From: Robert Berman [mailto:bermaneconomics@gmail.com] 

Sent: Wednesday, October 12, 2011 6:29 AM 

To: Bob Smith 

Cc: 'Robert Berman'; 'Phil Hopkinson'; 'Caskey, John'; Brian Coffey; 'Alex Hofmann'; 'Andrew Delaski'; 

Aris Marantan; 'Art Rosenfeld'; 'Bob Saint'; Caitlin Johnson; 'Carlos Gaytan'; 'Charlie Drexler'; 'Charlie 

Stevens'; 'Chris Bolduc'; 'Silcox, Clark'; 'Creevy, Jim'; 'Dan Cohen'; 'Daniel Young'; 'Eric Peterson'; 

'Freeman, Jeremiah'; 'Gary Fernstrom'; 'Greg Coulter'; 'Greg Rosenquist'; 'Hirsch, Bruce R'; 'James Lass'; 

'Jennifer Tiedeman'; 'Jerry Corkran'; 'Jerry Hodge'; 'Jerry Schoen'; 'Joanna Mauer'; 'John Cymbalsky'; 

'John Rossetti'; 'Katie Coughlin'; 'Ken Winder'; 'Mahesh P. Sampat'; 'Matt Miller'; Matthew Nardotti; 'Meg 

Waltner'; 'Meyers, Aaron'; 'Michael Hyland'; Michael Rivest; 'Millure, Dave'; 'Phil Harter'; 'Polinski, 

Raymond'; 'Puesh Kumar'; 'Rick Anderson'; 'Rob Greeson'; 'Robert van Buskirk'; 'Robin Roy'; 'Ryan, Paul'; 

'Scott Beck'; 'Simmons, Chuck'; 'Steve Nadel'; 'Steve Rosenstock'; 'Tim Ballo'; 'Tom Eckman'; 'Wes 

Patterson'; Zhimei Luo; rjstahara@centralmoloneyinc.com; 'Ali Ghafourian'; 'Ned Brush'; 'Dave Brender'; 

jay.ballard@schneider-electric.com; Kenneth.Harden@schneider-electric.com; 'Tom Patzner'; 'Steve 

Nizinski'; 'Richard Parker' 

Subject: Re: Distribution Transformer Loading and other Analyses 

My thoughts as follows: 

1. The nature of social costs and benefits different from private or individual costs and 

benefits so that the answer to "who should pay" is "not me" (knowing that I can't be 

excluded from benefits, or that my share of the cost can't matter to everyone else because 

it's so small, but it matter mightily to me.) Pull out the words "environmental costs, 

impact on energy prices" and replace them with "national defense". Is your position 

different? 

2. The nature of private company hurdle rates are not the public's or Government's business, 

and I certainly do not suggest we make it so. That would include not adopting private 

company hurdle rates for high(er) risk investments to guide a decision on low(er) risk 

public matters. What I propose is that we set a MEPS, using considerations appropriate to 

the reasons for the MEPS determination. 

3. If the consumer made the decision for its own use, and it did not collectively impact 

others, I would be far more sympathetic to the voluntary example. Your example of the 

EPA action appears to be on point. 

4. I suspect wiggling would be deterred by fire codes and safety considerations -- and 

hopefully the advice of a knowledgeable, risk averse engineer who would point out that, 

on occasion, many outlets may me in use; not to mention power strips chained like 

Christmas tree lights (yes, a confession of an errant strip stringer). But the fact remains 

that the actual use studies show that the loads are much lower than 35%, and that the 

energy conservation culture will drive the loads further down. 

Regards,

Robert A. Berman, Principal

Berman Economics

www.BermanEconomics.com
1915 Grand Court

Vienna, VA 22182

703‐281‐0490

703‐655‐8398 (cell)

BermanEconomics@gmail.com

On Oct 11, 2011, at 10:45 PM, Bob Smith wrote: 

Dear Robert:

I am very appreciative to receive your excellent & very  well‐written reply to my questions earlier.  If I

may be allowed, I would like to pursue your thoughts a little further.

1. Referencing your statement: Moreover, there are public benefits (e.g., environmental costs, impact 

on energy prices, etc) that is a fundamental part of the reason for Federal intervention in the 

market in this case. 

Question:  Who should bear the higher costs for the higher efficiency transformers?  The manufacturers,

the end user customers, or the USA taxpayers?  Should these higher cost not be borne by those who

benefit the most?

2. Referencing your statement: In the case of energy conservation, a 3-year payback period seems 

inappropriate. 

Question:  Do you really believe that our committee is going to change the investment guidelines of a 3‐

5 year payback criterion for incremental capital equipment investment used by almost every private

enterprise in our country?   How do you propose we tackle this challenge?

3. Referencing your statement: Energy Star appliances are a great example. The consumer looks at 

the difference in cost and efficiency, evaluates the efficiency at current energy prices, and 

decides whether it's a good buy. Nothing like that is available here: 

Question:  Are you aware that we Low voltage transformer manufacturers in early 2007 were attaching

the Energy Star Label on our TP‐1 transformers.  Before the end of the 2nd quarter of 2007 the EPA

withdrew its permission for the transformer manufacturers to use the Energy Star label on TP‐1

transformers.

4. Referencing your statement: What I am unwilling to accept is an argument that asserts a reality 

based on the regulatory measurement decision 

Question: Why don’t you think that a higher mandated efficiency for transformers won’t cause the end

user to wiggle around for a viable lower cost alternative and take advantage of the excellent thermal

rating of the transformers made today and place higher loads than the 35% we are now assuming for

Low Voltage?  
I am truly interested in your extending your thoughts on these subjects as I truly don’t know what the

answers should be in our present market driven economy.

Regards,

Bob Smith, PE

Product Manager

Federal Pacific

601 Old Airport Road

Bristol, VA 24201 

TEL: (276) 645-8836

FAX: (276) 645-8212

CELL: (276) 591-6143

Email: bsmith@federalpacific.com

From: Robert Berman [mailto:bermaneconomics@gmail.com] 

Sent: Monday, October 10, 2011 10:49 PM 

To: Bob Smith 

Cc: 'Robert Berman'; 'Phil Hopkinson'; 'Caskey, John'; 'Brian Coffey'; 'Alex Hofmann'; 'Andrew Delaski'; 

'Aris Marantan'; 'Art Rosenfeld'; 'Bob Saint'; 'Caitlin Johnson'; 'Carlos Gaytan'; 'Charlie Drexler'; 'Charlie 

Stevens'; 'Chris Bolduc'; 'Silcox, Clark'; 'Creevy, Jim'; 'Dan Cohen'; 'Daniel Young'; 'Eric Peterson'; 

'Freeman, Jeremiah'; 'Gary Fernstrom'; 'Greg Coulter'; 'Greg Rosenquist'; 'Hirsch, Bruce R'; 'James Lass'; 

'Jennifer Tiedeman'; 'Jerry Corkran'; 'Jerry Hodge'; 'Jerry Schoen'; 'Joanna Mauer'; 'John Cymbalsky'; 

'John Rossetti'; 'Katie Coughlin'; 'Ken Winder'; 'Mahesh P. Sampat'; 'Matt Miller'; 'Matthew Nardotti'; 'Meg 

Waltner'; 'Meyers, Aaron'; 'Michael Hyland'; 'Michael Rivest'; 'Millure, Dave'; 'Phil Harter'; 'Polinski, 

Raymond'; 'Puesh Kumar'; 'Rick Anderson'; 'Rob Greeson'; 'Robert van Buskirk'; 'Robin Roy'; 'Ryan, Paul'; 

'Scott Beck'; 'Simmons, Chuck'; 'Steve Nadel'; 'Steve Rosenstock'; 'Tim Ballo'; 'Tom Eckman'; 'Wes 

Patterson'; 'Zhimei Luo'; rjstahara@centralmoloneyinc.com; 'Ali Ghafourian'; 'Ned Brush'; 'Dave 

Brender'; jay.ballard@schneider-electric.com; Kenneth.Harden@schneider-electric.com; 'Tom Patzner'; 

'Steve Nizinski'; 'Richard Parker' 

Subject: Re: Distribution Transformer Loading and other Analyses

 

Thanks for you response, Bob. 

 

I don't take issue with any analysis of how a transformer manages a load, or the technical aspects 

of how a transformer is designed to manage that load. The nature of that load, though, I accept as 

a given. In the LV meeting at the end of September, I was surprised to learn that the LV dry load 

was a low as it was. Couldn't imagine why anyone would deliberately oversize a transformer so 
inefficiently. A near-by engineer simply said "fire codes" and that immediately made sense. I 

was also directed to ASHRAE and related K-12 studies that assessed the likelihood of further 

falling loads due to increased efforts for energy conservation, and the need, for safety reasons, to 

maintain the capability for a full load on every outlet. I view that load as a reality -- a fact of life 

-- something as an analyst I cannot choose to disregard. I also see the load for measurement of 

efficiency, for manufacturer compliance purposes, as a separate and separable question. 

Although my own predilection is that the load for measurement "ought" to be the "real" load, I'm 

certainly prepared to hear arguments for doing otherwise; recognizing that they are not the same. 

What I am unwilling to accept is an argument that asserts a reality based on the regulatory 

measurement decision. That's at best backwards. Indeed, I would insist that the impact evaluation 

be done at the real load; possibly even considering some alternative measurement points on cost 

and efficiency given the real load. 

 

As far as a payback period is concerned, my own preference is for an incremental rate of return 

given my orientation to economics. However, since one is simply the reciprocal of the other, I 

have no objection if someone is more comfortable having gone to a different school. Some 

recognition of the cost of money, productivity of capital, and business risk is absolutely 

necessary, whether a hospital or cookie factory. The question, then, is the appropriate hurdle rate 

(or payback period) for the investment. In the case of energy conservation, a 3-year payback 

period seems inappropriate. That would correspond to a 33% return on investment, and is 

consistent with substantially higher costs of capital than we see in the current economy, and 

substantially greater risks than is present in an energy savings investment, whose only real 

private risk is a substantial fall in energy prices. Moreover, there are public benefits (e.g., 

environmental costs, impact on energy prices, etc) that is a fundamental part of the reason for 

Federal intervention in the market in this case. Those considerations would obviate for a criteria 

that may be different from the one some companies may use in their private, more risky 

investments. At this point, I would not recommend a particular PBP, but support one based on an 

appropriate assessment of the additional risk to consumer, with appropriate recognition for the 

additional, social return. 

 

With respect to an "economically justifiable" investment: generally speaking, it is one consistent 

with the opportunity costs -- with what you give up in order to have it. Similar to the reason for a 

hurdle rate, it is what a purchaser give up in order to have it (or not have it). If users (electricity 

consumes) made the investment decision, and there were no third-party benefits or costs, the 

decision would be rather straight forward. Energy Star appliances are a great example. The 

consumer looks at the difference in cost and efficiency, evaluates the efficiency at current energy 

prices, and decides whether it's a good buy.Nothing like that is available here: the consumer does 

not get to direct the utility's purchase, and there are other, non-market costs. The situation was 

beautifully illustrated by a conversation I had with the transformer purchasing manager at a 

major IOU. I pointed out that the energy savings associated with the incremental cost of an 

efficient transformer in a particular situation resulted in a return on investment of more than 80% 

annually (PBP= about 15 months), based on current energy prices alone. He agreed, but properly 

noted that his company and stockholders did not get it. Except for a very small return on the 

incremental investment, it all went to the ratepayer. And that doesn't even begin to address the 

environmental and other social costs. That's the reason for the Federal action. Cookie factories 

can figure out how to run their businesses w/o any Federal help or direction. 
 

Hope that helps. Look forward to seeing you Wednesday. 

Regards,

Robert A. Berman, Principal

Berman Economics

www.BermanEconomics.com

1915 Grand Court

Vienna, VA 22182

703‐281‐0490

703‐655‐8398 (cell)

BermanEconomics@gmail.com

 

On Oct 10, 2011, at 4:51 PM, Bob Smith wrote: 

Dear Robert:

Phil’s paper utilizes a lot of good and diverse loading situations.  I believe his analysis is going to be as

accurate as we’ll find anywhere.   Tom Paztner wrote an interesting follow‐up (attached) to his

comments during the last meeting.  His comments started me thinking about another source for loading

on 600 volt dry transformers.  That source, which has not been fully utilized, includes the many

consulting engineers (Fluor, Black & Veatch, Kiewit, Burns & McDonald, O’Neal, CH2MHill, etc.) that are

specifying the power ratings of the LV Drys based on their connected loads.  I’d encourage those doing

the technical loading analysis for this committee to utilize this source.  Phil’s data; however, may still be

much more valuable, because it is empirical by measurements actually made at installations.

Robert, in the area of economics I would value greatly your listing of attributes that fall into the category

of “economically justifiable”.  For instance, in the attached note that I sent last week I expressed great

concern that the “A” and “B” values were not appropriate for our ICI customers.   What do you think?  

How do you feel about the appropriate payback period for an incremental investment by a hospital,

paper mill, or a tire plant?  I would greatly value your input on these subjects.  For I am also searching

for the right answer to the equipment efficiency question, whether it be a gasoline engine, steam

turbine or a transformer.

Going back for a moment on your concern for the loading on transformers, I think I can say with almost

perfect accuracy, that if we establish efficiency levels another 1⁄2 percentage point higher for the Low

Voltage Transformers,  the consultants and end users, as they are faced with substantially increased
pricing, will definitely start buying smaller size KVA ratings with the effect that the loading as a

percentage  of nameplate rating will exceed the assumed 35% that we are now using.  For the sake of

energy conservation I don’t think this is a good outcome.

Sincerely,    

Bob Smith, PE

Product Manager

Federal Pacific

601 Old Airport Road

Bristol, VA 24201 

TEL: (276) 645-8836

FAX: (276) 645-8212

CELL: (276) 591-6143

Email: bsmith@federalpacific.com

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From: Robert Berman [mailto:bermaneconomics@gmail.com] 

Sent: Monday, October 10, 2011 2:40 PM 

To: Richard Parker 

Cc: Phil Hopkinson; Caskey, John; Brian Coffey; Alex Hofmann; Andrew Delaski; Aris Marantan; Art 

Rosenfeld; Bob Saint; Bruce Smith; Caitlin Johnson; Carlos Gaytan; Charlie Drexler; Charlie Stevens; Chris 

Bolduc; Silcox, Clark; Creevy, Jim; Dan Cohen; Daniel Young; Eric Peterson; Freeman, Jeremiah; Gary 

Fernstrom; Greg Coulter; Greg Rosenquist; Hirsch, Bruce R; James Lass; Jennifer Tiedeman; Jerry 

Corkran; Jerry Hodge; Jerry Schoen; Joanna Mauer; John Cymbalsky; John Rossetti; Katie Coughlin; Ken 

Winder; Mahesh P. Sampat; Matt Miller; Matthew Nardotti; Meg Waltner; Meyers, Aaron; Michael Hyland; 

Michael Rivest; Millure, Dave; Phil Harter; Polinski, Raymond; Puesh Kumar; Rick Anderson; Rob Greeson; 

Robert Berman; Robert van Buskirk; Robin Roy; Ryan, Paul; Scott Beck; Simmons, Chuck; Steve Nadel; 

Steve Rosenstock; Tim Ballo; Tom Eckman; Wes Patterson; Zhimei Luo; 

(rjstahara@centralmoloneyinc.com); Ali Ghafourian (aghafourian@ermco-eci.com); Ned Brush 

(Ned.efbrush@gmail.com); Dave Brender (dbrender@cda.copper.org);jay.ballard@schneiderelectric.com; Kenneth.Harden@schneider-electric.com; Tom Patzner (thomas.patzner@us.schneiderelectric.com); Steve Nizinski 

Subject: Re: Distribution Transformer Loading and other Analyses

 
Richard, 

 

I have carefully reviewed the HVOLT analysis. Although I am not an engineer, and will not 

comment on particular engineering designs, I am concerned about a number of the assumptions 

made regarding electricity utility system economics as well as the transformer prices. The latter 

appear at odds with published market data and appear to misquote the DOE PTSD. As the 

analytical conclusions appear to be riven by the assumptions, it is important to put the 

assumptions in their proper context. Attached are my detailed comments. 

 

<Patzner.doc><October 6.doc>