confusing to the marketplace. 11 So we came back to the committee with the name -- with 12 standard size and nonstandard size to clarify that. 13 We also made a slight change in definition to 14 basically qualify nonstandard size PTACs as being less than 16 inches wide and that's -- and all less than 42, 16 and that's about it. So we -- it's not a major change 17 that we made to ASHRAE 40.1. As I said, this has been 18 around for 10 years almost. 19 MR. BROOKMAN: Other comments related to this, these equipment size issues? And also, the 21 entire equipment class organization scheme that's 22 presented. 23 MR. BENZ: Jim Benz from GE. 24 MR. BROOKMAN: Get close, Jim. MR. BENZ: We see no evidence of any current **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 3 3

1 problem with the definitions. Our only concern is 2 writing it into a regulation that has the force of law 3 for efficiency allows a potential loophole for somebody 4 to come in at a later date and come in with a product that would, by definition, be nonstandard but in fact 6 be used in more standard installations and for that 7 purpose. 8 Our only suggestion would be that the non

9 standard size PTACs are a known entity in the market today. We should be able to determine that the largest 11 nonstandard size PTACs is X, and our recommendation 12 would be to use that dimension as opposed to 42-by-16. 13 We do see no current problems today and, if people act 14 rationally, would not necessarily see problems in the future. 16 The issue we have is the potential for 17 somebody to act less rationally and come out with a 18 product that would be 41 3/4 inches wide by 15 3/4 19 inches wide, would in fact work in a standard sleeve, and although we have a sticker that says "Not for new 21 construction," in some applications a product like that 22 could even be used in existing properties. 23 So, would somebody doing that be 24 circumventing the intention of the regulations? Absolutely. So we are recommending that we look at a **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 3 4

1 standard that would prevent anybody from circumventing 2 the intent of the regulation and the intent of the 3 classification. 4 MR. BROOKMAN: By modifying the definition. MR. BENZ: By modifying the dimensional 6 definition to -- the nonstandard size is a known 7 entity. So we know. And forgive me that I don't, we 8 don't participate in that standard. But if the largest 9 nonstandard size in the market is 36 inches or 38 inches or whatever it is, you could avoid a potential 11 loophole by defining or differentiating the two 12 categories by the largest nonstandard PTAC available in 13 the marketplace today. That would further encourage 14 people to only use that in a situation where it's absolutely necessary and it's cost prohibitive to do 16 something else. 17 I think the end result would be essentially 18 the same. I think operationally today the end result 19 is the same. But our only concern is somebody coming out with a product with the intent of circumventing 21 both the DOE regulations and what ASHRAE is trying to 22 define. 23 MR. BROOKMAN: Karim. 24 MR. AMRANE: Karim. I'm on AHRI. I think we took care of your concern by putting a limit on the **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 3 5

1 square footage area as well. So it's not just the 2 dimensions but it's also the cross-sectional area. So 3 I believe that your concern is being addressed there. 4 MR. BROOKMAN: Okay. Thank you. Other comments on equipment class organization? Harvey 6 Sachs. 7 MS. PINTO: Excuse me. I have a question. 8 MR. BROOKMAN: Yes, Francine Pinto. 9 MS. PINTO: Francine Pinto, DOE. Karim, could you tell me the status of Addendum T? 11 MR. AMRANE: As I mentioned -- Karim Amrane 12 with AHRI. As I mentioned before, it went out for 13 public review. The public review has closed. And as I 14 said, there were a couple of comments that were submitted which had absolutely nothing to do with the 16 addendum. It was from a gentleman who had more issues 17 with the process than anything else. 18 Those comments were rejected by the committee 19 because they were not addressing the addendum itself. So this is it. I mean, as far as ASHRAE, ASHRAE went 21 through the process, solicited comments from the 22 public, and nothing came to the committee, so. 23 MS. PINTO: Is there a formal adoption 24 process where you then publish that it's done? MR. AMRANE: Yes. Yes, there is. And that **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 3 6

1 will be, I believe, in the June meeting of ASHRAE. 2 MS. PINTO: Thank you. 3 MR. BROOKMAN: So that was Francine followed 4 by Karim one more time. Okay. So, additional comments, then? Yes, 6 Harvey Sachs. 7 MR. SACHS: Harvey Sachs, ACEEE. Several 8 years ago we had the question arise of the small 9 diameter, high velocity residential central air conditioning. And we were able to convince our 11 colleagues in the environmental community that allowing 12 a lower efficiency standard for that equipment class 13 was acceptable because of two factors. 14 One, sales were low, so the national energy impact was small, and two, there was language 16 constructed, and it was modified through this DOE 17 process, to give us the best possible assurances that 18 there would not be a loophole through which the 19 standard process, for let's call it standard equipment, was not subverted. 21 I think it's important for DOE to assure the 22 broad community and the stakeholders in this room that 23 the exceptions for nonstandard equipment meet those 24 tests. Although I have not looked at this issue in depth, I don't think it makes sense to proceed without **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 3 7

1 answering GE's questions. What is the largest 2 nonstandard sleeve that is now sold that is now used in 3 older buildings. And, to consider setting the limit at 4 that rather than the loophole-enabling 42 by 16. MR. BROOKMAN: Thank you. Scott? 6 MR. TOUKATLY: I believe that's been done, 7 Harvey. As a matter of fact, he's mentioned what the 8 maximum limit is in square inches of face area in that 9 definition. So that's been done. I don't know -- it doesn't come to mind what 11 the largest one is right now. There's obviously many 12 of them. I didn't come prepared with the answer to 13 that question what the largest one is and what it 14 measures. But I can also tell you this, that even this 16 definition -- I can't speak for other companies, but 17 we're prepared that that probably eliminates a couple 18 of our offerings now. So we tried to come up with a 19 fair definition that was fair to new construction and fair to the industry. And also, actually in that 21 definition, it probably eliminates some of our present 22 offer right now. 23 MR. BROOKMAN: Mary Ann, I don't want to put 24 you on the spot, but I see you nodding your head. Do you wish to comment here? **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 3 8

1 MS. STOJKOVSKI: Yes. He's absolutely 2 correct that there are some that would fall into the 3 standard that I would consider nonstandard equipment. 4 But we tried to make it fair and I think the definition is very reasonable. The need is there. This equipment 6 is out there. We cannot put a standard piece of 7 equipment in these buildings. These buildings are 8 going to be there. So we really have to think about 9 the market and consumers' needs. What are they going to do. 11 I mean, you could make it very stringent on 12 us and chase, you know, I'd say the reputable 13 manufacturers out of this market, but you're not going 14 to make this business go away. You're going to see somewhat of a black market turn up, and people are 16 going to find this equipment. And it's going to be a 17 lot less efficient than what you even think. 18 MR. BROOKMAN: And Mary Ann, you represent 19 who? MS. STOJKOVSKI: McQuay International. 21 MR. BROOKMAN: Thank you very much. Thank 22 you. Harvey Sachs. 23 MR. SACHS: Please, it's not my goal to be 24 obstructionist but to ask the Department for some additional information. For example, not having **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 3 9

1 reviewed Addendum T, I don't know the cross-sectional 2 areas. Karim, do you remember that? 3 MR. BROOKMAN: Karim? 4 MR. AMRANE: Six hundred or so. MR. SACHS: Six-seventy square inches? Thank 6 you. That in itself is helpful, but I do think that if 7 we're going to go forward with this we need the 8 assurance that this is not loophole-inducing. That's 9 all. MR. BROOKMAN: Okay. 11 MS. ARMSTRONG: Just to note -- 12 MR. BROOKMAN: Ashley. 13 MS. ARMSTRONG: -- their exact wording are 14 presented in the NOPR. So both the addenda, the exact wording from them and everything, like the square 16 inches and how they're different, are discussed in the 17 NOPR in this section. So you can also refer to that. 18 MR. BROOKMAN: Thank you. 19 MS. ARMSTRONG: Sure. MR. BROOKMAN: Thank you. Other comments on 21 Slide 15, Equipment Class Organization? 22 (No response.) 23 MR. BROOKMAN: Okay. 24 MS. ARMSTRONG: Okay. Next I'll be speaking about the screening analysis. The purpose of the **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 4 0

1 screening analysis is to evaluate options to improve 2 the energy efficiency and to determine what 3 technologies to consider further and which to screen 4 out. DOE identified a range of technology options 6 in the market and tech assessments for further 7 consideration. DOE will now review these technologies 8 with the screening criteria that are presented on this 9 slide. The screening criteria include technological feasibility, practicability to manufacture and sell and 11 service, adverse impacts on product utility or product 12 availability, and adverse impacts on health and safety. 13 The technology we consider for further 14 consideration in the engineering include higher efficiency compressors, increased heat exchanger area, 16 and -- heat exchanger coils, all of which manufacturers 17 use today. 18 Next I'll be speaking about the engineering 19 analysis. The purpose of the engineering analysis is to take a baseline model and improve the efficiency to 21 derive a cost efficiency relationship. The cost 22 efficiency relationship developed as part of the 23 engineering analysis is very critical input of the 24 life-cycle cost and payback period analysis, the national impact analysis, as well as the manufacturer **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 4 1

1 impact analysis. 2 For the engineering analysis, DOE reviewed 3 all 12 equipment classes that we presented earlier. 4 DOE examined standard size and nonstandard size PTACs and PTHPs separately. For standard size equipment, DOE 6 examined two specific -- which include 9,000 Btu/h and 7 12,000 Btu/h -- capacity is at the highest shipment 8 volume. 9 For nonstandard size equipment, DOE only looked at one cooling capacity in the middle range, 11 which was 11,000 Btu/h. 12 For this analysis DOE used a design option 13 approach which involved consultation with outside 14 experts, review of publicly available data, performance information, as well as physical teardowns and modeling 16 of manufacturing costs. 17 Lastly, DOE performed an alternative 18 refrigerant analysis to characterize the performance 19 implications of the R410A. Currently, DOE recognizes there are no commercially available PTAP and PTHP 21 equipment that utilize R410A. The engineering analysis 22 estimated system degradation based on studies in 23 similar market transformations, and we're going to 24 speak more about the R22 data in a couple of slides. So for standard size equipment, the energy **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 4 2

1 efficiency equation, EER, is a function of cooling 2 capacity. Therefore, for these equipment classes DOE 3 explicitly analyzed two cooling capacities, 9,000 and 4 12,000 Btu/h, to further investigate the slope of the energy efficiency equation. 6 To derive the energy efficiency equation for 7 all cooling capacities within the range, the 7,000 to 8 15,000 range, DOE used the results from the 9,000 and 9 12,000 and then extended those results to the other cooling capacities. In other words, we did not use the 11 same equation -- the same slope of the equation as in 12 ASHRAE Standard 90.1 (1999). 13 DOE invites comments on the extension of the 14 energy conservation standards on the two cooling capacities with the highest number of shipments to the 16 full cooling capacity range. 17 MR. BROOKMAN: Comments on that issue? 18 MR. SACHS: Harvey Sachs. I guess I'm a 19 little confused why the axes aren't labeled. We have a purely conceptual pair of slides. 21 MS. ARMSTRONG: You mean with numbers? 22 MR. SACHS: Yeah. 23 MS. ARMSTRONG: Because for each TSL, which 24 I'll show you later, there's a different equation. But basically what we're showing you is that the slopes **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 4 3

1 aren't parallel. In other words, we've looked at -- 2 for 9,000 and 12,000, we've plotted the results and 3 then we found a new equation altogether. So for this 4 equation, it's actually -- it's a little steeper than the ASHRAE slope. The proposed standard is. 6 MR. BROOKMAN: Karim. 7 MR. AMRANE: Karim Amrane, AHRI. I guess, 8 when you -- when we looked at this issue of efficiency 9 versus capacity, in particular with the R410A refrigeration, we noticed that there was more 11 degradation at the larger capacity than at the lower 12 capacity. How does one take into account -- 13 MS. ARMSTRONG: That's why we did the 14 analysis on two different capacities, the 9,000 and 12,000. We changed the slope such that for 12,000 the 16 EER requirements -- 12,000 and above the EER 17 requirements would be lower. In other words, it would 18 more meet, like, the ASHRAE and they would start to 19 converge. MR. BROOKMAN: Other questions on Slide 17? 21 Or comments. Please. 22 MR. MARKUSZ: I've got a question. 23 MR. BROOKMAN: Just say your name, David. 24 MR. MARKUSZ: My name is David Markusz. I guess the question is, the slope is based on the **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 4 4

1 degradation from the R410A or is it based on what you 2 saw in the actual units that you analyzed? 3 MS. ARMSTRONG: It's based on the analysis, 4 the full analysis, which was done on R410A. So, right from the engineering, we assumed a certain degradation, 6 and I'll get to those percentages in a minute. But 7 it's like -- and then we built the full analysis off -- 8 on that. 9 MR. MARKUSZ: Okay. Thank you. MS. ARMSTRONG: Okay? Now for nonstandard 11 size equipment. For nonstandard size equipment, we 12 only fully examined one cooling capacity within range, 13 and that was in the middle of the range, 11,000. We 14 proposed to streamline the analysis by maintaining the ASHRAE slope and then just finding a new equation with 16 the results based on the 11,000 analysis. 17 So DOE now invites comments on the extension 18 of energy conservation standards from one cooling 19 capacity to other cooling capacities maintaining the ASHRAE slopes for nonstandard equipment. 21 MR. BROOKMAN: You can see the same sort of 22 diagram with the slope compared to the ASHRAE Standard 23 90.1 slope. 24 MR. TOUKATLY: Scott Toukatly. I guess I would just reiterate the same concern for nonstandard. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 4 5

1 Once -- I mean, we've seen it in calculations. We've 2 also seen it in reality. Certainly once you get up to 3 the upper range of that 7- to 15,000, we feel that's a 4 little too stringent once you get up into a 15,000 nominal and then certainly an 18,000 nominal unit with 6 the technology that there's today. It falls off 7 considerably. Maybe that's a strong word. It falls 8 off more rapidly once you get up into 15- and 18,000 9 Btu nominal. We're seeing that in reality. MR. BROOKMAN: Can you say what it should be? 11 MR. TOUKATLY: As far as degradation? 12 MR. BROOKMAN: Yeah. 13 MR. TOUKATLY: I think we're seeing the same 14 degradations in reality as -- you know, I was reading the information that we supplied to this process as an 16 industry about two years ago, and we're seeing very 17 similar degradations from nominal capacity on down as 18 was in the letter that we submitted from ARI in this 19 process two years ago. MR. BROOKMAN: I thought you were suggesting 21 at the upper end of the range it was more. 22 MS. ARMSTRONG: I think he's talking about 23 the R410A degradation -- 24 MR. TOUKATLY: R410A degradation. MS. ARMSTRONG: That's on the next couple of **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 4 6

1 slides. We'll get to it. 2 MR. TOUKATLY: Specifically, just R410A 3 degradation as you go up in Btu nominal capacity, the 4 efficiency drops off at a more considerable rate than in this range that was evaluated here. 6 MR. BROOKMAN: Okay. So, additional or 7 perhaps final comments on Slide 18? 8 (No response.) 9 MS. ARMSTRONG: Okay. MR. KINGSBURY: I've got a question. 11 MR. BROOKMAN: Yes. Question, please. 12 Please say your name for the record, Ted. Ted, say 13 your name for the record, please. 14 MR. KINGSBURY: Ted Kingsbury. MR. BROOKMAN: Thank you. 16 MR. KINGSBURY: I have a question, but I'm 17 not sure it's the appropriate spot. 18 MS. ARMSTRONG: That's okay. 19 MR. KINGSBURY: In the detailed summary, 10 CFR Part 431, page 13, it talks about a 2 percent 21 increase. Is that R22 or is that 410A? 22 MS. ARMSTRONG: I'm not sure exactly what 23 you're going -- you're speaking of, so maybe when we 24 take a break you could show it to me and I could try to answer your question, then? **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 4 7

1 MR. BROOKMAN: Would you cite where it is 2 again? 3 MS. ARMSTRONG: And just, without the CFR in 4 front of me, I'm not exactly sure what you're -- MR. BROOKMAN: Let's do -- let's show it at 6 the break. 7 MR. KINGSBURY: DOE expects the price of the 8 high efficiency PTAC and PTHP equipment to be 9 approximately 2 percent higher than the average price of this equipment to date. And I think they're talking 11 about the cost added. The energy efficiency gains will 12 result in lower energy costs. We just have a concern, 13 I guess, that the cost model truly reflects what the 14 new energy standard will require as far as -- MR. BROOKMAN: Ted, will you say again what 16 the cite is? 17 MS. ARMSTRONG: I got it. 18 MR. BROOKMAN: You got it? 19 MS. ARMSTRONG: Yeah. MR. BROOKMAN: Okay. Yeah, Ashley's got it. 21 MS. ARMSTRONG: I would encourage you to look 22 at the manufacturer and cost estimates that are broken 23 down by -- equipment by energy efficiency level. 24 They're presented in Chapter 5 of the TSD. Those are the actual manufacturing costs the cost model **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 4 8

1 estimates. As far as like the capital costs and the 2 conversion costs that you would have to make to your 3 plants and facilities and stuff like that, that's 4 estimated in Chapter 13 of the TSD. So you can look at those and comment on those as well. 6 MR. BROOKMAN: Do we have a copy of the TSD 7 here today? 8 MS. ARMSTRONG: I do have one over there that 9 I can show you at the next break if you'd like to see it. 11 MR. KINGSBURY: I guess at 10,000 the concern 12 is making sure that the life-cycle payback energy 13 savings includes the appropriate cost addition based on 14 the technology options. MS. ARMSTRONG: Okay. 16 MR. KINGSBURY: So, maybe there's a better 17 time to, I guess, drill down on that a little bit. 18 MS. ARMSTRONG: Sure. 19 MR. KINGSBURY: But if the 2 percent really references 410A, then I guess I think it's wrong. 21 MS. ARMSTRONG: Okay. Great. Okay. Well, 22 that will segue right into our next slide. 23 MR. BROOKMAN: Do you have an additional 24 comment? Harvey Sachs. MR. SACHS: Harvey Sachs just with a **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 4 9

1 question. It seems as though this section includes the 2 screening analysis, but I've seen those slides. Am I 3 missing something? 4 MS. ARMSTRONG: No. There's only one slide on the screening analysis, and we talked about the four 6 criteria and then the three technology options -- there 7 are three design options to be considered further. 8 Slide -- I went through it. Slide 14, I 9 believe. MR. BROOKMAN: Did you expect some -- that 11 kind of information? 12 MR. SACHS: I'm sorry. I had a call and I 13 must have been out at that time. 14 MS. ARMSTRONG: Sure. MR. SACHS: I would like to make a comment on 16 that. I'm not sure if this is the right time. 17 MR. BROOKMAN: Go right ahead. Now would be 18 the time. 19 MR. SACHS: This is Harvey Sachs, ACEEE. In light of Mr. Lewis's comments earlier on the other 21 product class about my style, I'm trying to temper my 22 tone. But I guess I'm very much concerned about the 23 rather superficial treatment of the technologies that 24 were screened out. We'll address this in greater detail in our **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 5 0

1 comments, but 4.3.1 is referred to as "scroll 2 compressors." It makes no mention at all of the wide

3 scale availability of small-capacity compressors of 4 rather high efficiency in other product classes. I would refer as two examples to East Asian mini splits, 6 which don't have quite the same volumetric constraints, 7 but I'd also suggest the availability of the inherently 8 variable speed linear compressors used by OG and I 9 believe others by now in refrigerators with roughly the same Btu capacity for the compressors. 11 So we're concerned at the very narrow 12 approach taken to the question of availability of 13 compressors. We think it's quite unfair to the 14 potential for improvement. In terms of higher efficiency fan motors, 16 again we think there have been neglected some of the 17 opportunities. One of the simplest of these might 18 simply be, for single-motor PTHPs, the -- clutch that 19 would -- for PTACs, the -- clutch that would disengage the condenser fan when it's in heating cycle using heat 21 from other sources. That may not be a terribly 22 expensive thing. 23 We're concerned that micro channel heat 24 exchangers were simply written off. This is a very mature technology in automotive -- the dominant **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 5 1

1 technology I believe, in automotive air conditioning, 2 and has achieved wide market share for residential 3 split systems, where it has two singular 4 characteristics that are worthy of mention because of their potential importance. We're not the engineers. 6 The first of these is that it leads to 7 substantial reduction, in the range of 30 percent, in 8 the amount of expensive refrigerant required. The 9 second of these is that volumetric reduction is quite large, again in the range of 30 percent, which is a 11 concern that we've repeatedly heard this morning from 12 manufacturers and read earlier in the analysis. 13 Incidentally, the fact that these are 14 essentially 100 percent aluminum instead of copper has implications for the translation of product cost, since 16 copper is substantially more expensive today than 17 aluminum. 18 So we're very much concerned about the call 19 it level of sophistication that's gone into the analysis in terms of the screened-out options. We will 21 try to treat these in somewhat greater detail in our 22 comments. But we don't think that we're reflecting the 23 potential of improvements using existing technologies 24 that are widely applied in other product classes and important market issues and equivalent competitive **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 5 2

1 pressures. Thank you. 2 MR. BROOKMAN: Thank you. Of course, the 3 Department would appreciate your very specific comments 4 on these matters. MS. ARMSTRONG: Okay? 6 MR. BROOKMAN: Yeah. So now we're -- 7 MS. ARMSTRONG: One more comment. 8 MR. BROOKMAN: Oh, yes. Please. Ted. 9 MR. KINGSBURY: Ted Kingsbury, Goodman. I'd just like to comment on the last comment. It's kind of 11 a question I have, I guess, as far as technology, 12 feasibility, and using design concepts versus keeping 13 them out of the analysis picture. 14 These technologies definitely do exist: ECM motors, variable speed compressors, just as expressed 16 and said. However, basically, those tend to be much 17 more expensive. I'm not going to quote any numbers, 18 but yes, they're available. But I think it would 19 totally change the payback and the cost structure as far as that whole analysis goes. 21 And then the other issue is typically with 22 variable speed you have a different standard per rating 23 of product. What you're doing is you're basically 24 unloading the compressor during -- based on the load that you -- so there are probably -- we would probably **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 5 3

1 have to generate a new ARI 310 or 380 standard for 2 actually rating these products. So I'm not saying it's 3 out there, but I think there's a major, significant 4 cost impact and any implication would be that the rating standards for the product as well would have to 6 change. 7 MR. BROOKMAN: Thank you. Thank you. 8 Harvey? 9 MR. SACHS: This is Harvey Sachs again. Thank you very much. We certainly understand these 11 concerns. I guess one of the gorillas that's not 12 present but staying in the corner is exactly the one 13 you raised, that EER is an appropriate measure of the 14 peak demand impact, which leads to questions of the synchroneity (sic) or lack of synchroneity of the PTAC 16 market demand with that of the commercial sector or the 17 utilities in general. 18 We certainly would be pleased to support 19 participating in efforts to revise the rating method. We've found it unfortunate that potentially important 21 energy-saving technologies that you mentioned, 22 including variable capacity unloading and variable 23 speed fans, are essentially screened out at the 24 beginning because we're only looking at -- we're not looking at all the part load energy ratings. Most **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 5 4

1 equipment is operated most of the time as part load. 2 So we're really very close together there in 3 trying to deal -- play the hand of cards we've been 4 dealt. MR. BROOKMAN: Thank you. Any other comments 6 on this subject? 7 MR. MARKUSZ: I've got one more comment. 8 MR. BROOKMAN: Yes, David. 9 MR. MARKUSZ: David Markusz. I think there's a fundamental difference, too, between the way the 11 commercial equipment is rated or residential equipment 12 is rated under SEER and the way that PTAC is rated 13 under EER and the way things are run. But it's also 14 the way the buildings are and the building loads are set up. If you, you know, look at an analysis of a 16 home versus a commercial hotel, there's going to be 17 different load patterns and load calculations. So you 18 really can't have a comparable setup. I guess that was 19 my comment. MR. SACHS: Harvey Sachs again. David, thank 21 you very much. I certainly am very sensitive to that 22 myself, which is what led to the comments on the main 23 displacement relative to utility piece. 24 I would say I recently, with colleagues, published a paper on our perception of the problems **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 5 5

1 with the residential method as well. So we're equal 2 opportunity critics. 3 (Laughter.) 4 MR. BROOKMAN: Okay. Moving on, then. MS. ARMSTRONG: All right. Next I'll be 6 speaking on the EPA mandated refrigerant phase-out of 7 R22. As I said earlier, DOE -- PTAC and PTHP equipment 8 using R410A that is currently commercially available. 9 Based on research and studies, discussions with manufacturers of both compressors and this equipment, 11 DOE believes that R410A compressors, at least when they 12 first begin to come on the market, will be less 13 efficient than R22 compressors, which will thus 14 translate into overall system efficiency degradation of PTACs and PTHPs. 16 Therefore, for the engineering analysis, and 17 this is carried through the rest of the analyses, DOE 18 is using an overall lower system performance for PTAC 19 and PTHP equipment with R410A. For standard size PTACs and PTHPs with a 9,000 Btu cooling capacity, we use a 21 6.3 percent degradation. For standard size PTACs and 22 PTHPs with a 12,000 cooling capacity, we use a 7.6 23 percent degradation. For nonstandard size PTACs and 24 PTHPs of all cooling capacities we use a 6.8 percent. Some additional concerns that DOE received **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 5 6

1 and noted throughout its research for the engineering 2 analysis were compressor availability in the full range 3 of capacities, the increase in component costs, the 4 increase in heat exchanger and compressor costs, and the timing of the phase-out with the timing of the 6 imminent energy conservation standards. 7 So at this time I'm going to pass the 8 discussion to Doug and get all of you to comment on the 9 potential impact of the refrigerant phase-out on PTAC and PTHP equipment, the industry, and the availability 11 of components that are used in PTAC and PTHP equipment. 12 MR. BROOKMAN: And also the specifics that 13 are in this slide. Please, Scott. 14 MR. TOUKATLY: How much time do you have? (Laughter.) 16 MR. BROOKMAN: We've got time. 17 MR. TOUKATLY: This will be the rest of the 18 day. 19 MR. BROOKMAN: Let's just try and be concise in our comments here. 21 MR. TOUKATLY: Speaking from the nonstandard 22 side, I'm not sure if I agree with the degradation for 23 nonstandard being different than standard. I've got to 24 admit I haven't read through the 228 pages, so I'm sure it's there. So I'll just say I'm not sure if I agree **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 5 7

1 why it would be different. 2 MS. ARMSTRONG: Okay. 3 MR. TOUKATLY: And I would say from before, 4 it's very small picture of the whole PTAC offering. Like I said, once you get up into 15 nominal and 18 6 nominal, I think we're seeing more degradation than 7 that. So it is a concern on the way that the DOE has 8 locked in that 7- to 15- all in the same equation. 9 MR. BROOKMAN: Ashley, can you say why it's different? 11 MS. ARMSTRONG: I can kind of say why it's 12 different. Well -- our data that we received, and it's 13 consistent with -- ASHRAE when they were talking about 14 -- when ASHRAE was considering the continuous maintenance proposal for PTACs and PTHPs. 16 I would say because -- that 6 percent -- 6.8 17 percent is representative of 11,000 Btu/h whereas the 18 6.3 is 9,000 and the 7.6 is 12,000. That could be one 19 reason you're seeing a difference. They are different cooling capacities. 21 MR. BROOKMAN: Karim. 22 MR. AMRANE: Karim Amrane, AHRI. Just to 23 respond to Ashley here, our data from ASHRAE did not 24 specifically single out replacement -- nonstandard versus standard. It was for both. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 5 8

1 MS. ARMSTRONG: It's the capacity. 2 MR. AMRANE: Right. So it's -- degradation. 3 MS. ARMSTRONG: The capacity. 4 MR. BROOKMAN: Okay. Thank you. Scott? MR. TOUKATLY: Scott Toukatly. The only 6 other comment I would make is, I was reading that, and 7 I'm probably jumping probably way ahead, is -- speaking 8 for our company, I think the biggest concern of all the 9 concerns that we're seeing is the issue of raising the bar we think too high for the PTHP. I mean, if you're 11 seeing this kind of degradation, I'm missing the -- 12 well, I shouldn't say I'm missing the logic. I 13 understand where the DOE was going with the -- PTHPs 14 over PTACs. But this is just one more issue that plays 16 into a real concern that a PTHP proposed number can 17 even be reached with any feasible technology to keep 18 costs in line, let alone technology that is out there 19 that may not even meet that proposal in that box size

ever. 21 MR. BROOKMAN: So, Scott, if you can be 22 specific. That is, if you can say what you think is 23 achievable or in your written comments provide that 24 kind of detail, that's what they're looking for. Harvey. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 5 9

1 MR. SACHS: Harvey Sachs, ACEEE. I've just 2 got a small question technically because I'm having a 3 little trouble visualizing a 15- to 18,000 Btu 4 nonstandard PTAC or PTHP. Each time I try, it reminds me of the image of a NASCAR race vehicle trying to 6 breathe through his choke plate. Fundamentally, in 7 these very large sizes developing any kind of air flow 8 across the heat exchangers is an extraordinarily 9 challenging task. So the challenge that I'm inferring is making 11 a 15,000 or 18,000 small choke PTAC at any efficiency 12 level. That's a question. 13 (Laughter.) 14 MR. BROOKMAN: Scott. MR. TOUKATLY: It's probably a good analysis. 16 Certainly, you -- I don't know if you'll want to put 17 this on record -- 10 pounds of you know what in a nine

18 pound bag as you get bigger. But I will say that it 19 doesn't help, you know -- and I'm sure this issue is going to be touched on many times. It doesn't help 21 with the single-speed rotary technology that's out 22 there today, either. As you go up in nominal capacity 23 we're seeing more of a drop-off in rated EER of those 24 compressors. So that doesn't help. But yeah, I mean, it's the same box, if you **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 6 0

1 will, that you have a seven- and a nine- or a 12- in. 2 If you're starting to put in bigger coil surfaces, you 3 have to weigh that with the air flow issue. It can 4 also be a consumer problem for sound level and things like that. So you have to balance. You know, is a 6 consumer even going to be happy with a product even if 7 it meets an efficiency. What does it sound like if you 8 have to raise the air and you're breathing through that 9 small opening. MR. SACHS: I'm speaking as a hotel occupant 11 who is trying to sleep through some PTACs. 12 MR. BROOKMAN: That was Harvey Sachs, yes. 13 MR. SACHS: I want to -- 14 MR. BROOKMAN: Continuing, Harvey Sachs. MR. SACHS: Harvey Sachs, ACEEE. I just want 16 to read a statement -- it's very short -- from page 5

- 17 42 of the TSD. "DOE also found that residential 18 central air conditioning manufacturers were able to 19 develop technologies and redesign their equipment so that the R22 phase-out has little effect in system 21 efficiency when the equipment eventually came into the 22 market." 23 Now, to me, the logical implication of this 24 statement is that you may want to set an initial reduced stringency standard for the first few years to **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 6 1

1 allow that learning to happen. And we've made a fairly 2 large point of available technologies that are -- just 3 happen not to be used in this class of equipment. 4 But what I miss from this is a stepped standard that would simply say three years after we are 6 increasing the stringency; that is, removing the 7 degradated efficiency that was allowed for as part of 8 this refrigerant change-out. That of course is a 9 market and design challenge for each of the firms. Do they want to do a single redesign or two redesigns. 11 I don't have an answer, but I am struck by 12 the lack of that option in this analysis. 13 MR. BROOKMAN: Okay. Thank you. Other 14 comments? Yes, Karim. MR. AMRANE: Karim Amrane, AHRI. I think 16 what Harvey is suggesting is a good idea. I mean, what 17 we have heard of within the ASHRAE 90.1 committee when 18 Steve Nadel came to the committee with the proposal on 19 PTACs was to wait and see, to go with the ASHRAE 90.1 levels as we have them today, and then to reevaluate 21 the situation after the phase-out of R22 because there 22 are a great deal of unknowns for -- treatment. 23 Contrary to what you did with central air 24 where you had R410A units on the market since 1995 or 1996, five, six years, seven years before the final **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 6 2

1 rule was even published, we are here two years before 2 the phase-out date of R22 and there is not a single 3 R410A PTAC on the market. 4 I guess I have a fundamental issue with that because of how DOE has approached this rulemaking with 6 respect to what's technologically feasible here. You 7 are basically basing all this analysis on a theoretical 8 analysis and saying, well, you know, we -- with R22, we 9 know the -- is going to be phased out by 2012 when the standard will become effective, but we're going to use 11 a degradation factor and base our max tech on that, 12 base our technology feasibility on that. 13 I have a fundamental problem with that. I 14 think legally DOE, in my opinion, cannot go forward with a rulemaking without making sure there are 16 products available that can meet that efficiency level. 17 Today all of us around this table cannot say yes. The 18 gentleman from GE was supporting this rulemaking, and 19 my understanding is -- manufacturer of PTACs. So again, I have a fundamental problem with 21 that. And I'm not sure -- our proposal has been, and 22 always has been, adopt ASHRAE 90.l, move along. At 23 least you would have -- we could -- a big improvement 24 over what we have currently in the federal regulation. Then come back two or three years after the phase-out **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 6 3

1 happens and -- new product. 2 ASHRAE 90.1 is already documented. It's 3 being -- on a daily basis -- not a daily basis but all 4 the time. We've committed an industry to revisit the issue after the three years are up and we will have 6 more data to understand the situation of 410A. 7 And again, to our surprise -- direction, we 8 are basically guessing. We believe -- but show us that 9 we can meet that level today. I don't think we have the answer. Nobody knows. 11 MR. BROOKMAN: Thank you. 12 MR. TOUKATLY: Scott Toukatly. 13 MR. BROOKMAN: Yes. Go ahead. 14 MR. RAVA: -- raise the level with the technology right now, it's -- not saying that we have a 16 problem with R410A -- 17 MR. BROOKMAN: Thank you. Scott. 18 MR. TOUKATLY: I was just going to piggyback 19 on one of the other things that Harvey mentioned, is this -- right now if we go forward -- so, obviously we 21 agree with Karim's statements. Going forward right now 22 has been a two steps forward, one step back approach. 23 At our company, we're not quite sure how to skin the 24 cat because of this issue of the technology that's there and these proposed numbers. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 6 4

1 The problem that we're having is, do all we 2 do is change the refrigerant in complying for 2010 and 3 hope and pray that technology gets better -- reasonable 4 cost technology I should qualify -- for the 2012 implementation, or do we try to bite the bullet now and 6 go all the way to try to move the NOPR numbers, and 7 it's just that. They're NOPR numbers. For the next 8 four or five months that's all they are. 9 So we're in a tough spot right now because we don't know if these numbers are going to stick. We 11 have a big problems -- we have problems with the 12 numbers again, especially the PTHP level. So I think 13 we're in a bind where if this goes forward all we can 14 do is meet the refrigerant compliance issue of 2010 and then hope for reasonable cost technology to come on 16 board in the following two and a half years. 17 MR. BROOKMAN: Thanks for that description. 18 Harvey Sachs. 19 MR. SACHS: Thanks, Scott. I certainly appreciate the shoes you're wearing and I'm not. But 21 the colloquy between Karim and Jim reminded me of 22 another option that has not entered the screening and 23 surprised me. As I was getting ready for this meeting, 24 I happened to grab a cut sheet from one manufacturer in the room, and the cut sheet suggested very strongly, at **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 6 5

1 least -- unit, which is capped to the expansion -- from 2 that element of a cut sheet I inferred that some people 3 are using feedback-controlled metering devices such as 4 TXVs. Now, the reason I bring that up now is that 6 it actually costs money. But it's my understanding, as 7 a non-designer of this equipment, that a TXV also 8 allows you much better control of your metering at your 9 hottest conditions. So you don't have to oversize the evaporator as much to preclude the possibility of 11 liquid slugging. 12 So given that a TXV would seem to be on the 13 market, from the language in that cut sheet -- I don't 14 know that for a fact -- and given that this is a technology that offers some tradeoffs lead to greater 16 compactness and to some saving of money in the heat 17 exchanger, it's really surprising that it wasn't even 18 screened out and just wasn't considered. 19 I bring that to the attention of the group because it seems to be an example of why we use the 21 technology. One, it's widely used in the 410A and it 22 works well, to the best of my understanding, and this 23 is something that would have reasonably expected to 24 have been included in the analysis. MR. BROOKMAN: Okay. Thank you, thank you. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 6 6

1 MR. BENZ: Jim Benz from GE. Two points. 2 One, it's actually my understanding that a 410A product 3 is on the market in the United States right now in a 4 PTAC. So that's something people might want to take a look at. 6 Second, with respect to whether we are 7 dealing with theory, General Electric doesn't make 8 commitments that they don't have certainty that will be 9 met. We are far enough on the design phase, and most of the people in this room should be far enough on the 11 design phase, of a 410 product to know what the 12 capabilities are. Although we haven't completed design 13 phase of every single model, we have completed the 14 design phase on the vast majority of models and we will be able to meet the standard recommended by the DOE. 16 MR. BROOKMAN: Thank you for that comment. 17 Additional comments on the issues associated with Slide 18 19? 19 (No response.) MR. BROOKMAN: Okay. 21 MS. ARMSTRONG: All right. Last but not 22 least for engineering, DOE also performed an analysis 23 to determine the heating efficiency COP as it 24 corresponds to the cooling efficiency EER analyzed. DOE reviewed the AHRI Product Directory. Basically, **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 6 7

1 DOE graphed each EER versus COP and calculated the 2 minimum, maximum, and average COPs. The tables on the 3 slide show the EER and COP pairing that DOE is using 4 for this analysis. These represent average pairings for the given EER ranges in the cooling capacities that 6 we analyzed. 7 Now DOE invites comments on these EER and COP 8 pairings for PTHPs based on the current AHRI Product 9 Directory information. MR. BROOKMAN: So you can see all kinds of 11 specific information in that table. DOE would really 12 appreciate your comments on the specifics. Scott? 13 MR. TOUKATLY: I'm sorry. 14 MR. BROOKMAN: Not at all. Francine Pinto. MS. PINTO: Francine Pinto, DOE. I just want 16 a clarification. Jim, the last statement you made, was 17 that referring just to standard size? 18 MR. BENZ: Yes. 19 MS. PINTO: Okay. I just wanted to make sure that the record was really clear. 21 MR. BENZ: We're not in the nonstandard 22 business, and I have few comments other than the one I 23 made. 24 MS. PINTO: And Karim, just as a clarification to your point about the hypothetical **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 6 8

1 nature of being able to meet the standard, could you 2 just address Jim's comment on that? Are you saying 3 that for both standard and nonstandard, with the 4 transition to 410A, you don't know -- MR. AMRANE: Again, let me make clear here -- 6 Karim Amrane with AHRI. GE is not a member of AHRI, so 7 I'm not speaking for GE here. I'm speaking for some of 8 the manufacturers at this table who make both standard 9 and nonstandard equipment. And the feedback I'm getting from the manufacturers is that they don't -- 11 they're not sure right now whether those levels can be 12 met with the 410A. 13 MR. BROOKMAN: For both. 14 MR. AMRANE: For both, yes. MS. PINTO: Okay. I just wanted to be clear. 16 MR. TOUKATLY: Scott Toukatly. Certainly, 17 the comment that Jim made is -- you know, he's right. 18 I mean, manufacturers have seen this coming and we need 19 to be along in the process of not talking theoretical. We're not through the whole process of evaluating our 21 products, but we have been and we are generating our 22 own data. Two years ago, yeah, it was theoretical. 23 We're gathering our own data now. 24 That doesn't mean we don't have concerns meeting these numbers now that we're actually seeing it **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 6 9

1 in real life in our own labs. 2 So, yes, we as manufacturers need to be 3 responsible. We saw this coming. We were tight a 4 little bit, at least our company, because we're not as vertically integrated as some, on waiting for 6 compressors to be available, let alone efficient, just 7 to be available. So, for the North American market, I 8 guess I should say. 410A 60 hertz for the North 9 American market for a product like this. I had my head turned. I don't know if the 11 question was on this slide or not and what our thoughts 12 were. 13 MR. BROOKMAN: Yes. 14 MR. TOUKATLY: Was that -- MR. BROOKMAN: That's -- we're looking at 16 Slide 20 and particularly comments on EER and COP 17 pairings ratings. 18 MR. TOUKATLY: I was speaking here. We were 19 a little curious. Neither one of our companies on the nonstandard side have any equipment that's listed at 21 those numbers at the higher end, the 10.7 EER and 11.4 22 EER. We're pretty sure where they're coming from, and 23 leave it to say we have serious concerns that those are 24 real numbers or just printed numbers. Real concern because we feel we know where they came from. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 7 0

1 MR. BROOKMAN: I see. Okay. 2 MR. TOUKATLY: So, all I want to say is it's 3 easy to print numbers. 4 MR. BROOKMAN: Karim. MR. AMRANE: Karim Amrane, AHRI. Actually, 6 there's nothing wrong, but actually, I would like to 7 make sure. She's stating on this slide that the data 8 is coming from the AHRI Directory. I'm not so sure on 9 the nonstandard size that they're really coming from the AHRI Directory. 11 MR. BROOKMAN: Okay, okay. I'm wondering if 12 any -- 13 MR. AMRANE: They're probably not coming from 14 the AHRI Directory. So that's why we need to confirm that. 16 MR. BROOKMAN: And particularly the same ones 17 that Scott noted? 18 MR. TOUKATLY: Yeah, I can -- Scott Toukatly. 19 I can only speak for our company. If McQuay would like to speak to theirselves (sic.) I know that we do 21 have products listed. It's not in the AHRI Directory 22 because we don't participate in the cert program. But 23 we do list product and we stand behind it at 10 EER for 24 existing R22 product. MR. BROOKMAN: But not 10.7 or 11.4. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 7 1

1 MR. TOUKATLY: Not at all, not at all. 2 MR. BROOKMAN: Okay. 3 MR. TOUKATLY: We don't see it achievable 4 even in R22 and nonstandard. MR. BROOKMAN: 6 MS. ARMSTRONG: 7 MR. BROOKMAN: 8 briefly -- 9 MS. ARMSTRONG: MR. BROOKMAN: 11 (Laughter.) So, Ashley? Yes? While you were out of the room

Okay. Come back up here.

12 MR. SACHS: Your character was assassinated. 13 MS. ARMSTRONG: Oh, no, that's not very nice. 14 MR. BROOKMAN: Scott raises the question, and so does Karim, about the lower two cells on the right

16 hand side of your matrix, the EER 10.7 and EER 11.4, 17 whether those were -- how you got that information, 18 whether those were numbers that you obtained or whether 19 there was actual data for them, or something like that. MS. ARMSTRONG: They're all numbers from the 21 product directory. All of these. 22 MR. BROOKMAN: Karim. 23 MR. AMRANE: Again, Karim Amrane. Again, we 24 don't identify in our directory which is replacement versus -- nonstandard versus standard. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 7 2

1 MS. ARMSTRONG: So it would be our -- 2 MR. AMRANE: So we saw it coming from -- 3 probably not from the directory. So, I'm not sure. 4 MS. ARMSTRONG: Let's say DOE's interpretation of the directory, based on what we 6 considered to fall within nonstandard and standard size 7 classes. 8 MR. BROOKMAN: And then Scott's comment while 9 you were gone was that he has a unit at 10.0 but he really questions 10.7 or 11.4, the feasibility of that. 11 MS. ARMSTRONG: Okay. 12 MR. BROOKMAN: Is that fair? 13 MR. TOUKATLY: Definitely. 14 MR. BROOKMAN: Anybody else wish to comment on this issue? We're trying to -- it's very useful for 16 the Department, if you think it's not possible, if it's 17 not viable, to suggest these levels, 10.7 and 11.4. 18 They'd really like to know it now. 19 (No response.) MR. BROOKMAN: No additional comment? Okay. 21 Okay. So then, now we're moving from -- yes, 22 please. Ted. 23 MR. KINGSBURY: Probably at the risk of being 24 repetitive, just, I guess, agreeing with Karim's comment. I mean, like Scott, we have data, test data, **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 7 3

1 and yes, the technology exists to get there in 2010, 2 but 2012 is more of a question mark. Once again, it's 3 whether the cost payback analysis being done today is 4 going to make sense for 2010 also and then 2012. 2010 is here, so basically what the industry 6 has to utilize is pretty much current technologies. 7 And once again, going to more efficient rotaries, 8 basically I think we're already using more efficient 9 rotaries. Then the options become the other two or three, which is more surface, maybe more air, which 11 would be detrimental to the sound, but that's all got 12 to be factored into the equation. 13 But I just want to, maybe, reemphasize a 14 point that's already been emphasized and we need to move on, but I support, I guess, a two-stage approach. 16 And -- 17 MR. BROOKMAN: Two-stage being that one stage 18 for a certain amount of time and then another one 19 phases in? MR. KINGSBURY: A couple issues here. Once 21 again, some of these points have been made. The larger 22 you get, the less options you have because basically, 23 with a fixed sampling, your larger sizes are already 24 using larger heat exchangers, not necessarily in face area but -- and for things like that. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 7 4

1 So some of the -- part of the technology 2 assessment talked about going from one row to two rows. 3 Most of the product line already has gone two-row in 4 R22. So, not to get into that detail. Once again, it's understanding what the technology options are and 6 making sure that the right cost factors have been 7 applied in generating whatever that -- if that 2 8 percent was a cost added or system cost added. 9 MR. BROOKMAN: There's going to be much more detailed information on the cost side here as we move 11 along during the day. 12 MR. KINGSBURY: Okay. 13 MR. BROOKMAN: Okay. Francine Pinto. 14 MS. PINTO: Yeah, Francine Pinto again. I just want to make a comment off of your comment about 16 we want specific information now. This is primarily 17 for the new people. Once DOE sets a standard, there is 18 a legal provision that says we cannot reduce the 19 standard in the future, and that is discussed in the NOPR. It's called anti-backsliding. 21 So that's why it's very important that you 22 give us the correct information during the comment 23 period, that you clearly distinguish between standard 24 and nonstandard so we know exactly what you're saying, and so we can take all those comments into account. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 7 5

1 Thank you. 2 MR. BROOKMAN: Thank you. Okay. So then, no 3 additional comments on this matrix on Slide 20, EER and 4 COP? (No response.) 6 MR. BROOKMAN: We started at nine. It's now 7 10:40. Do you want to take a break now? Let's take a 8 short break now. Let's take a 15-minute break. So 9 that means we will resume at 10:55. And thanks for a good start on the day. 11 (Brief recess.) 12 MR. BROOKMAN: Sometimes at the break 13 discussion in the hallway causes some additional issues 14 to be raised that were -- so that people might wish to make an additional statement when they return. I 16 wanted to provide that opportunity now in case anybody 17 wishes to double back before we proceed. 18 MS. PINTO: That would include clarifications 19 that people came to. That would be nice to have on the record. 21 MR. BROOKMAN: So, Francine, thank you. We 22 also seek clarifications, if any of them are 23 forthcoming at this time. 24 MR. SACHS: I volunteer Karim and me not to comment again. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 7 6

1 (Laughter.) 2 MR. BROOKMAN: I thought the two of you 3 covered it adequately. 4 (Laughter.) MR. BROOKMAN: Okay. So then, seeing no 6 additional comments at this time based on what we've 7 covered already then, yes? Okay. Then we're fortunate 8 to have with us Bing Liu. 9 Energy Use Analysis and Life-Cycle Cost Analysis Bing Liu 11 (PowerPoint presentation.) 12 MS. LIU: Welcome back, everyone. Can you 13 hear me clearly? Okay. My name is Bing Liu from 14 Pacific Northwest National Laboratory. In conjunction with my colleague Mike Scott, we're presenting the 16 Life-Cycle Cost Analysis section, which we provided for 17 this rulemaking analysis. 18 As you can see, it looks that in this chart 19 we're going to cover three different analyses. We're going to talk about markups. These are distribution 21 channel markups to determine equipment price to the 22 customer. And we're going to be talking about the 23 energy use analysis. 24 And to bring all this together, we're going to be discussing the life-cycle cost analysis, **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 7 7

1 including the life-cycle cost savings and the payback 2 period. 3 To start off, DOE conducted an energy yield 4 analysis. The purpose of this analysis is to assess the energy saving potential of PTAC and PTHP equipment 6 at different efficiency levels. 7 DOE understands the equipment price of the 8 PTACs and the PTHPs depends on the distribution channel 9 and the customer use who purchases the equipment. So DOE used the markup analysis to determine the equipment 11 price to a customer. In this particular analysis, DOE 12 first identified the typical supply chains for PTACs 13 and PTHPs. Then DOE further determines the customer's 14 price by applying multipliers to the manufacturer selling prices. DOE developed the multipliers for both 16 their baseline and the higher efficiency equipment. 17 DOE conducted the life-cycle and the payback 18 period analysis to estimate the economic impact of 19 potential standards on individual customers of PTACs and PTHPs. The purpose of the life-cycle cost analysis 21 is to calculate the change in customer life-cycle cost 22 likely to result from higher efficiency levels as 23 compared with the baseline efficiency levels. DOE also 24 calculates the payback period. In the next two slides I will present the **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 7 8

1 approach and the summaries as part of the energy use 2 analysis. PTACs and the PTHP units generally are used 3 in hotel/motel rooms, assisted living homes, small 4 offices, and other applications that require individual room or zone heating/cooling control. Actually, we're 6 looking at -- Worldwide Analysis report. This report 7 indicates the majority of the PTAC and the PTHP 8 equipment is actually used in the hotel/motel building 9 types. Therefore, based on this study report, DOE decided to take the hotel/motel as their representative 11 building types to conduct their energy use analysis. 12 DOE used a whole building simulation tool 13 named as DOE-2.1E to estimate the energy use of PTACs 14 and PTHPs. The whole building energy simulation model took into account the effect of local weather 16 envelopes, lighting, occupancy, load, et cetera, on the 17 impact of the space heating and cooling. The energy 18 simulations provided hourly energy end use in the hotel 19 prototype buildings, including lighting, load, fan, space cooling, and heating. 21 DOE focused on the energy use analysis for 22 six representative equipment classes as the proposed 23 baseline efficiency levels and the five higher 24 efficiency levels in the different climate locations within the United States. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 7 9

1 Finally, DOE calculated the weighted average 2 energy use of PTAC and PTHP units within each state. 3 We further aggregated the energy use at a state level 4 to national average energy use using the U.S. census population data. 6 These slides provide a summary of the energy 7 use analysis results. As mentioned in the previous 8 slides, DOE calculated the energy consumption for 9 representative hotel buildings in diverse climate locations. DOE further validated this energy use 11 estimate by comparing it with the data from the Energy 12 Information Administration's Commercial Building Energy 13 Consumption Survey in 2003. 14 The validation showed the estimated data from the simulation were very close to the real survey data 16 for the energy use in the hotel/motel buildings. 17 In the next two paragraphs, as you look at 18 it, are very brief summaries of the range of the energy 19 savings compared between the baseline efficiency levels with the maximum efficiency levels. We call that "max 21 tech." For this comparison, for packaged terminal air 22 conditioning units, the energy we're looking at is 23 including the cooling energy and the fan energy. But 24 for the packaged terminal heat pumps, the energy we're looking at is including cooling, heating, and fan **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 8 0

1 energy uses. 2 For the PTAC units, the range of the energy 3 savings between the baseline and the maximum efficiency 4 levels is from 7.9 percent for standard size, 9,000 Btu/h to 12.2 percent for nonstandard size equipment. 6 For the PTHP, the range of the savings is 7 from 8.4 percent for 9,000 Btu/h standard size 8 equipment to 10.8 percent for nonstandard size heat 9 pump units. That's going to end the brief presentation on 11 energy use analysis. All the detailed methodologies 12 and analysis actually can be found in the NOPR notice 13 and the Technical Support Document, Number 7. 14 At this point I will turn over the presentation to my colleague, Mike Scott, who will 16 discuss the markups and the life-cycle cost analysis. 17 MR. SACHS: Can we have questions now? 18 MR. BROOKMAN: Well, I guess, yes. Let's do 19 that. Questions or comments on these first two bulleted points before Mike takes over at the podium? 21 Harvey Sachs. 22 MR. SACHS: Harvey Sachs, ACEEE. With 23 respect to Slide 24, Bullet 2, how did we treat the 24 heating energy that would be required in association with a PTAC? Was it assumed that this should be **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 8 1

1 ignored? Were you using the fan energy that would be 2 required during heating cycle, whether that was 3 provided by resistive hot water loop or other? How 4 were you treating the heating side on a PTAC and, for that matter, the resistive energy that might be 6 required in PTHP during very cold outdoor conditions? 7 MS. LIU: Bing Liu. I think I can answer 8 your questions. For PTACs, we also, through other 9 related research and the data and the status, it's showing a majority of the PTACs for the heating part 11 using electrical resistance for heating. 12 So the technology of design options has been 13 evaluated in order to look at the different efficiency 14 levels and have nothing to do on the heating part of the PTAC. That's why the annual energy savings for a 16 PTAC is only impacted on the cooling energy. But for 17 the heat pumps, because we know the heat pumps are both 18 running at a cooling mode and a heating mode, and if 19 you have higher efficiency levels in EER or COP, that impacts on both on your cooling and heating energy use. 21 That's why for PTHP we included the annual energy use 22 and the savings for both cooling and heating. 23 MR. SACHS: Thank you. I think we'll have to 24 go offline. MR. BROOKMAN: Okay. Thank you, Harvey. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 8 2

1 MS. LIU: Sure. 2 MR. BROOKMAN: Thank you. Additional 3 questions on the first two bulleted points on Slide 24? 4 MR. MARKUSZ: Could we go back to questions on the approach? 6 MR. BROOKMAN: Sure. Yes. David. 7 MR. MARKUSZ: David Markusz. I had two 8 questions. One is, when you looked at the approach did 9 you look at standard sleeves versus nonstandard installations, or was it just one approach overall? 11 MS. LIU: Bing Liu, PNNL. I'll wait for two 12 questions. Dave, you mentioned you have two questions. 13 MR. MARKUSZ: Okay. The second question. 14 For the building, you said you used energy simulation on a hotel/motel type building, right? And then you 16 set up some envelope assumptions, right? 17 MS. LIU: Yes. 18 MR. MARKUSZ: And that's based on some type 19 of standard or documentation? MS. LIU: Bing Liu, PNNL. I can address your 21 question. Your first question is about the -- oh, 22 maybe I'll address your second question first. 23 MR. MARKUSZ: Okay. 24 MS. LIU: Your second question is where are the assumptions coming from because we all know the **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 8 3

1 annual load of lighting or plaque load all have an 2 impact on your load of the equipment itself. So the 3 assumptions are really coming from the CBECS data 4 survey for the hotels and motels. They clearly tell you for the hotel/motel buildings served across the 6 country what is the most dominant construction type, 7 what is the window-to-wall ratio, very detailed. We 8 actually document each of the key input assumptions for 9 modeling in TSD Chapter Number 7. So if you have a special question or comment, 11 you are welcome to comment on that for us to improve 12 our -- update our analysis when we proceed. 13 MR. MARKUSZ: Okay. 14 MR. BROOKMAN: That's the CBECS data. MS. LIU: Yes. 16 MR. BROOKMAN: Okay. 17 MR. MARKUSZ: Right. Okay. 18 MR. BROOKMAN: Okay. 19 MS. LIU: I apologize. I forgot your first question. 21 MR. MARKUSZ: And for the analysis, because 22 we don't -- Carrier doesn't work in nonstandard, but 23 there could be different applications for each, and I 24 didn't know if there was any -- MS. LIU: Yes. Actually, for the whole -- in **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 8 4

1 order to gather the potential energy savings estimates, 2 we actually looked at both the standards and the 3 nonstandards. For standard size equipment, we're 4 looking at 9,000 and 12,000 Btu/h capacities at PTAP and PTHP. For nonstandard size equipment, we're 6 looking at both air conditioners and heat pumps but 7 only at 11,000 Btu/h. So it's really in line with what 8 has been done for the engineering analysis for all 9 these representative equipment classes. MR. BROOKMAN: Karim, go ahead. 11 MR. AMRANE: Karim Amrane, AHRI. I guess, to 12 follow what Dave was just saying, some of the 13 nonstandard size equipment is not used in motels or 14 hotels. I guess, did you look at that segment of the industry that's not typically used in motel 16 applications? 17 MS. LIU: No. Bing Liu, PNNL. The only 18 building type we were looking at is the hotel/motel 19 buildings. But what we found unique of this product is because it serves individual rooms, with the only 21 exception of if your room is operating totally 22 different -- it's more like a residential space, right, 23 for -- even you're looking at a nursing home, you know, 24 it's the same load pattern as we see. So if you have some other suggestions for nonstandard equipment, we **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 8 5

1 can take that into consideration. 2 MR. AMRANE: Okay. 3 MR. BROOKMAN: Okay. Thank you, David. 4 Thank you, Karim. Okay. Other questions on the approach slide 6 and also the results, the first two bullets on 24, 7 before we turn it over to Mike? 8 (No response.) 9 MR. BROOKMAN: Okay. Michael. Presentation by Michael Scott 11 (PowerPoint presentation.) 12 MR. SCOTT: Good morning. I'm Mike Scott. I 13 worked on a couple of items that we're going to be 14 talking about here. I'll be talking both about the markups, which are found in Chapter 6 in the TSD and 16 described briefly in the NOPR, and also the life-cycle 17 cost analysis in Chapter 8. 18 So, first, to the markups, I have two slides 19 on that. One describes the distribution channels and one describes the basis for the markups. We had some 21 information on the distribution channels on the pattern 22 of distribution of the equipment that we're dealing 23 with in this rulemaking. There was, in particular, a 24 market study that was done in 2001 by Drucker Industrial Standards. It describes the market and **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 8 6

1 provides information on what the distribution channels 2 actually are. 3 From that information we were able to develop 4 four primary channels. One is the equipment that's sold directly from manufacturer to a customer, usually 6 a very large one, on a national account. The second 7 channel goes through a wholesaler distributor. Some of 8 that equipment is sold directly to the customer. Some 9 of the equipment passes either through a mechanical contractor and then to the ultimate customer, and some 11 of it actually passes through the mechanical contractor 12 but that mechanical contractor is working with a 13 general contractor. 14 The information that we had suggested that there really was a separate set of patterns in the 16 replacement market as opposed to the new construction 17 market. When we say "replacement," we mean both 18 standard and nonstandard equipment, not the old ASHRAE 19 definition. But all of the nonstandard equipment goes, in 21 our analysis, to the replacement market only, okay? 22 Are we clear on that? So the percentages, then, for 23 the replacement market are about 15 percent national 24 account, 25 percent wholesaler directly, 60 percent mechanical contractor directly, and actually, nothing **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 8 7

1 going to a general contractor. 2 For new construction, 30 percent national 3 account, nothing directly from wholesaler, 38 percent 4 mechanical contractor, and 32 percent through a general contractor. So those are the patterns that we believe 6 best describe the market. 7 The markups themselves came from a number of 8 sources. We were able to find firm balance sheet 9 averages from the Heating, Air Conditioning, and Refrigeration Distributors International. They had a 11 2005 Profit Planning Report that gave us information on 12 the balance sheets of the wholesaler distributors. 13 For the mechanical contractors we used two 14 sources: the U.S. Census Bureau financial data on plumbing, heating, and air conditioning contractors 16 from the 2002 census, and then we also had information 17 from the Air Conditioning Contractors of America 18 financial analysis data for 2005. We used those two 19 together because some of the equipment we only had partial data from one source or the other, so we 21 blended them. All that detail is in Chapter 6. 22 For the general contractors, we used 23 financial data for commercial and institutional 24 building contractors from the 2002 census. In each case, that's the most recent information available. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 8 8

1 There was about a 20 percent to 80 percent 2 split of equipment between new construction and the 3 replacement market for the standard size equipment. Of 4 course the nonstandard size equipment all goes to the replacement market. 6 The outputs that we got were weighted average 7 baseline markups, and replacement markups separately, 8 for baseline efficiency equipment and then also, 9 because some of the components of cost don't scale with efficiency -- that is, they're the same regardless of 11 the efficiency of the equipment -- we also provided 12 incremental markups. Those are baseline -- both 13 baseline and the incremental markups are weighted 14 averages based on the distribution channels that I just described. 16 If there are questions or clarification, that 17 might be a good place to stop. Then I'll go to the 18 life-cycle cost analysis. 19 MR. BROOKMAN: Okay. Questions on distribution channels and the markups to determine 21 price? 22 (No response.) 23 MR. BROOKMAN: Comments on those two slides 24 before he moves on? (No response.) **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 8 9

1 MR. BROOKMAN: I see none on those. 2 MR. SCOTT: All right. We'll move on. 3 Okay. For the life-cycle cost analysis, I 4 have a summary slide here that I'll go through briefly. I've got one on the process, two on the inputs, and 6 then one that describes some of the outputs. All of 7 this is in Chapter 8, and there's a related appendix as 8 well. So there's a great deal of detail provided 9 there. We don't have time to go through it all this morning, but I'll give you a 10,000-foot view of the 11 whole thing. 12 All right. Life-cycle cost in this analysis 13 equals the customer price, which is the manufacturer's 14 cost -- manufacturer's price rather, plus the markups that I just described, plus the installation cost, and 16 I'll be going over that in a moment. And then, besides 17 the initial price, the initial customer price, we have 18 the sum of annual operating costs appropriately 19 discounted to the present, which in this case we consider to be the first year in which the equipment 21 would be in the marketplace, 2012. 22 We do the economic evaluation from the 23 customer perspective. We did the analysis in an Excel 24 spreadsheet model. Because we were asked to do uncertainty analysis with that spreadsheet model, we **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 9 0

1 have -- we do it inside of -- and you'll see this in 2 Chapter 8 -- we do it inside of a package called 3 Cristal Ball, which is a commercial add-on to the Excel 4 spreadsheet. The spreadsheet itself is available out on 6 the website for this rulemaking, and you can exercise 7 it yourself. We don't provide Cristal Ball out there, 8 but the Excel spreadsheet works perfectly well without 9 it. You can do any sensitivity analysis you wish with that spreadsheet. 11 The results from the analysis are expressed 12 as life-cycle cost savings, which would be the 13 difference in life-cycle cost between the baseline 14 level and the presumably lower, if it's a savings, cost associated with a standard level. We also calculated a 16 simple payback period because some people like to look 17 at that as a figure of merit. 18 Briefly, this is the way the life-cycle cost 19 calculation works. There are essentially two elements: the calculation of the total installed cost and the 21 calculation of the lifetime operating cost. In the 22 upper left-hand corner there, you'll see that we take 23 the baseline manufacturer's price and the 24 manufacturer's prices at each of the standard levels basically as calculated in the analysis that was **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 9 1

1 presented this morning by Ashley. 2 From that we -- to that we add the markups 3 for the equipment price, the distributor markup if 4 appropriate -- and it usually is -- the mechanical contractor markup, and I would add the general 6 contractor markup, and also sales taxes. Of course, 7 those sales taxes vary by state, so the analysis, when 8 we did the full analysis, was actually done at the 9 state level. Those two things together are the customer 11 price. To that we add an installation cost, which we 12 were able to obtain, and I'll discuss that in a moment. 13 That gives us a total installed cost. 14 Down below, we take energy consumption from the energy use analysis, which Bing just described, and 16 against that energy uses or that electricity use we 17 apply electricity prices, and I'll discuss those in a 18 moment. Together that's an annual energy expense. To 19 that we add repair cost estimate and an estimate of maintenance cost, and that gives us annual operating 21 expense. 22 We spread the annual operating expense, or 23 rather halve the annual operating expense for each year 24 in the lifetime of the equipment. The equipment lifetime we calculated as an average of 10 years, but **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 9 2

1 we actually have a distribution for that. The minimum 2 is about three years, the maximum about 20 years. 3 We apply a discount rate to each of the 4 future values, bring it back to 2012. Each of those years with the electricity prices changing, we apply an 6 electricity price trend over time to take that into 7 account. And the present value of all that is the 8 lifetime operating expense. 9 The total installed cost plus the lifetime operating expense are the life-cycle costs of that 11 equipment. The ratio between the total installed cost 12 and the annual operating expense is the payback period. 13 Okay. Now to some of the inputs. The life

14 cycle cost analysis, as I just described it, was based on a state-by-state average electricity price for the 16 commercial sector paid by, as we calculated, four 17 business types that use PTAC and PTHP equipment. 18 That's large hotel/motel chains, independent 19 hotel/motels, nursing homes and assisted care facilities, and small offices, which you can think of 21 as things like dentists' offices and physicians' 22 offices, mostly in the healthcare sector. 23 The electricity prices by business types were 24 developed by taking the commercial prices and developing a ratio of the average price to each of **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 9 3

1 those four building types as it appears in the 2003 2 Commercial Building Energy Conservation Survey by the 3 business type. We applied those ratios then against 4 the state-by-state average commercial sector prices to obtain the appropriate price by business type. 6 We calculated those average commercial 7 electricity prices, obtained the data on that from the 8 Energy Information Administration for 2006, which was 9 the most recent data available, to obtain state-by

state electricity prices by business type. The state

11 by-state prices by business type were projected then to 12 2012 using the EIA Annual Energy Outlook 2007 National 13 Commercial Electricity Price Trends. 14 Now, all of those price data have since been updated, so in the final rule analysis we'll use the 16 latest EIA data and the AEO 2008 forecast. I haven't 17 actually checked this morning, but allegedly that was 18 available by the end of April. 19 MR. BROOKMAN: Harvey Sachs. MR. SCOTT: Question? 21 MR. SACHS: Harvey Sachs, ACEEE. I did some 22 word searches through the chapter and thereby admit 23 that I haven't read it in detail as some of my 24 colleagues. MR. SCOTT: Okay. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 9 4

1 MR. SACHS: What I don't get is any sense 2 that you actually looked at demand charges as opposed 3 to energy charges or simply used a rolled-in average of 4 demand in energy in the average energy cost. MR. SCOTT: We used the rolled-in average. 6 MR. SACHS: I would respectfully suggest that 7 for many states recent information suggests that the 8 decoupling of demand in energy is proceeding, that 9 demand is an increasingly large fraction of cost, and that trend will continue. Most recently, we have 11 information from Tennessee Valley Authority of an 12 extraordinary capacity shortfall projected within a few 13 years. 14 For these reasons and the fact that EIA's own forecasts have changed by typically 20 percent each 16 year, we're very concerned about the way that you're 17 treating demand. I don't have a fix for you, but I 18 think it's important for all of us to remember that if 19 the cost of a kilowatt demand reduction is X, the cost of a kilowatt demand of supply, however few hours it is 21 utilized, is in the range of $1,000 now and frequently 22 much more, even CTs, by the time you consider 23 reinforcement. 24 It is absolutely imperative for rational grid planning that we come to grips with these attributes **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 9 5

1 and with the increasing willingness of utilities to pay 2 to avoid those demand increments. 3 MR. BROOKMAN: Thank you. Yes, Karim. 4 MR. AMRANE: Karim Amrane, AHRI. I guess I just want to caution here not to make this analysis 6 more complicated than it already is. I remember a few 7 years ago when DOE was doing one of the rulemakings on 8 commercial air conditioners an extensive analysis on 9 hourly cost of electricity and so on that, at the end

- - and I don't know how many millions of dollars DOE 11 spent on this -- at the end, that analysis was showing 12 not much difference between an average cost, you know. 13 So what I'm saying here, let's not complicate 14 the matter because at the end of the day I'm not sure it will make a big difference in the outcome of this. 16 MR. BROOKMAN: Okay. Thank you. 17 MR. SACHS: Harvey Sachs. Let me just 18 elaborate a little bit. I'm not sure that this 19 analysis would favor my case. But in particular, you're doing the hourly simulations of load. So what 21 we're asking for is to lay these against the utility 22 load profiles. It may be that in your predominant 23 billing type the peak load is early evening, after the 24 commercial building load. I don't know. But nonetheless, the increasing importance of **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 9 6

1 demand, and we could cite lots of examples, would 2 suggest that a small amount of additional information 3 to get a sense of this is likely to be important. 4 Thank you. MR. BROOKMAN: Thank you. Okay. Additional 6 comments on this? I think you should just proceed. 7 MR. SCOTT: Just proceed. Okay. Some other 8 inputs that I mentioned on the earlier slide. We have 9 installation costs on PTAC and PTHP equipment. There is a commercial source called RS Means CostWorks, and 11 we used their data on that. 12 For discount rates, we used the weighted 13 average cost of capital approach that's described in 14 the TSD. The data on individual firms actually comes from a website that's maintained by a finance professor 16 at New York University by the last name of Damodaran. 17 I think I pronounced the name correctly. That's 18 available online. 19 The equipment lifetime, as I alluded to before, is a statistical distribution based on a 21 commonly used statistical construct called the Wible 22 Distribution. And it begins a very slow decline. It's 23 used in engineering failure analyses and has, in this 24 case, a lifetime average of 10 years, and then the longest-lived equipment is about 20 years. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 9 7

1 The repair costs were an annualized value 2 based on warranty contracts. Finally, we did an 3 estimate of maintenance costs ourselves. 4 So DOE is interested in how installation, maintenance, and repair costs may change with the 6 implementation of 410A refrigerant in 2010 because at 7 least the current information is based on DOE -- is 8 based on data from the field for equipment that's R22. 9 I would remark that the escalation of the cost by efficiency level does reflect a difference in 11 cost of the R410A equipment, but there might be a 12 question about the baseline. 13 MR. BROOKMAN: So, we've already had some 14 comment on this. Karim. MR. AMRANE: Karim Amrane, AHRI. Did you 16 assume that the maintenance cost was zero, basically? 17 MR. SCOTT: No. We assumed for the 18 maintenance cost, which is basically keeping them 19 oiled, keeping them clean, and so on, not repairs. We assumed $50 a year per unit. 21 MR. AMRANE: Per unit. Irrespective of 22 efficiency, right? 23 MR. SCOTT: Irrespective of efficiency, yes. 24 MR. AMRANE: Okay. I think there's a belief among manufacturers that as you will go higher in **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 9 8

1 efficiency, as equipment will get more surface area for 2 the heat exchangers that there will be more maintenance 3 to clean the equipment than you currently have, for 4 example. So it's something that needs to be -- we think needs to be -- 6 MR. SCOTT: We'd be happy to have data. 7 MR. AMRANE: Right. 8 MR. BROOKMAN: Okay. Thank you. Harvey 9 Sachs. MR. SACHS: Harvey Sachs, ACEEE. There's 11 abiding faith in our organization that as equipment 12 redesigns are undertaken that we will actually have 13 increased reliability because manufacturers do learn, 14 and it's something we celebrate. So that, we are likely to have greater reliability that may offset the 16 possible increase in maintenance, and we'd suggest that 17 repairs are in a different labor category than 18 maintenance in these environments. We don't have an 19 answer, an analytical answer, but we would guess these would be offsetting and a credit to the industry. 21 MR. BROOKMAN: Okay. Ron Lewis. 22 MR. LEWIS: Earlier this morning when you 23 made your remarks for General Electric I believe you 24 noted that you took issue with the maintenance cost, that that was one area where you thought we were -- we **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 9 9

1 needed to take another look. Can you elaborate on that 2 in this section? 3 MR. BROOKMAN: Jim. 4 MR. BENZ: Jim Benz. Actually, I didn't make the comment with respect to maintenance costs. I made 6 the comment with respect to repairs. 7 MR. LEWIS: Repairs? 8 MR. BENZ: Our experience, which is 9 extensive, with customers would suggest that the maintenance on units is typically charged on a per-unit 11 basis, and I'm talking primarily cleaning. It's done 12 one of two ways. It's either done contracted out to a 13 local company at a fixed cost. I have never once seen 14 a variable cost for various efficiencies. The efficiencies over the last five years have changed on 16 our product on the order of close to 10 percent. 17 The other way a property will typically 18 handle the maintenance is with their in-house 19 maintenance, and on a per-unit cost that is suggested, that would be variable as a function of efficiency, we 21 don't see that. 22 The one area where we do expect to see some 23 cost impact is with respect to service and primarily 24 potential for a slightly more expensive service call as a function of parts. Nothing significant. But we do **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 00

1 expect service call costs to go up as a result of 2 having to buy new equipment. We have 2,000 techs 3 around the United States, and every single one of those 4 trucks will have to be equipped with 410 equipment. It is not a capital expense, so it's an actual expense. 6 But that's a one-time charge. It's a one

7 time hit, and it's going to have to happen. We have to 8 do it for window air conditioners. We have to do it 9 for all of our other air conditioning products, and this just ends up being one of the products that we 11 have to have that equipment to service. 12 MR. BROOKMAN: Scott. 13 MR. TOUKATLY: Scott Toukatly. I think like 14 for like. I don't really see -- I'm speaking for me, my company -- that I don't think we see a big 16 difference like for like in maintenance cost, probably. 17 But when you get into repair costs, I guess I would 18 turn the question around. 19 I'm a little bit more concerned -- I think we're a little bit more concerned -- and I don't know 21 if I'm speaking for the industry, the PTAC 22 manufacturers -- of the opposite effect of the expense 23 of -- that may be taken on by the maintenance and 24 repair, maybe more specifically the repair of the R22 systems that may remain in place if the standards are **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 01

1 set too high and they can't be met and it causes -- or 2 the expense of meeting those standards is more than 3 customers are willing to pay. They may be sitting on 4 older equipment longer and less efficient equipment that is also generating more cost for repair and 6 maintenance. 7 MR. BROOKMAN: Okay. Thank you. Yes, 8 please. 9 MR. GUFFEY: Tom Guffey, Goodman. In your analysis on the life-cycle of the PTAC, you stated the 11 10-year average, 20 years. Was that strictly done with 12 rotaries or were there some reciprocation? How far 13 back did you go in your analysis? 14 MR. SCOTT: Actually, we had some information from -- I believe this was from industry statements 16 that 10 years was pretty good for an average. There 17 was some average that somewhat longer -- some people 18 kept their machines a lot longer than that. I'm 19 presuming that's the current equipment, but I don't know the details of the technologies involved. 21 MR. GUFFEY: Tom Guffey again. The industry 22 switched from reciprocating back in the mid to late 23 '80s to rotaries. We've seen quite a degradation in 24 the overall life expectancy of the units with that change, the rotary being much more susceptible to heat **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 02

1 damage. 2 And with the heat exchange coil surface 3 probably having to go to a denser fin pack to get to -- 4 since we're in the 42-by-16-inch constraints, and adding coil depth as well, going to possibly three- or 6 even four-reel coil. 7 And also, the fact that a PTAC -- the 8 condenser side certainly doesn't have a filter and 9 you're also using a slinger ring to throw water onto that coil, which is going to catch the dirt more 11 frequently, I have general concerns over maintenance 12 both inside of the warranty and outside of the warranty 13 to customers and manufacturers and dramatically 14 shortened life of the compressor. MR. SCOTT: I'm sure that the Department 16 would be glad to have any data that you can provide on 17 that, or any opinions that would suggest that we use 18 different numbers than what we're using. 19 MR. BROOKMAN: Thanks for that detailed description. That's helpful. 21 22 23 24 McQuay. MR. SCOTT: The explanation is very helpful. MR. BROOKMAN: Very, very helpful. Mary Ann. MS. STOJKOVSKI: Yes, Mary Ann Stojkovski,

MR. BROOKMAN: Mary Ann, get close to the **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 03

1 mic, please. 2 MS. STOJKOVSKI: Yes, sorry. 3 MR. BROOKMAN: Thank you. 4 MS. STOJKOVSKI: Can you hear me? MR. BROOKMAN: Yes. 6 MS. STOJKOVSKI: I just have a question on 7 your analysis and how the installed cost was 8 determined. I'm wondering if you made a distinction 9 regarding replacement equipment versus standard equipment as far as the customer price is concerned as 11 there is a very big difference between replacement 12 equipment and standard equipment in terms of price to 13 customers because of the nature of the type of 14 equipment it is. MR. SCOTT: Okay. What we did do was to look 16 at the 2002 census of the construction industry. So 17 this is primarily -- this installation, then, is 18 primarily based on mechanical contractors in each 19 state. And we had the costs in each of those cases that we could apply a ratio against -- I'm sorry. This 21 is installation cost. We had the data that I just 22 described. We had it by state, and we used that by 23 state. 24 Now, as to the difference between -- I recognize that there would be a difference between the **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 04

1 installation -- essentially, a replacement drop-in and 2 maybe building from the beginning. My understanding of 3 what that data reflect, however, is that it's the cost 4 of sliding in the equipment and setting it up after the hole is available. 6 MS. STOJKOVSKI: Mary Ann from McQuay. Yes. 7 To install it, yes. But I think initially part of 8 your analysis takes into account the customer price. 9 And -- MR. SCOTT: Right. 11 MS. STOJKOVSKI: I just want to say that 12 there is definitely a difference with someone coming in 13 to replace a unit in a nonstandard configuration that 14 one usually is something that the manufacturer has to build to order. It's not something that's going to 16 come off the shelf. 17 MR. SCOTT: Okay. Understood. 18 MS. STOJKOVSKI: It is going to be vastly 19 more expensive to the manufacturer and will cost much more to the consumer when they get into the replacement 21 market. It should be considered. That is -- that will 22 affect your life-cycle cost amount. 23 MR. SCOTT: All right. I think I understand 24 the comment now. Again, we'd be very pleased to have anything quantitative that you can tell us about that. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 05

1 MS. STOJKOVSKI: Okay. 2 MR. BROOKMAN: Karim first. 3 MR. AMRANE: Karim Amrane. Just to follow 4 up. To answer the question did you assume the same installation cost for replacement for nonstandard 6 versus standard? 7 MR. SCOTT: Yes. 8 MR. AMRANE: Okay. Thank you. 9 MR. BROOKMAN: Okay. Harvey Sachs. MR. SACHS: Harvey Sachs. The installed cost 11 numbers were sort of fascinating. One question is sort 12 of a sanity check. I read it twice, but I still wound 13 up seeing a $50 lower installed price, or was that 14 manufactured price, for the heat pump version than for the PTAC. Did I read that correctly as what the 16 standard says? 17 MR. SCOTT: That doesn't sound right to me, 18 but I'm not sure. 19 MR. SACHS: It should be the opposite. I would have expected -- 21 MR. BROOKMAN: Ashley, come to the 22 microphone. 23 MR. SACHS: I hope so. 24 MR. BROOKMAN: Wait. Let's give Ashley a chance and then we'll return. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 06

1 MS. ARMSTRONG: I think you have them 2 switched. I didn't look at the total installed cost 3 numbers, but I can speak from a manufacturing cost 4 point that the heat pumps are higher than the ACs. The difference you're talking about is pretty close to what 6 is estimated in our analysis, so. 7 MR. SACHS: Well, I hope I was wrong because 8 it didn't make sense. 9 MS. ARMSTRONG: Yes. MR. SACHS: What I didn't find, Ashley -- 11 again, this is Harvey Sachs -- was the difference in 12 installed cost estimate, or even in manufactured cost 13 estimate, between the nonstandard and the standard in 14 the same capacity. MS. ARMSTRONG: That's because we looked at 16 different capacities for nonstandard versus standard. 17 But there is a difference in manufacturing costs 18 respectively for nonstandard and standard size 19 equipment. The tables by efficiency level are in Chapter 5. I can't speak to the total installed cost, 21 but I can -- 22 MR. SACHS: I'm sorry. Mary Ann has raised a 23 very important question. It would be very helpful to 24 have the analysis indicate whether there is a significant up charge for -- at the manufacturing level **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 07

1 or at the installed level for the nonstandard 2 equipment. 3 MS. ARMSTRONG: I can show you the tables at 4 the next break. MR. BROOKMAN: Ron, please. I also see that 6 Bing is able to comment. 7 MR. LEWIS: This is really healthy to have 8 all these questions come out. What will be even more 9 helpful is having data or any specifics to support the concerns. One of the things as far as the differences; 11 I've heard this morning -- there were some discussions 12 that almost made it sound like characterizing 13 nonstandard size units that were somewhat standardized. 14 There were some implications of that some places, and then other people have said no, that's not the case. 16 I think I just heard you say that for the 17 replacement market and the nonstandard sizes it's -- 18 you're characterizing it as custom. 19 MS. STOJKOVSKI: That's absolutely correct. This is Mary Ann from McQuay. 21 MR. BROOKMAN: That's Mary Ann speaking. 22 MS. STOJKOVSKI: In a lot of instances we 23 don't keep that on shelf. It's not like the 16-by-42 24 standard market. It's very unique. We get the orders. We have to schedule them into production, and **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 08

1 sometimes they're small run orders, sometimes they're 2 larger. It's a completely different process than the 3 standard side. 4 We sell both. We sell standard equipment and nonstandard. I can tell you the nonstandards are 6 vastly more complicated to build, and it is built to 7 order. It's small volume orders, and it's provided as 8 needed out there. 9 MR. LEWIS: Okay. So, just to carry on with the installed cost issue, then if that's the case then 11 it would be very important to get any kind of 12 multiplier or any kind of guidance that you could give 13 as far as what you're seeing from the manufacturing 14 side since that directly translates into installed cost. 16 MR. BROOKMAN: Thank you. Thank you, Mary 17 Ann. I appreciate that. Bing. 18 MS. LIU: I have a clarification here. I 19 heard we're actually using the same term maybe talking about different things. We're using the term 21 "installed cost," and we're using the term 22 "installation cost." I want to differentiate between 23 these two. 24 The installed cost we're using is the final, final cost paid out of the pocket from the customer who **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 09

1 purchased the PTAC or PTHP. 2 To answer your question, Mary Ann, for 3 installed cost, we see actually a quite significant 4 difference between standard and nonstandard equipment. One of the reasons is, as you said, it costs more to 6 build nonstandard equipment. And also, because the 7 distribution channel is different. You have a much 8 smaller market, leading to you charged more a little 9 bit because for nonstandard equipment. So we have a multiplier we call markup that 11 is quite different between standard and nonstandard. 12 So that makes the first cost between standard and 13 nonstandard quite different. 14 But, on the other side, if you're talking about installation cost, after you've already purchased 16 the equipment and you just want to hire somebody to pop 17 in that unit, my understanding assumption is we didn't 18 differentiate. We're just saying that's the same. So 19 that's kind of the clarification here. Thank you. MR. BROOKMAN: Thanks for that. 21 MR. SCOTT: May I add to that? This is Mike 22 again up front. So, if I did misunderstood -- if 23 that's a correct characterization and you still believe 24 that the installation cost is different, then we really do need some additional information. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 10

1 MR. BROOKMAN: Mary Ann. 2 MS. STOJKOVSKI: Mary Ann from McQuay. The 3 process of installing the equipment would not vary. 4 MR. SCOTT: Okay. MS. STOJKOVSKI: It should be a drop-in. 6 MR. SCOTT: Okay. Thank you. 7 MS. STOJKOVSKI: But to get the equipment and 8 the final cost to the customer, when you add it all 9 together -- MR. SCOTT: Right. 11 MS. STOJKOVSKI: -- is vastly different. 12 MR. SCOTT: Right. Okay. Thank you. 13 MR. BROOKMAN: Thank you. Thank you. That 14 was helpful. Okay. Additional comments on this series of issues before we proceed? 16 MR. SCOTT: One in back. 17 MR. BROOKMAN: Yes, please. Your name for 18 the record. 19 MR. BURT: Lane Burt, NRDC. I'd like to bring up the issue of the monetization of carbon, which 21 is in the NOPR but not in the life-cycle cost analysis. 22 The issue is, should it be input into the life-cycle 23 cost analysis and the net present value analysis. 24 Secondarily, we should get the price right. The new EIA report was mentioned earlier, and that has **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 11

1 the most up-to-date value for carbon in it, including a 2 forecast of future prices. So that would be the data 3 that we would point to as this is what you should use. 4 MR. BROOKMAN: Does NRDC have a perspective on this? Are you going to be an advocate? 6 MR. LEWIS: It's on the agenda later. 7 MR. BROOKMAN: Oh, it's on the agenda later 8 I'm told. Okay. Great. Ron, you had other things to 9 say about this? MR. LEWIS: No. 11 MR. BROOKMAN: No, that's it? Thank you. I 12 didn't realize. On the agenda later. Okay. 13 Okay. Other comments, then, on this segment? 14 Yes, Tom. MR. GUFFEY: Tom Guffey, Goodman. Just one 16 more comment on the maintenance cost of PTAC units 17 going forward. We as manufacturers can guess at what 18 that might be. I know the question was brought up 19 about supplying data on some of these issues. I think that going to servicers -- I know GE runs their own 21 trucks. Some other third party servicers are out in 22 the industry, as well as hoteliers themselves, might be 23 able to give you better data than the manufacturer. We 24 design to pristine conditions based on certain standards on AHRI test standards, and we're talking **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 12

1 about laboratory versus what's real world once they're 2 installed. 3 Again, let me reiterate that fins per inch. 4 I'm concerned about a quicker fouling of the condenser specifically and how that relates to compressor 6 degradation. I do have concerns on maintenance from a 7 perspective of hoteliers and other types of customers. 8 How do they know when a unit is dirty. I think the 9 answer is after we've already had compressor degradation that can't be reinstated once the unit is 11 cleaned at that point. 12 So I do have some major concerns about that 13 and how that relates with the viability and longevity 14 of the rotary compressor in general. MR. BROOKMAN: Okay. Thank you. Ron Lewis. 16 MR. LEWIS: Karim, you were earlier talking 17 about the ASHRAE standards and all and the committees. 18 Have any of these issues been brought up in the 19 committees? Is there anything that shows any study on the change to the rotary compressors or impacts from 21 that change? 22 MR. AMRANE: Well, when Steve Nadel submitted 23 the proposal to 90.1, we had a discussion at the 90.1 24 committee about moving forward, the decision about moving forward with a more stringent 90.1 standard. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 13

1 And we expressed the concern that we have expressed to 2 this group as well in terms of what can be achieved, 3 the concerns we had about the non-availability of 4 compressors, and so on. The committee, hearing both sides, decided 6 not to act because of the concerns that we raised. And 7 there was some discussion about maybe, you know, 8 inquiring about compressor technology and so on. 9 The 90.1 committee did not do anything further. I know that Steve Nadel was supposed to 11 research further this compressor technology, but we 12 haven't heard from him, either. Again, I mean, this 13 issue stopped. Of course, DOE was doing the rulemaking 14 as well and people were waiting for DOE. MR. BROOKMAN: Okay. Thanks. 16 MR. SCOTT: All right. Just to give you kind 17 of a rough idea of what some of the analysis results 18 look like, this is just a single set of curves for a 19 single piece of equipment running with R410A under the conditions that we heard about this morning and the 21 average life-cycle cost savings versus efficiency level 22 for standard size PTACs, PTHPs at 9,000 Btu/h and 23 12,000 Btu/h. 24 The two positive curves with life-cycle cost savings as efficiency increases are both for PTHPs, and **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 14

1 the two life-cycle costs -- two places where life-cycle 2 cost actually increases, therefore there are negative 3 savings, are for PTACs. The difference between the two 4 is largely because you get credit for the heating cycle on the PTHP side. 6 If you go to the TSP and to the NOPR, you'll 7 see the distribution of results for all of the 8 equipment. 9 MR. BROOKMAN: Karim. MR. AMRANE: Karim Amrane, AHRI. I guess I 11 have a couple of questions. The chart for the 410A 12 PTHP at 9,000, that doesn't seem to be right to me 13 anyway. I don't know; maybe it's something -- I would 14 have expected the chart to go through maximum and then go down, but then coming up again, I'm not quite sure I 16 understand that. 17 But then I have another question on the PTAC. 18 If I read those charts correctly, we don't have any 19 savings here. I mean, customers would be losing money by -- at any level except maybe -- you'd be losing 21 money. 22 I guess I have a more fundamental question to 23 DOE. I mean, if that's the case, I mean, how can DOE 24 justify the standard if the outcome is that the customers would be losing money by buying more **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 15

1 efficient product? 2 MR. SCOTT: Do you want to deal with that at 3 this point or do you want to do it at the TSL 4 description? MR. LEWIS: We're interested in perspectives. 6 MR. SCOTT: All right. This happens -- as I 7 tried to point out, though, this -- keep in mind that 8 this is one set of conditions. This is average price, 9 average energy use, and you actually have quite a bit of difference across the country. So what you really 11 have to look at is the distribution of gainers and 12 losers in each case. 13 There were also some decisions made that we 14 can maybe go into later about how the TSLs were actually put together based on those efficiency levels. 16 MR. BROOKMAN: So this is the national 17 average. 18 MR. SCOTT: This is national average 19 conditions. MR. BROOKMAN: All prices, all climate zones. 21 MR. SCOTT: Yeah. 22 MR. BROOKMAN: Okay. Harvey. 23 MR. SACHS: Harvey Sachs, ACEEE. At the risk 24 of wearing out my welcome by singing the same one note many times, these numbers are in the range of less than **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 16

1 2 percent, even at the extremes, of the total life

2 cycle cost. I think it remains to be established that 3 such small deltas in a very, very large number are even 4 meaningful, that they're even -- even the trends say anything that we have much confidence in, that these 6 are -- Karim and I vary enormously in our 7 interpretation of the meaning of these two graphs. 8 (Laughter.) 9 MR. BROOKMAN: It's useful for the Department to hear that variation. 11 MR. SACHS: Well, the question of sensitivity 12 comes up over and over that we have admitted that we've 13 been a little bit arbitrary in our assumption of 14 lifetime, for example, and that's a number which is influential in determination for the life-cycle cost 16 analysis. We've certainly had input that we haven't 17 fully understood some of the changes in cost. 18 Well, LCC is reasonably sensitive to the 19 question of whether we're using five-year, 10-year, 15

- year life for the equipment. 21 One of the things I'm missing, and I 22 appreciate the efforts the Department has made, is a 23 general sense of the size of the difference that's 24 required before you have any willingness to jump to that trapeze. Thank you. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 17

1 MR. BROOKMAN: Yes, Tom. 2 MR. GUFFEY: Tom Guffey, Goodman. I 3 apologize; I haven't read all of the material. But one 4 question comes to mind on increased heat pump usage. As part of life-cycle cost analysis and the fact that 6 drain systems are required for buildings on heat pumps 7 under most codes, was that part of the cost impact 8 where that typically is not something for PTAC but it 9 is required for PTHP installs for most of the country? Drain systems are fairly expensive. 11 MR. SCOTT: For the installation price 12 itself? 13 MR. GUFFEY: Correct. 14 MR. SCOTT: We didn't vary it by PTACs or PTHPs. I'm presuming that as a result it's probably a 16 mix of the two in the statistics. 17 MR. GUFFEY: Okay. I guess, further, to 18 state that most cooling-only electric heat PTACs 19 typically don't have drain systems. MR. SCOTT: Right. 21 MR. GUFFEY: Where heat pumps do. That's 22 fairly expensive in the construction phase and almost 23 impossible to do on a retrofit basis. 24 MR. SCOTT: I see. Going forward, particularly. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 18

1 MR. GUFFEY: If a building has been designed 2 for no drain system and you have a straight-cool 3 product, the odds of somebody putting a heat pump in 4 because of the water coming outside without a drain system is pretty low. 6 MR. SCOTT: Okay. Thanks for that 7 perspective. 8 MR. BROOKMAN: Thank you. Other comments 9 surrounding this chart, 31? (No response.) 11 MR. BROOKMAN: Okay. 12 MR. SCOTT: I'm done. 13 MR. BROOKMAN: You're done? 14 MR. SCOTT: Yeah. MR. BROOKMAN: Yeah, I thought so. It's just 16 about noon. It's a couple minutes before noon. I 17 think we should pause for lunch. It typically takes at 18 least an hour to eat lunch and get back here. That's 19 provided you don't go off campus, for those of you that

are new. 21 While you're in the building, please make 22 sure to wear your security badge because someone will 23 stop you and escort you if you don't wear one. I 24 promise you they will. We will lock this room, so you can leave your **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**1 19 1 materials here, and no one will be able to get in. 2 It's now noon. We'll resume at one. 3 (Whereupon, at 11:58 a.m., the proceedings 4 were adjourned for lunch, to reconvene at 1:05 p.m., 5 the same day.)

**EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 20

1 A F T E R N O O N S E S S I O N 2 (1:05 p.m.) 3 MR. BROOKMAN: Let's resume. We left off 4 with Slide 31 and now we're on Slide 32, not surprisingly. Mike Scott is going to take us through 6 these. 7 National Impact Analysis 8 Michael Scott 9 (PowerPoint presentation.) MR. SCOTT: Okay. I'm still up here, I 11 guess. I'll be talking about the shipments analysis, 12 which goes with the life-cycle cost and payback period 13 analysis and a little bit of other information to do 14 the national impact analysis, national economic impact analysis. 16 The details of the shipments analysis can be 17 found in Chapter 10 of the TSD and are summarized in 18 the NOPR, and also the national impact analysis, which 19 includes the national energy savings, are found in Chapter 11 and related appendices. Again, on the 21 national impact analysis, the model is posted on the 22 DOE website. 23 Okay. For shipments analysis I've got four 24 slides. I'm going to talk a little bit about the approach, a little bit about the process, and then I'll **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 21

1 have two slides on results. 2 So the purpose of the shipments analysis is 3 to estimate standard size and nonstandard size PTAC and 4 PTHP shipments over time. The national impact analysis is to -- the purpose of that is to estimate the 6 national energy savings from standard and nonstandard 7 PTAC efficiency standards at different efficiency 8 levels and then to estimate the national economic 9 impact on the nation, the net present value of the savings from equipment energy conservation standards 11 again at different efficiency levels. 12 The approach on shipments analysis considers 13 all the customer choices, including energy-saving and 14 non-energy-saving substitutes. We do the shipments analysis for the period 2012 through 2042. By 16 guidance, we're supposed to look at 30 years for energy 17 savings, and the shipment forecasts -- and the 18 shipments associated with that. The basis for that 19 material -- for that forecast includes some historical shipments data. Some information on equipment 21 lifetimes is used again to estimate the number of 22 replacements required. 23 New installations of equipment are based on 24 projected floor space construction estimates published in the National Energy Outlook, and we used the 2006 **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 22

1 forecast for that. And estimates of equipment mix of 2 baseline and higher efficiency technologies in the 3 stock and in the shipments. 4 Ultimately, the shipments and the stocks of equipment are tracked by what we call vintage, which 6 are a year class. So there's a 2012 class, 2013, 2014, 7 and 2015, all of which we track in detail. It's 8 tracked by what market it's in, new or replacement 9 market, and by equipment class. This is a diagram of the shipments model. 11 It's a pretty busy slide, so let me give you sort of 12 some of the major elements of it. On the left-hand 13 side there you see that we had some shipments estimates 14 from AHRI, not ARI, from 2005. It's, I believe, 1998 to at least partial year 2006 was covered. We had some 16 estimates of initial shipments to new construction for 17 the year 2000 from the earlier market study that I had 18 talked about. And we had some estimates of initial 19 replacement shipments for the same year. Putting the initial shipments together with 21 the initial replacement shipments and the ARI estimate 22 of total shipments, we were able to estimate shipments 23 to new construction for the period up through 2012, and 24 then we -- sorry, 2006, and then we took the NEMS, National Energy Modeling System, Building Construction **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 23

1 Forecast for hotels, lodging, for healthcare 2 facilities, and for small offices to basically do an 3 index of future construction through the building 4 stocks for which this equipment would be used. We also did an estimate of the initial 6 building stock -- sorry, the initial equipment stock, 7 working backwards from the number of shipments to 8 replacement markets and the estimated lifetime of the 9 equipment stock. We estimated percentage shipments by 11 equipment class on the right-hand side for 2005, and 12 then that gave us, together with the shipments of new 13 construction, total shipments initially by equipment 14 class and capacity. We did the same thing with the replacement 16 stock in shipments, and then thereafter we simply 17 integrated forward. As long as we had new buildings 18 being built, the new buildings had to have equipment 19 put in it. The equipment wore out according to our depreciation model, was replaced, and gradually the 21 stock built up from those shipments. That was all, as 22 I said, tracked by year. 23 What that gives us is some shipments by some 24 classes here. The new sales on this graph are the sales to new construction. Those would all be standard **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 24

1 size PTACs and PTHPs. The red wedge there reflects the 2 total replacements for the light blue shipments. The 3 reason that keeps growing over time is that the light 4 blue shipments produces an ever-expanding stock. The yellow is nonstandard sales. That's all 6 legacy equipment. So there was a bulge in the 7 shipments to nonstandard sales in the early 2000 8 period, but long-term we expect that to gradually go 9 away as the stock of buildings that employ that equipment eventually leave the inventory. 11 Similarly, for the existing standard stock in 12 the year 2000, those buildings and that equipment will 13 not have to be -- the buildings go away and the 14 equipment will not have to be replaced. So those are the shipments. The stock looks 16 a little different. What you have here, going from the 17 top, is cumulative new standard units, including the 18 replacement. So what we're seeing there is that -- 19 remember the red wedge. That wedge is sales, but it only -- it doesn't change the amount of stock in each 21 year. It just simply replaces stock that's wearing 22 out. 23 Nevertheless, that little blue bar at the top 24 of the shipments page keeps going -- keeps expanding the stock. So what you're seeing there is growth **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 25

1 beginning in essentially 2000, beginning the period of 2 analysis, and then 2012, and then increasing up to the 3 year 2042. 4 Similarly for nonstandard units, we have an existing stock in 2000, and the required stock slowly 6 depreciates to 2042. And then the standard units 7 existing in 2000 do the same thing. 8 What starts happening in 2042 is that we've 9 essentially stopped the shipments analysis. We've stopped the energy analysis, but we're required by 11 guidance again to look at the national economic impact 12 of the -- all of the equipment that was present as a 13 result of this rule in the year 2042. So that goes 14 away gradually. That's the way we've chosen to show this. It probably still is replaced, maybe by other 16 equipment, but it's not affected by this rulemaking, is 17 the point. So it goes away, and so that's the time 18 pattern of shipments that we show. 19 MR. SACHS: I'm sorry. If I might, this is Harvey Sachs. 21 MR. SCOTT: Sure. 22 MR. SACHS: I think I must misunderstand this 23 slide. 24 MR. SCOTT: All right. MR. SACHS: Because it looks to me, in the **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 26

1 purplish or bluish, that we're showing a reasonable 2 stock of 50-year-old units in 2052. 3 MR. SCOTT: There is still a stock in -- 4 2052? In 2062? MR. SACHS: Both. And I laud you for already 6 incorporating what Jim said this morning about some 40

- 7 year-old units. 8 MR. SCOTT: Yeah. 9 MR. SACHS: But, am I really understanding this correctly? 11 MR. SCOTT: No, these are not 40-year-old 12 units. At most they're 20-year-old units. What's 13 happening there is -- 14 MR. SACHS: But it says standard units existing in 2000. 16 MR. SCOTT: Including replacements for them. 17 MR. SACHS: Well, I'm sorry. That's just -- 18 that was not clear. 19 MR. SCOTT: I'm sorry because I should have said that. No, there are no units in the system older 21 than 20 years. 22 MR. SACHS: Well, I take back the nice things 23 I said about incorporating Jim's feedback from this 24 morning. MR. SCOTT: Okay. Let me go -- I'm actually **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 27

1 kind of through with that right now. So the issues for 2 which DOE seeks comments on this are, we have the NES 3 shipment forecast of total shipments for standard and 4 nonstandard size equipment. We have a distribution of equipment being placed into new buildings and replacing 6 existing units. And we're interested in any comments 7 that you have on any of that. 8 MR. BROOKMAN: So they've laid out -- Mike's 9 laid out the approach and the shipments model, and you can see what they forecast, both shipment and stock. 11 So, comments on those. 12 I thought he wowed you with his graphics. 13 Harvey Sachs. 14 MR. SACHS: Harvey Sachs again. I think it's fair to point out that all of us in the room, including 16 the analysts, are doing a little bit of suspension of 17 disbelief that this frozen technology model, which also 18 reflects today's assumptions about the shape of the 19 hospitality industry, is going to be applicable for 50 years. It's an extrapolation that the procedure 21 requires, but I don't think any of us takes the results 22 as being likely to be closely applicable to the reality 23 even our grandchildren will be facing. 24 MR. BROOKMAN: Would you care to comment about how you expect they might be different? Is there **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 28

1 another plausible way to consider it than this? 2 MR. SACHS: I think the answer there is my 3 own preference is to proceed with a certain humility 4 and not try to extrapolate beyond a time horizon where I think it looks similar to today. That might be 2030. 6 With all due respect to my colleagues at NRDC 7 and elsewhere who are doing carbon, I don't think I 8 know what our building stock is going to look like in 9 2050, much less 2060. This is not a critique of Navigant's careful 11 implementation of the procedure, but it is expressing a 12 certain amount of skepticism. 13 MR. BROOKMAN: And of course, the purpose of 14 these workshops is to get the best ideas from anybody that's got them about how the future might look. 16 MR. SACHS: I've well learned humility about 17 that. 18 (Laughter.) 19 MR. BROOKMAN: As we all have. Okay. Additional comments regarding the 21 approach, the model, and the actual predictions? 22 (No response.) 23 MR. BROOKMAN: None? I see none. Okay. 24 MR. SCOTT: All right. Moving on. Okay. Now I'm going to talk a little bit about the national **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 2 9

1 impact analysis. I've sort of stolen some of my own 2 thunder to begin with because I already mentioned to 3 you that the national energy savings are calculated by 4 guidance from 2012 through 2042. The result of guidance on using the depreciated out equipment for the 6 national present value analysis puts us out at 2012 7 through 2062. We already have comments on the record 8 about that. 9 The base case that I'm -- that we use in this analysis is a market base case. That is, there is a 11 distribution of efficiency levels assumed to be present 12 in the marketplace if we had R410A equipment, and we've 13 talked about that and the costs associated with that, 14 with the savings associated with those pieces of equipment, which we've covered in the LCC analysis. 16 So, as an example, with no amended standard 17 -- we actually have a standard -- the 9,000 Btu/h 18 standard size PTHP we've looked at. We did the 19 analysis for different efficiency levels. A note on this morning's slide on LCC. There was some discussion 21 around costs associated with efficiency levels. Those 22 are not costs associated with trial standard levels, 23 which we talk about later, because what we have is 24 actually some mixed efficiency levels, compared efficiency levels, that I hope we'll talk about a **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 30

1 little later. 2 In any case, the percentage of sales here by 3 efficiency level in the base case is -- there's some 4 larger in numbers toward the small end, but really fairly evenly distributed across the distribution. 6 What the standards do in this analysis is 7 actually cut off the availability of the -- in this 8 case, since we're talking about a standard with an 9 efficiency -- an EER of 11.3, the lowest three categories, which are 10.4, 10.9, and 11.1. Those all 11 roll up into the lowest available piece of -- the 12 lowest efficiency available piece of equipment, so that 13 rather than 16.5 percent it becomes 70 percent. 14 But notice that the two highest efficiency levels are unaffected because even without the standard 16 those two pieces of equipment, or those two types of 17 equipment, are already available in the marketplace so 18 that the standard would not be binding on them. 19 So, once the amended standard is in place, then the old equipment -- see the top table there -- 21 will go out of the inventory as it depreciates out. 22 The efficiency of that equipment is the same as the 23 base case. The new equipment that replaces it comes in 24 at the efficiency mix of the new case with the standard and new equipment is sold and replaced according to the **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 31

1 new efficiency mix. So what we have is a less 2 efficient stock slowly going out of the inventory, a 3 more efficient stock replacing it. All of that, again, 4 is tracked by year and market segment. So, once an amended standard is -- oh, sorry. 6 So the appropriate installed costs, electricity use, 7 electricity prices, maintenance, and repair costs are 8 assigned to all of the equipment and tracked through 9 time, calculated, and discounted to the present. MR. BROOKMAN: Karim. 11 MR. AMRANE: Karim Amrane, AHRI. Could you 12 tell us how you come up with the distribution 13 percentages? 14 MR. SCOTT: Sure. MR. BROOKMAN: You're referring to percentage 16 of sales on 39? 17 MR. SCOTT: Percentage of sales by efficiency 18 levels, sure. The procedure that was used is an 19 economics-based one. It's in the National Energy Modeling System. It's also in the Canadian model. It 21 assigns equipment -- well, first of all, we have 22 information on installed costs and annual operating 23 costs for the individual efficiency levels. 24 The way the procedure works is that there are a series of market segments with different discount **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 32

1 rates associated with higher appetites for risk and 2 lower appetites for risk. Most of the market has a 3 relatively low appetite for risk, meaning that they 4 have relatively high discount rates. In other words, they want a pretty fast payback. 6 Okay. So, assigning the equipment, then, 7 according to those segments, which are percentages of 8 the marketplace, we then get an idea of what 9 distribution each -- of efficiency levels each of those market segments prefers. That -- and the roll-up of 11 all of that is what's reflected in these efficiency 12 levels. 13 MR. BROOKMAN: Harvey Sachs. 14 MR. SACHS: I begin to think that Karim and I are sharing a perspective, and I'd like to ask a 16 similar question. The upper table in that slide 17 suggests that today, in a market which I had thought 18 was highly first cost sensitive, 45 percent of the 19 customers are choosing product at 11.3 or above. I just wonder if there's any empirical evidence that we 21 have such a high fraction of sales at what are premium 22 efficiency levels today. 23 MR. SCOTT: We would actually like to see 24 some empirical evidence against which to check these numbers. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 33

1 MR. SACHS: Well, the one thing we do know, 2 thanks to AHRI, is the shipment-weighted SEERs over the 3 transitional period from SEER 10 to SEER 13. The 4 shipment-weighted SEERs never got, if I recall the data, above 11.1 when base equipment was 10. That was 6 a residential market, not a commercial market, but it 7 was a market where there were large-scale incentives 8 out there and other things that are largely lacking 9 from this market. So that, my assumption would be that the 11 default model would be a relatively small fraction at 12 premium levels. And this matters because it will 13 impact -- 14 MR. SCOTT: Sure. MR. SACHS: -- the national energy savings. 16 MR. SCOTT: Sure it will. 17 MR. SACHS: I think it's indefensible to use 18 this distribution which we can't link to anything in 19 the real world. MR. BROOKMAN: Do you want to go to Ashley? 21 Ashley. 22 MS. ARMSTRONG: Can I follow up on that? 23 This is Ashley from Navigant. I see two ways you can 24 link it to real world. One is, you can look at the distribution of models and approximate that with the **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 34

1 number of models offered at the higher efficiency 2 level, the percentage of models distributed at that 3 level, and you can see that while it might not match 4 exactly, it's fairly heavily weighted also towards the higher end. 6 You can also match that with major 7 manufacturers, which products they offer as far as the 8 exact efficiency level and their market share, how they 9 apply it. MR. SACHS: How do those two approaches 11 differ? 12 MS. ARMSTRONG: How do they differ? The 13 first one is you would just approximate it by the 14 number of models. So you would not know the actual shipments associated with each model, right? It could 16 be -- that can be sometimes be -- 17 MR. SACHS: I've been guilty of that approach 18 myself. 19 (Laughter.) MS. ARMSTRONG: You can also -- you would see 21 a similar trend. You can also do it by knowing that 22 certain manufacturers offer certain efficiency levels, 23 and you can know their market share, and you would get 24 a similar trend. MR. SACHS: But those two approaches, if I'm **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 35

1 hearing correctly -- this is Harvey Sachs again -- are 2 functionally equivalent and I think need to be balanced 3 against some known effects of trying to offer a full 4 line, trying to offer some trophy models, a variety of other things. 6 MS. ARMSTRONG: Of course. 7 MR. SACHS: And it would seem to me that the 8 default hypothesis might not be the distribution of 9 models but where we do have some shipment-weighted averages, which would be residential splits. 11 MS. ARMSTRONG: Right. 12 MR. SACHS: I'm not saying that that's the 13 right model, but it would seem to me to be the default 14 as being the highest quality information we have. MS. ARMSTRONG: One thing that might be 16 helpful for the Department as they review this is -- 17 Karim, if you want to look and give us a shipment

18 weighted average efficiency for the base case. 19 MR. AMRANE: (Off mic.) MS. ARMSTRONG: Yeah. So I mean, it's just 21 one of those things that if anyone had that type of 22 information, that would be very helpful. 23 MR. BROOKMAN: That was, that last exchange, 24 between Ashley and Karim. Thank you, Karim and Ashley. MR. SACHS: So, to summarize -- **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 36

1 MR. BROOKMAN: So, Harvey again, yes. 2 MR. SACHS: -- we're talking about a beauty 3 contest and Ashley's proposing one set of judging rules 4 and I'm suggesting another. But this is about beauty, it's not about data. Thank you. 6 MR. BROOKMAN: I'm certain the Department, if 7 there were any data available, would love to have it. 8 MR. SACHS: The Department -- oh, well, I'm 9 all -- (Laughter.) 11 MR. BROOKMAN: Okay. So then, other 12 comments, then, on the approach listed on Slide 39? 13 Did you have anything to add at this point on this 14 slide, Mike? MR. SCOTT: No. 16 MR. BROOKMAN: Okay. 17 MR. SCOTT: I'm moving on. 18 MR. BROOKMAN: Further comments on this, the 19 approach portrayed here on 39? MR. BENZ: Jim Benz from GE. 21 MR. BROOKMAN: Yes. 22 MR. BENZ: On what you would expect the 23 impact to be, essentially what you propose -- what you 24 calculated at the end of the day as a worst case scenario, you're going to have 100 percent. I would **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 37

1 suggest it would be significantly different than the 2 worst case scenario. 3 MR. SCOTT: And it's worst case because? 4 MR. BENZ: It's worst case because all of your -- essentially, what you're saying is all of your 6 lower-level performance units will shift into the 7 lowest level category. 8 MR. SCOTT: No, into the lowest of the 9 remaining levels. MR. BENZ: I understand. 11 MR. SCOTT: Yeah. Okay, okay. 12 MR. BENZ: What I'm saying is -- 13 MR. SCOTT: They would be higher still. 14 MR. BENZ: -- my expectation would be that that 50 percent of the market might be skewed towards 16 the lower end, but to suggest it will be 100 percent at 17 the minimal efficiency levels I think is not realistic. 18 My expectation would be it would be much more normally 19 distributed than what you're representing. MR. BROOKMAN: Okay. Thank you. That's a 21 useful comment. 22 Okay. Other comments about this approach and 23 the details? 24 (No response.) MR. BROOKMAN: Okay. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 38

1 MR. SCOTT: All right. Okay. Now a little 2 bit about some of the key inputs. The discount rates 3 that we use in the national impact analysis are given 4 to us. They are OMB's Regulatory Analysis Circular A-4 rates from 2003. They are 3 percent and 7 percent 6 real. That means adjusted for inflation. 7 The electricity prices and trends. We used, 8 actually, a combination of the Energy Information 9 Administration 2006 data on commercial prices across the country, because 2006 was the last year that we had 11 full data, and Annual Energy Outlook 2007 forecasts 12 looking forward. Of course, we're going to update all 13 of that for the final rule. 14 Finally, an observation about the rebound effect. That is, do operating savings in equipment, as 16 they are alleged to do for some pieces of equipment, 17 result in increasing equipment use and therefore reduce 18 energy savings potential. We think that's not going to 19 happen because the customer who is renting the hotel/motel room, and that's the vast majority of these 21 folks who have this piece of equipment, don't pay the 22 utility bill. The hotel does. 23 So there's very, very indirect linkage at all 24 between the customer's usage of the equipment and its efficiency. So we don't think we will see much of a **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 39

1 rebound effect, if any. 2 So, DOE is inviting comments on the rebound 3 effect for PTAC and PTHP. 4 MR. BROOKMAN: I think we had one comment already today about rebound. Other comments about the 6 rebound effect potentially? Scott. 7 MR. TOUKATLY: Scott Toukatly. I would just 8 reiterate that we don't believe there would be a 9 rebound effect either in that case. MR. BROOKMAN: Okay. Thank you. 11 MR. SCOTT: Okay. And then there are three 12 other general issues on which DOE is seeking comments, 13 and they're on the screen there. The first is, can we 14 better characterize any increases of efficiency that would occur over the 30-year analysis period in the 16 absence of the rule. In other words, what's the market 17 look like. 18 Also, the -- are we correctly characterizing 19 forecast base case distribution of efficiencies after the refrigerant phase-out and how the standards would 21 impact the distribution of efficiencies. So that was 22 something that Harvey has already alluded to, and other 23 people may have other observations on it. 24 And then, finally, whether the amended energy conservation standards will result in -- or, do any of **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 40

1 you think that those standards would result in PTAC and 2 PTHP customers shifting to other, less efficient 3 equipment types from equipment that is more efficient. 4 Comments? MR. BROOKMAN: Harvey Sachs. 6 MR. SACHS: You've laid out an important 7 option. I haven't run into resistance cooling 8 equipment, and I'm trying to think of the equipment 9 classes that come to mind with respect to Question 8 that would be less efficient than the space-constrained 11 PTACs and PTHPs in ways that would affect the analysis. 12 That's the question. 13 I can think of some alternatives and 14 substitutions that might be cost effective even though at higher cost for higher efficiency, but I'm thinking 16 of equipment classes that would be lower efficiency. 17 MR. SCOTT: I'm going to go out here on a 18 limb a little bit. I believe that the way this came up 19 -- the context of this question was that there is a somewhat higher efficiency standard in these mixed TSL 21 levels that apply to PTHPs as compared with PTACs. So 22 the question is, would we see shifting from that more

- 23 - that higher efficiency equipment into something that 24 is lower efficiency. I believe that's the context in which this arose. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 41

1 MR. SACHS: So the internal shift from PTHP 2 to PTAC. Thank you. 3 MR. BENZ: Jim Benz from GE. I think you 4 actually covered that in another area. To answer your question, there would be an opportunity, although I do 6 not think it would be experienced, for PTAC customers 7 to switch to through-the-wall air conditioners that are 8 significantly less efficient than PTACs and at a lower 9 cost and heat-cool built-in air conditioners, which typically do not offer heat pumps, that would be 11 significantly less efficient and at a lower cost. 12 So there are products out there that would 13 fall under that definition. However, I think the 14 probability of that happening is remote. MR. BROOKMAN: Okay. Thank you. Thanks, 16 Jim. Yes. Scott and then back to Tom. 17 MR. TOUKATLY: Yeah. This is Scott Toukatly. 18 I would agree with Jim that I definitely think that19 there is a potential to go to products like throughthe-wall, I mean, window air conditioners. Although 21 speaking with Navigant at lunch, apparently they're 22 going to go through a rulemaking right now. So maybe 23 they won't stay less efficient or at their efficiency 24 levels for long. But I think this also ties to the other **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 42

1 question of -- and I don't know if you want to get into 2 it now -- this whole issue of PTHPs being set at a 3 higher level than PTACs. That could be one internal 4 way of going to a lower efficient product right there which would have the tendency to backfire. I mean, if 6 people are forced by cost or by lack of manufacturers 7 offering PTHPs and are forced to go to PTACs with 8 electric heat as their only form of providing heat, 9 it's effectively doing the same thing. It's forcing people into a less efficient product. 11 So my personal opinion is that setting a much 12 higher level for PTHPs is -- I believe it'll backfire. 13 MR. BROOKMAN: Tom. 14 MR. GUFFEY: Basically, I agree with that statement. The industry today on the nonstandard -- 16 excuse me, on the standard size is somewhere around 55 17 percent electric heat versus 45 percent heat pump 18 today. That's with virtually the same efficiencies. 19 If you raise the bar on heat pumps, yes, there is a potential for people because of first cost, 21 particularly people who build and turn properties, to 22 put electric heat in and not put heat pumps in. So, 23 yes, that could definitely backfire. 24 MR. BROOKMAN: Okay. Thank you. Other comments? Yes, please. David. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 43

1 MR. MARKUSZ: David Markusz. I think that 2 there's going to be a certain value segment or a 3 segment of the motel market which is small end user and 4 single owner, mom and pop type thing, or something like that where there's a good chance that they may go to 6 something that's lower efficiency like a window unit or 7 a solid side, based on some of the things that I've 8 seen done through the years, including seeing a 9 standard size sleeve blocked off to put a solid side in. 11 So I think it's something that I've seen 12 before, and I wouldn't put it past that smaller end 13 where they don't necessarily have a big capital budget 14 to renovate. It's the mother and father trying to support the family with a row of 10 rooms and the only 16 thing they can do is get this. Well, it's much easier 17 to go to Wal-Mart or Lowe's or Home Depot and pick up 18 something there than it is going to be to try to 19 replace something that's now much more expensive, or more expensive. 21 MR. BROOKMAN: Do you know how much of the 22 market that would represent? 23 MR. MARKUSZ: I don't. 24 MR. BROOKMAN: Pretty slim? MR. MARKUSZ: I would say it's smaller, yes, **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 44

1 but there is the possibility there, I think. 2 MR. BROOKMAN: Karim. 3 MR. AMRANE: Karim Amrane, AHRI. In addition 4 to product switching, I think a separate issue might happen as well. People are going to keep their old 6 equipment longer. That's a real possibility. As an 7 example, let me tell you that the central air 8 conditioning rulemaking that became effective in 2006, 9 we've been seeing since then a decline in shipments of about around 25 percent. But what we've been seeing at 11 the same time is an increase in parts. 12 So it's happening. I mean, the 13 SEER 13 standard had the effect of people keeping their old 14 units and fixing them. So that's a reality. MR. BROOKMAN: Thank you. 16 MR. SCOTT: Can I ask a follow-up question? 17 MR. BROOKMAN: Please do. 18 MR. SCOTT: From the stand up here. Is there 19 any kind of an outer limit on that, on simply replacing parts? I mean, you can obviously extend the time over 21 which that piece of equipment would run if you kept 22 replacing parts, but is there an outer limit of any 23 kind? 24 MR. BENZ: Jim Benz from GE. I think the dynamic in packaged terminal equipment is significantly **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 45

1 different from central air conditioning in that the 2 acquisition cost is 20 percent of what a central air 3 conditioner would be. The cost of servicing an old 4 unit is significant and, with the elimination of R22, will become much more significant. 6 So I think the possibility of people making a 7 decision to hold onto product -- the people that will 8 hold onto the product will hold onto the product 9 regardless. They just are people that will do that. Summarily, I think to the extent -- and I 11 would consider it a minute part of the market. To the 12 extent that people on a 10-room property that are 13 throwing a window air conditioner into a sleeve, the 14 rule or the proposed standard isn't going to change the degree that that happens. That happens today. It will 16 happen tomorrow. Those people will choose to do that, 17 as foolish as it may be. 18 I do think there is a dynamic with respect to 19 mix between PTACs and heat pumps. I do think that the cost benefit analysis for a property, and our customer 21 base is, from our experience, very concerned about 22 operating costs and efficiencies, and they tend to be 23 very astute and good businesspeople. The cost benefit 24 analysis on the heat pump is still extremely compelling regardless of whether -- I mean, the cost differential **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 46

1 today based on the research is $50. If that premium 2 goes up for that property, in most cases their payback 3 will be less than a year, almost in all cases will be 4 less than a year. In many cases it will be three or four months. 6 So, an additional premium on the heat pump 7 for the higher efficiency does not fundamentally change 8 the cost benefit analysis for that property. 9 MR. BROOKMAN: Thank you. Thanks a lot. Karim. 11 MR. AMRANE: If that's the case, then why is 12 it that the market share is, what, 45 or 55? Why is it 13 that the market has not switched to heat pumps 14 entirely? If the payback is that good, I mean, why is it that we still have 45 percent of the market on 16 PTACs? 17 MR. BENZ: Jim Benz again. I mean, it's a 18 good question. It's a function of people's awareness. 19 MR. LEWIS: Ron Lewis, DOE. There was an article in the Wall Street Journal this week about one 21 of the business inertias that's been underway in recent 22 years of the separation of the building owner from the 23 building operator in commercial hotels, especially 24 large hotels. As a business strategy, they have separated those two functions much more dramatically. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 47

1 The number of hotels that the chains own and operate 2 has gone way down. 3 That separation between owner -- that's first 4 cost -- versus operator with a different business model and cash flow and profit model, what kind of impact is 6 that going to have? They were representing it's, in 7 the last couple years, gone absolutely crazy. It's 8 reversed and the impacts on commercial building rates 9 and other things all come into play. If that's the trend and that's where everything has gone, making that 11 decision point separating owner and operator on large 12 properties that are buying a lot of these things, will 13 that have an influence on this? 14 MR. SACHS: We're supposed to ask you the questions. 16 (Laughter.) 17 MR. LEWIS: I'm asking for input. 18 MR. BROOKMAN: Scott. 19 MR. TOUKATLY: Scott Toukatly. I'm probably not responding to that question. I more want to make a 21 statement to the earlier comments. I haven't spent a 22 lot of time going through the cost benefit analysis, 23 but I just wanted to make the comment that that in 24 itself doesn't justify setting a higher PTHP standard. I think we can all agree that if somebody **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 48

1 puts in a PTHP and operates it in the mechanical 2 heating mode, they're going to save money over electric 3 heat. That in itself isn't a justification for setting 4 a higher standard. I haven't seen any compelling evidence that 6 could tell me that a PTHP can obtain such a 7 significantly higher efficiency than a PTAC. As a 8 matter of fact, it's typically been the other way 9 around. MR. LEWIS: That is good. Anybody that's got 11 analysis or data that supports anything is really 12 helpful. 13 MR. BROOKMAN: Yeah. Thank you, Ron. So, 14 Ron with another question on the table, should anybody wish to bite on that one. 16 MR. BENZ: Jim Benz with GE. The only input 17 I could give; we haven't seen a significant difference 18 yet in that the companies that are managing the 19 properties at least currently are still intimately involved in what goes in those properties. So the 21 owners of the properties do not have an active interest 22 in what goes into the properties as in other economic 23 systems. Those management people are still making most 24 of those decisions. MR. BROOKMAN: Okay. Final comments? You **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 49

1 can see three different questions there on Slide 41 in 2 your packet. Additional and perhaps final comments on 3 those? 4 (No response.) MR. BROOKMAN: Okay. 6 MR. SCOTT: One last thing here. We did do 7 an LCC subgroup analysis. We couldn't quite figure out 8 where to stick it, so here's where we stuck it. I have 9 only one slide on it. The purpose was to evaluate the economic 11 impacts of standards on consumer subgroups, emphasis 12 "consumer" subgroups, who may be disproportionately 13 impacted compared to the general user population. The 14 manufacturing subgroups are handled in the manufacturing impact analysis that we'll be talking 16 about in a few moments. 17 The method we used was to identify -- we 18 identified small businesses as a PTAC and PTHP customer 19 subgroup that could be disproportionately affected and examined the impact of the proposed standards on that 21 group. So what we did was we did the LCC analysis just 22 for the small businessmen, basically. 23 We found that the LCC savings and simple 24 payback were -- we calculated all of those and found out they just weren't dramatically different than for **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 50

1 the larger group of people. 2 All that analysis is available in I believe 3 it's Chapter 12 of the TSD. 4 MR. BROOKMAN: So then, comments on the LCC subgroup analysis, should there be any? 6 (No response.) 7 MR. SCOTT: Hearing none, I think I'm done. 8 I'll pass this over to Ashley. 9 MR. AMRANE: Yes, I -- sorry. MR. BROOKMAN: Yes. 11 MR. AMRANE: I just have a question. 12 MR. BROOKMAN: Karim. 13 MR. AMRANE: Karim Amrane with AHRI. Are we 14 going to be talking about how DOE ended up picking those levels based on LCC and other things later on, or 16 is it time to talk about it? 17 MR. BROOKMAN: I'm not sure where that's on 18 the agenda. Get near the microphone, please. 19 MR. LEWIS: I guess we just talked about LCC, so it would be an appropriate place, right? 21 MS. ARMSTRONG: Sure. I'm getting ready to 22 talk about the trial standard levels as far as how we 23 grouped efficiency levels across equipment classes. 24 That might segue back into it. That way you can see the different models that DOE considered, at least from **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 51

1 an analysis perspective. 2 MR. BROOKMAN: Thanks for raising it. Yeah, 3 sure. Tom, please. 4 MR. GUFFEY: Going out on a little bit of a limb here, Tom Guffey, Goodman. In general, to get the 6 higher efficiencies, we're going to smaller, more 7 efficient compressors, putting more coil in the unit, 8 which we believe is going to change the sensible latent 9 ratio on the product. Was there an impact analysis done on moisture removal in the motel rooms as how that 11 impacts not only the air conditioner and the run time 12 but also the FF & E package, added wear and tear, and 13 the four-letter word, mold? 14 MR. BROOKMAN: Can you comment on that, Ashley? 16 MS. ARMSTRONG: Bing, do you want to answer 17 that? Since you guys did the energy use analysis? I 18 think the answer is no, but I will let her comment. 19 MR. BROOKMAN: I see Bing. Yes, please. Bing. 21 MS. LIU: The answer is no. We actually, 22 when we do the whole building energy analysis, we're 23 looking at all the different equipment classes and for 24 applications survey space heating and cooling in the hotel buildings. But we do look at changing efficiency **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 52

1 levels for the same equipment, changing the efficiency 2 levels at the same building types. 3 What you're looking at, make sure the same 4 building maintains the same level of their temperature and humidity ratio. But the model itself and the 6 intent of the whole building analysis is not to address 7 the mold issue. We fully recognize that's -- life as a 8 designer, we know the issues. But the purpose for this 9 analysis is really to try to estimate the energy-saving potential through the higher efficiency equipment. 11 MR. BROOKMAN: So if I understand you, you 12 hold the moisture level constant. 13 MS. LIU: We change the efficiency levels. 14 We double check what's in the room, each of the rooms in the model, make sure it's within the ASHRAE 16 definition of the comfort levels, yeah. 17 MR. BROOKMAN: Yeah. Right. Karim. 18 MR. AMRANE: Karim Amrane, AHRI. Let me 19 follow up on this. I don't believe that your simulation model accounts for the fact that the heat 21 exchangers are going to be different, that the sensible 22 heat ratio of the equipment itself might be different, 23 and that's what the question was all about. I mean, it 24 might change that, which might end up having more moisture in the room. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 53

1 You're assuming basically that whatever -- 2 when you increase the efficiency the equipment will 3 still perform as before in terms of sensible heat 4 ratio. MS. LIU: Yeah. Bing Liu, PNNL again. 6 Karim, you're right. In the model we assume the 7 equipment has the same performance curves. So if you 8 have different curves caused by the higher efficiency 9 equipment, we definitely can put that -- can take your input and further modify and improve the model when we 11 proceed. 12 MR. BROOKMAN: Tom, thanks for the question. 13 Harvey Sachs, and then I'm coming back to you, Ted. 14 MR. KINGSBURY: Just on the same subject, and maybe it's -- 16 MR. BROOKMAN: Okay. Go ahead. Yeah. 17 MR. KINGSBURY: -- obvious. But, if that's 18 the case, then basically it's going to run longer also 19 to remove that moisture. MR. BROOKMAN: Okay. Thank you. Harvey. 21 MR. SACHS: Harvey Sachs, ACEEE. I hope I'm 22 not being too bold in translating what Ted and Tom have 23 said as being a call for -- look again at the rating 24 method to assure that is fair to the importance of -- it's not at all clear. I haven't reviewed this with **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 54

1 the care that I expect Karim has, but it's not at all 2 clear that we're giving adequate credit to -- removal 3 that's an important design constraint in some regions 4 and some applications. MR. BROOKMAN: Okay. Thank you. 6 MR. LEWIS: Ron Lewis, DOE. If there are any 7 recommendations of how to go about that, if there are 8 any techniques that you've seen, if there are any 9 bodies of knowledge that we can tap into -- MR. BROOKMAN: Ratios, proportions, anything. 11 MR. LEWIS: -- it would be helpful. Opinions 12 and concerns are of interest to us but not as helpful 13 as having something that gives us guidance and helps us 14 to do it correctly. It's one thing to notice that maybe we've got 16 room for improvement. It's something else to try to 17 get it correct. All the help we can get from people 18 who've got that concern to look for the solution, we're 19 open for input. MR. SACHS: We will send you -- Harvey Sachs 21 again. We will send you a copy of the recent paper on 22 splits that addressed this in the context of regional 23 rating methods. Again, we're not asking for regional 24 rating methods here, but I am suggesting that our grandfathers' quarter-century-old rating method may not **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 55

1 meet our needs with higher efficiency equipment. 2 MR. BROOKMAN: Scott, please. 3 MR. TOUKATLY: Scott Toukatly. Can we get an 4 extension on our deadline? (Laughter.) 6 MR. TOUKATLY: May 31st may not be enough to 7 give all the information that you need. 8 MR. LEWIS: We'll give you the same extension 9 we are getting from the court that's overseeing our work, which is zero. 11 (Laughter.) 12 MR. LEWIS: And that's not because we want to 13 operate that way, but we are under such tight 14 schedules. MR. TOUKATLY: You took a week away. It was 16 June 6th. 17 MR. BROOKMAN: You all feel pressed, I 18 promise you. 19 MR. AMRANE: Karim Amrane speaking. MR. BROOKMAN: Okay. Karim, yes. 21 MR. AMRANE: Actually, talking about the 22 date, the Federal Register says June 6th, not May 31st. 23 So we need to make sure -- 24 MR. LEWIS: It does say June 6th? MS. ARMSTRONG: Yeah. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 56

1 MR. AMRANE: So let's all agree on the date 2 because -- 3 MS. ARMSTRONG: June 6th was the date. 4 MR. LEWIS: Okay. That's what's in the Federal Register? 6 MS. ARMSTRONG: Yeah. 7 MR. LEWIS: Okay. 8 MR. BROOKMAN: Which means you're bound, 9 right? Yeah. MS. ARMSTRONG: -- being the Federal Register 11 date. 12 MR. BROOKMAN: So, wasn't that generous of 13 him? 14 (Laughter.) MR. BROOKMAN: Karim, thank you. Generosity 16 abounds here at DOE. 17 MR. LEWIS: You can send your thank-you notes 18 to the Federal Register. 19 (Laughter.) MR. BROOKMAN: I suggest you send them 21 straight to the Secretary or the court. Okay. 22 23 24

**EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 57

1 Trial Standard Level Development and Manufacturing 2 Impact Analysis 3 Ashley Armstrong 4 (PowerPoint presentation.) MS. ARMSTRONG: All right. Next, trial 6 standard levels. Okay. So, the purpose of selecting 7 trial standard levels and developing a list of possible 8 amended energy conservation standards from which DOE 9 can weigh the benefits and the burdens and finally select a proposed standard level. 11 Each trial standard level consists of a set 12 of potential minimum efficiency levels across all 13 equipment classes covered by the rulemaking. 14 So, here is a summary table of the trial standard levels DOE looked at for this PTAC and PTHP 16 rulemaking. The baseline level was chosen to be the 17 efficiency levels within ASHRAE Standard 90.1 (1999) 18 for each corresponding equipment class. 19 TSL 1, 3, 5, and 6 are what we call matched pairs. In other words, the efficiency levels for the 21 PTACs are the same as the efficiency levels for PTHPs. 22 TSL 7 is the max tech. That's the max 23 commercially available unit. 24 And then TSL 2 and 4 are what we call mixed TSLs. They're combination efficiency levels. There **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 58

1 are different efficiency levels for PTACs and PTHPs. 2 And that's that. So I'm guessing I should 3 open the floor to comments on DOE's trial standard 4 levels before I proceed with the manufacturing impact analysis summary. 6 MR. BROOKMAN: Karim, does this -- 7 MS. ARMSTRONG: Maybe, to answer your 8 question from earlier, in the presentation there's not 9 an exact description of how DOE weighed the benefits and the burdens for each TSL. That description is a 11 multi-linked -- or, many pages in the Federal Register 12 notice. You're more than welcome to comment on what's 13 in the Federal Register notice at this time or at the 14 end when we open it up for stakeholder comments. MR. BROOKMAN: Karim. 16 MR. AMRANE: Karim Amrane. Maybe we can 17 start a discussion and see how it goes. But I guess 18 when I was looking into the life-cycle cost and the 19 average -- the mean life-cycle cost savings, what I notice is that for PTACs that there is no positive 21 life-cycle cost savings. I mean, it's basically a cost 22 to the consumer. 23 And if you look at the payback, it's over 11 24 years for most -- for all of the TSL, which is greater than the lifetime of the equipment. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 59

1 So again, it tells me that -- 2 MR. SACHS: Forty-two years, right? Forty

3 two years? 4 MR. AMRANE: Well, 42 years, but the average is about 10 years, and that's what -- you know, of 6 course there will be exceptions. 7 But again, that tells me -- I mean, I'm not

- 8 - I can't -- I don't understand how then DOE ended up 9 saying, well, that's the right level, we should be moving with that. It tells me that whoever is going to 11 be buying this equipment will not be saving anything. 12 At least according to what we have in the notice. 13 So I just wanted to have some feedback as to 14 how you guys went through the process and how you decided to say, well, this is the right thing to do. 16 MR. SACHS: Ron, this is Harvey Sachs. I 17 think you misinterpreted the duration of service life 18 discussion. I think we had a consensus that for AHRI 19 member companies it's 10 years or less depending on compressor type. And for AHRI non-member companies, 21 it's 42 years. That's the empirical results I've been 22 hearing. 23 MR. BROOKMAN: Ron Lewis. 24 (Laughter.) MR. LEWIS: I'm not sure how the court **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 60

1 reporter will ever indicate how to present that. 2 MR. BROOKMAN: Let's make sure we identify 3 it. That was Harvey Sachs with that earlier comment. 4 MR. LEWIS: I guess all we can do is note that in the transcript there are opinions and there are 6 facts and there are a lot of words. 7 (Laughter.) 8 MR. LEWIS: Anyways, it's good to keep up 9 this tradition, though. There are some reasonable questions being 11 asked, and that's part of this process, is what's being 12 presented to you under the direction of DOE and the 13 senior management in looking at analyses of 14 technologies that are available. In our mission to save energy, we're laying out there what it looks like 16 to us right now. 17 And your question is a good question, and I 18 think that part of the purpose of today and the comment 19 period is to see your response to what we've put out there. 21 So one of the things that has been displayed 22 here, and I look forward to on every one of these, is a 23 different perspective from many different parties and 24 getting into the discussions of what's the substance behind it. That's our job right now, is to flesh all **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 61

1 of that out. 2 We have got a number of factors that we have 3 to balance and consider, and we welcome comments and 4 the things that you just said. Make sure and put them in your written comments as well. We're not ignoring 6 them, but what we're putting out for you to look at as 7 the proposed levels. 8 MR. BROOKMAN: Karim. 9 MR. AMRANE: Karim again. And that's fine. I was just curious because I've been involved in 11 rulemaking for, I don't know, maybe 10 years. This is 12 the first time I've come across analyses that tell me 13 that there is no payback, there is nothing but DOE 14 wanting to hold with a standard that apparently does not make sense. So that's why. I mean, it's just a 16 question. I was wondering whether there was a change 17 in directions or we were working under different 18 assumptions. I don't know. But it's news to me. This 19 is the first time. I'm surprised. MR. BROOKMAN: Joe Mattingly. 21 MR. MATTINGLY: Joe Mattingly from AHRI. 22 Yeah, just be honest. I mean, if you have a positive 23 national net present value savings or something that is 24 not reflected just in the cost payback to consumers, then say so. I mean, we just want to know what the **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 62

1 rationale is. 2 MR. BROOKMAN: Mike Scott, please. 3 MR. SCOTT: Maybe I can help a little bit. 4 We've had several comments on that kind of spaghetti figure that I put up earlier. 6 MR. BROOKMAN: Yeah. 7 MR. SCOTT: Those are efficiency levels, so 8 they're not TSL levels. What you have to do is map 9 back from the TSL levels to see what efficiency levels on those curves are actually in play. And for PTACs, 11 it's Level 1, basically. 12 MS. ARMSTRONG: Right. 13 MR. SCOTT: So your observation about the 14 declining -- or, the negative savings on the higher efficiency levels is actually not what's being 16 recommended. 17 MR. LEWIS: Do you have anything in the TSD 18 or a chart that we can show or point them to that shows 19 -- MR. SCOTT: Yeah. There's actually a whole 21 chapter on the mapping, Chapter 9. 22 MR. BROOKMAN: I notice that Ashley has got 23 in her hands the TSD. So maybe she's got something. 24 MR. AMRANE: This is Karim with AHRI. I'm referring again with Table 5-point-whatever, 5.12 on **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 63

1 the Federal Register. It has all the TSL levels. It 2 shows, at least for PTACs, that all the life-cycle 3 costs are negative and paybacks is above 11 years. So 4 I -- MS. ARMSTRONG: So I would refer -- if you 6 really want to know -- 7 MR. BROOKMAN: Hey, Ashley, hold that -- 8 someone hold that microphone. 9 MR. LEWIS: Here. We've got a handheld right here. 11 MS. ARMSTRONG: I'm coming around. So I 12 would point -- this is Table -- this is Ashley. I 13 would point you to Table V.28 in the notice. It's 14 basically a summary from -- of information from all the analyses from TSL 1 to 7. You can see the primary 16 energy savings, you can see the net present value, you 17 can see the LCC, you can see the industry impacts. 18 It's basically a summary of results, kind of like a 19 cross-section, a culmination of all the analyses that DOE has done. And then, you know, DOE can look at this 21 table and weigh the benefits and the burdens. 22 And then following that table is a complete 23 discussion of how DOE weighed the benefits and the 24 burdens by TSL. So we first considered TSL 7, and then they considered TSL 6. And it will walk you through **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 64

1 each of their thought processes in making their 2 decision until they got to the proposed standard level. 3 That's really the best place to -- and I 4 would encourage you to read that and, you know, if you have comments on that, submit them in writing 6 afterwards. 7 You can see where it might be a negative LCC, 8 it might be a positive NPV for the nation because of 9 the distribution. Okay? Does that help? (Laughter.) 11 MR. BROOKMAN: Thank you, Ashley. Thank you. 12 So we parted when we were on Slide 45, which 13 shows these trial standard levels. And Ashley provided 14 a brief overview. Do you wish to say anything more about 45, Ashley? 16 MS. ARMSTRONG: No. I think I'm ready for 17 46. 18 MR. BROOKMAN: Additional -- Scott. 19 MR. TOUKATLY: Scott Toukatly. I just wanted to -- maybe I'm dense on this, but going back to that 21 frame there, am I to understand, since TSL 4 was used 22 for the rulemaking? 23 MS. ARMSTRONG: You mean the proposed 24 standard? MR. TOUKATLY: The proposed standard. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 65

1 MS. ARMSTRONG: It is TSL 4. 2 MR. TOUKATLY: So, any energy efficiency 3 levels that are shown in 5, 6, or 7 were disregarded 4 for the rulemaking? MS. ARMSTRONG: The TSL as a whole was -- by 6 DOE. Now, for specific energy levels -- so if you look 7 at the efficiency level for heat pumps in 5 and you 8 look at the efficiency level for heat pumps in 4, 9 they're the same, right? Because it's a mixed pair. So you can't say that the efficiency levels are 11 disregarded. 12 But the TSL as a whole and its, you know, 13 different -- the results from all the analyses was 14 rejected, 7, 6, and 5. And then DOE, you know, proposed TSL 4. 16 MR. BROOKMAN: The combination of benefits 17 and burdens caused the Department to select TSL 4. 18 Propose. 19 MS. ARMSTRONG: Yeah. MR. TOUKATLY: Scott Toukatly. However, from 21 setting the efficiency levels that are in the NOPR, the 22 -- I don't know how to word this. The -- it was taken 23 into account what the maximum technology is in R22 24 product out there today? So those numbers were taken into account in the notice? Okay. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**-- 5

10

15

20

25 1 66

1 MS. ARMSTRONG: 2 MR. TOUKATLY: 3 MS. ARMSTRONG: 4 MR. TOUKATLY:

6 MS. ARMSTRONG: 7 commercial -- 8 MR. TOUKATLY: You're asking were they? Yes.

Correct. I'm asking they were for that

TSL 7 is the max tech

Right, right. So that comes 9 back to my concern that I showed before. If those values, I don't believe, hold any significance, then 11 that's a serious point. 12 MS. ARMSTRONG: So if you believe that the 13 max tech value would change -- the efficiency levels 14 would change under R410A. Would it be more than -- you know, how do you get your comments about which 16 efficiency level you think you could not obtain with 17 R410A. 18 MR. BROOKMAN: Okay. Ron Lewis. 19 MR. LEWIS: One thing that you may not be aware of is, along with the seven factors that were 21 shown on Slide 6 that we have to consider in analysis, 22 we're also directed to start at the highest, at the max 23 tech, and start there and go down through the logic and 24 stop at the highest level that can be supported. In going through that, we're required to **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 67

1 consider the max tech and look there. So it's not an 2 option for us to do that. 3 To your comment of concern about whether the 4 max tech is valid or not, whether it exists, if we've got a misunderstanding from data that we've looked at 6 from whether it's the directory or other things, then 7 please do correct us if there's an error there. But we 8 do not have an option to exclude considering those. 9 MR. BROOKMAN: Let's let Scott follow on, Karim. Go ahead. 11 MR. TOUKATLY: This is Scott Toukatly. I was 12 just going to say that, again, probably in the short 13 period of time we have that's going to be a difficult 14 thing to do. You know, other than pulling set equipment and testing it and having it reconfirmed, 16 that's a difficult thing to do. 17 So other than going back and making sure that 18 that data didn't correctly come out of the ARI 19 Directory, I don't know what else we can do in this short period of time other than to seriously question 21 that data being good. 22 MR. BROOKMAN: Karim. 23 MR. AMRANE: Karim Amrane with AHRI. I guess 24 I would like to go further than that. Whatever is in the directory or whatever is available to DOE is not **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 68

1 based on 410A. So this max tech is fictitious as far 2 as 410A. There is not such a product that meets the 3 level with 410A today. 4 So we are, as I said before, and I would like to repeat myself again, I think we are putting a number 6 here. We're saying we can achieve that number, but we 7 don't know for a fact if we can. 8 So that's why I'm saying this rule in 9 particular is very different from other rules because we are in the middle of a phase-out of R22. There are 11 no products today with 410A. Maybe there's one unit. 12 I don't know; I've heard that this morning. But we 13 don't know what it is and what level it is at. 14 But there is nothing out there today. So to say that we can reach that level, it's a max tech, it 16 might be true for R22 but it's not true for 410A. So 17 that's why this rule is very different. That's why I 18 would caution DOE, when you make a determination to 19 say, well, there are products out there. We are sure that you're going to be able to reach that level. 21 Because I don't think that we know today. 22 As Francine mentioned this morning, there is 23 no rollback. Once you establish the standard, 24 manufacturers will have to meet it. There's no way we can come back two years later and say, well, we **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 69

1 couldn't make it. What are we going to do? There is 2 nothing else. 3 That's why I'm saying that this is something 4 that, as an industry, we feel very uncomfortable with. That's why we've suggested another way to go through 6 this process by adopting ASHRAE now and maybe looking 7 at it later on. Maybe have a two-step efficiency 8 standard. But that's my comment, and I hope that DOE 9 will take this into consideration. MR. BROOKMAN: Thank you. Thank you. Harvey 11 Sachs. 12 MR. SACHS: I have a question, really, for 13 Scott and an observation I'd like to make. Scott -- 14 MR. BROOKMAN: Mike Scott. MR. SACHS: I'm sorry. To this Scott. 16 MR. BROOKMAN: Okay. 17 MR. SACHS: I've forgotten your last name. 18 MR. TOUKATLY: Toukatly. 19 MR. SACHS: Toukatly. My sense from your comments today is that the particular concerns are that 21 for the nonstandard size category in the largest 22 capacity classes the proposed levels are too stringent, 23 that you're looking for relief in that particular set 24 of -- principally, that particular set of circumstances. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 70

1 MR. TOUKATLY: Based on what I'm seeing 2 today, yes. I think the higher capacities are not 3 capable. I'm concerned about the lower capacities, but 4 certainly as you go up in capacity it appears that the efficiency levels fall off at a higher percentage. 6 MR. SACHS: That sharpening I think is very 7 helpful to me, maybe to DOE as well. 8 MR. BROOKMAN: Ron Lewis. 9 MR. LEWIS: With that being the case, on the nonstandard sizes we only analyzed the one size, the 11 11,000 Btu. Is there data -- are there size points 12 where there's enough data to analyze this at multiple 13 points to see that trend or that concern? 14 MR. TOUKATLY: Scott Toukatly. For nonstandard specifically? 16 MR. LEWIS: Yes. 17 MR. TOUKATLY: I can do my best to share any 18 calculations that we have and any actual test data we 19 have to back up what I'm saying. So I mean, that is information that I can certainly make available. 21 MR. LEWIS: Thank you. 22 MR. SACHS: Again, from our perspective -- 23 this is Harvey Sachs -- the 12,000 and above 24 nonstandard sleeve is a very small part of national energy savings at risk. It's a very tightly **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 71

1 constrained product. 2 While we're on this question of -- 3 MR. BROOKMAN: May I hold you for just a 4 moment? Mary Ann was going to follow onto Scott's comment. 6 MR. SACHS: I'm sorry. 7 MS. STOJKOVSKI: Yes, Mary Ann from McQuay. 8 I was just going to say that we will try and do the 9 same for the nonstandard from McQuay's perspective. MR. BROOKMAN: Thank you. Thank you. 11 Harvey, you're next. 12 MR. SACHS: I believe that we're really in 13 the midst of LCC now. If that's the case, Doug, I'm 14 concerned about Figure 8.4.1 in the NOPR -- I'm sorry, in the TSD, which is a plot of life-cycle cost against 16 efficiency level with trial standards apparently being 17 surrogates for efficiency level. 18 The point I want to make is that the total 19 variation in life-cycle cost from Trial Standard 0 through 5 is $12 on a life-cycle cost of $2,300. It is 21 slightly less than one-half of 1 percent. 22 From where I sit on the stratospheric level 23 as far as a scientist type rather than an accountant 24 type, I can't tell the difference between $2,330 and $2,341 over a 20-year life-cycle cost or even a 10-year **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 72

1 life-cycle cost. 2 I think the most important thing about this 3 figure is that within any reasonable reach of the 4 concept of reliability of our analysis these numbers are equivalent. They cannot be distinguished from each 6 other. Consequently, we'd fall back upon the burden of 7 the law, which gives primacy to the maximum that's 8 technically feasible and economically justified. And 9 that should push us toward max tech rather than away from it, again with specific exceptions such as Scott 11 and I have been discussing. 12 I really want to press upon the Department 13 our belief that I don't think I could make a business 14 case in any of these firms based on a half percent difference in life-cycle cost. It's a trivial 16 difference and a hurdle rate or any of the other 17 indicators that might be used. This is not decision 18 support quality. 19 That's not a criticism of your analysis. It's saying that you've revealed that there is not a 21 significant life-cycle cost difference. 22 MR. BROOKMAN: Joe Mattingly. 23 MR. MATTINGLY: Well, when you talk about all 24 the economics, like I say, if you're not going to pay

- - if life-cycle cost analysis is not going to drive the **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 73

1 issue, then something else must be. I mean, if you 2 talk about total economic burdens, I do notice in the 3 NOPR here that for Trial Standard Level 4 it talks 4 about a significant reduction in industry net present value. That's part of the economics. There's burden 6 right there. 7 So, what is it that keeps us Trial Standard 8 Level 4 for PTACs if it's a burden on industry, it 9 means nothing to the consumer? What is it that commands us to go Trial Standard Level 4, then? I'm 11 just looking for honesty. Is there some other factor? 12 MR. BROOKMAN: Of course, it's still a 13 proposal, so your comments are especially welcome. 14 MR. MATTINGLY: The next thing we're going to see is the final rule, so -- 16 (Laughter.) 17 MR. MATTINGLY: -- if we can't discuss it 18 now, there's not going to be another time for 19 discussion. MR. BROOKMAN: Yes, Scott. 21 MR. TOUKATLY: Scott Toukatly. I would only 22 reiterate what Joe said specifically in that comment 23 because it, for us specifically, according to the 24 evaluation, hits nonstandards very hard. MR. BROOKMAN: Okay. Tom. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 74

1 MR. GUFFEY: Tom Guffey, Goodman. I think we 2 have similar issues, particularly on heat pumps and 3 particularly on larger size, in standard equipment as 4 well. We're basing a 2012 proposed standard on prototype compressors, R410A, that -- I'll just call 6 them prototype compressors. Nobody is manufacturing 7 the compressors at this point that I'm aware of that 8 work in 60 hertz PTAC, 230 volt and 265 volt. We don't 9 even have prototype 265 volt compressors to test. MR. BROOKMAN: Okay. Just one brief moment 11 for consultation here. 12 (Pause.) 13 MR. BROOKMAN: I guess, yes, final comments 14 on this issue, this Slide 45? MR. MARKUSZ: This is David Markusz. I have 16 one question. 17 MR. BROOKMAN: Yes. 18 MR. MARKUSZ: Is there any opportunity to 19 couple the efficiency levels with other DOE programs, like Energy Star or something like that, and to maybe 21 set the efficiency level for the base models a little 22 bit lower but assume the distribution is going to be 23 skewed a little bit more towards higher efficiency? 24 And, could the coupling of those programs help the discussion? No? **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 75

1 MR. BROOKMAN: Ron Lewis. 2 MR. LEWIS: Separate entities. We're setting 3 the floor where there's supposed to be a stretch. They 4 complement each other, but they're distinctively different. Many times the Energy Star program has 6 different criteria that couldn't be supported in a 7 regulation at a minimum where it's the distinction 8 between the lesser performing and the higher performing 9 units. So we really -- this is a self-supporting 11 kind of issue that -- because it will be a regulation, 12 it has to stand on its own. The voluntary program, 13 because people have the choice to include it or not 14 include, the variation and variability there, we can't use that as part of the justification for regulation. 16 MR. MARKUSZ: Okay. David Markusz again. 17 The concern that I have is that there was some 18 discussion that there was going to be Energy Star -- 19 they were looking at a possible Energy Star program for PTACs. There's a lot of customers who are looking for 21 that program as well for rebates and for other things. 22 But if you look at the variation between the 23 levels and the -- what is considered max tech, it's 24 going to make it very difficult to make an Energy Star program. So it's going to kind of eliminate that **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 76

1 ability to get that voluntary increase. 2 MR. LEWIS: That's good input. We appreciate 3 that. 4 MR. BROOKMAN: Okay. So then, moving on. MS. ARMSTRONG: Okay. The next thing I'm 6 going to talk about is the manufacturer impact 7 analysis. 8 DOE performed the manufacturer impact 9 analysis, or MIA, to estimate the financial impact of higher energy conservation standards on both 11 manufacturers of standard size PTACs and PTHPs as well 12 as manufacturers of nonstandard size PTACs and PTHPs. 13 DOE developed a separate manufacturer impact analysis 14 for standard size versus nonstandard size industries, recognizing that the manufacturers and the industry 16 dynamics are very different. 17 DOE also calculated the impact of such 18 standards on employment and manufacturing capacity. 19 The MIA has both quantitative and qualitative aspects. The quantitative part is an industry cash flow 21 analysis. The qualitative part is going out and 22 interviewing with manufacturers and trying to capture 23 their concerns as far as different levels of amended 24 energy conservation standards for the Department. So the manufacturer impact analysis consists **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 77

1 of three different phases. The first phase is the 2 industry profile. This includes preparing an industry 3 characterization, including market sales, volume, 4 trends, pricing, employment levels, financial structures. Phase two is the industry cash flow 6 analysis and developing the interview guides to send 7 out to manufacturers. 8 Phase three is the actual conducting of 9 interviews, revising the cash flow analysis based on input we receive during our manufacturer interviews, 11 and then assessing the direct employment, competition, 12 and cumulative regulatory burden of the industry. 13 Some of the data DOE received from the MIA 14 interviews is covered under confidentiality agreements. It has been aggregated to an industry level to mask 16 that data. 17 So DOE discussed with manufacturers impacts 18 on a variety of different issues in the industry as a 19 whole at each TSL. DOE assessed the impacts of standard size and nonstandard size separately. 21 The output of the manufacturer impact 22 analysis is basically the industry net present value 23 impact at each TSL and under different scenarios. 24 While I haven't presented them on this slide, all the different scenarios and the results for each TSL for **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 78

1 nonstandard and standard size equipment manufacturers 2 are presented in Chapter 13 of the TSD and an overview 3 is given in the NOPR as well as the summarized impact 4 of their capital and product conversion costs and estimates, and things that are really driving the cash 6 flow analysis. 7 In addition, some qualitative concerns were 8 captured during the MIA. These include, obviously, the 9 refrigerant phase-out, including compressor availability, increase in product cost, capital and 11 conversion expenses that are associated with the 12 refrigerant phase-out. 13 The next would be the product conversion and 14 capital costs associated with any major redesigns of equipment to meet the amended efficiency standards. 16 Third is the timing of the phase-out as well 17 as the timing of the impact of the energy conservation 18 standards. Do you redesign once, do you redesign 19 twice. That's a question manufacturers are going to have to consider. The definition of nonstandard 21 equipment as far as any reductions in product lines or 22 the availability of nonstandard products. 23 And, the ability to recover increases in 24 production costs from the consumer. In other words, any increases you see due to the refrigerant phase-out **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 79

1 or amended energy conservation standards, can you pass 2 on that cost 100 percent to the consumer. I think DOE 3 models two different scenarios in the notice. 4 So the next thing that DOE looks at is the small business impacts. By small business impacts I 6 mean a manufacturing facility and its parent company 7 with 750 employees or less. That's defined by the 8 Small Business Administration. For this industry, 9 standard and nonstandard, we identified two small businesses. 11 So at this time I'd like to open up the 12 floor. DOE would like comments on the MIA results and 13 the qualitative descriptions I just said, as well as 14 DOE particularly invites comment on the unique impacts on the nonstandard size industry. Because their 16 industry is different, it is a made-to-order industry, 17 it is a smaller industry, DOE would like any 18 considerations you may have. 19 MR. BROOKMAN: Mary Ann. MS. STOJKOVSKI: Yes. This is Mary Ann from 21 McQuay. Obviously, there is a difference between the 22 nonstandard versus the standard equipment. I think I 23 tried to, as best that I could, describe that before. 24 There is a need out there. A lot of this equipment is older equipment, older designs. The equipment we **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 80

1 support, we're the original manufacturer of a lot of 2 that equipment. 3 So we do what we can and do maintain minimum 4 standards today to the efficiencies, and we are reputable. We try to maintain that. We're not trying 6 to get out there and sell space, our equipment does one 7 thing when it actually does something else. 8 At the same time, it's a market that's going 9 to eventually go away. New construction is going to be standard equipment. Eventually, the shipments for that 11 equipment will go down over time. 12 There isn't going to be, other than trying to 13 change refrigerants, there isn't going to be a large 14 cash-in by our industry to try and redesign this 30

- year-old equipment to make it really efficient. It's 16 just not going to happen. You could take that money 17 and you could spend it elsewhere. 18 If that happens, I can tell you that there 19 will be manufacturers that will come into the market that will find the business and will put equipment out 21 there that they will say -- they will claim certain 22 efficiencies. It happens all day long, every day. It 23 is nowhere near the efficiencies you think they are. 24 We've done some testing on our own, independently, and I think a lot more of that is going to go on. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 81

1 So I encourage you to think about the impact 2 to our industry, the replacement industry, the 3 nonstandard industry, and try and understand that we 4 are somewhat limited to what we can do with that type of equipment. 6 I'm a little bit nervous about what is going 7 on and what will continue to go on even more later on 8 should we decide not to continue or maybe other 9 companies decide not to continue and not to support that market because there is no policing of some of the 11 equipment that's out there. A lot of claims are made, 12 and I don't believe a lot of that stuff that's out 13 there is true. You might be getting worse than what 14 you thought. MR. BROOKMAN: Scott. 16 MR. TOUKATLY: Scott Toukatly. Yeah, I would 17 just reiterate that the nonstandard business is 18 probably a little bit more, I don't know, different. 19 It's definitely different than the standard business as far as -- it just appears to me anyway that the 21 standard PTAC manufacturers are all certainly well 22 known, reputable manufacturers. There are many not 23 well known manufacturers in the nonstandard business 24 that shy away from regulatory issues. I even commented at lunch that just by not **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 82

1 having more of them here just tells me that it doesn't 2 matter to them. Whatever happens here, it doesn't 3 affect them in any way. They're just going to look the 4 other way and do what they do. Like Mary Ann said, nobody regulates them other than, I guess, us. We 6 regulate each other. 7 I would answer the questions here that Ashley 8 posed. Certainly, the second portion of this comment 9 would be a resounding yes as far as the classification. If we don't get the ASHRAE addendum in the 11 classification, it will definitely create a major gap 12 in the product offering that would hurt us. But it 13 would also hurt the consumer as far as eliminating a 14 very wide range of products that we offer today being classified -- having to fall into the new construction 16 category -- standard category. 17 As far as the unique impacts portion, going 18 back to the first, I'm not understanding and I guess I 19 would just ask for just a brief summary -- I'm sure in it's in here somewhere -- of why the DOE has chosen to 21 tax the nonstandard PTAC at such a much higher 22 percentage proposals over ASHRAE 90.1 (1999) versus 23 standard. Is there -- I guess, what is the reason for 24 that in a quick summary? MS. ARMSTRONG: I don't think I could answer **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 83

1 that question wholesale as far as how -- why DOE made 2 their decision. As far as why we call the nonstandard 3 size equipment unique, there are multiple paragraphs 4 kind of explaining just how your industry works, or at least from the risk factors I would be able to gather 6 during the MIA, how your industry works differently. 7 The amount of capital you guys have to play 8 with is smaller. Product conversion costs. The number 9 is skews that you offer. It's such a wide range. It's not a standardized product. It's not built by volume. 11 It's a made-to-order kind of thing. People come and 12 see you when they need this equipment. You guys tend 13 to accommodate them and change things. 14 So it's not like -- you have -- I don't know if I would say you have a lot more things to redesign, 16 but you also don't -- from my perspective, you don't 17 redesign things often. Like Mary Ann said earlier, 18 things have been around and you continue making them 19 for a really long time. I can't speak for you guys, but that was kind 21 of the opinion that I was able to gather from doing the 22 manufacturer impact analysis as far as the industry was 23 concerned. 24 MR. BROOKMAN: Mary Ann. MS. STOJKOVSKI: The other point that I'd **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 84

1 like to make as far as manufacturer impact; what's 2 unique about us is we do build, engineer, support this 3 equipment in a U.S.-based facility. Everything is 4 built by our people in Auburn, New York by a union shop. So that's different. Most standard size 6 equipment tends to be built overseas. So there is -- 7 certainly, loss of that business for us would be an 8 economic impact. 9 MR. BROOKMAN: Ron Lewis. MR. LEWIS: When Scott, I think, asked the 11 question as far as why the disproportionate impact, I'm 12 trying to recall. It's been a long day and there's 13 been a lot of good input here by everybody. But I 14 think when we presented some data earlier today and said we got it from the directory, somebody was saying 16 that it's not correct for the nonstandard size, that 17 they thought that we had some incorrect -- is that -- 18 is my remembrance correct? 19 MR. TOUKATLY: Scott Toukatly. Sure, that would certainly be a -- I mean, if that's a major 21 portion of why, for instance, they felt that ASHRAE was 22 underestimating the ability of efficiencies for 23 nonstandard PTACs, because of the data that's out 24 there, that's major. MR. LEWIS: We have to start at the max tech **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 85

1 and look at what's out there as available technology. 2 If that's wrong, what we've seen, if we've 3 misinterpreted or the information is too vague, 4 correction of that would be very helpful. It is one of the elements that goes into this. 6 MR. BROOKMAN: Ron, I think Bing maybe has 7 some information. 8 MS. LIU: Bing Liu from PNNL. Scott, I'm 9 trying to address your question why you say for nonstandard equipment we raised the bar higher compared 11 to the standard size. Raise the bar higher, you were 12 looking for the data, but let's go back to what's their 13 baseline efficiency. 14 For the baseline efficiency, what is said in here is 90.1 (1999) ASHRAE standard no matter for 16 standard size or nonstandard size. But if you're 17 looking at ASHRAE Standard 90.1 (1999) standards for 18 standard-sized equipment, it has fairly higher 19 efficiency levels compared to EPCA standards, which is the current federal minimum standards. 21 But for the nonstandard equipment, ASHRAE 22 didn't increase the bar when they published the '99 23 standard. It still stayed at the EPCA level. 24 So the starting point between these two equipment is really different. So we're raising higher **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 86

1 if you compare -- compared back to EPCA level, not 2 compared to 90.1. The data is actually equivalent. I 3 mean, relatively equivalent. Hopefully I can address 4 your question. MR. TOUKATLY: That was helpful because 6 that's kind of what I presumed and I hadn't heard 7 anybody say it until just now, is that the feeling was 8 that maybe the bar was too low before and now it's 9 catch-up. I don't have to agree with it, but at least it's an answer. 11 MR. AMRANE: Karim Amrane with AHRI. I guess 12 as far as the impact on nonstandard size manufacturers, 13 I think you have it in your analysis. When you say 14 that almost, what, 44 percent of -- between 34 percent or 44 percent of -- the collective industry values of 16 nonstandard size manufacturers will decrease by 34 17 percent to 44 percent. So I think it's significant, 18 meaning that the impact on those manufacturers will be 19 much higher than others. I'm not sure how -- what those percentages 21 translate into dollars. It's not there. But I'm 22 pretty sure that it's high, too. 23 MR. BROOKMAN: Okay. So, other comments on 24 this section, particularly the manufacturer impact analysis? Harvey Sachs. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 87

1 MR. SACHS: Harvey Sachs at ACEEE. It's 2 getting to be late. That's partly my fault. I'd like 3 to summarize where we are on nonstandard size 4 equipment. First of all, the national energy savings at 6 stake are very, very small. Secondly, the 7 manufacturing jobs at risk are relatively small. 8 Therefore, the value of stringency is relatively small, 9 given the first considerations. What is important is that there be a leak

11 proof barrier so that products nominally nonstandard 12 size are not sold into the higher efficiency standard 13 size market. 14 Toward that end, I will admit that I'm uncomfortable with the cross-sectional area requirement 16 in -- is it Appendix T? Addendum T. Thank you, Karim 17 -- because that's essentially the same as 16-by-42. I 18 would ask that the Department, perhaps working with the 19 manufacturers, look at the distribution of nonstandard sleeve sizes and come up with some criterion that could 21 be used as an effective selector. This might even be a 22 size-dependent criterion. It might be 20 percent under 23 the cross-sectional area of 670 square inches, 24 equivalent to a 16-by-42. But let's try to proceed in a rational way so **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 88

1 that we prevent the outflow of this product class where 2 it would really impact energy savings and not worry 3 about the small losses associated with product class 4 that, as Mary Ann has pointed out, is gradually going away. Fair enough? 6 MR. BROOKMAN: Additional comments? Karim? 7 MR. AMRANE: Again, I mean, I think we've 8 done our homework. As I said, this product class has 9 been in place for almost 10 years. I don't think it was abused. I think we believe that we have the right 11 definition, but we are more than willing to entertain 12 discussion on tightening up the definition if need be. 13 MR. BROOKMAN: Thank you, thank you. So, 14 Ashley, are you finished with this section? MS. ARMSTRONG: I am. I'm handing it off now 16 to Bing, who's going to talk through the rest of the 17 analyses. 18 MR. BROOKMAN: Okay. Please, Bing. 19 Utility Impact Analysis, Employment Impact Analysis, Environmental Assessment, and Regulatory Impact 21 Analysis 22 Bing Liu 23 (PowerPoint presentation.) 24 MS. LIU: I apologize. There will not be a break. Hopefully, we may have some break after this. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 89

1 So just hang in with me here. Let me go through the 2 remainder of the NOPR analyses. Let me start with the 3 utility impact analysis. 4 The primary purpose of the utility impact analysis is to investigate and to estimate the effect 6 of the reduced energy sales and the peak load demand on 7 utility industry due to the improved equipment 8 efficiency. The approach that DOE used for this 9 rulemaking is really to use the EIA's National Energy Modeling System, in short terms NEMS, to tailor for 11 DOE's building technology programs. 12 Output for this analysis include the change, 13 you can see on the screen, in their electricity sales 14 and price by region, in the relative mix of the electricity generation, and also in their -- out 16 capacity and the generation by field types as a result 17 from the different trial standard levels. 18 The details of analysis and the results as 19 part of this utility impact analysis are presented in the TSD, Chapter Number 14. Also, the summaries you 21 can find in the NOPR analysis. 22 The next part is the employment impact 23 analysis. Employment impact is one of the factors that 24 DOE considered in selecting their standards. The purpose of the employment impact analysis is to report **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 90

1 the net job change in the national economy as a 2 consequence of amended energy conservation standards. 3 Employment impact analysis includes direct employment 4 impact and indirect employment impact. The direct employment impact is any change in 6 the number of the employees for PTAC and the PTHP 7 manufacturers which has been addressed in the 8 manufacturing impact analysis. Indirect impacts are 9 those changes of employment on the customer side in their large economy skills. So that's included in this 11 part of the analysis. 12 DOE used a tool called the Impact of Sector 13 Energy Technology, in short named the ImSET model, to 14 assess the indirect employment impact. What's coming from this tool is a change of the jobs of the 16 employment and the industry output and the wage income 17 in the broader skills of the economy in the United 18 States as the result of the change of their 19 expenditures and operations of basically running the PTACs and PTHPs for higher efficiency levels. 21 Together their expenditures you put into the 22 ImSET models. The input is coming from the result of 23 the national energy saving spreadsheet tools. 24 As I mentioned, the output for this whole analysis is the job change, either increase or **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 91

1 decrease, as a result of the amended energy 2 conservation standards. Again, the result and the 3 detailed methodologies you can find in the Federal 4 Register notice and also the TSD chapter. This one is going to be Chapter Number 15. 6 MR. BROOKMAN: Maybe we'll just pause right 7 here for just a moment. Comments on employment impact 8 analysis? 9 MS. LIU: Sure. (No response.) 11 MR. BROOKMAN: Okay. 12 MS. LIU: Okay. I will proceed. The next 13 part is -- the next slide is showing the environment 14 impact analysis. DOE conducted environmental assessments to report environmental impact also as a 16 consequence of these amended energy conservation 17 standards, including the change in power plant 18 emissions. DOE used the National Energy Modeling 19 System to calculate the power plant emissions, including carbon dioxide, oxide of nitrogen, and the 21 mercury rate. 22 One thing I want to point out is for sulfur 23 dioxide emission, you can gather results from the NEMS 24 model but it's not included and DOE does not report the result as the change of the emissions due to the fact **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 92

1 the emission cap set by the Clean Air Act amendment of 2 1990. 3 Lastly, DOE, in the NOPR notice, also reports 4 the monetized value of carbon dioxide reduction. I will stay here then to see in case you have 6 any comments. 7 MR. BROOKMAN: Please. Your name for the 8 record. 9 MR. BURT: Lane Burt, NRDC. I would just like to talk about the monetized value of carbon 11 dioxide. It's nice to see it discussed, but it's not 12 put into any of the analyses. It does have an economic 13 impact. It's a financial issue. So we would like to 14 see that put into the life-cycle cost analysis and net present value. 16 Secondarily, it says in the NOPR that there's 17 a range from $0 to $14. There's no discussion on why 18 there's a range. If the number then that's used is 19 $14, that's fine, but why is it $0 to $14? There's no discussion of that. 21 As a recommendation of what the number should 22 be, the EIA new report will have a price for carbon and 23 a forecast for how to change that in the future. So we 24 would recommend that be used. MR. BROOKMAN: Okay. Thank you. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 9 3

1 MS. LIU: Thank you for your comments. 2 MR. BROOKMAN: Karim. 3 MR. AMRANE: Karim Amrane, AHRI. I think 4 including the price of carbon in the analysis now is premature. The price of carbon is speculative. We 6 don't know what it is. We don't know what it will be. 7 I think DOE is doing the right thing for this 8 rulemaking. 9 If we want to get into speculation, then maybe DOE needs to look into the cost of refrigerant 11 that we believe is going to be multiplied by 500 12 percent if there is a climate change bill that passes 13 this year or next year. But we don't know what's going 14 to happen there, either, so we're not advocating for that. 16 So I think right now we need to wait and see 17 how this carbon issue plays out, and when we have a 18 better control on prices, maybe that will be something 19 that DOE should consider. MR. BROOKMAN: Yes, Lance. 21 MR. BURT: Lane Burt, NRDC. 22 MR. BROOKMAN: Lane. Pardon me. 23 MR. BURT: It's all right. It's certainly 24 true that we're not sure what's going to happen with the price of carbon, with all three presidential **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 94

1 candidates supporting cap and trade legislation. By 2 assuming -- we're speculating that the price is zero, 3 which we know is not going to be correct, by not 4 including it in the life-cycle cost analysis. So, why would we do that when we could speculate and at least 6 get closer to what is going to be the current answer -- 7 the correct answer, excuse me. 8 MR. BROOKMAN: Okay. Thank you. Karim. 9 MR. AMRANE: Karim Amrane again. I mean, then if we speculate, then we need to speculate on 11 other things as well. Like the price of refrigerant, 12 which might be, as I said, 500 percent more than what 13 it is today. That's going to change the entire 14 analysis. So again, we need to be consistent here. 16 Let's not speculate. Let's use what we know. 17 MR. BROOKMAN: Okay. Thank you. Harvey 18 Sachs. 19 MR. SACHS: Harvey Sachs, ACEEE. I think there's not a necessity for it being an either/or. 21 Longstanding tradition of doing scenario analysis: 22 what if the cost of carbon were $18, or to use the 23 McKenzie analysis of last year, it were $50? What if 24 it were $0? How does it change the outcomes? These are reasonable things to bring to the decision-makers. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 95

1 These are likely to be much larger effects than the 2 life-cycle cost analysis we've done, and they may be 3 informative, if not definitive. They're going to be 4 important added to this analysis. MR. BROOKMAN: Okay. Thank you. Other 6 comments with respect to environmental assessment and 7 the analysis that's been provided here? 8 (No response.) 9 MR. BROOKMAN: Okay. MS. LIU: The last part of this section of 11 analysis is the regulatory impact analysis. The 12 primary goal of this analysis is to investigate the 13 national impact due to non-regulatory alternatives 14 compared to these mandatory energy conservation standards. 16 DOE analyzed the following four alternatives, 17 as shown in the screens. The method DOE used for their 18 analysis is using the National Energy Savings 19 spreadsheet models and then modifying the input of the models to take into account the above four scenarios. 21 The output of this analysis included the 22 national energy savings and the net present values of 23 these non-regulatory alternatives, and how those might 24 influence the net purchase of the higher efficiency equipment. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 96

1 Again, this analysis result is presented in 2 the NOPR analysis and also regulatory impact analysis 3 report. 4 Any comments? MR. BROOKMAN: Yes, Karim. 6 MR. AMRANE: Karim Amrane, AHRI. I guess, 7 since there is no Energy Star program for PTACs, that 8 was not considered in the analysis, right? 9 MS. LIU: Well, the -- MR. AMRANE: The voluntary program Energy 11 Star was not part of the voluntary programs that you 12 looked at. 13 I guess my question is, to follow up on what 14 Dave said before, you're setting the level so high, proposing a level so high that it probably will be 16 impossible for Energy Star to set a program in future. 17 So I think it's something DOE needs to consider 18 because we believe, and I'm sure that many of you 19 believe, that Energy Star played a big role in trying to push high efficiency product into the marketplace on 21 a voluntary basis. I think we would like a program 22 like that to exist for PTAC in the future. 23 So in doing so, in setting those efficiency 24 levels, we need to make sure there is enough room for an Energy Star program, which right now it doesn't look **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 97

1 that there will be. 2 MR. BROOKMAN: Okay. Thank you. Additional 3 comments on regulatory impact analysis? You can see on 4 Slide 59 the Department lists a summary of issues on which DOE seeks comment. There were other issues that 6 were raised today as well. But this is certainly a 7 great outline for you to use as you construct your 8 comments that will be due by June 6th, right? 9 I think that's all the material that was gathered by the Department for presentation. I see two 11 additional issues on Slide 60. I didn't know who 12 raised those and how they -- but whoever did, we should 13 try and address those now. 14 Equipment switching -- yes. Harvey. MR. SACHS: You're a little faster than I am, 16 but going back to Karim -- Harvey Sachs, ACEEE. Going 17 back to Karim's comment on -- which effectively is the 18 head room required for an Energy Star program, that's 19 typically been formulated with savings of 10 percent for the Energy Star threshold. But the new water 21 heating proposal is at less than 5 percent. 22 So it's not at all clear that under DOE 23 leadership the Energy Star program would be precluded 24 in the standards that are proposed. MR. BROOKMAN: Okay. Thank you. So now I'm **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 98

1 looking at Slide 60, having noted 59, calling that to 2 your attention for your comments to DOE. What I see 3 here, this is issues raised by interested parties as of 4 4/28/08. Equipment switching will be very likely in 6 the nonstandard size industry because the industry is 7 very competitive and most, if not all, equipment is 8 sold based on price only. Have we addressed that 9 sufficiently? MR. ANDERSON: If anyone would like to -- 11 MR. BROOKMAN: That's Wes Anderson. 12 MR. ANDERSON: This is Wes Anderson, DOE. If 13 anybody would like to speak on this topic, please do so 14 at this time. After we finish this this week and carry on with any other open issues that you want to talk 16 about, this is the time. We need to address that and 17 finish off. 18 MR. BROOKMAN: That's what follows this 19 segment. Yes, Scott. MR. TOUKATLY: Scott Toukatly. Yeah, Doug, 21 those are my comments. Those were my initial comments 22 from reading the NOPR the first pass. So yeah, I've 23 already talked about those and actually, obviously, 24 expanded on them as I've had more time to think about them. So that was pretty much a preliminary comment **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 1 99

1 that I wanted to get off from my original pass. But in 2 thinking and reading about it more, obviously we've 3 talked about them today and I've already expanded on 4 them anyway. MR. BROOKMAN: Thank you. Anybody else that 6 wishes to comment on these two that are listed there 7 before we move on? 8 (No response.) 9 MR. BROOKMAN: So this segment of the agenda is where there's an opportunity for anybody that wishes 11 to make closing remarks. In particular, if you wish to 12 draw emphasis to something you said earlier and you 13 think wasn't sufficiently covered or if there's 14 something you think needs to be covered that hasn't been covered so far, now is the opportunity to do so. 16 Discussion of Issues 17 Doug Brookman 18 MR. KINGSBURY: Question. 19 MR. BROOKMAN: Yes, please. Ted. MR. KINGSBURY: Ted Kingsbury, Goodman. I 21 guess, going back into the section on technical 22 assessment and the cost data for 410A, generic or raw 23 material pricing is there. They look low compared to 24 where we are today. Plastic resin, I guess, wasn't that far off. It's certainly comparable. How is that **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 2 00

1 being addressed, I guess, based on where we are and 2 where we're going to be? 3 MS. ARMSTRONG: Now it's my turn again. 4 MR. BROOKMAN: Ashley. MS. ARMSTRONG: Okay. So, for the cost model 6 specifically, DOE uses a five-year average cost for 7 metal prices. So if you're comparing today's prices to 8 those, they will look -- your prices today will be 9 higher than our prices, our five-year average. For the final rule DOE will update that to a 11 2004 to 2008 average of metal prices. But that's -- 12 DOE does that across the rules. 13 MR. KINGSBURY: When the final energy ruling 14 is issued, it will -- the cost model will actually reflect better what the true cost data would be for a 16 410A system. 17 MS. ARMSTRONG: I would say that for metals 18 pricing it will incorporate the latest five years. As 19 far as our 410A price assumptions as far as refrigerant and compressor pricing, stuff like that, those 21 assumptions are in the Technical Support Document. If 22 you think our assumptions are different from what you 23 will experience, I encourage you to submit data. If 24 it's not something you can submit on the record, you're more than welcome to submit it under confidentiality **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 2 01

1 agreements with us. 2 MR. KINGSBURY: I think we intended to do 3 that. 4 MS. ARMSTRONG: Okay. That's great. MR. KINGSBURY: I wanted to ask a specific 6 question on the material commodities. 7 MS. ARMSTRONG: Okay. So it's the five-year 8 average. 9 MR. BROOKMAN: Okay. Karim, one point before you -- so, just the point that Ashley just made. It 11 may not be obvious to everyone. If you've got 12 information that you think should be confidential, it 13 can be submitted directly to Navigant, correct? So 14 that you're assured of that kind of confidentiality. Karim. 16 MR. AMRANE: Karim Amrane with AHRI. I 17 guess, Ashley, a follow-up question on what Ted talked 18 about. Do you attempt in your analysis to project the 19 cost of commodities like aluminum, copper, things like that? 21 MS. ARMSTRONG: Like, future prices of 22 materials? No. We use the previous five-year averages 23 to reflect our pricing. And we do a sensitivity with 24 current prices and we show how the results would change as far as the engineering curves in the TSD. But it's **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 2 02

1 just the past five years. 2 MR. AMRANE: Okay. Because we've noticed in 3 the last central air rulemaking that whatever estimates 4 were made by DOE at the time ended up being wrong in 2006 when the standard became effective. So I know 6 it's difficult. I'm not saying -- I'm just trying to 7 understand whether you at least try to account for 8 variation in prices. 9 MS. ARMSTRONG: That's why we do an average, a five-year average. I mean, it's a historic five-year 11 average, but it's to try to get rid of fluctuations 12 that might happen in a single year. 13 MR. BROOKMAN: Okay. Dave. 14 MR. MARKUSZ: It was just a comment -- David Markusz. It was just a comment on what Ashley had said 16 about information and confidentiality. More along the 17 lines to make sure that it's marked as confidential, 18 because I don't know if you would release it if it 19 wasn't. Would you release any specific information from a manufacturer if it wasn't marked? 21 MS. ARMSTRONG: If you send me information 22 directly, I'm going to treat it as confidential. If 23 you want information released to the record, send it to 24 DOE. MR. MARKUSZ: Okay. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 2 03

1 MS. ARMSTRONG: Is that fair? 2 MR. MARKUSZ: I just wanted to make sure that 3 everybody knew that. 4 MS. ARMSTRONG: Yeah. MR. BROOKMAN: Okay. Clear? So, going -- 6 Ron Lewis. Going to Ron Lewis. 7 MR. LEWIS: Just to clarify, the information, 8 I believe, that we collect from multiple parties -- if 9 it's something that's going to help us to be more accurate and get our arms around things, it may be 11 aggregated and released in an aggregated form with 12 others. The confidentiality is just we would not 13 expose a single company with a submission. But the 14 data may be -- you wouldn't be submitting it to us if you didn't want us to use it. It may be put out in 16 some form but not identified by the company. 17 MR. MARKUSZ: Right. 18 MR. BROOKMAN: Okay. So now, as we were just 19 a moment ago, additional remarks, closing remarks from anybody? Anything that anybody else wishes to say at 21 this time? 22 MR. BENZ: Jim Benz from GE. I'm sorry to 23 beat the horse one more time. In entering this, we had 24 a concern on Addendum T. After sitting through this meeting I have a greater concern on Addendum T. Just **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 2 04

1 as a point of reference, through-the-wall air 2 conditioning industry in the United States is probably 3 pretty close to the size of the PTAC industry. 4 Probably half of the through-the-wall air conditioners being purchased today do not fit the 6 sleeve that they're installed in. It's not a small 7 minority. They are less width and less height to the 8 tune of about an inch on each side. And again, our 9 concern is that a 41 3/4-inch by 15 3/4-inch product would meet Addendum T on the square inches as well as 11 the dimensions. 12 In a regulatory scheme, I think it's 13 important to think through what people could do as 14 opposed to what people are doing. With some of the concerns that Mary Ann brought up with respect to 16 people putting product out there that doesn't meet 17 specs today, leaving that loophole in the regulation I 18 think is very risky when another alternative would 19 solve the problem. Thank you. MR. BROOKMAN: Thank you. Additional 21 comments? Scott. 22 MR. TOUKATLY: Scott Toukatly. I think the 23 only comment I would make on that is I believe it's now 24 an ASHRAE issue. I got the impression that the DOE would just adopt what ASHRAE adopts for language. So I **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 2 05

1 think it's an ASHRAE issue. Am I correct, Karim? 2 MR. AMRANE: I guess it is. But I'm sure 3 that DOE can always amend whatever DOE wants to do. 4 MR. TOUKATLY: That's true. MR. AMRANE: I guess if there are concerns 6 about this, I think, as an industry, we can resubmit 7 another addendum to ASHRAE to tighten up the definition 8 a little bit more, or DOE can do it on its own. I 9 don't know. But I think if there are concerns -- I'm not sure whether I understand the concerns from GE, and 11 maybe as an industry we need to think about this. 12 MR. BROOKMAN: Okay. Thank you. Scott. 13 MR. TOUKATLY: I guess I just need to 14 understand the process. I mean, we're under a very tight timeline right now. The DOE's NOPR seemed to 16 indicate that they were waiting to see what ASHRAE did. 17 If ASHRAE gets held up on this definition and doesn't 18 adopt it, what is the DOE's plan to do? I would 19 imagine to fall back on the existing definition, which will cause even a bigger uproar. 21 MR. BROOKMAN: Ron Lewis? 22 MR. LEWIS: We are on a fast track and we 23 can't wait for ASHRAE if there's a new discussion and a 24 study underway. We have to come to closure. So I can't tell you exactly what the outcome of that's going **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 2 06

1 to be, but I can tell you that we can't wait for some 2 other process that may take considerable time. 3 MR. TOUKATLY: So it's essentially one or the 4 other. It's either today's definition or the adopted definition. It isn't one that if the DOE sees what 6 ASHRAE does this summer and doesn't adopt anything, 7 they're -- not in the last few months are they going to 8 adopt different language or propose different language. 9 I mean, it's going to be one or the other. It's either today's language or whatever language that 11 ASHRAE may adopt between now and June. But I would 12 imagine it would be getting very late for ASHRAE to 13 change. 14 MR. AMRANE: This is Karim. I think as far as ASHRAE is concerned this is it. I mean, there's no 16 time frame to change the addendum. So it's done. 17 So if the option that DOE has today is either 18 what we have currently in the 1999 standard versus the 19 addendum, I believe that the addendum is much better. It has a much better definition than what we currently 21 have. So I think as far as DOE adopting language, I 22 think I would recommend that DOE adopt Addendum T. 23 Now, if there is a need to further improve 24 the definition, I think we are willing as an industry to discuss it and to resubmit a new addendum for ASHRAE **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 2 07

1 to consider and then to change the definition in the 2 future. But at least for the time frame we're talking 3 about, there are not too many choices. 4 MR. LEWIS: I believe you said that was in June that you expect that to be -- 6 MR. AMRANE: That's it. I mean, the review 7 process, we went through it. That's it. It's going to 8 be adopted in June. 9 MR. BROOKMAN: Okay. That was Karim speaking, followed by Ron Lewis. Now Harvey. 11 MR. SACHS: Factual question. How many 12 nonstandard models are available on the market, to the 13 nearest hundred? 14 MS. ARMSTRONG: Could you repeat that? MR. SACHS: How many nonstandard PTAC and 16 PTHP models are available today in the United States? 17 MS. ARMSTRONG: Models? 18 MR. SACHS: What's the number of models? 19 MR. AMRANE: Shipments, or are you talking models? 21 MR. SACHS: Number of models. 22 MS. ARMSTRONG: Hundreds. 23 MR. SACHS: A hundred? 24 MS. ARMSTRONG: No, hundreds. There's a lot of them available. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 2 08

1 MR. SACHS: Okay. That's not a formidable 2 number for reviewing the cut sheets to get the sleeve 3 size distribution. With the sleeve size distribution 4 of the cross-sectional area, we can consider a size cut smaller than 670 square inches, significantly smaller 6 with reference to GE's concerns, that would minimize 7 the likelihood of leak-out of nonstandard product into 8 the standard category. 9 I would request that DOE go through the darn cut sheets that are on the Web and give us a sense of 11 where that cut should be. So I'm asking, really, if 12 our only two options are the present size cut or 13 Addendum T or if we can look at a third path that is a 14 DOE adoption of a cross-sectional area or dimensional standard that would minimize the likelihood of leak

16 out. 17 MR. BROOKMAN: Francine? 18 MS. PINTO: Yeah, this is Francine Pinto from 19 the General Counsel's Office. I can't give you a legal answer of what we will -- you know, if it's just 21 Addendum T or the ASHRAE definition at this moment. 22 Certainly, we're going to elevate this issue because 23 it's an issue on the table. 24 We will do a rule by the end of September. That's absolute. So there is no negotiation there. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 2 09

1 My feeling is, to the extent that in the 2 comment period people have suggestions they would want 3 us to consider on the definition that are really 4 specific, it's probably better for us to have them. I can't tell you what we'll do because we have to go 6 through a process to decide what we can legally do. 7 But certainly, since we have a short time frame to 8 finish this up, submit whatever detailed comments you 9 can that you think would be workable. Then we'll see what we can do legally or not. 11 MR. BROOKMAN: Harvey Sachs. Ron Lewis. 12 MR. LEWIS: Ashley and I have to join in a 13 conference call. I'm going to go get on the call and 14 she can stay a couple more minutes to be in this. But there are people on a conference call waiting for us 16 right now. So, I apologize and I have to run. If you 17 want to stay to just finish, I'll get on the call and 18 tell them you'll be there. 19 MR. BROOKMAN: Okay. Thank you. MR. LEWIS: Thanks, everybody, for being 21 here. We really appreciate the input. I think it was 22 a very productive day getting everything on the table. 23 I'm very satisfied that everybody's had a chance to 24 express their opinion and did so. So, thanks very much. **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 2 10

1 MR. SACHS: Francine, with all due respect, 2 DOE has not always found the law read in quite the same 3 way as the trade associations and the environmental 4 advocates together read the law. So, I appreciate the remark, but I'm not completely comforted. 6 But that not withstanding, I think we have 7 not heard anyone today from either manufacturers of 8 nonstandard or standard equipment who want to see 9 substantial market perturbation or distortion by the sales of nonstandard equipment into standard 11 applications. So I am specifically asking for the 12 Department's help in assuring that the rule does not 13 create a loophole where there is not one now. Thank 14 you. MR. BROOKMAN: Thank you. Thanks very much. 16 So, any additional final comments at this time? 17 (No response.) 18 MR. BROOKMAN: Then, before I turn it back to 19 Wes for closing remarks, I would ask you -- there's an evaluation form in your packet. Please take 30 seconds 21 or a minute to mark it. The Department reads these 22 things carefully. They're always looking for ways to 23 improve these proceedings. 24 And for my part, I just thank you. I thought this was a very constructive dialogue today. We **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**5

10

15

20

25 2 11

1 covered a lot of ground. 2 And then to Wes Anderson for closing remarks. 3 Closing Remarks 4 Wes Anderson (PowerPoint presentation.) 6 MR. ANDERSON: Basically, I'm going to talk 7 to you about how to submit your comments. The address 8 is in your handout as well as up here. Send it to 9 Brenda Edwards. She's standing out at the corner in the back right there. 11 I would like to make a change. Even though 12 we published the NOPR on the Web May 31st, the Federal 13 Register put June 6th. So we will allow the comment 14 period to last up 'til June 6th. However, the sooner the better. 16 (Laughter.) 17 MR. ANDERSON: I'd like to thank you guys for 18 coming out and voicing your opinion. It's very 19 important to get that perspective. It's been a while since it's been available for public comment. We're 21 going to take your comments, rationalize them, and then 22 move forward for a final rule in September. Thank you, 23 and that's all I have. We're done. 24 (Whereupon, at 3:10 p.m., the meeting was concluded.) **EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**2 12 1 **REPORTER'S CERTIFICATE**  2 3 This is to certify that the attached proceedings 4 before: 5 **UNITED STATES DEPARTMENT OF ENERGY** 6 In the Matter of: **PUBLIC MEETING ON PROPOSED ENERGY CONSERVATION STANDARDS FOR PACKAGED TERMINAL AIR CONDITIONERS AND**  **HEAT PUMPS** 7 Were held as herein appears and that this is the 8 original transcript thereof for the file of the 9 Department, Commission, Board, Administrative Law Judge 10 or the Agency. 11 Further, I am neither counsel for or related to any 12 party to the above proceedings. 13 14 15 

### Wendy Greene 16 Official Reporter 17 Dated: May 6, 2008

18

**EXECUTIVE COURT REPORTERS, INC. (301)**  **565-0064**