Executive Court Reporters (301) 565

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UNITED STATES OF AMERICA

DEPARTMENT OF ENERGY

**MEETING of the MV WORKING GROUP** 

Volume I

American Public Power Association

1875 Connecticut Ave., NW 12 th Washington, D.C. 20009 Floor

Wednes day
Novem ber 30 , 201 1

**Facilitator :** 

Richard Parker University of Connecticut Law School

**Host :** 

Edison Electric Institute 701 Pennsylvania Ave NW 4 th Washington, DC FloorExecu tive Court Reporters (301) 565

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**Participants Identified:**

Gene Andert RGA Magnet Wire

Rick Anderson Fayetteville Publi c Works Commission

Tim Ballo Earth Justice 1625 Massachusetts Avenue Suite 702 Washington, DC 20036

Scott Beck Lakeview Metals

Robert Berman Berman Economics 1915 Orchid Court Vienna, VA 22187

John Caskey National Electrical Manufacturers Association

Jerry Corkran Cooper Power Systems

Greg Coulter Consultant Prolec GE

Jim Creevy National Electrical Manufacturers Association 1300 North 17 th Suite 1752 Street

Rosslyn, VA 22209

Andrew deLaski
ASAP 20 Belgrade Ave, Suite 1 Boston, MA 02131

Tom Eckma n Northwest Power and Conservation CouncilExecu tive Court Reporters (301) 565

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Gary Fernstrom Pacific Gas & Electric Company 13055 Parkhurst Dr Oakland, CA 94619

Chuck Foster Edison Electric Institute

Carlos Gaytan Prolec GE

Robert Greeson Federal Pacific Company

Bruce Hirsch Baltimore Gas and Electric , EEI

Gerald Hodge Howard Industries PO Box 1586 Laurel, MS 39441

Alex Hoffman American Public Power Association

Phil Hopkinson HVolt, Inc.

Maxine Javitz ERRC (GE)

Aaron Meyers Cooper Power Systems

Dave Millure Metglas Incorporated 440 Allied Drive Conway, SC 29526

Steve Nadel American Council for an Energy

- Efficient EconomyExecu tive Court Reporters (301) 565

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Wes Patterson ABB, Inc.

Eric Petersen AK Steel

Ray Polinski Allegheny Ludlum

- ATI

James Rakowski ATI Allegheny Ludlum

Steven Rosenstock Edison Electri c Institute 701 Pennsylvania Avenue NW Washington, DC 20004

- 2696

Robin Roy Natural Resources Defense Council 1200 New York Avenue, NW, Suite 400 Washington, DC 20005

Paul Ryan Hitachi Metals America 800 Grand Avenue, Suite AG

- 6 Carlsbad, CA 92008

Bob Sa int National Rural Electric Cooperative Association

Mahesh P. Sampat EMS Consulting 1180 Brookview Dr Athens, GA 30606

Jerry Schoen AK Steel Corporation 705 Curtis Street Middletown, OH 45043

Mike Shannon RSA Magnet Wire

Chuck Simmons Progress EnergyExecu tive Court Reporters (301) 565

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Jim Rakowski Allegheny ATI

Antonio Trujillo Cooper Power Systems

Ken neth Winder
NRECA

**Participants from DOE:**

Sarah Butler

Dan Cohen General Counsel

John Cymbalsky

Jim Raba

**Participants from Navigant**  **/LBL :** 

Brian Coffey Navigant 1801 K St. NW Su ite 500 Washington, DC 20006

Mike Rivest Navigant

Rob Carmichael Navigant

Matt Nardotti Navigant Consulting

Chris Bolduc Lawrence Berkley National Laboratory Berkeley, CA 94720Execu tive Court Reporters (301) 565

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Katie Coughlin Lawrence Berkley National Laboratory

Art Rosenfeld (via ph one)
LBL

**Webinar Attendees**

Jerry Allen Metglas, Inc.

Pam Costello Navigant Consulting

Charles Drexler Ky. Assoc. of Electric Coops.

David Flaten Xcel Energy

Jeremiah Freeman New West Technologies

Caitlin Johnson Navigant Consulting

Brian Kaja
Gen eral Electric

James Lass Cleco Power LLC

Christopher Lau Navigant Consulting

Richard Lyke AK Steel

Tom Petrosino TRP Consulting

John Rosetti Memphis Light Gas and WaterExecu tive Court Reporters (301) 565

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Jeff Schneider Cooper Power Systems

Bob Smith Federal Pacific

Luo Zhimei Navig ant ConsultingExecu tive Court Reporters (301) 565

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**AGENDA**

**ITEM PAGE** 

Welcome, Mr. Parker 9

Self

- Introductions 12

Agenda Review 1 5

Discussion of Latest Liquid Immersed Analysis Results :

Updated Engineering Analysis Mr. Coffey 19

Relationship Between LCC and Dollars/Watt Metrics
M r . B olduc 70

Department approaches to negotiations
M r . C ohen 86

Presentations/Proposals

Steel Manufacturers, Mr. Polinski 127

NEMA, Mr. Caskey 139

Advocates, Mr. DeL aski 174Execu tive Court Reporters (301) 565

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9:1 8 a.m. 1

3 P R O C E E D I N G S 2

MR. PARKER: Welcome everyone

. I thank 4

everybody for coming. Welcome

. We have a lot of 5

work to do today, and it’s been a very, very 6

exciting 24 hours for a lot of us, I know. I want 7

to first thank our h ost, Mike Hyland of the American 8

Public Power Association for giving us this 9

conference room to meet in for the next couple of 10

days. It’s a beautiful space, and very nice thing 11

to do that. I don’t think he had any idea what he 12

was getting in for when he agreed to this hosting 13

role, including getting long documents late at night 14

to copy on the night before the meeting. He’s been 15

Absolutely heroic in his efforts for us, and I 16

really, really appreciate it. So thank you, Mike, 17

for all this. It’s been a hu ge help already. 18

We’re improvising a little bit because as 19

I think a number of you heard, there’s a little 20

snafu in the analysis for this round, some errors

-- 21

an error that was detected in previous analysis was 22

caught. I think it’s credit to the integr ity of th e 23

team that they pointed this out and brought it to 24

our attention. The analysis that you have in front 25Execu tive Court Reporters (301) 565

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of you is an updated analysis with 2011 materials 1

prices. So we should be good to go with the 2

analysis. 3

What I’d like to do to start is firs t turn 4

the mic over to Mike Hyland who will give us 5

appropriate view of logistics, where the conference 6

rooms are, where the breakout rooms are, the 7

restrooms, lunch arrangements. And then we’ll go 8

around the table and then the room with 9

introductions, an d then the phone for introductions. 10

So, Mike, it’s all yours. 11

MR. HYLAND: Thanks. Can you hear me back 12

there? Welcome. Logistically, first off, the 13

bathrooms, need a bathroom break, the easiest one is 14

right outside

-- there’s a little basket that Ba rry 15

has. (Laughter.) You just go out the glass doors 16

and you take a right, and the women’s room is down 17

there by the third door, and the men’s room is past 18

that. We do have another bathroom inside and Chuck 19

will lead you there since he knows where it’s at. 20

From the fire point of view, emergency, go 21

out the glass doors and you would take a left, not 22

the elevators, take a left and there are two stair 23

cases that go all the way down and lead out on to 24

the street here. What we typically say is go to the 25Execu tive Court Reporters (301) 565

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Hi lton side, right out front, to congregate there so 1

we’ll know who’s here. 2

Lunch is on your own. I’m not sure how 3

far we’ll get, how we’re going to break, but there’s 4

a lot of nice places to eat around here. Some will 5

take you forever, unfortunately. In side the 6

building, if you go out the front door and take a 7

right, there’s actually a little deli that’s 8

attached to this building. If you walk just a block 9

down there’s multiple places if you want a sandwich. 10

There’s coffee and juices in the back, and so das. We 11

will have cookies later this afternoon. My staff is 12

here, but we’ve got the executives in town. We’ve 13

got multiple meetings going on, so we’re pretty 14

busy. Just let me know and I’ll get you what you 15

need

-- if you need copies made, let us know. 16

The break

- outs, right through that door in 17

the back, you see that door that’s in the wall, we 18

have three glass little conference rooms, each one 19

probably fits about seven, eight, ten people max. I 20

also have a larger one for a group of say, 12 to 14, 21

and that’s back over near the internal bathrooms. 22

I’ll lead you to that one, if that group needs a 23

break out. I think that’s it. 24

MR. FERNSTROM: The WiFi guest key? 25Execu tive Court Reporters (301) 565

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MR. HYLAND: Yes. We have it up here, but 1

it is APPA

- guest, you know, the APPA

- dash

- gue st, and 2

then the password is powernet001

- all one word 3

power n

- e

- t 001. It was on a slide. 4

**Self**

**- introductions**  5

MR. PARKER: Okay. Let’s go around the 6

table with introductions. I’m Richard Parker, 7

University of Connecticut law school, facilitator

. 8

MR . HYLAND: Mike Hyland, APPA. 9

MR. SIMMONS: I’m Chuck Simmons, Progress 10

Energy. 11

MR. SAINT: I’m Bob Saint with the 12

National Rural Electric Cooperative Association. 13

MR. HIRSCH: Bruce Hirsch, Baltimore Gas 14

and Electric. 15

MR. ROSENSTOCK: Steve Rosen stock, E dison 16

Electric Institute. 17

MR. CASKEY: John Caskey, NEMA. 18

MR. ANDERSON: Rick Anderson, Fayetteville 19

PWC, and APPA. 20

MR. POLINSKI: Ray Polinski, ATI Allegheny 21

Ludlum. 22

MR. PETERSEN: Eric Petersen with AK 23

Steel. 24

MR. PATTERSON: Wes Patter son, ABB, Inc. 25Execu tive Court Reporters (301) 565

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MR. GREESON: Rob Greeson, Federal Pacific 1

Transformer. 2

MR. RYAN: Paul Ryan, Hitachi Metglas. 3

MR. MILLURE: Dave Millure, Metglas. 4

MR. HODGE: Gerry Hodge from Howard 5

Industry. 6

MR. COULTER: Greg Coulter, consultant for 7

Prolec GE. 8

MR. GAYTAN: I’m Carlos Gaytan, Prolec GE. 9

MR. FERNSTROM: Gary Fernstrom, PG&E 10

representing the California investor

- owned 11

ut ilities. 12

MR. ECKMAN: Tom Eckman, Northwest Power 13

and Conservation Council. 14

MR. HOPKINSON: Andrew DeLaski, actually, 15

I’m Phil Hopkinson sitting in as a spy. 16

MR. CO R KRAN: Jerry Co r kran, Cooper Power

. 17

MR. BECK: Scott Beck, Lakeview Metals. 18

MR. BALLO: Tim Ballo, Earth Justice. 19

MR. ROY: Robin Roy, Natural Resources 20

Defense Council. 21

MR. CYMBALSKY: John Cymb alsky, DOE. 22

MR. COHEN: Dan Cohen, DOE. 23

MR. BOLDUC: Chris Bolduc, Lawrence 24

Berkley National Labs. 25Execu tive Court Reporters (301) 565

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MS. COUGHLIN: Katie Coughlin, Lawrence 1

Berkley National Lab. 2

MR. COFFEY: Brian Coffey, Navigant 3

Consulting. 4

MR. RIVEST: Mike Rivest, Navigant 5

C onsulting. 6

MR. MEYERS: Aaron Meyers, Cooper. 7

MR. TRUJILLO: Antonio Trujillo, Cooper 8

Power Systems. 9

MS. BUTLER: Sarah Butler, DOE

. 10

MR. SAMPAT: Mahesh Sampat, EMS 11

Consulting. 12

MR. BROWN: Chris Brown, Cogent Power. 13

MR. SHANNON: Mike Shannon, RGA Magnet 14

Wire Company. 15

MR. RUSH: Ned Rush, consultant. 16

MR. CARMICHAEL: Rob Carmichael, Navigant. 17

MR. NARDOTTI: Matt Nardotti, Navigant. 18

MR. BERMAN: Robert Berman, Berman 19

Economics. 20

(several intros not on mic) 21

MR. RAKOWSKI: James Rako wski, ATI 22

Allegheny Ludlum

. 23

MR. CREEVY: NEMA

. 24

MR. RABA: Jim Raba, Department of 25Execu tive Court Reporters (301) 565

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Energy

. 1

(introductions on phone not clear) 2

MR. SMITH: Bob Smith, Federal Pacific. 3

MR. LYKE: Richard Lyke 4

AK Steel

. 5

MR. PARKER: Anybody else on the phone? 6

Oka y. Thank you. Just a word about mics and 7

participation. We have a couple of

-- we don’t have 8

mics in front of everybody, obviously. We do have a 9

couple of roving mics for the audience so that you 10

can be heard by the people in the webinar. If 11

you’re no t at the table, I would just ask you to 12

speak up, again, give your name each time before you 13

speak so the court reporter can get your name. And 14

please speak as loudly as possible. If we need to, 15

we’ll bring a roving mic to you so that you can be 16

heard an d it’s very important to get it for the 17

transcript and the record. Thank you. 18

**Agenda Review** 19

Let’s just start off for a bit, I can 20

present the agenda that I would propose . You should 21

have a copy of it in front of you. What I thought 22

we might do, given that people have just received 23

the updated and revised analysis , again have the 24

team walk us through quickly, the updates, the 25Execu tive Court Reporters (301) 565

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changes that were made to the analysis, both this 1

latest analysis and also the impact of the bug that 2

was caught in previous anal ysis. Have a brief 3

discussion of that. 4

And then turn to some

-- before we get 5

into negotiations, we need to decide whether we want 6

to go into negotiation, I thought it might be 7

helpful to just first hear from DOE staff about how 8

the analysis works as a matter of Department policy. 9

There has been a lot of confusion, and I think a lot 10

of talking past each other in the past on that. 11

Issues about the relationship between LCC and the 12

dollars per watt metrics that many of you are 13

familiar with, the way the L CC is constructed, why 14

is the LCC used. 15

There have been issues in the e

- mail track 16

about loading assumptions, energy prices and energy 17

demand, load growth and discount rates. 18

So I think it would be useful this morning 19

to do something that we probab ly should have done 20

long ago, which is really to just focus on the 21

agenda , get it out there, have a discussion about 22

it, let people ask questions and really clear the 23

way so that we can focus on what are the relevant 24

factors under the law and Department po licy behind 25Execu tive Court Reporters (301) 565

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this group for the analysis and for making decisions 1

based on that analysis. 2

I thought then we might take a break and 3

try to make up for lost time, I know we’re getting a 4

somewhat late start again, but in the latter 5

morning, work through a couple of proposals

-- the 6

proposals that have come forward for separate 7

treatment for networks and vaults, as well as the 8

proposal for BiL rating and scaling that has been 9

discussed in prior meetings. 10

At lunch we would then caucus with our 11

groups and ha ve an hour and a half lunch there so 12

that people can decide, basically, after you’ve had 13

a chance to talk with your groups, about whether you 14

feel comfortable going forward in making these 15

proposals on liquid immersed this afternoon. A nd if 16

people are com fortable, have been able to absorb the 17

revised analysis, and come to a common position to 18

make proposals in the afternoon, I think that might 19

be a very useful way to spend the time. 20

If not, if people feel like they need more 21

time to determine their posit ions based upon the 22

latest data, then we would turn the afternoon into a 23

meaningful dry type discussion, because I think 24

nothing has really changed there in a fundamental 25Execu tive Court Reporters (301) 565

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way. 1

So that’s what I’ve proposed on the 2

agenda . Are there any suggestions for ame ndments, 3

changes? Does this seem acceptable to people? 4

Andrew. 5

MR. DeLASKI: Richard, do we have caucus 6

rooms? 7

MR. PARKER: Yes, Mike, I think, went 8

through that before you just got in. 9

MR. HYLAND: Andrew, small lounge. Just 10

go right through tha t door behind you and there’s 11

three glass enclosed

-- like fishbowl type rooms. 12

The first have tables, the last one’s kind of like a 13

lounge with four chairs to see back and talk. 14

MR. DeLASKI: Thanks. 15

MR. PARKER: Great, so no objection, the 16

agenda i s adopted. Let’s turn it over first to 17

Brian Coffey from Navigant who will walk us through 18

the updated engineering analysis and changes that 19

have been made, and then we’ll hear from Chris 20

Bolduc and the National Labs about the LCC results. 21

Brian. 22

MR. DeLASKI: Excuse me, Mike. Can we get 23

the lights in the

-- is there a way to dim those, do 24

you know? 25Execu tive Court Reporters (301) 565

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MR. HYLAND: We’ll work on it. My IT 1

staff is actually in training over in Virginia. 2

(Discussion concerning lighting) 3

PARTICIPANT: That’s good. 4

MR. HYLAND: Just one small fact for those 5

of you who don’t know

-- 6

(For 2.15 minutes, static covered speech.) 7

**Discussion of Latest Liquid Immersed**  8

**Analysis Results** 9

**Updated Engineering Analysis** 10

MR. COFFEY: ... just so everyone can ... 11

MR. MEYERS: Br ian, what were the costs 12

for the steel? 13

MR. PARKER: Aaron Meyers. 14

MR. COFFEY: (softspoken, not all captured 15

on record) I’ll put those up in a second. This is 16

the time line. Now I’ll move forward to steel 17

prices. Sorry the text is a little bit s mall for 18

those in the back. This is the 2011 price scales. 19

MR. HOPKINSON: Phil Hopkinson, HVolt. 20

These material prices seem to be lower for core 21

steel than what the manufacturers have been able to 22

verify. How did these numbers arrive? 23

MR. COFFEY: We got these numbers from 24

talking to a number of people who purchase these 25Execu tive Court Reporters (301) 565

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steels, so it’s absolutely possible that any 1

individual would pay higher or lower . We thought 2

these were more reflective of what large and medium 3

manufacturers were paying in 201 1. 4

MR. HOPKINSON: ... be able to find the 5

$1.56.60 is the average for M3 for 2011. 6

MR. COFFEY: Well, this is why we’re 7

presenting to show what assumptions have been made 8

and let people give us feedback. 9

MR. PATTERSON: Wes Patterson, ABB. You 10

just s howed the standard diagrams with the impact of 11

the economic drivers, as I understand it, is the 12

rate of change of the cost with respect to the ... Do 13

you have anything that shows how those rates of 14

change vary from the old price data to the new? 15

MR. COFFE Y: That will be looked at with 16

the LCC which Chris is going to provide in a second. 17

That’s driven by exactly what you said, the rate of 18

change ... efficiency. 19

MR. PATTERSON: If you had the capability 20

to take away design line one scatter plot, and have 21

t he scatter plot old and new, one behind the other 22

one, flip your PowerPoint back and forth, and we’re 23

talking about the trend line on the bottom of all 24

the dots, then we could see whether or not the shape 25Execu tive Court Reporters (301) 565

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of that trend line changed. 1

MR. COFFEY: I think what the material 2

prices

-- 3

MR. RIVEST: Mike Rivest. I think

-- 4

MR. PARKER: Jerry, could you bring a mike 5

over? 6

MR. RIVEST: Mike Rivest, Navigant 7

Consulting. So as I’ve said in previous meetings, 8

there are sort of two clusters, two clouds

-- 9

the re’s one for grain

- oriented steels, and there’s 10

the amorphous cloud. The amorphous cloud has not 11

changed because the price of amorphous steel hasn’t 12

changed between the two analyses. So it’s that 13

cloud for the grain

- oriented steel that has changed, 14

and h aving a lower cost, say M3, going from $1.88 to 15

$1.30, what that does is that would have a slight 16

impact on the slope. What is driving the slope is 17

the incremental costs, and those incremental costs 18

are primarily steel. So, having the rate of change 19

... fo r the grain

- oriented would be about the same as 20

for amorphous. The reason Brian mentioned the LCC 21

is because at each EL it’s that selection of 22

transformers that ends up being caught in the 23

analysis, so what we could do is compare the 24

manufacturer’s sale p rice before and after, if you 25Execu tive Court Reporters (301) 565

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will, on the two runs, and that would give you the 1

actual trends we used. 2

MR. PARKER: Steve Rosenstock. 3

MR. ROSENSTOCK: Steve Rosenstock, EEI. 4

Just as another point of comparison, I thought, you 5

know, your old data show ed 2006, 2008, 2010 prices. 6

For grain

- oriented steel was 2008 prices

-- 2011? 7

MR. COFFEY: (inaudible) 8

MR. ROSENSTOCK: So

-- again, Steve 9

Rosenstock, EEI

-- why the insistence on using 2011 10

versus 2010 prices, when 2011 hasn’t been completed 11

yet? 12

MR. COFFEY: We had just got the feedback 13

that

-- 14

MR. ROSENSTOCK: From who? 15

MR. COFFEY: A number of parties, 16

actually, it’s pretty much a given that any time you 17

throw a stake in the ground, the prices

-- they’re 18

out of date, so we took the opportu nity, since 2011 19

is coming to a close, try to use something like 20

that. We heard it would be more reflective of the 21

market. Of course, we’re presenting them today so 22

people who deal with these steels can give us 23

feedback on it, how these look. 24

MR. ROSEN STOCK: Steve Rosenstock, EEI. 25Execu tive Court Reporters (301) 565

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Okay. In many parts of the country, power prices 1

are lower in 2011 than in 2010 and 2008, are you 2

using those prices in your analysis? 3

MR. RIVEST: Mike Rivest. It’s not a 4

question for us. 5

MR. ROSENSTOCK: Oh, okay. N o problem. 6

MR. RIVEST: Does this group have a 7

recommendation as to what steel prices should be? 8

MR. HOPKINSON: May I speak? 9

PARTICIPANTS: No. 10

MR. RIVEST: I’m not quite done. I think 11

the stakeholders ... at the previous ruling, for 12

example, and give you sort of a sense of how it 13

fluctuates. There’s been a lot of talk about M3 and 14

amorphous and the incremental cost of that, and when 15

we did the last rulemaking, what was used as the 16

default scenario, if you will, was five year 17

averaging of steel pr ices, and the incremental cost 18

of an M3 to an amorphous was $1.50 over that five 19

year period. The price

-- the average price of M3 20

was around $1.00, amorphous was around $2.50. 21

The previous analysis, the one we did just 22

before this one, M3 was at $1.8 8, amorphous was 23

about $2.30 or so. So the incremental cost for M3 24

to amorphous was down to fifty cents. And that 25Execu tive Court Reporters (301) 565

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really is what was driving this so

- called tipping 1

point. This set of pricing has an increment between 2

amorphous and M3 of about ninety cent s. Still 3

significantly lower than when we did the 2007 rule, 4

90 cents compared to 52 in the previous analysis. 5

So this is sort of the range that we’re 6

seeing the increment between the two steels, which 7

is pretty important. Again, as I say, we can keep 8

changing these prices forever . The question becomes 9

what is the right scenario. 10

MR. PARKER: Andy. 11

MR. DeLASKI: I don’t know about right 12

scenario is, I’m not a manufacturer or a purchaser. 13

I don’t buy or sell steel, so I don’t have a 14

specific data t o offer. But I presume that Brian, 15

you talked to some steel makers, you talked with 16

transformer manufacturers to get your data. It’s 17

like Phil talking to a different set of steel makers 18

and transformer manufacturers. So I just guess you 19

two can talk of f line, what or who you are talking 20

to, why you come up with different data for current 21

prices. Obviously, you’re both talking to the 22

market players to get these prices, you aren’t just 23

making them up, so there has to be some 24

synchronizing that needs to h appen there. 25Execu tive Court Reporters (301) 565

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But I want to go back, Brian, if you 1

could, to your plots. Now again, we just got these 2

last night, and I’ve been traveling, so I haven’t 3

had a chance to fully absorb them, and you just 4

flipped right through them. I’m also color

- blind, 5

so I was

-- it’s been going on for a while

-- so if 6

you could just help me to understand, Brian, what 7

the bottom boundary is, and what material choices 8

are you showing in the bottom boundary? You did 9

simplified plots earlier, I hope you have simplified 10

plots for these

-- for these graphs. 11

MR. COFFEY: They are on the Sharepoint, 12

but as you noted, they haven’t been up for very 13

long, so

-- 14

MR. DeLASKI: So what you put on 15

Sharepoint last night was for the updated data? 16

MR. COFFEY: That’s right. 17

MR. DeL ASKI: Okay. I did download those, 18

so I’ll look at those later, but if you could just 19

tell me, just briefly, some DL

- 1

-- design line 1, 20

if you don’t mind. So the bottom, as you go from 21

CSL

- 0 to CSL

- 1, almost to CSL

- 2, you’re showing a 22

certain ... Is that M3 aluminum

- aluminum? 23

MR. COFFEY: (inaudible) 24

MR. DeLASKI: And as you go out to the 25Execu tive Court Reporters (301) 565

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right, you go to that second set of clouds to the 1

right, that’s the amorphous clouds? 2

MR. COFFEY: That’s right. 3

MR. DeLASKI: And then in the next to the 4

last

-- so this is M3 aluminum

- aluminum up through 5

almost

-- help me out with the labeling here

-- CSL

6

0 is the first dotted line? 7

MR. COFFEY: Right, that’s the baseline. 8

MR. DeLASKI: At 99 point

-- a little 9

below 99.1. 10

MR. RIVEST: Point oh

- eight. 11

MR. DeLASKI: Right. And CSL

- 1 is the 12

next dotted line, CSL

- 2 is the third dotted line. 13

So the M3 almost goes up to

-- you’re showing M3 14

aluminum

- aluminum almost up to CSL

- 2, but not quite. 15

Is that correct? 16

MR. COFFEY: We

-- that’s right. 17

MR. DeLASKI: And now the next one, design 18

line 2, is that M4 aluminum

- aluminum at the far left 19

side? 20

MR. COFFEY: So those

-- 21

MR. DeLASKI: The bottom ones. 22

(discussion off mic) 23

MR. PARKER: Well, whether or not people 24

can see

-- 25Execu tive Court Reporters (301) 565

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MR. COFFEY: These are M2 aluminum

1

aluminum. 2

MR. DeLASKI: At the bottom boundary 3

there. 4

MR. COFFEY: Right, so starting at the 5

baseline, CSL

- 0, it’s just the bottom boundaries are 6

(inaudible) 7

MR. DeLASKI: Right. And then where does 8

M3 fit in that one

-- in that mix? 9

MR. COFFEY: M3 is sort of this rust 10

color, is the aluminum

- aluminum, copper

- aluminum is 11

this shade of gray. But the copper

- aluminum is not 12

really a factor. You see the same ... around the 13

baseline here, it’s sort of reddish. 14

PARTICIPANT: This one? 15

MR. COFFEY: I would say the darker red. 16

Burgundy. 17

MR. DeLASKI: But it stretches out, right? 18

You’re showing it stretching out. 19

MR. COFFEY: It doesn’t go very far. 20

MR. DeLASKI: All right. I’m having 21

trouble seeing the M3, but I’ll ask someone else. 22

Just bear with me

-- 23

MR. PARKER: Andrew DeLaski. 24

MR. DeLASKI: EL

- 3

-- EL

- 2 is the pole 25Execu tive Court Reporters (301) 565

- 0064 28

mounts, this is a specific situation that’s

-- 1

MR. POLINSKI: Andrew, before we go too 2

far, I think we were still talking about

-- Ray 3

Polinski, Allegheny Ludlu m

- ATI, sorry to interrupt 4

but I thought we were still talking about the 5

assumptions. Before we start analyzing the charts, 6

are the charts valid? I guess, why should we spend 7

any time analyzing the data if the data is not 8

valid. You’re just wasting my time. 9

MR. DeLASKI: Well, I suggest ... more on 10

that, Ray. I thought, you know, just look at the 11

charts, take five minutes, just so we know what the 12

conversation

-- 13

MR. POLINSKI: Well, we didn’t finish the 14

other conversation. I think we were in a dis cussion 15

about steel pricing and assumptions

-- and I don’t 16

know

-- Mr. Parker, you’re

-- 17

MR. PARKER: Well, I think it’s a fair 18

point that we should discuss

-- we should finish the 19

conversation on steel pricing, and then go back to 20

the charts. What I he ard about steel pricing is 21

that first, they had to choose prices. They tend to 22

be manufacturers

-- nobody’s going to have exactly 23

the same prices as what they use, there’s going to 24

be a range. That what really matters most is the 25Execu tive Court Reporters (301) 565

- 0064 29

increments rather than t he absolute prices, but the 1

increment as you move up in efficiency. And my 2

sense from what Mike Rivest said is that there is 3

communication, there is a sharp divergence in the 4

slope of the line as you move up, based on what the 5

prices are in 2010 and 2011. Is that a fair 6

assessment, or is that not what you were saying? 7

MR. RIVEST: So if you look at this

-- 8

MR. PARKER: Mike Rivest. 9

MR. RIVEST: That’s correct

-- look at DL

10

1. Here you’re seeing the distinction between the 11

amorphous and the grain

- or iented cloud. And the 12

slope of the grain

- oriented cloud is dependent on 13

the price of your grain

- oriented steel. So higher 14

the prices, the sharper that slope. So it matters 15

what it is. Now, is it going to change the answer 16

if it’s $1.56 versus $1.30? A nd the lab is 17

verifying the $1.56 versus the $1.30. 18

MR. HOPKINSON: We have 80 percent

-- this 19

is Phil Hopkinson, HVolt, Inc. We have 80 percent 20

of the market represented in the numbers that both I 21

presented to the DOE, to Navigant, as well as in the 22

di scussions we had at NEMA yesterday, and we’re at 23

$1.56.60. I do not know where $1.30 came from. The 24

20 percent of the market that apparently gave you 25Execu tive Court Reporters (301) 565

- 0064 30

$1.30 is getting an awfully good deal. 1

MR. PARKER: Eric. 2

MR. PETERSEN: Just as a steel 3

manufacture r, Eric Petersen, AK Steel, we were not 4

included in the discussions that you had

-- the 5

point was asked by Mr. DeLaski

-- I just want to 6

clarify that point

-- and the representative

-- what 7

we see with the price line is that looks to be a 8

base price, not i ncluding a surcharge. So from what 9

we’re seeing within that type of dollar, the range 10

that we’re hearing across the table here to 11

transformer manufacturers is more realistic because 12

that looks to include the full price, including the 13

surcharge, et cetera, not just the base. 14

MR. POLINSKI: Ray Polinski, ATI again

-- 15

Allegheny. We talked with Ryan in the past and we 16

kind of elected, properly as everyone said, it’s not 17

our place to tell the price. Talk to people who are 18

buying, so I think you did the righ t thing by going 19

to the transformer producers and asking for the 20

price information. But I can assure you that $1.30 21

is

-- I mean, for US transformer producers is paying 22

$1.30 for M3, I don’t know who that is. That’s 23

certainly not a reasonable number. It ’s kind of

-- 24

it’s just strange, you know, sitting here, we 25Execu tive Court Reporters (301) 565

- 0064 31

continue to try and put together scenarios

-- my 1

opinion, this is just my opinion

-- that seem to 2

support higher levels. You keep changing, moving 3

the data. Whenever things go to the higher leve ls, 4

you

-- 5

MR. RIVEST: I strongly

-- 6

MR. POLINSKI: Well, $1.30

-- 7

MR. RIVEST:

-- find that just

-- just 8

your opinion. 9

MR. POLINSKI: That’s my opinion. That’s 10

what I said

-- 11

MR. RIVEST: So I won’t really talk about 12

this slope. 13

(over

- spea king) 14

MR. POLINSKI: We are in the worst 15

economic times

-- 16

MR. RIVEST: I’ll looked at your 17

recommendation and let’s move forward. 18

MR. POLINSKI: My recommendation is let’s 19

stay with the prior

-- why are we looking at 2011? 20

This is $1.88 is a range between the peak economic 21

times of like, say, 2006 and 2007, and the worst 22

economic times in the history of the country, which 23

I would put to you is 2011. ... start in record lows, 24

and so this is a 30

-- I sure hope we don’t stay in 25Execu tive Court Reporters (301) 565

- 0064 32

this economic state for the next 30 years, because 1

then we’ve got lot bigger problems than efficient 2

transformers. The economy is going to go in cycles. 3

We’re at the lowest cycle right now and to make any 4

decisions based on 2011, maybe a higher efficiency 5

level would make a lit tle bit more sense, but it

-- 6

certainly a lower one would make sense in 2007. 7

It’s a 30

- year rule and so I just think we’ve got so 8

much analysis, we’ve been looking at this data for 9

so long, and the data comes out and start making 10

decisions to bring new d ata at ... we have the 2010 11

data, the $1.88. You know, again, some of the 12

things you talk about, Mike, I appreciate that, and 13

again

-- yeah, iron used to be $100 a ton. We can’t 14

control the cost of iron and the cost of iron ore. 15

It’s now $500 a ton. So m aybe the price of M3 15 16

years ago is not relative. We’re looking at price 17

ranges in the last five years, which is a complete 18

different cycle from a strong economy to a weak 19

economy. We think the buyer analysis performed was 20

acceptable and the basis on wh ich we should move 21

forward. That’s the recommendation. 22

MR. PARKER: Could I ask the people around 23

the table, is there

-- because I know that people 24

have expressed in previous meetings, a strong 25Execu tive Court Reporters (301) 565

- 0064 33

concern that the a real important factor is the 1

relationshi p between amorphous prices and grain

2

oriented steel prices. It’s the differential. And 3

so one of the factors that I think was considered, 4

as Mike explained, is that the 2010 differential 5

between amorphous and silicon steel was almost 6

historically small. And might create sort of a 7

misleading basis for going on, predicting the future 8

about how those markets would behave relative to 9

each other, that before 2010 and since 2010, the gap 10

has widened. 11

And so I’m wondering if this is

-- if 12

there’s other perc eptions around the table

-- is 13

there a sense that of what you might reflect and 14

what differential between amorphous and silicon 15

steel might provide a sound basis for thinking 16

about, you know, the future trend of the market, 17

because I think that’s one of th e things that’s 18

going on, quite frankly. Anyone want to respond to 19

that? Jerry S c hoen, in the back? 20

MR. SCHOEN: Jerry Schoen, AK Steel. One 21

of the concerns AK Steel has is ATI and AK Steel had 22

a raw material search ... Scrap prices are probably, 23

as yo u know ... 24

MR. PARKER: Sorry, you’re going to have 25Execu tive Court Reporters (301) 565

- 0064 34

to speak into the mic. 1

MR. SCHOEN: I’m sorry. What we have done 2

because scrap prices have been amazingly volatile in 3

this time period

-- at one time our surcharge

-- 4

this is during peak price periods

-- was as high a s 5

$1000, actually over $1000 a ton . That was part of 6

the price hike that you see in the historic data. 7

The other part of it was the escalating raw 8

materials price. Ray, can you refresh my memory? 9

The surcharge was put in place in 2003 o r 4, right? 10

MR. POLINSKI: Four. 11

MR. SCHOEN: Thank you. Because we had no 12

control

-- we have no control over scrap prices. So 13

that’s a variable in there. It should be in the 14

current price, I’m not sure if it’s in there. You 15

may have just gotten th e base price, because 16

surcharge fluctuates. Our ... relations with ... it’s 17

now only four to $500 a ton right now, and that’s 18

just because of the market demand for scrap. 19

The second part is, having the

-- 20

MR. PARKER: Jerry, what is the amount of 21

the sur charge? 22

MR. SCHOEN: It’s about $500, isn’t that 23

about right, Ray? 24

MR. POLINSKI: Yeah, I think it’s about 25 25Execu tive Court Reporters (301) 565

- 0064 35

cents a pound. 1

MR. SCHOEN: About 25 cents a pound. I 2

think some of the differences that you found is 3

basically contract price is the contr act price and 4

then raw material surcharge is a month

- to

- month 5

thing. 6

The other part of it is ... because if you 7

go ... get a more accurate first cost for these 8

transformers, there’s a very significant issue of 9

first cost for a number of reasons, not the leas t of 10

which is we’re seeing as we’re digging more and 11

more, there’s far more activity in transformer 12

refurbishment than actually we thought. That has 13

turned into a rapidly growing and no longer “this is 14

what will happen,” it has already happened. 15

MR. PAR KER: Let’s limit this to steel 16

prices for right now, though. 17

MR. SCHOEN: Accurate first cost. 18

MR. PARKER: That’s very helpful. So the 19

suggestion is that M3 steel prices in the 20

engineering analysis are about 30 cents a pound, 25 21

to 30 cents a pound too low, is that what I was 22

hearing? 23

PARTICIPANT: Right. 24

MR. POLINSKI: Ray Polinski, ATI 25Execu tive Court Reporters (301) 565

- 0064 36

Allegheny. For 2011, based on the data that Phil 1

and the group caught, yeah, it’s about 25 to 30 2

cents a pound too low. But again, as I said 3

earlier, that’s in the worst economic times and so 4

we’re not just talking about a standard for the 5

worst economic times, we’re talking about a standard 6

for, you know, all business cycles. We’re also 7

talking about the price for an M3 product that 8

permits necessary investmen t and ongoing operation 9

of the grain

- oriented supply base. 10

MR. PARKER: Okay. But we have to go from 11

concept to number now. So if not base, 30 cents, 25 12

cents, then what? Aaron. 13

MR. MEYERS: I would just recommend using 14

the old data. I mean this pr ovides nothing new. If 15

you’re going to change the price of grain

- oriented 16

steel and hold amorphous fixed, that doesn’t 17

represent reality. The two compete with each other. 18

They typically track each other, not necessarily 19

dollar for dollar, but they defin itely track each 20

other. When one’s going up, the other’s going up; 21

when one’s going down, the other’s going down. The 22

other data, I think, shows relatively closely what’s 23

going on. This gives the impression that somebody 24

was trying to cook the numbers, honestly, and I 25Execu tive Court Reporters (301) 565

- 0064 37

don’t think that somebody is, but when you adjust M3 1

down by 30 percent, and you don’t move amorphous by 2

a similar percentage, it looks like somebody’s 3

trying to produce a result that isn’t necessarily 4

reflective of reality. 5

MR. PARKER: I’d like to hear from the

-- 6

if we can, about what people believe that the 7

amorphous numbers are wrong. Because my 8

understanding is that just looking at the data is 9

from 2006 to 2008, M3 prices went very high, 10

amorphous prices did not go high

-- as high. From 11

2008 to 2010, M3 prices came way down, and amorphous 12

didn’t give up as much. By 2010, the gap between 13

amorphous and M3 had narrowed very considerably 14

compared to what it was in 2006. So it has not been 15

a stable relationship. I think that’s just n ot 16

accurate, at least if the data that we’ve been 17

working with from 2006 to 2010

-- all this period up 18

and down. Yes, David. 19

MR. MILLURE: Dave Millure, Metglas. In 20

2006, amorphous numbers were based on imported cores 21

from India, because there was no d omestic place for 22

making amorphous cores. So that accounts for that 23

in transportation costs and what

- not. So that’s why 24

the 2006 amorphous aren’t reflective of today’s 25Execu tive Court Reporters (301) 565

- 0064 38

situation, where amorphous cores are made in the US. 1

MR. PARKER: Robert. 2

MR. BERM AN: Robert Berman, Berman 3

Economics. I would just like to reflect on two 4

points basically, that you made, Richard, on 5

relationship between steel prices and amorphous 6

prices over time. It’s the opposite of what you 7

expected. As competition increased , on e would 8

expect that they’d get closer and closer. The more 9

competition, the tighter the spread, or the smaller 10

the spread. At higher efficiency levels, the

-- 11

there is additional pressure placed on M3 relative 12

to amorphous because of the efficiency prope rties. 13

So you would expect to see downward pressure due to 14

the downward evaluation on core steel and that would 15

add then to the very tight pricing between the two. 16

So, yeah, I would expect to see a smaller 17

differential. 18

MR. PARKER: Do you concur with t hat? You 19

don’t have to answer

-- 20

PARTICIPANT: I can’t talk about ... 21

MR. PARKER: Okay. Jerry. 22

MR. CORKRAN: Looking at the data, looking 23

at the different curves, the new data shows much 24

wider

-- 25Execu tive Court Reporters (301) 565

- 0064 39

MR. PARKER: Identify

-- Jerry Corkran. 1

MR. CORK RAN: Yeah, Jerry Corkran, sorry 2

about that. I don’t believe that this group should, 3

shall we say, waste any time on the new data. I 4

think it’s painfully off

-- the curve is so flat it 5

doesn’t show a true representation between the two 6

materials. The ot her data had some weaknesses, but 7

it was much better than that. I think we’re just 8

wasting our time to try to make any conclusions on 9

this. I say we should reject it. We know the price 10

is wrong, and move on. 11

MR. HOPKINSON: Good. Phil Hopkinson, 12

HVol t, Inc. I gave the right numbers when I gave 13

the curve over to Navigant that had more than 60 14

percent of the manufacturers data would represent 15

the cost curve, when you go from EL

- 0 to all the way 16

to EL

- 4. And apparently, you did not use that data, 17

and I don’t know why. 18

MR. RIVEST: What data? What time? 19

MR. HOPKINSON: The data that I

-- Mike 20

Rivest has just asked of Phil Hopkinson, and this is 21

Phil Hopkinson, to respond to what data at what 22

time? But this here, I did some work for Navigant 23

Consult ing

-- and I’m always delighted to help out 24

Navigant as well as any part of the DOE or other 25Execu tive Court Reporters (301) 565

- 0064 40

people who have questions. What I did was go to the 1

manufacturers

-- 2

MR. PARKER: Excuse me, I’m not entirely 3

sure

-- I’m just improvising here

-- I’m not 4

enti rely sure it’s appropriate to be discussing work 5

that you did on a confidential basis for Navigant. 6

MR. RIVEST: The point is, it’s 2010 data. 7

MR. HOPKINSON: Well, it was 2011 data 8

that was in my numbers, so I have the manufacturers 9

with 2011 data, re presenting 60 percent of ... it’s a 10

much deeper cost curve for M3 than what is in this 11

new set of data, and for that matter, what was in 12

the earlier set of data. 13

MR. RIVEST: Mike Rivest, Navigant. I 14

just

-- you can’t just choose to read some analyses 15

and time when it’s convenient and a lot of other 16

analyses and time when it’s convenient. So we did 17

analyses based on the 2010 prices. They weren’t 18

2011, and we don’t use information we have

-- that’s 19

a decision we make. Right. But it’s not a biased 20

situat ion. So

-- so if it’s decided to do five year 21

averaging, three year averaging, two year averaging, 22

that’s fine. But to say things are not valid

-- if 23

I understand, your contention is that the current 24

price is somewhere between this scenario and the 25Execu tive Court Reporters (301) 565

- 0064 41

previ ous one. So it makes both equally invalid in 1

that logic. 2

MR. HOPKINSON: Phil Hopkinson, HVolt Inc. 3

What I really think we should more focus on is the 4

slopes. And Wes Patterson in discussions we had 5

yesterday, actually had an extremely good point that 6

what really counts is ultimately the cost burden to 7

the end user of transformers produced with M3 versus 8

transformers produced with amorphous. And I’m just 9

leading you down the road to really think probably 10

we want to think about in terms of negotiation. But 11

that cost curve, when the M3 and the amorphous 12

intersect, if we do the curve correctly, and have 13

the correct slopes, then that becomes a very 14

critical point to think about in terms of where the 15

standard belongs. So, I’ve ... material prices, but 16

I’m t elling you that these slopes are absolutely 17

wrong and that the curve that I gave to the DOE is 18

based on 2011 prices from the manufacturers, and did 19

represent more than 60 percent of the market, both 20

small and large manufacturers, and I think that that 21

is s omething that all the negotiators had because I 22

passed it to all the negotiators. So I would not 23

ignore it, would be my recommendation. 24

MR. PATTERSON: Wes Patterson. Phil, 25Execu tive Court Reporters (301) 565

- 0064 42

thanks for mentioning me and my whole issue with

-- 1

MR. PARKER: Can we get a mic to Wes, 2

please? 3

MR. PATTERSON: Anyhow, I do have this 4

hangup on the slope. I believe this is the 5

fundamental driver in the calculation, and we have 6

lots of issues with this calculation. So if I use 7

this data that’s presented here, we’ll see that the 8

CGO comes up and it goes up here. There’s a big gap 9

here, and then we pick up a step change, a high step 10

change with the amorphous. Then it comes down and 11

kicks up. Now, there is no technical reason I’m 12

aware of why the amorphous steel could be high and 13

then come back down. Okay. If anything, it should 14

just continue on down this slope. 15

Similarly, if we had complete data, the 16

CGO material would not kick up the way it’s kicking 17

up, but it would continue along this slope and 18

eventually just die off

. 19

So what really exists here is like a 20

continual line. It goes from here all the way up to 21

here with some slope. So this is pointing out the 22

small deficiency in the DOE selection of designs. 23

However, their designs’ scatter diagram presents 24

enough da ta to extrapolate what the underlying 25Execu tive Court Reporters (301) 565

- 0064 43

physics is taking place. 1

So I think the main contention then is, I 2

drew a line through here and we said, okay, that’s 3

the slope of that line. Does that slope match a 4

comparable slopes that are actually produced in t he 5

industry? So what I have found in trying to work 6

with Mike on this is I see a fairly good agreement, 7

ignoring the kinds of materials, I see good 8

agreement on the pads, and I have a big concern on 9

the dry types and the poles. And I know Mike has 10

been t aken into this. I think some of the Lawrence 11

folks were taken into it. Once that is resolved, I 12

think the cost issue can then be clearly discussed 13

with no contention. And all this discussion about 14

the individual material prices

-- if these slopes 15

turn o ut to be comparable, whether or not those 16

prices change, doesn’t really impact the decision. 17

MR. PARKER: Mike, did you have a comment? 18

MR. HYLAND: Mike Hyland, APPA. First, it 19

would be really helpful if we had a best fit line. 20

These scatter plots d rive me nuts. Andrew can’t see 21

them anyway. S o would it be helpful, I mean, any 22

function I see uses best fit line every time you 23

scatter like that, it would be a line through it. 24

MR. PATTERSON: Absolut ely, Mike, and this 25Execu tive Court Reporters (301) 565

- 0064 44

has been what I have been doin g to model the data 1

that I’ve been presenting. The other recommendation 2

I would have is we move away from this efficiency 3

column and talk about watts. We talk about hard 4

watts, because this efficiency when you compare it 5

to various KVAs, it’s very mislea ding. So it’s 6

just a way of presenting the data. But, yeah, you 7

should have a fit line in there, and there’s enough 8

industry data to support a fit line is appropriate. 9

MR. RIVEST: Sure. 10

MR. PATTERSON: Because we have more 11

design data points than t he DOE sample. This is 12

just an arbitrary sample that they tried to model, 13

the physics. It is not a complete model of reality. 14

MR. PARKER: I’m really going to let Katie 15

address a comment that Wes made because I think it’s 16

an interesting proposal. I un derstand from her, 17

just briefly, that raises some issues for ... energy 18

savings down the road, so let me ask Katie to 19

comment on that. 20

MS. COUGHLIN: Yes, this is Katie 21

Coughlin, Lawrence Berkeley Labs. So I just wanted 22

to point out, I don’t disagree with what’s been 23

said. But the difficulty for

-- so, how you posture 24

that to give you a good estimate of dollars per watt 25Execu tive Court Reporters (301) 565

- 0064 45

but only if you assume the test procedure works. So 1

the difficulty for us in determining the energy 2

savings analysis in the LCC analysis is we have 3

these two contributions to the losses, the no load 4

to load losses. And so the problem that we have to 5

solve with this approach is to do some kind of curve 6

fit for the no load and the load losses separately, 7

because when we do the LCC, we have to deal with the 8

facts that the field loadings of most of these 9

transformers are substantially lower than the test 10

procedure, which changes the evaluation of the 11

energy savings. So that’s what, in order to 12

implement a simplified cost curve that would be t he 13

problem we would need to solve. 14

MR. PATTERSON: And I think the solution 15

to that would

-- 16

MR. PARKER: Wes Patterson. 17

MR. PATTERSON: Wes Patterson. The 18

solution to that is going back to the original work 19

that the DOE did when they put up this ch art with 20

the scaling factor relationships. The no load 21

losses will scale to a straight line on log

- log 22

scale. The load losses will scale as a straight 23

line on log

- log scale. And then you can add these 24

two relationships. So I believe it can be 25Execu tive Court Reporters (301) 565

- 0064 46

represent ed. 1

MS. COUGHLIN: The scaling, I think, is a 2

function of KVA, that’s what we’ve been using. But 3

this

-- if you look along the bottom of these cost 4

curves, at least for the last set of data, the ratio 5

of no load to load loss spans quite a lot. And to 6

c omment

-- which values do we use to extrapolate 7

along that line? 8

MR. PARKER: Did you want to respond to 9

that? 10

MR. PATTERSON: So, this is something that 11

I will volunteer to work with

-- LBL with, to try to 12

improve the extrapolation, the fitting of the data 13

to what we see in production. 14

MR. PARKER: Okay. Thank you. Steve. 15

MR. ROSENSTOCK: Steve Rosenstock, EEI 16

And again, I’m just trying to calculate. I have two 17

summary questions. Based on your review with the 18

new scatter plots compared to the scatter plots of a 19

month ago, would you say the slopes of best curve, 20

best fit lines or curves are higher or lower? I’m 21

trying to summarize all the data and all the

-- 22

MR. RIVEST: I can answer that. 23

MR. ROSENSTOCK: Okay. 24

MR. RIVEST: First quest ion? 25Execu tive Court Reporters (301) 565

- 0064 47

MR. ROSENSTOCK: I’m trying to get the 1

bottom line. Higher or lower? Or curves higher or 2

lower? 3

MR. RIVEST: Steve, Mike Rivest. And you 4

know this is not going to be a yes/no answer. 5

(Laughter.) 6

MR. ROSENSTOCK: All of a sudden he picked 7

up the microphone. 8

MR. RIVEST: One curve or two curves. 9

This curve has gone more shallow because the price 10

of the grain

- oriented steel has gone down. But if 11

you’re talking about the Wes curve, which is a curve 12

that goes across everything, it’s actually gone more 13

sloped, because not only has this gone more shallow

, 14

going down, so the regression of the amorphous ones 15

is more ... than the regression of these points. 16

MR. ROSENSTOCK: Thank you. That’s 17

exactly what

-- thank you very much. I appreciate 18

that. That helps. 19

Second question I had, again, sometimes 20

you like to get to the story behind the story, is 21

how many parties around this table asked to use 2011 22

metal prices? Just out of curiosity? I know I 23

don’t think any utilities asked, but I’m just kin d 24

of curious. How many parties around this table were 25Execu tive Court Reporters (301) 565

- 0064 48

asking for a 2011 metal prices? 1

PARTICIPANT: Show of hands? 2

MR. ROSENSTOCK: Yeah, show of hands. 3

MR. RIVEST: That’s not

-- Mike Rivest. 4

That’s not how the question was posed. What

-- 5

during the last meeting it was demonstrated that 6

that point where amorphous was competitive was 7

different based on the experience in the market than 8

from what these models were predicting. And the 9

charge was to make it more representative. And in 10

investigating why it might be that our model came up 11

with a different point inter section than that of the 12

market, we found that our grain

- oriented steel 13

prices were higher than the market. 14

MR. PARKER: Ray? 15

MR. POLINSKI: Ray Polinski, ATI 16

Allegheny. And again, just, you know, my 17

recollection

-- Mike, I think it’s just to clarify, 18

I think, you know, again, Wes’ data and Wes, we 19

respect everything that Wes has but this is one data 20

set. Wes’ data, there was the GE Prolec data which 21

was a little bit different. The re was Cooper data 22

that was different. And Howard

-- so, I mean, at 23

the end of the day there was a lot of different data 24

and that’s why we’re trying to use your data and go 25Execu tive Court Reporters (301) 565

- 0064 49

back to 2010 data and start making some decisions. 1

MR. PARKER: Well, at our las t meeting, 2

one of the concerns was that the data didn’t reflect 3

experience. And the experience was drawn on 2011 4

experience and so the hope was that by updating the 5

data it would accurately capture what was ... now, 6

that there would be an increased comfort and an 7

increased fit. So that’s the irony of this. John. 8

MR. CYMBALSKY: John Cymbalsky, DOE. Just 9

as a matter of policy for DOE, we try to use the 10

most recent data whenever we can in any analysis 11

that we do. We’re not going to pick and choose 12

points , but as a matter of policy, we use the most 13

recent

-- that’s a good policy. 14

MR. POLINSKI: Ray Polinski, ATI 15

Allegheny. John, I mean, we’re making a decision, 16

you’ve got to assume you make it on a five year 17

period or some longer period than just a poin t in 18

time. You guys take the most recent data and you 19

don’t look at

-- 20

MR. CYMBALSKY: Well, I think for this 21

we’ve described how things have changed in the 22

market, so what is reflective of the current market? 23

It’s this in my mind. We can argue if tha t’s the 24

case or not, and I think that’s what we’re doing. 25Execu tive Court Reporters (301) 565

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MR. PARKER: Aaron. 1

MR. MEYERS: Aaron Meyers, Cooper Power 2

Systems. I just want to ask

-- 3

MR. PARKER: Can someone give him a mic? 4

Otherwise, you’re going to have to

-- 5

MR. MEYERS: Aaron Meyers, Cooper Power 6

Systems. I just want to ask for confirmation 7

whether or not your grain

- oriented steel pricing did 8

or did not include surcharges. I’ll go back to a 9

comment that was made, I believe by Mr. Polinski, 10

speculating that the prices used her e do not include 11

surcharges and that seems to coincide very roughly 12

with the pricing, I guess, for 2011 that we’ve seen 13

in the marketplace, and I would challenge DOE or 14

Navigant to purchase a ton of steel and see if you 15

can get it for $1.30 because I can a lmost guarantee 16

that you cannot. 17

I appreciate the intent here to produce 18

more accurate data, because I’m with you on that. I 19

just feel that the pricing of grain

- oriented steel 20

needs to come up by about 25 percent. 21

MR. PARKER: Okay. Is there agreem ent 22

that

-- we’ve heard that the policy is to try to use 23

the most up to date data. Is there a sense that if 24

the surcharge were included that this would

-- DOE’s 25Execu tive Court Reporters (301) 565

- 0064 51

... approach to ... the problem, leaving aside for the 1

question of whether we move more to the cur rent 2

figure approach that Wes discussed and others 3

discussed, separate issue. Just on materials 4

prices, the basic inputs

-- is this problem solved 5

by insuring that we have the surcharge included in 6

the price? 7

MR. MEYERS: Yes. 8

MR. PARKER: Aaron Meyer s is saying yes. 9

Any others around the table? 10

MR. HOPKINSON: Not exactly. 11

MR. PARKER: All right. Ray? 12

MR. POLINSKI: Ray Polinski, ATI 13

Allegheny. You know, I’ll just go back to, again, 14

I’m not familiar with the DOE protocol or 15

procedures, it’s j ust that I am uncomfortable in 16

making a future decision based on a data point 17

that’s occurring in the worst of economic times. I 18

just don’t think that’s

-- I think it’s better to 19

look at a range. I mean, $1.88 was certainly not 20

the highest price for M3 i n the last five years, and 21

it wasn’t the lowest price or whatever. I just 22

thought that, again, I thought that we were, you 23

know, I thought the prior analysis was going to be 24

the basis. We have to draw the line in the sand 25Execu tive Court Reporters (301) 565

- 0064 52

somewhere. I mean, they asked t his committee to 1

make some proposals and have some voting and 2

everything, and so I just thought we were going to

- 3

- I thought that votes would be based on the prior 4

data. So that’s my point. 5

MR. PARKER: Okay. Andrew. 6

MR. DeLASKI: I think it’s fine to have 7

2011 data. I think it should be accurate, so I 8

think if it doesn’t include the surcharges, it 9

absolutely should include the surcharges. So that’s 10

the question for investigation that should be 11

correctable. What I’m hearing from Phil is that the 12

p rices that he observed are basically 22 cents 13

higher than what the Department observed. 14

MR. HOPKINSON: Twenty

- six. 15

MR. DeLASKI: Twenty

- six cents, right, 16

which is 22 cents lower than the 2010 prices. So, 17

again, I think that should be verified. But a ll it 18

means is the slope a little less, right? 19

PARTICIPANT: Yeah. 20

MR. DeLASKI: That’s all it means

-- it’s 21

a little less steep. The other thing I observed is 22

that

-- come back to me, I lost my train. 23

MR. HOPKINSON: Phil Hopkinson, HVolt, 24

Inc., wh ile he’s recollecting. What I would say is 25Execu tive Court Reporters (301) 565

- 0064 53

the material price probably would be fixed by 1

adjusting the steel price. There’s another factor 2

that I never was able to quite get comfortable with 3

and it’s still there, and that is that the spray and 4

eddy (ph) losses and lead losses associated with 5

transformers as they go up in efficiency are a 6

bigger factor that cause the curve to get steeper, 7

and it’s never really been in the DOE data. But in 8

the numbers that I have presented to Navigant, 9

through the study th at I did with the manufacturers, 10

the correct numbers are in there, and so if you 11

would use that data, that is the correct slope. 12

MR. PARKER: Let’s keep that aside for 13

right now and just go to the materials prices, if we 14

could, just so we’re not wanderin g all over the 15

place in our discussion. 16

MR. DeLASKI: I’ve got my thought

-- it 17

came back. Thank you, Phil for filling the dead 18

air. The thing that strikes me is the point that 19

you made about it’s

-- what drives the materials 20

choices is the differentia l in price of the 21

materials. And the problem with the 2010 data, the 22

challenge of the 2010 data is that it’s 23

historically, as someone pointed out, it’s 24

historically low. Fifty cents differential between 25Execu tive Court Reporters (301) 565

- 0064 54

amorphous and grain

- oriented strikes me as being a 1

problem as the basis on which to base future policy, 2

because it is, what I’m hearing, it’s the outlier in 3

terms of the differential. So I think it’s valuable 4

that we have data that is more indicative of what 5

the typical difference in terms of prices. Bec ause 6

that gets to the key issue that’s been important in 7

these discussions, which is, the needs of the steel 8

players, how to play the role, how to play in the 9

market is the relative price of the materials, not 10

the absolute prices. So that gives me some 11

he sitance to sort of lean heavily on that 2010 12

scenario exclusively , I mean the 2011 scenario gives 13

us a more indicative or a more representative basis 14

of that differential. 15

MR. PARKER: Thank you, Andrew. Let me 16

say also that uncertainty is normally appr oached in 17

any kind of predictive discussion, is to have a 18

false scenario, but a sensitivity analysis that 19

explores what happens if you vary the assumption if 20

the picture doesn’t turn out to be exactly like the 21

most recent data. So it strikes me that the l ogical 22

way to pursue it at this point would be to reopen 23

the false scenario, and I would propose that with 24

the adjustment that’s proposed of adding a surcharge 25Execu tive Court Reporters (301) 565

- 0064 55

-- 1

MR. RIVEST: That’s not

-- this is not at 2

all

-- 3

MR. PARKER: Excuse me? Can I finish th e 4

thought? 5

PARTICIPANT: No. 6

(Laughter.) 7

MR. RIVEST: It’s just not

-- Mike Rivest. 8

It’s supposing that that’s the problem, and I’m not 9

sure it is. So I can’t go down the path of being 10

charged with that surcharge when I don’t know that 11

that‘s the problem. People know what the price is. 12

They know what they’re paying. And I didn’t make up 13

those prices. 14

MR. PARKER: My proposal wasn’t

-- 15

MR. RIVEST: Was to add a surcharge. 16

MR. PARKER: My proposal

-- what I was 17

trying to go over is we need a sensitivity analysis 18

to explore the differences. But yes, we have to 19

find out if that is the problem. I think that there 20

is a dispute about that, is that the correct 21

understanding. 22

MR. RIVEST: That’s the issue. We may 23

find prices from people who do n’t ... quite honestly, 24

it may have been a point in time, representative of 25Execu tive Court Reporters (301) 565

- 0064 56

a price at the end of the year. Maybe this is a 1

disagreement, and I’m not going to name any names, 2

but this was not made up. 3

MR. PARKER: Mike, I thought I heard you 4

earlier that you wanted this group to suggest a 5

price that they felt comfortable with, that’s where 6

I was trying to go. It’s not based upon a 7

surcharge, but it is based upon some 25 cents higher 8

-- whatever the theory, you know, what we’re doing 9

is trying to come up w ith a valid basis for sort of 10

predicting the future. It doesn’t really so much 11

matter what exactly 2011 prices are, it’s what are 12

predictive of the future. Chuck? 13

MR. SIMMONS: This is Chuck Simmons, 14

Progress Energy. Did not ... steel manufacturers 15

stat e that the prices are much lower than what 16

they’re selling the product for? 17

MR. RIVEST: You can’t make that comment, 18

we asked them to comment and they would not comment. 19

MR. PARKER: They can’t comment. 20

MR. SIMMONS: I heard it. 21

MR. PARKER: Eric. 22

MR. PETERSEN: I think we can comment on 23

it here. We’re a negotiating committee so we can 24

all come together and have the opportunity to be 25Execu tive Court Reporters (301) 565

- 0064 57

able to correct issues. And I think what we’re 1

hearing is that the steel manufacturers and the 2

transformer manuf acturers are saying that the price 3

is not accurate. Now I understand that you believe 4

that you’ve gotten information from somebody, but 5

you’ve got a very large portion of the industry here 6

that is stating the numbers are not accurate. We’re 7

not looking f or a change associated with 2011, 2010, 8

2009. We’re just looking for accurate numbers. 9

MR. PARKER: Mike. 10

MR. HYLAND: There’s something in a 11

negotiation that I always keep in mind, and it’s a 12

FOI

- B and T. It’s fair, and it’s open, it’s 13

inclusive, it ’s balanced, and it’s transparent. I’m 14

a little nervous about the transparent part right 15

now. That’s what I think I’m hearing, no offense, 16

but I’m not getting a sense of transparency that 17

everybody’s trusting

-- I’m not saying there’s a 18

conspiracy theory ’s going on, I’m only kidding back 19

here, but I’m jacked up on Red Bull by the way. 20

(Laughter.) 21

MR. HYLAND: But you’ve got the right 22

people around the table, and then turn around and 23

say you can’t use this information

-- why are we

-- 24

the most importan t people at the table and then say 25Execu tive Court Reporters (301) 565

- 0064 58

I’m sorry

-- 1

MR. RIVEST: This is Mike Rivest. You 2

have to understand the sensitivities, to really ask 3

people how much they pay for the primary material in 4

this product, there are competitive implications for 5

everyone at the table, from the steel manufacturers, 6

for the transformer manufacturers, it’s very 7

delicate question. There are anti

- trust questions 8

as well. So, fair and open is going to be difficult 9

unless everyone will ... and that’s just not going to 10

happen. So we’re not talking about just 11

establishing a process. I explained that in the 12

previous rulemaking we took a five year average. 13

That’s what was the basis for the decision. The 14

last analysis, a base case scenario of 2010. We 15

just did one of 2011

-- this wasn’t a full year, but 16

it was the most recent year. I’m not

-- I believe 17

that ... last time in terms of coming up with a price 18

scenario. 19

MR. HYLAND: Mike Hyland here. What if we 20

don’t use it at all, and stop your arguing here? 21

That’s what I’m trying t o get, and Andrew said the 22

same thing. Get to the

-- what do we want? I’m 23

confused. 24

MR. ROSENSTOCK: Steve Rosenstock. Again, 25Execu tive Court Reporters (301) 565

- 0064 59

just follow up and point of clarification. All the 1

engineering spread sheets show, as I recall, 2006, 2

2008 and now it’s 20 11, or it was earlier, 2010, 3

prices for the different transformer designs, as I 4

recall. So obviously, at least, at one point there 5

was a thought of using a five year average, or maybe 6

out of the sensitivity case, but again, the data 7

that was presented to us was based over a five year 8

period. Isn’t that what was sent out to us? That’s 9

what I saw in the spread sheets early on. 2006 10

column, 2008, 2010 column, now it’s a 2011 column. 11

That’s what we’ve been presented. 12

MR. PARKER: The previous analysis wa s, as 13

I understand, was 2010 data, with 2006 and 2008 with 14

the sensitivities. It wasn’t five year averages, 15

Steve. Wes. 16

MR. PATTERSON: I don’t have one of these 17

mics. 18

PARTICIPANT: Speak loud. 19

MR. PATTERSON: No problem. Mike, one 20

question. When you change the material prices, did 21

we run entire new optimizations based on those 22

prices? 23

MR. RIVEST: No. 24

MR. PATTERSON: Okay. So everything that 25Execu tive Court Reporters (301) 565

- 0064 60

we’re talking about is saying I’m applying a change 1

in material price to a unit that was optimized on a 2

different material price, which is now a sub

- optimum 3

design. 4

MR. RIVEST: Yes. 5

MR. PATTERSON: So we’re introducing more 6

and more error in everything that we’re talking 7

about, unless you change all the prices, go back to 8

your optimization and run an other 40,000 9

optimizations which is about what the DOE runs. So, 10

to do this is significant amounts of labor, 11

significant. Huge cost. Okay. So what they have 12

is they have an analysis where I believe you did run 13

new optimizations with the 2010 prices. O kay. They 14

draw a line in the sand and made the expense. 15

Now we can argue about the

-- okay, maybe 16

some of the data elements going in there are 17

incorrect, but there’s 40,000 data points, right, 18

and we can look at those data points and say, okay, 19

given ou r engineering knowledge, if we move these 20

things, how does it significantly change the end 21

result that we’re trying to get to? And I don’t 22

believe this is changing it. And so we’re having a 23

large discussion on fuzzy numbers which are even 24

more fuzzy beca use they’re not optimized on those 25Execu tive Court Reporters (301) 565

- 0064 61

numbers. 1

So I don’t know where the value is in this 2

whole conversation. 3

MR. DeLASKI: Follow up question. So Wes, 4

if one

-- 5

MR. PARKER: Andrew DeLaski. 6

MR. DeLASKI: If one were to have done the 7

optimizations, w hat effect

-- 8

MR. PATTERSON: It would change the no 9

load loss and the load loss relationships, which 10

fundamentally changes the entire efficiency 11

equation. 12

MR. DeLASKI: You would just get a 13

different cloud. 14

MR. PATTERSON: It would be a different 15

cl oud. 16

MR. DeLASKI: And that cloud would move in 17

what way? Would it move down, would it move up? To 18

the right, left or

-- 19

MR. PATTERSON: It might just explode 20

bigger. Go up and down. 21

MR. DeLASKI: It could go up and down. 22

MR. PATTERSON: Yeah, t he cloud itself 23

might just open up. 24

MR. DeLASKI: Right, you could get a 25Execu tive Court Reporters (301) 565

- 0064 62

lower cost transformer or a higher cost 1

transformers, but you would see

-- the lower bound 2

would move down a little bit? 3

MR. PATTERSON: With lower prices, the 4

lower bound will m ove down, and the slope, I 5

believe, will become narrower. The slope that I 6

keep coming back to, it will pitch down, and become 7

narrower. 8

MR. DeLASKI: Okay. 9

MR. PATTERSON: But we can’t draw a 10

conclusion about the true slope because these are 11

not op timized material prices. These are just 12

taken, changed material prices, and put them in 13

designs that were optimized on another basis. So 14

it’s all fuzzy on fuzzy on fuzzy. 15

MR. PARKER: Well, I asked the question 16

about optimization of the Navigant staff earlier, 17

and what I thought I understood was well, it’s true 18

the effect on the actual cost is relatively minor 19

one overall. 20

MR. PATTERSON: But I’m talking about the 21

effect of a cost on the losses, not the cost on the 22

selling price. It’s the effect of the price change 23

on the loss relationship. What happened to the 24

relationship between the M3 price and the copper 25Execu tive Court Reporters (301) 565

- 0064 63

price? This will fundamentally change the no load 1

loss versus the load loss. And it’s not factored 2

into this kind of data. 3

MR. PARKER: O kay. I think we need to 4

take about a ten minute break. 5

(Whereupon, at 10: 3 8 a.m., the meeting was 6

recessed for a 3 0 minute period.) 7

MR. PARKER: Okay. Thank you everyone. 8

Welcome back. We had some productive conversations 9

during the break. Recogni zing that no analysis will 10

ever be perfect, and we could continue fiddling with 11

the analysis forever, but we need to get down to 12

bargaining if we can . Also with the understanding 13

that everybody at this table, with the exception of 14

the advocates, have th eir own analysis to go on, and 15

the ir own set of numbers, the prices that are in the 16

analysis ... those prices, so this is all just for 17

planning purposes, it’s all just ... and the question 18

is, we are where we are, what is the best way 19

forward? 20

What I’d lik e to do is just open the table 21

for suggestions. I understand that Greg Coulter 22

came up with what I thought was a constructive 23

approach to go forward, so perhaps, I’ll just ask 24

Greg to introduce his proposal and we’ll then have a 25Execu tive Court Reporters (301) 565

- 0064 64

very brief discussion over that. Greg? 1

MR. COULTER: This is Greg Coulter, LBL. 2

What I was suggesting in some of the conversations 3

was that we recognize that everybody will have maybe 4

some issues with th e 2011 data points that just ca m e 5

out, but they could or should be used and willing to 6

be used as the analysis as a step forward from here. 7

That this should be good enough, so to speak, 8

showing a differential between amorphous and silicon 9

which is one of the big issues. We recognize that 10

silicon steel might be a little bit on t he low side, 11

but the differential is what is probably the more 12

important point, and we can fix up this and move 13

forward, rather than continue to argue about what 14

the exact numbers were. 15

MR. PARKER: Okay. Thank you, Greg. 16

Discussion? Rob. 17

MR. GREESO N: This is more of a procedural 18

thing. I talked to Bob Smith over the phone

-- Rob 19

Greeson, Federal Pacific

-- and he was saying it was 20

hard for him to hear on the conference what people 21

were saying. It may have something to do with the 22

little microphon es on the table, if you get too far 23

away from them, I don’t think people on the phone 24

can hear, but I think this microphone helps us in 25Execu tive Court Reporters (301) 565

- 0064 65

here, but maybe not on the phone. He just wanted me 1

to mention that. 2

MR. PARKER: Thank you. We’ll try to carry 3

the m ic around if that’s the case. Any other 4

discussion? Ray. 5

MR. POLINSKI: Ray Polinski, ATI Allegheny 6

Ludlum. Just one request on the record is that

-- 7

and if it’s out there, then I missed it with all the 8

data coming in, that was this LCC error that was 9

referenced, and has that ever been corrected in the 10

2010 data

-- the LCC, or has it just been corrected 11

in this 2011? Has it been corrected for 2010 to see 12

the magnitude of the error? 13

MR. BOLDUC: Chris Bolduc, LBL. The 14

error’s only been corrected for the 2011 data in the 15

results that you’ve got in front of you. We’re 16

working on the new 2010 for reference right now. 17

MR. POLINSKI: So your plan is to correct 18

2010? 19

MR. BOLDUC: If the committee wants 2010 20

to see the magnitude of the error, we will s upply 21

it. 22

MR. POLINSKI: I vote that we do that. 23

I’ll leave it up to the committee, but I think, you 24

know, we are comparing 2011 conclusions to the 2010 25Execu tive Court Reporters (301) 565

- 0064 66

conclusions, and they’re different. 1

MR. BOLDUC: You’ve got it. 2

MR. PARKER: I guess I missed th e 3

question, but we’ll probably get it after this 4

meeting today

-- tomorrow. 5

MR. BOLDUC: This evening. 6

(Discussion off mic) 7

MR. PARKER: We’re going to have that 8

discussion next, so let’s have that discussion in 9

order. Jerry. 10

MR. CORKRAN: Jerry C orkran, Cooper Power. 11

I would vote 180 degrees from what Greg said, and I 12

don’t think we should use this data. I think we 13

should go back to the older analysis, which I think 14

was more accurate and also we have, I think, I 15

recommend the core steel price an alysis that Phil 16

together that was 60 percent of the market or 17

something like that, as being more accurate than 18

this. I don’t know, I don’t think that DOE claims 19

that kind of coverage was new prices, is that 20

correct? 21

MR. CYMBALSKY: I’m not personally a llowed 22

to talk to that, so

-- if Navigant can help me. 23

MR. POLINSKI: Pay Polinski, API Allegheny 24

Ludlum. Is it fair to just

-- on 2011, we went 25Execu tive Court Reporters (301) 565

- 0064 67

beyond that

-- is it fair

-- we want to know who the 1

customers are

-- that’s proprietary, but how many 2

custo mers you talked to to get that data? Is that a 3

number of customers? 4

MR. CYMBALSKY: (Response off mic) 5

MR. POLINSKI: Ray Polinski, ATI Allegheny 6

Ludlum, you know, some of the discussions with the 7

transformer producers at the break or whatever, I 8

mean , I think we just set the 2011 data aside. Our 9

biggest concern is that if

-- and we’re still 10

hopeful we can come to an agreement in this 11

committee

-- but our biggest concern is if we don’t 12

come to an agreement, it goes to DOE making their 13

own decision bas ed on flawed data. But for the sake 14

of moving forward towards a vote, I think we can

-- 15

MR. PARKER: Great. Thank you. So all in 16

favor

-- with the understanding that the 17

reservations about the data have been eloquently and 18

extensively stated, ... is on record as wholeheartedly 19

supporting the data is the understatement of the 20

year, but as a basis of going forward, all in favor, 21

say aye, please. 22

PARTICIPANTS: Aye. 23

MR. PARKER: Opposed? We accept the 2011 24

data as the basis for our discussions, underst anding 25Execu tive Court Reporters (301) 565

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that people will be negotiating from their own data 1

as well, and their own records as well in 2

formulating their positions. So your positions can 3

reflect your own understanding of what you perceive 4

the market place to be, so that we can continue 5

for ward without, you know, having to have a new 6

analysis run on this data. 7

MR. ROSENSTOCK: Clarification? Steve 8

Rosenstock, EEI. 2011 prices for materials as shown 9

on that one slide, is that what we’re talking about? 10

MS. COUGHLIN: Yes. 11

MR. ROSENSTOC K: General prices or 12

transformer prices or both? 13

MS. COUGHLIN: Both. 14

MR. ROSENSTOCK: I just wanted it 15

clarified for everybody, clear in my own mind and 16

for everybody, that’s what we’re talking about using 17

these as the basis. 18

MS. COUGHLIN: Yes. 19

MR. PARKER: Understanding that there may 20

be an error, but the question is whether the error 21

makes a sufficiently fundamental difference to 22

outcomes that it has to be redone. And the sense is 23

that it isn’t. Gary. 24

MR. FERNSTROM: I agree we move forward
, 25Execu tive Court Reporters (301) 565

- 0064 69

based on that. 1

MR. PARKER: Again, all in favor? Raise 2

your hands. Opposed? No opposition. 3

PARTICIPANT: Abstain. 4

MR. PARKER: ... abstains. 5

PARTICIPANT: We don’t care about that. 6

MR. PARKER: Great. The next item is the 7

LCC results, and I turn the mic over to Chris Bolduc 8

to do that. 9

PARTICIPANT: The very first day I 10

proposed we went 22 to two, or 24 to zero

-- 11

PARTICIPANT: No, 18 to seven. 12

PARTICIPANT: Eighteen to six, all that 13

kind of stuff, and we kept being rejected. So I 14

don’t know if we discussed it, do we need 24 to zero 15

on every motion? 16

MR. PARKER: No. No, we need 24 to zero 17

at the end of the day. 18

**Relationship Between LCC and Dollars/Watt Metrics** 19

MR. BOLDUC: Good morning. My name is 20

Chris Bolduc from Lawre nce Berkeley National Labs. 21

I’ll be presenting the LCC data and results. One of 22

the things that went over the e

- mail last night that 23

I’ll discuss first is that we did find an error in 24

the LCC analysis. Yes, pass the microphone to 25Execu tive Court Reporters (301) 565

- 0064 70

Katie. 1

MS. COUGHLIN: So the error was in

-- 2

MR. ROSENSTOCK: Excuse me, there’s a very 3

high

- pitched feedback from somewhere. 4

PARTICIPANT: (on phone) We’re having 5

trouble hearing. 6

MR. PARKER: Can we turn off the mics in 7

the back? 8

PARTICIPANT: The room mics are only for 9

our

-- the phone is at star. And there’s three 10

microphones

-- 11

(Discussion re: feedback) 12

PARTICIPANT: That doesn’t sound like 13

feedback to me. 14

PARTICIPANT: It’s gone now. 15

MS. COUGHLIN: (very soft

- spoken) ... too 16

long period, and that ended up having a 20 percent 17

over

- estimate to the operating costs ... and the 18

effect that that has on the LCC really depends on 19

the details. So the LCC, to simplify, we had a 20

change in the first cost, and you have a change in 21

the operating costs. Change in the oper ating cost 22

is equal to the annual operating cost savings times, 23

it’s like a present value factor, represents the 24

discount seen during the lifetime of the unit. 25Execu tive Court Reporters (301) 565

- 0064 71

So depending on

-- those are two large 1

numbers that you’re taking the difference of to get 2

the LCC. So depending on how close those two 3

numbers were, it may or may not have a significant 4

impact on the LCC, the shape of this LCC curve. So 5

design by design, it’s

-- I believe it’s comparable 6

to a sensitivity analysis in the overall magnitude 7

of the change in numerical results. And we’ll give 8

you the

-- as Chris was saying, if you’re interested 9

in the details of the comparison, you’ll have the 10

previous engineering with the revised LCC this 11

evening. 12

And I want to make sure that everybody 13

understan ds that these curves that you’re going to 14

see now include the change to the engineering, and 15

in some cases, the change to the incremental first 16

cost can be quite significant, and that’s the 17

engineering contributing to the change in the 18

overall ... So you’re going to see a mixture of these 19

two things and the change in the LCC. 20

MR. ROSENSTOCK: Steve Rosenstock, EEI. 21

I’m just looking at the November 3 rd LCC results, the 22

presentation that was using the data of the previous 23

iteration. So the new one again, j ust is the 2011 24

material prices, but also the LCC revision based on 25Execu tive Court Reporters (301) 565

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your correction of the error. My other question 1

was, and I

-- I was told that wholesale pow er prices 2

are down significantly this year compared to last 3

year. My colleague said that PGM pr ices, which 4

serve this area, wholesale prices were down 25 5

percent to date, so far, 2011 compared to 2010. So 6

I’ve heard that people want to use the most recent 7

prices, do these include the most recent power 8

prices that went down, especially when compared to 9

2008? 10

MS. COUGHLIN: Electricity prices

-- the ... 11

starts in 2016

-- 12

MR. ROSENSTOCK: Right. 13

MS. COUGHLIN: So we’re really using 2016 14

electricity prices as predicted by AEO2011 (ph). 15

MR. ROSENSTOCK: But are those the 16

wholesale or retail prices ? 17

MS. COUGHLIN: They are the

-- we’re 18

essentially scaling these based on, I think the 19

average, essentially. 20

MR. ROSENSTOCK: The average retail price? 21

MS. COUGHLIN: Yeah, ... publishes wholesale 22

prices. They break it down by ... generation ... 23

distribut ion, but they don’t give you a wholesale. 24

We go by the averages. And for your information, 25Execu tive Court Reporters (301) 565

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it’s pretty standard

-- 2016 is pretty close to 1

2010. 2010 is significantly ... 2

MR. ROSENSTOCK: Thank you. 3

MR. PARKER: Rick Anderson. 4

MR. ANDERSON: Rick An derson, PWC. ... I’m 5

looking at design line one, which is a 50 KVA bed

-- 6

the payback period, and I see that

-- I see that the 7

mean incremental first cost is $380. 8

PARTICIPANT: What page? 9

MR. ANDERSON: It’s page 30. Yes, $380, 10

the mean incremental fi rst cost. But then to go 11

back to the LCC, and it says the mean LCC savings is 12

$56. 13

MS. COUGHLIN: So what that means is 14

essentially that ... first cost and add the mean LCC 15

savings, you get the mean operating cost, which are 16

not ... So essentially this i s saying that the mean 17

operating cost savings are ... 18

(Discussion off mic) 19

MS. COUGHLIN: (feedback and soft speech 20

made transcription problematic). This number is not 21

in it. But when you see an LCC savings that’s 22

positive, it’s telling you that this is a positive 23

number which is larger

-- 24

MR. HOPKINSON: The question I have is, is 25Execu tive Court Reporters (301) 565

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it appropriate to use retail cost in this analysis 1

or should it be wholesale cost? I have used, in my 2

analysis, the wholesale cost and annualized that and 3

then developed a present worth and an inflation 4

series for it. I would ask the utility people 5

present, since it’s really the cost to the utility 6

of ownership of the transformer, based on the 7

improvement in watts that they save, what basis 8

would you recommend? 9

PARTICIP ANT: Wholesale. 10

MS. COUGHLIN: We use wholesale prices. 11

We were discussing earlier, the price trends over 12

time, so if you set the prices in 2010 equal to one, 13

and you get a price trend out of ... year. We’re using 14

wholesale price trends ... so we use the a verage 15

retail price trend on the assumption that the 16

difference in trends would be largely the same. Now 17

if there’s a ... argument about why they’re different, 18

we can implement that. 19

MR. ROSENSTOCK: Steve Rosenstock, EEI. 20

But in terms of recent data, le t’s say that 2010, 21

the annualized average wholesale is a number, let’s 22

say, five cents. The 2011 was four cents, would you 23

then use the four cents and then extrapolate based 24

on that? 25Execu tive Court Reporters (301) 565

- 0064 75

MS. COUGHLIN: And the data is normalized 1

to one, and then we apply the 2010 average prices to 2

scale it to 2016. So it wouldn’t make any 3

difference. The only thing that would affect

-- 4

MR. ROSENSTOCK: How could it not make a 5

difference? The value of the watt per kilowatt hour 6

stage is twenty percent less from one ye ar to the 7

next, how can that not have a difference in the life 8

cycle cost analysis? 9

MS. COUGHLIN: The way the difference is 10

using the data to go between two date years, is 11

different from eight year best, when they calculate 12

a trend. So, assuming that

- - okay, but I don’t

-- 13

I haven’t seen any evidence that it is. 14

MR. ROSENSTOCK: My colleague said on PJM 15

(ph) it’s 25 percent lower this year, and you do not 16

show that trend. I’m saying wholesale price, not 17

retail. 18

MS. COUGHLIN: It will show next ye ar. 19

MR. ROSENSTOCK: Well, I’m giving you most 20

recent data, that’s what I heard this morning is 21

that we

-- 22

MS. COUGHLIN: We need the whole country 23

for the full period for the analysis, so we’re tied 24

-- we understand there are issues with AEO. 25Execu tive Court Reporters (301) 565

- 0064 76

MR. R OSENSTOCK: Well, we’re talking about 1

the most recent data. ... too, Pacific Northwest is 2

really

-- 3

MR. PARKER: Well, this takes us to 4

essentially what was on the agenda for a little bit 5

later, but it’s where the various model assumptions 6

and data come f rom. My understanding is that for 7

price trends, with the policy across an array of 8

products, if you draw from AEO, and not to put it on 9

an ad hoc basis ... 10

MR. ROSENSTOCK: For the trends, okay, but 11

I’m saying that the baseline is significantly lower, 12

tha t’s going to significantly affect life cycle cost 13

analysis. You say five and the trend, which is four 14

and the trend, can have significant difference over 15

life cycle cost. 16

MS. COUGHLIN: But the prices start off in 17

2016, so

-- 18

MR. ROSENSTOCK: But stil l, if they’re 19

flat, you said that they were

-- this is Steve 20

Rosenstock, EEI

-- you say if they’re flat

-- flat 21

at five, versus flat at four, that’s 25 percent 22

difference in the LCC. You have a price curve

-- 23

MS. COUGHLIN: I understand. Again, the 24

onl y thing that I can say is if we keep this up long 25Execu tive Court Reporters (301) 565

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enough we’ll have the year 2012 and

-- 1

(Laughter.) 2

MS. COUGHLIN: So in order to implement 3

any change to the prices, we need to have the data 4

for the full country, and we don’t have it for 2011. 5

MR. PARKER: It comes from AEO. AEO isn’t 6

published yet for 2011, so it’ll come in 2012

-- so 7

we have to use what we have. Using the most recent 8

data source that they have, they’re using the most 9

recent data published. 10

MR. ROSENSTOCK: ... data for sale pri ces? 11

MS. COUGHLIN: We can’t get

-- first of 12

all, we don’t have a full year of 2011, and we don’t 13

have it for the whole country. So if we could get 14

it for

-- 15

MR. ROSENSTOCK: You can get it for 2011 16

steel prices easily. 17

MS. COUGHLIN: I’m not going to discuss 18

steel prices. 19

MR. PARKER: Yes. Microphone, please. 20

MR. FOSTER: Chuck Foster, EEI. Katie, in 21

the reformulation of the LCC savings in terms of A 22

and B factors, a piece was sent out last night that 23

discusses or shows as an input, the pric e of energy 24

for no load losses and then separately, the price of 25Execu tive Court Reporters (301) 565

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energy for load losses. In fact, can you just put a 1

general description on how you differentiate, how 2

you come up with those prices? 3

MS. COUGHLIN: Yes, we use either a system 4

Landis (ph) when they’re available, or ... incremental 5

operating cost in the next unit that’s going to be 6

used in a particular area. So it’s very close to a 7

marginal price for operating the generation. We use 8

the correlation between that number and the system 9

load to get the variability on price as a function 10

of load. And we use the correlation between the 11

system load and the essentially, the ... 12

responsibility factor, the correlation between the 13

size of the system load and the size of the 14

transformer load to get the co rrelation between 15

price for the transformer. 16

MR. ROSENSTOCK: Steve Rosenstock, EEI. 17

And that system Landis (ph) in the earlier analysis 18

was based on 2008 data as I recall. 19

MS. COUGHLIN: That’s right. 20

MR. ROSENSTOCK: And the most recent 21

analysis, is that still using 2008 data? 22

MS. COUGHLIN: Yes. 23

MR. ECKMAN: If I could? 24

MR. PARKER: Yes, Tom. 25Execu tive Court Reporters (301) 565

- 0064 79

MR. ECKMAN: Tom Eckman, National Power 1

Conservation Council. So the real question in terms 2

of

-- because this standard takes effect in 2016 is 3

not what prices are today, it’s what we would expect 4

them to be in 2016 going forward. That’s what the 5

analysis is trying to represent. Correct? 6

MS. COUGHLIN: Well, we do

-- we are 7

trying to represent two things. We’re trying to 8

represent the way that th e price varies, essentially 9

the dynamics in the prices because over the course 10

of a year the prices go up and down

-- 11

MR. ECKMAN: Using hourly (ph) prices, but 12

going

-- 13

MS. COUGHLIN: And then overall we need 14

that trend forward

-- 15

MR. ECKMAN: Star ting in 2016 going 16

forward. 17

MS. COUGHLIN: And we’re also

-- we are 18

also representing the regional diversity in prices, 19

which is pretty large. 20

MR. ECKMAN: Right. Again, starting in 21

2016 going forward the next 30 years. 22

MS. COUGHLIN: That’s right. So we use 23

the fully disaggregated eight

- year

- old trends in 22 24

regions. 25Execu tive Court Reporters (301) 565

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MR. ECKMAN: For the utilities in the 1

world, we’re talking about a 30

- year corporate strip 2

starting in 2016, that’s what we’re talking about. 3

So for our purchase agreement, a 30

- yea r strip, if 4

you can go out and get one today, what would you 5

estimate that price to be? Right? Anybody got a 6

clue? No. It could be 2011 data, it could be 1992 7

data. Who knows? But it’s a 30

- year strip. That’s 8

what we’re talking about, so that’s thei r best 9

effort using AEO to get there. So it’s not like

-- 10

today’s wholesale market prices are irrelevant for a 11

30

- year strip. Fix whatever that price is with 12

whatever escalators are in there, so good luck 13

finding one. That’s the problem we’re trying to 14

solve. 15

MR. PARKER: I think the point that people 16

understand is that pricing comes from a published 17

document. That’s Department policy. It’s not going 18

to change. It comes from a published document. 19

That’s different from steel prices that the 20

individu al may actually

-- that individual 21

manufacturers are facing. So it’s just

-- it’s an 22

apples and oranges comparison and we really do not 23

have time to pick at every item in the analysis. 24

Let’s focus on the fundamentals. Steve. 25Execu tive Court Reporters (301) 565

- 0064 81

MR. ROSENSTOCK: Steve R osenstock, EEI. I 1

hate to sound like a broken record, but I know 2010 2

has been published for the system Landis (ph) and 3

I’m hearing again that 2008 data is being used. 4

MS. COUGHLIN: That’s right, and again, 5

it’s because

-- I’ve looked at this data actu ally, 6

for eleven years, and what we’re interested in is 7

the shape of this correlation function between the 8

system prices and ... and that is an extremely slowly 9

varying function. So we have not updated the data, 10

that’s correct, and, you know, if we have eno ugh 11

time, we can, but we’re very confident that it would 12

have a minimal impact statistically, because it’s 13

the way the price increases with load, that’s the 14

only thing we’re using that data for. And that’s a 15

very stable relationship. 16

MR. HOPKINSON: Phi l Hopkinson at HVolt, 17

Inc. I would just like to ask a question, Katie. 18

Is the core loss assigned to the base cost of power 19

and load loss assigned to the peaking cost of power? 20

So core loss is a factor of using the base 21

generation cost, and load loss is using the peaking 22

hour cost? 23

MS. COUGHLIN: For the capacity component, 24

yes. 25Execu tive Court Reporters (301) 565

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MR. HOPKINSON: Okay. Thank you. 1

MR. PARKER: Yes, Gary. 2

MR. FERNSTROM: I know we’re talking about 3

wholesale prices here, but I’d just like to make the 4

point that, from the utility business point of view, 5

if we’re buying that power and wasting it in our 6

transformers, we’re not making any money off of it, 7

and it’s reasonable to think that we ought to be 8

using the retail cost because if we weren’t losing 9

it in the transform ers, we could be selling it and 10

making some money off of it. 11

MR. PARKER: Jerry. 12

MR. CORKRAN: Along the same line, on the 13

analysis, I believe the

-- what is the RMS load used 14

for the evaluation? I believe it’s very low, 15

something, what, 35 percent or so for the life of 16

the current transformer? And if we figure 17

transformer’s going to be in place for the next 60 18

years, I think that these utility people will use 19

better judgment than to put a transformer in that’s 20

only loaded at 35 percent for the next 3 0 years. It 21

might be that installation now, but for 30 years I 22

think that

-- that’s not a good number. Could be 23

much higher, like 50 percent. 24

MR. ANDERSON: No, that’s voltage drop. 25Execu tive Court Reporters (301) 565

- 0064 83

You run into voltage drop problems based on watt 1

lines, things like t hat. So I wouldn’t foresee 2

loading practices to change significantly. Because 3

of the size of a subdivision, not unless watts 4

become extremely small, then maybe yes, but the ... 5

watts stayed the same size, it’s due to voltage drop 6

that becomes the limiting factor. 7

MR. CORKRAN: So what are you saying on 8

percentage? 9

MR. ANDERSON: No change in loading. 10

MR. HOPKINSON: No change over what? 11

MR. ANDERSON: Over the next 30 years. 12

MR. HOPKINSON: Oh, I know, but over

-- I 13

think that what the line

-- t his is Phil Hopkinson. 14

I think that I heard the question asked from Jerry, 15

what load assumption was used in the analysis, and I 16

don’t think I heard a response. 17

MS. COUGHLIN: Yeah, it’s

-- we use a 18

distribution of loads and that distribution is 35 19

perce nt, and we have a subset in the LCC of rural 20

utilities that use a lower loading. Those are 21

utilities that have a very low population density, 22

and I believe when the high capacity transformers 23

are loading somewhat higher. The low loads are 24

mostly small ca pacity transformers. And there is a 25Execu tive Court Reporters (301) 565

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switch in the LCC that allows you to model a pretty 1

small load growth over time, which is again, 2

standard practice, for example, in calculating cost 3

evaluation. 4

MR. CORKRAN: This is Jerry Corkran again. 5

Could you gi ve us numbers rather than higher? 6

MS. COUGHLIN: I think in the low density 7

areas, the RMS goes down to about a median of 25 8

percent. And in the high concentration, it’s about 9

40 percent, the median. Again, it’s a distribution. 10

MR. PARKER: Okay. I’ m going to suggest 11

that we

-- that we focus our comments first on the 12

results of the errors in the analysis that was made. 13

I take it that that is

-- well, let’s make sure that 14

we have people comfortable with their understanding 15

of what that was and what i t does to the analysis. 16

Let’s again, try to avoid going over sort of cases 17

which are not responsive. Bob. 18

MR. SAINT: I understand that there was an 19

additional error in the calculation of power cost 20

and the demands on what those power costs

-- Ken 21

Wind er brought up last week? 22

MS. COUGHLIN: No, we don’t think it was 23

an error. It was a difference of the 24

interpretation. So, ... so we added the generation 25Execu tive Court Reporters (301) 565

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actually to the overall energy savings, and we 1

believe that that’s correct. And then in areas 2

where we are using market prices, if there’s a 3

capacity market where people also have to buy into, 4

we’re using those numbers to represent ... in cost 5

savings. And I believe that’s also correct. 6

MR. PARKER: Okay. I’m not going to

-- we 7

have the revised analys is drawing on 2011 data with 8

the error corrected. We have before you

-- I’m not 9

going to put you on the spot and ask if you want to 10

make a proposal

-- we can think about that over 11

lunch and have that discussion right after lunch. 12

What I thought might be useful now is to 13

start off hearing from DOE’s General Counsel, Dan 14

Cohen, just to set the table for our discussions 15

about what are the factors that we are considering 16

in the negotiations? Where do the various 17

parameters come from? And then look at it

-- start 18

a discussion of some of the issues that have really 19

vexed us in the past, the question of dollars per 20

watt versus life cycle cost savings. I’d like to 21

not let us get bogged down with that, but just have 22

a frank and candid exchange about the life cy cle 23

cost analysis is done, why it matters and how it 24

relates to dollars per watt, so people can 25Execu tive Court Reporters (301) 565

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communicate, so we can bridge these two different 1

worlds of the economists and the business world and 2

hopefully get people

-- get where everyone will 3

understand it so we can move forward fruitfully 4

later on. 5

So before we go further, let me turn it 6

over to Dan Cohen here to just walk us through again 7

how the Department approaches and how we are to 8

approach, under the statute, the negotiations of 9

standards leve ls. 10

**Department approaches to negotiations** 11

MR. COHEN: (not at mic) I don’t know if 12

you all have been following your e

- mails this 13

morning, but there was an interesting exchange 14

between ... asking about

-- discussing what is the 15

economic justification and wh at we do with the 16

accessibility act and some other things. And I 17

thought what we should do is really kind of go 18

through what our statute says and what those terms 19

that we’ve been talking about here today

-- 20

justification

-- and they’re not a clean slate. The 21

statute actually tells us what they are. 22

So I want to start by going through the 23

basic standard that we have to meet for any of our 24

standards, not only this one, but any kind of 25Execu tive Court Reporters (301) 565

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standard, efficiency standard, that guarantees a 1

maximum improvement in energy or water or 2

efficiency. The second thing is which is 3

technologically feasible. 4

So parsing that out a little bit, we 5

realize ... so if you take that sentence apart, what 6

it says is that we shall achieve the maximum 7

improvement in energy or water efficiency. That’s 8

an absolute. We don’t have an option there. It’s 9

then a determination made by the Secretary about 10

technological feasibility and economic 11

justification. So that’s where the decision making 12

is concerned. We have to do the first, but w e do 13

that in light of a determination made on the next 14

two. 15

So, as we’ve been talking about this in 16

the past, we explained how when we look at the 17

various standard levels we always start at the most 18

efficient level and then work down, applying the 19

variou s tests, which I’ll get to in a moment, to see 20

where we get to a first place, we get to an economic 21

determination. This is law, because we have to 22

achieve a maximum improvement in energy efficiency. 23

That’s our charge, and to figure out what 24

technological feasibility and economically 25Execu tive Court Reporters (301) 565

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justified. 1

MR. ANDERSON: Dan, Rick Anderson. Does 2

it matter if you put anybody out of business while 3

you do that? 4

MR. COHEN: So, we’ll get to that

-- we 5

consider that

-- 6

MR. ANDERSON: How about everybody? 7

MR. COHEN : There are different analyses 8

that we’re going to do where we’ll look at those 9

sorts of questions. But overall, this is the big 10

picture, bottom line, that we need to be thinking 11

about. 12

MR. SAINT: So since you mentioned the big 13

picture, are you

-- y our interpretation is that you 14

have to

-- for each individual component you have to 15

look at the maximum efficiency and ignore the 16

overall energy efficiency? 17

MR. COHEN: This is by product, the 18

covered product. The covered product is 19

distribution transfo rmers, the refrigerator, the 20

dish washer

-- those are all covered products. 21

MR. SAINT: And so you’re required to 22

ignore the overall efficiency, is that what you’re 23

saying? 24

MR. COHEN: No, not at all. In fact, just 25Execu tive Court Reporters (301) 565

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the office. If I understand what yo u’re asking, 1

it’s just the opposite. Our job is to see how we 2

can maximize the energy efficiency of that product. 3

Get it to its most maximum efficiency. 4

MR. SAINT: But by making a single 5

component product more efficient, you might be side

6

stepping or sabotaging the overall efficiency, 7

operational and energy efficiency of the utility 8

under consideration. 9

MR. COHEN: So you’re getting to

-- this 10

is your dollars per watt. And I understand the 11

problem. I’m just saying you have X number of 12

dollars to sp end in any given year, and you make a 13

business decision about how best to spend those 14

dollars to maximize your business. What we

-- we do 15

this analysis, we consider different factors in 16

economic justification, but we don’t do it that way, 17

and that’s, I th ink, where we’ve had the disconnect 18

in this conversation. 19

So when I go to the next slide, I’ll show 20

you when we do this

- when we do our analysis, 21

because we have to im prove

-- we have to reach the 22

maximum improvement in energy efficiency that we 23

deter mine to be technologically feasible and 24

economically justified, the statute that helps us 25Execu tive Court Reporters (301) 565

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with economic justification doesn’t

-- technological 1

feasibility, we’ve actually flushed out something we 2

call process ... where we make this analysis for 3

looking at te chnologies that are on the market. And 4

it’s a pretty straightforward screening. And that’s 5

not really much of an issue, I don’t think. It’s 6

pretty obvious what is technologically feasible. 7

It’s the economic justification that 8

becomes an issue, and so we get the very next 9

paragraph in the statute

-- and I put it up there, 10

and I apologize this is hard to read, probably, in 11

the back of the room

-- but what it says is in 12

determining whether the standard is economically 13

justified

-- so, don’t forget, maximu m improvement 14

in energy efficiency that the Secretary determines 15

is technologically feasible and economically 16

justified. In determining what is economically 17

justified, the Secretary, after getting comments on 18

it, has to consider those seven things that I’ ve 19

listed up here. 20

And if you look at the second of them, 21

this is the one we’ve been talking most about, is 22

the savings in operating cost and the estimated 23

average life of the covered product in the product 24

class that any increase in the price of what the 25Execu tive Court Reporters (301) 565

- 0064 91

usual charges are ... covered product for life cycle 1

cost analysis. That’s it. That’s where it comes 2

from. So we have to do that analysis in order to 3

figure out, as part of our interpretation, whether 4

something is economically justified. 5

You also note that the first one is the 6

impact of the standard on manufacturers, so we do a 7

manufacturing analysis. The predicted amount of 8

energy or water savings

-- the energy impact. 9

The various items that we calculate in our 10

analysis for those seven , the s even being the 11

factors considered by the Secretary, that is a 12

product

- specific determination. It’s not just we’ll 13

come along and say oh, you know, for every product 14

we look at we’re going to also account for ... There 15

are product

- specific factors that dete rmine ... But we 16

have to do those analyses. If we don’t do those 17

analyses, we simply aren’t compliant with the law. 18

And the way we then set it up is we take 19

each of those factors that are just in those seven, 20

and we do various analyses as we’ve been talki ng 21

about. We do the life cycle cost analysis, 22

manufacturing impact analysis that helps us measure 23

the first factor. The life cycle cost analysis is 24

the second factor. The national impact analysis is 25Execu tive Court Reporters (301) 565

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an overall

-- what happens as a result of energy 1

savin gs. 2

The seventh factor, I’ll skip over some of 3

the other factors, that’s where we consider things 4

typically like environmental impacts of the rule. 5

Utility impacts analysis is

-- not utilities, but 6

utility in terms of the consumer utility of the 7

produ ct to do what people want it to do. Your 8

refrigerator still keeps your food cold. That’s the 9

utility impact. 10

So then we take all those various analyses 11

and we look again at what is technologically 12

feasible and we create standards from them, which 13

we’ll talk to in a minute, but the whole idea is to 14

take all that various data and coalesce it into 15

figuring what is the maximum technologically 16

feasible level and then apply those seven factors 17

for economically justification. 18

If it is economically justifie d, which 19

typically means there’s a positive net present 20

value, assuming all those factors, because then we 21

pick the maximum energy efficiency that’s 22

technologically feasible and economically justified. 23

If it’s not, economically justified, we go down in 24

en ergy efficiency. And so on, and so on, until we 25Execu tive Court Reporters (301) 565

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find the first level that is economically justified, 1

because then we’ve met our statutory obligations to 2

be the maximum improvement in energy efficiency to 3

be economically justified and technologically 4

feasi ble. So Jack you want to talk about

-- 5

MR. POLINSKI: Ray Polinski, ATI Allegheny 6

Ludlum. The basis of the law suit that we’re under 7

now is that you didn’t factor all those in the last 8

time? 9

MR. COHEN: So actually the law suit that 10

challenged the ’ 07 rulemaking, actually had nothing 11

to do with any of this. It had to do with our 12

environmental impact analysis. 13

MR. POLINSKI: That was on there, I 14

thought. 15

MR. COHEN: It was, yeah. So what the law 16

suit ultimately came down to the issue of our

-- at 17

the time, the failure to monetize the emissions 18

reductions in any analysis, and since that we’ve 19

actually come up with

-- it’s government

- wide 20

procedure for coming up with a dollar value, if you 21

will, for reduction in CO2 emissions. And we do 22

impact ... and café standards for vehicles, EPA uses 23

it when they do various environmental regulations to 24

calculate the monetized value of CO2 emissions that 25Execu tive Court Reporters (301) 565

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occurs as a result of

-- 1

MR. POLINSKI: So somewhere

-- 2

MR. COHEN: That rule was adopted. 3

MR. POLINSK I: Somewhere around this 4

analysis there’s some monetary value now that’s

-- 5

MR. COHEN: So the way

-- yeah, so the way 6

it’s done, it’s in that seventh factor. So we apply 7

the first six factors into our calculation of net 8

present value, and we then we d o additional analyses 9

of environmental impact ... gas emissions reductions 10

to see if it changes. But we do put it now through 11

all of our

-- we put a dollar on the CO2 emissions. 12

MR. CASKEY: John Caskey, NEMA. Thanks 13

for explaining that. I’ve heard this before, but 14

it’s been a while. My question really relates to 15

newly manufactured idea versus DOE’s effort to try 16

and improve the efficiency of products that are 17

already in place out there. I can always hear, sort 18

of second hand or third hand, the funny t hing that 19

you only impact

-- you can only provide rulings 20

relative to newly manufactured products. So what 21

statute drives that and why can’t you get involved 22

with existing things that are out there in the place 23

today. 24

MR. COHEN: I’m not sure what you m ean

-- 25Execu tive Court Reporters (301) 565

- 0064 95

I ’m not sure I understand the question. 1

MR. CASKEY: DOE has set rules, as I 2

understand it, they control the efficiency of a 3

newly

- manufactured product, like a transformer. But 4

there’s a million transformers out in the field 5

today. 6

MR. COHEN: Yeah, this can get more and 7

more complicated. I don’t know how familiar you are 8

about these things. There’s a definition of what we 9

call a new covered product

-- it may be the worst 10

sentence in the entire US Code. But basically what 11

it says is that once a product is

-- first of all, 12

the power of authority ... is over the manufacturer, 13

it’s not over the consumer. So if we

-- if you go 14

to Best Buy and you buy what is otherwise a covered 15

product, a dish washer

-- you go to Best Buy tonight 16

and you buy yourse lf a freezer ... so if I go buy a 17

freezer and once I buy that freezer, then I can do 18

whatever I want with that freezer. I can add TVs to 19

it, I can add

-- you name it, any kind of energy 20

consuming part because of this definition of a new 21

covered product that says once title is transferred 22

to the ultimate end user, the power authority ends. 23

So basically it means that everything that 24

we do applies to product manufacturers on or after ... 25Execu tive Court Reporters (301) 565

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that they’re compliant with the standards. So the

- 1

- obviously what that means is that if there is a 2

product that after distribution, like freezers, if 3

there was a new standard that was going to come into 4

effect tomorrow for freezers, and there were 5

millions of freezers out there on the market that 6

met the old standards, they c an be sold, because 7

they were manufactured before the date of the new 8

standard. And once the standard compliance

-- the 9

new standard, then all manufactured must meet it. 10

MR. POLINSKI: Thanks. 11

MR. PATTERSON: Related to that, if a

-- 12

Wes Patterson

-- if the refrigerator was purchased 13

by somebody who would refurbish, he took it and say 14

the motor had failed, and he puts in a new motor, 15

and now it’s efficiency doesn’t meet the current 16

standard, and he resells it, is that covered by the 17

regulation or not? 18

MR. COHEN: It also depends. If it was a 19

person whose job is, that their business to buy lots 20

of refrigerators and the way that new covered 21

product is written, they take title to the product 22

for purposes of their own

-- for purposes of resale, 23

and so t he chain of commerce would not have been 24

cut. But if I buy that freezer and brought it home, 25Execu tive Court Reporters (301) 565

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and I’m using it in my house and then the motor 1

dies, and I send it to you to put a new motor into 2

it and you put in the least efficient motor on the 3

face of the planet, nothing we can do about it. 4

MR. PATTERSON: So the

-- 5

MR. COHEN: And by the way, if I give it 6

to you because I really don’t want the freezer any 7

more, and you then turn around and sell it, chain of 8

title was cut by my purchase of it as the ult imate 9

end user. 10

MR. PATTERSON: So the key issue there is 11

whether or not the ownership was transferred for 12

remanufacturing. 13

MR. COHEN: Correct. And if it was

-- if 14

ownership as the end user was transferred to a party 15

in that chain of commerce. So if the ownership to 16

the end user, then the chain of commerce is cut. If 17

ownership was transferred for purposes of resale, 18

solely, ... and you buy those boxes to put in the 19

boat, you bought them for purposes of selling the 20

box. 21

MR. PATTERSON: Let’s talk abo ut 22

transformers. 23

MR. COHEN: Yeah, we’ll talk about 24

transformers. 25Execu tive Court Reporters (301) 565

- 0064 98

MR. PATTERSON: I’ve got an old 1

transformer and it failed, it gets put in the yard 2

of the utility where the utilities keep all their 3

junk. So they sell it to a guy who rebuilds. 4

Right. And the guy who rebuilds it, he refurbishes 5

it and sells it to another utility, because that’s 6

his business. Now, should that comply with the 7

regulation or not? 8

MR. COHEN: He purchases the transformer? 9

MR. PATTERSON: No, the utility bought it. 10

M R. COHEN: The utility bought it from 11

manufacturer X. 12

MR. PATTERSON: Yes. And it failed, and 13

he sold it to rebuilder B. And then rebuilder B 14

fixes it up and sells it to utility C. A third 15

party. 16

MR. COHEN: Utility A bought it for their 17

own purpo se to put it in their line. 18

MR. PATTERSON: Yes. 19

MR. COHEN: They were the end user. The 20

chain is broken and that’s no longer covered. 21

MR. PATTERSON: Okay. So now the 22

implication of some of these standards with products 23

that can be readily remanuf actured, easily 24

remanufactured, is, especially when we have millions 25Execu tive Court Reporters (301) 565

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of the products sitting in the marketplace, is that 1

the transformers will become potentially cheaper to 2

rebuild and sell than to manufacture new. And thus 3

circumventing any efficiency st andard. 4

MR. COHEN: Yes. So go back and look at 5

the 2007 rule. We spent a lot of tim e talking about 6

this very issue in the 2007 rule and came to the 7

conclusion that refurbished transformers are beyond 8

our control. 9

MR. DeLASKI: Dan, did you address t hat 10

specific question

-- this is Andrew

-- did you

-- do 11

you remember if you addressed the specific question 12

of who owned the transformers? 13

MR. COHEN: Yeah, actually

-- we actually 14

talked about it in the context of the new covered 15

product definition. I think it’s on page

-- let’s 16

see if I can find it. 17

(Discussion off mic) 18

MR. COHEN: So look, it’s on

-- so this 19

was published on October 12, 2007, and if you look 20

at the ... on page

-- it’s in the middle column on 21

page 58203, and you’ll see we go through the whole 22

conversation about new covered product and goes on 23

about two columns

. 24

MR. MEYERS: What page was that? 25Execu tive Court Reporters (301) 565

- 0064 100

MR. COHEN: 58203. So it’s in the October 1

12, 2007 Federal Register

MR. PATTERSON: So while we’re ge tting 4

copies made, I’d like to think about looking at 5

problems, looking at the limits of what happens, and 6

let’s just suppose

-- let’s suppose that we agree 7

with a new standard, and the new standard raises the 8

price of the existing transformers 50 percent. 9

Fifty percent more expensive. And we know from the 10

physics of this type of product in the market, that 11

somewhere around 20 percent increase in price would 12

shove the production of a rebuild rather than a new. 13

Okay. So if we set the standard 50 percent, we know 14

that 50 percent of our transformer sales will 15

evaporate and become ... We know this. So the 16

regulation says we can’t do anything about the 17

efficiency standard of rebuilt, however your 18

national impact standard has this manufacturers 19

impact analysis point, right, and the effect of the 20

standard essentially is we put 50 percent of the 21

producers out of business. Should that economics 22

then be in this analysis? 23 . Can we get copies made

2

of this? 3

MS. COUGHLIN: If we have evidence, and we 24

can quantify this, then it would go in the analys is. 25Execu tive Court Reporters (301) 565

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In many products in the national impact analysis, we 1

include rescission where a purchaser chooses to 2

repair rather than replace. That slows down 3

shipments of new units and affects the energy 4

savings. It’s not in the current analysis because 5

we did n ot have the data when we put the analysis 6

together to prescribe a refurbishment market. And 7

then for the manufacturing impact, I’ll let Navigant 8

answer that. 9

MR. PATTERSON: So to add to your 10

analysis, we have a number of utility members here, 11

and they can easily comment on the corporate policy 12

for when they will make a decision as to when they 13

will buy new versus rebuilt, especially on liquid

14

filled distribution transformers . They all have 15

policies inside their firms. So they could easily 16

give you som e kind of a number. 17

MR. PARKER: Mike. 18

MR. HYLAND: Yeah, this is Mike Hyland. 19

Isn’t that what I saw last night on our trails, 20

Steve, didn’t you comment on

-- was it AK Steel on 21

the paper on that? I made copies of it in case you 22

wanted it, about the refurbishing market. And 23

nobody commented on it , it was like mid

- November. 24

MR. PETERSEN: Eric Petersen, AK Steel. 25Execu tive Court Reporters (301) 565

- 0064 102

Jerry Schoen actually put the data together and 1

essentially what the information is is a projection 2

of the market of transformers that ar e currently 3

associated with replacements versus new. So yeah, 4

this is the copy that went around, “Comments on 5

projected US demand for core materials.” So that 6

front page, it essentially shows a graph going back 7

to 1965, which shows the percentage of tran sformers 8

within the markets that were purchased as a results 9

of being replaced, as opposed to new, and as you can 10

see from that graph, in the current 2010, we were 11

showing that approximately eight percent of the 12

transformers that are going in the market to day are 13

the result of replacements as opposed to buying new, 14

and that’s simply, as you can see, we’re in one of 15

the worst housing starts of US economy right now, so 16

you’d expect it to meet the projection, then takes a 17

perspective associated with what we se e housing 18

starts becoming over the next 30 years, and as you 19

can see, the trend essentially puts a position that 20

50 percent of the transformers that are put in the 21

marketplace are put in for the purpose of 22

replacement. 23

So essentially, what we are demon strating 24

with this data is that there is a significant 25Execu tive Court Reporters (301) 565

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portion of the market that is associated with 1

replacements, and if there is a real issue 2

associated with refurbishing these because of the 3

economics, then the benefits associated with 4

anything pre

- ener gy saving standards would be 5

severely diminished if 50 percent of the market 6

chooses to refurbish as opposed to buying new. 7

MR. PARKER: Just to clarify, what your 8

analysis shows is that 50 percent is replacement, 9

but not necessarily refurbishment, right ? 10

MR. PETERSEN: What it shows

-- 11

MR. PARKER: It could be made with either 12

a new unit or a refurbished unit. 13

MR. PETERSEN: That’s correct. What we’re 14

showing is the size of the market that would be 15

susceptible to the question of do I refurbish thi s 16

unit or do I buy a new one? And obviously, then, 17

that’s, according to what Wes is saying, well, what 18

is the utility companies’ policy, procedure, in 19

regards to where is that clip of when they choose to 20

refurbish as opposed to buying new. 21

MR. PATTERSON : If the utility company can 22

get a refurbished transformer that functions as well 23

as the new, except for the efficiency, and they got 24

it at zero cost, they wouldn’t buy any of these 50 25Execu tive Court Reporters (301) 565

- 0064 104

percent. 1

MR. PETERSEN: That’s right. 2

MR. ANDERSON: You’re exactl y right. 3

MR. PATTERSON: Okay. So, we go from 4

there to if they buy refurbished units at the same 5

price as a new, but they have a risk because of the 6

quality issues of the refurbishment process, then 7

they more than likely will opt to buy the new rather 8

t han buying the refurbished. 9

MR. PARKER: As I understood from previous 10

discussions, there were two issues, right. One was 11

the question of is it the same quality, but there’s 12

also a question of freight and shipment if they have 13

to send something out

-- 14

MR. PATTERSON: That adds in to the price 15

of the

-- the purchase price of the utility. The 16

freight is picked up in the selling price. Each 17

freight is included in the end user price, so it 18

comes down to these two extremes. Potentially, you 19

know, if we gave it away, 50 percent of the 20

transformers just disappear. So the question then 21

becomes that I think Katie would need some kind of a 22

number, consensus from both the utility, that says 23

if the price drops ten percent, we’ll see

-- of that 24

50 percent, we’l l see a 20 percent increase in 25Execu tive Court Reporters (301) 565

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refurbishing. If the price drops 20 percent, we’ll 1

see a 40 percent increase in refurbishing. And with 2

that then, you would have enough data to put your ... 3

together. 4

MS. COUGHLIN: Yeah, I think essentially 5

we have to ackn owledge that this would not be data. 6

This would be speculation. So we can put together 7

scenarios based on a reasonable, informed, 8

speculation about what would happen. The problem 9

for us in operating within the constraints that DOE 10

operates, is we’re sup posed to use existing data to 11

do the modeling. And since we didn’t have 12

information on the refurbished market, we’re not 13

able to do things like, you know, give the constant 14

refurbishing relative performance and then a 15

lifetime beyond refurbishment. So

-- but yes, we 16

can make assumptions about those numbers and we can 17

build a model around those assumptions, but they are 18

going to remain assumptions. 19

MR. PATTERSON: I’m not quite sure. There 20

are some utilities that actually have their own 21

internal refurbi shment capabilities. Okay. And 22

they

-- internally, make the economic decision to 23

whether or not they want to rebuild this transformer 24

or buy a new one to replace it. So it’s not 25Execu tive Court Reporters (301) 565

- 0064 106

speculation, it’s hard economic fact. 1

MR. PARKER: Okay. Now, forgive me but I 2

must make a process point. We had this discussion 3

in September, in October, in November, and in each 4

and every discussion we asked utility people if they 5

have actual data on refurbishments and the cost of 6

refurbishments and number of refurbishments to be 7

analyzed so they can take it on board. As I 8

understand it, nothing was forthcoming. What they 9

got was a useful but not conclusive study about 10

replacement markets, not refurbishment markets. And 11

so here we are at the end of the day, this is where 12

we are, and the question is, what do we do about it 13

now? We still do not have data on refurbishments. 14

Andrew? 15

MR. DeLASKI: Yeah, just a quick question, 16

and then I’ll echo the comment on process. So this 17

is useful, Jerry, thank you for putting it toge ther. 18

So my question for you is, maybe it’s in your memo, 19

I haven’t had a chance to read it yet, but your 20

model

-- you’re not a transformer seller so you 21

don’t really know whether

-- how do you know, I 22

guess is the question. 23

MR. SCHOEN: (not at mic) J erry Schoen, 24

AK Steel. It’s not explained in there. ... suburban 25Execu tive Court Reporters (301) 565

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power consumption based on capacity

-- and natural 1

load growth. The DOE is using natural load growth. 2

It’s actually misleading. Taking data we had ... 3

literally, on what’s out there, and the n build this 4

separate model ... based on a full housing market of ... 5

units a year. That is a normal pace of housing, and 6

it’s been that way for the last 50 years, and ... 7

expected to be that. Again, that’s a smoothed

- out 8

average. But what that does is, you l ook at the age 9

of the fleet with the life cycle model that we have 10

for transformers which we obtained from the third 11

market, and that happens to do industrial analysis 12

for business interruption insurance, so it’s 13

actually very good data. And roll that int o the 14

model basically for housing. So it’s a fairly 15

complicated model, proprietary model, because we 16

built it, not for any one utility, but for the whole 17

market. 18

The thing of it is is has actually been

-- 19

you know this isn’t our field of expertise. We ’re 20

not a tradesmen ... We’re a supplier ... However, we 21

looked at it, we found that there’s a lot more 22

activity out there because of the 2010 standards 23

than we appreciated. There are

-- it is not a 24

nascent industry. It is a well

- established and 25Execu tive Court Reporters (301) 565

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rapidly gr owing industry. And they’re rather 1

excited about prospects for the future because it’s 2

a very cheap business to go into. It’s

- again, 3

there’s not a whole lot of capital intensity. You 4

basically need a rewinder, which basically you take 5

out the old wind ings, replace it with new windings, 6

and everything else pretty much goes back into 7

service with a coating of fresh paint on the 8

outside. Sometimes they’ll replace the caps, 9

sometimes they won’t. 10

I was surprised to find out how rapidly 11

growing it is. If we hadn’t looked at it carefully, 12

and I’ve talked a little bit with the folks from 13

APPA, they’ve had the same observation. That yeah, 14

when we started looking around, to find it is 15

actually a cottage industry that is not

-- there’s a 16

lot of cottages out there, you’ve just got to 17

discover them. 18

MR. DeLASKI: So then if I could follow up 19

on Jerry from a process point. I’m looking at our 20

agenda, Richard. I think we’re before 9:45 on the 21

agenda. So I’m concerned that we’re running out of 22

time. I know t he Department’s got to write a NOPR 23

with or without a recommendation from this group. 24

So I hear us sort of circling around issues that 25Execu tive Court Reporters (301) 565

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we’ve discussed in prior meetings. I’m getting 1

concerned, we’ve got medium voltage liquid and dry 2

type to discuss, and I’m just getting concerned that 3

we’re running out of time. I don’t know what your 4

thoughts are on the agenda in terms of how you get 5

us back on track, but I don’t see how we’re going to 6

get to the substance of it. This is substance, I 7

don’t think this is a very substantive discussion, 8

but I just wonder about our timing here. 9

MR. PARKER: Well, what I’d like to do is 10

-- we have had along the way a discussion about some 11

of the issues that were ahead of us on the agenda, 12

the dollars per watt, the loading a ssumptions. My 13

recommendation would be that we

-- it’s now 12:15. 14

What we absolutely could do is discuss the

-- first, 15

do people want to discuss the dollars per watt 16

versus LCC

-- or does the presentation about the LCC 17

satisfy you at this point? Is ther e

-- is there a 18

need to have that discussions still? 19

MR. HYLAND: Mike Hyland, APPA. I don’t 20

want to leave this yet . Only because there are 21

other things that have to be studied, you know, 22

that’s why the SBA was created, that’s why we’re

-- 23

we’ve had SB A here today. ... small businesses, 95 24

percent of my membership are considered small 25Execu tive Court Reporters (301) 565

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businesses, and that wasn’t, I think, analyzed 1

correctly. We hope that it’s being analyzed now. 2

We did calculations, based on our survey of our 3

members, and it’s about $1 4.23 a customer is the 4

transformer life. When we correlate that number 5

with 98 percent, we thought it was pretty good. So 6

an increase of ten percent would be another $1.42, 7

20 percent would be $2.80

-- you do the math. When 8

you do that, you can extrapol ate it out over the 9

number of customers these small members serve. And 10

another thing that has to be analyzed which we ... and 11

that’s the

-- by the mandate, which is a hundred 12

million is what’s set, and we’re pretty close to 13

that too. So I just want to thro w it out there. 14

DOE has their houses, but the reason things like ... 15

come into play and SBA come into play is because 16

they found out from the original statute that the 17

DOE works under, you sometimes can do something that 18

is such an impact, 100 million being one of the 19

thresholds, EPA is now bringing that down to 25, 20

that engages the legislative body because they’re 21

not happy about such a big mandate. The situation 22

with SBA, it’s the ill facts fall on small entities, 23

which my utilities are. So that’s going to have to 24

come into play sooner or later, whatever you decide. 25Execu tive Court Reporters (301) 565

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No matter how shallow it is, it’s pretty severe. 1

The refurbish market ties into this 2

because we ask those questions to our utility 3

members who are non

- profit, what will a 10 or 20 4

percent increase going to do? Some of them are 5

already refurbishing

-- that’s what he’s referring 6

to. Utilities in Virginia refurbish any time they 7

can. It’s real. Can I get the data from 2000 8

m unis? I can get that. I’d love to, but the market 9

is real and it’ s going to get worse. 10

MR. DeLASKI: Mike, just a quick follow 11

up. This is Andrew. You said $14.20 per customer 12

per transformer. What is that? Per year? 13

MR. HYLAND: We asked

-- I read it off of 14

one of our meetings

-- I asked this question, what 15

is your history of this? What would happen if the 16

units were larger? What would happen ... And we 17

asked, do you know what your transformer budget is? 18

We just wanted to make sure they knew. So every 19

single one that answered, gave us their budgets

-- 20

last ye ar it was X, 1.2 million, 200,000. Some 21

small guy wrote, $8000 is their budget. What we did 22

is we then referenced that back to get the number of 23

customers they served based on EIA data that we have 24

on the record, that you can look at, it’s on our 25Execu tive Court Reporters (301) 565

- 0064 112

website . So we now have customers served to the 1

transformer budget on a yearly basis. So now we can 2

say how much per customer we expect, pretty quick 3

math. It comes out to $14.23 a customer on an 4

average, median. I can show you the numbers. So if 5

you increas e it ten percent, you’d be increasing on 6

every customer $1.42, 43 cents. Twenty percent

-- 7

and we did that escalation of a 10 percent, 20 8

percent, 30 percent, going forward, based on Wes’ 9

comment how much prices would go up. So it gives a 10

good feel. 11

And when you extrapolate those numbers 12

over all the customers served by just the munis

-- 13

we’re not talking Bob’s guys yet, and we’re not 14

talking Steve’s guys yet, we’re talking just my 15

customers which is only 14 percent of the customers 16

served in the US, you’re getting close to $100 17

million dollars if you go above 20 percent. It’s 18

right there. If I add in theirs, and we’re only 14 19

percent of the US, we can times that by a factor of 20

almost seven, and now we’re talking $700 million if 21

we go up twenty per cent. This isn’t a small number 22

we’re talking about here. Which is why I say we 23

want to see SBA engaged. We want to see the ABRA 24

analysis, because ultimately we have to go that 25Execu tive Court Reporters (301) 565

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route because we don’t see this going anywhere. 1

MR. PARKER: Tom. 2

MR. EC KMAN: Are those expensed or are 3

those capitalized? 4

MR. HYLAND: That wasn’t in the survey. 5

It was an e

- mail

-- 6

MR. ECKMAN: Given they’re 30 year 7

product, you probably capitalize those investments, 8

so that $14 is amortized over some period of time, 9

i t’s not up front. 10

MR. HYLAND: Well, we sampled on a yearly, 11

every year

-- 12

MR. ECKMAN: Yeah, but that’s a P&I 13

payment on capitalization going forward. 14

MR. ANDERSON: Yeah, but Tom, it’s cash 15

flow. 16

MR. ECKMAN: I understand that, but it’s 17

not

-- it ’s $14 that gets capitalized, next year 18

it’s P&I on $14 plus the next, and what you’re 19

looking at the rates now to pay off those 20

investments, and if you have

-- depending on what

-- 21

they will go up, there’s no doubt, I’m not saying 22

they won’t go up, but it ’s not

-- it’s not a full 23

dollar the first year. It’s capitalized. Some 24

amount of that gets raised that next year. 25Execu tive Court Reporters (301) 565

- 0064 114

MR. HYLAND: Some of our munis work on a 1

complete cash basis. 2

MR. ECKMAN: I’m aware of that. 3

MR. HYLAND: So, every dollar is going to 4

go to that. We don’t have any buffer. We’re not 5

sitting on any money at the end of December. 6

Sometimes we empty our closets. Have no bill for 7

that month. 8

MR. DeLASKI: I think the numbers that 9

you’re putting out, Mike, are entirely consistent 10

with the DOE analysis, and the DOE showing equipment 11

cost changes in hundreds of billions of dollars. 12

MR. HYLAND: Right. 13

MR. DeLASKI: And the savings are also in 14

the tens of billions of dollars. Those are the 15

impacts. 16

PARTICIPANT: He’s talking about a hundred 17

million a year. 18

MR. DeLASKI: I’m talking about

-- 19

MR. HYLAND: Yeah. 20

(overspeaking.) 21

MR. DeLASKI: ... DOE has their stats. This 22

is all beautiful stuff and you can read it. And you 23

can argue what is economically justified. 24

MR. HYLAN D: But because of this, it’s 25Execu tive Court Reporters (301) 565

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affecting people, that’s why we’ve created in this 1

government, the Small Business Administration, and 2

that’s why we’ve created ABRA, to look at things 3

that could impact ... because of this. So it’s just 4

something to be aware of so when you hear me say I 5

just want to see the SBA analysis, because we would 6

like to see them engaged in this. And somebody had 7

told me they were looking at it and my fear is were 8

they looking at just the small manufacturer, the 9

small core guys. Maybe they don’t realize that 90 10

percent of my members are small businesses under the 11

SBA, and when we use these arguments many times 12

throughout

-- and with EPA, everything has to be 13

reviewed ... and DOE ... doesn’t exist that way, but we 14

can ask for one. We can as k them to show the 15

analysis. That was my e

- mail that started

-- 16

MR. COHEN: No, no, that’s fine. Very 17

valid point. So a couple things about it, just on a 18

pure legal sense, not on the analysis at all. So 19

when we do our

-- any of our rulemakings, we pr oduce 20

a technical support document that’s about as thick 21

as ... that goes through all of the various analyses 22

that have been done, and also addresses the 23

Regulatory Flexibility Act, and the Environmental ... 24

Act, and a myriad of other executive orders and 25Execu tive Court Reporters (301) 565

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stat utory and political requirements that are ... 1

All of those analyses are done. The statute that 2

set those out, the mandates and the Flexibility Act, 3

all are set out with

-- consistent with the law that 4

governs the rulemaking itself. And so none of those 5

a nalytical requirements that we perform overcome the 6

basic statutory obligation we have to maximize 7

ene r gy efficiency. 8

So we produce all of that as separate 9

chapters in the technical support document. There’s 10

a chapter on environment and a chapter on s mall 11

business. All those various analyses are all 12

separately laid out in the technical support 13

document. So you’ll see all that. 14

Typically, those are shared with the Small 15

Business Administration, and of course the 16

rulemaking process is when we share t hose documents, 17

and we will do that. There we’ll show the 18

flexibility analysis. 19

I think though that you may have been 20

referring to

-- a further comment was your concern 21

that SBA may be looking at the manufacturer impacts 22

not the impacts on utilities? 23

MR. HYLAND: ... DOE analysis

-- Navigant. 24

MR. COHEN: (inaudible) 25Execu tive Court Reporters (301) 565

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MR. HYLAND: Right, so we’ve engaged that 1

-- if these negotiations break down and you guys go 2

to lunch, because this isn’t going anywhere

-- 3

that’s the next step in looking at the total right 4

now, it’s not a popular thing if something’s got an 5

initial cost of a million dollars. That’s just

-- 6

we’ll see. Engagement starts to change after ... 7

MR. PARKER: Let me ask the analysts, is 8

it possible to go through by design line and take 9

out, for the ... the ones that you actually selected 10

on a least cost basis

-- what the price increment 11

for that unit would be compared to the base case? 12

PARTICIPANT: That’s all in there. 13

MR. PARKER: What we don’t have is

-- 14

right

-- what we don’t have readi ly, I’m just 15

looking at the payback period. Do we have the mean 16

-- mean installation cost, incremental first cost

-- 17

that’s it. Right there, and compare that to the 18

cost savings. You can do

-- people can look at 19

this, if they want to look at the refurbi shing 20

issue, and I know the number 20 percent batted 21

around

-- we haven’t seen any real documentation on 22

that. We can look at that and see for each of these 23

cases, whether there would be a 20 percent increase. 24

I guess it might be a little bit easier to c alculate 25Execu tive Court Reporters (301) 565

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the increment at each level, but you can do your own 1

math. And decide the refurbishment issue, and also 2

you have the incremental operating cost there, Mike, 3

it’s just a matter of ruling out the individual ... 4

your industry, what the impact would be

. 5

I guess what I’m getting at is do we

-- we 6

do need to break for lunch now, and what I would 7

suggest is that we, in various, in groups, caucus, 8

look at the numbers, look at your own analysis, and 9

decide over lunch whether you feel comfortable 10

putting fo rward a proposal. And it may be, even 11

though we have items on the agenda, you know, 12

dollars per watt, the BiL rating and network issues, 13

it may be that those become less salient when we 14

actually focus on actual proposals as opposed to 15

talking about it in the abstract. So that might be 16

the form. 17

MR. HYLAND: If you don’t have plans, I 18

know some of you already have plans, I’ve put a list 19

up here of a list of places that are quick. There’s 20

a place across from Hilton there, you can go, 21

actually down the lo bby

-- there’s a guy making 22

sandwiches in there in a rack behind the security 23

guard. You go out here and take a left, go down 24

Connecticut, there’s a Pot Belly, there’s a 25Execu tive Court Reporters (301) 565

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Chipolte, there’s a Flipping Pizza, all down there. 1

MR. SAINT: Before we break, can I ask a 2

question of Dan? 3

MR. COHEN: Yes. 4

MR. SAINT: ... DOE, but this is a 5

negotiation committee, and can you explain a little 6

bit about how we can deviate from those ... in the 7

negotiations that we’re doing. 8

MR. COHEN: That’s an interesting and v ery 9

difficult question because ultimately ... statute. If 10

you will all, in the negotiating committee, come up 11

with a proposal and everybody agrees with it, that 12

somehow didn’t meet the statute, we would have to ... 13

so our hope for being here is that in doing this 14

process we are part of the negotiations, not a 15

member of the committee, that we can explain it to 16

you, that might be a problem for us and hopefully. 17

MR. SAINT: So conceivably, if we, as the 18

negotiating committee, can come up with a compromise 19

that was unreasonable, we can all ... then it goes to 20

DOE and you determine that we did follow these 21

guidelines

-- 22

MR. COHEN: That’s part of it, and part of 23

this process is we’re on the committee so that when 24

something comes out of the committee, we want to 25Execu tive Court Reporters (301) 565

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m ake sure that what we’re talking about is ... because 1

our obligation, our commitment to this process, is 2

that if there is a consensus agreement, then we’ll 3

deal with it. 4

MR. SAINT: Okay. 5

MR. PETERSEN: If I may just tack on to 6

that. Eric Petersen, AK Steel. On the ... analysis 7

it gives a number of TSLs. Based on what you just 8

stated, that your responsibility is to meet those 9

requirements you just went through, is the 10

population of potential resolutions or answers that 11

come out of this negotiating sess ion then have to 12

comply with these TSLs? 13

MR. COHEN: Different ELs could be moved 14

around and new TSLs formed. 15

MR. PETERSEN: Okay. Thank you. 16

Let’s break for lunch and think about what 17

we talked about. 18

(Whereupon, at 12: 3 2 p.m., the meet ing in 19

the above captioned matter was adjourned for lunch 20

recess and caucuses , to reconvene at 2: 1 3 p .m.) 21

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2: 13 p.m. 2 AFTERNOON SESSION 1

MR. PARKER: I understand from NEMA that 3

they need about 30 more minutes to caucus. I 4

understand some of the other parties would like to 5

caucus for a little bit more among themselves as 6

well. So why don’t we take a 20 or 30 minute break 7

-- the conference rooms are out this way. We will 8

reconvene here say at 2:45. Some people are ... 9

PARTICIPANT: Who’s meeting? 10

MR. COHEN: So the Federal Register 11

notice that we sent around the page, I just want it 12

to be clear, ... look at the last paragraph above of 13

the left hand column on page 58204, where we said, 14

“We understand that at present (of course that was 15

2007) rebuilt transformers a re only a small part of 16

the market. If conditions change, for example, 17

rebuilt transformers become a larger share of the 18

transformer market, in their response to energy 19

conservation standards adopted today, DOE would 20

consider appropriate action at that ti me.” I just 21

want to be clear that, you know, that’s still the 22

case. If we were to see some shift in the market, 23

we would figure out what we would can or might do, 24

based on that information. 25Execu tive Court Reporters (301) 565

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MR. ROSENSTOCK: Mr. Cohen, Steve 1

Rosenstock, EEI. I’m just k ind of curious, you 2

know, after the air conditioner rules promulgated in 3

2006, shipments went down quite a bit, essential air 4

conditioners and heat pumps, because people were 5

either substituting room air conditioners for 6

central, or repairing their old uni ts. What would 7

be considered appropriate action? 8

MR. COHEN: So I assume part of that 9

question

-- what I can tell you is that when

-- I 10

actually partially wrote this

-- I didn’t know then 11

what that meant. I don’t know now what it means. 12

But it would b e appropriate. 13

(Laughter) 14

MR. PARKER: Wes, could you stay with us 15

for just one second because this question actually 16

goes to something you mentioned at one point. And 17

that is that there is, as I understand it, there is 18

already a significant refurbish ment market in our 19

transformer area, right? 20

MR. PATTERSON: That’s correct. 21

MR. PARKER: So I guess one question that 22

I had, just thinking aloud, is if, based upon the 23

experience of power transformers, this group were to 24

conclude that there is a signif icant prospect of a 25Execu tive Court Reporters (301) 565

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shift to refurbishment at certain price levels, 1

certain scenarios in the distribution transformer 2

market as well, would the prospect of that enable 3

the Department, given the Department enough 4

latitude, to think about that during our pro cess as 5

opposed to later? 6

MR. COHEN: Yeah, I mean, theoretically, 7

the question would be what information we had, what 8

we could do ... 9

MR. PATTERSON: I don’t know how it 10

impacts this meeting, but our factories were visited 11

by the Department of Energy, some Department, just 12

looking into the remanufacture, refurbish business, 13

and collecting data. I’ve never heard it in the 14

context of this meeting, but somewhere in this 15

world, some group is already looking at it. 16

MR. COHEN: I don’t know what that is. 17

MR. PATTERSON: No, it’s DOE. It’s 18

Department of Energy. Whatever Department it was, 19

they were trying to understand from something in 20

Congress as to the magnitude of the remanufacture, 21

refurbish business for all products, not just 22

transformers now. But they did visit our 23

transformer factories. 24

MR. ROSENSTOCK: And Mr. Cohen, Steve 25Execu tive Court Reporters (301) 565

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Rosenstock, EEI again, in terms of taking action, if 1

you start on transformers, wouldn’t you have to do 2

the same action for all other appliances? Otherwise 3

it’s kind of a s elected and arbitrary enforcement. 4

MR. COHEN: Yeah, we would have to figure 5

out what’s appropriate. 6

MR. ROSENSTOCK: Thank you. 7

MR. PATTERSON: And Dan, in your 8

experience level, for something like that to happen, 9

what kind of timeframe does it take to finally end 10

up with an action? Is this

-- the distribution 11

transformers standard, the first time I got involved 12

with it, was 1992. This has been a lengthy career. 13

PARTICIPANT: I started in 1991. 14

MR. PATTERSON: I’m curious, you know. Is 15

that li ke a usual timeframe? 16

MR. PARKER: I think maybe I’m more 17

optimistic than the others, but I’m a lawyer, and a 18

creative lawyer, and my take

- away from this is that 19

the problem is not intractable, although it’s not 20

easily solved either. We should not think of the 21

refurbishment thing as a non

- issue. We should also 22

not think of it as a

-- as necessarily a ... barrel. 23

And I think that we might be able to think about it 24

now at least in the power transformer market and 25Execu tive Court Reporters (301) 565

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distribution transformer market, it might e nable us 1

to make a case that there is a justification for 2

some sort of special treatment, and then we’d have 3

to just discuss what that would be. We have some 4

thoughts about that, but I think enough

-- that’s 5

about as far as we can go with that for now. 6

So we did want to put that out there 7

because we know that refurbishment is a source of 8

concern. Now we’ll caucus and reconvene 30 minutes 9

from now which is ten to three. 10

PARTICIPANT: Make it three o’clock. 11

(Whereupon, at 2:20 p.m., the meeting was 12

off the record to allow for caucus time for a 29

- 13

minute period.) 14

MR. PARKER: Okay, we’re going to start

-- 15

Jeremiah’s just getting slides in the system ... for 16

his presentation. While he’s doing that, I thought 17

we might just open the presentation of t he proposal 18

of the steel makers that Ray Polinski

-- 19

MR. POLINSKI: Is everybody here? 20

PARTICIPANT: Some people missing? 21

MR. PARKER: So as I understand it, we’re 22

going to hear from Ray Polinski, the steel makers. 23

We’ll hear from John Caskey from NEMA, Steve 24

Rosenstock from the utility perspective to present 25Execu tive Court Reporters (301) 565

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his thoughts, is that right, Steve? 1

MR. ROSENSTOCK: Well, I’ll see what 2

happens after the other presentations. A lot of 3

people are not at the table right now for the 4

presentations. 5

MR. P ARKER: Well, I think we’re going to 6

need to

-- 7

MR. ROSENSTOCK: But they won’t be able to 8

hear

-- there are four voters who are not at the 9

table right now. We can’t get a consensus if all 10

the voters aren’t here. 11

MR. PARKER: Let’s see if we can get t hem 12

here. 13

PARTICIPANT: I’ll look for them. 14

MR. PARKER: One person leaves and now we 15

have another person missing. 16

PARTICIPANT: Right. 17

MR. PARKER: My thing is that while 18

individuals are absent, the blocks are here

-- 19

NEMA’s not. 20

MR. ROSENSTOCK: But if we want to take 21

votes, people need to be in the room. 22

MR. PARKER: Let’s see if we can get the 23

advocates around the table. 24

(Pause.) 25Execu tive Court Reporters (301) 565

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MR. PARKER: Okay, Steve, thank you for 1

watching out for Navigant’s interest. Now that we 2

have everybody her e, we have the slides on the 3

computer over there, let’s start on the proposals. 4

Go ahead. 5

**Presentations/Proposals** 6

MR. POLINSKI: I’m Ray Polinski, ATI 7

Allegheny, and the steel supplier proposal is not a 8

whole lot different from the first one that was 9

di scussed. AK had put some reports out showing 10

where M3 and amorphous could compete, and that was 11

something, the consensus from day one of our 12

meetings, where we said that was a key point that we 13

had and we’ve been trying to debate where that 14

crossover is. In many studies that have been 15

performed, LBL and Navigant have done some studies. 16

In the 2010 study, they did show tables where M3 17

would be a material of choice and so the number one 18

criterion for selecting these

-- the levels we are 19

going to propose, t hese are for the liquid filled, 20

design lines one through five: 21

T he number one criteria is to maintain 22

manufacturing jobs, not just the jobs in the grain

23

oriented steel industry, but all the jobs from our ... 24

suppliers, our coveting suppliers, all the mater ials 25Execu tive Court Reporters (301) 565

- 0064 128

that we consume as well as

-- that’s one criteria. 1

Then moving down

-- so we started with 2

that issue, and consistent with the impact on 3

lessening the competition, which is the key criteria 4

for the DOE in making their determination, but 5

another key criteria, impact on manufacturers, 6

certainly maintaining manufacturing jobs in the 7

steel industry

. 8

A lso some concern I’ve heard from some of 9

our second tier customers, that if these efficiency 10

levels are pushed too high, the transformer 11

producers second tier producers, some that are not 12

represented on this committee, move to amorphous

, 13

big concerns about they’re just not being able to 14

compete and loss of jobs, impact on employment in 15

that area as well. 16

And again, there’s many reasons why we 17

can’t push these

-- there’s the small business, 18

utilities concerns that have been raised. 19

And then a couple of things that we moved 20

down. So we’ll start with the transformer producers 21

and the utility about the rebuild portion, and the 22

concerns of this. 23

So this i s more from a manufacturing jobs 24

standpoint, competitive standpoint. 25Execu tive Court Reporters (301) 565

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So for dEL

- 1 proposed an efficiency level 1

of point five, so halfway between the current state 2

and one. 3

One thing is to note there, and I 4

mentioned this previously as well, we thou ght the 5

DOE did an outstanding job on design lines, 6

especially on design lines one and two. We thought 7

they did an excellent job and stretched very far in 8

developing the current standard. And in fact, from 9

the data that I have, the current standard which was 10

put in place in early January

-- January 1, 2010

-- 11

was higher than the advocates had requested, and 12

prior to that, so the DOE went higher than requested 13

by the advocates, only to be rewarded with some 14

environmental group coming in with a lawsuit. Bu t I 15

thought the lawsuit in my

-- I could be all wrong, 16

and I’m sure someone will correct me if my facts are 17

correct

-- but they went higher than the advocates 18

requested with the standard so they did a good job, 19

a lot of savings. And I thought the lawsuits were 20

more based on the three

- phase units. 21

So we’re talking about single phase, pad

22

mount and go to point five. We’d like to say no 23

change, really no change is the position we’d like 24

to have, but in the spirit of trying to continually 25Execu tive Court Reporters (301) 565

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to try to cost

- eff ectively save some energy and 1

still allow M3 to be competitive, we propose a point 2

five for design line one. 3

Moving to design line two. That one 4

there, the DOE went considerably higher. The 5

advocates were asking initially, by my research and 6

data, was asking throughout like .987, and the 7

standard was .989, so quite a higher level was 8

chosen already, so

-- and you look at the cost 9

overage, you look at the LBNL, the Navigant data, 10

and they show the tables and they show the 11

crossovers and at the current le vel that is M3 and 12

amorphous, that’s where the crossover is of the 13

current curves in the 2010. So we propose a no

14

change for dL

- 2. 15

Moving to dL

- 3, that one there, point five 16

-- point five efficiency level for dL

- 3. 17

Moving to design line four, also poi nt 18

five is the

-- if you look at the crossover and the 19

curves, the M3 and the amorphous, that’s kind of 20

what’s dictating these proposals, also point five. 21

And then finally for design line five, it 22

should be a zero again, but in the spirit of trying 23

to mo ve forward, propose a point two. 24

So based on those proposals, I would ask 25Execu tive Court Reporters (301) 565

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if there’s a second

-- well, first I’d like to

-- if 1

Eric has anything to add, I’ll hand the mic to him 2

and after that I’ll ask for a second on those levels 3

and then a vote again st those levels. 4

MR. PARKER: So can you just run through 5

them one more time? dL

- 1, point five. 6

MR. POLINSKI: 7

**•** dL

- 1, point five 8

**•** dL

- 2, zero 9

**•** dL

- 3, point five 10

**•** dL

- 4, point five 11

**•** dL

- 5, point two. 12

MR. PARKER: Okay. 13

MR. PETERSEN: Eric Petersen, AK St eel. 14

The only comment I want to make is that in our last 15

-- when this technology program was completed, there 16

was a core material selection graph that came 17

through that helps to give an idea of what materials 18

would be used at what efficiency levels. That has 19

not been included in the most recent data. That’s 20

something that I thought we were going to get prior 21

to this meeting, but I think it’s important to note 22

that the DOE is talking about conducting this study 23

for a long time. I know that they’re

-- out of our 24

last meeting we talked about issues associated with 25Execu tive Court Reporters (301) 565

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data from the individual transformer manufacturers 1

that threw some of this in question. I recognize 2

that, but after X number of weeks, this is still as 3

much as we have to stand on, and right now I’m 4

looking at data from this large study that’s been 5

conducted that says our products will not be used at 6

these efficiency levels, and I guess I’m questioning 7

how we can support efficiency levels that don’t 8

utilize our products, and I would suggest we wou ld 9

be out of business. 10

MR. ANDERSON: Rick Anderson, I’ll second 11

Ray’s motion. 12

MR. DeLASKI: Can I ask a clarifying 13

question? 14

MR. PARKER: Sure. 15

MR. DeLASKI: You mentioned the crossover 16

a few times. I think you’re looking at

-- am I 17

correct that you’re looking at

-- to determine the 18

crossover in your discussion right now, you’re using 19

the 2010 pricing. 20

MR. POLINSKI: I’m using the 2010 21

analysis, that’s correct. 22

MR. DeLASKI: That’s this plot. 23

MR. POLINSKI: Yes, and we kind of 24

simplified the m with

-- we made our own plots which 25Execu tive Court Reporters (301) 565

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were a little easier to follow, but that’s the 1

crossover points

-- 2

MR. DeLASKI: You figured the crossover 3

based on a simplified

-- using a simplified data. 4

MR. POLINSKI: Yes. Jim R akows k i

, you 5

know, who’s my se cond on this committee, he got 6

access through the websites of the Navigant Excel 7

file and just did some plotting of his own, cleaned 8

them up a little bit so that the clouds were not as 9

cloudy. 10

MR. DeLASKI: Got it. All right, thanks. 11

MR. PARKER: Well , what I think we should 12

do is get all of the proposals out on the table. 13

MR. HOPKINSON: But you’ve got a motion 14

and a second. 15

MR. PARKER: And only clarifying questions 16

asked about each of the proposals. Let’s hear all 17

of the proposals so people can decide which ones 18

they favor before they’re asked to vote on them. 19

Normally you’re allowed to know what the candidates 20

-- who the candidates are before you cast your vote. 21

So I think it would be a good idea to actually hear 22

from everybody with again, ju st the questions that 23

are needed to clarify a proposal or the basis of a 24

proposal, not to take issue with them. And then we 25Execu tive Court Reporters (301) 565

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can have a more ... discussion and recess again, and 1

let people take time on deciding on these proposals. 2

Yes, Ray. 3

MR. POLINSKI: Ray Polinski, ATI Allegheny 4

Ludlum. Richard, just so I understand the process, 5

we will not vote on each proposal just to get the 6

count as to, okay, how many would vote yes or no. 7

You’re saying every proposal will be put on the 8

table, we’ll have a vote on the record? 9

MR. PARKER: I’m not sure that we had ever 10

discussed having a vote at this stage. What we want 11

to do

-- ultimately, at the end of the day, we’re 12

going to have to have a vote, right. I’m not sure 13

we need to have a vote as they are present ed, or 14

even right after they are presented. I think it 15

would be helpful to have a discussion about them, 16

and negotiation about them before we decide yay or 17

nay. So yes, we absolutely will not pass the 18

proposals without having a vote, and it has to be 19

una nimous. 20

MR. POLINSKI: My point is just to 21

clarify, whatever the rules of engagement are is, 22

I’m just saying that if there are

-- if there are 23

three proposals, fine, we try to negotiate. But if 24

there are four

-- if there are four separate 25Execu tive Court Reporters (301) 565

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proposals and we can’t come to agreement to move 1

them all into one proposal, I think it would be good 2

to see, all right, who supports option one, who 3

supports option two, three, four

-- and separate 4

votes on each one. 5

MR. PARKER: So your clarification is we 6

could ha ve a straw poll as opposed to a formal, 7

final vote. Yes, that’s fine. 8

(Overspeaking) 9

MR. POLINSKI: I have just one last item 10

and I’m done. ... on the record, and I think Phil had 11

already stated this is the one thing is this .. and 12

loss issue

-- we’ve never really

-- I just think 13

it’s important that somewhere along the line we get 14

closure as to how significant that is. I’m not a 15

transformer engineer, but if there are costs that 16

are not

-- that are real, that they increase with 17

higher efficiencies that are not part of the low 18

cost comparison, then, I just, you know, we need to 19

add that to the

-- 20

MR. HOPKINSON: Could I explain the

-- 21

(Overspeaking.) 22

MR. POLINSKI: The bottom line is DOE 23

needs to have

-- Phil needs to explain it to the DOE 24

I think, or Navigant or who else

-- 25Execu tive Court Reporters (301) 565

- 0064 136

MR. PARKER: We need to do that, but right 1

now we need to

-- 2

MR. DeLASKI: I just want to respond to 3

what Ray said. Our views in the 2007 document

-- 4

this is a good document, but things have changed. I 5

don’t have the numbe rs in front of me so I can’t 6

confirm for you whether or not those numbers are the 7

same. Now we did make a two tiered proposal along 8

with the utilities in 2007

. It called for a two 9

step. So you have that, but I don’t know whether it 10

was

-- the levels are n’t consistent with it or not. 11

MR. POLINSKI: Andrew, and the only other 12

thing is that

-- Ray Polinski, ATI Allegheny

-- but 13

my point again is just we’re consistent

-- if 14

nothing else I’m consistent but it is

- and this is 15

a 30 year rule, and so all I’m saying is the 16

advocates proposed that in 2007, you know, I think 17

it has some weight still in 2011 because I heard 18

Mike say that the last time DOE took a five year 19

view of things

-- I just think it’s important, this 20

is a very important decision in the Unite d States of 21

America, and we can’t base it on one data point that 22

I would ask

-- I would say

-- you know, before we’re 23

done, I would ask the DOE, the Navigant and everyone 24

to sit side by side and explain to me what’s changed 25Execu tive Court Reporters (301) 565

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since 2007. I believe the advoc ates have been shown 1

to be very aggressive in their response to save 2

energy, so the fact that they proposed that, that 3

the upper level of capability in 2007 and now we 4

think the upper level was moved a whole lot further 5

-- I just have become a little bit c oncerned about 6

that. 7

MR. PARKER: That’s a fair point, and I 8

think we need to have at the next break, perhaps a 9

sidebar conversation about that, perhaps with the 10

advocates if you’d like. But right now, let’s focus 11

on just getting the proposals out and c larifying 12

them and we’ll move through this just as quickly as 13

we can. 14

MR. PETERSEN: If I may, one last time on 15

the steel side. Eric Petersen, AK Steel. The one 16

point I would continue to raise in this discussion 17

is the refurbishment issue. I guess my feeling 18

would be even as a steel supplier, even if we could 19

go out to an EL

- 2, 3, you name the number, and show 20

that steel would be a competitive product that could 21

continue to perform, if we were looking at these 22

refurbishment costs, it would concern me j ust from 23

an industry perspective and as a citizen associated 24

with the severe diminishments associated with the 25Execu tive Court Reporters (301) 565

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efficiencies. We can see, when you look at where 1

the ten percent increase is, you’re looking at 2

design line one, zero point six; design line two

, 3

zero point three; and zero point fives for design 4

lines three, four and five. You increase cost ten 5

percent, and if that issue is real, we could very 6

seriously step into creating a whole new market that 7

erases all of the savings we would like to achieve

. 8

MR. ANDERSON: It is real. 9

MR. PARKER: Okay. Let’s focus on getting 10

proposals out. Okay. Who would like to go next? 11

John? Caskey. 12

**Proposal** 13

MR. CASKEY: John Caskey, NEMA. Thanks 14

for the opportunity to be here, and I also wanted to 15

thank the Department of Energy just for providing 16

the opportunity for us to all come to the table and 17

sort of share diverse ideas and sort of talk fairly 18

openly. I personally think it’s been a great 19

accomplishment, and I think a lot more information 20

has been divulg ed or shared, than really what I 21

expected. So I want to thank the Department of 22

Energy, I want to thank all the other sort of 23

stakeholders, not only at the table but also, you 24

know, in the background that are contributing 25Execu tive Court Reporters (301) 565

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information and doing analysis an d trying to make 1

sure that we come up with the best answers possible. 2

And I’d also like to thank the manufacturers that 3

are here, because quite honestly, I think they’ve 4

shared a lot more data than I’ve ever imagined that 5

they would because as a NEMA pers on, I’m really not 6

allowed to delve into that area, you know, some cost 7

effectiveness issues, and some pricing issues and 8

other issue. So I think they’ve shared an awful lot 9

more data than I ever imagine that they would, so I 10

wanted to thank them also. 11

In addition, I hope everyone knows that 12

NEMA’s committed to distribution transformer energy 13

efficiency, and that’s evidenced not only by the 14

fact that one of the standards referred to today is 15

a TP

- 1 standard, and tha t ’s still used for the low 16

voltage dry type, and that’s a cornerstone for the 17

2010 rule for medium voltage dry type and liquid 18

filled. In addition to that, we’ve been issued a 19

NEMA premium program which is basically 30 percent 20

lower losses for the low voltage dry type 21

transformers. So we try to be a trend

- setter 22

relative to energy efficiency. 23

So the other thing that I wanted to say is 24

that we really basically come to the table, whenever 25Execu tive Court Reporters (301) 565

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that was, it seems like years ago, but I’m sure it’s 1

only been a month or two ago, but we came to the 2

tabl e with three fundamental principles. 3

**•** And the one fundamental principle is that NEMA 4

supports the development of new transformer 5

energy efficiency standards, provided that they 6

can be shown to be cost

- effective. So

-- and 7

we talked a little bit about wha t that 8

definition of cost

- effectiveness is. 9

**•** The second thing was that we always felt that 10

it is very critical to have competition among 11

various grades of steel, among various steel 12

suppliers, or among various designs of 13

transformers, and we think that that is 14

important for the whole industry moving forward 15

to make sure that we continue to have that 16

flexibility and don’t lock us in with a high

-- 17

a super

- high efficiency that is going to negate 18

some of that open competition and some of that 19

design substitutio n that is currently going on. 20

**•** And the third thing that we’ve been consistent 21

with is just dealing with the small, not 22

necessarily even the small businesses, but 23

small manufacturing facilities, and they have a 24

capability today to compete in the market place 25Execu tive Court Reporters (301) 565

- 0064 141

fairly well. And just as we go to higher 1

efficiency standards, it’s more difficult for 2

them to compete, and particularly some of those 3

as we go to amorphous steel or something else, 4

may require substantial investments that may, 5

in fact, make it impossibl e for them to stay in 6

business. And we may pick an answer that 7

causes that to occur, but at least we need to 8

know about that from our perspective going into 9

it. 10

So in terms of those three principles that 11

we’ve laid out here, I feel that everyone at the 12

table has been very responsive to this issue of this 13

steel substitution and providing the flexibility of 14

design, and I think we’ve covered that fairly 15

effectively. 16

I think the areas where there’s still some 17

weaknesses are really in the area of the cost

18

e ffectiveness analysis and, for me being a 19

scientist, it’s always easiest when you have an 20

answer that you can get to two different ways, and 21

you can validate that answer. And I just feel as we 22

get to a lot of the life cycle cost analysis, it’s 23

difficult t o validate that. It’s almost like we’re 24

just trusting that these are in the right ball park, 25Execu tive Court Reporters (301) 565

- 0064 142

and some of the manufacturers have been able to say 1

that they feel like some of that analysis is in the 2

right ball park, others feel that it’s not, and 3

particular ly when you go to the perspective of the 4

dollars per watt saved, it really seems like there’s 5

a significant disconnection between that sort of 6

approach in looking at what a reasonable decision 7

is, versus the life cycle cost analysis that’s been 8

presented t o us. 9

So in addition, dealing with the life 10

cycle cost analysis, or even the design engineering 11

analysis, we still seem to be consistently be 12

finding from the manufacturers that as you get up to 13

the EL

- 3 and beyond, that the shape of that curve is 14

signif icantly different than what’s been reported by 15

the analysis that we’ve seen so far. 16

So some of the general points on behalf of 17

NEMA

-- just want to cross over all

-- the three 18

different types of transformers, that’s really 19

**•** Number one is that the single

- p hase and three

20

phase efficiency standards have essentially 21

been normalized to one another in the previous 22

analysis, and basically what’s come out from 23

this assessment or these discussions is that it 24

is more difficult to increase the efficiency of 25Execu tive Court Reporters (301) 565

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three

- pha se transformers than it is to increase 1

the sort of normalized efficiency of the 2

single

- phase transformers. And we just want to 3

make sure that that’s reflected in the final 4

decision or in the final analysis. 5

**•** In addition, we talked a little bit about BiLs 6

a nd feel that going to higher BiLs are also 7

more difficult, particularly once you get 8

beyond the 95 BiL, that it’s more difficult to 9

increase the efficiency in those markets than 10

it is in the lower BiL markets. 11

**•** One thing that has strongly come out

-- this i s 12

item three

-- that has really strongly come out 13

deals with the issue of if the first

-- if the 14

incremental cost for the transformers go up 15

significantly, then we all pretty much know 16

that at some point we’re going to almost reward 17

the utilities for going to refurbished or 18

remanufactured products. And certainly that 19

not only hurts the new manufactured products, 20

but it also hurts the whole effort of trying to 21

improve efficiency, unless DOE goes through and 22

actually starts to regulate that part of the 23

indus try. So we’re very concerned about that 24

substitution where people, instead of buying 25Execu tive Court Reporters (301) 565

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new equipment, will be basically refurbishing 1

old equipment. And we don’t know exactly what 2

that price is, whether it’s a ten percent 3

increment or 20 percent increment, but at some 4

point we know that that refurbishment market is 5

going to exist, and some of the people around 6

the table have already said that that 7

refurbishment market is already starting to 8

expand, just as a result of the 2010 9

rulemaking. 10

**•** The other thing tha t I touched on a little bit 11

before is that we continue to be very concerned 12

of the possibility that the higher efficiency 13

standards will negatively impact small 14

manufacturing facilities and may drive these

-- 15

some of them out of business, and hopefully 16

tha t the final analysis that you guys say is 17

one of your seven criteria, will actually take 18

that into account. 19

**•** Another thing we didn’t discuss very much yet 20

so far is from the manufacturer’s perspective, 21

is when there’s a standard set, whether it’s 22

EL

- 0, EL

- 0 1 or 2, basically they have to over

23

design above that standard in order to be able 24

to be sure that they consistently pass all the 25Execu tive Court Reporters (301) 565

- 0064 145

testing requirements. So when you ask for EL

1

1.0 you may actually be getting EL

- 1.1 or 2

something above that in order for them to make 3

sure that they consistently pass the testing 4

requirements. 5

**•** So and then the final point in sort of these 6

general category deals with the fact

-- and 7

we’ve talked about it a little bit today

-- 8

deals with the idea that there’s an awful lot 9

of equipm ent out in the field today that has 10

sort of modest efficiency and that in terms of 11

the bang for the buck for America, it may be

-- 12

NEMA is willing to work with the advocates and 13

DOE and whoever, to try and move that market a 14

little bit to get the, essentia lly to something 15

like a cash for clunkers, to try and get some 16

of the really outdated, inefficient equipment 17

off the systems and move towards higher 18

efficiencies. 19

Okay, so with all that in mind, I’m sure 20

we’re all waiting to hear what these five numbers

-- 21

you’re already guessing

-- we go back to the issue 22

of the dollars per watt saved and I think most of 23

the manufacturers, it may not even be a consensus 24

among manufacturers, is that it’s really hard from 25Execu tive Court Reporters (301) 565

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the evidence that has been presented and the 1

calcul ations we are making, to say convincingly that 2

moving beyond the EL

- 0 is essentially, is cost

3

effective. However, we feel that that is not a 4

tenable solution, so what we are really recommending 5

is that

-- and this would probably be a good place 6

to go to t hose graphs. 7

So what we consistently talked about 8

hopefully is this crossover point

-- and the steel 9

manufacturers talked about it some, I think they 10

were using the earlier analysis, which I think if it 11

gets up here is the 2011 analysis. So for this is 12

for design line one and this is showing some 13

crossover point slightly above dEL

- 1, so we are 14

saying that, again, we’re not convinced that there’s 15

a lot of cost justification to go beyond dEL

- 0, but 16

we think we have to do better than that, so the way 17

that w e can

-- we think our sort of upper limit is 18

really at this crossover point because below that 19

crossover point

-- in this case, it looks like we’re 20

just going to say dEL

- 1 but above

-- below that 21

crossover point, you know, you see that there’s 22

obvious subs titutions, that there’s various grades 23

of steel. Above that point, you pretty quickly 24

diminish where it’s basically amorphous versus M3 25Execu tive Court Reporters (301) 565

- 0064 147

and that we really feel that there’s

-- once that 1

gap develops, then in essence you’re going to be 2

either going all the way to amorphous, in which case 3

then you’ve lost this substitution capability, or 4

you end up with the amorphous manufacturers 5

increasing their price to match M3 and that you 6

basically invalidated the cost

- effectiveness 7

analysis, because what you’ve assume d is the cost 8

going forward is not really the cost. So that’s one 9

of the concerns, so we can probably go ahead and run 10

through all of these. 11

**•** So basically we’re saying for design line 12

one, the upper limit is EL

- 1. 13

**•** For design line two, this crossover point is 14

below EL

- 1, so we’re basically

-- whether 15

you call that 0.5 or whether you call that 16

zero, it doesn’t matter. We

-- our 17

consensus would be to just go ahead and make 18

it zero. But we don’t feel that strongly 19

about it. 20

**•** And then we go to design line three

-- 21

MR. PARKER: What’s your

-- 22

MR. CASKEY: Point five. 23

MR. PARKER: Point five? 24

MR. CASKEY: Yeah, we officially say zero 25Execu tive Court Reporters (301) 565

- 0064 148

point zero. 1

MR. DeLASKI: I’m sorry so what is the 2

position on EL

- 2? 3

MR. PARKER: Zero. 4

MR. CASKEY: For design line t wo? 5

MR. DeLASKI: Yes. 6

MR. CASKEY: EL

- 0. 7

MR. DeLASKI: And one is one? 8

MR. CASKEY: Right. And then for design 9

line three, essentially for the next three, the 10

crossover point is above EL

- 1, 11

**•** so we’re saying EL

- 1 for design line three, 12

**•** EL

- 1 for d esign line four, and 13

**•** EL

- 1 for design line five. 14

So the concerns going beyond EL

- 1 are 15

related to the fact that, again, we still have this 16

ongoing concern where the manufacturers analysis 17

indicate the slope of the curve increases more 18

steeply than what’s reflected in the design lines in 19

the latest cost analysis. 20

We’d also

-- and again, depending on where 21

you take it, whether you picked it at, say, ten 22

percent price differential or 20 percent price 23

differential, that at some point the refurbishing 24

marke t will begin to creep in, and we feel that that 25Execu tive Court Reporters (301) 565

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is also above this EL

- 1 level. When you look at the 1

incremental cost for those various design lines for 2

the EL

- 1 level, that in reality, some of those are 3

in that ten to 20 percent range. So right around 4

th ere is probably where you’re going to get a 5

significant refurbishment market. 6

In addition, talking with the 7

manufacturers

-- and there is a difference in the 8

manufacturers that are NEMA members, and some feel 9

that they can still retain substitution of st eels up 10

in that EL

- 2 to EL

- 3 category, and other ones say 11

that they cannot do it beyond the

-- in between the 12

EL

- 1 and EL

- 2 category. And I’ve asked for at least 13

one or two of the manufacturers to be on call to 14

possibly explain that better. 15

And the othe r things deals with at least 16

one of the small manufacturers has reported to me 17

that anything above EL

- 1, he just cannot stay in 18

business. So I mean that’s not a quanti

-- well, in 19

his respect it would probably be quantifiable, but 20

overall it’s not really a quantifiable piece of 21

information. But certainly that’s an issue that 22

we’ve had all the way along. 23

MR. PARKER: Can you say which design line 24

that would be? 25Execu tive Court Reporters (301) 565

- 0064 150

MR. CASKEY: That was for all of them. So 1

in addition to those points with the recommendati ons 2

relative to the energy efficiency levels, we 3

continue to support a separate treatment for the 4

network and vault transformers that basically should 5

go on higher efficiencies for them, then the 6

replacement transformers will not necessarily 7

physically fit in the vault that’s already been 8

designed that’s out in the ground somewhere. 9

We also want to talk about

-- we also want 10

to just mention the BiL issue, and we want to come 11

back to that later, as we go to negotiations, and 12

just say that we support basica lly, for the medium 13

voltage liquid filled transformers with a 150 BiL or 14

higher, that they be maintained at the EL

- 0 level. 15

I mean we also, we are concerned about 16

sort of gaining the system, and we know that that 17

needs to be taken care of effectively, bu t we’ll 18

need to work with the rest of the stakeholders to 19

take ... 20

So one of the other exceptions, if you 21

want to call it that, is dealing with the high 22

current transformers and basically for transformers 23

over 2000 amps, we feel that that needs to be 24

sepa rated out, basically treated differently. 25Execu tive Court Reporters (301) 565

- 0064 151

And then I will, once I clean this up, I 1

will actually send this, but I also wanted to remind 2

people that back in the spring, the Department of 3

Energy went out with whatever it was, 35 questions 4

or whatever, whic h is really feeding some 5

information to this whole issue of distribution 6

transformer efficiency and they asked several 7

questions, and we responded to all those questions. 8

You look

-- am I not saying something correct? We 9

actually responded

-- this is EER E

- 2010 DT standards 10

0048. So we actually submitted our answers to those 11

questions back on April 18, 2011. And we have not 12

really heard a response that we want those issues 13

dealing with, like dual voltage transformer , to be 14

covered in this rulemaking. Th ey tried to make up 15

or resolve or answer some of the issues that 16

occurred in that 2010 rulemaking. So we just want 17

to make sure that they’re part of the record and 18

that scaling methodology and other things like that 19

are considered in this rulemaking proce ss. 20

So I think that’s it unless, you know, Wes 21

had done a great job of really helping to explain 22

why there are difficulties in going up into the EL

- 2 23

and EL

- 3 level. I don’t know if you want to just 24

come back to that later or if you want to

-- Wes, do 25Execu tive Court Reporters (301) 565

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y ou want to expand on any of that now? 1

MR. PATTERSON: Let’s see what the folks 2

out there

-- 3

MR. CASKEY: Okay. So thanks for the 4

opportunity to present all this. 5

MR. PARKER: Thank you, John, very 6

helpful. I should say that, you know, the question 7

of BiL scaling and separate treatments for networks 8

and vaults and perhaps for certain other categories 9

... My sense is that quite a lot of agreement that 10

these issues can be dealt with and should be dealt 11

with on a different level. We have groups that hav e 12

been formed to address those issues, and I think 13

they’ve made pretty good progress ... so I feel very 14

comfortable focusing on the big picture with the 15

understanding that, yes, we will have to discuss 16

special cases if we have time. 17

MR. ANDERSON: If I cou ld just confirm

-- 18

where is the

-- where can we find those plots right 19

there? I’ve got the last one, but I don’t have the 20

plots right there. Was that

-- did you send that 21

out? Is that on the Sharepoint? 22

MR. PARKER: I think it’s on Sharepoint. 23

MR. A NDERSON: It just came out? That’s 24

why I missed it. Thank you. 25Execu tive Court Reporters (301) 565

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MR. DeLASKI: So point of clarification, 1

if I may. 2

MR. PARKER: Yes, Andrew. 3

MR. DeLASKI: So you’re using

-- 4

MR. PARKER: Andrew, give your name. 5

MR. DeLASKI: Andrew. 6

MR. PARK ER: Just trying to

-- 7

MR. HOPKINSON: I sat on this side of the 8

table because originally your name tag was over 9

there, so I thought I’d better ... your name tag. 10

MR. DeLASKI: Phil took my spot. So 11

you’re using the 2011 plot? 12

MR. CASKEY: Correct. 13

MR. DeLASKI: So that

-- you guys are 14

using a similar decision criteria as what the steel 15

men are using

. 16

MR. CASKEY: Right, and the reason we’re 17

not going up to like 1.2 or one

-- this is John 18

Caskey, NEMA

-- the reason we’re not going up to 19

those i ncremental increases is because we really 20

feel that the manufacturers, again, they over

21

design, so in reality, what they’re going to be 22

building is going to be close to that anyway. 23

MR. DeLASKI: ... and then bringing it back 24

to the closest design

-- close st EL backwards? 25Execu tive Court Reporters (301) 565

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MR. CASKEY: Correct, essentially. 1

MR. DeLASKI: That’s your approach? 2

MR. CASKEY: Yes, sir. 3

MR. DeLASKI: All right. Thank you. 4

MR. PARKER: Let me just also offer one 5

point of clarification that might help with the 6

discussion of steel selection and why it is not 7

featured in the current analyses. My sense from 8

talking to people at BNL over the last few weeks, 9

and increasingly over the past couple of weeks is 10

that the

-- is that the whole, the tool that they 11

use is not very wel l suited to modeling and 12

predicting actual steel selection. What they tried 13

to do with the last least cost analysis is examine 14

the performance metric, and to achieve this 15

performance you will get the least cost savings 16

compared to the first cost. It does n’t really 17

enable them to micromanage and second

- guess 18

manufacturers as to what particular steels they will 19

ship, and what particular steels they will use. And 20

I think if we take away anything from the last five 21

discussions of analysis that we’ve had, it’ s that 22

there isn’t a lot of confidence, not on your side, 23

not on our side, not on the analysts side, in the 24

ability of the tools that we have now to predict 25Execu tive Court Reporters (301) 565

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what steel will be selected at what efficiency 1

levels, below the obvious

-- there are high 2

efficien cy levels where it’s all amorphous all the 3

way. But at the levels that are critical to this 4

committee, it’s really a certain amount of humility 5

is required and I think is there. 6

More recently, after the last meeting, 7

Navigant went out and sent surveys t o the 8

transformer makers about what steels they would see 9

-- foresee using under a variety of scenarios, not 10

trying to guess what the price is, let them guess 11

their own prices for material prices in the future. 12

I think it was, you know, what would you see as your 13

... we received a few responses which have been very 14

helpful, I think very appreciated. We should have 15

gotten many responses. It would be very, very 16

helpful if they could get more, and if they could, I 17

think we could have although subjective, surv eys 18

that empirical database

-- foundation on which to 19

base our positions in our ... 20

So that’s why we didn’t feature in the 21

analysis, so far, and I think it would be useful for 22

people to just keep that in mind when we look at 23

choice of steel. It’s an imper fect tool. Steve. 24

MR. ROSENSTOCK: Steve Rosenstock, EEI. 25Execu tive Court Reporters (301) 565

- 0064 156

Just to follow up on that, and I appreciate that, 1

but again, looking at this just from a kind of 2

consumer perspective, looking at the November 3 rd 3

handout, the November 3 rd analysis, where it do es 4

show what happens in different design lines in terms 5

of steel choices. Start with design line two

-- 6

again, based on this analysis from November 3 rd

Going up to EL

- 1, based on this analysis, 11

it says 100 percent amorphous

-- 12 using

7

the 2010 prices, they’re saying in design line two 8

they

-- in this analysis it says 91.5 percent M2, 9

SA

- 1 amorphous 8.5 percent for the base case. 10

MR. PARKER: What page are you on? 13

MR. ROSENSTOCK: I’m on page 13 of the 14

November 3 rd

MR. PARKER: You’re talking about the 18

November 3 handout that’s entitled life cycle cos t 15

impact period, national impact analysis results for 16

medium voltage liquid immersed transformers. 17

rd

MR. ROSENSTOCK: November 3 ? 19

rd , yes. That’s 20

the latest data that we have. There is no breakout 21

of st eel by design by efficiency level in the 22

November 3 rd

MR. PARKER: I explained why there wasn’t. 24 -- 23

MR. ROSENSTOCK: Right. But I’m saying, 25Execu tive Court Reporters (301) 565

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following up on your point, is that okay, fine, it 1

might not be the most perfect analysis, even if it’s 2

off by say 20 percent, even if it’s off 20 percent, 3

that would still mean 80 percent amorphous and 20 4

percent other steels at EL

- 1. Again, using a plus 5

or minus, using an estimation factor, using a 6

variability factor, that’s still a pretty massive ... 7

MR. RIVEST : Steve? 8

MR. ROSENSTOCK: Yes, sir. 9

MR. RIVEST: This is Mike Rivest. I 10

understand where people’s positions are and I just 11

wanted to support what was said here about the tool. 12

Keeping in mind that the intent of the tool is to 13

drive the general cost efficiency track, and it 14

certainly was not the intention of the analysts to 15

be predicting market share of steels in putting 16

together this analysis, or ... construct of designs. 17

And we find it unfortunate that it’s become a 18

central point of everyone’s attent ion, because 19

that’s not what it was supposed to be. 20

And if I compare with every other ruling 21

that I’ve been involved with over 15 years, DOE has 22

never had the ambition to get into the business of 23

designing like it seems we have been here. And I 24

don’t know how many rules have been five dots in a 25Execu tive Court Reporters (301) 565

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regression and ... that, so it just seems as though 1

we’re 95 percent of the way there, 100 percent of 2

the way there, but we shouldn’t be leaning so much 3

on the tool that wasn’t designed for that, and 4

that’s why I think there’s value in listening to 5

what people are building at those efficiency levels 6

today and factoring that in with at least the 7

weight, or more, than those plots. 8

MR. ROSENSTOCK: Steve Rosenstock, EEI. I 9

-- again, I appreciate that, but

-- 10

MR. RIVEST: What you’re looking at is not 11

a complete record. 12

MR. ROSENSTOCK: It’s not a complete 13

record, but again, Steve Rosenstock, EEI, that’s why 14

I was trying to say is even if a complete record 15

shows, you know, again, instead of 100 percent, 16

let’s say the complete record shows 70 percent. 17

Again, I have no idea what that answer’s going to be 18

based on life cycle cost analysis, based on 2011 19

prices, based on other input that you get, it still 20

shows

-- again, it’s still estimates, it still 21

theorizes

-- I don’t know which adjective to use

-- 22

a significant market shift even at EL

- 1. So you can 23

choose whatever road you’re most comfortable with, 24

but again, information that we have, that we have to 25Execu tive Court Reporters (301) 565

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use to try to reach consensus is at this design 1

level

-- 2

MR . RIVEST: I’m saying

-- Mike Rivest

-- 3

don’t use just that. 4

MR. SCHOEN: Jerry Schoen, AK Steel. 5

Excuse me, but I’d like to jump in here. I sense 6

the spreadsheet ... from the 2007 rulemaking that 7

showed exactly what we were asking for. We took 8

some com fort from the analysis that it showed a 9

breakdown of product types by tonnage, by design 10

segment. It was a fairly exhaustive piece of work 11

by the Navigant team

-- I’m not sure who did it. 12

I’m sure you’re aware of that. That was generated. 13

But why can w e not get something like that now? 14

MR. PARKER: Jeremiah, can you get that 15

please? 16

MR. RIVEST: Jerry, I’m well aware it’s 17

easy when you’re far from the cliff to take a couple 18

steps. As we get closer, the accuracy of the tools 19

have to be taken into ac count, so you have the 20

coarse adjust and you have the fine adjust. And 21

we’re just recognizing the inaccuracy of the tool. 22

I think that, from what I’m hearing, from the other 23

evidence that exists that it’s a conservative value 24

right now that’s being built in where amorphous is 25Execu tive Court Reporters (301) 565

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being permitted. ... reason that, that may be the 1

right place to be, is to be conservative. But let’s 2

not say it has 100 percent accuracy. It does not. 3

MR. PETERSEN: Eric Peterson, AK Steel. I 4

think you made a couple of really g ood points, that 5

previously it was more a coarse adjustment and now 6

it’s a fine, and that we can’t necessarily just look 7

at the model. We have to look at what else we have. 8

And I think what else we have is the transformer 9

manufacturers that have just co me forward and 10

provided efficiency levels at which they believe 11

they can still have a good level of supply. And you 12

will notice that it is very low. And based off of 13

our analysis, and taking the tool that we were just 14

talking about, and recognizing that it is fine, we 15

are very near a cliff, very near a cliff. And when 16

you go over that cliff, you will have US steel 17

industry that can no longer support the US 18

transformer manufacturing and will be out of the 19

business. And it truly is that close to the cliff 20

and must be very seriously considered. 21

So we do have to take all these things 22

into concern. We ask what the steel industry has 23

brought together, the model you’ve brought, and 24

we’ve just heard from the transformer manufacturers 25Execu tive Court Reporters (301) 565

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of how far they believe t hey can go. The last point 1

I guess I make, is that all of the numbers they 2

provided is on the 2011 data, which against the 2010 3

or the last draft, is basically consistent with the 4

exception of this design line five. I would say 5

that if you looked at this one versus the last one, 6

the design line five would have a zero for that 7

crossover instead of a one, and again, I just 8

reference the conversation we had this morning, 9

questioning the validity of the pricing. 10

So I would emphasize that the position of 11

whether or not steel can continue to compete and 12

support the US transformer industry is very tenuous. 13

MR. ALLEN: (on phone) Jerry Allen, 14

Metglas. A B B’s analysis , some of you could show 15

that the various steels are competitive well above 16

level one, an d if you use that same argument that 17

you people are using, that because amorphous is a 18

cheaper product, below level one nobody will use the 19

other steels could be used to say they need designs 20

to use amorphous at level zero, which is not true. 21

You’re pull ing this too far. 22

MR. PATTERSON: Wes Patterson, ABB. I 23

think I’ve caused a lot of discussion with some of 24

the information that I’ve provided. The first go

- 25Execu tive Court Reporters (301) 565

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around, back, I don’t know, three, four meetings 1

ago, we spent maybe two hours discussing where do we 2

have a mix of grades of steel. And at that time we 3

didn’t have defined lines of efficiency levels. So 4

I arbitrarily chose ten percent buckets, and I 5

looked at combinations of steels that were used to 6

get from

-- to build between five and ten percen t 7

below the current standard. 8

And then I eventually showed at that 9

meeting that ABB’s experience was that if we were 10

building units between ten or 20 and 30 percent 11

below the current standard, we would have used a mix 12

of amorphous and grain

- oriented stee ls at that 13

level. 14

Then after we defined the efficiency 15

levels, the question became then, not at what 16

efficiency level would I be able to design a 17

particular unit, but what would be the impact on the 18

business if we set the standard at the particular 19

leve l. It’s not exactly the same question. Because 20

we build a mix of units, no matter what level we set 21

the standard at, I will be supplying product that is 22

better than the standard. Much better. 23

And in order to maintain a balanced supply 24

of materials, we must insure that we have adequate 25Execu tive Court Reporters (301) 565

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supply of CGO. Adequate supply of CGO cannot be 1

established merely by M2, because M2 availability is 2

linked tightly to M3. So we have to be cognizant of 3

the relative volumes of the M3 with the M2, and then 4

where does amo rphous play in. 5

So I produced a number of other charts, 6

sent those out for distribution, and these charts 7

show that for sure, that if we set a standard a dEL

8

1, this is from ABB’s experience, that we will have 9

an adequate supply of amorphous, M3, and M 2 in the 10

liquid filled market. There’s no doubt in my mind. 11

When I move to standards set at dEL

- 2, the relative 12

mix of the M3/M2 shifts and starts to raise a 13

concern about the availability of CGO because the M2 14

percentage is starting to kick up. The dEL

- 2 level 15

losses is 15 percent below the current standard. 16

When we move to dEL

- 3, which is only 18 percent 17

losses below the current standard, only three 18

percent spread, my data indicates I am now 19

destroying the supply of CGO. I’ve essentially 20

shifted all the CGO to M2. I don’t understand how 21

the steel manufacturers can supply it because they 22

can only supply it as an outgrowth of the M3. 23

So there my data is saying that a standard 24

set at dEL

- 3 could put CGO stock totally in 25Execu tive Court Reporters (301) 565

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jeopardy. And this will then create a supply issue, 1

from my perspective. DEL

- 2 is a question mark, and 2

dEL

- 1, I feel we can do. I hope that helps clarify. 3

MR. ALLEN: Yes. 4

MR. PARKER: John, as I understood your 5

proposal, it is based upon a variety of factors, not 6

just the ques tion of steel supply, but the question 7

of life cycle cost, of dollars per watt, and so 8

forth, is that right? I’m not going to put you on 9

the spot and ask you what the factor that was 10

determinant, but if you were basing your analysis 11

just on steel supply, you might not have come up 12

with the same analysis that you came up with. Fair 13

to state? 14

MR. CASKEY: I tried to do my best job of 15

clearly communicating what the principles were that 16

we were using to arrive at an appropriate EL level. 17

So if we tried to apply all of those issues dealing 18

with small manufacturers going out of business, and 19

the crossover point, and the competitiveness of 20

materials and suppliers, as well as the issue with 21

life cycle cost

-- so we tried to factor all of that 22

in as best we coul d. 23

MR. PARKER: Any other clarifying 24

questions of John’s proposal? Steve, did you want 25Execu tive Court Reporters (301) 565

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to make a proposal? 1

**Proposal** 2

MR. ROSENSTOCK: Steve Rosenstock, EEI . I 3

want to kind of start with just following up on the 4

network and the vault issue as a part of this 5

negotiation. We’re

-- there was a subgroup out, a 6

variety of people on it, and I think it’s pretty 7

close in terms of getting a good definition and also 8

deciding on, well again, the issue is, exemption 9

versus keeping it at EL

- 0. There is obviously f or 10

legal reasons as ..., there is obviously a difference 11

in terms of federal

-- federal action. Because 12

right now, officially, all of those transformers are 13

under EL

- zero, and we’re saying we really don’t

-- 14

we’d rather have an exemption, but there’s alread y a 15

standard out there, and you don’t get an exemption 16

after a standard has been put in place for these 17

products. He’s shaking his head no. That’s not a 18

good sign. Mike. 19

MR. COHEN: There’s no standard in place 20

for it. 21

MR. ROSENSTOCK: There is a st andard in 22

place for it now, it’s EL

- 0, I believe. 23

(overspeaking.) 24

MR. ROSENSTOCK: So the question is

-- I 25Execu tive Court Reporters (301) 565

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think there’s agreement, especially among the 1

utility side, we’d like the exemption or having it 2

not raised at this point. Exemption, especial ly for 3

retrofits especially. 4

But again, I think we can come to getting 5

to yes on that issue. I think some, I think, we’re 6

getting pretty close on that. So again, in terms of 7

that sub

- issue, again, I put that on the table. I 8

don’t know if we have an exact proposal today, but I 9

think the subgroup is pretty close in terms of 10

everybody sees a very small niche market, but there 11

are size constraints that I think we’ve come to 12

agreement on. 13

MR. PARKER: Excuse me, just a second, 14

Steve. Just if the folks will mute their phones, 15

we’re getting a lot of excess noise, making it hard 16

to hear, so please mute your phones. Thank you, 17

Steve, go ahead. 18

MR. ROSENSTOCK: Again, Steve Rosenstock, 19

EEI. We do not have our own separate proposal for 20

this group. We’ve been meeting with other groups to 21

see if we can come to a consensus in terms of how 22

many groups we could work with and so we think there 23

are

-- so we would like to probably look, probably 24

maybe go off separately, maybe to caucus about the 25Execu tive Court Reporters (301) 565

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two proposals, bu t I think we were

-- I think at 1

this point we’re looking favorable on the steel 2

proposal right now. We do not have separate 3

numbers, but I think at this point, we have the most 4

comfort with the proposal from the steel makers 5

because it minimizes risk. Ou r member companies are 6

very much involved with risk management. You’ve 7

heard about the issues in terms of materials supply, 8

transformer supply, manufacturers, and especially we 9

are concerned with reliability. There have been 10

issues in the past, there’s s ome transformers used, 11

and we do all want to see higher efficiency and we 12

think that, again, we’re very concerned about that 13

crossover point. At this point, based on all the 14

evidence we’ve seen and all the numbers, and all the 15

-- and the latest and greate st analysis, we think 16

that, especially to minimize incremental cost and to 17

minimize paybacks, and to have higher efficiency, at 18

this time, based on all the analysis that we’ve 19

seen, right now we are most comfortable with the 20

proposal from the steel manufac turers. Thank you. 21

MR. HIRSCH: an I just add a couple 22

comments real quick? Steve mentioned the data, and 23

I think from the utility industry, I’ve been in the 24

industry four years plus, and I can tell you it’s 25Execu tive Court Reporters (301) 565

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been drummed into me from day one, every dol lar I 1

spend I need to make sure I’m getting adequate 2

payback for my customers. So we’re really concerned 3

about that. 4

The other thing on the reliability end. 5

Reliability is two

- fold. Number one, reliability of 6

supply. We’re afraid if we go to a comp letely 7

different steel very quickly, that there’s going to 8

be supply problems and we’ll not be able to serve 9

our customers. The other part of reliability is the 10

fact that there is a learning curve, whether you 11

like the factor or not, there’s a learning cu rve in 12

using amorphous steel, building transformers with 13

amorphous steel. So we drive the smaller 14

manufacturers to that point, if they don’t go out of 15

business, that there’s going to be a learning curve, 16

and the reliability of the product is going to 17

suff er from that. 18

I think those two things I just wanted to 19

clarify here. Most utilities that have bought 20

amorphous in the past do not track them to tell me 21

whether they had problems or not. There’s one other 22

utility besides my utility, that has tracked them 23

and you’ll see my numbers most probable, but we see 24

about a 10.9 year life out of the amorphous steel 25Execu tive Court Reporters (301) 565

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transformers, where our normal transformer 1

population is about 29.4. 2

So I think we’re a little bit concerned. 3

We suspect that that was a learnin g curve in using 4

the product, but those issues are really what’s 5

playing on utility minds. 6

MR. HYLAND: Mike Hyland, APPA. Because I 7

love using e

- mails, I e

- mail ed at 1:56 out to my TD 8

list, which is about 700 utilities, and I said, hey, 9

do you rewind? Have you started to rewind? What 10

percentage? One of my utilities in the top five in 11

the south rewinds based on 20 percent increase from 12

2010 dollars. Across the state, in the same state, 13

the utility that’s in our top 50 is rewinding every 14

single distri ct transformer now. They’ve already 15

made that decision as an engineering practice. I’m 16

getting a few other samplings. And I was telling 17

the guys a lot of smaller systems with no 18

engineering staff, they said they don’t rewind at 19

all. They will look at i t. Between ten percent and 20

20 percent is really going to make them tip. Some 21

of them don’t want to do it, which we don’t want 22

them to do it, to be honest with you, we don’t want 23

them to because some of the comments we’re getting 24

about rewinding is, you’ re not getting the same 25Execu tive Court Reporters (301) 565

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warranty

-- some you are, some they’re not. And 1

some are saying they’re just not that great. 2

They’ve experienced rewinding so they really, really 3

are hoping we don’t go to push them to rewinding. 4

MR. PARKER: John, did you want to 5

comment? 6

MR. CASKEY: Yeah, just a quick point . A 7

quick point of clarification and to help people in 8

terms of when they throw out ten or 20 percent, it’s 9

the incremental cost between the, I guess like the 10

EL

- 0 and the next efficiency level. You kno w, what 11

is incremental cost, the first cost of the 12

transformer. Other people are saying the ten or 20 13

percent relates to the price differential between 14

the new transformer and the rebuilt transformer. So 15

when you throw out ten or 20 percent, are you sayi ng 16

that’s the price differential between new and 17

rebuilt, and that makes the decision? Or are you 18

just saying an incremental price increase of ten 19

percent above what they’re used to paying, they’re 20

going to switch to rebuilt? 21

MR. HYLAND: It’s Mike Hyl and, APPA. It’s 22

an incremental increase in the transformer budget 23

for new transformers. 24

MR. CASKEY: Okay. 25Execu tive Court Reporters (301) 565

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MR. HYLAND: Now I did have a guy from 1

Kentucky say that for a 25 KVA pad

-- let’s see if I 2

can pull up John’s e

- mail

-- a new pad was costing 3

about $2000, and he can rewind it for $900

-- that’s 4

what he just got in this week. 5

PARTICIPANT: 25 KVA? 6

MR. HYLAND: This is a small muni in 7

Kentucky. 8

MR. ANDERSON: Richard, while Mike looks 9

for that, I’m sorry, Rick Anderson. 10

MR. PARKER: Ye s, go ahead, Rick. 11

MR. ANDERSON: It’s important to know that 12

when we looked at the Sharepoint data, that the 13

current base case efficiency level, 99.08 for a 50 14

KVA pad, that the first costs

-- we’re already there 15

inasmuch as quotes from the rewinding ma nufacturers, 16

they’re already quoting that based on the current 17

efficiency levels, you know, they can beat the price 18

of an EL

- 0. That’s right now. So, you know, you 19

start to approach one, and that’s a little bit why, 20

like Steve said, we agree with the ste el 21

manufacturers that, you know, you’re getting real 22

close to forcing us to really seriously consider 23

rewinding transformers. So we’re already there. If 24

you go higher, you’re going to push us over the 25Execu tive Court Reporters (301) 565

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cliff. 1

MR. FERNSTROM: Gary Fernstrom, PG&E. 2

Richa rd, a lot of the utilities in EEI, APPA and so 3

on have been stating their position on this. I feel 4

like I need to speak up for PG&E and California 5

investor

- owned utilities. PG&E serves roughly nine 6

million customers. I don’t know for Sempra, but the 7

pop ulation of California is about 30 million, I 8

guess, and aside from the munis and public power, we 9

serve most of the rest of the customers. 10

We too are concerned about minimizing cost 11

and the lowest life cycle cost for our customers. 12

However, as Tom Eck man stated earlier, we’re looking 13

at a 30 year window into the future here, and we 14

feel like investment in a little higher efficiency 15

is important because we’re much more likely to 16

undershoot than overshoot that investment. 17

The second point I’d like to m ake is 18

there’s been a lot of discussion about risk and the 19

rebuild market in contrast to the equipment market. 20

Those are real risks, for sure, but they’re risks 21

involved with everything the utility does. And 22

frankly I think this relatively small change t hat 23

would occur in the transformer manufacturing and 24

design is relatively low risk. If we decide to 25Execu tive Court Reporters (301) 565

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rebuild transformers rather than purchase new, we’re 1

shooting ourselves in the foot because while that 2

may be less expensive, it certainly isn't a prudent 3

thing to do, looking forward 30 years into the 4

future. 5

MR. HYLAND: I found that e

- mail. Just 6

says a 25 KVA, $2000. To rewind it was $900. 7

And I want to address that comment real 8

quick too. And I appreciate it. But municipal 9

market, we operate unde r Sunshine Laws. You want to 10

find out transformer bid, they’re on the website, 11

they’re public records. Unfortunately, that’s 12

operating in every single employee’s pay too. If 13

you want to know what your neighbor makes in a 14

municipal. So we do all look at first cost a lot. 15

In some areas, we are forbidden from looking at 16

total life cycle cost. When we pushed, the EPA 17

Energy Star transformer program back in the 90s that 18

we signed on to, that was one of the kickbacks from 19

some of our munis. We’d love to, b ut we can’t. It 20

comes down to the first cost, whether it’s a fire 21

truck, whether it’s building a school, it’s 22

contractor or it’s a transformer. 23

MR. HOPKINSON: What are the numbers 24

again? 25Execu tive Court Reporters (301) 565

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MR. HYLAND: $2000 to $900. $2000 for the 1

new, $900 for the re wind. 2

MR. HOPKINSON: And that was a 50 KVA? 3

MR. HYLAND: Twenty

- five. 4

MR. PARKER: Are these munis regulated? 5

MR. HYLAND: These are self

- regulated. 6

Non

- profit, owned by ... so they answer to the ..., 7

typically. 8

MR. PARKER: Andrew. 9

**Proposal: Advoc ates**  10

MR. DeLASKI: So I’d like to respond to 11

the proposal on the table. We did have a chance to 12

caucus over lunch and as everyone knows, we made a 13

proposal at the last meeting what our ... So I want 14

to make a few observations. One is that we also 15

want t o echo John Caskey’s words that we really 16

appreciate the process that this took. We learned a 17

lot through this process. It’s been an enormous 18

amount of work. I started to think about the 19

person

- hours that have gone into this effort over 20

the past few mon ths, I guess it’s the past two 21

months. It’s been kind of a lightning

- speed 22

process, and I just

-- just the person

- hours, and 23

you figure the e

- mail time we’ve spent, more than 24

I’ve spent on most topics, both on the part of the 25Execu tive Court Reporters (301) 565

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suppliers, the transformer ma nufacturers, utilities, 1

DOE and the consultants. So we really appreciate 2

all the effort that’s gone into this process. 3

I recognize for DOE this is the first time 4

that a rulemaking like this

-- a process like this 5

has been attempted for a rulemaking, and it was a 6

complex one, given the interests at stake and in 7

terms of technology. This is more complex than a 8

lot. So I really appreciate the effort put into it. 9

I also observed that there are a lot of 10

areas of agreement. Some of the issues that the 11

gro up differed, parties just raised, the 12

manufacturers, the transformer manufacturers, and 13

the utilities represented by Steve, by EEI, there is 14

agreement where we see our agreement that we also 15

noted in our comments, our proposal last time. We 16

said that we w ere comfortable with the notion of 17

some sort of scaling to deal with high BILs, and we 18

remain comfortable with some sort of scaling to deal 19

with high BIL transformers. 20

We remain comfortable with some special 21

treatment for vaults and networks and I think Tim 22

and Tom Eckman have been involved in that working 23

group to come up with their approach, definitions 24

for vaults and networks. 25Execu tive Court Reporters (301) 565

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We remain comfortable, as we said early 1

on, the first meeting, with separate treatment for 2

poles and pads, and I understand t hat we remain 3

flexible on that point, let’s put it that way, that 4

-- there was discussion last time about consistent 5

standard for poles and pads. Today the proposals 6

are for different standards for poles and pads, I 7

think, as I interpret them. However, w e remain 8

comfortable with either approach. And appreciate 9

the words that Wes said early on about not wanting 10

poles to pull down the standard for pads. 11

We haven’t discussed the other proposals 12

we heard today, have not addressed the issue of 13

timeframe, th at is the period between when the final 14

rule would be published and the effective data, so I 15

presume the assumption is, I guess, three years. 16

And we remain comfortable with a three year lead 17

time. 18

A new topic that we felt significant today 19

was this issu e of refurbishment. We think there’s a 20

shared interest around this table in avoiding seeing 21

the refurbishment market take off. I think we’ve 22

heard a lot of folks say it’s not in the interest of 23

anyone to see that market take off. So we have 24

shared inter ests and we are interested in working in 25Execu tive Court Reporters (301) 565

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the future to prevent that. There are a number of 1

ways that can be done, either through rulemaking, 2

we’ve argued that DOE has some authority in 3

rulemakings. I think the ... was responding to our 4

comments in part ... w e made a comment in other 5

dockets that we think there’s an opportunity to 6

address it, either through DOE or in other venues at 7

the state or federal level. So we think this is 8

something that can be addressed, and that we can 9

address it most effectively wor king collaboratively. 10

So those are the areas of agreement. 11

However, the big issue of what levels we remain 12

pretty far apart. We started out at EL

- 4. We 13

suggested last time that we could

-- that EL

- 3 was a 14

level that we would support. We remain commit ted to 15

that position. We think at that level they’re not 16

all amorphous world, that there is competition, 17

based on the information that we’ve seen. We take 18

that as a position that is defensible one and that 19

has

-- one that would get a fair consideration i n a 20

contestable rulemaking process. 21

We said last time, at the end of the 22

meeting that we sort of drew a line in the sand, 23

frankly. We said we’re not interested in looking at 24

EL

- 1 or below. For the proposal that we heard today 25Execu tive Court Reporters (301) 565

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from NEMA was EL

- 1 and bel ow for one class, one 1

design line. And the steel manufacturers below EL

2

1. So we were pretty clear last time that we 3

weren’t interested in looking at levels below

-- at 4

EL

- 1 and below. And that remains true. Our view is 5

that

-- what we heard today, fra nkly, is a bit of a 6

step backwards for some stakeholders. Some 7

stakeholders last time were ones that supported two, 8

are now saying one. So we’re kind of going 9

backwards in our argument. So, I understand that 10

people change their positions in attempts to get to 11

consensus, and I understand that as part of the 12

process, but we sort of see this as not a step 13

forward. We saw some momentum towards level two 14

last time, that seems to not be the case as we sit 15

here today. 16

So our sense is that, again, we asked 17

ourselves, what’s going to happen on behalf of the 18

rulemaking. What happens when this process, if this 19

process breaks down, if we don’t have consensus from 20

this table? What’s going to happen? DOE is going 21

to make the decision based on the record, and we 22

think that that’s likely to be above the levels that 23

have been proposed today by the utilities, by EEI, 24

by steel manufacturers and by NEMA. So we think 25Execu tive Court Reporters (301) 565

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that we are better served by going through a 1

contestable rulemaking process than by agreeing to 2

levels that have been proposed today. 3

Again, we really appreciate the process, 4

but we

-- the zone of agreement, so

- to

- speak, seems 5

to be pretty big gulf, and a widening one, as 6

opposed to a narrowing one. So our sense is, unless 7

there’s a

-- some sort of move ment possible by the 8

other parties, that we may have reached a point 9

where we’re just have to say we tried and we 10

couldn’t get there. We’ve had two other transformer 11

-- two other sets of transformers that we could talk 12

about, and we’re ready to move on. Unless other 13

parties are ready to start moving towards higher 14

efficiency levels, then we should move on to medium 15

voltage dry type. 16

MR. ROSENSTOCK: Clarifying

-- clarifying 17

question? Just clarifying question, Andrew. Steve 18

Rosenstock, EEI. So previous ly your proposal was 19

level four for design line one, EL

- 4 for design line 20

two, EL

- 3 for design line 3, EL

- 4 for design line 21

four, and EL

- 4 for design line five. Again, just 22

clarifying, are you saying you’re okay with three 23

for all of the design lines? 24

M R. DeLASKI: That was thrown out at the 25Execu tive Court Reporters (301) 565

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last meeting. 1

MR. ROSENSTOCK: That’s where you are now, 2

basically, three for all the design lines? 3

MR. DeLASKI: Yeah, three . 4

MR. ROSENSTOCK: I just want to clarify. 5

MR. DeLASKI: Yeah, thanks, Steve. We 6

recognize that four pushed up against the limits, 7

the engineering limits last time, and three gave 8

more space, so to speak, where there’s still

-- both 9

materials can be used for the product, both material 10

classes. And that four was pushing it too far 11

agai nst the limits and that would lead to some 12

transformer types where you would only have one 13

material. So we pulled back to three with that 14

understanding. We also had suggested that we would 15

be comfortable with differential treatment for poles 16

and pads. S o the new analysis that may suggest that 17

one step back on poles may be appropriate, so in 18

other words, three across the board, but again, 19

we’re comfortable, as I said in my opening remarks, 20

with differential treatment for poles by BIL class 21

for vaults and networks. 22

MR. ROSENSTOCK: Thank you. 23

MR. ROY: This is Robin Roy, NRDC. One 24

little nuance, or insight, a little bit. We ... an 25Execu tive Court Reporters (301) 565

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area of agreement and that is one additional one , is 1

our interest in defining efficiency levels where 2

there is a role for al l types of steel. I think you 3

mentioned it, but I didn’t think you emphasized it

- 4

- quite emphasized it. We really are in agreement 5

on efficiency levels where there is a role for 6

multiple steel types. We see how important that is 7

for a variety of reason s. That gets back to some of 8

the questions you were discussing for these past 9

three years, is trying to figure out where those 10

levels exist. We’ve, through some excellent wise 11

advice from DOE and from General Electric, but we 12

don’t have the ability to lo ok at DOE’s analysis to 13

get comfortable. We appreciate the role that 14

Navigant and DOE are undertaking in trying to help 15

us form that issue a bit more. I think it’s really 16

very important. 17

So one of the reasons we would be

-- I 18

would be

-- ready to dis cuss this within a caucus, 19

but I would be reluctant to step back to the 20

proposals that was made at zero level for some more 21

analysis, some opportunity for that to inform the 22

decision ... And that’s going to

-- if we can’t come 23

to an agreement ... possible, it will fall back to DOE 24

and you’ll have to ... process, and we’ll look to you 25Execu tive Court Reporters (301) 565

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to do that analysis. 1

MR. PARKER: Gary. 2

MR. FERNSTROM: Gary Fernstrom, PG&E. I 3

just got one more quick comment. I believe 4

California’s needs line up pretty closely with the 5

p osition that Andrew just outlined. But, by nature, 6

any federal standard is a compromise, so we’re 7

prepared to compromise at some reasonable level, but 8

it needs to be a level that meets the needs of the 9

most needy with respect to energy efficiency as well 10

as those that are more first cost conscious. 11

MR. PARKER: So let me offer just a couple 12

of thoughts. It may or may not be useful. As I see 13

there are three main sticky points. 14

One is from the steel makers’ standpoint 15

and the transformer manufacturer s standpoint, the 16

question of steel selection. At what point is it, 17

exactly that we have a healthy, whatever that means, 18

mix of steels? We have been rather vague about that 19

around this table. We brought an analysis that is 20

not entirely reliable in all c ases, and we don’t yet 21

have what transformer makers are shipping now in 22

terms of mix of steels, across the board, beyond A 23

and B. What were shipments ... 24

One thing we might discuss, if you think 25Execu tive Court Reporters (301) 565

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this is worth it, is what do we mean by having a mix 1

of stee ls? Today’s market share? The only market 2

share that we can contemplate. Or is there a market 3

share from the standpoint of transformer makers that 4

would be somewhat different from today but that 5

would still be acceptable? 6

Secondly, from the utilities, is that 7

there’s fundamental problem with this dollars per 8

watt method. It is a concern that the metrics that 9

have been

-- that the dollars per watt figures that 10

they come up with when they do their own internal 11

analysis is just too high from the standpoi nt of 12

their own ... 13

I think clearly the thing that is 14

important to understand is that the DOE doesn’t 15

follow the corporate decision policy, and won’t 16

under any circumstances. It will base its decisions 17

upon the economics and particularly, based on the 18

e conomics of life cycle cost. If there are

-- we 19

had this discussion in the morning, but if it would 20

be helpful to actually explore how does dollars per 21

watt relate to the life cycle cost assessment, how 22

do you translate from one to the other? How do you 23

bridge those things? If there is genuine concern 24

that that’s a genuine issue for people that would 25Execu tive Court Reporters (301) 565

- 0064 184

benefit from further discussion, I’d like to hear 1

that. I propose that we could get to it

-- and I 2

don’t have a sense of whether that’s just a 3

bargaining p osition, or whether that’s a genuine 4

intellectual problem that people are having a hard 5

time to contend with. 6

But I think what you do need to understand 7

is that as I understand that based on the law, life 8

cycle cost in some way will be the metric by whic h 9

cost savings are measured in the final analysis, in 10

the DOE rulemaking. That’s what the statute says. 11

So a third issue that got hung up on the 12

timing again is refurbishment. And this is probably 13

the most frustrating for everybody because on the 14

one h and, people are rock

- solid that it’s going to 15

happen , it’s a risk, that it’s another cliff. On 16

the other hand, through four meetings now, we have 17

not gotten any concrete data on what refurbishment 18

costs are, on how big the market is. There has been 19

nothi ng that they can sink their teeth into 20

analytically that gives them a way to incorporate 21

refurbishment into the model, into the life cycle 22

cost assessment, in the DOE’s decision. 23

In the absence of that, I don’t think 24

frankly

-- I’ll just tell you my view s as a 25Execu tive Court Reporters (301) 565

- 0064 185

mediator, I don’t think frankly that they’re going 1

to be able to do much with anecdotes around the 2

table if they don’t have data. And we haven’t 3

gotten

-- we’ve gotten some data allegedly on 4

replacement, but not on refurbishment, and not 5

systematic . So it is a risk and we do need to have 6

a discussion about how to deal with it. I think 7

that Andrew’s point is, I am sure, is well meant. 8

It’s not in the interest of the environmentalists or 9

the industry to have the unintended consequences of 10

a shift t o refurbishments. But what we need is a 11

way of actually figuring out what increase in first 12

cost will create this risk, at what level? And what 13

do we do about it? 14

We can punt it to the DOE, but I don’t 15

think that’s going to get you where you want to en d 16

up. The question is

-- is a discussion of dollars 17

per watt, refurbishment

-- are we at a point where 18

further discussion, using surveys for example of 19

manufacturers who have the steel selection, or do 20

people just want to say this is enough, we’ve done 21

wh at we can? Ray. 22

MR. POLINSKI: ATI Allegheny Ludlum, Ray 23

Polinski. Again, I’m just asking Richard or the 24

DOE, I mean if the utilities had a published PP&I 25Execu tive Court Reporters (301) 565

- 0064 186

procedure which statement what their practice was as 1

far as cost

- effectiveness, that said, hey, i f the 2

rebuilt transformer

-- if there was something 3

written like that

-- right now, the difference isn’t 4

great enough to get it back in a lot of cases, but 5

they have a published document that says, hey, if 6

it’s 20 percent, if that’s the number, and right n ow 7

we’re at 15 percent, and so it’s zero, but hey, if 8

we go ten percent up, it’s going to be 25 percent 9

and what is that? IS that adequate or ... it’s this 10

cliff mentality. When you’re at a cliff, you know, 11

you don’t have a problem until you fall off. So 12

it’s like what position are we going to use, 13

sometimes from the top of the cliff or whatever, but 14

just when you fall off it’s kind of catastrophic. 15

MR. ROSENSTOCK: Steve Rosenstock, EEI. 16

There’s no published document in our members. It’s 17

always a budge t issue, just like for manufacturers 18

of anything. You have a piece of equipment that 19

breaks down, what do you do? Repair it or replace 20

it? It’s the same decision. There isn’t

-- there 21

may be a written policy, other times it’s just based 22

on your annual budgets. 23

MR. POLINSKI: It would be better if there 24

was some guideline though that

-- 25Execu tive Court Reporters (301) 565

- 0064 187

MR. ROSENSTOCK: Well, you have guidelines 1

on some of your people, maybe. There’s probably no 2

-- you’re asking for written policy. I don’t know 3

of any utility that has a, quote, “written policy” 4

on transformer repair versus replace. 5

MR. POLINSKI: Again, Ray Polinski, ATI 6

Allegheny. And would it be

-- I’m just trying to 7

get something

-- I think I understand DOE’s point 8

and LBL’s point and Richard’s point is that if 9

there’s no data, then you can’t include it, so I’m 10

just saying what kind of data can we have. Is it a 11

survey that you guys in utilities and ask them what 12

the premium, you know, is when

-- if you get a 13

survey from the top ten utilities and they say thi s 14

is the premium, is that adequate for them to 15

consider? I don’t know what it takes to incorporate 16

it. 17

MR. RIVEST: Mike Rivest, Navigant. I 18

think, thinking from a manufacturing impact, which 19

is different ... so if transformers go up in cost ten 20

percent, suppose that’s ten percent of the base cost 21

... on different steels, and actually steel 22

incremental sales are going up maybe 20 percent,

-- 23

Wes is saying no. 24

MR. PATTERSON: Wes. 25Execu tive Court Reporters (301) 565

- 0064 188

MR. RIVEST: You’re saying core steel is 1

half

-- 2

MR. PATTERSON: It’s h alf, say roughly 3

half the price. 4

MR. RIVEST: Right, then the incremental 5

cost is more than half, most of that is some copper, 6

so if the price is going up ten percent versus

-- 7

MR. POLINSKI: Again, Ray Polinski, ATI 8

Allegheny. Wes’ point, I think, is there’s the cost 9

of oil, there’s the case

-- 10

MR. RIVEST: (inaudible) 11

MR. POLINSKI: Okay. 12

MR. RIVEST: To get to the ball park, so 13

your loss in sales are lost to other types of steel, 14

and potentially to the replacement market. Is that 15

what you’ re trying to get at? 16

MR. POLINSKI: I’m just trying to

-- Ray 17

Polinski, ATI Allegheny. I’m trying to say that a 18

refurbished transformer, whatever that percentage 19

is, generates no energy savings and reduces the quad 20

savings

-- 21

MR. RIVEST: But your in terests

-- I’m not 22

talking

-- 23

MR. POLINSKI: I’m

-- 24

MR. RIVEST: You’re representing

... 25Execu tive Court Reporters (301) 565

- 0064 189

MR. POLINSKI: I’m representing the steel 1

company and my family who, you know, the consumer, 2

also a consumer of electricity who just feels awful 3

concerned that w e’re going to be less reliable or 4

we’re going to be paying more for our electricity if 5

we move forward. 6

MR. PARKER: All right, that’s

-- 7

MR. RIVEST: You’re here representing 8

Allegheny’s interests and ... consumer on the street. 9

MR. POLINSKI: Maybe. 10

MR. RIVEST: It’s that exciting? 11

(Laughter.) 12

MR. POLINSKI: I thought this was a new 13

reality show ... 14

(Overspeaking.) 15

MR. POLINSKI: Please, Mike, don’t assume 16

-- there’s certainly a pound of steel aspect of it. 17

There are jobs for transformer prod ucers. There are 18

-- it’s

-- it’s

-- 19

MR. RIVEST: ... and I’m not saying

-- this 20

is why we’re here. This is the interest group you 21

represent, the steel industry. Standard results in 22

more pounds of steel, and it counterbalances the 23

loss, potential lost sa les to refurbishments, 24

potential lost sales to

-- 25Execu tive Court Reporters (301) 565

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MR. POLINSKI: Ray Polinski

-- 1

MR. RIVEST: So whether we run that in 2

amorphous, that’s what’s happening. 3

MR. POLINSKI: Mike, again, it’s still a 4

point, right. I mean, yeah, if the levels proposed 5

-- the levels that we proposed, yes, there’s some 6

potential, but you get to the levels that Andrew and 7

his team were proposing, that’s not

-- that’s not a 8

good scenario for I think

-- I’m saying that those 9

scenarios, the costs are up

-- EL

- 3s, the numbers I 10

heard, sometimes they’re even more than double. 11

Sometimes, you know, so the transformer costs are 12

going way up and we’re not talking 20 percent, we’re 13

talking like one of them was 106 percent. One was 14

78 percent. I mean, so there’s a lot that’s been 15

said, there’s a lot of ingenious people out there 16

that will put the businesses in place to refurbish 17

when maybe they don’t just got to pay

-- they’ve got 18

a lot of margin to work with, and then there’s the 19

amorphous component. So, Andrew, with all due 20

resp ect, I’ve never seen any data, I’ve seen no data 21

where the cost for materials is a EL

- 3. But for

-- 22

for liquid fuel. But if you have that data, please 23

send it to me. 24

MR. DeLASKI: Yeah, we

-- as I said, we 25Execu tive Court Reporters (301) 565

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were looking for it, and both materials were 1

a vailable at our very first meeting. We recognized 2

... points to the left is what I’m saying. ... that 3

crossover point. And I recognize that. So

-- and 4

Richard, I would suggest we might take a break, so 5

people can figure if they want to think of anything 6

el se, before we wrap it up ... 7

MR. PARKER: Well, what I would suggest is 8

first, I didn’t hear Andrew saying that it was EL

- 3 9

or bust, right. I think what you’re looking for is 10

the ... but I guess the

-- what I’m hearing is let’s 11

take a sort of a straw poll o n where people are, and 12

then I’d just like to hear from people about whether 13

they think further conversation would be useful or 14

not. 15

MR. ANDERSON: If you don’t mind, Richard, 16

just one last piece. A transformer winding machine, 17

the prices start at $150, 000. So my transformer 18

budget’s two million dollars a year, and I spend ten 19

percent, I’ve got a winding machine. So

-- it’s ten 20

percent. 21

MR. PARKER: Does every transformer 22

failure could be ... 23

MR. ANDERSON: I mean I guess what I’m 24

getting at is the prices go up, we’ll be forced to 25Execu tive Court Reporters (301) 565

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educate ourselves on how to rewind transformers. 1

It’s not possible for us to buy a rewinding machine. 2

MR. PARKER: Okay. Let’s take a quick 3

straw poll on the three proposals

-- 4

(General overspeaking.) 5

MR. MEYERS: Do you mind waiting a minute 6

for Chuck Simmons? He’s the voting member for 7

Cooper. 8

(Pause for approximately five minutes.) 9

MR. PARKER: Okay. I think we are ready 10

for the poll. 11

PARTICIPANT: Richard, what’s your 12

proposal? 13

MR. PARKER: There are three proposals on 14

the table. The steel makers proposal which is 15

supported by the utilities ... NEMA, and the 16

advocates’ proposal. 17

MR. DeLASKI: And can you remind us of our 18

rules. 19

MR. PARKER: We don’t really have rules 20

directed at whether we take roll call vote, as you 21

would say, or we just have a show of hands. There 22

is a preference expressed by Mike for roll call ... 23

MR. DeLASKI: Yeah, my sense is that was

- 24

- our rule was unanimity. Right? So what’s the 25Execu tive Court Reporters (301) 565

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purpose of a roll call vote for the purpos e of 1

unanimity. And I’m concerned that the role of this 2

committee is to get to consensus, and I worry that 3

if we start with a roll call vote, people will be 4

sort of locked into positions that ends the 5

conversation. That’s my concern. I’m also 6

concerned about what happens next. So if you want 7

to go to a contested rulemaking

-- I don’t want 8

someone to come out of this room

-- I mean this 9

committee is 19 people from industry, broadly 10

speaking, and six of us who are not

-- or five of us 11

not from industry, a nd one government. 12

MR. HYLAND: I think maybe

-- is that what 13

it is? I thought it was 24. I think your total was 14

25. 15

MR. DeLASKI: Okay. Twenty

- five, or 24, 16

but anyway, it’s disproportionately people from 17

industry. Industry broadly speaking. So I think 18

the vast majority of people in this room wouldn’t be 19

here if not for ... rulemaking. You’re not here 20

because

-- the context

-- so I think there’s a 21

majority here, a large majority who say if there’s 22

zero change you vote for it because that would be, I 23

think .... So I’m concerned that straw votes and 24

formal votes will say, look, all these guys, these 25Execu tive Court Reporters (301) 565

- 0064 194

three or four guys who stopped us from getting the 1

consensus. So I’m kind of in a

-- 2

MR. HYLAND: I’ve never read anything that 3

said it was unanimity or whatever. I don’t remember 4

reading that. I don’t remember discussing it. I 5

don’t remember it being 24

- zero. And I personally 6

have no problem with it being in the public records 7

and know exactly where each and every person 8

presents. 9

MR. DeLASKI: Yeah . The committee ’s 10

charged with getting to consensus. 11

MR. HYLAND: We still can. This is 12

nothing other than putting your name to your vote, 13

and we know where you are. So if you want to go out 14

for a beer and talk about it, and see where we need 15

to go, we know. What I’d hate to see is us not get 16

anywhere, not get anywhere tomorrow, and walk away, 17

and two months from now, or three months from now, 18

we’re saying well this what he really was saying. 19

No, I want to know. Why shouldn’t we know? Why 20

shouldn ’t we know where everybody stands on this 21

issue? 22

PARTICIPANT: I agree. 23

MR. HYLAND: I said, do we have consensus? 24

When you negotiate you want to know where 25Execu tive Court Reporters (301) 565

- 0064 195

ultimately, at the end of the day, your closing 1

point was. And if they don’t overlap, at leas t we 2

know what the chasm is, what that difference is. 3

MR. DeLASKI: All right. I follow that. 4

My point is that the committee is overwhelmingly 5

represented by folks who

-- industry. 6

PARTICIPANT: And the conservor. 7

MR. HYLAND: I think Ray’s point a nd your 8

point aren’t representing your companies, but you 9

are representing your companies. So

-- 10

MR. DeLASKI: I’m finding the percentage 11

is wrong and I think

-- you have the people around 12

the table who produce the cores, the steel, 13

manufactured produc t, the purchased product to 14

install the product, and use the product. So don’t 15

you think it should be

-- 16

MR. PARKER: We are spending a lot of time 17

on this. Let’s just have the vote. I will

-- 18

there’s nothing in the ground rules that says that 19

we have to put names to votes, and I’m not sure that 20

that is useful to having discussion. It will take a 21

lot of time if we have to go through that. So let’s 22

just have a show of hands for each proposal. I will 23

go write down the show of hands, write down the 24

num ber for each one, and then we can discuss whether 25Execu tive Court Reporters (301) 565

- 0064 196

we want to go forward or not. The purpose of this 1

is to try to reach consensus. It’s not to allow 2

people to position or ... it’s to try to reach 3

consensus and we hope

-- if we can reach consensus, 4

that’s fi ne, but let’s just decide that. Eric? 5

MR. PETERSEN: Can you vote more than once 6

since there’s three options? 7

MR. PARKER: Yes. Yes. 8

MR. PETERSEN: Thank you. 9

MR. PARKER: So, first for the steel 10

makers proposal, show of hands. 11

PARTICIPANT: This is only for

-- 12

PARTICIPANT: You can vote twice. 13

PARTICIPANT: Wes is not here and he needs 14

to be here. He went for a smoke. He wasn’t here. 15

PARTICIPANT: Wes, we just had a vote

-- 16

MR. PARKER: Wes, steel makers proposal

-- 17

PARTICIPANT: You can vote twice. 18

(Laughter and discussion.) 19

MR. PATTERSON: From my perspective I 20

think we can do a little better than that one. 21

MR. DeLASKI: So you’re not voting yes. 22

MR. ROSENSTOCK: You’re abstaining? 23

MR. PATTERSON: I’m not voting yes. Take 24

that as a no or abstain, I don’t care. 25Execu tive Court Reporters (301) 565

- 0064 197

PARTICIPANT: What was the count, Richard? 1

MR. PARKER: What’s that? 2

PARTICIPANT: What was the count? 3

MR. PARKER: Eleven. 4

(Discussion off mic) 5

MR. PARKER: All right, NEMA proposal. 6

PARTICIPANT: No, no. Abstains. 7

MR. PARKER: Abstained? 8

MR. ROSENSTOCK: Yes. 9

MR. PARKER: Abstentions? 10

(Discussions off mic) 11

MR. ROSENSTOCK: This is Steve Rosenstock, 12

EEI. So this vote was 11 yes, 8 no and two 13

abstentions. So three people did not vote. R ight? 14

PARTICIPANT: That’s correct. 15

(Discussions off mic) 16

MR. ROSENSTOCK: So it’s four abstentions? 17

MR. PARKER: Four abstentions. Okay. Now 18

the NEMA proposal. Raise your hand. Eleven. 19

MR. ROSENSTOCK: Count them again. 20

Recount. 21

MR. P ARKER: You want a recount. Okay. 22

Show of hands. Twelve. Twelve for NEMA. All 23

opposed? Seven. Seven opposed. 24

PARTICIPANT: Who’s the seven? 25Execu tive Court Reporters (301) 565

- 0064 198

PARTICIPANT: I saw seven. 1

MR. PARKER: Okay. Abstentions? Four. 2

Let the record reflect that DOE w as not voting 3

twice. Four abstentions. Yes. 4

MR. POLINSKI: Richard. One comment from 5

ATI Allegheny Ludlum, Ray Polinski. We’re very 6

close on the NEMA. There’s one design level that we 7

have a concern with so we can talk outside on this, 8

but on the re cord that we’re pretty close. 9

MR. PETERSEN: Yes on four of the design 10

lines. 11

MR. PARKER: Yes on four

-- 12

MR. PETERSEN: Yes on four of the five. 13

MR. PARKER: Which one gives the problem? 14

MR. PETERSEN: Design line five is the 15

concern. Whe n you look at that versus the 2010 16

data, they use the same perspective of where it 17

crosses over. Today we talked about the concern for 18

the pricing and what pushes the crossover from zero 19

to one is not including the surcharge. 20

MR. PARKER: Okay. Advocat es’ proposal. 21

All in favor. Six. 22

MR. CASKEY: I count seven. 23

MR. PARKER: Raise your hands higher 24

please. 25Execu tive Court Reporters (301) 565

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PARTICIPANT: I’m sorry, what’s this one 1

for? 2

PARTICIPANT: Advocates. 3

MR. PARKER: Seven. All opposed? 4

(Counting) 5

PARTICIPANT: S tart over. 6

MR. PARKER: All opposed to the advocates 7

proposal? 8

PARTICIPANT: The advocates proposal is? 9

PARTICIPANT: All three’s. 10

MR. PARKER: (Counting) Thirteen. 11

Abstentions? Three abstentions. 12

MR. PATTERSON: This is the last thing I 13

hea rd from Andrew was EL

- 3 and EL

- 2. 14

MR. DeLASKI: I said threes. 15

MR. POLINSKI: Yeah, I think he officially 16

said three across the board, unless I misunderstood, 17

Andrew. 18

MR. DeLASKI: I officially said three 19

across the board, with the understanding that some 20

adjustment on poles may be necessary, to a lower 21

level. And high BILs and vaults and networks. 22

MR. MEYERS: Who is the second

-- voting? 23

MR. CYMBALSKY: I’m sorry, it’s Maxine. 24

MR. MEYERS: Can we have a recount of 25Execu tive Court Reporters (301) 565

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steel manufacturers? The nu mbers don’t add up. We 1

voted immediately after that for NEMA and the 2

numbers are two less

-- 3

PARTICIPANT: Twenty versus 23. 4

PARTICIPANT: There were abstentions. 5

MR. PARKER: What’s your count? 6

MR. ANDERSON: It’s 11, 8 and 4. 7

MR. POLINSKI: W ould you just go through 8

the numbers for each one? 9

MR. PARKER: What I’ve got for the steel 10

makers was 11 yea, 8 nay, and 4 abstain. For NEMA, 11

12 yeas, 7 nay, 4 abstain. For advocates, 7 yea, 13 12

nay, 3 abstain. The numbers may not add up because 13

some people have the right to not vote at all, but 14

we had no choice but to count them as an abstention. 15

PARTICIPANT: Each one has 23. 16

MR. PARKER: Okay. Why don’t we

-- do 17

people want to stay a little bit after, or do we

-- 18

why don’t we recess for ten min utes and adjourn for 19

the purpose of discussion whether it’s worth 20

continuing the process in the future. 21

MR. PATTERSON: I personally have 22

difficulty with the concept of like adjourning for 23

ten minutes which turns into a half hour and then we 24

want to go t o six o’clock or whatever. I mean it’s 25Execu tive Court Reporters (301) 565

- 0064 201

tiring as it is. I’m not sure what we’re going to 1

accomplish like five minutes from now. Can you 2

outline what you picture is going to be accomplished 3

five minutes from now, or ten minutes from now? 4

MR. PARKER: P erhaps nothing. 5

(Laughter.) 6

MR. PARKER: I was just encouraged that we 7

moved with lightning speed in the last five minutes. 8

Let’s do this, then. Let’s just adjourn for the 9

evening and perhaps start tomorrow morning with the 10

discussion of whether it ’s worth going on. ... 11

MR. PATTERSON: Could we get

-- could we 12

get the medium voltage dry type maybe first thing in 13

the morning. 14

MR. PARKER: What’s that? 15

MR. PATTERSON: Could we get the medium 16

voltage dry out of the way first thing? 17

MR. PARKER: Okay. My only concern with 18

doing that is if we revisit the liquid immersed, I’m 19

not sure how many of the utility people are going to 20

want to be around for the dry type. 21

MR. DeLASKI: I mean they’re on the 22

committee, right? 23

(Discussions off mic) 24

MR. PARKER: Yeah. ... So let’s do that, 25Execu tive Court Reporters (301) 565

- 0064 202

then. Is that amenable to people? Then we’ll see 1

you here tomorrow morning at nine. 2

MR. HYLAND: Reminder. You can’t get in 3

the building until eight. 4

(Whereupon, at 5:00 p.m., the meet ing in 5

the above captioned mat ter was adjourned , to 6

reconvene tomorrow morning, Thursday, December 1, 7

2011, at 9:00 a.m.) 8

9

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18

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25Execu tive Court Reporters (301) 565

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**REPORTER'S CERTIFICATE**

This is to certify that the attached proceedings

before:

**U.S. DEPARTMENT OF ENERGY**

In the Matter of:

**MEE TING**  **of the MV WORKING GROUP**

Were held as herein appears and that this is the

original transcript thereof for the file of the

Department, Commission, Board, Administrative Law

Judge or the Agency.

Further, I am neither counsel for or related to

any part y to the above proceedings.

Official Reporter 

### Wendy Greene

Dated: December 6, 2011