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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

12th

Washington, D.C. 20009

Floor

Wednesday

 November 30, 2011

Facilitator:

Richard Parker

University of Connecticut Law School

Host:

Edison Electric Institute

701 Pennsylvania Ave NW

4th

Washington, DC

Floor
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Participants Identified: 

Gene Andert

RGA Magnet Wire

Rick Anderson

Fayetteville Public 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 17th

Suite 1752

Street

Rosslyn, VA 22209

Andrew deLaski

ASAP

20 Belgrade Ave, Suite 1

Boston, MA 02131

Tom Eckman

Northwest Power and Conservation Council
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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 Economy
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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 Electric 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 Saint 

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 Energy
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Jim Rakowski 

Allegheny ATI

Antonio Trujillo

Cooper Power Systems

Kenneth 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

Suite 500

Washington, DC 20006

Mike Rivest

Navigant

Rob Carmichael

Navigant

Matt Nardotti

Navigant Consulting

Chris Bolduc

Lawrence Berkley National Laboratory

Berkeley, CA 94720
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Katie Coughlin

Lawrence Berkley National Laboratory

Art Rosenfeld (via phone)

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

General Electric

James Lass

Cleco Power LLC

Christopher Lau

Navigant Consulting

Richard Lyke

AK Steel

Tom Petrosino

TRP Consulting

John Rosetti

Memphis Light Gas and Water
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Jeff Schneider

Cooper Power Systems

Bob Smith 

Federal Pacific

Luo Zhimei

Navigant Consulting
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AGENDA

 ITEM PAGE

Welcome, Mr. Parker 9

Self-Introductions 12

Agenda Review 15

Discussion of Latest Liquid Immersed

Analysis Results:

Updated Engineering Analysis

Mr. Coffey 19

 Relationship Between LCC and 

 Dollars/Watt Metrics

Mr. Bolduc 70

Department approaches to negotiations

Mr. Cohen 86

Presentations/Proposals

Steel Manufacturers, Mr. Polinski 127

NEMA, Mr. Caskey 139

Advocates, Mr. DeLaski 174
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1 9:18 a.m.

3

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

4 MR. PARKER: Welcome everyone. I thank 

5 everybody for coming. Welcome. We have a lot of 

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

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

8 to first thank our host, Mike Hyland of the American 

9 Public Power Association for giving us this 

10 conference room to meet in for the next couple of 

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

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

13 was getting in for when he agreed to this hosting 

14 role, including getting long documents late at night 

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

16 Absolutely heroic in his efforts for us, and I 

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

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

19 We’re improvising a little bit because as 

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

21 snafu in the analysis for this round, some errors --

22 an error that was detected in previous analysis was 

23 caught. I think it’s credit to the integrity of the

24 team that they pointed this out and brought it to 

25 our attention. The analysis that you have in front 
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1 of you is an updated analysis with 2011 materials 

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

3 analysis.

4 What I’d like to do to start is first turn 

5 the mic over to Mike Hyland who will give us 

6 appropriate view of logistics, where the conference 

7 rooms are, where the breakout rooms are, the 

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

9 around the table and then the room with 

10 introductions, and then the phone for introductions. 

11 So, Mike, it’s all yours.

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

13 there? Welcome. Logistically, first off, the 

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

15 right outside -- there’s a little basket that Barry 

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

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

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

19 that. We do have another bathroom inside and Chuck 

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

21 From the fire point of view, emergency, go 

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

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

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

25 the street here. What we typically say is go to the 
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1 Hilton side, right out front, to congregate there so 

2 we’ll know who’s here.

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

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

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

6 take you forever, unfortunately. Inside the 

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

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

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

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

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

12 will have cookies later this afternoon. My staff is 

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

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

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

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

17 The break-outs, right through that door in 

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

19 have three glass little conference rooms, each one 

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

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

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

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

24 break out. I think that’s it.

25 MR. FERNSTROM: The WiFi guest key?
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1 MR. HYLAND: Yes. We have it up here, but 

2 it is APPA-guest, you know, the APPA-dash-guest, and 

3 then the password is powernet001 - all one word 

4 power n-e-t 001. It was on a slide.

5 Self-introductions

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

7 table with introductions. I’m Richard Parker, 

8 University of Connecticut law school, facilitator.

9 MR. HYLAND: Mike Hyland, APPA.

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

11 Energy.

12 MR. SAINT: I’m Bob Saint with the 

13 National Rural Electric Cooperative Association.

14 MR. HIRSCH: Bruce Hirsch, Baltimore Gas 

15 and Electric.

16 MR. ROSENSTOCK: Steve Rosenstock, Edison 

17 Electric Institute.

18 MR. CASKEY: John Caskey, NEMA.

19 MR. ANDERSON: Rick Anderson, Fayetteville 

20 PWC, and APPA.

21 MR. POLINSKI: Ray Polinski, ATI Allegheny 

22 Ludlum.

23 MR. PETERSEN: Eric Petersen with AK 

24 Steel.

25 MR. PATTERSON: Wes Patterson, ABB, Inc.
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1 MR. GREESON: Rob Greeson, Federal Pacific

2 Transformer.

3 MR. RYAN: Paul Ryan, Hitachi Metglas.

4 MR. MILLURE: Dave Millure, Metglas.

5 MR. HODGE: Gerry Hodge from Howard 

6 Industry.

7 MR. COULTER: Greg Coulter, consultant for 

8 Prolec GE.

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

10 MR. FERNSTROM: Gary Fernstrom, PG&E 

11 representing the California investor-owned 

12 utilities.

13 MR. ECKMAN: Tom Eckman, Northwest Power 

14 and Conservation Council.

15 MR. HOPKINSON: Andrew DeLaski, actually,

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

17 MR. CORKRAN: Jerry Corkran, Cooper Power.

18 MR. BECK: Scott Beck, Lakeview Metals.

19 MR. BALLO: Tim Ballo, Earth Justice.

20 MR. ROY: Robin Roy, Natural Resources 

21 Defense Council.

22 MR. CYMBALSKY: John Cymbalsky, DOE.

23 MR. COHEN: Dan Cohen, DOE.

24 MR. BOLDUC: Chris Bolduc, Lawrence 

25 Berkley National Labs.
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1 MS. COUGHLIN: Katie Coughlin, Lawrence 

2 Berkley National Lab.

3 MR. COFFEY: Brian Coffey, Navigant 

4 Consulting.

5 MR. RIVEST: Mike Rivest, Navigant 

6 Consulting.

7 MR. MEYERS: Aaron Meyers, Cooper.

8 MR. TRUJILLO: Antonio Trujillo, Cooper 

9 Power Systems.

10 MS. BUTLER: Sarah Butler, DOE.

11 MR. SAMPAT: Mahesh Sampat, EMS 

12 Consulting.

13 MR. BROWN: Chris Brown, Cogent Power.

14 MR. SHANNON: Mike Shannon, RGA Magnet

15 Wire Company.

16 MR. RUSH: Ned Rush, consultant.

17 MR. CARMICHAEL: Rob Carmichael, Navigant.

18 MR. NARDOTTI: Matt Nardotti, Navigant.

19 MR. BERMAN: Robert Berman, Berman 

20 Economics.

21 (several intros not on mic) 

22 MR. RAKOWSKI: James Rakowski, ATI 

23 Allegheny Ludlum.

24 MR. CREEVY: NEMA.

25 MR. RABA: Jim Raba, Department of 
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1 Energy.

2 (introductions on phone not clear)

3 MR. SMITH: Bob Smith, Federal Pacific.

4 MR. LYKE: Richard Lyke

5 AK Steel.

6 MR. PARKER: Anybody else on the phone? 

7 Okay. Thank you. Just a word about mics and 

8 participation. We have a couple of -- we don’t have 

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

10 couple of roving mics for the audience so that you 

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

12 you’re not at the table, I would just ask you to 

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

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

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

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

17 heard and it’s very important to get it for the 

18 transcript and the record. Thank you.

19 Agenda Review

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

21 present the agenda that I would propose. You should 

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

23 we might do, given that people have just received 

24 the updated and revised analysis, again have the 

25 team walk us through quickly, the updates, the 
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1 changes that were made to the analysis, both this 

2 latest analysis and also the impact of the bug that 

3 was caught in previous analysis. Have a brief 

4 discussion of that.

5 And then turn to some -- before we get 

6 into negotiations, we need to decide whether we want 

7 to go into negotiation, I thought it might be 

8 helpful to just first hear from DOE staff about how 

9 the analysis works as a matter of Department policy. 

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

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

12 Issues about the relationship between LCC and the 

13 dollars per watt metrics that many of you are 

14 familiar with, the way the LCC is constructed, why 

15 is the LCC used. 

16 There have been issues in the e-mail track 

17 about loading assumptions, energy prices and energy 

18 demand, load growth and discount rates. 

19 So I think it would be useful this morning 

20 to do something that we probably should have done 

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

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

23 it, let people ask questions and really clear the 

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

25 factors under the law and Department policy behind 
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1 this group for the analysis and for making decisions 

2 based on that analysis. 

3 I thought then we might take a break and 

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

5 somewhat late start again, but in the latter 

6 morning, work through a couple of proposals -- the 

7 proposals that have come forward for separate 

8 treatment for networks and vaults, as well as the 

9 proposal for BiL rating and scaling that has been 

10 discussed in prior meetings.

11 At lunch we would then caucus with our 

12 groups and have an hour and a half lunch there so 

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

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

15 feel comfortable going forward in making these 

16 proposals on liquid immersed this afternoon. And if 

17 people are comfortable, have been able to absorb the 

18 revised analysis, and come to a common position to 

19 make proposals in the afternoon, I think that might 

20 be a very useful way to spend the time.

21 If not, if people feel like they need more 

22 time to determine their positions based upon the 

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

24 meaningful dry type discussion, because I think 

25 nothing has really changed there in a fundamental 
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1 way.

2 So that’s what I’ve proposed on the 

3 agenda. Are there any suggestions for amendments, 

4 changes? Does this seem acceptable to people? 

5 Andrew.

6 MR. DeLASKI: Richard, do we have caucus 

7 rooms?

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

9 through that before you just got in. 

10 MR. HYLAND: Andrew, small lounge. Just 

11 go right through that door behind you and there’s 

12 three glass enclosed -- like fishbowl type rooms. 

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

14 lounge with four chairs to see back and talk.

15 MR. DeLASKI: Thanks.

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

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

18 Brian Coffey from Navigant who will walk us through 

19 the updated engineering analysis and changes that 

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

21 Bolduc and the National Labs about the LCC results. 

22 Brian. 

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

24 the lights in the -- is there a way to dim those, do 

25 you know?
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1 MR. HYLAND: We’ll work on it. My IT 

2 staff is actually in training over in Virginia.

3 (Discussion concerning lighting)

4 PARTICIPANT: That’s good.

5 MR. HYLAND: Just one small fact for those 

6 of you who don’t know --

7 (For 2.15 minutes, static covered speech.)

8 Discussion of Latest Liquid Immersed

9 Analysis Results

10 Updated Engineering Analysis

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

12 MR. MEYERS: Brian, what were the costs 

13 for the steel? 

14 MR. PARKER: Aaron Meyers.

15 MR. COFFEY: (softspoken, not all captured 

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

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

18 prices. Sorry the text is a little bit small for 

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

20 MR. HOPKINSON: Phil Hopkinson, HVolt. 

21 These material prices seem to be lower for core 

22 steel than what the manufacturers have been able to 

23 verify. How did these numbers arrive?

24 MR. COFFEY: We got these numbers from 

25 talking to a number of people who purchase these 
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1 steels, so it’s absolutely possible that any 

2 individual would pay higher or lower. We thought 

3 these were more reflective of what large and medium 

4 manufacturers were paying in 2011.

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

6 $1.56.60 is the average for M3 for 2011.

7 MR. COFFEY: Well, this is why we’re 

8 presenting to show what assumptions have been made 

9 and let people give us feedback.

10 MR. PATTERSON: Wes Patterson, ABB. You 

11 just showed the standard diagrams with the impact of 

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

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

14 you have anything that shows how those rates of 

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

16 MR. COFFEY: That will be looked at with 

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

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

19 change ... efficiency.

20 MR. PATTERSON: If you had the capability 

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

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

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

24 talking about the trend line on the bottom of all 

25 the dots, then we could see whether or not the shape 
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1 of that trend line changed.

2 MR. COFFEY: I think what the material 

3 prices --

4 MR. RIVEST: Mike Rivest. I think --

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

6 over?

7 MR. RIVEST: Mike Rivest, Navigant 

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

9 there are sort of two clusters, two clouds --

10 there’s one for grain-oriented steels, and there’s 

11 the amorphous cloud. The amorphous cloud has not 

12 changed because the price of amorphous steel hasn’t 

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

14 cloud for the grain-oriented steel that has changed, 

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

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

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

18 the incremental costs, and those incremental costs 

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

20 ... for the grain-oriented would be about the same as 

21 for amorphous. The reason Brian mentioned the LCC 

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

23 transformers that ends up being caught in the 

24 analysis, so what we could do is compare the 

25 manufacturer’s sale price before and after, if you 
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1 will, on the two runs, and that would give you the 

2 actual trends we used.

3 MR. PARKER: Steve Rosenstock.

4 MR. ROSENSTOCK: Steve Rosenstock, EEI. 

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

6 know, your old data showed 2006, 2008, 2010 prices. 

7 For grain-oriented steel was 2008 prices -- 2011? 

8 MR. COFFEY: (inaudible)

9 MR. ROSENSTOCK: So -- again, Steve 

10 Rosenstock, EEI -- why the insistence on using 2011 

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

12 yet?

13 MR. COFFEY: We had just got the feedback 

14 that --

15 MR. ROSENSTOCK: From who?

16 MR. COFFEY: A number of parties, 

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

18 throw a stake in the ground, the prices -- they’re 

19 out of date, so we took the opportunity, since 2011 

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

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

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

23 people who deal with these steels can give us 

24 feedback on it, how these look.

25 MR. ROSENSTOCK: Steve Rosenstock, EEI. 
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1 Okay. In many parts of the country, power prices 

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

3 using those prices in your analysis?

4 MR. RIVEST: Mike Rivest. It’s not a 

5 question for us.

6 MR. ROSENSTOCK: Oh, okay. No problem.

7 MR. RIVEST: Does this group have a 

8 recommendation as to what steel prices should be?

9 MR. HOPKINSON: May I speak?

10 PARTICIPANTS: No.

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

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

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

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

15 amorphous and the incremental cost of that, and when 

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

17 default scenario, if you will, was five year 

18 averaging of steel prices, and the incremental cost 

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

20 year period. The price -- the average price of M3 

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

22 The previous analysis, the one we did just 

23 before this one, M3 was at $1.88, amorphous was 

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

25 to amorphous was down to fifty cents. And that 
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1 really is what was driving this so-called tipping 

2 point. This set of pricing has an increment between 

3 amorphous and M3 of about ninety cents. Still 

4 significantly lower than when we did the 2007 rule, 

5 90 cents compared to 52 in the previous analysis.

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

7 seeing the increment between the two steels, which 

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

9 changing these prices forever. The question becomes 

10 what is the right scenario.

11 MR. PARKER: Andy.

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

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

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

15 specific data to offer. But I presume that Brian, 

16 you talked to some steel makers, you talked with 

17 transformer manufacturers to get your data. It’s 

18 like Phil talking to a different set of steel makers 

19 and transformer manufacturers. So I just guess you 

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

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

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

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

24 making them up, so there has to be some 

25 synchronizing that needs to happen there.
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1 But I want to go back, Brian, if you 

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

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

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

5 flipped right through them. I’m also color-blind, 

6 so I was -- it’s been going on for a while -- so if 

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

8 the bottom boundary is, and what material choices 

9 are you showing in the bottom boundary? You did 

10 simplified plots earlier, I hope you have simplified 

11 plots for these -- for these graphs.

12 MR. COFFEY: They are on the Sharepoint, 

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

14 long, so --

15 MR. DeLASKI: So what you put on 

16 Sharepoint last night was for the updated data?

17 MR. COFFEY: That’s right.

18 MR. DeLASKI: Okay. I did download those, 

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

20 tell me, just briefly, some DL-1 -- design line 1, 

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

22 CSL-0 to CSL-1, almost to CSL-2, you’re showing a 

23 certain ... Is that M3 aluminum-aluminum?

24 MR. COFFEY: (inaudible)

25 MR. DeLASKI: And as you go out to the 
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1 right, you go to that second set of clouds to the 

2 right, that’s the amorphous clouds?

3 MR. COFFEY: That’s right.

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

5 last -- so this is M3 aluminum-aluminum up through 

6 almost -- help me out with the labeling here -- CSL7 0 is the first dotted line?

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

9 MR. DeLASKI: At 99 point -- a little 

10 below 99.1.

11 MR. RIVEST: Point oh-eight.

12 MR. DeLASKI: Right. And CSL-1 is the 

13 next dotted line, CSL-2 is the third dotted line. 

14 So the M3 almost goes up to -- you’re showing M3 

15 aluminum-aluminum almost up to CSL-2, but not quite. 

16 Is that correct?

17 MR. COFFEY: We -- that’s right.

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

19 line 2, is that M4 aluminum-aluminum at the far left 

20 side?

21 MR. COFFEY: So those --

22 MR. DeLASKI: The bottom ones.

23 (discussion off mic)

24 MR. PARKER: Well, whether or not people 

25 can see --
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1 MR. COFFEY: These are M2 aluminum2 aluminum.

3 MR. DeLASKI: At the bottom boundary 

4 there.

5 MR. COFFEY: Right, so starting at the 

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

7 (inaudible)

8 MR. DeLASKI: Right. And then where does 

9 M3 fit in that one -- in that mix?

10 MR. COFFEY: M3 is sort of this rust 

11 color, is the aluminum-aluminum, copper-aluminum is 

12 this shade of gray. But the copper-aluminum is not 

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

14 baseline here, it’s sort of reddish. 

15 PARTICIPANT: This one?

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

17 Burgundy.

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

19 You’re showing it stretching out.

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

21 MR. DeLASKI: All right. I’m having 

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

23 Just bear with me --

24 MR. PARKER: Andrew DeLaski.

25 MR. DeLASKI: EL-3 -- EL-2 is the pole 
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1 mounts, this is a specific situation that’s --

2 MR. POLINSKI: Andrew, before we go too 

3 far, I think we were still talking about -- Ray 

4 Polinski, Allegheny Ludlum - ATI, sorry to interrupt 

5 but I thought we were still talking about the 

6 assumptions. Before we start analyzing the charts, 

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

8 any time analyzing the data if the data is not 

9 valid. You’re just wasting my time.

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

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

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

13 conversation --

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

15 other conversation. I think we were in a discussion 

16 about steel pricing and assumptions -- and I don’t 

17 know -- Mr. Parker, you’re --

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

19 point that we should discuss -- we should finish the 

20 conversation on steel pricing, and then go back to 

21 the charts. What I heard about steel pricing is 

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

23 be manufacturers -- nobody’s going to have exactly 

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

25 be a range. That what really matters most is the 
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1 increments rather than the absolute prices, but the 

2 increment as you move up in efficiency. And my 

3 sense from what Mike Rivest said is that there is 

4 communication, there is a sharp divergence in the 

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

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

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

8 MR. RIVEST: So if you look at this --

9 MR. PARKER: Mike Rivest.

10 MR. RIVEST: That’s correct -- look at DL11 1. Here you’re seeing the distinction between the 

12 amorphous and the grain-oriented cloud. And the 

13 slope of the grain-oriented cloud is dependent on 

14 the price of your grain-oriented steel. So higher 

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

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

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

18 verifying the $1.56 versus the $1.30.

19 MR. HOPKINSON: We have 80 percent -- this 

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

21 of the market represented in the numbers that both I 

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

23 discussions we had at NEMA yesterday, and we’re at 

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

25 20 percent of the market that apparently gave you 
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1 $1.30 is getting an awfully good deal.

2 MR. PARKER: Eric.

3 MR. PETERSEN: Just as a steel 

4 manufacturer, Eric Petersen, AK Steel, we were not 

5 included in the discussions that you had -- the 

6 point was asked by Mr. DeLaski -- I just want to 

7 clarify that point -- and the representative -- what 

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

9 base price, not including a surcharge. So from what 

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

11 that we’re hearing across the table here to 

12 transformer manufacturers is more realistic because 

13 that looks to include the full price, including the 

14 surcharge, et cetera, not just the base.

15 MR. POLINSKI: Ray Polinski, ATI again --

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

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

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

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

20 to the transformer producers and asking for the 

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

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

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

24 certainly not a reasonable number. It’s kind of --

25 it’s just strange, you know, sitting here, we 
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1 continue to try and put together scenarios -- my 

2 opinion, this is just my opinion -- that seem to 

3 support higher levels. You keep changing, moving 

4 the data. Whenever things go to the higher levels, 

5 you --

6 MR. RIVEST: I strongly --

7 MR. POLINSKI: Well, $1.30 --

8 MR. RIVEST: -- find that just -- just 

9 your opinion.

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

11 what I said --

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

13 this slope.

14 (over-speaking)

15 MR. POLINSKI: We are in the worst 

16 economic times --

17 MR. RIVEST: I’ll looked at your 

18 recommendation and let’s move forward.

19 MR. POLINSKI: My recommendation is let’s 

20 stay with the prior -- why are we looking at 2011? 

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

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

23 economic times in the history of the country, which 

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

25 and so this is a 30 -- I sure hope we don’t stay in 
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1 this economic state for the next 30 years, because 

2 then we’ve got lot bigger problems than efficient 

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

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

5 decisions based on 2011, maybe a higher efficiency 

6 level would make a little bit more sense, but it --

7 certainly a lower one would make sense in 2007. 

8 It’s a 30-year rule and so I just think we’ve got so 

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

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

11 decisions to bring new data at ... we have the 2010 

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

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

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

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

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

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

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

19 different cycle from a strong economy to a weak 

20 economy. We think the buyer analysis performed was 

21 acceptable and the basis on which we should move 

22 forward. That’s the recommendation.

23 MR. PARKER: Could I ask the people around 

24 the table, is there -- because I know that people 

25 have expressed in previous meetings, a strong 
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1 concern that the a real important factor is the 

2 relationship between amorphous prices and grain3 oriented steel prices. It’s the differential. And 

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

5 as Mike explained, is that the 2010 differential 

6 between amorphous and silicon steel was almost 

7 historically small. And might create sort of a 

8 misleading basis for going on, predicting the future 

9 about how those markets would behave relative to 

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

11 has widened. 

12 And so I’m wondering if this is -- if 

13 there’s other perceptions around the table -- is 

14 there a sense that of what you might reflect and 

15 what differential between amorphous and silicon 

16 steel might provide a sound basis for thinking 

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

18 because I think that’s one of the things that’s 

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

20 that? Jerry Schoen, in the back?

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

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

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

24 as you know ...

25 MR. PARKER: Sorry, you’re going to have 
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1 to speak into the mic.

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

3 because scrap prices have been amazingly volatile in 

4 this time period -- at one time our surcharge --

5 this is during peak price periods -- was as high as 

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

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

8 The other part of it was the escalating raw 

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

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

11 MR. POLINSKI: Four.

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

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

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

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

16 may have just gotten the base price, because 

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

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

19 just because of the market demand for scrap.

20 The second part is, having the --

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

22 the surcharge?

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

24 about right, Ray?

25 MR. POLINSKI: Yeah, I think it’s about 25 
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1 cents a pound.

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

3 think some of the differences that you found is 

4 basically contract price is the contract price and 

5 then raw material surcharge is a month-to-month 

6 thing.

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

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

9 transformers, there’s a very significant issue of 

10 first cost for a number of reasons, not the least of 

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

12 more, there’s far more activity in transformer 

13 refurbishment than actually we thought. That has 

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

15 what will happen,” it has already happened.

16 MR. PARKER: Let’s limit this to steel 

17 prices for right now, though.

18 MR. SCHOEN: Accurate first cost.

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

20 suggestion is that M3 steel prices in the 

21 engineering analysis are about 30 cents a pound, 25 

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

23 hearing?

24 PARTICIPANT: Right.

25 MR. POLINSKI: Ray Polinski, ATI 
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1 Allegheny. For 2011, based on the data that Phil 

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

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

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

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

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

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

8 talking about the price for an M3 product that 

9 permits necessary investment and ongoing operation 

10 of the grain-oriented supply base.

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

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

13 cents, then what? Aaron.

14 MR. MEYERS: I would just recommend using 

15 the old data. I mean this provides nothing new. If 

16 you’re going to change the price of grain-oriented 

17 steel and hold amorphous fixed, that doesn’t 

18 represent reality. The two compete with each other. 

19 They typically track each other, not necessarily 

20 dollar for dollar, but they definitely track each 

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

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

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

24 going on. This gives the impression that somebody 

25 was trying to cook the numbers, honestly, and I 
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1 don’t think that somebody is, but when you adjust M3 

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

3 a similar percentage, it looks like somebody’s 

4 trying to produce a result that isn’t necessarily 

5 reflective of reality.

6 MR. PARKER: I’d like to hear from the --

7 if we can, about what people believe that the 

8 amorphous numbers are wrong. Because my 

9 understanding is that just looking at the data is 

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

11 amorphous prices did not go high -- as high. From 

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

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

14 amorphous and M3 had narrowed very considerably 

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

16 a stable relationship. I think that’s just not 

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

18 working with from 2006 to 2010 -- all this period up 

19 and down. Yes, David.

20 MR. MILLURE: Dave Millure, Metglas. In 

21 2006, amorphous numbers were based on imported cores 

22 from India, because there was no domestic place for 

23 making amorphous cores. So that accounts for that 

24 in transportation costs and what-not. So that’s why 

25 the 2006 amorphous aren’t reflective of today’s 
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1 situation, where amorphous cores are made in the US.

2 MR. PARKER: Robert.

3 MR. BERMAN: Robert Berman, Berman 

4 Economics. I would just like to reflect on two 

5 points basically, that you made, Richard, on 

6 relationship between steel prices and amorphous 

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

8 expected. As competition increased, one would 

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

10 competition, the tighter the spread, or the smaller 

11 the spread. At higher efficiency levels, the --

12 there is additional pressure placed on M3 relative 

13 to amorphous because of the efficiency properties. 

14 So you would expect to see downward pressure due to 

15 the downward evaluation on core steel and that would 

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

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

18 differential.

19 MR. PARKER: Do you concur with that? You 

20 don’t have to answer --

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

22 MR. PARKER: Okay. Jerry.

23 MR. CORKRAN: Looking at the data, looking 

24 at the different curves, the new data shows much 

25 wider --
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1 MR. PARKER: Identify -- Jerry Corkran.

2 MR. CORKRAN: Yeah, Jerry Corkran, sorry 

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

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

5 think it’s painfully off -- the curve is so flat it 

6 doesn’t show a true representation between the two 

7 materials. The other data had some weaknesses, but 

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

9 wasting our time to try to make any conclusions on 

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

11 is wrong, and move on.

12 MR. HOPKINSON: Good. Phil Hopkinson, 

13 HVolt, Inc. I gave the right numbers when I gave 

14 the curve over to Navigant that had more than 60 

15 percent of the manufacturers data would represent 

16 the cost curve, when you go from EL-0 to all the way 

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

18 and I don’t know why.

19 MR. RIVEST: What data? What time?

20 MR. HOPKINSON: The data that I -- Mike 

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

22 Phil Hopkinson, to respond to what data at what 

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

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

25 Navigant as well as any part of the DOE or other 
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1 people who have questions. What I did was go to the 

2 manufacturers --

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

4 sure -- I’m just improvising here -- I’m not 

5 entirely sure it’s appropriate to be discussing work 

6 that you did on a confidential basis for Navigant.

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

8 MR. HOPKINSON: Well, it was 2011 data 

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

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

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

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

13 the earlier set of data.

14 MR. RIVEST: Mike Rivest, Navigant. I 

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

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

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

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

19 2011, and we don’t use information we have -- that’s 

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

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

22 averaging, three year averaging, two year averaging, 

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

24 I understand, your contention is that the current 

25 price is somewhere between this scenario and the 
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1 previous one. So it makes both equally invalid in 

2 that logic.

3 MR. HOPKINSON: Phil Hopkinson, HVolt Inc. 

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

5 slopes. And Wes Patterson in discussions we had 

6 yesterday, actually had an extremely good point that

7 what really counts is ultimately the cost burden to 

8 the end user of transformers produced with M3 versus 

9 transformers produced with amorphous. And I’m just 

10 leading you down the road to really think probably 

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

12 that cost curve, when the M3 and the amorphous 

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

14 the correct slopes, then that becomes a very 

15 critical point to think about in terms of where the 

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

17 I’m telling you that these slopes are absolutely 

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

19 based on 2011 prices from the manufacturers, and did 

20 represent more than 60 percent of the market, both 

21 small and large manufacturers, and I think that that 

22 is something that all the negotiators had because I 

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

24 ignore it, would be my recommendation.

25 MR. PATTERSON: Wes Patterson. Phil, 
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1 thanks for mentioning me and my whole issue with --

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

3 please?

4 MR. PATTERSON: Anyhow, I do have this 

5 hangup on the slope. I believe this is the 

6 fundamental driver in the calculation, and we have 

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

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

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

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

11 change with the amorphous. Then it comes down and 

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

13 aware of why the amorphous steel could be high and 

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

15 just continue on down this slope.

16 Similarly, if we had complete data, the 

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

18 up, but it would continue along this slope and 

19 eventually just die off. 

20 So what really exists here is like a 

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

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

23 small deficiency in the DOE selection of designs. 

24 However, their designs’ scatter diagram presents 

25 enough data to extrapolate what the underlying 
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1 physics is taking place.

2 So I think the main contention then is, I 

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

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

5 comparable slopes that are actually produced in the 

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

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

8 ignoring the kinds of materials, I see good 

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

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

11 been taken into this. I think some of the Lawrence 

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

13 think the cost issue can then be clearly discussed 

14 with no contention. And all this discussion about 

15 the individual material prices -- if these slopes 

16 turn out to be comparable, whether or not those 

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

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

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

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

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

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

23 function I see uses best fit line every time you 

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

25 MR. PATTERSON: Absolutely, Mike, and this 
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1 has been what I have been doing to model the data 

2 that I’ve been presenting. The other recommendation 

3 I would have is we move away from this efficiency 

4 column and talk about watts. We talk about hard 

5 watts, because this efficiency when you compare it 

6 to various KVAs, it’s very misleading. So it’s 

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

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

9 industry data to support a fit line is appropriate.

10 MR. RIVEST: Sure.

11 MR. PATTERSON: Because we have more 

12 design data points than the DOE sample. This is 

13 just an arbitrary sample that they tried to model, 

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

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

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

17 an interesting proposal. I understand from her, 

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

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

20 comment on that.

21 MS. COUGHLIN: Yes, this is Katie 

22 Coughlin, Lawrence Berkeley Labs. So I just wanted 

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

24 said. But the difficulty for -- so, how you posture 

25 that to give you a good estimate of dollars per watt 
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1 but only if you assume the test procedure works. So 

2 the difficulty for us in determining the energy 

3 savings analysis in the LCC analysis is we have 

4 these two contributions to the losses, the no load 

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

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

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

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

9 facts that the field loadings of most of these 

10 transformers are substantially lower than the test 

11 procedure, which changes the evaluation of the 

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

13 implement a simplified cost curve that would be the 

14 problem we would need to solve.

15 MR. PATTERSON: And I think the solution 

16 to that would --

17 MR. PARKER: Wes Patterson.

18 MR. PATTERSON: Wes Patterson. The 

19 solution to that is going back to the original work 

20 that the DOE did when they put up this chart with 

21 the scaling factor relationships. The no load 

22 losses will scale to a straight line on log-log 

23 scale. The load losses will scale as a straight 

24 line on log-log scale. And then you can add these 

25 two relationships. So I believe it can be 
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1 represented.

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

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

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

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

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

7 comment -- which values do we use to extrapolate 

8 along that line?

9 MR. PARKER: Did you want to respond to 

10 that?

11 MR. PATTERSON: So, this is something that 

12 I will volunteer to work with -- LBL with, to try to 

13 improve the extrapolation, the fitting of the data 

14 to what we see in production.

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

16 MR. ROSENSTOCK: Steve Rosenstock, EEI 

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

18 summary questions. Based on your review with the 

19 new scatter plots compared to the scatter plots of a 

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

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

22 trying to summarize all the data and all the --

23 MR. RIVEST: I can answer that.

24 MR. ROSENSTOCK: Okay. 

25 MR. RIVEST: First question?
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1 MR. ROSENSTOCK: I’m trying to get the 

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

3 lower?

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

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

6 (Laughter.)

7 MR. ROSENSTOCK: All of a sudden he picked 

8 up the microphone.

9 MR. RIVEST: One curve or two curves. 

10 This curve has gone more shallow because the price 

11 of the grain-oriented steel has gone down. But if 

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

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

14 sloped, because not only has this gone more shallow, 

15 going down, so the regression of the amorphous ones 

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

17 MR. ROSENSTOCK: Thank you. That’s 

18 exactly what -- thank you very much. I appreciate 

19 that. That helps.

20 Second question I had, again, sometimes 

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

22 how many parties around this table asked to use 2011 

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

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

25 of curious. How many parties around this table were 
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1 asking for a 2011 metal prices?

2 PARTICIPANT: Show of hands?

3 MR. ROSENSTOCK: Yeah, show of hands.

4 MR. RIVEST: That’s not -- Mike Rivest. 

5 That’s not how the question was posed. What --

6 during the last meeting it was demonstrated that 

7 that point where amorphous was competitive was 

8 different based on the experience in the market than 

9 from what these models were predicting. And the 

10 charge was to make it more representative. And in 

11 investigating why it might be that our model came up 

12 with a different point intersection than that of the 

13 market, we found that our grain-oriented steel 

14 prices were higher than the market. 

15 MR. PARKER: Ray?

16 MR. POLINSKI: Ray Polinski, ATI 

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

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

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

20 respect everything that Wes has but this is one data 

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

22 was a little bit different. There was Cooper data 

23 that was different. And Howard -- so, I mean, at 

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

25 and that’s why we’re trying to use your data and go 
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1 back to 2010 data and start making some decisions.

2 MR. PARKER: Well, at our last meeting, 

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

4 experience. And the experience was drawn on 2011 

5 experience and so the hope was that by updating the 

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

7 that there would be an increased comfort and an 

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

9 MR. CYMBALSKY: John Cymbalsky, DOE. Just 

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

11 most recent data whenever we can in any analysis 

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

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

14 recent -- that’s a good policy.

15 MR. POLINSKI: Ray Polinski, ATI 

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

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

18 period or some longer period than just a point in 

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

20 don’t look at --

21 MR. CYMBALSKY: Well, I think for this 

22 we’ve described how things have changed in the 

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

24 It’s this in my mind. We can argue if that’s the 

25 case or not, and I think that’s what we’re doing.
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1 MR. PARKER: Aaron.

2 MR. MEYERS: Aaron Meyers, Cooper Power 

3 Systems. I just want to ask --

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

5 Otherwise, you’re going to have to --

6 MR. MEYERS: Aaron Meyers, Cooper Power 

7 Systems. I just want to ask for confirmation 

8 whether or not your grain-oriented steel pricing did 

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

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

11 speculating that the prices used here do not include 

12 surcharges and that seems to coincide very roughly 

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

14 in the marketplace, and I would challenge DOE or 

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

16 can get it for $1.30 because I can almost guarantee 

17 that you cannot. 

18 I appreciate the intent here to produce 

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

20 just feel that the pricing of grain-oriented steel 

21 needs to come up by about 25 percent.

22 MR. PARKER: Okay. Is there agreement 

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

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

25 the surcharge were included that this would -- DOE’s 
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1 ... approach to ... the problem, leaving aside for the 

2 question of whether we move more to the current 

3 figure approach that Wes discussed and others 

4 discussed, separate issue. Just on materials 

5 prices, the basic inputs -- is this problem solved 

6 by insuring that we have the surcharge included in 

7 the price?

8 MR. MEYERS: Yes.

9 MR. PARKER: Aaron Meyers is saying yes. 

10 Any others around the table?

11 MR. HOPKINSON: Not exactly.

12 MR. PARKER: All right. Ray?

13 MR. POLINSKI: Ray Polinski, ATI 

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

15 I’m not familiar with the DOE protocol or 

16 procedures, it’s just that I am uncomfortable in 

17 making a future decision based on a data point 

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

19 just don’t think that’s -- I think it’s better to 

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

21 the highest price for M3 in the last five years, and 

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

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

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

25 the basis. We have to draw the line in the sand 
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1 somewhere. I mean, they asked this committee to 

2 make some proposals and have some voting and 

3 everything, and so I just thought we were going to -

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

5 data. So that’s my point.

6 MR. PARKER: Okay. Andrew.

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

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

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

10 absolutely should include the surcharges. So that’s 

11 the question for investigation that should be 

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

13 prices that he observed are basically 22 cents 

14 higher than what the Department observed.

15 MR. HOPKINSON: Twenty-six.

16 MR. DeLASKI: Twenty-six cents, right, 

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

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

19 means is the slope a little less, right?

20 PARTICIPANT: Yeah.

21 MR. DeLASKI: That’s all it means -- it’s 

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

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

24 MR. HOPKINSON: Phil Hopkinson, HVolt, 

25 Inc., while he’s recollecting. What I would say is 
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1 the material price probably would be fixed by 

2 adjusting the steel price. There’s another factor 

3 that I never was able to quite get comfortable with 

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

5 eddy (ph) losses and lead losses associated with 

6 transformers as they go up in efficiency are a 

7 bigger factor that cause the curve to get steeper, 

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

9 the numbers that I have presented to Navigant, 

10 through the study that I did with the manufacturers, 

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

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

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

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

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

16 place in our discussion.

17 MR. DeLASKI: I’ve got my thought -- it 

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

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

20 you made about it’s -- what drives the materials 

21 choices is the differential in price of the 

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

23 challenge of the 2010 data is that it’s 

24 historically, as someone pointed out, it’s 

25 historically low. Fifty cents differential between 
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1 amorphous and grain-oriented strikes me as being a 

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

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

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

5 that we have data that is more indicative of what 

6 the typical difference in terms of prices. Because 

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

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

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

10 market is the relative price of the materials, not 

11 the absolute prices. So that gives me some 

12 hesitance to sort of lean heavily on that 2010 

13 scenario exclusively, I mean the 2011 scenario gives 

14 us a more indicative or a more representative basis 

15 of that differential.

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

17 say also that uncertainty is normally approached in 

18 any kind of predictive discussion, is to have a 

19 false scenario, but a sensitivity analysis that 

20 explores what happens if you vary the assumption if 

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

22 most recent data. So it strikes me that the logical 

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

24 the false scenario, and I would propose that with 

25 the adjustment that’s proposed of adding a surcharge 
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1 --

2 MR. RIVEST: That’s not -- this is not at 

3 all --

4 MR. PARKER: Excuse me? Can I finish the 

5 thought?

6 PARTICIPANT: No. 

7 (Laughter.)

8 MR. RIVEST: It’s just not -- Mike Rivest. 

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

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

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

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

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

14 those prices.

15 MR. PARKER: My proposal wasn’t --

16 MR. RIVEST: Was to add a surcharge.

17 MR. PARKER: My proposal -- what I was 

18 trying to go over is we need a sensitivity analysis 

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

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

21 is a dispute about that, is that the correct 

22 understanding.

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

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

25 it may have been a point in time, representative of 
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1 a price at the end of the year. Maybe this is a 

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

3 but this was not made up.

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

5 earlier that you wanted this group to suggest a 

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

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

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

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

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

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

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

13 predictive of the future. Chuck?

14 MR. SIMMONS: This is Chuck Simmons, 

15 Progress Energy. Did not ... steel manufacturers 

16 state that the prices are much lower than what 

17 they’re selling the product for?

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

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

20 MR. PARKER: They can’t comment.

21 MR. SIMMONS: I heard it.

22 MR. PARKER: Eric.

23 MR. PETERSEN: I think we can comment on 

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

25 all come together and have the opportunity to be 
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1 able to correct issues. And I think what we’re 

2 hearing is that the steel manufacturers and the 

3 transformer manufacturers are saying that the price 

4 is not accurate. Now I understand that you believe 

5 that you’ve gotten information from somebody, but 

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

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

8 not looking for a change associated with 2011, 2010, 

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

10 MR. PARKER: Mike.

11 MR. HYLAND: There’s something in a 

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

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

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

15 a little nervous about the transparent part right 

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

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

18 everybody’s trusting -- I’m not saying there’s a 

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

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

21 (Laughter.)

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

23 people around the table, and then turn around and 

24 say you can’t use this information -- why are we --

25 the most important people at the table and then say 
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1 I’m sorry --

2 MR. RIVEST: This is Mike Rivest. You 

3 have to understand the sensitivities, to really ask 

4 people how much they pay for the primary material in 

5 this product, there are competitive implications for 

6 everyone at the table, from the steel manufacturers, 

7 for the transformer manufacturers, it’s very 

8 delicate question. There are anti-trust questions 

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

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

11 happen. So we’re not talking about just 

12 establishing a process. I explained that in the 

13 previous rulemaking we took a five year average. 

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

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

16 just did one of 2011 -- this wasn’t a full year, but 

17 it was the most recent year. I’m not -- I believe 

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

19 scenario.

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

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

22 That’s what I’m trying to get, and Andrew said the 

23 same thing. Get to the -- what do we want? I’m 

24 confused.

25 MR. ROSENSTOCK: Steve Rosenstock. Again, 
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1 just follow up and point of clarification. All the 

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

3 2008 and now it’s 2011, or it was earlier, 2010, 

4 prices for the different transformer designs, as I 

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

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

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

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

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

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

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

12 That’s what we’ve been presented.

13 MR. PARKER: The previous analysis was, as 

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

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

16 Steve. Wes.

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

18 mics.

19 PARTICIPANT: Speak loud.

20 MR. PATTERSON: No problem. Mike, one 

21 question. When you change the material prices, did 

22 we run entire new optimizations based on those 

23 prices?

24 MR. RIVEST: No.

25 MR. PATTERSON: Okay. So everything that 
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1 we’re talking about is saying I’m applying a change 

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

3 different material price, which is now a sub-optimum 

4 design.

5 MR. RIVEST: Yes.

6 MR. PATTERSON: So we’re introducing more 

7 and more error in everything that we’re talking 

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

9 your optimization and run another 40,000 

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

11 to do this is significant amounts of labor, 

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

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

14 new optimizations with the 2010 prices. Okay. They 

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

16 Now we can argue about the -- okay, maybe 

17 some of the data elements going in there are 

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

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

20 given our engineering knowledge, if we move these 

21 things, how does it significantly change the end 

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

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

24 large discussion on fuzzy numbers which are even 

25 more fuzzy because they’re not optimized on those 
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1 numbers.

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

3 whole conversation.

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

5 if one --

6 MR. PARKER: Andrew DeLaski.

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

8 optimizations, what effect --

9 MR. PATTERSON: It would change the no 

10 load loss and the load loss relationships, which 

11 fundamentally changes the entire efficiency 

12 equation.

13 MR. DeLASKI: You would just get a 

14 different cloud.

15 MR. PATTERSON: It would be a different 

16 cloud.

17 MR. DeLASKI: And that cloud would move in 

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

19 the right, left or --

20 MR. PATTERSON: It might just explode 

21 bigger. Go up and down.

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

23 MR. PATTERSON: Yeah, the cloud itself 

24 might just open up.

25 MR. DeLASKI: Right, you could get a 
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1 lower cost transformer or a higher cost 

2 transformers, but you would see -- the lower bound 

3 would move down a little bit?

4 MR. PATTERSON: With lower prices, the 

5 lower bound will move down, and the slope, I 

6 believe, will become narrower. The slope that I 

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

8 narrower.

9 MR. DeLASKI: Okay. 

10 MR. PATTERSON: But we can’t draw a 

11 conclusion about the true slope because these are 

12 not optimized material prices. These are just 

13 taken, changed material prices, and put them in 

14 designs that were optimized on another basis. So 

15 it’s all fuzzy on fuzzy on fuzzy.

16 MR. PARKER: Well, I asked the question 

17 about optimization of the Navigant staff earlier, 

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

19 the effect on the actual cost is relatively minor 

20 one overall. 

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

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

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

24 on the loss relationship. What happened to the 

25 relationship between the M3 price and the copper 
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1 price? This will fundamentally change the no load 

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

3 into this kind of data.

4 MR. PARKER: Okay. I think we need to 

5 take about a ten minute break.

6 (Whereupon, at 10:38 a.m., the meeting was 

7 recessed for a 30 minute period.)

8 MR. PARKER: Okay. Thank you everyone. 

9 Welcome back. We had some productive conversations 

10 during the break. Recognizing that no analysis will 

11 ever be perfect, and we could continue fiddling with 

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

13 bargaining if we can. Also with the understanding 

14 that everybody at this table, with the exception of 

15 the advocates, have their own analysis to go on, and 

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

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

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

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

20 forward? 

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

22 for suggestions. I understand that Greg Coulter 

23 came up with what I thought was a constructive 

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

25 Greg to introduce his proposal and we’ll then have a 
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1 very brief discussion over that. Greg?

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

3 What I was suggesting in some of the conversations 

4 was that we recognize that everybody will have maybe 

5 some issues with the 2011 data points that just came

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

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

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

9 showing a differential between amorphous and silicon 

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

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

12 but the differential is what is probably the more 

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

14 forward, rather than continue to argue about what 

15 the exact numbers were.

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

17 Discussion? Rob.

18 MR. GREESON: This is more of a procedural 

19 thing. I talked to Bob Smith over the phone -- Rob 

20 Greeson, Federal Pacific -- and he was saying it was 

21 hard for him to hear on the conference what people 

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

23 little microphones on the table, if you get too far 

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

25 can hear, but I think this microphone helps us in 
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1 here, but maybe not on the phone. He just wanted me 

2 to mention that.

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

4 the mic around if that’s the case. Any other 

5 discussion? Ray.

6 MR. POLINSKI: Ray Polinski, ATI Allegheny 

7 Ludlum. Just one request on the record is that --

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

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

10 referenced, and has that ever been corrected in the 

11 2010 data -- the LCC, or has it just been corrected 

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

13 the magnitude of the error?

14 MR. BOLDUC: Chris Bolduc, LBL. The 

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

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

17 working on the new 2010 for reference right now.

18 MR. POLINSKI: So your plan is to correct 

19 2010?

20 MR. BOLDUC: If the committee wants 2010 

21 to see the magnitude of the error, we will supply 

22 it.

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

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

25 know, we are comparing 2011 conclusions to the 2010 
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1 conclusions, and they’re different.

2 MR. BOLDUC: You’ve got it.

3 MR. PARKER: I guess I missed the 

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

5 meeting today -- tomorrow.

6 MR. BOLDUC: This evening.

7 (Discussion off mic)

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

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

10 order. Jerry.

11 MR. CORKRAN: Jerry Corkran, Cooper Power. 

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

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

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

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

16 recommend the core steel price analysis that Phil 

17 together that was 60 percent of the market or 

18 something like that, as being more accurate than 

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

20 that kind of coverage was new prices, is that 

21 correct?

22 MR. CYMBALSKY: I’m not personally allowed 

23 to talk to that, so -- if Navigant can help me.

24 MR. POLINSKI: Pay Polinski, API Allegheny 

25 Ludlum. Is it fair to just -- on 2011, we went 
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1 beyond that -- is it fair -- we want to know who the 

2 customers are -- that’s proprietary, but how many 

3 customers you talked to to get that data? Is that a 

4 number of customers?

5 MR. CYMBALSKY: (Response off mic)

6 MR. POLINSKI: Ray Polinski, ATI Allegheny 

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

8 transformer producers at the break or whatever, I 

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

10 biggest concern is that if -- and we’re still 

11 hopeful we can come to an agreement in this 

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

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

14 own decision based on flawed data. But for the sake 

15 of moving forward towards a vote, I think we can --

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

17 favor -- with the understanding that the 

18 reservations about the data have been eloquently and 

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

20 supporting the data is the understatement of the 

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

22 say aye, please.

23 PARTICIPANTS: Aye.

24 MR. PARKER: Opposed? We accept the 2011 

25 data as the basis for our discussions, understanding 
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1 that people will be negotiating from their own data 

2 as well, and their own records as well in 

3 formulating their positions. So your positions can 

4 reflect your own understanding of what you perceive 

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

6 forward without, you know, having to have a new 

7 analysis run on this data.

8 MR. ROSENSTOCK: Clarification? Steve 

9 Rosenstock, EEI. 2011 prices for materials as shown 

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

11 MS. COUGHLIN: Yes.

12 MR. ROSENSTOCK: General prices or 

13 transformer prices or both?

14 MS. COUGHLIN: Both.

15 MR. ROSENSTOCK: I just wanted it 

16 clarified for everybody, clear in my own mind and 

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

18 these as the basis.

19 MS. COUGHLIN: Yes.

20 MR. PARKER: Understanding that there may 

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

22 makes a sufficiently fundamental difference to 

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

24 that it isn’t. Gary.

25 MR. FERNSTROM: I agree we move forward, 
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1 based on that. 

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

3 your hands. Opposed? No opposition.

4 PARTICIPANT: Abstain.

5 MR. PARKER: ... abstains.

6 PARTICIPANT: We don’t care about that.

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

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

9 to do that. 

10 PARTICIPANT: The very first day I 

11 proposed we went 22 to two, or 24 to zero --

12 PARTICIPANT: No, 18 to seven.

13 PARTICIPANT: Eighteen to six, all that 

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

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

16 on every motion?

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

18 at the end of the day. 

19 Relationship Between LCC and Dollars/Watt Metrics

20 MR. BOLDUC: Good morning. My name is 

21 Chris Bolduc from Lawrence Berkeley National Labs. 

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

23 the things that went over the e-mail last night that 

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

25 the LCC analysis. Yes, pass the microphone to 
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1 Katie.

2 MS. COUGHLIN: So the error was in --

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

4 high-pitched feedback from somewhere.

5 PARTICIPANT: (on phone) We’re having 

6 trouble hearing.

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

8 the back?

9 PARTICIPANT: The room mics are only for 

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

11 microphones --

12 (Discussion re: feedback)

13 PARTICIPANT: That doesn’t sound like 

14 feedback to me.

15 PARTICIPANT: It’s gone now.

16 MS. COUGHLIN: (very soft-spoken) ... too 

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

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

19 effect that that has on the LCC really depends on 

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

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

22 the operating costs. Change in the operating cost 

23 is equal to the annual operating cost savings times, 

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

25 discount seen during the lifetime of the unit.
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1 So depending on -- those are two large 

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

3 the LCC. So depending on how close those two 

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

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

6 design by design, it’s -- I believe it’s comparable 

7 to a sensitivity analysis in the overall magnitude 

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

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

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

11 previous engineering with the revised LCC this 

12 evening. 

13 And I want to make sure that everybody 

14 understands that these curves that you’re going to 

15 see now include the change to the engineering, and 

16 in some cases, the change to the incremental first 

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

18 engineering contributing to the change in the 

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

20 two things and the change in the LCC.

21 MR. ROSENSTOCK: Steve Rosenstock, EEI. 

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

23 presentation that was using the data of the previous 

24 iteration. So the new one again, just is the 2011 

25 material prices, but also the LCC revision based on 
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1 your correction of the error. My other question 

2 was, and I -- I was told that wholesale power prices 

3 are down significantly this year compared to last 

4 year. My colleague said that PGM prices, which 

5 serve this area, wholesale prices were down 25 

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

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

8 prices, do these include the most recent power 

9 prices that went down, especially when compared to 

10 2008?

11 MS. COUGHLIN: Electricity prices -- the ... 

12 starts in 2016 --

13 MR. ROSENSTOCK: Right.

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

15 electricity prices as predicted by AEO2011 (ph). 

16 MR. ROSENSTOCK: But are those the 

17 wholesale or retail prices?

18 MS. COUGHLIN: They are the -- we’re 

19 essentially scaling these based on, I think the 

20 average, essentially.

21 MR. ROSENSTOCK: The average retail price?

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

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

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

25 We go by the averages. And for your information, 
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1 it’s pretty standard -- 2016 is pretty close to 

2 2010. 2010 is significantly ...

3 MR. ROSENSTOCK: Thank you.

4 MR. PARKER: Rick Anderson.

5 MR. ANDERSON: Rick Anderson, PWC. ... I’m 

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

7 the payback period, and I see that -- I see that the 

8 mean incremental first cost is $380.

9 PARTICIPANT: What page?

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

11 the mean incremental first cost. But then to go 

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

13 $56. 

14 MS. COUGHLIN: So what that means is 

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

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

17 not ... So essentially this is saying that the mean 

18 operating cost savings are ... 

19 (Discussion off mic)

20 MS. COUGHLIN: (feedback and soft speech 

21 made transcription problematic). This number is not 

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

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

24 number which is larger --

25 MR. HOPKINSON: The question I have is, is 
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1 it appropriate to use retail cost in this analysis 

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

3 analysis, the wholesale cost and annualized that and 

4 then developed a present worth and an inflation 

5 series for it. I would ask the utility people 

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

7 of ownership of the transformer, based on the 

8 improvement in watts that they save, what basis 

9 would you recommend?

10 PARTICIPANT: Wholesale.

11 MS. COUGHLIN: We use wholesale prices. 

12 We were discussing earlier, the price trends over 

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

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

15 wholesale price trends ... so we use the average 

16 retail price trend on the assumption that the 

17 difference in trends would be largely the same. Now 

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

19 we can implement that.

20 MR. ROSENSTOCK: Steve Rosenstock, EEI. 

21 But in terms of recent data, let’s say that 2010, 

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

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

24 then use the four cents and then extrapolate based 

25 on that? 
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1 MS. COUGHLIN: And the data is normalized 

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

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

4 difference. The only thing that would affect --

5 MR. ROSENSTOCK: How could it not make a 

6 difference? The value of the watt per kilowatt hour 

7 stage is twenty percent less from one year to the 

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

9 cycle cost analysis?

10 MS. COUGHLIN: The way the difference is 

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

12 different from eight year best, when they calculate 

13 a trend. So, assuming that -- okay, but I don’t --

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

15 MR. ROSENSTOCK: My colleague said on PJM 

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

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

18 retail.

19 MS. COUGHLIN: It will show next year.

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

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

22 that we --

23 MS. COUGHLIN: We need the whole country 

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

25 -- we understand there are issues with AEO.
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1 MR. ROSENSTOCK: Well, we’re talking about 

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

3 really --

4 MR. PARKER: Well, this takes us to 

5 essentially what was on the agenda for a little bit 

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

7 and data come from. My understanding is that for 

8 price trends, with the policy across an array of 

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

10 an ad hoc basis ...

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

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

13 that’s going to significantly affect life cycle cost 

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

15 and the trend, can have significant difference over 

16 life cycle cost.

17 MS. COUGHLIN: But the prices start off in 

18 2016, so --

19 MR. ROSENSTOCK: But still, if they’re 

20 flat, you said that they were -- this is Steve 

21 Rosenstock, EEI -- you say if they’re flat -- flat 

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

23 difference in the LCC. You have a price curve --

24 MS. COUGHLIN: I understand. Again, the 

25 only thing that I can say is if we keep this up long 
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1 enough we’ll have the year 2012 and --

2 (Laughter.)

3 MS. COUGHLIN: So in order to implement 

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

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

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

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

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

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

10 recent data published.

11 MR. ROSENSTOCK: ... data for sale prices?

12 MS. COUGHLIN: We can’t get -- first of 

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

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

15 it for --

16 MR. ROSENSTOCK: You can get it for 2011 

17 steel prices easily.

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

19 steel prices. 

20 MR. PARKER: Yes. Microphone, please.

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

22 the reformulation of the LCC savings in terms of A 

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

24 discusses or shows as an input, the price of energy 

25 for no load losses and then separately, the price of 
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1 energy for load losses. In fact, can you just put a 

2 general description on how you differentiate, how 

3 you come up with those prices?

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

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

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

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

8 marginal price for operating the generation. We use 

9 the correlation between that number and the system 

10 load to get the variability on price as a function 

11 of load. And we use the correlation between the 

12 system load and the essentially, the ... 

13 responsibility factor, the correlation between the 

14 size of the system load and the size of the 

15 transformer load to get the correlation between 

16 price for the transformer.

17 MR. ROSENSTOCK: Steve Rosenstock, EEI. 

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

19 was based on 2008 data as I recall.

20 MS. COUGHLIN: That’s right.

21 MR. ROSENSTOCK: And the most recent 

22 analysis, is that still using 2008 data?

23 MS. COUGHLIN: Yes.

24 MR. ECKMAN: If I could?

25 MR. PARKER: Yes, Tom.
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1 MR. ECKMAN: Tom Eckman, National Power 

2 Conservation Council. So the real question in terms 

3 of -- because this standard takes effect in 2016 is 

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

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

6 analysis is trying to represent. Correct?

7 MS. COUGHLIN: Well, we do -- we are 

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

9 represent the way that the price varies, essentially 

10 the dynamics in the prices because over the course 

11 of a year the prices go up and down --

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

13 going --

14 MS. COUGHLIN: And then overall we need 

15 that trend forward --

16 MR. ECKMAN: Starting in 2016 going 

17 forward.

18 MS. COUGHLIN: And we’re also -- we are 

19 also representing the regional diversity in prices, 

20 which is pretty large.

21 MR. ECKMAN: Right. Again, starting in 

22 2016 going forward the next 30 years.

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

24 the fully disaggregated eight-year-old trends in 22 

25 regions.
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1 MR. ECKMAN: For the utilities in the 

2 world, we’re talking about a 30-year corporate strip 

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

4 So for our purchase agreement, a 30-year strip, if 

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

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

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

8 data. Who knows? But it’s a 30-year strip. That’s 

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

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

11 today’s wholesale market prices are irrelevant for a 

12 30-year strip. Fix whatever that price is with 

13 whatever escalators are in there, so good luck 

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

15 solve.

16 MR. PARKER: I think the point that people 

17 understand is that pricing comes from a published 

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

19 to change. It comes from a published document. 

20 That’s different from steel prices that the 

21 individual may actually -- that individual 

22 manufacturers are facing. So it’s just -- it’s an 

23 apples and oranges comparison and we really do not 

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

25 Let’s focus on the fundamentals. Steve. 
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1 MR. ROSENSTOCK: Steve Rosenstock, EEI. I 

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

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

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

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

6 it’s because -- I’ve looked at this data actually, 

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

8 the shape of this correlation function between the 

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

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

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

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

13 have a minimal impact statistically, because it’s 

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

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

16 very stable relationship.

17 MR. HOPKINSON: Phil Hopkinson at HVolt, 

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

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

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

21 So core loss is a factor of using the base 

22 generation cost, and load loss is using the peaking 

23 hour cost?

24 MS. COUGHLIN: For the capacity component, 

25 yes.
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1 MR. HOPKINSON: Okay. Thank you.

2 MR. PARKER: Yes, Gary.

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

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

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

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

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

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

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

10 it in the transformers, we could be selling it and 

11 making some money off of it.

12 MR. PARKER: Jerry.

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

14 analysis, I believe the -- what is the RMS load used 

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

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

17 the current transformer? And if we figure 

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

19 years, I think that these utility people will use 

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

21 only loaded at 35 percent for the next 30 years. It 

22 might be that installation now, but for 30 years I 

23 think that -- that’s not a good number. Could be 

24 much higher, like 50 percent.

25 MR. ANDERSON: No, that’s voltage drop. 
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1 You run into voltage drop problems based on watt 

2 lines, things like that. So I wouldn’t foresee 

3 loading practices to change significantly. Because 

4 of the size of a subdivision, not unless watts 

5 become extremely small, then maybe yes, but the ... 

6 watts stayed the same size, it’s due to voltage drop 

7 that becomes the limiting factor.

8 MR. CORKRAN: So what are you saying on 

9 percentage?

10 MR. ANDERSON: No change in loading.

11 MR. HOPKINSON: No change over what?

12 MR. ANDERSON: Over the next 30 years. 

13 MR. HOPKINSON: Oh, I know, but over -- I 

14 think that what the line -- this is Phil Hopkinson. 

15 I think that I heard the question asked from Jerry, 

16 what load assumption was used in the analysis, and I 

17 don’t think I heard a response.

18 MS. COUGHLIN: Yeah, it’s -- we use a 

19 distribution of loads and that distribution is 35 

20 percent, and we have a subset in the LCC of rural 

21 utilities that use a lower loading. Those are 

22 utilities that have a very low population density, 

23 and I believe when the high capacity transformers 

24 are loading somewhat higher. The low loads are 

25 mostly small capacity transformers. And there is a 
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1 switch in the LCC that allows you to model a pretty 

2 small load growth over time, which is again, 

3 standard practice, for example, in calculating cost 

4 evaluation.

5 MR. CORKRAN: This is Jerry Corkran again. 

6 Could you give us numbers rather than higher?

7 MS. COUGHLIN: I think in the low density 

8 areas, the RMS goes down to about a median of 25 

9 percent. And in the high concentration, it’s about 

10 40 percent, the median. Again, it’s a distribution.

11 MR. PARKER: Okay. I’m going to suggest 

12 that we -- that we focus our comments first on the 

13 results of the errors in the analysis that was made. 

14 I take it that that is -- well, let’s make sure that 

15 we have people comfortable with their understanding 

16 of what that was and what it does to the analysis. 

17 Let’s again, try to avoid going over sort of cases 

18 which are not responsive. Bob.

19 MR. SAINT: I understand that there was an 

20 additional error in the calculation of power cost 

21 and the demands on what those power costs -- Ken 

22 Winder brought up last week?

23 MS. COUGHLIN: No, we don’t think it was 

24 an error. It was a difference of the 

25 interpretation. So, ... so we added the generation 
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1 actually to the overall energy savings, and we 

2 believe that that’s correct. And then in areas 

3 where we are using market prices, if there’s a 

4 capacity market where people also have to buy into, 

5 we’re using those numbers to represent ... in cost 

6 savings. And I believe that’s also correct.

7 MR. PARKER: Okay. I’m not going to -- we 

8 have the revised analysis drawing on 2011 data with 

9 the error corrected. We have before you -- I’m not 

10 going to put you on the spot and ask if you want to 

11 make a proposal -- we can think about that over 

12 lunch and have that discussion right after lunch.

13 What I thought might be useful now is to 

14 start off hearing from DOE’s General Counsel, Dan 

15 Cohen, just to set the table for our discussions 

16 about what are the factors that we are considering 

17 in the negotiations? Where do the various 

18 parameters come from? And then look at it -- start 

19 a discussion of some of the issues that have really 

20 vexed us in the past, the question of dollars per 

21 watt versus life cycle cost savings. I’d like to 

22 not let us get bogged down with that, but just have 

23 a frank and candid exchange about the life cycle 

24 cost analysis is done, why it matters and how it 

25 relates to dollars per watt, so people can 
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1 communicate, so we can bridge these two different 

2 worlds of the economists and the business world and 

3 hopefully get people -- get where everyone will 

4 understand it so we can move forward fruitfully 

5 later on. 

6 So before we go further, let me turn it 

7 over to Dan Cohen here to just walk us through again 

8 how the Department approaches and how we are to 

9 approach, under the statute, the negotiations of 

10 standards levels.

11 Department approaches to negotiations

12 MR. COHEN: (not at mic) I don’t know if 

13 you all have been following your e-mails this 

14 morning, but there was an interesting exchange 

15 between ... asking about -- discussing what is the 

16 economic justification and what we do with the 

17 accessibility act and some other things. And I 

18 thought what we should do is really kind of go 

19 through what our statute says and what those terms 

20 that we’ve been talking about here today --

21 justification -- and they’re not a clean slate. The 

22 statute actually tells us what they are.

23 So I want to start by going through the 

24 basic standard that we have to meet for any of our 

25 standards, not only this one, but any kind of 
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1 standard, efficiency standard, that guarantees a 

2 maximum improvement in energy or water or 

3 efficiency. The second thing is which is 

4 technologically feasible. 

5 So parsing that out a little bit, we 

6 realize ... so if you take that sentence apart, what 

7 it says is that we shall achieve the maximum 

8 improvement in energy or water efficiency. That’s 

9 an absolute. We don’t have an option there. It’s 

10 then a determination made by the Secretary about 

11 technological feasibility and economic 

12 justification. So that’s where the decision making 

13 is concerned. We have to do the first, but we do 

14 that in light of a determination made on the next 

15 two.

16 So, as we’ve been talking about this in 

17 the past, we explained how when we look at the 

18 various standard levels we always start at the most 

19 efficient level and then work down, applying the 

20 various tests, which I’ll get to in a moment, to see 

21 where we get to a first place, we get to an economic 

22 determination. This is law, because we have to 

23 achieve a maximum improvement in energy efficiency. 

24 That’s our charge, and to figure out what 

25 technological feasibility and economically 
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1 justified.

2 MR. ANDERSON: Dan, Rick Anderson. Does 

3 it matter if you put anybody out of business while 

4 you do that?

5 MR. COHEN: So, we’ll get to that -- we 

6 consider that --

7 MR. ANDERSON: How about everybody?

8 MR. COHEN: There are different analyses 

9 that we’re going to do where we’ll look at those 

10 sorts of questions. But overall, this is the big 

11 picture, bottom line, that we need to be thinking 

12 about. 

13 MR. SAINT: So since you mentioned the big 

14 picture, are you -- your interpretation is that you 

15 have to -- for each individual component you have to 

16 look at the maximum efficiency and ignore the 

17 overall energy efficiency?

18 MR. COHEN: This is by product, the 

19 covered product. The covered product is 

20 distribution transformers, the refrigerator, the 

21 dish washer -- those are all covered products.

22 MR. SAINT: And so you’re required to 

23 ignore the overall efficiency, is that what you’re 

24 saying?

25 MR. COHEN: No, not at all. In fact, just 
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1 the office. If I understand what you’re asking, 

2 it’s just the opposite. Our job is to see how we 

3 can maximize the energy efficiency of that product. 

4 Get it to its most maximum efficiency.

5 MR. SAINT: But by making a single 

6 component product more efficient, you might be side7 stepping or sabotaging the overall efficiency, 

8 operational and energy efficiency of the utility 

9 under consideration.

10 MR. COHEN: So you’re getting to -- this 

11 is your dollars per watt. And I understand the 

12 problem. I’m just saying you have X number of 

13 dollars to spend in any given year, and you make a 

14 business decision about how best to spend those 

15 dollars to maximize your business. What we -- we do 

16 this analysis, we consider different factors in 

17 economic justification, but we don’t do it that way, 

18 and that’s, I think, where we’ve had the disconnect 

19 in this conversation. 

20 So when I go to the next slide, I’ll show 

21 you when we do this - when we do our analysis, 

22 because we have to improve -- we have to reach the 

23 maximum improvement in energy efficiency that we 

24 determine to be technologically feasible and 

25 economically justified, the statute that helps us 
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1 with economic justification doesn’t -- technological 

2 feasibility, we’ve actually flushed out something we 

3 call process ... where we make this analysis for 

4 looking at technologies that are on the market. And 

5 it’s a pretty straightforward screening. And that’s 

6 not really much of an issue, I don’t think. It’s 

7 pretty obvious what is technologically feasible.

8 It’s the economic justification that 

9 becomes an issue, and so we get the very next 

10 paragraph in the statute -- and I put it up there, 

11 and I apologize this is hard to read, probably, in 

12 the back of the room -- but what it says is in 

13 determining whether the standard is economically 

14 justified -- so, don’t forget, maximum improvement 

15 in energy efficiency that the Secretary determines 

16 is technologically feasible and economically 

17 justified. In determining what is economically 

18 justified, the Secretary, after getting comments on 

19 it, has to consider those seven things that I’ve 

20 listed up here. 

21 And if you look at the second of them, 

22 this is the one we’ve been talking most about, is 

23 the savings in operating cost and the estimated 

24 average life of the covered product in the product 

25 class that any increase in the price of what the 
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1 usual charges are ... covered product for life cycle 

2 cost analysis. That’s it. That’s where it comes 

3 from. So we have to do that analysis in order to 

4 figure out, as part of our interpretation, whether 

5 something is economically justified. 

6 You also note that the first one is the 

7 impact of the standard on manufacturers, so we do a 

8 manufacturing analysis. The predicted amount of 

9 energy or water savings -- the energy impact. 

10 The various items that we calculate in our 

11 analysis for those seven, the seven being the 

12 factors considered by the Secretary, that is a 

13 product-specific determination. It’s not just we’ll 

14 come along and say oh, you know, for every product 

15 we look at we’re going to also account for ... There 

16 are product-specific factors that determine ... But we 

17 have to do those analyses. If we don’t do those 

18 analyses, we simply aren’t compliant with the law.

19 And the way we then set it up is we take 

20 each of those factors that are just in those seven, 

21 and we do various analyses as we’ve been talking 

22 about. We do the life cycle cost analysis, 

23 manufacturing impact analysis that helps us measure 

24 the first factor. The life cycle cost analysis is 

25 the second factor. The national impact analysis is 
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1 an overall -- what happens as a result of energy 

2 savings. 

3 The seventh factor, I’ll skip over some of 

4 the other factors, that’s where we consider things 

5 typically like environmental impacts of the rule. 

6 Utility impacts analysis is -- not utilities, but 

7 utility in terms of the consumer utility of the 

8 product to do what people want it to do. Your 

9 refrigerator still keeps your food cold. That’s the 

10 utility impact.

11 So then we take all those various analyses 

12 and we look again at what is technologically 

13 feasible and we create standards from them, which 

14 we’ll talk to in a minute, but the whole idea is to 

15 take all that various data and coalesce it into 

16 figuring what is the maximum technologically 

17 feasible level and then apply those seven factors 

18 for economically justification. 

19 If it is economically justified, which 

20 typically means there’s a positive net present 

21 value, assuming all those factors, because then we 

22 pick the maximum energy efficiency that’s 

23 technologically feasible and economically justified. 

24 If it’s not, economically justified, we go down in 

25 energy efficiency. And so on, and so on, until we 
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1 find the first level that is economically justified, 

2 because then we’ve met our statutory obligations to 

3 be the maximum improvement in energy efficiency to 

4 be economically justified and technologically 

5 feasible. So Jack you want to talk about --

6 MR. POLINSKI: Ray Polinski, ATI Allegheny 

7 Ludlum. The basis of the law suit that we’re under 

8 now is that you didn’t factor all those in the last 

9 time?

10 MR. COHEN: So actually the law suit that 

11 challenged the ’07 rulemaking, actually had nothing 

12 to do with any of this. It had to do with our 

13 environmental impact analysis. 

14 MR. POLINSKI: That was on there, I 

15 thought.

16 MR. COHEN: It was, yeah. So what the law 

17 suit ultimately came down to the issue of our -- at 

18 the time, the failure to monetize the emissions 

19 reductions in any analysis, and since that we’ve 

20 actually come up with -- it’s government-wide 

21 procedure for coming up with a dollar value, if you 

22 will, for reduction in CO2 emissions. And we do 

23 impact ... and café standards for vehicles, EPA uses 

24 it when they do various environmental regulations to 

25 calculate the monetized value of CO2 emissions that 
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1 occurs as a result of --

2 MR. POLINSKI: So somewhere --

3 MR. COHEN: That rule was adopted.

4 MR. POLINSKI: Somewhere around this 

5 analysis there’s some monetary value now that’s --

6 MR. COHEN: So the way -- yeah, so the way 

7 it’s done, it’s in that seventh factor. So we apply 

8 the first six factors into our calculation of net 

9 present value, and we then we do additional analyses 

10 of environmental impact ... gas emissions reductions 

11 to see if it changes. But we do put it now through 

12 all of our -- we put a dollar on the CO2 emissions.

13 MR. CASKEY: John Caskey, NEMA. Thanks 

14 for explaining that. I’ve heard this before, but 

15 it’s been a while. My question really relates to 

16 newly manufactured idea versus DOE’s effort to try 

17 and improve the efficiency of products that are 

18 already in place out there. I can always hear, sort 

19 of second hand or third hand, the funny thing that 

20 you only impact -- you can only provide rulings 

21 relative to newly manufactured products. So what 

22 statute drives that and why can’t you get involved 

23 with existing things that are out there in the place 

24 today.

25 MR. COHEN: I’m not sure what you mean --
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1 I’m not sure I understand the question.

2 MR. CASKEY: DOE has set rules, as I 

3 understand it, they control the efficiency of a 

4 newly-manufactured product, like a transformer. But 

5 there’s a million transformers out in the field 

6 today.

7 MR. COHEN: Yeah, this can get more and 

8 more complicated. I don’t know how familiar you are 

9 about these things. There’s a definition of what we 

10 call a new covered product -- it may be the worst 

11 sentence in the entire US Code. But basically what 

12 it says is that once a product is -- first of all, 

13 the power of authority ... is over the manufacturer, 

14 it’s not over the consumer. So if we -- if you go 

15 to Best Buy and you buy what is otherwise a covered 

16 product, a dish washer -- you go to Best Buy tonight 

17 and you buy yourself a freezer ... so if I go buy a 

18 freezer and once I buy that freezer, then I can do 

19 whatever I want with that freezer. I can add TVs to 

20 it, I can add -- you name it, any kind of energy 

21 consuming part because of this definition of a new 

22 covered product that says once title is transferred 

23 to the ultimate end user, the power authority ends.

24 So basically it means that everything that 

25 we do applies to product manufacturers on or after ... 
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1 that they’re compliant with the standards. So the -

2 - obviously what that means is that if there is a 

3 product that after distribution, like freezers, if 

4 there was a new standard that was going to come into 

5 effect tomorrow for freezers, and there were 

6 millions of freezers out there on the market that 

7 met the old standards, they can be sold, because 

8 they were manufactured before the date of the new 

9 standard. And once the standard compliance -- the 

10 new standard, then all manufactured must meet it.

11 MR. POLINSKI: Thanks. 

12 MR. PATTERSON: Related to that, if a --

13 Wes Patterson -- if the refrigerator was purchased 

14 by somebody who would refurbish, he took it and say 

15 the motor had failed, and he puts in a new motor, 

16 and now it’s efficiency doesn’t meet the current 

17 standard, and he resells it, is that covered by the 

18 regulation or not?

19 MR. COHEN: It also depends. If it was a 

20 person whose job is, that their business to buy lots 

21 of refrigerators and the way that new covered 

22 product is written, they take title to the product 

23 for purposes of their own -- for purposes of resale, 

24 and so the chain of commerce would not have been 

25 cut. But if I buy that freezer and brought it home, 
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1 and I’m using it in my house and then the motor 

2 dies, and I send it to you to put a new motor into 

3 it and you put in the least efficient motor on the 

4 face of the planet, nothing we can do about it.

5 MR. PATTERSON: So the --

6 MR. COHEN: And by the way, if I give it 

7 to you because I really don’t want the freezer any 

8 more, and you then turn around and sell it, chain of 

9 title was cut by my purchase of it as the ultimate 

10 end user.

11 MR. PATTERSON: So the key issue there is 

12 whether or not the ownership was transferred for 

13 remanufacturing.

14 MR. COHEN: Correct. And if it was -- if 

15 ownership as the end user was transferred to a party 

16 in that chain of commerce. So if the ownership to 

17 the end user, then the chain of commerce is cut. If 

18 ownership was transferred for purposes of resale, 

19 solely, ... and you buy those boxes to put in the 

20 boat, you bought them for purposes of selling the 

21 box.

22 MR. PATTERSON: Let’s talk about 

23 transformers.

24 MR. COHEN: Yeah, we’ll talk about 

25 transformers.
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1 MR. PATTERSON: I’ve got an old 

2 transformer and it failed, it gets put in the yard 

3 of the utility where the utilities keep all their 

4 junk. So they sell it to a guy who rebuilds. 

5 Right. And the guy who rebuilds it, he refurbishes 

6 it and sells it to another utility, because that’s 

7 his business. Now, should that comply with the 

8 regulation or not?

9 MR. COHEN: He purchases the transformer?

10 MR. PATTERSON: No, the utility bought it.

11 MR. COHEN: The utility bought it from 

12 manufacturer X.

13 MR. PATTERSON: Yes. And it failed, and 

14 he sold it to rebuilder B. And then rebuilder B 

15 fixes it up and sells it to utility C. A third 

16 party. 

17 MR. COHEN: Utility A bought it for their 

18 own purpose to put it in their line.

19 MR. PATTERSON: Yes.

20 MR. COHEN: They were the end user. The 

21 chain is broken and that’s no longer covered.

22 MR. PATTERSON: Okay. So now the 

23 implication of some of these standards with products 

24 that can be readily remanufactured, easily 

25 remanufactured, is, especially when we have millions 
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1 of the products sitting in the marketplace, is that 

2 the transformers will become potentially cheaper to 

3 rebuild and sell than to manufacture new. And thus 

4 circumventing any efficiency standard.

5 MR. COHEN: Yes. So go back and look at 

6 the 2007 rule. We spent a lot of time talking about 

7 this very issue in the 2007 rule and came to the 

8 conclusion that refurbished transformers are beyond 

9 our control.

10 MR. DeLASKI: Dan, did you address that 

11 specific question -- this is Andrew -- did you -- do 

12 you remember if you addressed the specific question 

13 of who owned the transformers?

14 MR. COHEN: Yeah, actually -- we actually 

15 talked about it in the context of the new covered 

16 product definition. I think it’s on page -- let’s 

17 see if I can find it.

18 (Discussion off mic)

19 MR. COHEN: So look, it’s on -- so this 

20 was published on October 12, 2007, and if you look 

21 at the ... on page -- it’s in the middle column on 

22 page 58203, and you’ll see we go through the whole 

23 conversation about new covered product and goes on 

24 about two columns.

25 MR. MEYERS: What page was that?
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1 MR. COHEN: 58203. So it’s in the October 

12, 2007 Federal Register

4 MR. PATTERSON: So while we’re getting 

5 copies made, I’d like to think about looking at 

6 problems, looking at the limits of what happens, and 

7 let’s just suppose -- let’s suppose that we agree 

8 with a new standard, and the new standard raises the 

9 price of the existing transformers 50 percent. 

10 Fifty percent more expensive. And we know from the 

11 physics of this type of product in the market, that 

12 somewhere around 20 percent increase in price would 

13 shove the production of a rebuild rather than a new. 

14 Okay. So if we set the standard 50 percent, we know 

15 that 50 percent of our transformer sales will 

16 evaporate and become ... We know this. So the 

17 regulation says we can’t do anything about the 

18 efficiency standard of rebuilt, however your 

19 national impact standard has this manufacturers 

20 impact analysis point, right, and the effect of the 

21 standard essentially is we put 50 percent of the 

22 producers out of business. Should that economics 

23 then be in this analysis?

2 . Can we get copies made 

3 of this?

24 MS. COUGHLIN: If we have evidence, and we 

25 can quantify this, then it would go in the analysis. 
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1 In many products in the national impact analysis, we 

2 include rescission where a purchaser chooses to 

3 repair rather than replace. That slows down 

4 shipments of new units and affects the energy 

5 savings. It’s not in the current analysis because 

6 we did not have the data when we put the analysis 

7 together to prescribe a refurbishment market. And 

8 then for the manufacturing impact, I’ll let Navigant 

9 answer that.

10 MR. PATTERSON: So to add to your 

11 analysis, we have a number of utility members here, 

12 and they can easily comment on the corporate policy 

13 for when they will make a decision as to when they 

14 will buy new versus rebuilt, especially on liquid15 filled distribution transformers. They all have 

16 policies inside their firms. So they could easily 

17 give you some kind of a number.

18 MR. PARKER: Mike.

19 MR. HYLAND: Yeah, this is Mike Hyland. 

20 Isn’t that what I saw last night on our trails, 

21 Steve, didn’t you comment on -- was it AK Steel on 

22 the paper on that? I made copies of it in case you 

23 wanted it, about the refurbishing market. And 

24 nobody commented on it, it was like mid-November.

25 MR. PETERSEN: Eric Petersen, AK Steel. 
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1 Jerry Schoen actually put the data together and 

2 essentially what the information is is a projection 

3 of the market of transformers that are currently 

4 associated with replacements versus new. So yeah, 

5 this is the copy that went around, “Comments on 

6 projected US demand for core materials.” So that 

7 front page, it essentially shows a graph going back 

8 to 1965, which shows the percentage of transformers 

9 within the markets that were purchased as a results 

10 of being replaced, as opposed to new, and as you can 

11 see from that graph, in the current 2010, we were 

12 showing that approximately eight percent of the 

13 transformers that are going in the market today are 

14 the result of replacements as opposed to buying new, 

15 and that’s simply, as you can see, we’re in one of 

16 the worst housing starts of US economy right now, so 

17 you’d expect it to meet the projection, then takes a 

18 perspective associated with what we see housing 

19 starts becoming over the next 30 years, and as you 

20 can see, the trend essentially puts a position that 

21 50 percent of the transformers that are put in the 

22 marketplace are put in for the purpose of 

23 replacement. 

24 So essentially, what we are demonstrating 

25 with this data is that there is a significant 
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1 portion of the market that is associated with 

2 replacements, and if there is a real issue 

3 associated with refurbishing these because of the 

4 economics, then the benefits associated with 

5 anything pre-energy saving standards would be 

6 severely diminished if 50 percent of the market 

7 chooses to refurbish as opposed to buying new.

8 MR. PARKER: Just to clarify, what your 

9 analysis shows is that 50 percent is replacement, 

10 but not necessarily refurbishment, right?

11 MR. PETERSEN: What it shows --

12 MR. PARKER: It could be made with either 

13 a new unit or a refurbished unit.

14 MR. PETERSEN: That’s correct. What we’re 

15 showing is the size of the market that would be 

16 susceptible to the question of do I refurbish this 

17 unit or do I buy a new one? And obviously, then, 

18 that’s, according to what Wes is saying, well, what 

19 is the utility companies’ policy, procedure, in 

20 regards to where is that clip of when they choose to 

21 refurbish as opposed to buying new.

22 MR. PATTERSON: If the utility company can 

23 get a refurbished transformer that functions as well 

24 as the new, except for the efficiency, and they got 

25 it at zero cost, they wouldn’t buy any of these 50 
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1 percent.

2 MR. PETERSEN: That’s right.

3 MR. ANDERSON: You’re exactly right.

4 MR. PATTERSON: Okay. So, we go from 

5 there to if they buy refurbished units at the same 

6 price as a new, but they have a risk because of the 

7 quality issues of the refurbishment process, then 

8 they more than likely will opt to buy the new rather 

9 than buying the refurbished.

10 MR. PARKER: As I understood from previous 

11 discussions, there were two issues, right. One was 

12 the question of is it the same quality, but there’s 

13 also a question of freight and shipment if they have 

14 to send something out --

15 MR. PATTERSON: That adds in to the price 

16 of the -- the purchase price of the utility. The 

17 freight is picked up in the selling price. Each 

18 freight is included in the end user price, so it 

19 comes down to these two extremes. Potentially, you 

20 know, if we gave it away, 50 percent of the 

21 transformers just disappear. So the question then 

22 becomes that I think Katie would need some kind of a 

23 number, consensus from both the utility, that says 

24 if the price drops ten percent, we’ll see -- of that 

25 50 percent, we’ll see a 20 percent increase in 
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1 refurbishing. If the price drops 20 percent, we’ll 

2 see a 40 percent increase in refurbishing. And with 

3 that then, you would have enough data to put your ... 

4 together.

5 MS. COUGHLIN: Yeah, I think essentially 

6 we have to acknowledge that this would not be data. 

7 This would be speculation. So we can put together 

8 scenarios based on a reasonable, informed, 

9 speculation about what would happen. The problem 

10 for us in operating within the constraints that DOE 

11 operates, is we’re supposed to use existing data to 

12 do the modeling. And since we didn’t have 

13 information on the refurbished market, we’re not 

14 able to do things like, you know, give the constant 

15 refurbishing relative performance and then a 

16 lifetime beyond refurbishment. So -- but yes, we 

17 can make assumptions about those numbers and we can 

18 build a model around those assumptions, but they are 

19 going to remain assumptions.

20 MR. PATTERSON: I’m not quite sure. There 

21 are some utilities that actually have their own 

22 internal refurbishment capabilities. Okay. And 

23 they -- internally, make the economic decision to 

24 whether or not they want to rebuild this transformer 

25 or buy a new one to replace it. So it’s not 
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1 speculation, it’s hard economic fact.

2 MR. PARKER: Okay. Now, forgive me but I 

3 must make a process point. We had this discussion 

4 in September, in October, in November, and in each 

5 and every discussion we asked utility people if they 

6 have actual data on refurbishments and the cost of 

7 refurbishments and number of refurbishments to be 

8 analyzed so they can take it on board. As I 

9 understand it, nothing was forthcoming. What they 

10 got was a useful but not conclusive study about 

11 replacement markets, not refurbishment markets. And 

12 so here we are at the end of the day, this is where 

13 we are, and the question is, what do we do about it 

14 now? We still do not have data on refurbishments. 

15 Andrew?

16 MR. DeLASKI: Yeah, just a quick question, 

17 and then I’ll echo the comment on process. So this 

18 is useful, Jerry, thank you for putting it together. 

19 So my question for you is, maybe it’s in your memo, 

20 I haven’t had a chance to read it yet, but your 

21 model -- you’re not a transformer seller so you 

22 don’t really know whether -- how do you know, I 

23 guess is the question.

24 MR. SCHOEN: (not at mic) Jerry Schoen, 

25 AK Steel. It’s not explained in there. ... suburban 
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1 power consumption based on capacity -- and natural 

2 load growth. The DOE is using natural load growth. 

3 It’s actually misleading. Taking data we had ... 

4 literally, on what’s out there, and then build this 

5 separate model ... based on a full housing market of ... 

6 units a year. That is a normal pace of housing, and 

7 it’s been that way for the last 50 years, and ... 

8 expected to be that. Again, that’s a smoothed-out 

9 average. But what that does is, you look at the age 

10 of the fleet with the life cycle model that we have 

11 for transformers which we obtained from the third 

12 market, and that happens to do industrial analysis 

13 for business interruption insurance, so it’s 

14 actually very good data. And roll that into the 

15 model basically for housing. So it’s a fairly 

16 complicated model, proprietary model, because we 

17 built it, not for any one utility, but for the whole 

18 market.

19 The thing of it is is has actually been --

20 you know this isn’t our field of expertise. We’re 

21 not a tradesmen ... We’re a supplier ... However, we 

22 looked at it, we found that there’s a lot more 

23 activity out there because of the 2010 standards 

24 than we appreciated. There are -- it is not a 

25 nascent industry. It is a well-established and 
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1 rapidly growing industry. And they’re rather 

2 excited about prospects for the future because it’s 

3 a very cheap business to go into. It’s - again, 

4 there’s not a whole lot of capital intensity. You 

5 basically need a rewinder, which basically you take 

6 out the old windings, replace it with new windings, 

7 and everything else pretty much goes back into 

8 service with a coating of fresh paint on the 

9 outside. Sometimes they’ll replace the caps, 

10 sometimes they won’t. 

11 I was surprised to find out how rapidly 

12 growing it is. If we hadn’t looked at it carefully, 

13 and I’ve talked a little bit with the folks from 

14 APPA, they’ve had the same observation. That yeah, 

15 when we started looking around, to find it is 

16 actually a cottage industry that is not -- there’s a 

17 lot of cottages out there, you’ve just got to 

18 discover them.

19 MR. DeLASKI: So then if I could follow up 

20 on Jerry from a process point. I’m looking at our 

21 agenda, Richard. I think we’re before 9:45 on the 

22 agenda. So I’m concerned that we’re running out of 

23 time. I know the Department’s got to write a NOPR 

24 with or without a recommendation from this group. 

25 So I hear us sort of circling around issues that 
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1 we’ve discussed in prior meetings. I’m getting 

2 concerned, we’ve got medium voltage liquid and dry 

3 type to discuss, and I’m just getting concerned that 

4 we’re running out of time. I don’t know what your 

5 thoughts are on the agenda in terms of how you get 

6 us back on track, but I don’t see how we’re going to 

7 get to the substance of it. This is substance, I 

8 don’t think this is a very substantive discussion, 

9 but I just wonder about our timing here.

10 MR. PARKER: Well, what I’d like to do is 

11 -- we have had along the way a discussion about some 

12 of the issues that were ahead of us on the agenda, 

13 the dollars per watt, the loading assumptions. My 

14 recommendation would be that we -- it’s now 12:15. 

15 What we absolutely could do is discuss the -- first, 

16 do people want to discuss the dollars per watt 

17 versus LCC -- or does the presentation about the LCC 

18 satisfy you at this point? Is there -- is there a 

19 need to have that discussions still?

20 MR. HYLAND: Mike Hyland, APPA. I don’t 

21 want to leave this yet. Only because there are 

22 other things that have to be studied, you know, 

23 that’s why the SBA was created, that’s why we’re --

24 we’ve had SBA here today. ... small businesses, 95 

25 percent of my membership are considered small 
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1 businesses, and that wasn’t, I think, analyzed 

2 correctly. We hope that it’s being analyzed now. 

3 We did calculations, based on our survey of our 

4 members, and it’s about $14.23 a customer is the 

5 transformer life. When we correlate that number 

6 with 98 percent, we thought it was pretty good. So 

7 an increase of ten percent would be another $1.42, 

8 20 percent would be $2.80 -- you do the math. When 

9 you do that, you can extrapolate it out over the 

10 number of customers these small members serve. And 

11 another thing that has to be analyzed which we ... and 

12 that’s the -- by the mandate, which is a hundred 

13 million is what’s set, and we’re pretty close to 

14 that too. So I just want to throw it out there. 

15 DOE has their houses, but the reason things like ... 

16 come into play and SBA come into play is because 

17 they found out from the original statute that the 

18 DOE works under, you sometimes can do something that 

19 is such an impact, 100 million being one of the 

20 thresholds, EPA is now bringing that down to 25, 

21 that engages the legislative body because they’re 

22 not happy about such a big mandate. The situation 

23 with SBA, it’s the ill facts fall on small entities, 

24 which my utilities are. So that’s going to have to 

25 come into play sooner or later, whatever you decide. 
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1 No matter how shallow it is, it’s pretty severe. 

2 The refurbish market ties into this 

3 because we ask those questions to our utility 

4 members who are non-profit, what will a 10 or 20 

5 percent increase going to do? Some of them are 

6 already refurbishing -- that’s what he’s referring 

7 to. Utilities in Virginia refurbish any time they 

8 can. It’s real. Can I get the data from 2000 

9 munis? I can get that. I’d love to, but the market 

10 is real and it’s going to get worse.

11 MR. DeLASKI: Mike, just a quick follow 

12 up. This is Andrew. You said $14.20 per customer 

13 per transformer. What is that? Per year?

14 MR. HYLAND: We asked -- I read it off of 

15 one of our meetings -- I asked this question, what 

16 is your history of this? What would happen if the 

17 units were larger? What would happen ... And we 

18 asked, do you know what your transformer budget is? 

19 We just wanted to make sure they knew. So every 

20 single one that answered, gave us their budgets --

21 last year it was X, 1.2 million, 200,000. Some 

22 small guy wrote, $8000 is their budget. What we did 

23 is we then referenced that back to get the number of 

24 customers they served based on EIA data that we have 

25 on the record, that you can look at, it’s on our 
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1 website. So we now have customers served to the 

2 transformer budget on a yearly basis. So now we can 

3 say how much per customer we expect, pretty quick 

4 math. It comes out to $14.23 a customer on an 

5 average, median. I can show you the numbers. So if 

6 you increase it ten percent, you’d be increasing on 

7 every customer $1.42, 43 cents. Twenty percent --

8 and we did that escalation of a 10 percent, 20 

9 percent, 30 percent, going forward, based on Wes’ 

10 comment how much prices would go up. So it gives a 

11 good feel. 

12 And when you extrapolate those numbers 

13 over all the customers served by just the munis --

14 we’re not talking Bob’s guys yet, and we’re not 

15 talking Steve’s guys yet, we’re talking just my 

16 customers which is only 14 percent of the customers 

17 served in the US, you’re getting close to $100 

18 million dollars if you go above 20 percent. It’s 

19 right there. If I add in theirs, and we’re only 14 

20 percent of the US, we can times that by a factor of 

21 almost seven, and now we’re talking $700 million if 

22 we go up twenty percent. This isn’t a small number 

23 we’re talking about here. Which is why I say we 

24 want to see SBA engaged. We want to see the ABRA 

25 analysis, because ultimately we have to go that 
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1 route because we don’t see this going anywhere.

2 MR. PARKER: Tom.

3 MR. ECKMAN: Are those expensed or are 

4 those capitalized?

5 MR. HYLAND: That wasn’t in the survey. 

6 It was an e-mail --

7 MR. ECKMAN: Given they’re 30 year 

8 product, you probably capitalize those investments, 

9 so that $14 is amortized over some period of time, 

10 it’s not up front.

11 MR. HYLAND: Well, we sampled on a yearly, 

12 every year --

13 MR. ECKMAN: Yeah, but that’s a P&I 

14 payment on capitalization going forward.

15 MR. ANDERSON: Yeah, but Tom, it’s cash 

16 flow.

17 MR. ECKMAN: I understand that, but it’s 

18 not -- it’s $14 that gets capitalized, next year 

19 it’s P&I on $14 plus the next, and what you’re 

20 looking at the rates now to pay off those 

21 investments, and if you have -- depending on what --

22 they will go up, there’s no doubt, I’m not saying 

23 they won’t go up, but it’s not -- it’s not a full 

24 dollar the first year. It’s capitalized. Some 

25 amount of that gets raised that next year.
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1 MR. HYLAND: Some of our munis work on a 

2 complete cash basis.

3 MR. ECKMAN: I’m aware of that.

4 MR. HYLAND: So, every dollar is going to 

5 go to that. We don’t have any buffer. We’re not 

6 sitting on any money at the end of December. 

7 Sometimes we empty our closets. Have no bill for 

8 that month.

9 MR. DeLASKI: I think the numbers that 

10 you’re putting out, Mike, are entirely consistent 

11 with the DOE analysis, and the DOE showing equipment 

12 cost changes in hundreds of billions of dollars.

13 MR. HYLAND: Right.

14 MR. DeLASKI: And the savings are also in 

15 the tens of billions of dollars. Those are the 

16 impacts.

17 PARTICIPANT: He’s talking about a hundred 

18 million a year.

19 MR. DeLASKI: I’m talking about --

20 MR. HYLAND: Yeah.

21 (overspeaking.)

22 MR. DeLASKI: ... DOE has their stats. This 

23 is all beautiful stuff and you can read it. And you 

24 can argue what is economically justified. 

25 MR. HYLAND: But because of this, it’s 
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1 affecting people, that’s why we’ve created in this 

2 government, the Small Business Administration, and 

3 that’s why we’ve created ABRA, to look at things 

4 that could impact ... because of this. So it’s just 

5 something to be aware of so when you hear me say I 

6 just want to see the SBA analysis, because we would 

7 like to see them engaged in this. And somebody had 

8 told me they were looking at it and my fear is were 

9 they looking at just the small manufacturer, the 

10 small core guys. Maybe they don’t realize that 90 

11 percent of my members are small businesses under the 

12 SBA, and when we use these arguments many times 

13 throughout -- and with EPA, everything has to be 

14 reviewed ... and DOE ... doesn’t exist that way, but we 

15 can ask for one. We can ask them to show the 

16 analysis. That was my e-mail that started --

17 MR. COHEN: No, no, that’s fine. Very 

18 valid point. So a couple things about it, just on a 

19 pure legal sense, not on the analysis at all. So 

20 when we do our -- any of our rulemakings, we produce 

21 a technical support document that’s about as thick 

22 as ... that goes through all of the various analyses 

23 that have been done, and also addresses the 

24 Regulatory Flexibility Act, and the Environmental ... 

25 Act, and a myriad of other executive orders and 
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1 statutory and political requirements that are ... 

2 All of those analyses are done. The statute that 

3 set those out, the mandates and the Flexibility Act, 

4 all are set out with -- consistent with the law that 

5 governs the rulemaking itself. And so none of those 

6 analytical requirements that we perform overcome the 

7 basic statutory obligation we have to maximize 

8 energy efficiency. 

9 So we produce all of that as separate 

10 chapters in the technical support document. There’s 

11 a chapter on environment and a chapter on small 

12 business. All those various analyses are all 

13 separately laid out in the technical support 

14 document. So you’ll see all that.

15 Typically, those are shared with the Small 

16 Business Administration, and of course the 

17 rulemaking process is when we share those documents, 

18 and we will do that. There we’ll show the 

19 flexibility analysis. 

20 I think though that you may have been 

21 referring to -- a further comment was your concern 

22 that SBA may be looking at the manufacturer impacts 

23 not the impacts on utilities?

24 MR. HYLAND: ... DOE analysis -- Navigant.

25 MR. COHEN: (inaudible)
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1 MR. HYLAND: Right, so we’ve engaged that 

2 -- if these negotiations break down and you guys go 

3 to lunch, because this isn’t going anywhere --

4 that’s the next step in looking at the total right 

5 now, it’s not a popular thing if something’s got an 

6 initial cost of a million dollars. That’s just --

7 we’ll see. Engagement starts to change after ...

8 MR. PARKER: Let me ask the analysts, is 

9 it possible to go through by design line and take 

10 out, for the ... the ones that you actually selected 

11 on a least cost basis -- what the price increment 

12 for that unit would be compared to the base case?

13 PARTICIPANT: That’s all in there.

14 MR. PARKER: What we don’t have is --

15 right -- what we don’t have readily, I’m just 

16 looking at the payback period. Do we have the mean 

17 -- mean installation cost, incremental first cost --

18 that’s it. Right there, and compare that to the 

19 cost savings. You can do -- people can look at 

20 this, if they want to look at the refurbishing 

21 issue, and I know the number 20 percent batted 

22 around -- we haven’t seen any real documentation on 

23 that. We can look at that and see for each of these 

24 cases, whether there would be a 20 percent increase. 

25 I guess it might be a little bit easier to calculate 
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1 the increment at each level, but you can do your own 

2 math. And decide the refurbishment issue, and also 

3 you have the incremental operating cost there, Mike, 

4 it’s just a matter of ruling out the individual ... 

5 your industry, what the impact would be.

6 I guess what I’m getting at is do we -- we 

7 do need to break for lunch now, and what I would 

8 suggest is that we, in various, in groups, caucus, 

9 look at the numbers, look at your own analysis, and 

10 decide over lunch whether you feel comfortable 

11 putting forward a proposal. And it may be, even 

12 though we have items on the agenda, you know, 

13 dollars per watt, the BiL rating and network issues, 

14 it may be that those become less salient when we 

15 actually focus on actual proposals as opposed to 

16 talking about it in the abstract. So that might be 

17 the form.

18 MR. HYLAND: If you don’t have plans, I 

19 know some of you already have plans, I’ve put a list 

20 up here of a list of places that are quick. There’s 

21 a place across from Hilton there, you can go, 

22 actually down the lobby -- there’s a guy making 

23 sandwiches in there in a rack behind the security 

24 guard. You go out here and take a left, go down 

25 Connecticut, there’s a Pot Belly, there’s a 
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1 Chipolte, there’s a Flipping Pizza, all down there. 

2 MR. SAINT: Before we break, can I ask a 

3 question of Dan?

4 MR. COHEN: Yes.

5 MR. SAINT: ... DOE, but this is a 

6 negotiation committee, and can you explain a little 

7 bit about how we can deviate from those ... in the 

8 negotiations that we’re doing.

9 MR. COHEN: That’s an interesting and very 

10 difficult question because ultimately ... statute. If 

11 you will all, in the negotiating committee, come up 

12 with a proposal and everybody agrees with it, that 

13 somehow didn’t meet the statute, we would have to ... 

14 so our hope for being here is that in doing this 

15 process we are part of the negotiations, not a 

16 member of the committee, that we can explain it to 

17 you, that might be a problem for us and hopefully.

18 MR. SAINT: So conceivably, if we, as the 

19 negotiating committee, can come up with a compromise 

20 that was unreasonable, we can all ... then it goes to 

21 DOE and you determine that we did follow these 

22 guidelines --

23 MR. COHEN: That’s part of it, and part of 

24 this process is we’re on the committee so that when 

25 something comes out of the committee, we want to 
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1 make sure that what we’re talking about is ... because 

2 our obligation, our commitment to this process, is 

3 that if there is a consensus agreement, then we’ll 

4 deal with it.

5 MR. SAINT: Okay. 

6 MR. PETERSEN: If I may just tack on to 

7 that. Eric Petersen, AK Steel. On the ... analysis 

8 it gives a number of TSLs. Based on what you just 

9 stated, that your responsibility is to meet those 

10 requirements you just went through, is the 

11 population of potential resolutions or answers that 

12 come out of this negotiating session then have to 

13 comply with these TSLs?

14 MR. COHEN: Different ELs could be moved 

15 around and new TSLs formed.

16 MR. PETERSEN: Okay. Thank you.

17 Let’s break for lunch and think about what 

18 we talked about.

19 (Whereupon, at 12:32 p.m., the meeting in 

20 the above captioned matter was adjourned for lunch 

21 recess and caucuses, to reconvene at 2:13 p.m.)

22
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2 2:13 p.m.

1 AFTERNOON SESSION

3 MR. PARKER: I understand from NEMA that 

4 they need about 30 more minutes to caucus. I 

5 understand some of the other parties would like to 

6 caucus for a little bit more among themselves as 

7 well. So why don’t we take a 20 or 30 minute break 

8 -- the conference rooms are out this way. We will 

9 reconvene here say at 2:45. Some people are ... 

10 PARTICIPANT: Who’s meeting?

11 MR. COHEN: So the Federal Register 

12 notice that we sent around the page, I just want it 

13 to be clear, ... look at the last paragraph above of 

14 the left hand column on page 58204, where we said, 

15 “We understand that at present (of course that was 

16 2007) rebuilt transformers are only a small part of 

17 the market. If conditions change, for example, 

18 rebuilt transformers become a larger share of the 

19 transformer market, in their response to energy 

20 conservation standards adopted today, DOE would 

21 consider appropriate action at that time.” I just 

22 want to be clear that, you know, that’s still the 

23 case. If we were to see some shift in the market, 

24 we would figure out what we would can or might do, 

25 based on that information.
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1 MR. ROSENSTOCK: Mr. Cohen, Steve 

2 Rosenstock, EEI. I’m just kind of curious, you 

3 know, after the air conditioner rules promulgated in 

4 2006, shipments went down quite a bit, essential air 

5 conditioners and heat pumps, because people were 

6 either substituting room air conditioners for 

7 central, or repairing their old units. What would 

8 be considered appropriate action?

9 MR. COHEN: So I assume part of that 

10 question -- what I can tell you is that when -- I 

11 actually partially wrote this -- I didn’t know then 

12 what that meant. I don’t know now what it means. 

13 But it would be appropriate.

14 (Laughter)

15 MR. PARKER: Wes, could you stay with us 

16 for just one second because this question actually 

17 goes to something you mentioned at one point. And 

18 that is that there is, as I understand it, there is 

19 already a significant refurbishment market in our 

20 transformer area, right?

21 MR. PATTERSON: That’s correct.

22 MR. PARKER: So I guess one question that 

23 I had, just thinking aloud, is if, based upon the 

24 experience of power transformers, this group were to 

25 conclude that there is a significant prospect of a 
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1 shift to refurbishment at certain price levels, 

2 certain scenarios in the distribution transformer 

3 market as well, would the prospect of that enable 

4 the Department, given the Department enough 

5 latitude, to think about that during our process as 

6 opposed to later?

7 MR. COHEN: Yeah, I mean, theoretically, 

8 the question would be what information we had, what 

9 we could do ... 

10 MR. PATTERSON: I don’t know how it 

11 impacts this meeting, but our factories were visited 

12 by the Department of Energy, some Department, just 

13 looking into the remanufacture, refurbish business, 

14 and collecting data. I’ve never heard it in the 

15 context of this meeting, but somewhere in this 

16 world, some group is already looking at it.

17 MR. COHEN: I don’t know what that is.

18 MR. PATTERSON: No, it’s DOE. It’s 

19 Department of Energy. Whatever Department it was, 

20 they were trying to understand from something in 

21 Congress as to the magnitude of the remanufacture, 

22 refurbish business for all products, not just 

23 transformers now. But they did visit our 

24 transformer factories.

25 MR. ROSENSTOCK: And Mr. Cohen, Steve 
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1 Rosenstock, EEI again, in terms of taking action, if 

2 you start on transformers, wouldn’t you have to do 

3 the same action for all other appliances? Otherwise 

4 it’s kind of a selected and arbitrary enforcement.

5 MR. COHEN: Yeah, we would have to figure 

6 out what’s appropriate.

7 MR. ROSENSTOCK: Thank you.

8 MR. PATTERSON: And Dan, in your 

9 experience level, for something like that to happen, 

10 what kind of timeframe does it take to finally end 

11 up with an action? Is this -- the distribution 

12 transformers standard, the first time I got involved 

13 with it, was 1992. This has been a lengthy career.

14 PARTICIPANT: I started in 1991.

15 MR. PATTERSON: I’m curious, you know. Is 

16 that like a usual timeframe?

17 MR. PARKER: I think maybe I’m more 

18 optimistic than the others, but I’m a lawyer, and a 

19 creative lawyer, and my take-away from this is that 

20 the problem is not intractable, although it’s not 

21 easily solved either. We should not think of the 

22 refurbishment thing as a non-issue. We should also 

23 not think of it as a -- as necessarily a ... barrel. 

24 And I think that we might be able to think about it 

25 now at least in the power transformer market and 
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1 distribution transformer market, it might enable us 

2 to make a case that there is a justification for 

3 some sort of special treatment, and then we’d have 

4 to just discuss what that would be. We have some 

5 thoughts about that, but I think enough -- that’s 

6 about as far as we can go with that for now. 

7 So we did want to put that out there 

8 because we know that refurbishment is a source of 

9 concern. Now we’ll caucus and reconvene 30 minutes 

10 from now which is ten to three.

11 PARTICIPANT: Make it three o’clock.

12 (Whereupon, at 2:20 p.m., the meeting was

13 off the record to allow for caucus time for a 29-

14 minute period.)

15 MR. PARKER: Okay, we’re going to start --

16 Jeremiah’s just getting slides in the system ... for 

17 his presentation. While he’s doing that, I thought 

18 we might just open the presentation of the proposal 

19 of the steel makers that Ray Polinski --

20 MR. POLINSKI: Is everybody here?

21 PARTICIPANT: Some people missing?

22 MR. PARKER: So as I understand it, we’re 

23 going to hear from Ray Polinski, the steel makers. 

24 We’ll hear from John Caskey from NEMA, Steve 

25 Rosenstock from the utility perspective to present 
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1 his thoughts, is that right, Steve?

2 MR. ROSENSTOCK: Well, I’ll see what 

3 happens after the other presentations. A lot of 

4 people are not at the table right now for the 

5 presentations.

6 MR. PARKER: Well, I think we’re going to 

7 need to --

8 MR. ROSENSTOCK: But they won’t be able to 

9 hear -- there are four voters who are not at the 

10 table right now. We can’t get a consensus if all 

11 the voters aren’t here.

12 MR. PARKER: Let’s see if we can get them 

13 here.

14 PARTICIPANT: I’ll look for them.

15 MR. PARKER: One person leaves and now we 

16 have another person missing.

17 PARTICIPANT: Right.

18 MR. PARKER: My thing is that while 

19 individuals are absent, the blocks are here --

20 NEMA’s not.

21 MR. ROSENSTOCK: But if we want to take 

22 votes, people need to be in the room.

23 MR. PARKER: Let’s see if we can get the 

24 advocates around the table.

25 (Pause.)
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1 MR. PARKER: Okay, Steve, thank you for 

2 watching out for Navigant’s interest. Now that we 

3 have everybody here, we have the slides on the 

4 computer over there, let’s start on the proposals. 

5 Go ahead.

6 Presentations/Proposals

7 MR. POLINSKI: I’m Ray Polinski, ATI 

8 Allegheny, and the steel supplier proposal is not a 

9 whole lot different from the first one that was 

10 discussed. AK had put some reports out showing 

11 where M3 and amorphous could compete, and that was 

12 something, the consensus from day one of our 

13 meetings, where we said that was a key point that we 

14 had and we’ve been trying to debate where that 

15 crossover is. In many studies that have been 

16 performed, LBL and Navigant have done some studies. 

17 In the 2010 study, they did show tables where M3 

18 would be a material of choice and so the number one 

19 criterion for selecting these -- the levels we are 

20 going to propose, these are for the liquid filled, 

21 design lines one through five:

22 The number one criteria is to maintain 

23 manufacturing jobs, not just the jobs in the grain24 oriented steel industry, but all the jobs from our ... 

25 suppliers, our coveting suppliers, all the materials 
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1 that we consume as well as -- that’s one criteria. 

2 Then moving down -- so we started with 

3 that issue, and consistent with the impact on 

4 lessening the competition, which is the key criteria 

5 for the DOE in making their determination, but 

6 another key criteria, impact on manufacturers, 

7 certainly maintaining manufacturing jobs in the 

8 steel industry.

9 Also some concern I’ve heard from some of 

10 our second tier customers, that if these efficiency 

11 levels are pushed too high, the transformer 

12 producers second tier producers, some that are not 

13 represented on this committee, move to amorphous, 

14 big concerns about they’re just not being able to 

15 compete and loss of jobs, impact on employment in 

16 that area as well.

17 And again, there’s many reasons why we 

18 can’t push these -- there’s the small business, 

19 utilities concerns that have been raised.

20 And then a couple of things that we moved 

21 down. So we’ll start with the transformer producers 

22 and the utility about the rebuild portion, and the 

23 concerns of this.

24 So this is more from a manufacturing jobs 

25 standpoint, competitive standpoint. 
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1 So for dEL-1 proposed an efficiency level 

2 of point five, so halfway between the current state 

3 and one. 

4 One thing is to note there, and I 

5 mentioned this previously as well, we thought the 

6 DOE did an outstanding job on design lines, 

7 especially on design lines one and two. We thought 

8 they did an excellent job and stretched very far in 

9 developing the current standard. And in fact, from 

10 the data that I have, the current standard which was 

11 put in place in early January -- January 1, 2010 --

12 was higher than the advocates had requested, and 

13 prior to that, so the DOE went higher than requested 

14 by the advocates, only to be rewarded with some 

15 environmental group coming in with a lawsuit. But I 

16 thought the lawsuit in my -- I could be all wrong, 

17 and I’m sure someone will correct me if my facts are 

18 correct -- but they went higher than the advocates 

19 requested with the standard so they did a good job, 

20 a lot of savings. And I thought the lawsuits were 

21 more based on the three-phase units.

22 So we’re talking about single phase, pad23 mount and go to point five. We’d like to say no 

24 change, really no change is the position we’d like 

25 to have, but in the spirit of trying to continually 
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1 to try to cost-effectively save some energy and 

2 still allow M3 to be competitive, we propose a point 

3 five for design line one.

4 Moving to design line two. That one 

5 there, the DOE went considerably higher. The 

6 advocates were asking initially, by my research and 

7 data, was asking throughout like .987, and the 

8 standard was .989, so quite a higher level was 

9 chosen already, so -- and you look at the cost 

10 overage, you look at the LBNL, the Navigant data, 

11 and they show the tables and they show the 

12 crossovers and at the current level that is M3 and 

13 amorphous, that’s where the crossover is of the 

14 current curves in the 2010. So we propose a no15 change for dL-2.

16 Moving to dL-3, that one there, point five 

17 -- point five efficiency level for dL-3.

18 Moving to design line four, also point 

19 five is the -- if you look at the crossover and the 

20 curves, the M3 and the amorphous, that’s kind of 

21 what’s dictating these proposals, also point five.

22 And then finally for design line five, it 

23 should be a zero again, but in the spirit of trying 

24 to move forward, propose a point two. 

25 So based on those proposals, I would ask 
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1 if there’s a second -- well, first I’d like to -- if 

2 Eric has anything to add, I’ll hand the mic to him 

3 and after that I’ll ask for a second on those levels 

4 and then a vote against those levels.

5 MR. PARKER: So can you just run through 

6 them one more time? dL-1, point five.

7 MR. POLINSKI: 

8 • dL-1, point five

9 • dL-2, zero

10 • dL-3, point five

11 • dL-4, point five

12 • dL-5, point two.

13 MR. PARKER: Okay. 

14 MR. PETERSEN: Eric Petersen, AK Steel. 

15 The only comment I want to make is that in our last 

16 -- when this technology program was completed, there 

17 was a core material selection graph that came 

18 through that helps to give an idea of what materials 

19 would be used at what efficiency levels. That has 

20 not been included in the most recent data. That’s 

21 something that I thought we were going to get prior 

22 to this meeting, but I think it’s important to note 

23 that the DOE is talking about conducting this study 

24 for a long time. I know that they’re -- out of our 

25 last meeting we talked about issues associated with 
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1 data from the individual transformer manufacturers 

2 that threw some of this in question. I recognize 

3 that, but after X number of weeks, this is still as 

4 much as we have to stand on, and right now I’m 

5 looking at data from this large study that’s been 

6 conducted that says our products will not be used at 

7 these efficiency levels, and I guess I’m questioning 

8 how we can support efficiency levels that don’t 

9 utilize our products, and I would suggest we would 

10 be out of business.

11 MR. ANDERSON: Rick Anderson, I’ll second 

12 Ray’s motion.

13 MR. DeLASKI: Can I ask a clarifying 

14 question?

15 MR. PARKER: Sure.

16 MR. DeLASKI: You mentioned the crossover 

17 a few times. I think you’re looking at -- am I 

18 correct that you’re looking at -- to determine the 

19 crossover in your discussion right now, you’re using 

20 the 2010 pricing.

21 MR. POLINSKI: I’m using the 2010 

22 analysis, that’s correct.

23 MR. DeLASKI: That’s this plot.

24 MR. POLINSKI: Yes, and we kind of 

25 simplified them with -- we made our own plots which 
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1 were a little easier to follow, but that’s the 

2 crossover points --

3 MR. DeLASKI: You figured the crossover 

4 based on a simplified -- using a simplified data.

5 MR. POLINSKI: Yes. Jim Rakowski, you 

6 know, who’s my second on this committee, he got 

7 access through the websites of the Navigant Excel 

8 file and just did some plotting of his own, cleaned 

9 them up a little bit so that the clouds were not as 

10 cloudy.

11 MR. DeLASKI: Got it. All right, thanks.

12 MR. PARKER: Well, what I think we should 

13 do is get all of the proposals out on the table.

14 MR. HOPKINSON: But you’ve got a motion 

15 and a second.

16 MR. PARKER: And only clarifying questions 

17 asked about each of the proposals. Let’s hear all 

18 of the proposals so people can decide which ones 

19 they favor before they’re asked to vote on them. 

20 Normally you’re allowed to know what the candidates 

21 -- who the candidates are before you cast your vote. 

22 So I think it would be a good idea to actually hear 

23 from everybody with again, just the questions that 

24 are needed to clarify a proposal or the basis of a 

25 proposal, not to take issue with them. And then we 
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1 can have a more ... discussion and recess again, and 

2 let people take time on deciding on these proposals. 

3 Yes, Ray.

4 MR. POLINSKI: Ray Polinski, ATI Allegheny 

5 Ludlum. Richard, just so I understand the process, 

6 we will not vote on each proposal just to get the 

7 count as to, okay, how many would vote yes or no. 

8 You’re saying every proposal will be put on the 

9 table, we’ll have a vote on the record?

10 MR. PARKER: I’m not sure that we had ever 

11 discussed having a vote at this stage. What we want 

12 to do -- ultimately, at the end of the day, we’re 

13 going to have to have a vote, right. I’m not sure 

14 we need to have a vote as they are presented, or 

15 even right after they are presented. I think it 

16 would be helpful to have a discussion about them, 

17 and negotiation about them before we decide yay or 

18 nay. So yes, we absolutely will not pass the 

19 proposals without having a vote, and it has to be 

20 unanimous.

21 MR. POLINSKI: My point is just to 

22 clarify, whatever the rules of engagement are is, 

23 I’m just saying that if there are -- if there are 

24 three proposals, fine, we try to negotiate. But if 

25 there are four -- if there are four separate 
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1 proposals and we can’t come to agreement to move 

2 them all into one proposal, I think it would be good 

3 to see, all right, who supports option one, who 

4 supports option two, three, four -- and separate 

5 votes on each one.

6 MR. PARKER: So your clarification is we 

7 could have a straw poll as opposed to a formal, 

8 final vote. Yes, that’s fine.

9 (Overspeaking)

10 MR. POLINSKI: I have just one last item 

11 and I’m done. ... on the record, and I think Phil had 

12 already stated this is the one thing is this .. and 

13 loss issue -- we’ve never really -- I just think 

14 it’s important that somewhere along the line we get 

15 closure as to how significant that is. I’m not a 

16 transformer engineer, but if there are costs that 

17 are not -- that are real, that they increase with 

18 higher efficiencies that are not part of the low 

19 cost comparison, then, I just, you know, we need to 

20 add that to the --

21 MR. HOPKINSON: Could I explain the --

22 (Overspeaking.)

23 MR. POLINSKI: The bottom line is DOE 

24 needs to have -- Phil needs to explain it to the DOE 

25 I think, or Navigant or who else --
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1 MR. PARKER: We need to do that, but right 

2 now we need to --

3 MR. DeLASKI: I just want to respond to 

4 what Ray said. Our views in the 2007 document --

5 this is a good document, but things have changed. I 

6 don’t have the numbers in front of me so I can’t 

7 confirm for you whether or not those numbers are the 

8 same. Now we did make a two tiered proposal along 

9 with the utilities in 2007. It called for a two 

10 step. So you have that, but I don’t know whether it 

11 was -- the levels aren’t consistent with it or not.

12 MR. POLINSKI: Andrew, and the only other 

13 thing is that -- Ray Polinski, ATI Allegheny -- but 

14 my point again is just we’re consistent -- if 

15 nothing else I’m consistent but it is - and this is 

16 a 30 year rule, and so all I’m saying is the 

17 advocates proposed that in 2007, you know, I think 

18 it has some weight still in 2011 because I heard 

19 Mike say that the last time DOE took a five year 

20 view of things -- I just think it’s important, this 

21 is a very important decision in the United States of 

22 America, and we can’t base it on one data point that 

23 I would ask -- I would say -- you know, before we’re 

24 done, I would ask the DOE, the Navigant and everyone 

25 to sit side by side and explain to me what’s changed 
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1 since 2007. I believe the advocates have been shown 

2 to be very aggressive in their response to save 

3 energy, so the fact that they proposed that, that 

4 the upper level of capability in 2007 and now we 

5 think the upper level was moved a whole lot further 

6 -- I just have become a little bit concerned about 

7 that.

8 MR. PARKER: That’s a fair point, and I 

9 think we need to have at the next break, perhaps a 

10 sidebar conversation about that, perhaps with the 

11 advocates if you’d like. But right now, let’s focus 

12 on just getting the proposals out and clarifying 

13 them and we’ll move through this just as quickly as 

14 we can.

15 MR. PETERSEN: If I may, one last time on 

16 the steel side. Eric Petersen, AK Steel. The one 

17 point I would continue to raise in this discussion 

18 is the refurbishment issue. I guess my feeling 

19 would be even as a steel supplier, even if we could 

20 go out to an EL-2, 3, you name the number, and show 

21 that steel would be a competitive product that could 

22 continue to perform, if we were looking at these 

23 refurbishment costs, it would concern me just from 

24 an industry perspective and as a citizen associated 

25 with the severe diminishments associated with the 
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1 efficiencies. We can see, when you look at where 

2 the ten percent increase is, you’re looking at 

3 design line one, zero point six; design line two, 

4 zero point three; and zero point fives for design 

5 lines three, four and five. You increase cost ten 

6 percent, and if that issue is real, we could very 

7 seriously step into creating a whole new market that 

8 erases all of the savings we would like to achieve.

9 MR. ANDERSON: It is real.

10 MR. PARKER: Okay. Let’s focus on getting 

11 proposals out. Okay. Who would like to go next? 

12 John? Caskey.

13 Proposal

14 MR. CASKEY: John Caskey, NEMA. Thanks 

15 for the opportunity to be here, and I also wanted to 

16 thank the Department of Energy just for providing 

17 the opportunity for us to all come to the table and 

18 sort of share diverse ideas and sort of talk fairly 

19 openly. I personally think it’s been a great 

20 accomplishment, and I think a lot more information 

21 has been divulged or shared, than really what I 

22 expected. So I want to thank the Department of 

23 Energy, I want to thank all the other sort of 

24 stakeholders, not only at the table but also, you 

25 know, in the background that are contributing 
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1 information and doing analysis and trying to make 

2 sure that we come up with the best answers possible. 

3 And I’d also like to thank the manufacturers that 

4 are here, because quite honestly, I think they’ve 

5 shared a lot more data than I’ve ever imagined that 

6 they would because as a NEMA person, I’m really not 

7 allowed to delve into that area, you know, some cost 

8 effectiveness issues, and some pricing issues and 

9 other issue. So I think they’ve shared an awful lot 

10 more data than I ever imagine that they would, so I 

11 wanted to thank them also.

12 In addition, I hope everyone knows that 

13 NEMA’s committed to distribution transformer energy 

14 efficiency, and that’s evidenced not only by the 

15 fact that one of the standards referred to today is 

16 a TP-1 standard, and that’s still used for the low 

17 voltage dry type, and that’s a cornerstone for the 

18 2010 rule for medium voltage dry type and liquid 

19 filled. In addition to that, we’ve been issued a 

20 NEMA premium program which is basically 30 percent 

21 lower losses for the low voltage dry type 

22 transformers. So we try to be a trend-setter 

23 relative to energy efficiency.

24 So the other thing that I wanted to say is 

25 that we really basically come to the table, whenever 
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1 that was, it seems like years ago, but I’m sure it’s 

2 only been a month or two ago, but we came to the 

3 table with three fundamental principles. 

4 • And the one fundamental principle is that NEMA 

5 supports the development of new transformer 

6 energy efficiency standards, provided that they 

7 can be shown to be cost-effective. So -- and 

8 we talked a little bit about what that 

9 definition of cost-effectiveness is.

10 • The second thing was that we always felt that 

11 it is very critical to have competition among 

12 various grades of steel, among various steel 

13 suppliers, or among various designs of 

14 transformers, and we think that that is 

15 important for the whole industry moving forward 

16 to make sure that we continue to have that 

17 flexibility and don’t lock us in with a high --

18 a super-high efficiency that is going to negate 

19 some of that open competition and some of that 

20 design substitution that is currently going on.

21 • And the third thing that we’ve been consistent 

22 with is just dealing with the small, not 

23 necessarily even the small businesses, but 

24 small manufacturing facilities, and they have a 

25 capability today to compete in the market place
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1 fairly well. And just as we go to higher

2 efficiency standards, it’s more difficult for 

3 them to compete, and particularly some of those 

4 as we go to amorphous steel or something else, 

5 may require substantial investments that may, 

6 in fact, make it impossible for them to stay in 

7 business. And we may pick an answer that 

8 causes that to occur, but at least we need to 

9 know about that from our perspective going into 

10 it.

11 So in terms of those three principles that 

12 we’ve laid out here, I feel that everyone at the 

13 table has been very responsive to this issue of this 

14 steel substitution and providing the flexibility of 

15 design, and I think we’ve covered that fairly 

16 effectively.

17 I think the areas where there’s still some 

18 weaknesses are really in the area of the cost19 effectiveness analysis and, for me being a 

20 scientist, it’s always easiest when you have an 

21 answer that you can get to two different ways, and 

22 you can validate that answer. And I just feel as we 

23 get to a lot of the life cycle cost analysis, it’s 

24 difficult to validate that. It’s almost like we’re 

25 just trusting that these are in the right ball park, 
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1 and some of the manufacturers have been able to say 

2 that they feel like some of that analysis is in the 

3 right ball park, others feel that it’s not, and 

4 particularly when you go to the perspective of the 

5 dollars per watt saved, it really seems like there’s 

6 a significant disconnection between that sort of 

7 approach in looking at what a reasonable decision 

8 is, versus the life cycle cost analysis that’s been 

9 presented to us.

10 So in addition, dealing with the life 

11 cycle cost analysis, or even the design engineering 

12 analysis, we still seem to be consistently be 

13 finding from the manufacturers that as you get up to 

14 the EL-3 and beyond, that the shape of that curve is 

15 significantly different than what’s been reported by 

16 the analysis that we’ve seen so far.

17 So some of the general points on behalf of 

18 NEMA -- just want to cross over all -- the three 

19 different types of transformers, that’s really

20 • Number one is that the single-phase and three21 phase efficiency standards have essentially 

22 been normalized to one another in the previous 

23 analysis, and basically what’s come out from 

24 this assessment or these discussions is that it 

25 is more difficult to increase the efficiency of 
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1 three-phase transformers than it is to increase 

2 the sort of normalized efficiency of the 

3 single-phase transformers. And we just want to 

4 make sure that that’s reflected in the final 

5 decision or in the final analysis.

6 • In addition, we talked a little bit about BiLs 

7 and feel that going to higher BiLs are also 

8 more difficult, particularly once you get 

9 beyond the 95 BiL, that it’s more difficult to 

10 increase the efficiency in those markets than 

11 it is in the lower BiL markets.

12 • One thing that has strongly come out -- this is 

13 item three -- that has really strongly come out 

14 deals with the issue of if the first -- if the 

15 incremental cost for the transformers go up 

16 significantly, then we all pretty much know 

17 that at some point we’re going to almost reward 

18 the utilities for going to refurbished or 

19 remanufactured products. And certainly that 

20 not only hurts the new manufactured products, 

21 but it also hurts the whole effort of trying to 

22 improve efficiency, unless DOE goes through and 

23 actually starts to regulate that part of the 

24 industry. So we’re very concerned about that 

25 substitution where people, instead of buying 
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1 new equipment, will be basically refurbishing 

2 old equipment. And we don’t know exactly what 

3 that price is, whether it’s a ten percent 

4 increment or 20 percent increment, but at some 

5 point we know that that refurbishment market is 

6 going to exist, and some of the people around 

7 the table have already said that that 

8 refurbishment market is already starting to 

9 expand, just as a result of the 2010 

10 rulemaking.

11 • The other thing that I touched on a little bit 

12 before is that we continue to be very concerned 

13 of the possibility that the higher efficiency 

14 standards will negatively impact small 

15 manufacturing facilities and may drive these --

16 some of them out of business, and hopefully 

17 that the final analysis that you guys say is 

18 one of your seven criteria, will actually take 

19 that into account.

20 • Another thing we didn’t discuss very much yet 

21 so far is from the manufacturer’s perspective, 

22 is when there’s a standard set, whether it’s 

23 EL-0, EL-01 or 2, basically they have to over24 design above that standard in order to be able 

25 to be sure that they consistently pass all the 
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1 testing requirements. So when you ask for EL2 1.0 you may actually be getting EL-1.1 or 

3 something above that in order for them to make 

4 sure that they consistently pass the testing 

5 requirements.

6 • So and then the final point in sort of these 

7 general category deals with the fact -- and 

8 we’ve talked about it a little bit today --

9 deals with the idea that there’s an awful lot 

10 of equipment out in the field today that has 

11 sort of modest efficiency and that in terms of 

12 the bang for the buck for America, it may be --

13 NEMA is willing to work with the advocates and 

14 DOE and whoever, to try and move that market a 

15 little bit to get the, essentially to something 

16 like a cash for clunkers, to try and get some 

17 of the really outdated, inefficient equipment 

18 off the systems and move towards higher 

19 efficiencies.

20 Okay, so with all that in mind, I’m sure 

21 we’re all waiting to hear what these five numbers --

22 you’re already guessing -- we go back to the issue 

23 of the dollars per watt saved and I think most of 

24 the manufacturers, it may not even be a consensus 

25 among manufacturers, is that it’s really hard from 
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1 the evidence that has been presented and the 

2 calculations we are making, to say convincingly that 

3 moving beyond the EL-0 is essentially, is cost4 effective. However, we feel that that is not a 

5 tenable solution, so what we are really recommending 

6 is that -- and this would probably be a good place 

7 to go to those graphs.

8 So what we consistently talked about 

9 hopefully is this crossover point -- and the steel 

10 manufacturers talked about it some, I think they 

11 were using the earlier analysis, which I think if it 

12 gets up here is the 2011 analysis. So for this is 

13 for design line one and this is showing some 

14 crossover point slightly above dEL-1, so we are 

15 saying that, again, we’re not convinced that there’s 

16 a lot of cost justification to go beyond dEL-0, but 

17 we think we have to do better than that, so the way 

18 that we can -- we think our sort of upper limit is 

19 really at this crossover point because below that 

20 crossover point -- in this case, it looks like we’re 

21 just going to say dEL-1 but above -- below that 

22 crossover point, you know, you see that there’s 

23 obvious substitutions, that there’s various grades 

24 of steel. Above that point, you pretty quickly 

25 diminish where it’s basically amorphous versus M3 
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1 and that we really feel that there’s -- once that 

2 gap develops, then in essence you’re going to be 

3 either going all the way to amorphous, in which case 

4 then you’ve lost this substitution capability, or 

5 you end up with the amorphous manufacturers 

6 increasing their price to match M3 and that you 

7 basically invalidated the cost-effectiveness 

8 analysis, because what you’ve assumed is the cost 

9 going forward is not really the cost. So that’s one 

10 of the concerns, so we can probably go ahead and run 

11 through all of these.

12 • So basically we’re saying for design line 

13 one, the upper limit is EL-1.

14 • For design line two, this crossover point is 

15 below EL-1, so we’re basically -- whether 

16 you call that 0.5 or whether you call that 

17 zero, it doesn’t matter. We -- our 

18 consensus would be to just go ahead and make 

19 it zero. But we don’t feel that strongly 

20 about it.

21 • And then we go to design line three --

22 MR. PARKER: What’s your --

23 MR. CASKEY: Point five.

24 MR. PARKER: Point five?

25 MR. CASKEY: Yeah, we officially say zero 
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1 point zero.

2 MR. DeLASKI: I’m sorry so what is the 

3 position on EL-2?

4 MR. PARKER: Zero.

5 MR. CASKEY: For design line two?

6 MR. DeLASKI: Yes.

7 MR. CASKEY: EL-0.

8 MR. DeLASKI: And one is one?

9 MR. CASKEY: Right. And then for design 

10 line three, essentially for the next three, the 

11 crossover point is above EL-1, 

12 • so we’re saying EL-1 for design line three, 

13 • EL-1 for design line four, and

14 • EL-1 for design line five.

15 So the concerns going beyond EL-1 are 

16 related to the fact that, again, we still have this 

17 ongoing concern where the manufacturers analysis 

18 indicate the slope of the curve increases more 

19 steeply than what’s reflected in the design lines in 

20 the latest cost analysis. 

21 We’d also -- and again, depending on where 

22 you take it, whether you picked it at, say, ten 

23 percent price differential or 20 percent price 

24 differential, that at some point the refurbishing 

25 market will begin to creep in, and we feel that that 
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1 is also above this EL-1 level. When you look at the 

2 incremental cost for those various design lines for 

3 the EL-1 level, that in reality, some of those are 

4 in that ten to 20 percent range. So right around 

5 there is probably where you’re going to get a 

6 significant refurbishment market.

7 In addition, talking with the 

8 manufacturers -- and there is a difference in the 

9 manufacturers that are NEMA members, and some feel 

10 that they can still retain substitution of steels up 

11 in that EL-2 to EL-3 category, and other ones say 

12 that they cannot do it beyond the -- in between the 

13 EL-1 and EL-2 category. And I’ve asked for at least 

14 one or two of the manufacturers to be on call to 

15 possibly explain that better.

16 And the other things deals with at least 

17 one of the small manufacturers has reported to me 

18 that anything above EL-1, he just cannot stay in 

19 business. So I mean that’s not a quanti -- well, in 

20 his respect it would probably be quantifiable, but 

21 overall it’s not really a quantifiable piece of 

22 information. But certainly that’s an issue that 

23 we’ve had all the way along.

24 MR. PARKER: Can you say which design line 

25 that would be?
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1 MR. CASKEY: That was for all of them. So 

2 in addition to those points with the recommendations 

3 relative to the energy efficiency levels, we 

4 continue to support a separate treatment for the 

5 network and vault transformers that basically should 

6 go on higher efficiencies for them, then the 

7 replacement transformers will not necessarily 

8 physically fit in the vault that’s already been 

9 designed that’s out in the ground somewhere.

10 We also want to talk about -- we also want 

11 to just mention the BiL issue, and we want to come 

12 back to that later, as we go to negotiations, and 

13 just say that we support basically, for the medium 

14 voltage liquid filled transformers with a 150 BiL or 

15 higher, that they be maintained at the EL-0 level.

16 I mean we also, we are concerned about 

17 sort of gaining the system, and we know that that 

18 needs to be taken care of effectively, but we’ll 

19 need to work with the rest of the stakeholders to 

20 take ... 

21 So one of the other exceptions, if you 

22 want to call it that, is dealing with the high 

23 current transformers and basically for transformers 

24 over 2000 amps, we feel that that needs to be 

25 separated out, basically treated differently.
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1 And then I will, once I clean this up, I 

2 will actually send this, but I also wanted to remind 

3 people that back in the spring, the Department of 

4 Energy went out with whatever it was, 35 questions 

5 or whatever, which is really feeding some 

6 information to this whole issue of distribution 

7 transformer efficiency and they asked several 

8 questions, and we responded to all those questions. 

9 You look -- am I not saying something correct? We 

10 actually responded -- this is EERE-2010 DT standards 

11 0048. So we actually submitted our answers to those 

12 questions back on April 18, 2011. And we have not 

13 really heard a response that we want those issues 

14 dealing with, like dual voltage transformer, to be 

15 covered in this rulemaking. They tried to make up 

16 or resolve or answer some of the issues that 

17 occurred in that 2010 rulemaking. So we just want 

18 to make sure that they’re part of the record and 

19 that scaling methodology and other things like that 

20 are considered in this rulemaking process.

21 So I think that’s it unless, you know, Wes 

22 had done a great job of really helping to explain 

23 why there are difficulties in going up into the EL-2 

24 and EL-3 level. I don’t know if you want to just 

25 come back to that later or if you want to -- Wes, do 
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1 you want to expand on any of that now?

2 MR. PATTERSON: Let’s see what the folks 

3 out there --

4 MR. CASKEY: Okay. So thanks for the 

5 opportunity to present all this.

6 MR. PARKER: Thank you, John, very 

7 helpful. I should say that, you know, the question 

8 of BiL scaling and separate treatments for networks 

9 and vaults and perhaps for certain other categories 

10 ... My sense is that quite a lot of agreement that 

11 these issues can be dealt with and should be dealt 

12 with on a different level. We have groups that have 

13 been formed to address those issues, and I think 

14 they’ve made pretty good progress ... so I feel very 

15 comfortable focusing on the big picture with the 

16 understanding that, yes, we will have to discuss 

17 special cases if we have time.

18 MR. ANDERSON: If I could just confirm --

19 where is the -- where can we find those plots right 

20 there? I’ve got the last one, but I don’t have the 

21 plots right there. Was that -- did you send that 

22 out? Is that on the Sharepoint?

23 MR. PARKER: I think it’s on Sharepoint.

24 MR. ANDERSON: It just came out? That’s 

25 why I missed it. Thank you.
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1 MR. DeLASKI: So point of clarification, 

2 if I may.

3 MR. PARKER: Yes, Andrew.

4 MR. DeLASKI: So you’re using --

5 MR. PARKER: Andrew, give your name.

6 MR. DeLASKI: Andrew. 

7 MR. PARKER: Just trying to --

8 MR. HOPKINSON: I sat on this side of the 

9 table because originally your name tag was over 

10 there, so I thought I’d better ... your name tag.

11 MR. DeLASKI: Phil took my spot. So 

12 you’re using the 2011 plot?

13 MR. CASKEY: Correct.

14 MR. DeLASKI: So that -- you guys are 

15 using a similar decision criteria as what the steel 

16 men are using. 

17 MR. CASKEY: Right, and the reason we’re 

18 not going up to like 1.2 or one -- this is John 

19 Caskey, NEMA -- the reason we’re not going up to 

20 those incremental increases is because we really 

21 feel that the manufacturers, again, they over22 design, so in reality, what they’re going to be 

23 building is going to be close to that anyway.

24 MR. DeLASKI: ... and then bringing it back 

25 to the closest design -- closest EL backwards?
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1 MR. CASKEY: Correct, essentially.

2 MR. DeLASKI: That’s your approach?

3 MR. CASKEY: Yes, sir.

4 MR. DeLASKI: All right. Thank you.

5 MR. PARKER: Let me just also offer one 

6 point of clarification that might help with the 

7 discussion of steel selection and why it is not 

8 featured in the current analyses. My sense from 

9 talking to people at BNL over the last few weeks, 

10 and increasingly over the past couple of weeks is 

11 that the -- is that the whole, the tool that they 

12 use is not very well suited to modeling and 

13 predicting actual steel selection. What they tried 

14 to do with the last least cost analysis is examine 

15 the performance metric, and to achieve this 

16 performance you will get the least cost savings 

17 compared to the first cost. It doesn’t really 

18 enable them to micromanage and second-guess 

19 manufacturers as to what particular steels they will 

20 ship, and what particular steels they will use. And 

21 I think if we take away anything from the last five 

22 discussions of analysis that we’ve had, it’s that 

23 there isn’t a lot of confidence, not on your side, 

24 not on our side, not on the analysts side, in the 

25 ability of the tools that we have now to predict 
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1 what steel will be selected at what efficiency 

2 levels, below the obvious -- there are high 

3 efficiency levels where it’s all amorphous all the 

4 way. But at the levels that are critical to this 

5 committee, it’s really a certain amount of humility 

6 is required and I think is there.

7 More recently, after the last meeting, 

8 Navigant went out and sent surveys to the 

9 transformer makers about what steels they would see 

10 -- foresee using under a variety of scenarios, not 

11 trying to guess what the price is, let them guess 

12 their own prices for material prices in the future. 

13 I think it was, you know, what would you see as your 

14 ... we received a few responses which have been very 

15 helpful, I think very appreciated. We should have 

16 gotten many responses. It would be very, very 

17 helpful if they could get more, and if they could, I 

18 think we could have although subjective, surveys 

19 that empirical database -- foundation on which to 

20 base our positions in our ...

21 So that’s why we didn’t feature in the 

22 analysis, so far, and I think it would be useful for 

23 people to just keep that in mind when we look at 

24 choice of steel. It’s an imperfect tool. Steve.

25 MR. ROSENSTOCK: Steve Rosenstock, EEI. 
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1 Just to follow up on that, and I appreciate that, 

2 but again, looking at this just from a kind of 

consumer perspective, looking at the November 3rd 3

handout, the November 3rd 4 analysis, where it does 

5 show what happens in different design lines in terms 

6 of steel choices. Start with design line two --

again, based on this analysis from November 3rd

11 Going up to EL-1, based on this analysis, 

12 it says 100 percent amorphous --

7 using 

8 the 2010 prices, they’re saying in design line two 

9 they -- in this analysis it says 91.5 percent M2, 

10 SA-1 amorphous 8.5 percent for the base case.

13 MR. PARKER: What page are you on?

14 MR. ROSENSTOCK: I’m on page 13 of the 

November 3rd

18 MR. PARKER: You’re talking about the 

November 3

15 handout that’s entitled life cycle cost 

16 impact period, national impact analysis results for 

17 medium voltage liquid immersed transformers.

rd

MR. ROSENSTOCK: November 3

19 ?

rd 20 , yes. That’s 

21 the latest data that we have. There is no breakout 

22 of steel by design by efficiency level in the 

November 3rd

24 MR. PARKER: I explained why there wasn’t.

23 --

25 MR. ROSENSTOCK: Right. But I’m saying, 
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1 following up on your point, is that okay, fine, it 

2 might not be the most perfect analysis, even if it’s 

3 off by say 20 percent, even if it’s off 20 percent, 

4 that would still mean 80 percent amorphous and 20 

5 percent other steels at EL-1. Again, using a plus 

6 or minus, using an estimation factor, using a 

7 variability factor, that’s still a pretty massive ...

8 MR. RIVEST: Steve?

9 MR. ROSENSTOCK: Yes, sir.

10 MR. RIVEST: This is Mike Rivest. I 

11 understand where people’s positions are and I just 

12 wanted to support what was said here about the tool. 

13 Keeping in mind that the intent of the tool is to 

14 drive the general cost efficiency track, and it 

15 certainly was not the intention of the analysts to 

16 be predicting market share of steels in putting 

17 together this analysis, or ... construct of designs. 

18 And we find it unfortunate that it’s become a 

19 central point of everyone’s attention, because 

20 that’s not what it was supposed to be. 

21 And if I compare with every other ruling 

22 that I’ve been involved with over 15 years, DOE has 

23 never had the ambition to get into the business of 

24 designing like it seems we have been here. And I 

25 don’t know how many rules have been five dots in a 
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1 regression and ... that, so it just seems as though 

2 we’re 95 percent of the way there, 100 percent of 

3 the way there, but we shouldn’t be leaning so much 

4 on the tool that wasn’t designed for that, and 

5 that’s why I think there’s value in listening to 

6 what people are building at those efficiency levels 

7 today and factoring that in with at least the 

8 weight, or more, than those plots.

9 MR. ROSENSTOCK: Steve Rosenstock, EEI. I 

10 -- again, I appreciate that, but --

11 MR. RIVEST: What you’re looking at is not 

12 a complete record.

13 MR. ROSENSTOCK: It’s not a complete 

14 record, but again, Steve Rosenstock, EEI, that’s why 

15 I was trying to say is even if a complete record 

16 shows, you know, again, instead of 100 percent, 

17 let’s say the complete record shows 70 percent. 

18 Again, I have no idea what that answer’s going to be 

19 based on life cycle cost analysis, based on 2011 

20 prices, based on other input that you get, it still 

21 shows -- again, it’s still estimates, it still 

22 theorizes -- I don’t know which adjective to use --

23 a significant market shift even at EL-1. So you can 

24 choose whatever road you’re most comfortable with, 

25 but again, information that we have, that we have to 
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1 use to try to reach consensus is at this design 

2 level --

3 MR. RIVEST: I’m saying -- Mike Rivest --

4 don’t use just that.

5 MR. SCHOEN: Jerry Schoen, AK Steel. 

6 Excuse me, but I’d like to jump in here. I sense 

7 the spreadsheet ... from the 2007 rulemaking that 

8 showed exactly what we were asking for. We took 

9 some comfort from the analysis that it showed a 

10 breakdown of product types by tonnage, by design 

11 segment. It was a fairly exhaustive piece of work 

12 by the Navigant team -- I’m not sure who did it. 

13 I’m sure you’re aware of that. That was generated. 

14 But why can we not get something like that now?

15 MR. PARKER: Jeremiah, can you get that 

16 please?

17 MR. RIVEST: Jerry, I’m well aware it’s 

18 easy when you’re far from the cliff to take a couple 

19 steps. As we get closer, the accuracy of the tools 

20 have to be taken into account, so you have the 

21 coarse adjust and you have the fine adjust. And 

22 we’re just recognizing the inaccuracy of the tool. 

23 I think that, from what I’m hearing, from the other 

24 evidence that exists that it’s a conservative value 

25 right now that’s being built in where amorphous is 
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1 being permitted. ... reason that, that may be the 

2 right place to be, is to be conservative. But let’s 

3 not say it has 100 percent accuracy. It does not.

4 MR. PETERSEN: Eric Peterson, AK Steel. I 

5 think you made a couple of really good points, that 

6 previously it was more a coarse adjustment and now 

7 it’s a fine, and that we can’t necessarily just look 

8 at the model. We have to look at what else we have. 

9 And I think what else we have is the transformer 

10 manufacturers that have just come forward and 

11 provided efficiency levels at which they believe 

12 they can still have a good level of supply. And you 

13 will notice that it is very low. And based off of 

14 our analysis, and taking the tool that we were just 

15 talking about, and recognizing that it is fine, we 

16 are very near a cliff, very near a cliff. And when 

17 you go over that cliff, you will have US steel 

18 industry that can no longer support the US 

19 transformer manufacturing and will be out of the 

20 business. And it truly is that close to the cliff

21 and must be very seriously considered.

22 So we do have to take all these things 

23 into concern. We ask what the steel industry has 

24 brought together, the model you’ve brought, and 

25 we’ve just heard from the transformer manufacturers 
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1 of how far they believe they can go. The last point 

2 I guess I make, is that all of the numbers they 

3 provided is on the 2011 data, which against the 2010 

4 or the last draft, is basically consistent with the 

5 exception of this design line five. I would say 

6 that if you looked at this one versus the last one, 

7 the design line five would have a zero for that 

8 crossover instead of a one, and again, I just 

9 reference the conversation we had this morning, 

10 questioning the validity of the pricing. 

11 So I would emphasize that the position of

12 whether or not steel can continue to compete and 

13 support the US transformer industry is very tenuous. 

14 MR. ALLEN: (on phone) Jerry Allen, 

15 Metglas. ABB’s analysis, some of you could show 

16 that the various steels are competitive well above 

17 level one, and if you use that same argument that 

18 you people are using, that because amorphous is a 

19 cheaper product, below level one nobody will use the 

20 other steels could be used to say they need designs 

21 to use amorphous at level zero, which is not true. 

22 You’re pulling this too far.

23 MR. PATTERSON: Wes Patterson, ABB. I 

24 think I’ve caused a lot of discussion with some of 

25 the information that I’ve provided. The first go-
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1 around, back, I don’t know, three, four meetings 

2 ago, we spent maybe two hours discussing where do we 

3 have a mix of grades of steel. And at that time we 

4 didn’t have defined lines of efficiency levels. So 

5 I arbitrarily chose ten percent buckets, and I 

6 looked at combinations of steels that were used to 

7 get from -- to build between five and ten percent 

8 below the current standard.

9 And then I eventually showed at that 

10 meeting that ABB’s experience was that if we were 

11 building units between ten or 20 and 30 percent 

12 below the current standard, we would have used a mix 

13 of amorphous and grain-oriented steels at that 

14 level. 

15 Then after we defined the efficiency 

16 levels, the question became then, not at what 

17 efficiency level would I be able to design a 

18 particular unit, but what would be the impact on the 

19 business if we set the standard at the particular 

20 level. It’s not exactly the same question. Because 

21 we build a mix of units, no matter what level we set 

22 the standard at, I will be supplying product that is 

23 better than the standard. Much better.

24 And in order to maintain a balanced supply 

25 of materials, we must insure that we have adequate 
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1 supply of CGO. Adequate supply of CGO cannot be 

2 established merely by M2, because M2 availability is 

3 linked tightly to M3. So we have to be cognizant of 

4 the relative volumes of the M3 with the M2, and then 

5 where does amorphous play in. 

6 So I produced a number of other charts, 

7 sent those out for distribution, and these charts 

8 show that for sure, that if we set a standard a dEL9 1, this is from ABB’s experience, that we will have 

10 an adequate supply of amorphous, M3, and M2 in the 

11 liquid filled market. There’s no doubt in my mind. 

12 When I move to standards set at dEL-2, the relative 

13 mix of the M3/M2 shifts and starts to raise a 

14 concern about the availability of CGO because the M2 

15 percentage is starting to kick up. The dEL-2 level 

16 losses is 15 percent below the current standard. 

17 When we move to dEL-3, which is only 18 percent 

18 losses below the current standard, only three 

19 percent spread, my data indicates I am now 

20 destroying the supply of CGO. I’ve essentially 

21 shifted all the CGO to M2. I don’t understand how 

22 the steel manufacturers can supply it because they 

23 can only supply it as an outgrowth of the M3. 

24 So there my data is saying that a standard 

25 set at dEL-3 could put CGO stock totally in 
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1 jeopardy. And this will then create a supply issue, 

2 from my perspective. DEL-2 is a question mark, and 

3 dEL-1, I feel we can do. I hope that helps clarify.

4 MR. ALLEN: Yes.

5 MR. PARKER: John, as I understood your 

6 proposal, it is based upon a variety of factors, not 

7 just the question of steel supply, but the question 

8 of life cycle cost, of dollars per watt, and so 

9 forth, is that right? I’m not going to put you on 

10 the spot and ask you what the factor that was 

11 determinant, but if you were basing your analysis 

12 just on steel supply, you might not have come up 

13 with the same analysis that you came up with. Fair 

14 to state?

15 MR. CASKEY: I tried to do my best job of 

16 clearly communicating what the principles were that 

17 we were using to arrive at an appropriate EL level. 

18 So if we tried to apply all of those issues dealing 

19 with small manufacturers going out of business, and 

20 the crossover point, and the competitiveness of 

21 materials and suppliers, as well as the issue with 

22 life cycle cost -- so we tried to factor all of that 

23 in as best we could.

24 MR. PARKER: Any other clarifying 

25 questions of John’s proposal? Steve, did you want 
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1 to make a proposal?

2 Proposal

3 MR. ROSENSTOCK: Steve Rosenstock, EEI. I 

4 want to kind of start with just following up on the 

5 network and the vault issue as a part of this 

6 negotiation. We’re -- there was a subgroup out, a 

7 variety of people on it, and I think it’s pretty 

8 close in terms of getting a good definition and also 

9 deciding on, well again, the issue is, exemption 

10 versus keeping it at EL-0. There is obviously for 

11 legal reasons as ..., there is obviously a difference 

12 in terms of federal -- federal action. Because 

13 right now, officially, all of those transformers are 

14 under EL-zero, and we’re saying we really don’t --

15 we’d rather have an exemption, but there’s already a 

16 standard out there, and you don’t get an exemption 

17 after a standard has been put in place for these 

18 products. He’s shaking his head no. That’s not a 

19 good sign. Mike.

20 MR. COHEN: There’s no standard in place 

21 for it.

22 MR. ROSENSTOCK: There is a standard in 

23 place for it now, it’s EL-0, I believe. 

24 (overspeaking.)

25 MR. ROSENSTOCK: So the question is -- I 
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1 think there’s agreement, especially among the 

2 utility side, we’d like the exemption or having it 

3 not raised at this point. Exemption, especially for 

4 retrofits especially. 

5 But again, I think we can come to getting 

6 to yes on that issue. I think some, I think, we’re 

7 getting pretty close on that. So again, in terms of 

8 that sub-issue, again, I put that on the table. I 

9 don’t know if we have an exact proposal today, but I 

10 think the subgroup is pretty close in terms of 

11 everybody sees a very small niche market, but there 

12 are size constraints that I think we’ve come to 

13 agreement on.

14 MR. PARKER: Excuse me, just a second, 

15 Steve. Just if the folks will mute their phones, 

16 we’re getting a lot of excess noise, making it hard 

17 to hear, so please mute your phones. Thank you, 

18 Steve, go ahead.

19 MR. ROSENSTOCK: Again, Steve Rosenstock, 

20 EEI. We do not have our own separate proposal for 

21 this group. We’ve been meeting with other groups to 

22 see if we can come to a consensus in terms of how 

23 many groups we could work with and so we think there 

24 are -- so we would like to probably look, probably 

25 maybe go off separately, maybe to caucus about the 
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1 two proposals, but I think we were -- I think at 

2 this point we’re looking favorable on the steel 

3 proposal right now. We do not have separate 

4 numbers, but I think at this point, we have the most 

5 comfort with the proposal from the steel makers 

6 because it minimizes risk. Our member companies are 

7 very much involved with risk management. You’ve 

8 heard about the issues in terms of materials supply, 

9 transformer supply, manufacturers, and especially we 

10 are concerned with reliability. There have been 

11 issues in the past, there’s some transformers used, 

12 and we do all want to see higher efficiency and we 

13 think that, again, we’re very concerned about that 

14 crossover point. At this point, based on all the 

15 evidence we’ve seen and all the numbers, and all the 

16 -- and the latest and greatest analysis, we think 

17 that, especially to minimize incremental cost and to 

18 minimize paybacks, and to have higher efficiency, at 

19 this time, based on all the analysis that we’ve 

20 seen, right now we are most comfortable with the 

21 proposal from the steel manufacturers. Thank you.

22 MR. HIRSCH: an I just add a couple 

23 comments real quick? Steve mentioned the data, and 

24 I think from the utility industry, I’ve been in the 

25 industry four years plus, and I can tell you it’s 
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1 been drummed into me from day one, every dollar I 

2 spend I need to make sure I’m getting adequate 

3 payback for my customers. So we’re really concerned 

4 about that. 

5 The other thing on the reliability end. 

6 Reliability is two-fold. Number one, reliability of 

7 supply. We’re afraid if we go to a completely 

8 different steel very quickly, that there’s going to 

9 be supply problems and we’ll not be able to serve 

10 our customers. The other part of reliability is the 

11 fact that there is a learning curve, whether you 

12 like the factor or not, there’s a learning curve in 

13 using amorphous steel, building transformers with 

14 amorphous steel. So we drive the smaller 

15 manufacturers to that point, if they don’t go out of 

16 business, that there’s going to be a learning curve, 

17 and the reliability of the product is going to 

18 suffer from that. 

19 I think those two things I just wanted to 

20 clarify here. Most utilities that have bought 

21 amorphous in the past do not track them to tell me 

22 whether they had problems or not. There’s one other 

23 utility besides my utility, that has tracked them 

24 and you’ll see my numbers most probable, but we see 

25 about a 10.9 year life out of the amorphous steel 
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1 transformers, where our normal transformer 

2 population is about 29.4. 

3 So I think we’re a little bit concerned. 

4 We suspect that that was a learning curve in using 

5 the product, but those issues are really what’s 

6 playing on utility minds.

7 MR. HYLAND: Mike Hyland, APPA. Because I 

8 love using e-mails, I e-mailed at 1:56 out to my TD 

9 list, which is about 700 utilities, and I said, hey, 

10 do you rewind? Have you started to rewind? What 

11 percentage? One of my utilities in the top five in 

12 the south rewinds based on 20 percent increase from 

13 2010 dollars. Across the state, in the same state, 

14 the utility that’s in our top 50 is rewinding every 

15 single district transformer now. They’ve already 

16 made that decision as an engineering practice. I’m 

17 getting a few other samplings. And I was telling 

18 the guys a lot of smaller systems with no 

19 engineering staff, they said they don’t rewind at 

20 all. They will look at it. Between ten percent and 

21 20 percent is really going to make them tip. Some 

22 of them don’t want to do it, which we don’t want 

23 them to do it, to be honest with you, we don’t want 

24 them to because some of the comments we’re getting 

25 about rewinding is, you’re not getting the same 
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1 warranty -- some you are, some they’re not. And 

2 some are saying they’re just not that great. 

3 They’ve experienced rewinding so they really, really 

4 are hoping we don’t go to push them to rewinding.

5 MR. PARKER: John, did you want to 

6 comment?

7 MR. CASKEY: Yeah, just a quick point. A 

8 quick point of clarification and to help people in 

9 terms of when they throw out ten or 20 percent, it’s 

10 the incremental cost between the, I guess like the 

11 EL-0 and the next efficiency level. You know, what 

12 is incremental cost, the first cost of the 

13 transformer. Other people are saying the ten or 20 

14 percent relates to the price differential between 

15 the new transformer and the rebuilt transformer. So 

16 when you throw out ten or 20 percent, are you saying 

17 that’s the price differential between new and 

18 rebuilt, and that makes the decision? Or are you 

19 just saying an incremental price increase of ten 

20 percent above what they’re used to paying, they’re 

21 going to switch to rebuilt?

22 MR. HYLAND: It’s Mike Hyland, APPA. It’s 

23 an incremental increase in the transformer budget 

24 for new transformers.

25 MR. CASKEY: Okay. 
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1 MR. HYLAND: Now I did have a guy from 

2 Kentucky say that for a 25 KVA pad -- let’s see if I 

3 can pull up John’s e-mail -- a new pad was costing

4 about $2000, and he can rewind it for $900 -- that’s 

5 what he just got in this week. 

6 PARTICIPANT: 25 KVA?

7 MR. HYLAND: This is a small muni in 

8 Kentucky.

9 MR. ANDERSON: Richard, while Mike looks 

10 for that, I’m sorry, Rick Anderson.

11 MR. PARKER: Yes, go ahead, Rick.

12 MR. ANDERSON: It’s important to know that 

13 when we looked at the Sharepoint data, that the 

14 current base case efficiency level, 99.08 for a 50 

15 KVA pad, that the first costs -- we’re already there 

16 inasmuch as quotes from the rewinding manufacturers, 

17 they’re already quoting that based on the current 

18 efficiency levels, you know, they can beat the price 

19 of an EL-0. That’s right now. So, you know, you 

20 start to approach one, and that’s a little bit why, 

21 like Steve said, we agree with the steel 

22 manufacturers that, you know, you’re getting real 

23 close to forcing us to really seriously consider 

24 rewinding transformers. So we’re already there. If 

25 you go higher, you’re going to push us over the 
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1 cliff.

2 MR. FERNSTROM: Gary Fernstrom, PG&E. 

3 Richard, a lot of the utilities in EEI, APPA and so 

4 on have been stating their position on this. I feel 

5 like I need to speak up for PG&E and California 

6 investor-owned utilities. PG&E serves roughly nine 

7 million customers. I don’t know for Sempra, but the 

8 population of California is about 30 million, I 

9 guess, and aside from the munis and public power, we 

10 serve most of the rest of the customers. 

11 We too are concerned about minimizing cost 

12 and the lowest life cycle cost for our customers. 

13 However, as Tom Eckman stated earlier, we’re looking 

14 at a 30 year window into the future here, and we 

15 feel like investment in a little higher efficiency 

16 is important because we’re much more likely to 

17 undershoot than overshoot that investment.

18 The second point I’d like to make is 

19 there’s been a lot of discussion about risk and the 

20 rebuild market in contrast to the equipment market. 

21 Those are real risks, for sure, but they’re risks 

22 involved with everything the utility does. And 

23 frankly I think this relatively small change that 

24 would occur in the transformer manufacturing and 

25 design is relatively low risk. If we decide to 
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1 rebuild transformers rather than purchase new, we’re 

2 shooting ourselves in the foot because while that 

3 may be less expensive, it certainly isn't a prudent 

4 thing to do, looking forward 30 years into the 

5 future.

6 MR. HYLAND: I found that e-mail. Just 

7 says a 25 KVA, $2000. To rewind it was $900.

8 And I want to address that comment real 

9 quick too. And I appreciate it. But municipal 

10 market, we operate under Sunshine Laws. You want to 

11 find out transformer bid, they’re on the website, 

12 they’re public records. Unfortunately, that’s 

13 operating in every single employee’s pay too. If 

14 you want to know what your neighbor makes in a 

15 municipal. So we do all look at first cost a lot. 

16 In some areas, we are forbidden from looking at 

17 total life cycle cost. When we pushed, the EPA 

18 Energy Star transformer program back in the 90s that 

19 we signed on to, that was one of the kickbacks from 

20 some of our munis. We’d love to, but we can’t. It 

21 comes down to the first cost, whether it’s a fire 

22 truck, whether it’s building a school, it’s 

23 contractor or it’s a transformer.

24 MR. HOPKINSON: What are the numbers 

25 again?
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1 MR. HYLAND: $2000 to $900. $2000 for the 

2 new, $900 for the rewind.

3 MR. HOPKINSON: And that was a 50 KVA?

4 MR. HYLAND: Twenty-five.

5 MR. PARKER: Are these munis regulated?

6 MR. HYLAND: These are self-regulated. 

7 Non-profit, owned by ... so they answer to the ..., 

8 typically.

9 MR. PARKER: Andrew.

10 Proposal: Advocates

11 MR. DeLASKI: So I’d like to respond to 

12 the proposal on the table. We did have a chance to 

13 caucus over lunch and as everyone knows, we made a 

14 proposal at the last meeting what our ... So I want 

15 to make a few observations. One is that we also 

16 want to echo John Caskey’s words that we really 

17 appreciate the process that this took. We learned a 

18 lot through this process. It’s been an enormous 

19 amount of work. I started to think about the 

20 person-hours that have gone into this effort over 

21 the past few months, I guess it’s the past two 

22 months. It’s been kind of a lightning-speed 

23 process, and I just -- just the person-hours, and 

24 you figure the e-mail time we’ve spent, more than 

25 I’ve spent on most topics, both on the part of the 
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1 suppliers, the transformer manufacturers, utilities, 

2 DOE and the consultants. So we really appreciate 

3 all the effort that’s gone into this process.

4 I recognize for DOE this is the first time 

5 that a rulemaking like this -- a process like this 

6 has been attempted for a rulemaking, and it was a 

7 complex one, given the interests at stake and in 

8 terms of technology. This is more complex than a 

9 lot. So I really appreciate the effort put into it.

10 I also observed that there are a lot of 

11 areas of agreement. Some of the issues that the 

12 group differed, parties just raised, the 

13 manufacturers, the transformer manufacturers, and 

14 the utilities represented by Steve, by EEI, there is 

15 agreement where we see our agreement that we also 

16 noted in our comments, our proposal last time. We 

17 said that we were comfortable with the notion of 

18 some sort of scaling to deal with high BILs, and we 

19 remain comfortable with some sort of scaling to deal 

20 with high BIL transformers.

21 We remain comfortable with some special 

22 treatment for vaults and networks and I think Tim 

23 and Tom Eckman have been involved in that working 

24 group to come up with their approach, definitions 

25 for vaults and networks.
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1 We remain comfortable, as we said early 

2 on, the first meeting, with separate treatment for 

3 poles and pads, and I understand that we remain 

4 flexible on that point, let’s put it that way, that 

5 -- there was discussion last time about consistent 

6 standard for poles and pads. Today the proposals 

7 are for different standards for poles and pads, I 

8 think, as I interpret them. However, we remain 

9 comfortable with either approach. And appreciate 

10 the words that Wes said early on about not wanting 

11 poles to pull down the standard for pads.

12 We haven’t discussed the other proposals 

13 we heard today, have not addressed the issue of 

14 timeframe, that is the period between when the final 

15 rule would be published and the effective data, so I 

16 presume the assumption is, I guess, three years. 

17 And we remain comfortable with a three year lead 

18 time.

19 A new topic that we felt significant today 

20 was this issue of refurbishment. We think there’s a 

21 shared interest around this table in avoiding seeing 

22 the refurbishment market take off. I think we’ve 

23 heard a lot of folks say it’s not in the interest of 

24 anyone to see that market take off. So we have 

25 shared interests and we are interested in working in 
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1 the future to prevent that. There are a number of 

2 ways that can be done, either through rulemaking, 

3 we’ve argued that DOE has some authority in 

4 rulemakings. I think the ... was responding to our 

5 comments in part ... we made a comment in other 

6 dockets that we think there’s an opportunity to 

7 address it, either through DOE or in other venues at 

8 the state or federal level. So we think this is 

9 something that can be addressed, and that we can 

10 address it most effectively working collaboratively.

11 So those are the areas of agreement. 

12 However, the big issue of what levels we remain 

13 pretty far apart. We started out at EL-4. We 

14 suggested last time that we could -- that EL-3 was a 

15 level that we would support. We remain committed to 

16 that position. We think at that level they’re not 

17 all amorphous world, that there is competition, 

18 based on the information that we’ve seen. We take 

19 that as a position that is defensible one and that 

20 has -- one that would get a fair consideration in a 

21 contestable rulemaking process.

22 We said last time, at the end of the 

23 meeting that we sort of drew a line in the sand, 

24 frankly. We said we’re not interested in looking at 

25 EL-1 or below. For the proposal that we heard today 
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1 from NEMA was EL-1 and below for one class, one 

2 design line. And the steel manufacturers below EL3 1. So we were pretty clear last time that we 

4 weren’t interested in looking at levels below -- at 

5 EL-1 and below. And that remains true. Our view is 

6 that -- what we heard today, frankly, is a bit of a 

7 step backwards for some stakeholders. Some 

8 stakeholders last time were ones that supported two, 

9 are now saying one. So we’re kind of going 

10 backwards in our argument. So, I understand that 

11 people change their positions in attempts to get to 

12 consensus, and I understand that as part of the 

13 process, but we sort of see this as not a step 

14 forward. We saw some momentum towards level two 

15 last time, that seems to not be the case as we sit 

16 here today. 

17 So our sense is that, again, we asked 

18 ourselves, what’s going to happen on behalf of the 

19 rulemaking. What happens when this process, if this 

20 process breaks down, if we don’t have consensus from 

21 this table? What’s going to happen? DOE is going 

22 to make the decision based on the record, and we

23 think that that’s likely to be above the levels that 

24 have been proposed today by the utilities, by EEI, 

25 by steel manufacturers and by NEMA. So we think 
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1 that we are better served by going through a 

2 contestable rulemaking process than by agreeing to 

3 levels that have been proposed today.

4 Again, we really appreciate the process, 

5 but we -- the zone of agreement, so-to-speak, seems 

6 to be pretty big gulf, and a widening one, as 

7 opposed to a narrowing one. So our sense is, unless 

8 there’s a -- some sort of movement possible by the 

9 other parties, that we may have reached a point 

10 where we’re just have to say we tried and we 

11 couldn’t get there. We’ve had two other transformer 

12 -- two other sets of transformers that we could talk 

13 about, and we’re ready to move on. Unless other 

14 parties are ready to start moving towards higher 

15 efficiency levels, then we should move on to medium 

16 voltage dry type.

17 MR. ROSENSTOCK: Clarifying -- clarifying 

18 question? Just clarifying question, Andrew. Steve 

19 Rosenstock, EEI. So previously your proposal was 

20 level four for design line one, EL-4 for design line 

21 two, EL-3 for design line 3, EL-4 for design line 

22 four, and EL-4 for design line five. Again, just 

23 clarifying, are you saying you’re okay with three 

24 for all of the design lines?

25 MR. DeLASKI: That was thrown out at the 
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1 last meeting.

2 MR. ROSENSTOCK: That’s where you are now, 

3 basically, three for all the design lines?

4 MR. DeLASKI: Yeah, three .

5 MR. ROSENSTOCK: I just want to clarify.

6 MR. DeLASKI: Yeah, thanks, Steve. We 

7 recognize that four pushed up against the limits, 

8 the engineering limits last time, and three gave 

9 more space, so to speak, where there’s still -- both 

10 materials can be used for the product, both material 

11 classes. And that four was pushing it too far 

12 against the limits and that would lead to some 

13 transformer types where you would only have one 

14 material. So we pulled back to three with that 

15 understanding. We also had suggested that we would 

16 be comfortable with differential treatment for poles 

17 and pads. So the new analysis that may suggest that 

18 one step back on poles may be appropriate, so in 

19 other words, three across the board, but again, 

20 we’re comfortable, as I said in my opening remarks, 

21 with differential treatment for poles by BIL class 

22 for vaults and networks.

23 MR. ROSENSTOCK: Thank you.

24 MR. ROY: This is Robin Roy, NRDC. One 

25 little nuance, or insight, a little bit. We ... an 
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1 area of agreement and that is one additional one, is 

2 our interest in defining efficiency levels where 

3 there is a role for all types of steel. I think you 

4 mentioned it, but I didn’t think you emphasized it -

5 - quite emphasized it. We really are in agreement 

6 on efficiency levels where there is a role for 

7 multiple steel types. We see how important that is 

8 for a variety of reasons. That gets back to some of 

9 the questions you were discussing for these past 

10 three years, is trying to figure out where those 

11 levels exist. We’ve, through some excellent wise 

12 advice from DOE and from General Electric, but we 

13 don’t have the ability to look at DOE’s analysis to 

14 get comfortable. We appreciate the role that 

15 Navigant and DOE are undertaking in trying to help 

16 us form that issue a bit more. I think it’s really 

17 very important. 

18 So one of the reasons we would be -- I 

19 would be -- ready to discuss this within a caucus, 

20 but I would be reluctant to step back to the 

21 proposals that was made at zero level for some more 

22 analysis, some opportunity for that to inform the 

23 decision ... And that’s going to -- if we can’t come 

24 to an agreement ... possible, it will fall back to DOE 

25 and you’ll have to ... process, and we’ll look to you 
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1 to do that analysis.

2 MR. PARKER: Gary.

3 MR. FERNSTROM: Gary Fernstrom, PG&E. I 

4 just got one more quick comment. I believe 

5 California’s needs line up pretty closely with the 

6 position that Andrew just outlined. But, by nature, 

7 any federal standard is a compromise, so we’re 

8 prepared to compromise at some reasonable level, but 

9 it needs to be a level that meets the needs of the 

10 most needy with respect to energy efficiency as well 

11 as those that are more first cost conscious. 

12 MR. PARKER: So let me offer just a couple 

13 of thoughts. It may or may not be useful. As I see 

14 there are three main sticky points.

15 One is from the steel makers’ standpoint 

16 and the transformer manufacturers standpoint, the 

17 question of steel selection. At what point is it, 

18 exactly that we have a healthy, whatever that means, 

19 mix of steels? We have been rather vague about that 

20 around this table. We brought an analysis that is 

21 not entirely reliable in all cases, and we don’t yet 

22 have what transformer makers are shipping now in 

23 terms of mix of steels, across the board, beyond A 

24 and B. What were shipments ...

25 One thing we might discuss, if you think 
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1 this is worth it, is what do we mean by having a mix 

2 of steels? Today’s market share? The only market 

3 share that we can contemplate. Or is there a market 

4 share from the standpoint of transformer makers that 

5 would be somewhat different from today but that 

6 would still be acceptable?

7 Secondly, from the utilities, is that 

8 there’s fundamental problem with this dollars per 

9 watt method. It is a concern that the metrics that 

10 have been -- that the dollars per watt figures that 

11 they come up with when they do their own internal 

12 analysis is just too high from the standpoint of 

13 their own ... 

14 I think clearly the thing that is 

15 important to understand is that the DOE doesn’t 

16 follow the corporate decision policy, and won’t 

17 under any circumstances. It will base its decisions 

18 upon the economics and particularly, based on the 

19 economics of life cycle cost. If there are -- we 

20 had this discussion in the morning, but if it would 

21 be helpful to actually explore how does dollars per 

22 watt relate to the life cycle cost assessment, how 

23 do you translate from one to the other? How do you 

24 bridge those things? If there is genuine concern 

25 that that’s a genuine issue for people that would 
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1 benefit from further discussion, I’d like to hear 

2 that. I propose that we could get to it -- and I 

3 don’t have a sense of whether that’s just a 

4 bargaining position, or whether that’s a genuine 

5 intellectual problem that people are having a hard 

6 time to contend with.

7 But I think what you do need to understand 

8 is that as I understand that based on the law, life 

9 cycle cost in some way will be the metric by which 

10 cost savings are measured in the final analysis, in 

11 the DOE rulemaking. That’s what the statute says.

12 So a third issue that got hung up on the 

13 timing again is refurbishment. And this is probably 

14 the most frustrating for everybody because on the 

15 one hand, people are rock-solid that it’s going to 

16 happen, it’s a risk, that it’s another cliff. On 

17 the other hand, through four meetings now, we have 

18 not gotten any concrete data on what refurbishment 

19 costs are, on how big the market is. There has been 

20 nothing that they can sink their teeth into 

21 analytically that gives them a way to incorporate 

22 refurbishment into the model, into the life cycle 

23 cost assessment, in the DOE’s decision.

24 In the absence of that, I don’t think 

25 frankly -- I’ll just tell you my views as a 
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1 mediator, I don’t think frankly that they’re going 

2 to be able to do much with anecdotes around the 

3 table if they don’t have data. And we haven’t 

4 gotten -- we’ve gotten some data allegedly on 

5 replacement, but not on refurbishment, and not 

6 systematic. So it is a risk and we do need to have 

7 a discussion about how to deal with it. I think 

8 that Andrew’s point is, I am sure, is well meant. 

9 It’s not in the interest of the environmentalists or 

10 the industry to have the unintended consequences of 

11 a shift to refurbishments. But what we need is a 

12 way of actually figuring out what increase in first 

13 cost will create this risk, at what level? And what 

14 do we do about it?

15 We can punt it to the DOE, but I don’t 

16 think that’s going to get you where you want to end 

17 up. The question is -- is a discussion of dollars 

18 per watt, refurbishment -- are we at a point where 

19 further discussion, using surveys for example of 

20 manufacturers who have the steel selection, or do 

21 people just want to say this is enough, we’ve done 

22 what we can? Ray.

23 MR. POLINSKI: ATI Allegheny Ludlum, Ray 

24 Polinski. Again, I’m just asking Richard or the 

25 DOE, I mean if the utilities had a published PP&I 
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1 procedure which statement what their practice was as 

2 far as cost-effectiveness, that said, hey, if the 

3 rebuilt transformer -- if there was something 

4 written like that -- right now, the difference isn’t 

5 great enough to get it back in a lot of cases, but 

6 they have a published document that says, hey, if 

7 it’s 20 percent, if that’s the number, and right now 

8 we’re at 15 percent, and so it’s zero, but hey, if 

9 we go ten percent up, it’s going to be 25 percent 

10 and what is that? IS that adequate or ... it’s this 

11 cliff mentality. When you’re at a cliff, you know, 

12 you don’t have a problem until you fall off. So 

13 it’s like what position are we going to use, 

14 sometimes from the top of the cliff or whatever, but 

15 just when you fall off it’s kind of catastrophic.

16 MR. ROSENSTOCK: Steve Rosenstock, EEI. 

17 There’s no published document in our members. It’s 

18 always a budget issue, just like for manufacturers 

19 of anything. You have a piece of equipment that 

20 breaks down, what do you do? Repair it or replace 

21 it? It’s the same decision. There isn’t -- there 

22 may be a written policy, other times it’s just based 

23 on your annual budgets.

24 MR. POLINSKI: It would be better if there 

25 was some guideline though that --
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1 MR. ROSENSTOCK: Well, you have guidelines 

2 on some of your people, maybe. There’s probably no 

3 -- you’re asking for written policy. I don’t know 

4 of any utility that has a, quote, “written policy” 

5 on transformer repair versus replace.

6 MR. POLINSKI: Again, Ray Polinski, ATI 

7 Allegheny. And would it be -- I’m just trying to 

8 get something -- I think I understand DOE’s point 

9 and LBL’s point and Richard’s point is that if 

10 there’s no data, then you can’t include it, so I’m 

11 just saying what kind of data can we have. Is it a 

12 survey that you guys in utilities and ask them what 

13 the premium, you know, is when -- if you get a 

14 survey from the top ten utilities and they say this 

15 is the premium, is that adequate for them to 

16 consider? I don’t know what it takes to incorporate 

17 it.

18 MR. RIVEST: Mike Rivest, Navigant. I 

19 think, thinking from a manufacturing impact, which 

20 is different ... so if transformers go up in cost ten 

21 percent, suppose that’s ten percent of the base cost 

22 ... on different steels, and actually steel 

23 incremental sales are going up maybe 20 percent, --

24 Wes is saying no.

25 MR. PATTERSON: Wes.
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1 MR. RIVEST: You’re saying core steel is 

2 half --

3 MR. PATTERSON: It’s half, say roughly 

4 half the price.

5 MR. RIVEST: Right, then the incremental 

6 cost is more than half, most of that is some copper, 

7 so if the price is going up ten percent versus --

8 MR. POLINSKI: Again, Ray Polinski, ATI 

9 Allegheny. Wes’ point, I think, is there’s the cost 

10 of oil, there’s the case --

11 MR. RIVEST: (inaudible)

12 MR. POLINSKI: Okay. 

13 MR. RIVEST: To get to the ball park, so 

14 your loss in sales are lost to other types of steel, 

15 and potentially to the replacement market. Is that 

16 what you’re trying to get at?

17 MR. POLINSKI: I’m just trying to -- Ray 

18 Polinski, ATI Allegheny. I’m trying to say that a 

19 refurbished transformer, whatever that percentage 

20 is, generates no energy savings and reduces the quad 

21 savings --

22 MR. RIVEST: But your interests -- I’m not 

23 talking --

24 MR. POLINSKI: I’m --

25 MR. RIVEST: You’re representing ...
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1 MR. POLINSKI: I’m representing the steel 

2 company and my family who, you know, the consumer, 

3 also a consumer of electricity who just feels awful 

4 concerned that we’re going to be less reliable or 

5 we’re going to be paying more for our electricity if 

6 we move forward.

7 MR. PARKER: All right, that’s --

8 MR. RIVEST: You’re here representing 

9 Allegheny’s interests and ... consumer on the street.

10 MR. POLINSKI: Maybe.

11 MR. RIVEST: It’s that exciting?

12 (Laughter.)

13 MR. POLINSKI: I thought this was a new 

14 reality show ...

15 (Overspeaking.)

16 MR. POLINSKI: Please, Mike, don’t assume 

17 -- there’s certainly a pound of steel aspect of it. 

18 There are jobs for transformer producers. There are 

19 -- it’s -- it’s --

20 MR. RIVEST: ... and I’m not saying -- this 

21 is why we’re here. This is the interest group you 

22 represent, the steel industry. Standard results in 

23 more pounds of steel, and it counterbalances the 

24 loss, potential lost sales to refurbishments, 

25 potential lost sales to --
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1 MR. POLINSKI: Ray Polinski --

2 MR. RIVEST: So whether we run that in 

3 amorphous, that’s what’s happening.

4 MR. POLINSKI: Mike, again, it’s still a 

5 point, right. I mean, yeah, if the levels proposed 

6 -- the levels that we proposed, yes, there’s some 

7 potential, but you get to the levels that Andrew and 

8 his team were proposing, that’s not -- that’s not a 

9 good scenario for I think -- I’m saying that those 

10 scenarios, the costs are up -- EL-3s, the numbers I 

11 heard, sometimes they’re even more than double. 

12 Sometimes, you know, so the transformer costs are 

13 going way up and we’re not talking 20 percent, we’re 

14 talking like one of them was 106 percent. One was 

15 78 percent. I mean, so there’s a lot that’s been 

16 said, there’s a lot of ingenious people out there 

17 that will put the businesses in place to refurbish 

18 when maybe they don’t just got to pay -- they’ve got 

19 a lot of margin to work with, and then there’s the 

20 amorphous component. So, Andrew, with all due 

21 respect, I’ve never seen any data, I’ve seen no data 

22 where the cost for materials is a EL-3. But for --

23 for liquid fuel. But if you have that data, please 

24 send it to me.

25 MR. DeLASKI: Yeah, we -- as I said, we 
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1 were looking for it, and both materials were 

2 available at our very first meeting. We recognized 

3 ... points to the left is what I’m saying. ... that 

4 crossover point. And I recognize that. So -- and 

5 Richard, I would suggest we might take a break, so 

6 people can figure if they want to think of anything 

7 else, before we wrap it up ...

8 MR. PARKER: Well, what I would suggest is 

9 first, I didn’t hear Andrew saying that it was EL-3 

10 or bust, right. I think what you’re looking for is 

11 the ... but I guess the -- what I’m hearing is let’s 

12 take a sort of a straw poll on where people are, and 

13 then I’d just like to hear from people about whether 

14 they think further conversation would be useful or 

15 not.

16 MR. ANDERSON: If you don’t mind, Richard, 

17 just one last piece. A transformer winding machine, 

18 the prices start at $150,000. So my transformer 

19 budget’s two million dollars a year, and I spend ten 

20 percent, I’ve got a winding machine. So -- it’s ten 

21 percent.

22 MR. PARKER: Does every transformer 

23 failure could be ... 

24 MR. ANDERSON: I mean I guess what I’m 

25 getting at is the prices go up, we’ll be forced to 
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1 educate ourselves on how to rewind transformers. 

2 It’s not possible for us to buy a rewinding machine. 

3 MR. PARKER: Okay. Let’s take a quick 

4 straw poll on the three proposals --

5 (General overspeaking.)

6 MR. MEYERS: Do you mind waiting a minute 

7 for Chuck Simmons? He’s the voting member for 

8 Cooper.

9 (Pause for approximately five minutes.)

10 MR. PARKER: Okay. I think we are ready 

11 for the poll.

12 PARTICIPANT: Richard, what’s your 

13 proposal?

14 MR. PARKER: There are three proposals on 

15 the table. The steel makers proposal which is 

16 supported by the utilities ... NEMA, and the 

17 advocates’ proposal.

18 MR. DeLASKI: And can you remind us of our 

19 rules.

20 MR. PARKER: We don’t really have rules 

21 directed at whether we take roll call vote, as you 

22 would say, or we just have a show of hands. There 

23 is a preference expressed by Mike for roll call ... 

24 MR. DeLASKI: Yeah, my sense is that was -

25 - our rule was unanimity. Right? So what’s the 
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1 purpose of a roll call vote for the purpose of 

2 unanimity. And I’m concerned that the role of this 

3 committee is to get to consensus, and I worry that 

4 if we start with a roll call vote, people will be 

5 sort of locked into positions that ends the 

6 conversation. That’s my concern. I’m also 

7 concerned about what happens next. So if you want 

8 to go to a contested rulemaking -- I don’t want 

9 someone to come out of this room -- I mean this 

10 committee is 19 people from industry, broadly 

11 speaking, and six of us who are not -- or five of us 

12 not from industry, and one government.

13 MR. HYLAND: I think maybe -- is that what 

14 it is? I thought it was 24. I think your total was 

15 25.

16 MR. DeLASKI: Okay. Twenty-five, or 24, 

17 but anyway, it’s disproportionately people from 

18 industry. Industry broadly speaking. So I think 

19 the vast majority of people in this room wouldn’t be 

20 here if not for ... rulemaking. You’re not here 

21 because -- the context -- so I think there’s a 

22 majority here, a large majority who say if there’s 

23 zero change you vote for it because that would be, I

24 think .... So I’m concerned that straw votes and 

25 formal votes will say, look, all these guys, these 
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1 three or four guys who stopped us from getting the 

2 consensus. So I’m kind of in a --

3 MR. HYLAND: I’ve never read anything that 

4 said it was unanimity or whatever. I don’t remember 

5 reading that. I don’t remember discussing it. I 

6 don’t remember it being 24-zero. And I personally 

7 have no problem with it being in the public records 

8 and know exactly where each and every person 

9 presents.

10 MR. DeLASKI: Yeah. The committee’s 

11 charged with getting to consensus. 

12 MR. HYLAND: We still can. This is 

13 nothing other than putting your name to your vote, 

14 and we know where you are. So if you want to go out 

15 for a beer and talk about it, and see where we need 

16 to go, we know. What I’d hate to see is us not get 

17 anywhere, not get anywhere tomorrow, and walk away, 

18 and two months from now, or three months from now, 

19 we’re saying well this what he really was saying. 

20 No, I want to know. Why shouldn’t we know? Why 

21 shouldn’t we know where everybody stands on this 

22 issue?

23 PARTICIPANT: I agree.

24 MR. HYLAND: I said, do we have consensus? 

25 When you negotiate you want to know where 
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1 ultimately, at the end of the day, your closing 

2 point was. And if they don’t overlap, at least we 

3 know what the chasm is, what that difference is.

4 MR. DeLASKI: All right. I follow that. 

5 My point is that the committee is overwhelmingly 

6 represented by folks who -- industry.

7 PARTICIPANT: And the conservor.

8 MR. HYLAND: I think Ray’s point and your 

9 point aren’t representing your companies, but you 

10 are representing your companies. So --

11 MR. DeLASKI: I’m finding the percentage 

12 is wrong and I think -- you have the people around 

13 the table who produce the cores, the steel, 

14 manufactured product, the purchased product to 

15 install the product, and use the product. So don’t 

16 you think it should be --

17 MR. PARKER: We are spending a lot of time 

18 on this. Let’s just have the vote. I will --

19 there’s nothing in the ground rules that says that 

20 we have to put names to votes, and I’m not sure that 

21 that is useful to having discussion. It will take a 

22 lot of time if we have to go through that. So let’s 

23 just have a show of hands for each proposal. I will 

24 go write down the show of hands, write down the 

25 number for each one, and then we can discuss whether 
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1 we want to go forward or not. The purpose of this 

2 is to try to reach consensus. It’s not to allow 

3 people to position or ... it’s to try to reach 

4 consensus and we hope -- if we can reach consensus, 

5 that’s fine, but let’s just decide that. Eric?

6 MR. PETERSEN: Can you vote more than once 

7 since there’s three options?

8 MR. PARKER: Yes. Yes.

9 MR. PETERSEN: Thank you.

10 MR. PARKER: So, first for the steel 

11 makers proposal, show of hands. 

12 PARTICIPANT: This is only for --

13 PARTICIPANT: You can vote twice.

14 PARTICIPANT: Wes is not here and he needs 

15 to be here. He went for a smoke. He wasn’t here.

16 PARTICIPANT: Wes, we just had a vote --

17 MR. PARKER: Wes, steel makers proposal --

18 PARTICIPANT: You can vote twice.

19 (Laughter and discussion.)

20 MR. PATTERSON: From my perspective I 

21 think we can do a little better than that one.

22 MR. DeLASKI: So you’re not voting yes.

23 MR. ROSENSTOCK: You’re abstaining?

24 MR. PATTERSON: I’m not voting yes. Take 

25 that as a no or abstain, I don’t care.
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1 PARTICIPANT: What was the count, Richard?

2 MR. PARKER: What’s that?

3 PARTICIPANT: What was the count?

4 MR. PARKER: Eleven.

5 (Discussion off mic)

6 MR. PARKER: All right, NEMA proposal.

7 PARTICIPANT: No, no. Abstains.

8 MR. PARKER: Abstained?

9 MR. ROSENSTOCK: Yes.

10 MR. PARKER: Abstentions?

11 (Discussions off mic)

12 MR. ROSENSTOCK: This is Steve Rosenstock, 

13 EEI. So this vote was 11 yes, 8 no and two 

14 abstentions. So three people did not vote. Right?

15 PARTICIPANT: That’s correct. 

16 (Discussions off mic)

17 MR. ROSENSTOCK: So it’s four abstentions?

18 MR. PARKER: Four abstentions. Okay. Now 

19 the NEMA proposal. Raise your hand. Eleven. 

20 MR. ROSENSTOCK: Count them again. 

21 Recount.

22 MR. PARKER: You want a recount. Okay. 

23 Show of hands. Twelve. Twelve for NEMA. All 

24 opposed? Seven. Seven opposed.

25 PARTICIPANT: Who’s the seven? 
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1 PARTICIPANT: I saw seven.

2 MR. PARKER: Okay. Abstentions? Four. 

3 Let the record reflect that DOE was not voting 

4 twice. Four abstentions. Yes.

5 MR. POLINSKI: Richard. One comment from 

6 ATI Allegheny Ludlum, Ray Polinski. We’re very 

7 close on the NEMA. There’s one design level that we 

8 have a concern with so we can talk outside on this, 

9 but on the record that we’re pretty close.

10 MR. PETERSEN: Yes on four of the design 

11 lines.

12 MR. PARKER: Yes on four --

13 MR. PETERSEN: Yes on four of the five.

14 MR. PARKER: Which one gives the problem?

15 MR. PETERSEN: Design line five is the 

16 concern. When you look at that versus the 2010 

17 data, they use the same perspective of where it 

18 crosses over. Today we talked about the concern for 

19 the pricing and what pushes the crossover from zero 

20 to one is not including the surcharge.

21 MR. PARKER: Okay. Advocates’ proposal. 

22 All in favor. Six. 

23 MR. CASKEY: I count seven.

24 MR. PARKER: Raise your hands higher 

25 please. 
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1 PARTICIPANT: I’m sorry, what’s this one 

2 for?

3 PARTICIPANT: Advocates.

4 MR. PARKER: Seven. All opposed? 

5 (Counting)

6 PARTICIPANT: Start over.

7 MR. PARKER: All opposed to the advocates 

8 proposal? 

9 PARTICIPANT: The advocates proposal is?

10 PARTICIPANT: All three’s.

11 MR. PARKER: (Counting) Thirteen. 

12 Abstentions? Three abstentions.

13 MR. PATTERSON: This is the last thing I 

14 heard from Andrew was EL-3 and EL-2.

15 MR. DeLASKI: I said threes.

16 MR. POLINSKI: Yeah, I think he officially 

17 said three across the board, unless I misunderstood, 

18 Andrew.

19 MR. DeLASKI: I officially said three 

20 across the board, with the understanding that some 

21 adjustment on poles may be necessary, to a lower 

22 level. And high BILs and vaults and networks.

23 MR. MEYERS: Who is the second -- voting?

24 MR. CYMBALSKY: I’m sorry, it’s Maxine.

25 MR. MEYERS: Can we have a recount of 
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1 steel manufacturers? The numbers don’t add up. We 

2 voted immediately after that for NEMA and the 

3 numbers are two less --

4 PARTICIPANT: Twenty versus 23.

5 PARTICIPANT: There were abstentions.

6 MR. PARKER: What’s your count?

7 MR. ANDERSON: It’s 11, 8 and 4.

8 MR. POLINSKI: Would you just go through 

9 the numbers for each one?

10 MR. PARKER: What I’ve got for the steel 

11 makers was 11 yea, 8 nay, and 4 abstain. For NEMA, 

12 12 yeas, 7 nay, 4 abstain. For advocates, 7 yea, 13 

13 nay, 3 abstain. The numbers may not add up because 

14 some people have the right to not vote at all, but 

15 we had no choice but to count them as an abstention.

16 PARTICIPANT: Each one has 23.

17 MR. PARKER: Okay. Why don’t we -- do 

18 people want to stay a little bit after, or do we --

19 why don’t we recess for ten minutes and adjourn for 

20 the purpose of discussion whether it’s worth 

21 continuing the process in the future.

22 MR. PATTERSON: I personally have 

23 difficulty with the concept of like adjourning for 

24 ten minutes which turns into a half hour and then we 

25 want to go to six o’clock or whatever. I mean it’s 
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1 tiring as it is. I’m not sure what we’re going to 

2 accomplish like five minutes from now. Can you 

3 outline what you picture is going to be accomplished 

4 five minutes from now, or ten minutes from now?

5 MR. PARKER: Perhaps nothing. 

6 (Laughter.)

7 MR. PARKER: I was just encouraged that we 

8 moved with lightning speed in the last five minutes. 

9 Let’s do this, then. Let’s just adjourn for the 

10 evening and perhaps start tomorrow morning with the 

11 discussion of whether it’s worth going on. ...

12 MR. PATTERSON: Could we get -- could we 

13 get the medium voltage dry type maybe first thing in 

14 the morning.

15 MR. PARKER: What’s that?

16 MR. PATTERSON: Could we get the medium 

17 voltage dry out of the way first thing?

18 MR. PARKER: Okay. My only concern with 

19 doing that is if we revisit the liquid immersed, I’m 

20 not sure how many of the utility people are going to 

21 want to be around for the dry type.

22 MR. DeLASKI: I mean they’re on the 

23 committee, right?

24 (Discussions off mic)

25 MR. PARKER: Yeah. ... So let’s do that, 
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1 then. Is that amenable to people? Then we’ll see 

2 you here tomorrow morning at nine.

3 MR. HYLAND: Reminder. You can’t get in 

4 the building until eight.

5 (Whereupon, at 5:00 p.m., the meeting in 

6 the above captioned matter was adjourned, to 

7 reconvene tomorrow morning, Thursday, December 1, 

8 2011, at 9:00 a.m.) 

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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:

MEETING 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 party to the above proceedings.

 Official Reporter

Wendy Greene 

Dated: December 6, 2011