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Another for instance:

The National Science Foundation made a grant of $391,000 to the Southern California Gas Co. early this year to "install a solar assisted gas water heater during construction of a multiple unit dwelling and a second (to be) retrofitted into another unit already built."

The Southern California Gas Co. has strongly marketed against Piper Hydro for the last 3 years, including financing a major ad campaign for one of our competitors while they were involved in a court suit trying to capture our patents. They have advised our potential customers not to use our system, including solar. We are now in the position of having the Federal Government finance them to compete with us. In fact, a large builder who had been negotiating with us to utilize our solar system has advised us that they are "going with the gas company, instead." And they told us that last week and said the gas company was going to get them a Federal grant.

We do not believe the purpose of the National Science Foundation was to harm our business. But nevertheless, that has been the result. Another for instance:

We recently went through the first stages of a value engineering proposal for barracks being built now for the Navy by a private contractor at Camp Pendleton Marine Base.

After going through the actual bid amounts on the steam driven space heating/water heating system that was proposed, we estimated that we could save $300,000 in costs, install a solar system, and save at least 60 percent of the energy that will be expended over the life of the buildings. We dropped the proposal when we found that the Navy on the Pacific coast could not buy a solar system.

Senator MCINTYRE. Question. What do you mean by "could not buy a solar system?"

Mr. PIPER. We went to Congressman Anderson's small business meeting at the naval facility in Long Beach.

Senator MCINTYRE. Long Beach?

Mr. PIPER. Yes. And we asked the second in command of purchasing of the Navy on the west coast, who was at that meeting, who made the statement that everybody in the audience today sells a product that we buy. I personally went to the podium after he finished his speech, and I said we are doing a value engineering analysis for a private contractor selling a mechanical system to the Navy right now, and the mechanical system that we sell is a solar system. And he said, "I am sorry, if you sold it to me for a dollar I could not buy it." And I asked him if I went to San Bruno, could they accept it (San Bruno is the head of the Naval Purchasing District for California) and he said "No, only Washington could approve such a system, sorry," so we dropped it.

And let me say that the Federal Government then spent $300,000 more than they needed to, and they put in a steam-driven space heating/water heated system, and those barracks are under construction right now.

Senator MCINTYRE. Where?

Mr. PIPER. At Camp Pendleton. The contractor is Pankow.
Senator MCINTYRE. When did they do this?

Mr. PIPER. They started construction about 221⁄2 months ago.
Senator MCINTYRE. Two and a half months ago. Thank you.

Mr. PIPER. I will also make another observation. That system has been installed in military housing for probably the last 35 years, and it is considered by the mechanical engineering trade as a safe design. It is what I call a drawer design, you open a drawer and you pull it out and you do it again.

Another instance:

After our system has been utilized in over 600 dwelling units insured by HUD, and the architecture and engineering division in the central office in Washington has investigated and recommended it, the San Francisco office has prohibited its use after ostensibly investigating the same projects. You will notice, and you have the letters, that in the letter prohibiting the system, they are "concerned" about safety, and so forth, and no specific charge is made in the whole document except to mention lack of access to valves at the terminal units.

Since our system doesn't have any valves in it, we wonder if they even knew what they were looking at.

Senator MCINTYRE. They probably didn't.

Mr. PIPER. And it occurred to us that maybe it wasn't even our system on one of our projects, but we were nevertheless prohibited from any HUD projects from that office.

And I will make another observation. I just found out yesterday that the 220 unit project called Lytton Gardens that we completed, which was done through that office in downtown Palo Alto (and I invite you to look at that project if you would like to see one with our system installed in it) came in for approximately 50 percent of the next lowest mechanical bid.

Senator SPARKMAN. Well, let me ask this question: Do I understand that the west coast refused to let you use it in the first development, but they did not refuse to let you use it in the second one?

Mr. PIPER. No, sir. Washington (except for a few people responding to letters, and I believe they were ill-informed) that is to say the A. & E. Division of HUD, which is Jim McCullough's Division, has been most objective. They sent a man named Nate Eure to the west coast, a mechanical engineer, who I met there. I believe he did a thorough analysis, as he visited each of the projects with our system in it, which were HUD insured. Subsequent to that time the San Francisco office, who we have been in direct disagreement with over policy, prohibited the system.

Senator SPARKMAN. Was that the San Francisco office of HUD? Mr. PIPER. Yes. They are autonomous. They do not have to follow what the Washington office suggests. They can do whatever they would like to do, apparently. That is, I am jumping into an area that you may or may not want to ask me about, but that is one of the criticisms of HUD. The people in Washington have a hard enough time trying to determine whether new systems and processes are good ones or not, and if they go to the trouble to determine this, the local office does not have to accept their determination. They make their own. determination, and they may or may not be qualified to do so.

Senator MCINTYRE. The decisions in San Francisco are not subject to appeal here in Washington, the head office of HUD?

Mr. PIPER. I don't know if appeal is the correct word. I think if you make enough noise, which is obviously my approach at this point,

we have threatened to sue the San Francisco office of HUD. And that threat is still sitting in abeyance until we find out if it is possible for Washington to do anything about it. I think Washington wants to, but I don't know whether they are able to or not under the law. It is not for want of their trying.

Another instance. The mayor of Los Angeles, Tom Bradley, just asked the president of the Water and Power Commission to apply for a "solar grant" from ERDA for a major demonstration of solar power in the city of Los Angeles.

We have avoided doing business with the city of Los Angeles due to the extreme harassment we received from that same Department of Water and Power while they used their influence to cause builders to go "all electric" in the late 1960's.

And I want to emphasize the word extreme.

And we can go on and on, and on.

Being blunt about it, we do not want your sympathy but only the right and opportunity to compete on a fair and even basis.

Which brings me to the interim report, National Plan for Solar Heating and Cooling, Residential and Commercial Applications, dated March 1975. Mr. Fields and Mr. Rice of ERDA asked that I address this plan since little could be done about past occurrences and this plan Ideals with the future.

So I have.

In the 2 weeks since I received it, I rewrote it.1

I apologize for the typographical errors and the fact that the charts aren't retyped. Since the report runs 119 pages, we just didn't have enough time to do that part too.

However, what little knowledge I've gained about the building industry in the last 13 years, I've tried to incorporate into this document so it will work.

The major changes, I'll delineate for you.

First, on page 40 as Task C.4.2, I changed the method of picking a project for a solar system and established a budget formula which determines whether a project receives a priority or not.

Essentially, if the original projected cost of a heating, ventilating, and air-conditioning system is no more than doubled by utilizing a solar system instead, it goes to top priority. The original cost is determined by the cost breakdown given the lender.

Instead of trying to pick an area, find a builder, find a project, and so forth-which I incidentally believe is extremely unwieldly and time consuming this method calls for a team of the builder, developer and the solar system packager which can be the engineer, the architect, the mechanical engineer, the building contractor or any of these or all of them, to apply for a grant with a project already to go. By my budget, if that proposal is over 200 percent, they don't get the priority. Senator MCINTYRE. Would you give me an example of that?

Mr. PIPER. Yes. If you have a 100-unit multifamily project, and you do not have any a r-condition ng, you have heating and water heating only, and the cost for the mechanical system, the bottom of the line cost for the heat ng and water heating in that project comes to, say, $800 per apartment or condominium (which it is easy to deter

mine from the cost breakdown given the lender), I would suggest that the team be required to certify the cost breakdown given to the lender. Then f the total cost to put the solar system which replaces that original $800 water heating and space heating system in that project does not come to more than $1,600 per dwelling unit, the application for the grant goes to top priority.

Senator HATHAWAY. How did you arrive at the 200 percent?
Mr. PIPER. Past experience.

Senator HATHAWAY. Most people think it should be higher than that. Mr. PIPER. After 7,000 dwelling units, I can tell you what it costs to put a system into an apartment or into a single family house

Senator HATHAWAY. Now, how does this amortize out vis-a-vis coal or oil or gas?

Mr. PIPER. Someplace between 5 and 10 years, depending upon the energy usage, and the interest on the money and the length of the loan.

Senator HATHAWAY. What interest factor are you taking?

Mr. PIPER. Current.

Senator HATHAWAY. Current, 8 or 9 percent?

Mr. PIPER. Yes, and less than 10 years, that is the criteria that we have used.

Senator HATHAWAY. And the usage, the current usage, of course? Mr. PIPER. Yes, and the usage varies from area to area.

Senator HATHAWAY. Yes, but you have enough experience to know approximately what it is?

Mr. PIPER. This is a general rule of thumb.

Senator HATHAWAY. So after 10 years have occurred, it is down so that the solar user is saving considerable costs?

Mr. PIPER. Yes, sir.

Senator HATHAWAY. Let me ask you one more question on the $800. These units that you say are $1,600 to install, what would you estimate would be the maintenance and the annual expenditures?

Mr. PIPER. The maintenance, assuming that you encourage the use of what I consider to be a good system, and I would assume that is not really difficult to determine, although it may be more difficult for the Government than it is for the private sector, I would assume that the maintenance would be less than with a conventional system. In our system, there are no moving parts on the solar side except for a small pump, and the conventional Honeywell control. The system is virtually as good as the conventional Honeywell Aquastat, that you buy off the shelf.

Šenator HATHAWAY. What is the expected life of your system?

Mr. PIPER. The major components should outlive the building, because they are essentially galvanized steel, aluminum, and copper. Senator HATHAWAY. Thank you.

Senator MCINTYRE. Thank you, Senator. Go ahead, Mr. Piper.

Mr. PIPER. One of the major points I had to make with the rewrite of the document is that as you will see on page 105, the number of dwelling units with solar systems installed under the grant program jumps from 350 to 18,900 without increasing the budget. This is, of course, level I, the lowest funding level. And this is using my formula. That is to say, just to clarify this, instead of 350 dwelling units for

tion you take $55 million, and you will get just under 20,000 dwelling units installed with solar systems if you say we will fund systems that are 200 percent of a normal system in costs. And I think that is where it ought to be.

Incidentally, I think level III is the most appropriate which would provide 63,500 dwelling units, at $300 million, with solar systems over the next 5 years and begin to have some impact on energy conservation. You will note also on page 107, that I have restructured the budget. I am sure ERDA is tired of people telling them that there is a mistake in the original document. Column I only added to $89 million and not $109 million as the total said. But I used $109 million anyway, which looked like the right number. And I am not criticizing them for that because I make mistakes in budgets too.

I also changed the "grants" for hardware and system development to "loans" for the same. I do not think this is an absurd change.

This change appears throughout the document, and task D.3 on page 58, is an example. My reasoning in this area is that if the Government was not going to ask for the money back, what incentive would a hardware manufacturer have to really develop something useable? And besides, I couldn't picture a large manufacturer being given my tax money so he can improve the technology I've scrimped so hard to develop.

Maybe that's unfair, but I can't help it.

Also on pages 40 through 42, I wrote some control into the program so builders won't be quite so tempted to try and rip off the Government. And finally, under IV, the centralized market, page 113, I tried to put the utilities in a position where this program might help, rather than hinder, them which hopefully will attract their support. There are positive actions the Government can take to help alleviate the growth pattern that demands high and huge capital expenditures by utilities.

Incidentally, I would like to point out that there are some utilities in the United States that currently are promoting the use of solar energy without competing with small business.

Senator MCINTYRE. What was that again, please? There are some utilities that are doing what?

Mr. PIPER. That are promoting the use of solar energy in the United States without competing with small business. One of those is Southern Union Gas, headquartered in Dallas, and a recent one is Washington Natural Gas, who have just decided to follow a similar program.

All in all, I wouldn't have written the ERDA document in this manner, but as I said, I think what you have now will work.

Just in passing, I noticed a diagram of a system on page 98 which apparently infringes one of my issued system patents. I trust that if it does, ERDA will either change the diagram or see that I collect that "modest royalty" they talk about. I couldn't resist that.

I have only a couple of more observations and then my statement is finished.

Based upon my rewrite of the national solar plan, I asked several members of the building industry to write me a short letter stating whether or not they would like to participate under the terms and conditions I described. The time was very short; in fact, less than a

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