### 202-234-4433 Neal R. Gross & Co., Inc. Page 1 U.S. DEPARTMENT OF ENERGY + + + + + EFFICIENCY & RENEWABLES ADVISORY COMMITTEE (ERAC)

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APPLIANCE STANDARDS SUBCOMMITTEE

+ + + + +

NEGOTIATED RULEMAKING WORKING GROUP FOR LIQUID-IMMERSED AND MEDIUM-VOLTAGE DRY-TYPE TRANSFORMERS

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PUBLIC MEETING

+ + + + + FRIDAY, SEPTEMBER 16, 2011 + + + + + The Working Group met in Room 8E-089, 1000 Independence Avenue S.W., Washington, D.C., at 9:00 a.m., RICHARD PARKER, Facilitator, presiding.

MEMBERS PRESENT: RICHARD ANDERSON, Manager of Electrical Engineering, Fayetteville Public Works Commission TIM BALLO, ESQ., Earthjustice SCOTT BECK, Product Engineering Manager, Lakeview Metals

### 202-234-4433 Neal R. Gross & Co., Inc. Page 2 MEMBERS PRESENT (Continued): JOHN CASKEY, Assistant Vice President of Industry Operations, National Electrical Manufacturers Association JERRY CORKRAN, Staff Engineer, Cooper Power Systems JOHN CYMBALSKY, Supervisory Operations Research Analyst, U.S. Department of Energy ANDREW DeLASKI, Executive Director, Appliance Standards Awareness Project THOMAS ECKMAN, Manager, Northwest Power and Conservation Council CARLOS GAYTAN, Manager of Engineering, Prolec GE ROBERT GREESON, Senior Electrical Design Engineer, Federal Pacific Company GERALD HODGE, Consulting Engineer, Howard Industries MICHAEL HYLAND, Senior Vice President, American Public Power Association DAVID MILLURE, Senior Vice President, Metglas, Inc. WES PATTERSON, Vice President of Technology, ABB, Inc. ERIC PETERSON, Director of Customer Services and Research, AK Steel Corporation RAY POLINSKI, General Manager of Grain-Oriented Electrical Steels, ATI-Allegheny Ludlum ART ROSENFELD, Ph.D., Lawrence Berkeley National Laboratory, Efficiency and Renewables Advisory Committee STEVE ROSENSTOCK, Manager of Energy Solutions, Edison Electric Institute ROBIN ROY, Director, National Resources Defense Council ROBERT SAINT, Principal Transmission and Distribution Engineering, National Rural Electric Cooperative Association CHUCK SIMMONS, Senior Engineer, Progress Energy

### 202-234-4433 Neal R. Gross & Co., Inc. Page 3 ALSO PRESENT: RICHARD PARKER, Facilitator Professor of Law, University of Connecticut ROBERT BERMAN, Berman Economics DAVID FLATEN, Xcel Energy (via telephone) BRIAN COFFEY, Consultant, Navigant Consulting DAN COHEN, ESQ., U.S. Department of Energy KATIE COUGHLIN, Lead Analyst, Lawrence Berkeley National Laboratory GREG COULTER, Prolec GE JIM CREEVY, Director of Government Relations, National Electrical Manufacturers Association CHARLIE DREXLER, Kentucky Association of Electric Co-ops (via telephone) BRENDA EDWARDS, Program Support Specialist, U.S. Department of Energy CHUCK FOSTER, Edison Electric Institute JEREMIAH FREEMAN, Energy Analyst, New West Technologies BRIAN KAJA, GE Energy (via telephone) ZHIMEI LUO, Consultant, Navigant Consulting KEVIN LOOBY, President, Lakeview Metals AARON MEYERS, Cooper Power Systems (via telephone) MATTHEW NARDOTTI, Navigant Consulting TOM PETROSINO, Consultant, Prolec GE (via telephone) MIKE RIVEST, Managing Director, Navigant Consulting MAHESH SAMPAT, EMS Consulting JERRY SCHOEN, Principal Engineer, Product Research and Applications Engineering, AK Steel Corporation JOHN ROSSETTI, Memphis Light, Gas, and Water (via telephone) PAUL RYAN, Hitachi Metals America MEG WALTNER, Energy Efficiency Advocate, Natural Resources Defense Council KENNETH WINDER, Manager of Engineering, Moon Lake Electric Association DANIEL YOUNG, Consultant, Pacific Gas & Electric (via telephone)

### 202-234-4433 Neal R. Gross & Co., Inc. Page 4 1 P-R-O-C-E-E-D-I-N-G-S 2 (9:09 a.m.) 3 MR. PARKER: Welcome, everybody, to 4 day two. So we have a lot to cover today. 5 And so let's get right into it. We will start 6 now. We will adjourn promptly at 3:30, again 7 because people need to catch a plane and also 8 because the computer turns into a pumpkin at 9 that point. 10 So we will break for an hour for 11 lunch at 12:15, an hour and 15 minutes, 12:15 12 to 1:30. Did that work out for people 13 yesterday? Any problems? 14 Okay. Just a couple of 15 administrative things. First, please mute 16 your cell phones. People on the phones, 17 welcome. We're not going to take time to go 18 around and announce ourselves. Do we need to 19 for the phones? 20 Everybody here has given a business 21 card as security. So I think we have a record 22 of attendance at these meetings, right,

### 202-234-4433 Neal R. Gross & Co., Inc. Page 5 1 without having to put it on the transcript. 2 Is that right? Yes. We just need to have a 3 record of who is at this meeting. I guess we 4 should have the phone people announce 5 themselves. 6 So whoever is on the phone, could 7 you please give us your name and affiliation 8 for the record, speaking very clearly? 9 MR. KAJA: Brian Kaja with GE 10 Energy. 11 MR. PARKER: Thank you, Brian. Can 12 you spell your last name for the Court 13 Reporter? 14 MR. KAJA: Sure. It's K-a-j-a. 15 MR. PARKER: Thank you. Who else? 16 MR. FLATEN: David Flaten, Xcel 17 Energy. 18 MR. PARKER: Anybody else? 19 MR. ROSSETTI: John Rossetti, 20 Memphis Light, Gas, and Water. 21 MR. PARKER: Sorry. One more time, 22 please?

### 202-234-4433 Neal R. Gross & Co., Inc. Page 6 1 MR. ROSSETTI: John Rossetti, 2 Memphis Light, Gas, and Water. 3 MR. PARKER: Anybody else? 4 MR. YOUNG: Daniel Young, 5 consultant for Pacific Gas and Electric 6 Company. 7 MR. PARKER: Did you get that? 8 Daniel Young. Sometimes there's static on the 9 line. I'm just trying to make sure the Court 10 Reporter gets the name clearly. Okay. 11 Anybody else? 12 MR. DREXLER: Charlie Drexler, 13 Kentucky Association of Electric Co-ops. 14 MR. PARKER: Okay. Anybody else? 15 MR. PETROSINO: Tom Petrosino, 16 consultant for Prolec GE. 17 MR. PARKER: Tom Petrosino? 18 MR. PETROSINO: Right. 19 MR. PARKER: Okay. Thank you. 20 Anybody else? 21 MR. MEYERS: Aaron Meyers, Cooper 22 Power Systems.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 7 1 MR. PARKER: One more time, please, 2 for the -- 3 MR. MEYERS: Aaron Meyers. 4 MR. PARKER: Aaron Meyers. 5 MR. MEYERS: Cooper Power Systems. 6 MR. PARKER: Okay. Anyone else? 7 (No response.) 8 MR. PARKER: Great. Welcome. A 9 couple of other things that I have been asked 10 to announce. People around the table, please 11 -- again, this is for the Court Reporter, who 12 has got headphones on -- please speak into the 13 mike. 14 If you don't speak into the mike, 15 please make sure it's turned on with the green 16 light illuminated. If you don't speak into 17 the mike, the people on the phones can't hear 18 you, the Court Reporter can't hear you, and 19 even people in the back can't hear you. So 20 please speak into the mike. 21 People in the back, I really ask 22 that you come to the mike. Don't speak from

### 202-234-4433 Neal R. Gross & Co., Inc. Page 8 1 your chairs. I know it's a pain. I'm sorry 2 about that but absolutely have to have you 3 come up to the mike so that the Court Reporter 4 can get a record of your comments. 5 Again, each time you speak, please 6 announce yourself and your affiliation, 7 whether you are at the table or in the chairs. 8 Let's see. I think one other small 9 issue. I consulted the statute, the 10 regulations, the bylaws, the practices of 11 previous negotiated rulemakings, and my 12 colleagues at DOE. And I discovered that 13 there is nothing in any of those legal 14 authorities that preclude us from having a 15 casual dress in our meetings. It is off the 16 record that requires a unanimous vote or even 17 a modified unanimous vote of this group to do 18 that. 19 So I will exercise my prerogative 20 as facilitator, not that there are any 21 prerogatives with that but to say that people 22 should feel free to dress casually when they

### 202-234-4433 Neal R. Gross & Co., Inc. Page 9 1 come to our future meetings. I recognize that 2 some people feel more comfortable in a suit 3 and tie. And if that's the case, I'm more 4 than happy to come dressed that way. Also 5 people I know have other meetings to go to 6 sometimes during the day that require 7 different dress. 8 So you are certainly welcome to 9 wear a suit and tie, but I think we'll feel 10 more comfortable and things will proceed more 11 smoothly. And I, as an academic, have an 12 aversion to coat and ties anyway. 13 So let's just in the future if that 14 suits feel free to come dressed down. I 15 understand that DOE actually -- John has 16 already preempted the conversation by doing 17 that. 18 So hopefully that will help us get 19 more comfortable as we go through these longer 20 and longer meetings that Andrew is insisting 21 upon so that we can have fewer and fewer of 22 them.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 10 1 Okay. A lot to cover. Basically 2 we're going to start off with Katie Coughlin 3 from LBL to talk about her analysis. Oh, 4 excuse me. Before I start that, I'm reminded 5 that Dan Cohen from General Counsel's office 6 -- here is your name tent, not that we don't 7 know you already -- has a couple of comments 8 about handling your business-proprietary 9 information. 10 MR. COHEN: Yes. Dan Cohen, DOE. 11 So a question came up yesterday 12 after the meeting after business-confidential 13 information in these proceedings and how we 14 will deal with the business-confidential 15 information. 16 So, remember, everything that we 17 say here is public. So if something is 18 business-confidential, don't say it here 19 because it will then be public. 20 To the extent that 21 business-confidential information is sought by 22 either the government or our contractors, that

### 202-234-4433 Neal R. Gross & Co., Inc. Page 11 1 information is protected. We have 2 non-disclosure agreements. The Trade Secrets 3 Act applies to us. 4 Information can be shared with us. 5 That information when we present it, we 6 aggregate. We smooth. We do other things to 7 make sure that it is not identifiable to any 8 one particular submitter of that information. 9 So you can feel free providing 10 information to us or our contractors, but if 11 you don't want it public, don't say it here. 12 MR. PARKER: And also if you 13 provide it to DOE or to contractors, you have 14 to indicate that it is proprietary. They will 15 have no way of reading your mind. Okay? So 16 the burden is on you to indicate which 17 information is proprietary. Okay? 18 MR. SCHOEN: Jerry Schoen, AK 19 Steel. 20 Pursuant to that, do we contact you 21 or do we contact Richard? Who do we approach? 22 MR. COHEN: Dan Cohen, DOE.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 12 1 Typically it would either be the 2 program or the contractors, so either John's 3 folks or Navigant or Berkeley Lab. 4 MR. PARKER: But I operate under 5 the same ground rules, by the way. So I will 6 also. If you indicate to me that something is 7 business-proprietary, I am not obliged to 8 disclose information that is given to me 9 confidentially. So I can and will respect 10 confidentiality as well. 11 MR. COHEN: Thank you. Richard is 12 our contractor as well. So he has the same 13 nondisclosure requirement. 14 MR. SCHOEN: Does that require 15 written notifications? Because at one time 16 Navigant had a nondisclosure agreement that we 17 looked at -- 18 MR. COHEN: Yes. We will -- 19 MR. SCHOEN: -- that was a little 20 bit lacking in some of the coverage terms or 21 can you do it verbal? 22 MR. COHEN: No we would want you to

### 202-234-4433 Neal R. Gross & Co., Inc. Page 13 1 identify specifically on whatever piece of 2 paper you give us what is proprietary 3 information. 4 MR. SCHOEN: I'm sorry. What I -- 5 MR. PARKER: Can you speak into the 6 mike again? I'm sorry. You have to be -- 7 MR. SCHOEN: I'm sorry. Do we have 8 to first have a nondisclosure agreement signed 9 between our -- 10 MR. COHEN: No, no, no, no. The 11 nondisclosure agreement is our -- I'm sorry. 12 Dan Cohen, DOE. 13 The nondisclosure agreement is -- 14 our contractors have that agreement with us. 15 They have signed onto that as part of their 16 contract. And then we have just the Trade 17 Secrets Act applies to federal employees. 18 MR. PARKER: Any other comments or 19 questions on proprietary? Yes, sir? 20 MEMBER DeLASKI: This is on a 21 different topic. 22 MR. PARKER: Go ahead. First, any

### 202-234-4433 Neal R. Gross & Co., Inc. Page 14 1 other questions or comments on the proprietary 2 issue? 3 (No response.) 4 MR. PARKER: Okay. Andrew? 5 MEMBER DeLASKI: So Andrew DeLaski, 6 Appliance Standards Awareness Project. And I 7 apologize. I have to leave at 1:00 today, 8 even though I'm the one pushing for longer 9 meetings. 10 (Laughter.) 11 MEMBER DeLASKI: So I'm all for 12 pushing back 12:15 if you want. 13 I thought we had a constructive day 14 yesterday. And there were a couple of things 15 I wanted to draw out to make sure that they 16 were sort of recognized and I think our 17 important dimension for our discussions going 18 forward that I want to recognize the last 19 couple -- ask the Department or others to 20 think about. 21 One is the issue of compliance 22 dates. Dan mentioned this a couple of times

### 202-234-4433 Neal R. Gross & Co., Inc. Page 15 1 yesterday. So I guess I would ask the 2 Department to consider or think about what is 3 this Committee's flexibility with respect to 4 compliance dates? 5 And I want to give just a couple of 6 examples from prior negotiated agreements that 7 were implemented by DOE where they use 8 compliance dates as a way to help get to yes 9 in a negotiation. One was the ballast 10 negotiation in the year 2000 between our 11 coalition and NEMA, the NEMA manufacturers. 12 And in that situation, we set two 13 compliance dates. One was 2005. One was 14 2010. Some ballasts had compliant in 2005. 15 Other ballasts had compliant 2010. So that 16 sort of stage implementation date is a 17 question I guess for the Department. Is that 18 something that, one of the things that we can 19 be thinking about in this discussion? 20 Another approach was one used for 21 clothes washers, again, for clothes washers, 22 we had a negotiated agreement in 2000 that

### 202-234-4433 Neal R. Gross & Co., Inc. Page 16 1 also went into effect in 2 stages in 2004 and 2 2007 with increasing stringency, a modest 3 standard initially and then a more stringent 4 standard 3 years later. 5 So it was a stepping up but issued 6 as a single rule, as opposed to as two rules. 7 So it gave certainty over a longer period of 8 time but, yet, got to a higher level of 9 efficiency than otherwise would have been 10 possible if you were stuck with a shorter 11 implementation date. 12 And the final one I had mentioned 13 is that for clothes washers, again, are we 14 submitting for clothes washers, which is 15 before the Department right now? We agreed on 16 dates that were different for different 17 product classes. 18 So you have one product class that 19 went into effect in three years, one product 20 class that went into effect in five years. So 21 these are some of the dimensions that I had 22 asked you to think about. You could do

### 202-234-4433 Neal R. Gross & Co., Inc. Page 17 1 anything, but if there are limits, I want to 2 know what they are so we don't go down a path 3 that later on you say, "Well, that wasn't 4 legal." 5 MR. COHEN: Dan Cohen, DOE. 6 So given the conversation 7 yesterday, after the meeting was over, I went 8 back and started looking into this question 9 because I knew this was going to come up. 10 I don't have an answer today, but 11 either prior to or at the next meeting, you 12 will have an answer. Before that meeting 13 starts, we will have an answer to that 14 question. 15 MEMBER DeLASKI: Great. 16 MR. COHEN: I will say in the past, 17 when we have looked at this notion of tiered 18 standards; what I mean by that is sort of the 19 phased-in implementation date. We had taken a 20 position in a rule dealing with lighting, 21 actually the '09 lamps rule, that in that 22 particular case, we did not have the authority

### 202-234-4433 Neal R. Gross & Co., Inc. Page 18 1 for tiered standards because in that provision 2 of the statute, there were requirements for 3 rulemaking which specifically authorized 4 tiered standards but not the one that we were 5 then operating under. 6 So we concluded that Congress knew 7 how to give us the authority for tiered 8 standards and didn't in that particular case, 9 but our opinion was that it wasn't an absolute 10 that we couldn't do tiered standards. It was 11 a question of the particular authority we were 12 operating under in the particular rulemaking 13 we were engaged in. 14 MEMBER DeLASKI: So we'll ask you 15 to report back at our next meeting. 16 MR. COHEN: Okay. 17 MEMBER DeLASKI: And then the other 18 thing, other I think thing came out yesterday 19 that may be of significant value in looking at 20 product classes a little different than what 21 the Department has structured thus far. 22 So I would suggest there were four

### 202-234-4433 Neal R. Gross & Co., Inc. Page 19 1 that I heard discussed yesterday. One is that 2 it may make sense to look at round tanks and 3 square tanks separately, to evaluate those 4 separately so that we can look at those 5 numbers so we know how round tanks -- what the 6 LCC is for round tanks and square tanks 7 separately, so separating out those two 8 classes, those two products, those two design 9 lines as separate product classes I think 10 could be constructive for our discussions. 11 I think other ones that were raised 12 yesterday that may be worth looking at 13 separately would be network and substation 14 transformers. Wes, I'm picking up on your 15 conversation yesterday. 16 MEMBER PATTERSON: Yes. 17 MEMBER DeLASKI: And then I think 18 it's worth taking a look at the bill-rating 19 issue that Wes raised yesterday and do the 20 bill ratings, take a look. Does that yield 21 separate product classes or not? Points 22 raised by the contractor, I think, by Mike are

### 202-234-4433 Neal R. Gross & Co., Inc. Page 20 1 well-taken. It is the increment that matters. 2 Well, does it matter? 3 You know, and Wes provided 4 information this morning at 6:00 o'clock. 5 He's burning the midnight oil, apparently, to 6 give us information. So we appreciate that. 7 MR. PARKER: Yes. I spoke with 8 Brian this morning, Brian Coffey of Navigant. 9 And they have the information and will 10 respond between now and the next meeting. And 11 I want to discuss when we get there about how 12 we proceed between meetings, but we will. 13 MEMBER DeLASKI: So from my 14 perspective, maybe we can come at it this 15 afternoon. Again, I won't be here. So I'm 16 going to give my two cents right now but with 17 some sense of the Committee about what 18 additional product classes we would like the 19 Department to go look at. So then we come 20 back for the next meeting. We have data for 21 product classes that help us try to chart a 22 path forward.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 21 1 MR. PARKER: Right. And one thing 2 that came out on the substation issue was that 3 the cost is not really something that affects 4 the price of the transformer that goes into 5 manufacturing selling price. It's more of an 6 installation cost issue, right, because the 7 transformer is too big. It won't fit. 8 MEMBER DeLASKI: I'm fully aware of 9 the issue. 10 MR. PARKER: But it brings in the 11 LBL analysis. Yes. 12 MEMBER ROSENSTOCK: Steve 13 Rosenstock. You've got network/vault 14 transformers because, especially in urban 15 areas, that's a very big issue. 16 MEMBER DeLASKI: Help me with the 17 terminology here. Is this one and the same 18 thing? 19 MEMBER PATTERSON: Network and 20 vault are very similar products. They both go 21 into -- 22 MR. PARKER: You have to speak into

### 202-234-4433 Neal R. Gross & Co., Inc. Page 22 1 a mike, Wes. 2 MEMBER PATTERSON: Network and 3 vault transformers are very similar because 4 they both go into a vault sitting in a hole in 5 the ground. So they both have the same kind 6 of restriction. Substation transformers do 7 not have that restriction. 8 MEMBER DeLASKI: So would you tend 9 to treat vault and network together? 10 MEMBER PATTERSON: I would. 11 MR. PARKER: Again, if you're on 12 the phone, please mute your speaker. We're 13 getting ringing of phones in the background. 14 Again, please mute your phones if you're on 15 the line. Okay? If you're on the line? 16 Thank you. 17 MEMBER DeLASKI: I guess are there 18 reactions from others? 19 MR. PARKER: No. I think it's a 20 good idea. I think we're committed to doing 21 that. And that raises a general point. As we 22 go through today, basically our function again

### 202-234-4433 Neal R. Gross & Co., Inc. Page 23 1 today, as I said yesterday, is to identify the 2 issues that need to be looked at, either by 3 this group in the future and, more 4 specifically, the issues that are going to 5 need further analysis or refinement of the 6 analysis by the consultants. 7 So we really need to end today with 8 that business done. So please be thinking, 9 you know, and jot down whatever you think. We 10 got the issues from yesterday. Think about 11 what issues you want to put on the table. 12 I will mention that Tom Petrosino 13 just put in a question about material price 14 sensitivity that I will table when we get to 15 that part of the discussion. Thank you, Tom. 16 And feel free, anybody who is on 17 the line, to continue to call in to Tatiana 18 and give your questions. And we will make 19 sure that they're included in the discussion. 20 But we want to come up with a list. 21 And ideally at the end of the 22 session today after lunch, we will talk about

### 202-234-4433 Neal R. Gross & Co., Inc. Page 24 1 an order, you know, a schedule for working 2 through the list. 3 Steve, did you have a question? 4 MEMBER ROSENSTOCK: I just want to 5 follow up with Andrew. And I appreciate the 6 comments. I guess one of the keys is, is 7 there a way -- and, again, it all depends on 8 turnaround; I'm not trying to put DOE or 9 Navigant on the spot -- is, is there a way to 10 easily disaggregate that data to break out? 11 You know, we have the August data 12 based on kind of the current ways of 13 categorizing transformers. Is there a way to 14 disaggregate the data to show results based on 15 -- we have broken out by design lines, and now 16 we're doing subgroups, let's say, or, you know
17 -- 18 MR. PARKER: Let me put this to the 19 consultants. Do you have a way of knowing 20 what use a transformer is going to be put to, 21 what space it's going into when it's bought? 22 Let the record reflect that Katie is shaking

### 202-234-4433 Neal R. Gross & Co., Inc. Page 25 1 her head yes. So that information could be 2 supplied? Yes. Okay. 3 Mike? 4 MEMBER DeLASKI: Can we mute that? 5 MR. PARKER: Are people still on 6 the line? Can somebody who is on the phone 7 unmute their phone just enough to tell us if 8 you're on there? 9 MR. KAJA: Yes. I'm on this. This 10 is Brian with GE Energy. 11 MR. PARKER: Okay. Could everybody 12 who is on the line please hang up your phones 13 and call in again? Of course, the person 14 whose phone is ringing is the one who is not 15 listening to this. 16 (Laughter.) 17 MR. PARKER: So that won't do any 18 good. Oh, if we hang up, they will be gone. 19 Okay. All right. Yes. Okay. So we're going 20 to just disconnect you. Can we just hang up 21 the line? 22 (Whereupon, the foregoing matter

### 202-234-4433 Neal R. Gross & Co., Inc. Page 26 1 went off the record at 9:29 a.m. and went back 2 on the record at 9:37 a.m.) 3 MR. PARKER: Great. So why don't 4 we, then, get started? So, anyway, as I was 5 saying, think about issues. If you are on the 6 phone, send them in to Tatiana. If you're 7 around the table, jot them down. 8 I'm going to be pretty straight 9 about exploring the issue just long enough to 10 satisfy the group that this is an issue. 11 We're not going to try to resolve the merits 12 of these issues. Okay? 13 So that's the ground rules going 14 forward. All right? All we're doing now is 15 tabling issues and data needs. That's all 16 we're doing. 17 Let's set the table for that by 18 having Katie if she could come up and give us 19 her discussion, I think, of the LBL analysis, 20 life cycle cost analysis, and national impacts 21 analysis? She has had a rough morning at the 22 hotel, but I appreciate her getting here.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 27 1 Thanks. 2 MS. COUGHLIN: Okay. So the goal 3 this morning, I'm going to try to review. 4 This diagram is from the presentation we did 5 in April. So essentially we have this series 6 of chevrons that give you the steps in the 7 analysis -- can you see this? Okay. It's the 8 pointer that doesn't seem to point. 9 So, anyway, what I wanted to go 10 through today very quickly is the energy use 11 life cycle cost and national impacts analyses. 12 Most of the complexity in the analysis comes 13 into the life cycle cost. And in the April 14 meeting -- so this is a diagram of all the 15 steps that we go through to do the life cycle 16 cost analysis. 17 So the blue oblongs represent input 18 data. The white ovals represent calculation 19 steps that occur within the spreadsheets. The 20 yellow boxes represent intermediate outputs. 21 And then the final result is the LCC. And the 22 LCC is what ends up in the tables that are

### 202-234-4433 Neal R. Gross & Co., Inc. Page 28 1 published in the TSD. 2 So during the April meeting, we 3 went through in a lot of detail all those blue 4 boxes and all the input data. And based on 5 comments, some of the inputs have been 6 revised, but most of the revisions to those 7 inputs are relatively minor. So in the big 8 picture, they don't have a large impact on the 9 results. 10 Now, what I was hoping to do today 11 is, rather than go over the inputs again, 12 which I think most of the people in this 13 audience have already seen, I wanted to 14 discuss in a more intuitive way the mechanics 15 of the LCC and how the information is used and 16 how the results, some of the subtleties in 17 interpreting the results. 18 I think many of the issues that 19 have come up represent more or less minor 20 modifications to the inputs. And 21 understanding the relative importance of some 22 of those modifications might be easier if we

### 202-234-4433 Neal R. Gross & Co., Inc. Page 29 1 give a sort of clear picture of how the LCC 2 functions. 3 So that was what I wanted to try to 4 do today. I'm happy to go over the inputs 5 again in more detail if that's what people 6 want to hear. So let me move on to the 7 description of the LCC. 8 So basically what we're trying to 9 do in the life cycle cost analysis is simulate 10 a large number of installations of 11 transformers for a particular design line and 12 estimate that -- you know, the LCC is 13 conceptually very similar to the total 14 ownership cost, but we use a different set of 15 assumptions and a lot more variability in the 16 inputs. So we're trying to estimate in sort 17 of slightly more realistic conditions what the 18 cost and benefits of improved efficiency are. 19 So an LCC run -- and this is in one 20 of these spreadsheets that you can download -- 21 consists of some large number, 10,000 22 representations of what I call transformer

### 202-234-4433 Neal R. Gross & Co., Inc. Page 30 1 installations. 2 So an installation you can think of 3 as a kind of space in which you can put a 4 transformer. And there are characteristics of 5 each installation that go with the owner of 6 the transformer. And then there are other 7 characteristics that go with the transformer 8 load. And then there are characteristics that 9 go with the transformer itself. 10 So the way the LCC works is once we 11 define the owner characteristics and the kind 12 of loading characteristics, those don't change 13 under different standard-level scenarios. 14 It's just the transformer design parameters 15 that change. 16 So the owner characteristics 17 include -- there's a geographic location. 18 Most of the electricity prices and other data 19 depend on the region that you're in. 20 There's a question of whether or 21 not the purchaser of the transformer an 22 evaluator. That means whether or not they

### 202-234-4433 Neal R. Gross & Co., Inc. Page 31 1 simply buy the lowest-cost unit that meets 2 their needs or whether they actually apply 3 some valuation to the load losses and no load 4 losses, in which case they will buy a 5 higher-efficiency transformer. 6 Then there's an electricity price, 7 a discount rate and things that go with the 8 owner of the transformer. 9 MR. PARKER: Just for my knowledge 10 -- my apologies if other people know the 11 answer already, but why would they question 12 whether an evaluator would impact the life 13 cycle cost? 14 MS. COUGHLIN: Because if you are 15 buying a highly efficient transformer, then 16 the existence of the standard may not affect 17 your decision. So if that's the case, then 18 essentially the impact of the standard on that 19 owner is zero. 20 MR. PARKER: I see. 21 MR. COULTER: Excuse me. I have a 22 question about that. Could we --

### 202-234-4433 Neal R. Gross & Co., Inc. Page 32 1 MR. PARKER: Name and -- 2 MR. COULTER: Greg Coulter with 3 Prolec GE. 4 How do you know if somebody is an 5 evaluator in this -- 6 MS. COUGHLIN: We have -- well, 7 it's a statistical model. So based primarily 8 on comments, we have statements about what 9 fraction of purchasers evaluate different 10 types of equipment purchased. And that's a 11 parameter in the spreadsheet. 12 I think it's 75 percent for 13 liquid-immersed. And it's ten percent for 14 low-voltage dry. 15 MR. COULTER: Seventy-five percent 16 are evaluators? Is that what you -- 17 MS. COUGHLIN: Well, we do 18 different runs with different values. But I 19 think that the -- in the preliminary analysis, 20 the default was 75 percent. And that is a -- 21 you can set that parameter when you run the 22 LCC. So it's relatively easy to change it.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 33 1 MR. COULTER: Right. This 2 particular thing is where we are very 3 concerned because, I mean, we don't see 4 anywhere near 75 percent evaluators. I mean, 5 we have a lot of people who evaluate, but they 6 buy the lowest -- you know, DOE minimum 7 efficiency. 8 MS. COUGHLIN: Right. 9 MR. COULTER: You know, hey, we 10 have an evaluation form. So they evaluate. 11 That isn't what they're buying. They're 12 buying the minimum efficiency, -- 13 MS. COUGHLIN: Right. 14 MR. COULTER: -- especially people 15 who use the band of equivalence we talked 16 about earlier. I mean, basically that just 17 takes you down to you're going to buy minimum 18 efficiency. 19 We had a hard time getting that to 20 correlate when we were trying to run this 21 analysis. We think this is a major error on 22 the percentage that --

### 202-234-4433 Neal R. Gross & Co., Inc. Page 34 1 MS. COUGHLIN: Right, right. We do 2 the sensitivity of zero and 100 to see the 3 influence of that. And then, yes, I mean, 4 that number if easily changed if you want to 5 modify it. So we don't really have good data. 6 It's really a matter of coalescing a variety 7 of opinions. 8 MEMBER DeLASKI: I don't know 9 whether John -- 10 MR. PARKER: For the Court 11 Reporter, you have to give your name and -- 12 MEMBER DeLASKI: Andrew DeLaski. 13 Has NEMA submitted a comment on 14 what you all think the percent of evaluators 15 are? 16 MEMBER CASKEY: John Caskey with 17 NEMA. 18 No, I don't remember us submitting 19 a comment on this. But my first thought is 20 that given the high levels of energy 21 efficiency standards that became effective in 22 January of 2010, if I were doing this, I would

### 202-234-4433 Neal R. Gross & Co., Inc. Page 35 1 start with basically zero. 2 MR. COULTER: It's close enough to 3 zero that we would suggest it would be -- you 4 know, ten percent may be. 5 MEMBER DeLASKI: I know there are 6 some utilities -- 7 MR. COULTER: There are some 8 utilities -- 9 MEMBER DeLASKI: -- that are 10 aggressive in looking to get to the highest 11 efficiency and who are truly doing a TOC 12 without the BOE. But, you know, alas, you 13 guys, you're selling them. So you've got a 14 sense of who is really doing it and who is 15 not. 16 MR. PARKER: That's one of the 17 comments that came up in my interviews with 18 people, was that people are seeing more and 19 more utilities just say, "We're complying with 20 the regulation, and there's nothing to 21 evaluate." 22 MR. COULTER: In the listing

### 202-234-4433 Neal R. Gross & Co., Inc. Page 36 1 itself, there are evaluators, but in the end, 2 that is not what they're buying to. 3 MR. PARKER: Right. 4 MR. COULTER: They're buying to 5 minimum DOE efficiency. 6 MR. PARKER: Thank you, Greg. 7 MEMBER ROSENSTOCK: Steve 8 Rosenstock, Edison Electric Institute. 9 We made comments. We didn't give 10 an exact percentage, but we thought 75 percent 11 was far too high for base case based on some 12 of our discussions with some members. So, 13 again, I guess everything kind of leads up to 14 the August 23rd revision. So I have to ask 15 for the August 23rd revision of some of the 16 outputs, of some of the summary outputs, did 17 you use that same 75 percent as I'll say the 18 baseline pivot point on which you did the 19 sensitivity analysis? 20 MS. COUGHLIN: I'm not 100 percent 21 sure, but I don't think so. I think we 22 lowered it to 50 percent, yes.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 37 1 MEMBER ROSENSTOCK: Thank you. 2 MS. COUGHLIN: I have to double 3 check. 4 MR. RIVEST: Katie, it's Mike 5 Rivest, Navigant. 6 Just to clarify, just because 7 someone is an evaluator doesn't mean that they 8 will buy a more efficient transformer than the 9 minimum standard. Is that correct? 10 MS. COUGHLIN: It depends on the 11 standard level under consideration, but the 12 difference between an evaluator and a 13 non-evaluator is if they are evaluating, then 14 we have a process for assigning an A and B 15 value. And then that's the basis for the 16 choice of the transformer. 17 For a non-evaluator, you just go 18 with lowest first cost. So it is very likely 19 -- 20 MR. RIVEST: The lowest first that 21 complies to the minimum standard. 22 MS. COUGHLIN: Yes, under the

### 202-234-4433 Neal R. Gross & Co., Inc. Page 38 1 standard. Yes. 2 MR. RIVEST: So it may be that 3 yesterday I heard that the current standard 4 was equivalent to an A and B of $1, $4. So if 5 you assign A and B values to an evaluator with 6 lower values than that, they would default to
7 -- 8 MS. COUGHLIN: Possibly. 9 MR. RIVEST: -- buying lowest first 10 cost. 11 MS. COUGHLIN: Yes. I mean, I will 12 show some illustrations of how it works. Yes. 13 It's difficult to generalize but definitely 14 the -- 15 MR. RIVEST: I mean, the dream data 16 would be to have a distribution of sales -- 17 MS. COUGHLIN: Right. 18 MR. RIVEST: -- by product class, 19 by efficiency. That would be the dream data. 20 MS. COUGHLIN: Which we're not 21 going to get. 22 MR. PARKER: Yes, Bob?

### 202-234-4433 Neal R. Gross & Co., Inc. Page 39 1 MEMBER SAINT: And another comment 2 to -- 3 MR. PARKER: Sorry. You have to -- 4 MEMBER SAINT: Bob Saint, NRECA. 5 Another comment about the 6 evaluation. I do think less utilities are 7 evaluating because the evaluation results in a 8 lower efficient transformer than the minimum 9 standard. 10 MS. COUGHLIN: Right. 11 MEMBER SAINT: So if they were 12 buying their optimal transformer, it would be 13 less than the standard. 14 MS. COUGHLIN: That's right. 15 Right. And if that's the case in the LCC, 16 then the evaluation is rejected. And you have 17 just moved to the lowest cost that's available 18 under that standard. 19 MEMBER SAINT: Right. 20 MEMBER PATTERSON: Katie, Wes 21 Patterson. 22 MR. PARKER: Okay.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 40 1 MEMBER PATTERSON: I have a 2 question. If you were to assume everybody was 3 a non-evaluator, then what happens to the LCC 4 value? Does it go up or does it go down? 5 MS. COUGHLIN: It tends to -- the 6 estimate of savings would tend to increase 7 because in the base case, everybody is going 8 down to the lowest cost. 9 MEMBER PATTERSON: So if we assume 10 no evaluators, then the savings increases? 11 MS. COUGHLIN: They tend to, yes, 12 although, again, given the complexity of the 13 price efficiency, this is the sort of scatter 14 of points in the price efficiency space. It's 15 not always actually such a big effect. So 16 yes. 17 MR. PARKER: And as I understand 18 it, just to clarify, this issue, this variable 19 becomes relevant because you're trying to 20 determine the life cycle cost of the standard. 21 If we change the question to be 22 "What is the life cycle cost of the

### 202-234-4433 Neal R. Gross & Co., Inc. Page 41 1 transformer that meets the standard?" then it 2 doesn't matter whether they are evaluating or 3 not. 4 MS. COUGHLIN: No, not quite. 5 We're trying to determine the distribution of 6 life cycle costs over all possible transformer 7 purchasers. So if some of those purchasers 8 are not affected by the standard, we want to 9 count that sort of zero impact in our 10 statistics. 11 So the life cycle cost, you know, 12 there is transformer by transformer, but then 13 we do this full statistical sample to look at 14 all of the variability that affects the LCC of 15 a single installation. 16 MR. COULTER: And this is Greg 17 Coulter from Prolec GE again. 18 I just want to correct one thing. 19 It appears to us that if you assumed there are 20 less evaluators, what it does is it increases 21 the benefit of life cycle cost -- 22 MS. COUGHLIN: Yes.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 42 1 MR. COULTER: -- for the lower 2 efficiency levels because at higher efficiency 3 levels, you've got even past -- 4 MS. COUGHLIN: Right. High 5 efficiency levels no one is evaluating up 6 there anyway. 7 MR. COULTER: Right. 8 MS. COUGHLIN: So it has no impact. 9 That's right. 10 MR. COULTER: So it just improves 11 the benefits at lower efficiency levels. 12 MR. PARKER: Okay. So we've 13 identified an issue. What is the right 14 threshold evaluation to use as the baseline. 15 I assume whatever is used, it will still be 16 sensitivity analysis to capture. And then the 17 question will be, as with any sensitivity 18 analysis that gives a range, -- 19 MS. COUGHLIN: Right. 20 MR. PARKER: -- you know, what do 21 you use as the basis for planning if it 22 affects the outcome? But the question, what

### 202-234-4433 Neal R. Gross & Co., Inc. Page 43 1 is the base case, is a sensitive one. 2 Do we have more data that would 3 shed light on that that could be produced or 4 do we have to just -- 5 MS. COUGHLIN: We don't have any 6 data on the fraction of purchasers who 7 actually evaluate. It is a very difficult 8 thing to come by. 9 MR. PARKER: If we don't tell what 10 they're saying? 11 Yes, Rob? 12 MEMBER GREESON: Rob Greeson, 13 Federal Pacific Transformer. 14 Just regarding the percentage of 15 A/B evaluators on the medium-voltage dry, we 16 also feel that it is a very low number. The 17 numbers that we initially got from DOE were 18 that for low-voltage, it was approximately ten 19 percent evaluators. That should be zero. You 20 know, in our opinion, on the medium-capacity 21 dry-types, I think the number that we were 22 given was used was 50 percent. Fifteen

### 202-234-4433 Neal R. Gross & Co., Inc. Page 44 1 percent is an aggressive number. 2 And then on the high-capacity 3 dry-type, I think it was 80 percent. And we 4 went with 15 percent as just a rough guess on 5 that one as well. 6 And we have submitted that to 7 Navigant. You may have our comments 8 somewhere. 9 MS. COUGHLIN: Yes. I think we ran 10 those numbers as one of the cases. 11 MEMBER GREESON: Okay. 12 MS. COUGHLIN: Yes. 13 MEMBER GREESON: Thank you. 14 MS. COUGHLIN: Yes. I mean, in 15 this type of situation, we can also if people 16 want to agree on just a set of numbers to run 17 and look at the dependence of the results on 18 those numbers, we can do it that way, too. 19 MR. PARKER: Let's not leave it 20 hanging. Let's just say, why don't you -- can 21 they just send this to you directly? Would 22 that be all right?

### 202-234-4433 Neal R. Gross & Co., Inc. Page 45 1 MS. COUGHLIN: Sure. I'll set up a 2 web page, and you can vote on your -- 3 MR. PARKER: Yes. Please send your 4 nominations for the right ratio to Katie 5 directly with, please, a discussion of what 6 supports this. Anecdotal gut is fine, but 7 data is better. If there's anything that you 8 can refer to? That said, I really don't want 9 to discount gut. 10 I mean, in the absence of firm 11 data, the professional judgment of people who 12 are in the industry, I think, you know, is 13 valuable. It's better than nothing. 14 So I don't want to diminish. This 15 is my impression. I diminish that when there 16 is data available. I don't diminish it when 17 there isn't. 18 MEMBER PATTERSON: Richard, Wes 19 Patterson from ABB. 20 MR. PARKER: Yes? 21 MEMBER PATTERSON: My recollection 22 is that during the analysis that the DOE has

### 202-234-4433 Neal R. Gross & Co., Inc. Page 46 1 done, when they visited the factories, they 2 gathered input from the factories on what 3 percentage of the market was doing evaluation. 4 They have already got this data in the 5 archive somewhere. 6 MR. PARKER: Well, I think the 7 point is people's answers are not necessarily 8 reflective of their practice, I think. 9 MEMBER DeLASKI: Yes. This is the 10 thing. I get confused. Andrew DeLaski. 11 I think there is a question, as has 12 been pointed out several times, that we ask 13 the question, "Do you evaluate?" The answer 14 is yes. But they're not. There might be some 15 confusion as to what -- right. 16 The customers are evaluating. They 17 think they are evaluating for buying the 18 lowest LCC. 19 MR. PARKER: Yes. So I guess, do 20 you vote rationally? 21 MEMBER DeLASKI: So the question 22 is, is the data they got valid? What I'm

### 202-234-4433 Neal R. Gross & Co., Inc. Page 47 1 hearing, 35 percent of the use they didn't 2 pluck it out of a hat. I mean, it was used 3 because they heard it from somewhere. 4 MS. COUGHLIN: Yes. 5 MEMBER MILLURE: Dave Millure, 6 Metglas. 7 The percentage isn't so important 8 as what the A and B factors are. You have to 9 put them in buckets, right, because if 100 10 percent of these evaluators have an A factor 11 of one and a B factor of 25, then you're at 12 DOE, right? 13 So the percentage is one number, 14 but you really need the buckets of the 15 evaluation. 16 MS. COUGHLIN: Right, right. So we 17 have some surveys of A and B factors based -- 18 and we use that data to estimate what those 19 numbers will be. 20 And, again, it's a finite data set. 21 It's what we've got. So that was discussed 22 in the April meeting. So the data is in that

### 202-234-4433 Neal R. Gross & Co., Inc. Page 48 1 presentation. 2 MR. PARKER: Just to recap, is 3 there a difference in the A and B factors for 4 evaluators versus non? 5 MS. COUGHLIN: Well, non-evaluators 6 is effectively -- it's not exactly zero. It's 7 just irrelevant. They don't think about it. 8 MR. PARKER: What do you mean they 9 don't think? We don't know. 10 Yes? 11 MR. SAMPAT: Mahesh Sampat, EMS 12 Consulting. 13 I think the better way to frame the 14 question would be not whether you evaluate or 15 not evaluate. If you ask people, "Do you 16 evaluate?" everybody will say, "We evaluate." 17 The question is, "Do you buy better 18 than DOE minimum-required efficiency?" And 19 they will separate it out. Okay? It doesn't 20 matter how much better. Then because what I 21 heard is only ten percent of people buy better 22 than DOE. Ninety percent buy what is DOE

### 202-234-4433 Neal R. Gross & Co., Inc. Page 49 1 minimum requirement, minimum efficiencies. 2 So I think what we heard is only 3 ten percent of people buy better than DOE. 4 Then whether they buy a little bit better than 5 DOE or greatly better than DOE will have very 6 little impact on the LCC numbers. 7 MR. PARKER: Brian, could I put you 8 on the spot, if I might? Was that question 9 posed directly to the manufacturers in the 10 surveys in those terms? 11 MR. COFFEY: I can say that the 12 general consensus was that, regardless of 13 whether people were self-identifying as 14 evaluators, they wound up purchasing, by and 15 large, very close to the DOE standards. That 16 seemed to be the consensus. 17 MR. PARKER: Okay. Thank you. 18 Helpful. 19 Yes? Yes? Go ahead. Start with 20 your name. 21 MR. WINDER: Ken Winder, NRECA. 22 One of the purposes of the

### 202-234-4433 Neal R. Gross & Co., Inc. Page 50 1 evaluations is to -- 2 MR. PARKER: Could people on the 3 phone please mute your phones? 4 MR. WINDER: One of the purposes of 5 evaluation is not necessarily buy higher 6 energy efficiency transformers, but to select 7 the current suppliers is to -- so you may say, 8 "I evaluate," but you are trying to select 9 between suppliers. And so that is another 10 function of evaluation. 11 MS. COUGHLIN: Yes. And it's also, 12 you know, although we use a single number to 13 represent efficiency, those are under test 14 procedure conditions. So under real 15 conditions, there are load losses and no-load 16 losses. And you can evaluate because you have 17 a different -- you have a different set of 18 criteria for evaluating those two types of 19 losses. So it isn't just an efficiency 20 constraint. 21 And, again, in terms of the LCC, 22 it's relatively straightforward for us to do

### 202-234-4433 Neal R. Gross & Co., Inc. Page 51 1 these. You know, the two extreme cases are 2 obviously zero percent and 100 percent. We 3 can do anything in between, but we do need to 4 retain within the LCC the ability to represent 5 purchasers who are trying to minimize one type 6 of loss versus the other. So that's one 7 reason why it's in there. 8 MEMBER PATTERSON: This is Wes 9 Patterson with ABB. 10 It would be very interesting to see 11 what is the impact on the final analysis, if 12 it's all zero or 100 percent. 13 MS. COUGHLIN: Yes, right. 14 MEMBER PATTERSON: If this is a 15 small variation, it's not a point to belabor. 16 MS. COUGHLIN: Right. 17 MEMBER PATTERSON: You know, if 18 it's a huge variation, then maybe we need to 19 look at it in more detail. 20 MR. PARKER: That's helpful, yes. 21 MEMBER DeLASKI: And I guess I 22 would just take it a little bit further, which

### 202-234-4433 Neal R. Gross & Co., Inc. Page 52 1 is that if we know there is a consensus around 2 10-20 percent, why don't we just file it to 3 that and then we'll see? You know -- 4 MS. COUGHLIN: Yes. I mean, we 5 could -- 6 MEMBER DeLASKI: That could be the 7 consensus. 8 MS. COUGHLIN: Yes. If you -- 9 MEMBER DeLASKI: I'm not hearing 10 anybody say it's higher, it's way higher than 11 20 percent. That should be the main case. 12 And then you have sensitivities. 13 MR. PARKER: Any others on that? 14 Go ahead. 15 MEMBER CASKEY: Yes. Excuse me. 16 John Caskey with NEMA. 17 It seems like you're using an 18 estimation process of the evaluator when, in 19 reality, Brian and maybe others already have 20 sort of the answer. And the answer is that a 21 relatively small number of people buy a higher 22 efficiency than the 20/10 DOE rule.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 53 1 So, I mean, it seems like you're 2 using an approximation to get to a buying 3 decision when, in reality, you already have 4 the results of the buying decision -- 5 MR. PARKER: Well, we have to know 6 it's relatively small. I mean, is it zero? 7 Is it ten? Is it 20? I mean, we just have to 8 know. 9 MS. COUGHLIN: Yes. And you have 10 to be careful to make a distinction between 11 statements made in interviews and a kind of 12 rigorous statistical sample. So we don't have 13 a rigorous statistical sample. 14 So we can see what we can do with 15 the information that has been gathered 16 recently and what we can do to modify the -- I 17 just don't want a claim that there is data 18 that would settle the issue when really -- 19 MR. PARKER: Right. 20 MS. COUGHLIN: Even if you have 21 interview responses, there's still going to be 22 some uncertainty about how to interpret them.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 54 1 But yes, we're continuing to -- 2 MEMBER CASKEY: That makes sense. 3 MR. PARKER: Right. 4 MEMBER CASKEY: This is John Caskey 5 again. But that methodology seems like you're 6 taking it further away from statistical 7 information that might be available. 8 I mean, the sales information is 9 available, you know, one way or the other. If 10 you're using a methodology to get to a sales 11 decision process to estimate that or represent 12 that when, in reality -- 13 MR. PARKER: You're saying you 14 could just look at the sale and see if it 15 comes in higher than the DOE -- 16 MS. COUGHLIN: Right. We currently 17 have very limited information on purchases as 18 a function of efficiency. We have some 19 information, but it's pretty limited. 20 MR. PARKER: Okay. So we basically 21 need to work with the data we've got. We 22 can't go back and do additional manufacturer

### 202-234-4433 Neal R. Gross & Co., Inc. Page 55 1 interviews. 2 Do you have actual sales data? 3 MEMBER CASKEY: I don't. The 4 manufacturers do. 5 MR. PARKER: Yes. That would 6 require -- I mean, we can't go back and do a 7 new round of interviews, but -- 8 MEMBER CASKEY: No. I agree. This 9 is This is John Caskey with NEMA. 10 But the manufacturers I think 11 during the interviews have already shared this 12 information with them. So what I am trying to 13 get to is if we're doing an approximation 14 method, a new methodology dealing with this 15 evaluator decision-making process -- 16 MR. PARKER: I see what you're 17 saying. 18 MEMBER CASKEY: -- when, in 19 reality, you sort of know what decisions have 20 been made over the last year and a half 21 essentially relative to the DOE regulation. 22 MR. PARKER: Okay.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 56 1 MEMBER CASKEY: So why are you 2 coming up with a secondary analysis. 3 MR. PARKER: She doesn't know it 4 based on any statistical data that she has 5 that she can point to. So all we have to do 6 is just be candid about the basis for our -- I 7 think what she is saying is that we have to be 8 candid about the basis for information. 9 If it is based upon interviews with 10 manufacturers according to their selling 11 records, then we just indicate that. But if 12 you don't have data, you don't have data, and 13 we can't pretend that you do. 14 MEMBER CASKEY: This is John Caskey 15 with NEMA. 16 You have the buyer, the 17 representatives of the buyers also. 18 MR. PARKER: Right. 19 MEMBER CASKEY: So hopefully what 20 the manufacturers are selling and what the 21 buyers are buying, there is some truth in 22 those two numbers.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 57 1 MR. PARKER: Right, right, right. 2 But I believe that they're emphasizing that 3 the basis is, you know, in this room we are 4 producing not only a standard, but we are 5 producing a supporting analysis. And so we're 6 generating a record that will, you know, 7 hopefully support the recommendations that we 8 come up with. 9 So that is why and I think that is 10 why John's point is particularly well-taken. 11 You know, if the people come forward in our 12 discussions and say, "This is our experience," 13 that is part of the record. That is something 14 that a court could consider when deciding 15 whether what we have done is arbitrary of 16 capricious or whether it passes judicial 17 scrutiny. 18 And, again, I should emphasize, by 19 the way, that the results of this Committee if 20 it's enacted into law won't get any greater 21 deference from a court than it would if DOE 22 enacted it on its own.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 58 1 So it is incumbent upon us to 2 produce, you know, not only a standard but an 3 analysis that withstands scrutiny. That's why 4 it's important to be very transparent about 5 where our data is coming from and why we'll be 6 very pedantic about that as we go forward. 7 Okay. Anything else on this? Yes, 8 Jerry? 9 MEMBER CORKRAN: I brought it up 10 yesterday -- 11 MR. PARKER: Start with name and 12 affiliation. For the record, you just have to 13 give your name and affiliation. 14 MEMBER CORKRAN: Okay. For the 15 record, Jerry Corkran. Sorry about that. 16 Yesterday I brought it up about the 17 A and B factors, which is a very important 18 part of your analysis up there. And I believe 19 that if it would be focused on the cost of 20 energy, the A and B factors, for the total 21 earning cost, you could do a very good job and 22 it would resolve the various problems that

### 202-234-4433 Neal R. Gross & Co., Inc. Page 59 1 happen when you carry it out kind of out on a 2 tree limb to the 900 kinds of transformers 3 that we have and try to create the 4 efficiencies when, really, if you stop with 5 the A and B factors, your cost of energy, 6 that's what influences the efficiency of the 7 transformer. 8 So if we focused on creating a 9 procedure where the manufacturers were 10 required to use an optimized total earning 11 cost with A and B factors, which were agreed 12 on by the subcommittee, it would resolve all 13 the variations which are going to happen with 14 changes in material cost, changes in who knows 15 what. 16 But the further out we go out on 17 the tree limbs trying to specify things, the 18 more errors that are going to occur 19 eventually. 20 I don't know whether it needs one A 21 or B factor or maybe two or something, but 22 apparently if the cost of energy is what you

### 202-234-4433 Neal R. Gross & Co., Inc. Page 60 1 are focusing on, you could come up with an A 2 and B factor which would solve the transformer 3 energy efficiency problem. And we would have 4 to use those in quoting transformers, just 5 like now we have to meet the DOE efficiencies. 6 I don't see why it wouldn't work very well. 7 MS. COUGHLIN: I mean, that's not a 8 technical issue. That's a process issue. So 9 I will defer to -- 10 MEMBER CYMBALSKY: I want to go 11 back to the evaluator percent. I think Mike 12 Rivest had a good point. I don't know what 13 kind of -- what is the functional form for 14 that? Is it for a choice? It is like a logit 15 function or is it -- 16 MS. COUGHLIN: No. It's just a 17 probability. 18 MEMBER CYMBALSKY: Okay. 19 MS. COUGHLIN: So 30 percent or 20 20 percent of -- 21 MEMBER CYMBALSKY: So if we say 50 22 percent go in this bucket where they evaluate,

### 202-234-4433 Neal R. Gross & Co., Inc. Page 61 1 of that 50 percent, still 90 percent could 2 still choose the least efficient one. 3 MS. COUGHLIN: I mean, it may be 4 useful to move on and look at some of the 5 diagrams before we spend too much time on this 6 because it may be less important than you 7 think it is. 8 MEMBER CYMBALSKY: Yes. Let's go 9 -- 10 MS. COUGHLIN: Yes. 11 MEMBER ROSENSTOCK: Just a quick 12 question. We haven't seen these slides. So 13 that's why we're -- 14 MR. PARKER: Steve, your name and 15 affiliation. 16 MEMBER ROSENSTOCK: Sorry. Steve 17 Rosenstock, EEI. 18 How many slides are there? And are 19 you talking about each of these 20 characteristics in the future slides? 21 MS. COUGHLIN: No. I have about 22 ten slides that I wanted to get through this

### 202-234-4433 Neal R. Gross & Co., Inc. Page 62 1 morning. So we're on number 2. 2 (Laughter.) 3 MS. COUGHLIN: Most of the stuff, 4 as I said, most of the -- the information 5 about how these individual things were 6 calculated was presented in April. So I won't 7 review it unless people ask me to go over it 8 again. That was my plan. 9 So, you know, things about discount 10 rates, lifetimes, how we did the energy use 11 simulation. All that stuff was going in -- we 12 went over that in a lot of detail in April. 13 And that has not changed fundamentally since 14 then. 15 MEMBER ROSENSTOCK: Steve 16 Rosenstock, EEI. 17 Despite all the comments, those 18 values really haven't changed? Is that what 19 I'm hearing? 20 MS. COUGHLIN: Well, we have 21 responded to the comments, but they don't 22 actually result in large impact changes to the

### 202-234-4433 Neal R. Gross & Co., Inc. Page 63 1 analytical inputs. So we have modified some 2 of the markups. We have adjusted the way we 3 do the transformer loads. We separated the 4 commercial from the industrial buildings, as 5 was requested. We looked at updated 6 electricity price data. But none of these 7 things end up having an enormous impact. 8 So back to this scheme. So we have 9 these characteristics that go with the owner 10 and then the characteristics that go with the 11 transformer installation, which include the 12 lifetime and data about the loads on that 13 transformer. This is where something like 14 whether the transformer is in a 15 space-constrained installation were to appear. 16 So that is part of the installation 17 cost. And you again track the number of 18 installations that are space-constrained so 19 that, if necessary, we can deal with 20 additional costs that might be incurred by the 21 standard. 22 And then within the -- so the LCC

### 202-234-4433 Neal R. Gross & Co., Inc. Page 64 1 takes the base case, which is the current DOE 2 standard, and then goes through these 3 hypothetical efficiency levels that are 4 attached to each design line. And, again, 5 I'll illustrate in a graphic what happens when 6 you move from the base case to a higher 7 efficiency level. 8 I just want to make a quick 9 statement about the energy use. Because of 10 no-load losses, that's not problematic. You 11 have the engineering parameter that gives you 12 the no-load loss rate. And that can be used 13 to estimate the no-load losses. But the load 14 losses depend on the actual shape of the loads 15 on the transformer. 16 So one of the biggest differences 17 between what we do in a TOC is we actually try 18 to capture two things. One is the variability 19 in the population on those load shapes, and 20 the other is the correlation between the time 21 variation of the load on the transformer and 22 time-varying electricity prices.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 65 1 And, again, this is something that 2 was reviewed in detail in the April meeting. 3 In the model, this is where you get a 4 significant difference between the dry-type 5 transformers and the liquid-immersed 6 transformers. 7 So for liquid-immersed, the 8 assumption is most of them are utility-owned. 9 Therefore, you see these hourly varying kind 10 of system-wide -- we used the day-ahead hourly 11 market price to represent the marginal hourly 12 varying price. And so we do that correlation 13 with an hourly transformer load. 14 And for dry-type transformers, if 15 the assumption is that they're installed in 16 buildings and the buildings are on tariffs, 17 then the variability is at a monthly level. 18 So we look at monthly variations in load 19 factors and loss factors and how that 20 correlates with monthly marginal electricity 21 prices. 22 MR. PARKER: Okay. Steve?

### 202-234-4433 Neal R. Gross & Co., Inc. Page 66 1 MEMBER ROSENSTOCK: Steve 2 Rosenstock, EEI. 3 In the April analysis, it looked 4 like all the prices that were used were based 5 on 2008 wholesale price data from markets. 6 MS. COUGHLIN: Right. 7 MEMBER ROSENSTOCK: And I didn't 8 point out in my comments but I'll point out 9 now that in 2008, there was a huge run-up in 10 natural gas prices that had an effect on all 11 wholesale prices -- 12 MS. COUGHLIN: Right. 13 MEMBER ROSENSTOCK: -- in the 14 United States. And, in fact, they reached, I 15 think it was, like $1.20 from them, $12 per 16 million BTUs. And this year they have been 17 average about $4 per million BTUs. 18 So if you're using those, the 2008 19 wholesale prices, as your base case and then 20 using the EIA outlook to extrapolate in the 21 future, you have a much higher base case. And 22 then you're going up or kind of down and up

### 202-234-4433 Neal R. Gross & Co., Inc. Page 67 1 based on the EIA annual energy outlook versus 2 using 2010 or 2011 data. 3 So I'm kind of curious if you are 4 going to use the hourly for some of this 5 analysis, would you be able to use the 2010 6 data on the hourly basis and then use the 7 annual energy outlook for your projections? 8 MS. COUGHLIN: Yes. Okay. So let 9 me clarify a couple of things. First of all, 10 we don't have -- FERC is pretty slow. And we 11 get the data from the FERC 714. They're 12 fairly slow. So they have released 2009, but 13 we don't have 2010 complete. 14 But I want to clarify that the 15 hourly data is used to look at the correlation 16 structure between prices and loads, but it is 17 not used to set the kind of absolute level of 18 the prices. And that's where the AEO comes in 19 because we only start counting these costs at 20 some future time, where we're using the AEO 21 projection to set the electricity price kind 22 of baseline level at that future time.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 68 1 So what we use is the AEO average 2 electricity price to ratio the data year to 3 the beginning of the analysis period. 4 MEMBER ROSENSTOCK: Steve 5 Rosenstock, EEI. 6 Again, I'm just trying to interpret 7 what you are saying. So the AEO puts out 8 average retail prices. 9 MS. COUGHLIN: The AEO puts out 10 everything, but yes, because, again, we need 11 an indicator of general cost of production. 12 And so we use the actual average electricity 13 price. But we check to see whether there are 14 significant differences depending on which 15 index that you use. 16 MR. PARKER: You can do a 17 sensitivity on that, too, right? 18 MS. COUGHLIN: Yes, you can do -- I 19 guess I just want to say that the only thing 20 that will affect this analysis is if I do a 21 price load correlation plot that's normalized 22 to, say, one for the average price if the

### 202-234-4433 Neal R. Gross & Co., Inc. Page 69 1 shape is different. That will affect this 2 analysis. 3 And we have checked for a couple of 4 regions, the 2009 and 2008 data. And that 5 shape has not changed significantly. 6 MR. PARKER: Why did the absolute 7 values not matter? I don't quite understand. 8 MS. COUGHLIN: Because the absolute 9 values are in the future. And they're set by 10 the AEO forecasts. 11 MEMBER ROSENSTOCK: Well, the 12 reason I am discussing this is -- Steve 13 Rosenstock, EEI -- the fact that, especially 14 the last five years, the amount of renewables 15 has gotten, especially in certain ISO markets, 16 has been significantly increased. 17 And, actually, for example, like in 18 the Pacific Northwest and in Texas, there are 19 times when it's at the margin, the actual 20 wholesale price approaches zero. 21 MS. COUGHLIN: Yes. 22 MEMBER ROSENSTOCK: That's not

### 202-234-4433 Neal R. Gross & Co., Inc. Page 70 1 reflected in your analysis. And that is 2 having an impact on the actual -- some of the 3 output. Now, of course -- 4 MS. COUGHLIN: It is in the 5 analysis. ERCOT is one of the regions. 6 MEMBER ROSENSTOCK: Yes. 7 MS. COUGHLIN: Yes. It's true that 8 there is some small change, but, again, it's 9 not really going to make a huge difference 10 because we are using these distributions of 11 price load. So, you know, you're going to 12 have a minor impact on that distribution 13 function. And at the end of the day, it's not 14 going to be very large. 15 MEMBER ROSENSTOCK: Well, I have to 16 respectfully disagree because there are so 17 many states with renewable portfolio 18 standards. And as renewables become bigger 19 and bigger portion of either the peak load or 20 the base load, I know they're intermittent, 21 but that's going to have a huge impact on the 22 wholesale prices. That will have an impact on

### 202-234-4433 Neal R. Gross & Co., Inc. Page 71 1 some of these results. And, again -- 2 MS. COUGHLIN: Yes. That's where 3 the AEO price forecast comes in. So we're not 4 going to forecast. The price forecast itself 5 comes out of the AEO. And, you know, you can 6 look at the penetration of renewables that 7 they're assuming and all of that. But all I'm 8 saying is that the 2008 -- 9 MR. PARKER: You're saying that 10 historically it doesn't matter because you're 11 just using AEO forecasts? 12 MS. COUGHLIN: What I'm saying is 13 that we have 2008 data that describes the 14 correlation between the prices and loads. I 15 can take everything out and replace it with 16 2009 data, but if the correlation doesn't 17 change, then the results won't change because 18 the results -- we're only using the data to 19 get that level of correlation. We're not 20 using the data to set the absolute price 21 level. 22 MEMBER ROSENSTOCK: But okay.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 72 1 Steve Rosenstock, EEI. 2 But the wholesale prices drop. You 3 know, say they went from five cents down to 4 two and a half cents. 5 MS. COUGHLIN: Then that will be 6 reflected in the rescaling of the whole price 7 function. 8 MEMBER ROSENSTOCK: So are you able 9 to rescale it based on more recent data? 10 MS. COUGHLIN: We use AEO. So we 11 use AEO 2011. 12 MEMBER ROSENSTOCK: But if you were 13 able to get -- I'm pretty sure that each of 14 the -- I know FERC publishes, but also each of 15 the ISOs publish their wholesale prices on 16 their websites. Would you be able to rescale 17 based on, let's say, the 2010 wholesale prices 18 that have been published by the ISOs? 19 MS. COUGHLIN: Let's see. If you 20 can get 2010 data for every region of the 21 country, you could do that. So we can look at 22 the most recent -- I mean, we can also use --

### 202-234-4433 Neal R. Gross & Co., Inc. Page 73 1 there are EEI reports that we could use to 2 rescale the data. But, again, for the 3 analysis, if you want to look out forward to 4 the compliance data and beyond that, that's 5 where we have to use AEO. 6 MR. PARKER: When you say you "have 7 to," why do you have to? 8 MS. COUGHLIN: That's the 9 Department policy to use AEO. 10 MR. PARKER: Okay. 11 MEMBER ROSENSTOCK: Steve 12 Rosenstock, EEI. 13 I don't mind using AEO projections. 14 It's just a matter of depending on where you 15 have that baseline of those prices. That will 16 make a difference on life cycle cost analysis. 17 MS. COUGHLIN: We set the baseline 18 saying -- so we have the data year for prices. 19 We take AEO. We look at the price that they 20 claimed in that data year and then whatever 21 year's dollars that we're using for the 22 analysis. And we use that ratio to rescale

### 202-234-4433 Neal R. Gross & Co., Inc. Page 74 1 the absolute price. 2 MEMBER ROSENSTOCK: So, again, 3 Steve Rosenstock, EEI. 4 Again, if the wholesale -- again, 5 let me just -- so if AEO says the retail price 6 -- again, I don't know whether it's commercial 7 or industrial -- was I'll just say 10 cents 8 and the wholesale price was 5 cents in 2008 9 and in 2010, the wholesale price is down to 3 10 cents but the retail prices are about the same 11 but the transformer, the actual cost savings, 12 you are going to have the wholesale side, not 13 the retail side. Are you able to rescale it 14 and then use the projections? 15 MS. COUGHLIN: Yes. 16 MEMBER ROSENSTOCK: Okay. And 17 would you be able to do that over the next 18 month or so? 19 MS. COUGHLIN: It's done. That's 20 what we do. That's the procedure that we use. 21 MEMBER ROSENSTOCK: Okay. But I'm 22 still saying, would you be able to use it, do

### 202-234-4433 Neal R. Gross & Co., Inc. Page 75 1 it as a sensitivity analysis using 2010 data? 2 MS. COUGHLIN: You mean to use 3 something other than AEO? 4 MEMBER ROSENSTOCK: No. I'm sorry. 5 MS. COUGHLIN: Because AEO 2011 6 goes back to 2007, I think. Since our data 7 year is 2008, we just take what is in AEO to 8 do that rescaling. 9 MR. PARKER: Bob, you were waiting 10 patiently at the mike. And then go up. 11 MR. BERMAN: Yes. Robert Berman, 12 Berman Economics. 13 Just a point of clarification, 14 Katie. On the load losses, are you using a 50 15 percent load factor or are you using your 16 estimate of the actual RMS? 17 MS. COUGHLIN: We're using an 18 analysis of metered building data to look at 19 the distribution of load factors. 20 MR. BERMAN: No. I'm talking about 21 liquid-filled. 22 MS. COUGHLIN: We're using the same

### 202-234-4433 Neal R. Gross & Co., Inc. Page 76 1 information. It's the only hourly metered 2 data that we have. So we're using a 3 distribution that represents the relationship 4 between load factors and loss factors to book 5 it as a statistical model of what the loss 6 factor is likely to be. 7 So we have a distribution of loss 8 factors. And then the median value of that 9 distribution can be scaled to be, say, 35 10 percent or 50 percent or whatever, again, is a 11 consensus view of the average loading. And 12 then within the simulation, you pick. You 13 pick a loss factor from the distribution for 14 each transformer. 15 MR. BERMAN: Okay. What loss 16 factor or what RMS load are you assuming? 17 MS. COUGHLIN: I believe for the -- 18 I have to look it up. Liquid-filled I think 19 is 45 percent. It amounts to a 45 percent RMS 20 load I think. 21 MR. PARKER: So there's a general 22 theme that I think is emerging from all of

### 202-234-4433 Neal R. Gross & Co., Inc. Page 77 1 these comments, which is that I think the 2 group would benefit from having basically like 3 a cheat sheet that just sets out in one place 4 if it's not already there all of the key 5 assumptions that go into the analysis and the 6 origin of the data for those assumptions and 7 then the results of any sensitivity analysis 8 around the range of what you're using for the 9 sensitivity analysis. 10 MS. COUGHLIN: Yes. That's in the 11 TSD basically. So we can try and shorten it, 12 but it's going to be 50 pages of information. 13 MR. PARKER: Right. And you're 14 saying that it has not -- the TSD was in 15 April. And you're saying it has not 16 materially changed since then? 17 MS. COUGHLIN: That's right. I 18 mean, there have been certain changes made in 19 response to comments, but they don't impact 20 the quantitative results -- 21 MR. PARKER: Okay. So it sounds to 22 me, then, like the answer to a lot of these

### 202-234-4433 Neal R. Gross & Co., Inc. Page 78 1 questions, they're set forth in the TSD and 2 people could be referred back to that? 3 MS. COUGHLIN: Yes. 4 MR. PARKER: Because I don't want 5 to -- you know, we're spending a lot of time 6 working out "Did you assume this?" or "Did you 7 assume that?" If we can stipulate that the 8 answer to all of these things is in the TSD, 9 people need to refer back to it, we can do 10 that, but I don't want to continue to consume 11 time with the same genre of questions. 12 Steve? 13 MEMBER ROSENSTOCK: I'm sorry. 14 Steve Rosenstock, EEI. 15 The issue is we have this August 16 23rd report with different levels and 17 different LCC numbers than were in the TSD. 18 So all we have is a summary. We have the 19 April report, which shows a lot of the 20 assumptions and how some of this was done. 21 And that was fine, and it was a very good 22 report.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 79 1 The issue why these questions are 2 coming up is that we have now different sets 3 of numbers and different levels, where, you 4 know, we don't have the details about what the 5 underlying assumptions were that got to these 6 new levels and the new life cycle costs and 7 what parameters were changed. 8 This is summary data. We don't 9 have the detailed data for the August 23rd 10 report. That's why a lot of us are asking 11 questions. 12 MR. PARKER: So could you 13 regenerate it for the August 23rd report? 14 MS. COUGHLIN: Well, again, that's 15 not really my decision. 16 MR. PARKER: Would that take a long 17 time? 18 MS. COUGHLIN: Yes. I mean, you 19 know, we can provide whatever documentation 20 the Committees agrees to publish, but, yes, 21 this goes into the process more than -- 22 MR. PARKER: Right. Well, I guess

### 202-234-4433 Neal R. Gross & Co., Inc. Page 80 1 the question is it would take a long time 2 because you would have to rerun the 3 sensitivity analysis? 4 MS. COUGHLIN: No, no. I mean, I 5 think the principal change in -- 6 MR. PARKER: I know, but -- 7 MS. COUGHLIN: -- between April and 8 August was the changes to the engineering 9 data. That's going to be the biggest 10 contributor to changes in the LCC analysis. 11 And there may be some minor but statistically 12 insignificant changes due to these other 13 modifications of inputs to the LCC. 14 And we can prepare a memo that 15 details the exact differences in the inputs to 16 the LCC, but I think, again, one of the things 17 that I wanted to try to move towards is to try 18 to get a sense of the impact. 19 There are a lot of inputs. And 20 most of them are statistical distributions. 21 So modifications to the shapes of those 22 distributions don't always have a very large

### 202-234-4433 Neal R. Gross & Co., Inc. Page 81 1 impact on the results. 2 So in some sense, even if, you 3 know, we could spend a lot of time going 4 through and detail all of these things, you 5 would not be able to tell in the actual output 6 that anything had been changed. 7 I would like to try to clarify a 8 little bit why it works that way. 9 MR. PARKER: Okay. 10 MEMBER GREESON: Rob Greeson, 11 Federal Pacific Transformer. 12 I keep hearing this over and over 13 again. And a lot of the stuff we're talking 14 about in the long run doesn't make a lot of 15 difference. Would it be agreeable to most 16 people if that's the viewpoint on a lot of 17 these things to say, "Hey, that doesn't really 18 make" -- in other words, let's identify what 19 does make a huge difference on the life cycle 20 cost and focus on that and then defer the 21 other smaller detailed things maybe a little 22 bit later and you could just kind of be more

### 202-234-4433 Neal R. Gross & Co., Inc. Page 82 1 -- push us around a little bit, say, "Oh, that 2 doesn't make a difference. This is what does" 3 or "This is what we have seen does. And let's 4 focus on that"? Otherwise we might spend a 5 little bit too much time talking about 6 details. 7 MR. PARKER: Brian, did you want to 8 chime in there? 9 MR. COFFEY: Sure. 10 MR. PARKER: Thank you. 11 MR. COFFEY: This is Brian Coffey, 12 Navigant. 13 Rather than spend a lot of time 14 recapitulating all of the information through 15 a cheat sheet, I know that Navigant and LBNL 16 have prepared draft updates to several of the 17 TSD chapters containing all of this 18 information. So those could be made available 19 well before the next meeting if that would be 20 helpful and circumvent a lot of this back and 21 forth about all of the assumptions that were 22 made.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 83 1 MR. PARKER: And that would answer 2 the questions about the assumptions that were 3 made? 4 MR. COFFEY: I think it would 5 probably answer many of them, yes. 6 MR. PARKER: Do you agree with 7 that, Katie? 8 MS. COUGHLIN: It may be more 9 efficient to just prepare a document that 10 summarizes the changes, but we can discuss 11 that later, I think. Yes, yes. 12 MR. COFFEY: We'll touch base. 13 MS. COUGHLIN: I mean, obviously 14 eventually everything is documented in 15 exhaustive detail. The question of within 16 this process sort of how to present 17 information in a way that is actually useful 18 to the Committee in real time, I think we need 19 to think a little bit more about how to do 20 that. 21 MR. PARKER: And you need to do it 22 on the basis of a CSL, you know, a set of

### 202-234-4433 Neal R. Gross & Co., Inc. Page 84 1 CSLs, that we agree on. 2 MS. COUGHLIN: Moving right along. 3 MR. PARKER: That's our next 4 presentation. Thanks.
5 MS. COUGHLIN: Yes. 6 MR. PARKER: Steve, let's hold off. 7 Let's let her finish. Okay? Because we're 8 running behind schedule. 9 MS. COUGHLIN: Okay. So, again, 10 this is from the -- I'm going to show three 11 plots of the -- this is the price-efficiency 12 design space. 13 This is illustrative. This is 14 design line 1, which is liquid-immersed. So 15 the horizontal axis is the efficiency at the 16 test procedure conditions. 17 So one of the things to remember is 18 that, really, the efficiency is a 19 two-parameter function. It depends on the 20 load losses and the no-load losses. 21 So the test procedure represents a 22 particular combination of those two components

### 202-234-4433 Neal R. Gross & Co., Inc. Page 85 1 of the efficiency, but the way we do the LCC 2 simulation, you could have different levels of 3 load losses. So in the field, you may have a 4 different kind of practical efficiency for the 5 product. 6 And then these CSLs, which are now 7 known as ELs, are simply divisions of this 8 design space. And, you know, we try to 9 essentially come up with a set of divisions 10 that is relatively evenly spaced so that you 11 kind of essentially can represent a relatively 12 continuously the effective efficiency on these 13 different outputs. But you also need to 14 respect any significant engineering 15 constraints. 16 So these lines, you know, are going 17 to be subject to some adjustment, but once 18 they're set, they actually have an engineering 19 significance. So we don't really want to move 20 them around too much. 21 And the way that the LCC works is 22 that anything that is to the right of a dashed

### 202-234-4433 Neal R. Gross & Co., Inc. Page 86 1 line is available to be selected in an LCC 2 run. 3 So the line at the far left is what 4 we call CSL-0. That's the base case. So 5 everything is allowed in the base case. And 6 then as you move to the efficiency level 1, 2, 7 3, some of the lower efficiency designs drop 8 out of the population. 9 So the next slide, it's on a very 10 different scale. So it's been really 11 compressed in the vertical. 12 So this is just an illustrative 13 example of the output of one of the LCC runs. 14 So what are we -- I think I picked CSL-5. So 15 the green dots are that full design space. 16 And the blue dots were the base case 17 selections. 18 So since this particular run has a 19 high level of evaluators, you can see that, 20 even in the base case, there's a fairly large 21 number of choices of efficiency that are above 22 the minimum price.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 87 1 And then if you go past each one of 2 those lines, the LCC is essentially forcing 3 the choice of higher and higher efficiency. 4 So up at CSL-5, you can see that there is a -- 5 well, there is a limited number of designs 6 that are available. And none of them would 7 have been chosen in the base case. 8 And for each, if you review the TSD 9 again, the general idea of what is going on 10 hasn't changed between April and August. So 11 if you review the April TSD and -- the shapes 12 of these price efficiency clouds of points can 13 be quite variable from one design line to 14 another. 15 So in some cases, that lower 16 boundary is very flat, which means there is 17 very little cost differential between 18 efficiency levels, at least for the lower 19 standard level, for the lower efficiencies. 20 And in those cases, the standard has very 21 little impact. The number of evaluators has 22 very little impact because the price

### 202-234-4433 Neal R. Gross & Co., Inc. Page 88 1 differentials are just not that significant. 2 In other cases, these curves are 3 very steep. And in those cases, then things 4 like the evaluation rate are going to start to 5 have an important influence on the results. 6 So the next plot is the same data 7 again. This is now looking at the two 8 parameters of our two-parameter efficiency 9 space. So the vertical axis is the load loss 10 rate for the design. And the horizontal axis 11 is the no-load loss rate. 12 The full cloud of points is the 13 full set of designs, again for design line 1. 14 So now in this space, since the efficiency 15 essentially depends on the sum of the load 16 losses and the no-load losses, a single 17 efficiency level is a diagonal line along that 18 cloud. 19 MEMBER PATTERSON: Excuse me, 20 Katie. Is this load losses at 100 percent 21 rate or is this a 50 percent or rate of load? 22 MS. COUGHLIN: Rate of load I think

### 202-234-4433 Neal R. Gross & Co., Inc. Page 89 1 is full capacity. 2 MEMBER PATTERSON: Okay. 3 MS. COUGHLIN: So essentially 4 anything that is along that, that red line is 5 compliance with CSL-1, I think. But, again, 6 that doesn't really matter. The main point is 7 that any design along that line is going to 8 have the same efficiency because the 9 efficiency depends on the sum of the load 10 losses and no-load losses. 11 So, again, within the choice, even 12 once you have chosen a design at a particular 13 efficiency, you may or may not realize that 14 efficiency in the field depending on the 15 balance of load losses to no-load losses in 16 the simulation. 17 MEMBER PATTERSON: Just as a point 18 of reference from an old engineer, in an 19 unconstrained design environment, the ratio of 20 the load loss to the no-load loss runs around 21 8 to 1, which if I look at 100 and I go up, 22 you're at 600. Okay. That's a factor of six.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 90 1 If I look at 200 and then I'm down 2 at 200, something doesn't feel good. I would 3 expect to see the ratio of the two losses to 4 be a ratio of about eight to one in an 5 unconstrained environment, which is the top 6 line, just as a technical point of reference. 7 MS. COUGHLIN: Yes. I mean, that 8 is more of an engineering point. This is just 9 engineering data. 10 MEMBER PATTERSON: Yes. That's 11 what I am. 12 MR. COULTER: Katie, I have a 13 question. This is Greg Coulter with Prolec 14 GE. 15 It was not clear to me how you are 16 using the no-load loss data and the load loss 17 data in your model. 18 MS. COUGHLIN: Okay. 19 MR. COULTER: Because if I heard 20 you right, it seemed to me you are using each 21 one of those ratios. You have said, "We are 22 going to pick this no-load and this load loss

### 202-234-4433 Neal R. Gross & Co., Inc. Page 91 1 so that you can make an adjustment on the 2 loading and how it does affect this on 3 loading. 4 You're not just using efficiency. 5 You're using the actual -- 6 MS. COUGHLIN: Right, right. So 7 the no-load loss rate is an engineering 8 parameter. You just multiply by 8,760 to get 9 the annual losses. And then for the load loss 10 rate, we have this load simulation that tries 11 to estimate what the actual load might be. 12 And then you multiply that by the load loss 13 rate to get the load losses. 14 MEMBER PATTERSON: Which I 15 understood you said earlier was roughly gave a 16 mean of about 45 percent. 17 MS. COUGHLIN: Yes. Again, that's 18 one of those parameters that is -- 19 MEMBER PATTERSON: And the standard 20 is based on 50 percent. So it's a close 21 match. 22 MS. COUGHLIN: Well, the test

### 202-234-4433 Neal R. Gross & Co., Inc. Page 92 1 procedure is based on 50 percent. 2 MEMBER PATTERSON: Right. 3 MS. COUGHLIN: So the test 4 procedure is just a way of assigning a number 5 to a piece of equipment. 6 MEMBER PATTERSON: Not totally true 7 in this environment because that 50 percent 8 was the industry's estimation of a typical 9 load on a transformer. 10 MS. COUGHLIN: Right, right. But 11 the standard -- 12 MEMBER PATTERSON: Your data is 13 correlating well with the gut feel. 14 MS. COUGHLIN: Right. But now we 15 haven't set the standard. And the value that 16 will be used to set the standard has not been 17 finalized. So we're using for these runs 45 18 percent for liquid-immersed. And low-voltage 19 dry is much lower. And medium voltage I think 20 is lower than 45 percent. 21 MEMBER PATTERSON: And, Greg, if I 22 may, could I back up two slides just for one

### 202-234-4433 Neal R. Gross & Co., Inc. Page 93 1 quick question? 2 MR. COULTER: Why, of course, Wes. 3 (Laughter.) 4 MEMBER PATTERSON: Thank you. 5 If we could back up two slides, 6 please? 7 MS. COUGHLIN: Let's see. 8 MEMBER PATTERSON: Okay. What we 9 said, if I understood correctly, if I look at 10 CSL-1, we said everything that is considered 11 under CSL-1 are all the dots to the left of 12 the line. 13 MS. COUGHLIN: To the right. 14 Sorry. To the right. So that -- 15 MEMBER PATTERSON: All the dots to 16 the right? 17 MS. COUGHLIN: With higher 18 efficiency than that dashed line, yes. 19 MEMBER PATTERSON: Okay. I'm 20 comfortable with that. Thank you. 21 MR. PARKER: Chuck? 22 MEMBER SIMMONS: Excuse me. I'm

### 202-234-4433 Neal R. Gross & Co., Inc. Page 94 1 still a little unclear. I'm sorry. Chuck 2 Simmons, Progress Energy. 3 As far as all the candidates for 4 CSL-1, would it be all of the dots to the 5 right of the second left most vertical dotted 6 line or is it --
7 MS. COUGHLIN: Yes. 8 MR. PARKER: To the left of the 9 line. 10 MS. COUGHLIN: Yes. It's the 11 dashed line that is to the right of the label, 12 the -- 13 MR. PARKER: Katie, do you want a 14 laser pointer? Would that help? 15 MS. COUGHLIN: Sure. 16 MR. PARKER: One that works, 17 actually. 18 MEMBER SIMMONS: Thank you. Just a 19 fine point. Just want to make sure that's -- 20 MS. COUGHLIN: Okay. So this line 21 is CSL-1, then CSL-2, et cetera. Now they're 22 called efficiency levels.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 95 1 MR. PARKER: It just varies for 2 CSL-6 because there wasn't space for it. 3 MS. COUGHLIN: No. Essentially in 4 this particular design line, there is I think 5 one dot there that meets that standard. So 6 it's just there's not that many designs that 7 are that efficient. That's a high number. 8 MR. PARKER: Right. Okay? Steve 9 has a question. 10 MEMBER ROSENSTOCK: Well, no. I 11 just want to say for everybody, remember, 12 though, based on August 23rd, there might only 13 be 5 vertical lines now. 14 MR. PARKER: Right. 15 MEMBER ROSENSTOCK: So this is from 16 March. We don't have the lines for the August 17 paper yet. 18 MS. COUGHLIN: The five things in 19 there are TSLs, not ELs. So we'll get into 20 that. 21 MEMBER ROSENSTOCK: Whatever the 22 thing is, there might be five or six or seven

### 202-234-4433 Neal R. Gross & Co., Inc. Page 96 1 there. There's only five here. 2 MS. COUGHLIN: They're not the same 3 thing. They're not the same thing. 4 MEMBER DeLASKI: Keep in mind TSL 5 can gather together various CSLs. 6 MEMBER ROSENSTOCK: I know, but my 7 point was that those vertical lines might have 8 shifted based on this document now. 9 MS. COUGHLIN: I don't think they 10 have shifted significantly. Yes. I think 11 that engineering data has been released, and I 12 don't think that they have moved around that 13 -- they may have moved a little bit but not a 14 lot. 15 The inputs that generated this plot 16 were updated, new materials, prices, et 17 cetera, et cetera. So that this cloud of 18 points I think has moved around a little bit. 19 And then the lines would be shifted to meet 20 whatever engineering criteria are logically 21 consistent with the new distribution of 22 points. Overall it's the same basic setup.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 97 1 MR. PARKER: That's why the lines 2 moved, because engineering criteria suggested 3 a different -- 4 MS. COUGHLIN: Well, for example, I 5 mean, you know, you have these different 6 designs that appear on the plot at a certain 7 place. So there's a -- well, whatever. 8 MR. PARKER: Right. 9 MR. COULTER: Katie, this is Greg 10 Coulter from Prolec GE again. 11 I understand the generation of all 12 of those dots. What I don't understand is 13 when everything is finished for each CSL 14 level, why you're not just choosing one dot 15 and making all the analysis off of one dot 16 inside that CSL. That's the part I'm having 17 trouble with. 18 MS. COUGHLIN: Because, first of 19 all, you know, we don't have infinite 20 precision in this plot. So one thing that we 21 do is in the purchase prices that are produced 22 by the -- this is the OPS output.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 98 1 Without the LCC, we add a kind of a 2 random 15 percent to the purchase price. It's 3 similar to the band of equivalence idea. So 4 you create a sort of fuzzy band at the bottom 5 of that curve because it's not possible for 6 the engineering to predict the purchase prices 7 with that level of accuracy. 8 And then the second thing is that, 9 again, we do have some part of the market that 10 does its own independent evaluation of what it 11 wants to buy. 12 So to allow that to be represented 13 within the LCC, we need to include -- again, 14 this is really a three-dimensional plot with 15 the load loss and no-load loss rates that are 16 correlated with the A/B values. So we allow 17 the possibility of purchasers who use those 18 criteria to choose something other than the 19 cheapest thing at that CSL. 20 MR. PARKER: Again, please mute the 21 phones if you're on the phone. Please mute 22 the phones. Thank you.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 99 1 MR. COULTER: The issue is in the 2 end now, as you try to make that fuzzy, what 3 you're trying to do is put sensitivity before 4 you have the data to do sensitivity analysis. 5 What you ought to do is pick the best point 6 in there. And then once chosen, the 7 sensitivity analysis -- 8 MR. PARKER: I guess what they're 9 saying is -- 10 MS. COUGHLIN: I disagree that that 11 is analytically sound. I mean, what you have, 12 in reality, is a lot of variability. And so 13 the analysis should represent that variability 14 as a fundamental component of the real world. 15 So it's -- 16 MR. PARKER: But in terms of a 17 decision, it's hard to make a clear decision 18 with cloudy data, even if the reality is that 19 you have a cloud. 20 So I guess the point is, you know, 21 I think what Greg is saying is that if you 22 look at the southeast line, that would be the

### 202-234-4433 Neal R. Gross & Co., Inc. Page 100 1 most efficient line. 2 MS. COUGHLIN: Let's see. Let's go 3 back to this one. Can we go back? Okay. So, 4 again, these blue dots are what are being 5 selected in the base case. 6 And it's true. I could do the 7 entire LCC with the single lowest value, but I 8 don't think a lot of stakeholders would accept 9 that as a realistic picture of the way the 10 world works. 11 So you guys can discuss among 12 yourselves if you wish to go in between those 13 two, but in these analyses, we have been doing 14 Monte Carlo-type simulations for a long time 15 to represent all of these sources of 16 variability. And that is what we have applied 17 here. 18 MR. COULTER: Greg Coulter from GE. 19 You know, obviously we are a 20 manufacturer. We do this same thing. And we 21 do it at one point because, you know, in the 22 end -- pick whatever your best efficiency,

### 202-234-4433 Neal R. Gross & Co., Inc. Page 101 1 best unit is for that efficiency level. That 2 is all we care about. We don't care about all 3 of those other points, -- 4 MS. COUGHLIN: Right. 5 MR. COULTER: -- which only raises 6 price the best I can tell. I mean, all you 7 are doing is picking some -- you're putting 8 noise in the equation. We pick the best 9 design, whatever it is. 10 And this is why, you know, we take 11 all of your data and we're running through our 12 own analysis to see, do we care? Right? 13 Don't we see enough difference that it makes 14 any -- 15 MS. COUGHLIN: Okay. So -- 16 MR. COULTER: Here's where we can't 17 get correlation because we didn't on the -- I 18 wasn't here at the earlier meeting. So I 19 apologize for that, you know, the one you had 20 in April. 21 I mean, we aren't going to 22 understand this, what is happening. But it

### 202-234-4433 Neal R. Gross & Co., Inc. Page 102 1 appears to me you're putting noise in the 2 equation too soon. Hey, it is an absolute 3 design. You want the lowest-cost design that 4 meets that efficiency. You don't care about 5 any other design in there, not one. 6 MS. COUGHLIN: But your situation 7 is -- 8 MR. COULTER: The data, but you 9 don't need to use it in this analysis. 10 MS. COUGHLIN: But we are trying to 11 model -- I mean, when you do that, you do that 12 for a single client, right? We have to model 13 the entire population of clients in all 14 possible installation conditions. 15 MR. COULTER: No, no. 16 MS. COUGHLIN: So it's a -- 17 MR. COULTER: No. I'm not doing it 18 for a single client. I'm doing that because I 19 have to meet DOE minimum efficiency for every 20 client, 100 percent of everybody. So I'm 21 using that for everybody. And it's the same 22 point.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 103 1 MR. PARKER: Okay. A note has been 2 passed to me that Brian on the phone would 3 like to comment. Please, Brian, go ahead. 4 MR. KAJA: Yes. This is Brian Kaja 5 with GE Energy. 6 I want to highlight one thing about 7 this plot and the plot where you showed which 8 core steel was specific to the dots. I think 9 when people look at this plot, they see a 10 trend. 11 But you have to look closely at 12 core steel. And part of NEMA's -- yes, 13 they're the yellow dots, which is 14 representative of the steel that we have most 15 readily available. It's very touchy to a 16 small increase. And it's not following a 17 narrow band of variance, like the others. 18 So I do think that, Katie, your 19 presentation is correct to show, you know, 20 there's a lot of design that could go up and 21 down for M-3 with just a small change; 22 whereas, if you're with a ZDMH, you're

### 202-234-4433 Neal R. Gross & Co., Inc. Page 104 1 following a narrow increase. 2 So, even though Greg's comments are 3 correct, I think when I ran support, this 4 analysis, there are small things that occur 5 that give you a big variance. And one of 6 those is that you don't have every single size 7 of core steel available or every single wire 8 size available. So you just aren't an open 9 design. 10 So when you go two slides forward 11 and you remove the color of what is M-3 or M-2 12 and it's just -- or the one before that. And 13 now you aren't paying attention to is this 14 M-3, is it M-2, is it ZDMH? And that's 15 something that needs to be noted. 16 This represents like you have every 17 single steel, every single wire size available 18 at any given time. And we do not have that 19 available as a manufacturer. We have to work 20 with standard sizes. And so I just think that 21 needs to be noted. 22 MR. PARKER: Okay. So I did want

### 202-234-4433 Neal R. Gross & Co., Inc. Page 105 1 to just -- first, I guess does that mean that 2 -- are you disagreeing with Greg or is this a 3 separate point? 4 MR. KAJA: It's a little bit -- 5 MR. PARKER: GE debate here? 6 MR. KAJA: It's disagreeing from 7 the point that when you do a small increase on 8 a design rating, you can get a lot of variance 9 because you have to jump to a non-standard 10 size of wire because you don't have every 11 single size available. So you do get great 12 jumps, like the plot is showing. 13 It doesn't follow this trend. It's 14 like, you know, we can all see the trend line 15 in there. It's more of a blob. And also if 16 you focus on M-3, that's what I just want to 17 highlight. 18 MR. PARKER: Okay. 19 MS. COUGHLIN: It's the yellow, I 20 guess the yellow, dots. 21 MR. KAJA: Yes. That's like if you 22 put a trend line for the yellow dots, that

### 202-234-4433 Neal R. Gross & Co., Inc. Page 106 1 would be a much steeper line. 2 MR. PARKER: Let the record reflect 3 that I have asked our consultants to make the 4 dots in the legend larger so that you can 5 actually tell -- 6 (Laughter.) 7 MR. PARKER: -- what color 8 corresponds to what design line. I've been 9 promised that that will happen, but I haven't 10 seen it yet. 11 MS. COUGHLIN: So if I could just 12 summarize, it sounds like the request is -- 13 and, again, this is actually part of the 14 engineering analysis. But what you want is to 15 screen out some of these designs because you 16 don't think they would ever actually be part 17 of the manufacturer's sort of options. Is 18 that what this is coming down to? 19 MR. BERMAN: Let me try and get -- 20 MR. PARKER: Okay. 21 MR. BERMAN: -- an easier way to do 22 it.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 107 1 MR. PARKER: Name and affiliation. 2 MR. BERMAN: Robert Berman, Berman 3 Economics. 4 I think what I am hearing Greg say 5 and I'm thinking an easier way to do this is 6 the variation comes in the designs narrowed 7 down to one point at the bottom on each one. 8 What could happen is that the cost 9 because of material cost changes and so forth 10 or price changes can cause some variation 11 ultimately in that. But the variation in that 12 is going to be a uniform up and down of the 13 curve. 14 So if you have a single line at the 15 bottom, if you will, or a single point for 16 each CSL, you can have that shift up or shift 17 down within a band. You always want to take 18 the lowest line. 19 It can shift up. It could be 20 anywhere in that band. But when it shifts up, 21 you don't have one point shifting up in one 22 CSL and another point shifting up in another

### 202-234-4433 Neal R. Gross & Co., Inc. Page 108 1 CSL. You still have the same relationships. 2 It's just the line itself is shifting up and 3 down so that the increment between the CSLs, 4 between the costs ought to be the same. 5 MR. PARKER: As I understand it, 6 the argument is that actual experiment will 7 sort of randomly fluctuate around the optimal 8 line on the southeast corner -- 9 MR. BERMAN: But not differently 10 for each design in each CSL. In other words, 11 if costs are going to be a bit higher, then 12 all the points, all the minimum points move 13 up. So the difference between the minimum 14 points may always be the same. 15 And I hate to say it. Greg is 16 correct. 17 (Laughter.) 18 MR. BERMAN: It pains me to say 19 that. Greg is correct when he says that you 20 only want to base it on the minimum points. 21 And then if you want to show variations in the 22 results in terms of what absolute cost levels

### 202-234-4433 Neal R. Gross & Co., Inc. Page 109 1 may be or what absolute price levels might be, 2 that's an after the fact. 3 MR. PARKER: Okay. Got it. Got 4 it. Brian, did you want to comment on that?
5 No? 6 MR. KAJA: I do. This is Brian 7 with GE Energy. I do want to make one comment 8 on that. 9 That is correct to say if you can 10 optimize every single parameter of a design, 11 but it's easy to see the blue dots, which is 12 ZDMH. And as you get higher efficiency, all 13 of a sudden, the range of those blue dots 14 spread out. And that is happening on an 15 earlier point for M-3. But everyone can kind 16 of see the blue dots easier. 17 So where it happens for M-3, which 18 is the main steel that we have available, the 19 designs are very touchy to sudden increases. 20 So I don't think it's exactly correct to 21 consider the minimum dot at any point as 22 obtainable.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 110 1 That's just my -- that's what I 2 found when I did runs. And I think the blue 3 dots sort of demonstrate that. As you get 4 higher, the steel loses. I just wanted to 5 make a note on that. 6 MR. PARKER: Thank you. Brian. 7 Tom Eckman? 8 MEMBER ECKMAN: Tom Eckman, Power 9 Council. 10 Yes. I think it seems to me that 11 given the -- it's unlikely that the minimum 12 dot in each CSL, EL is going to be stable with 13 respect to the next level up or next level 14 down because the design that is required to 15 get there has a different mix of steel buy or 16 whatever. 17 And so, as prices change for those 18 particular pieces of commodity, the 19 relationship amongst the CSLs or ELs in this 20 case is going to variety. The incremental 21 cost is going to vary because you're going to 22 have a different mix of the design to get to

### 202-234-4433 Neal R. Gross & Co., Inc. Page 111 1 that particular level of efficiency. So 2 pricing impacts are going to be different 3 depending upon -- you can see as you go out 4 there the scatter gets different because 5 you've got different product mix, different 6 components of that product. 7 MR. PARKER: They should be picked 8 up, though, in your sensitivity analysis for 9 prices from materials prices, right? 10 MEMBER ECKMAN: If the 11 relationship, the incremental cost 12 differential between them is going to be 13 impacted by the design of that particular -- 14 required to get that particular level of 15 efficiency and maybe differentially impacted 16 by a difference in prices of wire, steel, or 17 what have you. 18 So I'm just saying I don't think 19 it's a stable relationship, which is why 20 you've got the scatter here if there are 21 different designs that get to the same level 22 of efficiency. You've got different prices

### 202-234-4433 Neal R. Gross & Co., Inc. Page 112 1 impacting that design. 2 MR. PARKER: Okay. So I think 3 we're going to have to move on. I think 4 basically what we're saying is the issue for 5 this group is do we want to consider a 6 scenario, not necessarily the only scenario 7 but do we want to explore a scenario where we 8 are using essentially the southeast dot at 9 each design level. Southwest. Sorry. 10 MS. COUGHLIN: You need the whole 11 space because you need to consider efficiency 12 levels and you don't know a priori what 13 efficiency levels are going to be. So you 14 can't eliminate the designs because they use 15 it to go in and restructure the LCC every time 16 you change the efficiency level. 17 So, really, I think the question 18 is, you know, if I took this plot and, instead 19 of having those slight, tilted price curves, I 20 made steps so that the price was the same and 21 we don't care about the details of the design, 22 would that have any impact on the output

### 202-234-4433 Neal R. Gross & Co., Inc. Page 113 1 because that is equivalent to what you are 2 suggesting, that there is just one price? And 3 my claim is no, that would have no impact. 4 So we can do something that tries 5 to represent this, but, again, I don't think 6 -- what we are trying to do here is that there 7 is a lot of variability in the details of when 8 a particular purchaser makes a purchase in the 9 price that they pay. 10 And what we're trying to capture 11 with all the designs is many, many ways of 12 meeting a standard level with tweaking a lot 13 of this and that. 14 Now, the engineering analysis uses 15 a finite amount of information. But what we 16 rely on is that it gives you a correct kind of 17 ballpark figure for a design that meets the 18 standard level and some measure of the range 19 of variation around those prices. 20 MR. PARKER: Okay. Wait a minute, 21 Greg. There were some other people who I cut 22 off. So let me get back. Wes, did you have a

### 202-234-4433 Neal R. Gross & Co., Inc. Page 114 1 comment? 2 MEMBER PATTERSON: Can we go back 3 to the slide before this? I think everybody 4 should understand when we look at those blue 5 dots, those dots were created by running an 6 optimized design for a certain A/B ratio. 7 Okay? 8 So the reason why those dots go up 9 and down for the exact same efficiency level. 10 It's because they have different ratios of 11 A/B factors when they were optimized. It 12 doesn't reflect anything related to the cost 13 of the unit to meet that efficiency level. It 14 had to do with meeting an optimized design for 15 an A/B ratio. 16 MS. COUGHLIN: Right. That's 17 right. So the A/B value, as I was saying, 18 there's a whole series of designs that have 19 the same efficiency under test procedure 20 conditions. And that's what that variability 21 represents, yes. 22 MEMBER PATTERSON: But that does

### 202-234-4433 Neal R. Gross & Co., Inc. Page 115 1 not reflect trying to meet a design for a 2 specific efficiency level. It has nothing at 3 all to do with it. It's an apple and an 4 orange. That's why we have that scatter in 5 the diagram. 6 MR. PARKER: Okay. 7 MR. KAJA: This is Brian Kaja, GE 8 Energy. 9 The only error in that comment is 10 that you do not have every single size 11 available to go from point to point in the 12 real world. 13 MEMBER GREESON: Rob Greeson, 14 Federal Pacific Transformer. 15 MR. PARKER: Okay. 16 MEMBER GREESON: I would just like 17 to comment on the material variability. We 18 are restricted in what sizes we have 19 available: Strip widths, conductor sizes, and 20 that sort of thing. 21 It is true that that does introduce 22 some variability; however, not the kind of

### 202-234-4433 Neal R. Gross & Co., Inc. Page 116 1 variability we are talking about here, which 2 is 50 percent. I'm looking at these scatters, 3 3,200 down to 2,200. Those material 4 limitations in my best approximation would be 5 no more than five percent, six, seven percent 6 unless it's just a massive, you know, you have 7 to go from a very, very small wire to a huge 8 wire just because you can't get the small 9 wire. 10 I don't see material limitations 11 causing that kind of variation. And that's 12 where I would just make a finer point or a 13 comment. Thank you. 14 MR. PARKER: Okay. 15 MEMBER PATTERSON: One other 16 comment on the material variation. The 17 thickness of the core steel is in defined 18 increments as set by the core steel 19 manufacturers. The width of the core steel is 20 dependent on the manufacturing process you 21 deploy. And you can make it any number you 22 want.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 117 1 When it comes to the conductor 2 dimension, some folks have the capability to 3 draw their own conductor at any essentially 4 infinitely variable, down to one mil 5 increments, where others because of their 6 processes find it better to optimize their 7 building on discrete increments. 8 So my point is that infinite 9 variability of the dimensions is possible in 10 optimization. I don't know if the OPS 11 software used thick sets or infinitely 12 variable dimensions. But the only dimension 13 that is really fixed is the thickness of the 14 steel. 15 MR. COFFEY: This is Brian Coffey, 16 Navigant. I am hearing two over-arching 17 concerns. They are unrelated. The first is 18 whether we are using infinitely variable 19 conductor gauges. The answer is no. All of 20 these designs reflected use commonly available 21 wire gauges that manufacturers would tend to 22 have in stock.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 118 1 Sure, it's true that manufacturers 2 for bulk purchasing reasons may tend to stock 3 more of one or the other, but these are all 4 done using common standardized wire gauges. 5 The second issue is that people are 6 saying, well, what is the reason for ever 7 purchasing a design that doesn't lie on the 8 southeast frontier of that curve right there? 9 The reason for that is that there is a third 10 dimension to this plot that is maybe subtle. 11 And that is that if you were to recast this 12 plot using efficiency as measured at a 13 different load, all of those points would 14 shift. 15 They're designed with different A's 16 and B's in mind. And that is reflective of 17 the fact that different purchasers, different 18 utilities might specify different A's and B's. 19 Now, we've just finished a 20 discussion of whether or not a large 21 percentage of customers are evaluating. If 22 nobody is evaluating, then that point is moot.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 119 1 And then everybody purchases at the front 2 tier of the curve. 3 But if everyone is evaluating, it's 4 possible that they may use an A and B that 5 implies a loading of other than 50 percent. 6 Nonetheless, I think that this is set or has 7 the possibility of being addressed in the LCC 8 as we revisit the topic of what fraction of 9 customers evaluate. I don't -- 10 MR. PARKER: So if a section goes 11 to zero, approaches that, this goes to -- do 12 you concur with that, that this would be -- 13 MS. COUGHLIN: Well, again, there's 14 an uncertainty band on the price. I think 15 there is another issue of it's possible that 16 some of the designs that lie close to that 17 boundary are not considered to be realistic 18 alternates to the cheapest, the one that 19 happens to be cheapest in this version of the 20 engineering analysis. So that's something we 21 would need to review with the engineering. 22 MR. PARKER: Okay. So, Brian,

### 202-234-4433 Neal R. Gross & Co., Inc. Page 120 1 would it be feasible to run an analysis 2 looking at the southeast boundary? 3 MS. COUGHLIN: Well, no. You have 4 to -- again, the analysis -- southwest. The 5 analysis -- 6 MR. PARKER: East/west. 7 MS. COUGHLIN: The analysis is to 8 look at the -- the analysis essentially for 9 each installation does all the standard 10 levels. 11 MR. PARKER: Southwest is you are 12 just meeting the standard. 13 MS. COUGHLIN: Yes. 14 MR. PARKER: Right. Sorry. 15 MS. COUGHLIN: But we can eliminate 16 some designs. Okay. It is straightforward to 17 go through the design table and take some of 18 them out if we can get a systematic statement 19 of what the criteria for eliminating those 20 designs are. That's a straightforward thing 21 to do. 22 MR. PARKER: Okay.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 121 1 MS. COUGHLIN: I don't want to 2 anticipate what it would end up looking like 3 on this plot because, as Brian said and people 4 have said, there are, really, three dimensions 5 in this design picture, but if you want to 6 provide some criteria, whether it's core 7 materials or some other aspect of the design 8 that you want to say, "Screen everything out 9 that does this," then we can do that. 10 MR. PARKER: Well, I guess what I 11 heard Brian was saying is if you assume zero 12 evaluators, that would have the impact of -- 13 MS. COUGHLIN: No. Again, we have 14 to consider the entire space in one LCC run. 15 So the evaluator issue is a side thing. That 16 doesn't really -- 17 MR. COFFEY: So this introduced 18 uncertainty. That's entirely separate from 19 what I'm talking about. 20 MR. PARKER: Okay. I got you. All 21 right. Thank you. 22 Any other comments?

### 202-234-4433 Neal R. Gross & Co., Inc. Page 122 1 (No response.) 2 MR. PARKER: Go ahead. 3 MS. COUGHLIN: It is complicated. 4 So, anyway, after all of the selection of 5 designs and the relative numbers -- okay. One 6 thing I want to say -- and I encourage people 7 to look at the data. 8 There are some design lines where 9 these curves have a fairly flat bottom 10 boundary. And in those cases, it tends to be 11 very -- it is very insensitive to a lot of the 12 stuff that we have been discussing. 13 So one of the things that we can do 14 is to focus our attention on those design 15 lines that do have much more sensitivity in 16 the price-efficiency relationship. 17 So these, again, are the -- so, 18 again, after all of this, we go through all of 19 this, so when you think of -- you know, we 20 have picked an installation for our 21 transformer, we have a load simulation that 22 creates variability from one transformer to

### 202-234-4433 Neal R. Gross & Co., Inc. Page 123 1 another, we have variability on the lifetime, 2 we have variability on the discount rate, so, 3 in addition to the variability of the initial 4 design, we have a lot of variability in the 5 actual operating conditions over the lifetime 6 of the transformer. 7 So what you end up with is at each 8 efficiency level a distribution of possible 9 LCC results. And so this is a representation 10 of those distributions. 11 Again, I just lifted this slide out 12 of the April presentation. Design line 1 is 13 on the left, and design line 7, which is a 14 dry-type, is on the right, I think low voltage 15 dry-type. 16 And then these efficiency levels -- 17 so what we have is the -- it doesn't seem to 18 be showing up. There should be a dot in the 19 center that gives you the median and then a 20 bar that gives you the average. 21 The boxes represent the 25 percent, 22 75 percent ranges of the distribution. And

### 202-234-4433 Neal R. Gross & Co., Inc. Page 124 1 then the bars at the far ends are the 5 2 percent, 95 percent. 3 So 90 percent of all of the LCC 4 results are within those external bars. And 5 then when you shrink down to the box, 50 6 percent are centered within the box. And then 7 you have the median and average. And this 8 type of behavior is more or less what is 9 expected. 10 As you go up in efficiency, you 11 know, there is a balance of energy savings and 12 the cost savings associated with those and 13 then additional purchase prices. So the net 14 of those two gives you the LCC savings, tends 15 to go up for some standard levels. And then 16 it starts to decrease. And eventually you hit 17 an efficiency level that is not 18 cost-effective. 19 And so in the current posting, the 20 August 23rd, we have posted some point data 21 from the updated LCC results. We have not yet 22 posted the full distribution results, but

### 202-234-4433 Neal R. Gross & Co., Inc. Page 125 1 those can be made available. 2 MR. PARKER: So you're saying, 3 then, that for CSL, CSL-5 makes sense for more 4 than 75 percent of the purchasers, life cycle 5 cost savings? 6 MS. COUGHLIN: Positive LCC savings 7 in the simulation. And then, you know, you 8 look at sensitivities and that sort of thing. 9 And it's a challenge to think about how to 10 represent the effective sensitivities in a way 11 that -- 12 MR. PARKER: Right. But those 13 lines don't reflect sensitivities. Those just 14 reflect the range of -- 15 MS. COUGHLIN: The actual 16 distribution of results under all the 17 variables that are -- 18 MR. PARKER: Right. 19 MS. COUGHLIN: -- treated as 20 random. 21 MR. PARKER: Right. 22 MS. COUGHLIN: Yes.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 126 1 MR. PARKER: But with 2 sensitivities, you have to have a completely 3 different chart, in other words, run with -- 4 MS. COUGHLIN: Yes. Essentially a 5 sensitivity is going to move the whole 6 distribution in a particular way. 7 MR. PARKER: Right. Right. 8 MS. COUGHLIN: And it may move it 9 or it may widen it or it may narrow it or it 10 can have different -- 11 MR. PARKER: Right. 12 MEMBER PATTERSON: Katie, the life 13 of this life cycle cost was like 32 years. 14 MS. COUGHLIN: I think that's the 15 average, yes. And then there's, again, a 16 distribution around it. 17 MEMBER PATTERSON: I think that's 18 also another issue that has been raised is the 19 term that is used for this calculation, the 20 32-year window. 21 MS. COUGHLIN: Oh, okay. Let's 22 see. So that's the LCC. And then there's the

### 202-234-4433 Neal R. Gross & Co., Inc. Page 127 1 national impacts analysis. And one of the 2 things -- so when we do the LCC, we produce 3 the numbers for each design line individually 4 and for each of the efficiency levels. 5 But to move to the national impacts 6 analysis, this is where you have to combine 7 the different design lines according to the 8 market share that you think that they have. 9 And the standard procedure is to 10 produce national impacts numbers by equipment 11 class. So in this case, we would do the 12 national impacts for low-voltage dry-type, 13 medium-voltage dry-type, and liquid-immersed. 14 And, again, that is sort of an 15 algebraic combination of the individual 16 results. So we can modify that if that would 17 turn out to be useful. 18 MEMBER DeLASKI: Katie, so it's by 19 each of the 14 equipment classes that the NIA 20 -- 21 MS. COUGHLIN: To do that? No. 22 The design lines, there's terminology. I

### 202-234-4433 Neal R. Gross & Co., Inc. Page 128 1 believe we use equipment class as a very broad 2 distinction between dry-type, low-voltage; 3 dry-type, medium-voltage; and liquid-immersed. 4 And then there are product classes and design 5 lines. 6 MEMBER ROSENSTOCK: Steve 7 Rosenstock, EEI. 8 For the equipment class for the 9 liquid-filled, equipment class 1 is the 10 single-phase. And class 2 is a three-phase, 11 correct? That didn't change. 12 MEMBER DeLASKI: Right. 13 MS. COUGHLIN: Yes. I mean, I 14 don't want to make a mistake on the 15 terminology, but yes. We're -- 16 MEMBER DeLASKI: There are ten 17 equipment classes. 18 MS. COUGHLIN: Ten equipment 19 classes. 20 MEMBER DeLASKI: Right. 21 MS. COUGHLIN: But currently we're 22 producing the national impacts for the

### 202-234-4433 Neal R. Gross & Co., Inc. Page 129 1 groupings, our liquid-immersed; 2 medium-voltage, dry-type; and low-voltage, 3 dry-type. 4 MEMBER DeLASKI: Right. So right 5 now we have just two equipment classes, Steve. 6 Am I correct? 7 MS. COUGHLIN: For this outfit, 8 yes. 9 MEMBER DeLASKI: For this, for the 10 liquid-immersed. 11 MS. COUGHLIN: Yes. I think the 12 technical issue there is whether there is -- 13 the degree to which equipment, these more 14 precise equipment heads, are substitutable for 15 one another. If they are, they have to be 16 treated at the national level as one, as one 17 category, so that the results at the end can 18 simply be added to get the full standard 19 impacts. 20 So another thing that we have to 21 add -- and this was discussed a bit yesterday 22 -- is we have -- you know, the design lines

### 202-234-4433 Neal R. Gross & Co., Inc. Page 130 1 are particular capacities. And then we have 2 to extrapolate the results to capacities that 3 haven't been studied in detail. 4 We have used the .75 scaling law. 5 So what that ends up is that ends up with some 6 problems because if you think of, for example, 7 I've got two capacities where I've done a 8 detailed calculation, if I take one capacity 9 and rescale it using that scaling law, I get a 10 different answer than what I did from the 11 detailed calculation. 12 So the way we handled the situation 13 is we just essentially interpolate between the 14 points that we have. So we assume that there 15 is some scaling law and the exponent is close 16 to .75, but we actually used the data, the 17 engineering data, to determine what that 18 exponent is. 19 And so that essentially provides 20 you with a -- if you look at the -- this is 21 for the medium-voltage, dry-type, one of the 22 design lines. These again are the efficiency

### 202-234-4433 Neal R. Gross & Co., Inc. Page 131 1 levels now as a function of kVA. 2 So the dashed lines are where we 3 have the representative units. So we have an 4 interpolation so that you get a sort of smooth 5 curve when you go across those representative 6 units. And then when we have to extrapolate 7 outside the range for which we have actual 8 units modeled, we use the .75 scaling law. So 9 this is slightly different from what was done 10 in the preliminary analysis. 11 So essentially what we do, then, 12 for the national impacts analysis -- 13 MEMBER PATTERSON: Just a point of 14 -- go back to that one. If I understood -- 15 MR. PARKER: Wes Patterson. 16 MEMBER PATTERSON: Wes Patterson 17 with ABB. 18 If I'm between 300 kVA and 2,000 19 kVA, you did a linear interpolation of the 20 percent efficiency. 21 MS. COUGHLIN: I did an 22 interpolation that takes this point and this

### 202-234-4433 Neal R. Gross & Co., Inc. Page 132 1 point and assumes that there is a scaling law 2 that matches them up that calculates the 3 exponent in that scaling law from the data. 4 MEMBER PATTERSON: You used the 5 scaling law between the two points also and 6 not a linear interpolation of the -- 7 MS. COUGHLIN: That's right. 8 That's right. 9 MEMBER PATTERSON: -- efficiency? 10 MS. COUGHLIN: That's right. 11 MEMBER PATTERSON: Okay. 12 MS. COUGHLIN: So to do the 13 national -- 14 MR. RIVEST: Katie, to tie this 15 back to our conversation from yesterday, if we 16 can come back to that slide? So yesterday 17 what we were talking about was whether or not 18 the representative units -- that those lines 19 that you have coming down were the appropriate 20 kVA ratings, for example, whether we should 21 have more to make sure that we're anchoring 22 that fit into some sort of real world data.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 133 1 MS. COUGHLIN: Right. 2 MEMBER GREESON: Rob Greeson, 3 Federal Pacific. 4 Just a real quick observation. And 5 I agree with the way you interpolated between 6 the two. I've talked about this a little bit 7 before with different people. 8 From what I have seen across the 9 kVA range with the existing DOE levels, 10 there's what I call kind of a skew to the 11 curve. And I think it basically came from 12 this point, 75 scaling factor. 13 Certain ones of the trends, certain 14 of the transformer kVAs are much more 15 difficult to achieve at levels that were 16 legislated than others. And I believe it's 17 because, for example, in this one, we used a 18 .75 scaling factor to go all the way down to 19 15 kVA from a 300. 20 What begins to happen on these 21 smaller kVAs, particularly with higher voltage 22 and the medium-voltage dry-type is you begin

### 202-234-4433 Neal R. Gross & Co., Inc. Page 134 1 to run into a lot of limitations on materials. 2 One thing that DOE is probably not 3 aware of is for a disc-wound construction for 4 a medium-voltage, dry, when you get down to 5 the smaller kVAs, we're not allowed to use any 6 kind of round wire. OPS probably used 7 whatever wire was available to them. 8 When you restrict that particular 9 parameter, about the smallest rectangle wire 10 we can use is about .4 by .2. And what 11 happens is the wire becomes extremely 12 expensive to wrap, and it becomes extremely 13 expensive to buy because it's so small. And 14 you get these crazy points on the ends. And 15 it affects the way that you have arrived at 16 those efficiencies. 17 And one of the problems that I've 18 got with this whole discussion is if we try to 19 move these curves up, it is going to work a 20 lot better for some. And on others, it may 21 make it near impossible. 22 In other words, you may break the

### 202-234-4433 Neal R. Gross & Co., Inc. Page 135 1 ends of the curve. And we're going to have to 2 figure out a way not to do that. And I'm not 3 exactly sure how we're going to do that. But 4 we may have to -- after we propose some sort 5 -- and if it gets to the point where you 6 propose an elevation, we need to check the 7 endpoints. 8 Any other comments from design 9 folks would be welcome, but -- 10 MR. PARKER: That seems like an 11 important -- thoughts around the table? 12 Reactions? People concur? Dissent? 13 MEMBER PATTERSON: Wes Patterson 14 with ABB. 15 I think this goes back to the issue 16 of how far can you extend the scaling rule. 17 The scaling rule is based on a pure 18 theoretical and doesn't reflect what actually 19 occurs in practice of building transformers. 20 MR. PARKER: I guess the question 21 is, does it matter of the reason that I don't 22 have data and had to use the scaling rule to

### 202-234-4433 Neal R. Gross & Co., Inc. Page 136 1 begin with is -- 2 MEMBER PATTERSON: Rob's point is 3 is that we could inadvertently set an 4 efficiency level on this chart for the 15 kVA, 5 150 BIL unit that is unattainable. It cannot 6 be possibly built. 7 MS. COUGHLIN: Right. 8 MEMBER PATTERSON: And this is a 9 result of trying to scale from a 300 kVA 10 design down to 15 kVA using .75 exponent 11 because, in reality, that .75 exponent is 12 probably closer to about .9 for that dry-type 13 transformer. 14 MR. PARKER: So if the reason you 15 don't have the data, though, because it's 16 outside your range -- 17 MS. COUGHLIN: That's an 18 engineering question. 19 MR. PARKER: And this is an 20 engineering question -- 21 MS. COUGHLIN: I defer to Brian. 22 MR. PARKER: -- for Brian. If the

### 202-234-4433 Neal R. Gross & Co., Inc. Page 137 1 reason you don't have the data is because it 2 is outside your range, does that mean that it 3 is not something that matters because it is 4 not -- it sounds like, Rob, you're saying it 5 does matter, even though you were presumably 6 talked to when you had that information in the 7 manufacturing interviews? 8 MEMBER GREESON: Rob Greeson, 9 Federal Pacific. 10 We had some data that we submitted 11 to DOE. It showed some interesting plots on 12 the lower kVAs, for example, how they just 13 sort of went crazy. And this has to do with 14 where we're constricted. A lot of our stuff 15 has to be UL listed. We can't use round wires 16 on a -- 17 MR. PARKER: I guess what I'm 18 trying to get at is if the reason for 19 extrapolation is a lack of data, I'm wondering 20 why there is a lack of data if the 21 manufacturers were -- 22 MEMBER GREESON: OPS generated.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 138 1 Wouldn't they save several thousand designs 2 per design line and for limited resources with 3 most manufacturers, it's not possible for us 4 to provide some of this design work -- 5 MR. PARKER: Okay. 6 MEMBER GREESON: -- that's 7 required. And I'm going to comment a little 8 bit more about that later in the day. 9 MR. PARKER: Okay. Thank you. 10 MR. RIVEST: Mike Rivest. 11 So certainly as a general 12 statement, I think we need to be exploring 13 these end effects and making sure that our 14 scaling relationships are accurate. 15 And also in setting the standard, 16 one thing to think about is the sales volumes 17 associated with some of these transformers. 18 What percentage of your sales are in the 15 19 kVA? 20 MEMBER GREESON: Rob Greeson, 21 Federal Pacific. 22 Even if the sales volumes are low,

### 202-234-4433 Neal R. Gross & Co., Inc. Page 139 1 still people need -- 2 MR. RIVEST: Oh, I wasn't saying 3 that. I wasn't saying that so that -- I'm not 4 saying it doesn't matter if we regulate them 5 out of business. What I'm saying is it may 6 not have a large impact on energy savings if 7 they were given a break from the standard. 8 MEMBER GREESON: Oh, right. I 9 agree with that part of it. 10 (Laughter.) 11 MEMBER GREESON: Here's my thing. 12 We the designers have to live with these 13 efficiency levels. And Navigant has a pretty 14 daunting task. I can't imagine being in your 15 shoes to do all of this. 16 My only point was we have to be 17 extremely careful when we set those efficiency 18 levels. And, granted, they may represent a 19 small volume. We just have to be careful 20 where we put those efficiency levels. We'll 21 break it. 22 MR. PARKER: Okay. So this is a

### 202-234-4433 Neal R. Gross & Co., Inc. Page 140 1 great point. And, look, this is a data-driven 2 process, right? In the absence of data, they 3 are going to do the best they can. But they 4 only have the data that you give them. 5 So the point is with regard to 6 supplying data for Navigant and LBL to work 7 with, it's the time to step forward. Okay? 8 It's a great point, but you've got to follow 9 it up with some data. 10 We can keep it confidential, as Dan 11 was discussing earlier. It doesn't have to 12 be, the data doesn't have to be, shared with 13 the group. It's got to be put into the 14 Navigant computer, the LBL computer so that 15 they can figure out how to adjust based on the 16 actual data. Does that make sense? 17 MS. COUGHLIN: Yes. I mean, the 18 standard -- 19 MR. PARKER: This is for a small 20 subset of -- 21 MS. COUGHLIN: I know the standard 22 way to deal with this type of situation is to

### 202-234-4433 Neal R. Gross & Co., Inc. Page 141 1 do a subgroup analysis, where you isolate the 2 problematic part of the market and put 3 different modeling conditions. 4 MR. PARKER: Right. 5 MS. COUGHLIN: So we can certainly 6 set that up. We'll have to talk about what 7 the appropriate way to fit it into the rest of 8 the picture is. 9 MR. PARKER: And this is a generic 10 issue, right? This goes to the point that Wes 11 made yesterday about the vaulted network 12 versus pole, right? If there are subgroups 13 that you want, now is the time to get them on 14 the table. Okay? Speak now or forever hold 15 your peace. We don't want to be revisiting 16 this in the third session. 17 So you have between now and the 18 second session to get any subgroups that you 19 want to put forward. Okay? And let's 20 stipulate that if they're not put forward by 21 the next session, they are off the table. 22 Okay? So please do your homework between now

### 202-234-4433 Neal R. Gross & Co., Inc. Page 142 1 and the next session to identify any gaps in 2 the analysis, any subgroups that you want. 3 Send it directly to me, to DOE, to 4 Brian Coffey, and Mike Rivest at Navigant. I 5 guess, Brian, you will be the point person for 6 Navigant? Katie Coughlin, you have her 7 information. Send it directly there. 8 And we will disseminate to the -- 9 no. We will not disseminate it to the group 10 because you may be supplying proprietary data. 11 If you are, please indicate what is 12 proprietary. And we will caucus and think of 13 the right way to get the generalized, 14 sanitized results of what you're trying to put 15 out there to the group to discuss and also to 16 modify the analysis. But this is the time to 17 do it now. 18 Steve? 19 MEMBER ROSENSTOCK: Steve 20 Rosenstock, EEI. 21 Along with groups of utilities, in 22 terms of the analysis, we did send in

### 202-234-4433 Neal R. Gross & Co., Inc. Page 143 1 clarifying questions on Tuesday. Some of them 2 have been answered. Others have not been 3 answered. So I hope that we will be able to 4 get some answers before the next meeting. 5 MR. PARKER: Right. And I would 6 like to try to work through those questions. 7 Some of them I think go to these points, 8 right? And so as soon as Katie is done, we 9 can turn to those questions in a structured 10 way, which I had in mind. But let's let her 11 finish her speech. 12 MS. COUGHLIN: Yes. I just -- 13 MR. PARKER: Thank you. 14 MS. COUGHLIN: So I guess part of 15 this is to -- I mean, we're in somewhat of a 16 circular process because we do the NIA. A lot 17 of people want to see the NIA results when 18 they are considering what type of standard 19 level that they would support. The NIA 20 results depend on what standard level you put 21 into the picture. 22 So essentially to generate the NIA,

### 202-234-4433 Neal R. Gross & Co., Inc. Page 144 1 it's actually -- it's a complicated accounting 2 problem, but it's fairly straightforward. You 3 have a market share for each of the equipment 4 types. And you have the energy savings. And 5 you project the market share forward. And you 6 add up all the energy savings from each class. 7 And you get total energy savings. 8 You get the net benefit, which is the sum of 9 the additional purchase price and operating 10 cost savings. 11 And then further downstream from 12 that in the standard DOE process there, there 13 are the calculations of emissions impacts. 14 And there's now the social cost of carbon and 15 all that stuff. 16 All of that is sort of downstream 17 of the definition of a set of trial standard 18 levels. And so what you have in the document 19 that was posted from August 23rd are the NIA 20 results for a set of what we're calling draft 21 TSLs. So to generate those results, we need 22 to make some decisions about what efficiency

### 202-234-4433 Neal R. Gross & Co., Inc. Page 145 1 level would be prescribed for each design 2 line. 3 These are lifted out of that 4 document. I've grouped -- the two top tables 5 are the liquid-immersed and medium-voltage, 6 dry-type. 7 So essentially you have this matrix 8 that you fill in. So we have the design line 9 on the row. And then the columns are these 10 definitions of draft TSLs. We have five of 11 them in this particular addition of the 12 document. And then the boxes they correspond 13 to actually an efficiency level for each one 14 of the design lines. 15 So in some sense, part of the 16 Committee's activity is going to be filling in 17 these matrices with suggestions about what the 18 efficiency might -- which efficiency level 19 should be chosen for which design line. 20 And then we can generate results 21 based on the filling in those boxes. But 22 obviously there is a very, very, very large

### 202-234-4433 Neal R. Gross & Co., Inc. Page 146 1 set of possible combinations. So some type of 2 process for setting up these draft TSLs and 3 then summarizing the output that you would 4 like to see would be very helpful. 5 MR. PARKER: So this is very 6 important. So basically what I understand you 7 are looking for, then, is you aren't looking 8 for absolute numbers from this group that you 9 want. You are looking for sort of design 10 criteria or not design criteria but parameter 11 criteria to be applied to use like lowest life 12 cycle cost. 13 MS. COUGHLIN: Yes. I mean, one 14 way to fill in the boxes is to specify 15 criteria. So we go in and fill in this matrix 16 by taking the minimum LCC from every design 17 line. That would be one way. 18 Another way -- 19 MR. PARKER: That could be column 20 2. We have the base. Column 1 could be that 21 or column 1 could be something else. 22 MS. COUGHLIN: Right. You could do

### 202-234-4433 Neal R. Gross & Co., Inc. Page 147 1 one with an LCC. You could do another one 2 with maximum energy savings. You could do 3 another one that's just take out certain 4 material from consideration and do it that 5 way. So yes. 6 MR. PARKER: Right. Do we have a 7 slide that lists the criteria? Is everybody 8 already familiar? Am I the only one that's 9 not? 10 MR. COFFEY: Examples were passed 11 out. 12 MR. PARKER: Passed out? 13 MS. COUGHLIN: Yes, yes. 14 MR. PARKER: On the thing. That's 15 right. Okay. 16 MS. COUGHLIN: So I guess my point 17 is that I think the role of the analysts in 18 this is to take that input from you and 19 produce the results. And I just want to make 20 sure that -- there is such a thing as too much 21 information. 22 So, you know, we don't want to

### 202-234-4433 Neal R. Gross & Co., Inc. Page 148 1 overburden people with every possible 2 combination. So essentially it's in trying to 3 sort of sort out the assignment of efficiency 4 levels to design lines. We need that 5 information to generate the national impacts 6 results. And then once we have that, we can 7 produce those results that you can compare for 8 different scenarios. 9 And just I think the last slide, 10 this is just -- essentially these are the 11 results that come out of the NIA. 12 This is again a typical picture. 13 Over time you have an increasing penetration 14 of the more efficient units. And you get -- 15 as the penetration increases, you get the 16 operating cost savings. 17 So that's what the blue bars are. 18 And sort of on the debit side of the account, 19 you have the increased equipment price. 20 And the way that the analysis is 21 sort of formal requirements of how the 22 analysis is set up is that we do the

### 202-234-4433 Neal R. Gross & Co., Inc. Page 149 1 replacement accounting over one lifetime of 2 the equipment, but then we add up the energy 3 savings until the equipment that is purchased 4 in this year is actually out of the stock in 5 the end year. 6 And this is just an accounting 7 convention to look at the long-term impacts of 8 the standard. So these are the types of 9 things that you -- you know, when we do 10 produce the NIA. 11 And then we have these tables. 12 This table is in the August 23rd document. 13 Again, under these draft TSLs, we have our 14 shipments estimates. This is the base case 15 equipment cost. And then this is a debit. 16 This means it's a cost of implementing the 17 standard. 18 The operating cost savings are done 19 in some nominal dollars. And then we have the 20 net savings is the sum of the equipment and 21 operating cost at different discount rates, so 22 three percent and seven percent.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 150 1 And then these are the cumulative 2 energy savings over the lifetime of the 3 equipment. So that's the type of results that 4 you can get. 5 And then one can add many rows to 6 this type of table. And whatever type of 7 summary quantity might be considered useful we 8 can put out. 9 So that's all I have to say. 10 MR. PARKER: Great. Thank you for 11 that presentation. 12 First, could you send a copy of 13 your slides to everybody in the room? Is that 14 something that you could do if we supply you 15 -- 16 MS. COUGHLIN: I'm not really sure. 17 We need to discuss I guess whether we want to 18 do websites or -- 19 MR. PARKER: I think it would -- 20 MS. COUGHLIN: We can certainly do 21 something. 22 MR. PARKER: Or just post it on the

### 202-234-4433 Neal R. Gross & Co., Inc. Page 151 1 website. 2 MS. COUGHLIN: Yes. I mean, I 3 don't know what the process is for sharing the 4 information that comes up in the meeting. 5 Once that's decided -- 6 MR. PARKER: That would even be 7 more transparent. 8 MS. COUGHLIN: -- we will deal with 9 it. 10 MR. PARKER: This is all public. 11 MS. COUGHLIN: Yes. 12 MR. PARKER: Everything that is 13 said here is public. So if you wouldn't mind 14 just posting this on the website? Maybe what 15 we could do with the website is just set up a 16 thing for each meeting that would have a link 17 they could click on or a box or something for 18 each meeting so it would be categorized that 19 way and there would be a record of what was 20 presented at each meeting. 21 So all of the exhibits and 22 everything for each meeting will be posted on

### 202-234-4433 Neal R. Gross & Co., Inc. Page 152 1 the website so that anybody who was not at the 2 meeting will be able to at least get what was 3 done in writing. 4 Great. So, as I understand it, 5 then, what we need to do at this meeting 6 before we conclude to make your analysis 7 possible going forward is agree on criteria 8 for -- they don't have to be five, right? 9 MS. COUGHLIN: Yes. No. 10 MR. PARKER: That's just an 11 example? 12 MS. COUGHLIN: You can add as many 13 columns there as you want. 14 MR. PARKER: Or fewer. 15 MS. COUGHLIN: Yes. 16 MR. PARKER: We could have fewer. 17 There are some that are statutorily required. 18 I think base case is one. Max tech I'm 19 understanding from John is the other. So that 20 would be five, right? 21 One through four is basically for 22 this group to decide. Once this group

### 202-234-4433 Neal R. Gross & Co., Inc. Page 153 1 decides, LBL is off and running to do their 2 analysis on what would be the LCC for TSL. Is 3 that right? 4 MS. COUGHLIN: It just affects the 5 NIA, the national -- 6 MR. PARKER: Right. For the 7 national impact assessment. 8 So there are various -- I'm sorry. 9 Go ahead. 10 MS. COUGHLIN: Yes. There are 11 other things that have come up over the last 12 couple of days that may require modifications 13 to the engineering and the LCC. So we would 14 have to do all of that first. 15 MR. PARKER: Right. 16 MS. COUGHLIN: Then we can get to 17 this stuff. 18 MR. PARKER: Right. 19 MS. COUGHLIN: Yes. 20 MR. PARKER: Okay. 21 MR. COULTER: This is Greg Coulter, 22 Prolec GE.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 154 1 I do have a question on where in 2 this analysis various other things go, like in 3 a national impact analysis. It would seem to 4 me we would somehow have to put all of the 5 costs associated with us converting, us 6 transforming, converting to amorphous because 7 if you look at some of those ELs, they're all 8 amorphous ELs. And we're not anywhere near 9 all amorphous manufacturers. 10 MS. COUGHLIN: Right. 11 MR. COULTER: So there are a lot of 12 equipment costs associated with us. My guess 13 is there are equipment costs associated with 14 amorphous guys. 15 MS. COUGHLIN: Yes, yes. 16 MR. COULTER: My guess is there are 17 costs associated with steel guys as they exit 18 steel. 19 MR. PARKER: Absolutely. 20 MR. COULTER: Yes. I don't know 21 where that is. 22 MS. COUGHLIN: That's in the

### 202-234-4433 Neal R. Gross & Co., Inc. Page 155 1 manufacturer impact analysis. 2 MS. COUGHLIN: When I look on the 3 national impact -- 4 MS. COUGHLIN: Well, what we need 5 to do -- 6 MEMBER DeLASKI: Could I just say 7 it is a misnomer -- okay? -- national impact 8 analysis because it doesn't -- there are lots 9 of impacts that are certainly happening to 10 people that are in the nation, like your 11 company, that aren't reflected in that. 12 MR. COULTER: Kind of important to 13 us. 14 MEMBER DeLASKI: Right. 15 (Laughter.) 16 MEMBER DeLASKI: There are other 17 impacts, too. There are a pollution impacts 18 that have a dollar impact that aren't 19 reflected in this particular impact number. 20 MS. COUGHLIN: Right. Right. So 21 there's a number of additional -- there are 22 manufacturer impacts. There is utility.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 156 1 There is impacts. Those are sort of further 2 downstream still of this particular piece of 3 the calculation. So this is the nationalized 4 energy and LCC savings calculation. 5 MR. PARKER: So for the 6 cost-benefit analysis that you have to do 7 under the executive order, that is -- 8 MS. COUGHLIN: Yes. That's -- 9 MEMBER CYMBALSKY: Greg, the answer 10 is there is a manufacturer impact analysis 11 which accounts for everything you just stated: 12 the cost to convert your product lines, all 13 that. And we look at each of the industries 14 that way. It's not reflective -- 15 MR. COULTER: All summarized in the 16 end. 17 MEMBER CYMBALSKY: Yes, it's all 18 summarized, absolutely. 19 MR. COULTER: You know, you've got 20 to -- 21 MR. PARKER: Mike. 22 MR. COULTER: I don't see how you

### 202-234-4433 Neal R. Gross & Co., Inc. Page 157 1 can -- 2 MEMBER CYMBALSKY: It's part of the 3 seven criteria, the impact on -- 4 MR. COULTER: I don't see how. I 5 mean, at some point there has to be -- okay. 6 We just had the energy savings. Now, I mean, 7 I'm glad you clarified that, but there still 8 needs to be like another chart like this. 9 Okay? 10 Bottom line, what is it? You know, 11 it's -- everything has got to be put on an 12 apples and apples basis, right? You can't 13 have one. Okay. Here is the cost to 14 manufacturers. How does it fit if you 15 amortize that over the time that, you know, 16 manufacturers do? We're seeing this, the 17 total benefit or cost, you know, whatever -- 18 MS. COUGHLIN: Right. So all of 19 those and, as I was saying, all of those 20 additional analyses require a set of draft 21 TSLs, which is what this Committee is 22 discussing. So once you settle on your

### 202-234-4433 Neal R. Gross & Co., Inc. Page 158 1 complete set of those scenarios, we can go and 2 complete the actual impacts analyses. 3 MEMBER DeLASKI: I have a process 4 question, which is that we have two parallel 5 processes going on, right? There's a process 6 of this Negotiating Committee, and there's a 7 process the government has to fulfill to carry 8 out its obligations to set a rule or not set 9 or to decide not to set a modified standard. 10 And so, John, what you are 11 describing is that we will see a manufacturer 12 impact analysis at the NOPR stage typically. 13 Will we have one to look at as part 14 of this negotiation? I mean, will there be a 15 draft that the agency is able to share with 16 the Committee or is that something that is not 17 far enough along? 18 MR. COFFEY: As Katie mentioned, 19 there are various impacts analyses that take 20 as one of their inputs a proposed TSL. 21 Normally that would be set forth in the NOPR. 22 For the purposes of these

### 202-234-4433 Neal R. Gross & Co., Inc. Page 159 1 negotiations, we could try one on for size and 2 then run the manufacturer impacts analysis and 3 see what the results look like. That is 4 something that we could supply. 5 MS. COUGHLIN: But realistically 6 you can only do that for a few TSLs. So if we 7 could get some consensus on what those 8 proposed TSLs should look like, that would be 9 a lot more efficient. 10 MEMBER DeLASKI: I'll put a few on 11 the table. I think the Department's 12 traditional approach to this is a good one, 13 what you have historically done. So I 14 wouldn't want us to diverge far from that 15 because that's what you're going to look at 16 absent this Committee coming to an agreement. 17 So I don't think we should get a 18 dozen. I think we should have something on 19 the order of five. 20 MR. PARKER: This is John's slide 21 from yesterday that contains I think sort of 22 the usual suspects, shall we say, for TSL.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 160 1 MEMBER DeLASKI: My view is the 2 usual suspects are pretty good. You know, max 3 tech, as you said, is statutorily required. 4 We think that that next level is a very 5 important level to evaluate. We think it's 6 you attempt to look at the land absent other 7 factors, the level that is the maximum level. 8 It's cost-effective, maximum savings that are 9 cost-effective. 10 We think the minimum LCC point is 11 also a very important point and a point at 12 which historically many standards have landed. 13 We think that looking at points that clearly 14 the point that you can get to short of 15 amorphous is an important point in our 16 discussions. 17 MR. PARKER: So that's the 18 noteworthy technologies point, right? 19 MEMBER DeLASKI: What is a 20 cost-effective level short of amorphous or 21 short of the ZDMH question, short of a sole 22 source supplier in the market today? That's

### 202-234-4433 Neal R. Gross & Co., Inc. Page 161 1 an important point, it seems to me. 2 MR. PARKER: Could you unpack the 3 last bullet a bit, Katie? 4 MS. COUGHLIN: Well, that's the 5 matrix that I -- 6 MR. PARKER: If we can set that 7 with the large gaps? 8 MS. COUGHLIN: Oh, the large gap? 9 Well, if you end up with a huge chunk of the 10 design space that doesn't have a proposed 11 standard, we just put one in there to see what 12 the numbers look like. 13 MR. PARKER: Okay. 14 MEMBER ROSENSTOCK: As long as 15 we're thinking about ideas, again, just for 16 the possible potential list, why don't we 17 think out of the box a little bit? How about 18 lowest incremental cost to manufacturers? How 19 about lowest incremental costs to customers? 20 How about lowest job losses, domestic job 21 losses is another possibility. 22 No. That was incremental costs

### 202-234-4433 Neal R. Gross & Co., Inc. Page 162 1 based on a higher level. 2 MR. PARKER: Zero. 3 MEMBER ROSENSTOCK: Okay. Above 4 the baseline. Above the baseline. 5 MEMBER DeLASKI: But that's still 6 the baseline for our statistical purposes, 7 right? So what do you mean? 8 MEMBER ROSENSTOCK: Okay. Instead 9 of going from 99.08 to 99.16, maybe the lowest 10 incremental cost could be at 99.1. Do you 11 know what I'm saying? 12 MS. COUGHLIN: It tends to be a 13 smooth function. So it's always going to be 14 zero. 15 MEMBER CYMBALSKY: Remember how we 16 do the walk-down. It starts from the top to 17 the bottom. So you can't -- 18 MEMBER ROSENSTOCK: I know, but in 19 terms of one of the levels, in terms of 20 highlighting one of the levels during -- 21 MR. PARKER: Yes. 22 MEMBER ROSENSTOCK: -- the

### 202-234-4433 Neal R. Gross & Co., Inc. Page 163 1 walk-down, I was suggesting a few other 2 potential -- 3 MR. PARKER: There's not a 4 non-arbitrary selection. 5 MEMBER CYMBALSKY: We should really 6 focus -- 7 MR. PARKER: It's either zero or -- 8 MEMBER CYMBALSKY: -- focus the 9 analysis. We don't want to do 50 things here, 10 right? So we need to focus on what the 11 reality is going to be coming out of this. 12 And so if we do just a little bit above the 13 baseline, I'm not sure what purpose that 14 serves. 15 MEMBER DeLASKI: What I would add 16 is that there should be a gap fill. I think 17 the gap fill notion is correct, but if there 18 is a big gap between the baseline and the 19 other levels that I described, I would be 20 really in favor of -- let's make sure we've 21 got some options in that gap. You don't want 22 ten options in that gap. You want an option

### 202-234-4433 Neal R. Gross & Co., Inc. Page 164 1 in the gap. 2 MEMBER PATTERSON: Andrew, could 3 you repeat your levels quickly? 4 MR. PARKER: They are the bullets 5 that are here, the bullets under -- 6 MEMBER PATTERSON: They didn't 7 match those. 8 MEMBER DeLASKI: Well, the one that 9 wouldn't match those would be the maximum 10 level, the maximum level that you can get to 11 without forcing amorphous. 12 MS. COUGHLIN: Yes. That would be 13 a noteworthy technology. 14 MEMBER PATTERSON: So maintaining 15 multiple vendors. 16 MEMBER DeLASKI: Yes. And then I 17 elaborated on that. They maintain multiple 18 vendors for the core material. 19 MS. COUGHLIN: Yes. 20 MR. PARKER: Wes is making a good 21 point. Maybe we should clarify. But there is 22 a vague list of noteworthy technologies.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 165 1 MEMBER CYMBALSKY: Right. This was
2 -- 3 MR. PARKER: Let's see if we can 4 eliminate that. 5 MEMBER CYMBALSKY: This was just 6 meant to be an example for like everything we 7 do, not just transformer-centric. 8 MR. PARKER: Right. 9 MEMBER CYMBALSKY: So these bullets 10 were written if we were doing refrigerators or 11 whatever. 12 MS. COUGHLIN: Yes. 13 MEMBER CYMBALSKY: But just plug in 14 whatever you want for -- 15 MR. PARKER: Okay. So that -- 16 MEMBER CYMBALSKY: -- the phrase 17 "noteworthy technology." 18 MR. PARKER: First off, before we 19 get there, just from a parliamentary 20 standpoint, can we all agree on the three 21 bullets above? 22 I'm sorry. Tatiana, is there a way

### 202-234-4433 Neal R. Gross & Co., Inc. Page 166 1 to zoom this so we can get larger? I'm just 2 sorry. I can zoom on an Apple but not a Dell. 3 Yes, and then make it bigger. I mean, can 4 you enlarge the print? In a Mac, you push
5 CTRL+P. 6 (Laughter.) 7 MR. PARKER: Make it bigger, yes. 8 Sorry. Change the font size. There. Good, 9 good. Beautiful. Thank you. 10 Okay. Can everybody see that now? 11 Jim? All right. Now we need to scroll down. 12 How do you scroll? Okay. 13 So max tech, energy efficiency 14 level with greatest national energy savings, 15 maximum net benefit. Is that -- 16 MS. COUGHLIN: Yes. Those are 17 well-defined. We can do those. 18 MR. PARKER: You can do that? But 19 is that covered by the second bullet, "maximum 20 net benefit"? This is maximum net energy 21 savings. 22 MS. COUGHLIN: The second and third

### 202-234-4433 Neal R. Gross & Co., Inc. Page 167 1 bullets are different. 2 MR. PARKER: Okay. Various life 3 cycle cost savings. Is that maximum net 4 benefit?
5 MS. COUGHLIN: Yes. 6 MR. PARKER: Because cost and 7 benefits are, as we just described, different 8 from -- 9 MS. COUGHLIN: Yes. 10 MR. PARKER: -- life cycle cost. 11 MS. COUGHLIN: Life cycle cost is 12 usually a net benefit analysis. 13 MR. PARKER: Okay. All right. So 14 can we agree on the top three bullets? Let's 15 discuss that first before we get to the 16 noteworthy technologies point because that is 17 going to require a longer discussion. 18 Tim? 19 MEMBER BALLO: Tim Ballo with 20 Earthjustice. 21 On the second bullet point, the 22 level with the greatest energy savings,

### 202-234-4433 Neal R. Gross & Co., Inc. Page 168 1 provide greater consumer benefits. You have 2 the three percent and seven percent discount 3 rate that you use in the NIA. Would you do 4 that analysis at three and at seven or pick a 5 winner? 6 MS. COUGHLIN: We tend to do it at 7 three and at seven because OMB is eventually 8 going to make us do it. So we want to -- 9 MEMBER BALLO: Then that seems like 10 four. 11 MS. COUGHLIN: That's right. There 12 will be -- 13 MEMBER DeLASKI: Yes. But the 14 point from an analytic point of view, you've 15 got to do it that way anyway. The model setup 16 is just once you plug it in, it just fits it 17 out, I assume. 18 MS. COUGHLIN: Yes. 19 MEMBER DeLASKI: Right, Katie? I 20 mean, am I making some -- 21 MS. COUGHLIN: Yes. And 22 eventually, irrespective of what happens here,

### 202-234-4433 Neal R. Gross & Co., Inc. Page 169 1 we end up with OMB. And they want everything 2 at three percent and at seven percent. So 3 we'll just do it all. 4 MEMBER DeLASKI: It's not 5 negotiating discount rates. 6 MR. PARKER: You can't do that 7 anyway. The life cycle cost we went through 8 this a little bit last night. Life cycle cost 9 is a little bit different from net benefits 10 because net benefits includes social cost of 11 carbon, right; whereas, life cycle costs -- 12 MS. COUGHLIN: Not at this stage, 13 they don't. Yes. That's done at the end. 14 MR. PARKER: Okay. Done at the 15 end. All right. But this is for the net 16 impact analysis, isn't it? 17 MS. COUGHLIN: This is for the -- 18 again, it's taking the LCC and generalizing 19 them to the nation over the analysis period. 20 MR. PARKER: Okay. Got it. So any 21 other comments on the top -- 22 MEMBER ROSENSTOCK: Steve

### 202-234-4433 Neal R. Gross & Co., Inc. Page 170 1 Rosenstock, EEI. 2 On the second bullet, when you say 3 "Consumer Savings," are you saying a positive 4 LCC? 5 MS. COUGHLIN: Yes. 6 MEMBER ROSENSTOCK: And it could be 7 anything above zero? Is that what you're 8 saying? 9 MS. COUGHLIN: That's right. 10 MEMBER ROSENSTOCK: So one dollar, 11 and that counts? 12 MS. COUGHLIN: In this definition, 13 yes, anything that's above zero. 14 MR. PARKER: Over the life of the 15 transformer. 16 MS. COUGHLIN: LCC is for the life 17 of the transformer. 18 MR. PARKER: Right. 19 MEMBER DeLASKI: That's why I think 20 you may need a gap fill between those two, but 21 you don't know until you look at what the gap 22 is.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 171 1 MR. PARKER: Right. Okay? 2 MS. COUGHLIN: Yes. 3 MR. PARKER: So could we take a -- 4 just so we get a feeling of momentum here, can 5 we take a vote on the top three as criteria 6 and adopting them? And then we'll add. 7 Basically what Katie needs is, are 8 these three criteria acceptable as bases for 9 establishing TSLs for purposes of their 10 analysis? 11 MEMBER ROSENSTOCK: Steve 12 Rosenstock, EEI. 13 It all depends on how many we're 14 allowed to use. If we're only allowed to use 15 three, I -- 16 MR. PARKER: No, no, no. 17 MEMBER ROSENSTOCK: -- we have more 18 flexibility. 19 MR. PARKER: No, we're not required 20 to use three. Well, just what's there, the 21 first three. As I said, then we'll go on to 22 the others. And we can add more if we want.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 172 1 I'm just trying to get something down so we -- 2 MEMBER CYMBALSKY: I think we're 3 going to do these anyway because just in case 4 this breaks down, our NOPR is still hanging 5 out there. 6 MR. PARKER: Right. 7 PARTICIPANT: We can vote for this, 8 then. 9 MR. PARKER: Right. 10 MS. COUGHLIN: You can all vote for 11 this. It doesn't deprive you of anything. 12 MEMBER CYMBALSKY: Can I cast my 13 100 percent vote? 14 MR. PARKER: You still only get one 15 vote around this table. Sorry. So DOE will 16 be doing this anyway, but does the group 17 concur that these are relevant because I just 18 want to hear from you. Shaking your heads? 19 Yes? All in favor, aye? 20 (Whereupon, there was a chorus of 21 "Ayes.") 22 MR. PARKER: Opposed?

### 202-234-4433 Neal R. Gross & Co., Inc. Page 173 1 (No response.) 2 MR. PARKER: Okay. So these three 3 are adopted. Now let's talk about noteworthy 4 technologies. Basically this is the point at 5 which you start impacting the steel makers. 6 Is that the way we basically are defining 7 this? 8 I just toss that out for 9 discussion. This is the shift between 10 amorphous and conventional. 11 MEMBER DeLASKI: Obviously we 12 impact steel makers at all levels. And I want 13 to be -- 14 MR. PARKER: Right. 15 MEMBER DeLASKI: The point I think 16 is that I think we're interested. I am 17 interested in what are the levels that are 18 cost-effective but short of a sole source 19 supplier, a single source supplier in today's 20 market. 21 MS. COUGHLIN: Okay. 22 MR. PARKER: Is there a way to pin

### 202-234-4433 Neal R. Gross & Co., Inc. Page 174 1 that down? That's what we need to discuss. 2 Robert? 3 MR. BERMAN: Robert Berman, Berman 4 Economics. 5 Could we talk about market share of 6 the various materials; that is to say, 7 categories which have 20 percent, 40 percent, 8 60 percent of -- 9 MR. PARKER: Based on shipments 10 analysis, for example? 11 MS. COUGHLIN: Yes. There are the 12 beginnings of that type of analysis in this 13 document, I believe. There are some tables of 14 steel requirements for different standard 15 levels. Is that -- so it's a combination of 16 the market share of the design and the 17 standard -- 18 MR. BERMAN: No. It gets back to I 19 guess it's slide 3. 20 MS. COUGHLIN: You don't have the 21 presentation up anymore. 22 MR. BERMAN: Big scatter plot. At

### 202-234-4433 Neal R. Gross & Co., Inc. Page 175 1 different CSLs, the higher efficiency 2 materials -- that's the one -- get larger and 3 larger market shares. So it seems that you 4 want to start looking, say, at CSLs 2, 3, and 5 4, for example, and see what the market shares 6 are for the -- say, even just for 2, 3, and 4, 7 what the market shares are for the various 8 materials, not the tonnage. 9 MR. PARKER: Do we want to talk 10 about a threshold market share because 11 otherwise that last one could be a series of 12 things? 13 MS. COUGHLIN: Yes. You can 14 represent it as total demand or you can 15 represent it as market share, so one or the 16 other. We have put, I believe, the demand for 17 particular materials in the current document. 18 That could be converted to market share. 19 MEMBER MILLURE: This is Dave 20 Millure, Metglas. 21 We have to be careful. These are 22 based on the old CSLs.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 176 1 MS. COUGHLIN: Well, this picture 2 is based on the old -- 3 MEMBER MILLURE: Those pictures. 4 MS. COUGHLIN: Yes, but they're -- 5 MEMBER MILLURE: And that's what 6 most of us have on our mind, --
7 MS. COUGHLIN: Yes. 8 MEMBER MILLURE: -- are these older 9 pictures. But right now with the new ELs for 10 design line 1, CSL-4 is actually less than in 11 efficiency the old CSL-3. 12 MS. COUGHLIN: That's TSL. That 13 TSL is a collection of CSLs for all the design 14 lines. So yes. I guess the -- I don't know 15 if the design line specific efficiency level 16 numbers are in these documents, but they're -- 17 so yes. So the -- 18 MR. PARKER: We have to be 19 sensitive to that difference. 20 MEMBER PATTERSON: If I may, 21 there's a lot of confusion. 22 MR. PARKER: Wes Patterson?

### 202-234-4433 Neal R. Gross & Co., Inc. Page 177 1 MEMBER PATTERSON: Wes Patterson. 2 There's a lot of confusion on CSLs 3 version 1, -- 4 MR. PARKER: Right. 5 MEMBER PATTERSON: -- CSL version 6 2, and TSL -- 7 MS. COUGHLIN: Right. 8 MEMBER PATTERSON: -- pre-version. 9 MS. COUGHLIN: Right. So, again -- 10 MEMBER PATTERSON: So there's a lot 11 of confusion on this. But if you go to your 12 chart, your chart on the bottom looks a 13 scatter diagram. It has a continuous spectrum 14 of per-unit efficiencies. 15 MS. COUGHLIN: Yes. 16 MEMBER PATTERSON: So going back in 17 the next chart -- 18 MS. COUGHLIN: Yes. It's stuck. 19 MEMBER PATTERSON: Yes. So on the 20 bottom axis, I've got per-unit efficiencies. 21 And then Andrew's point was if you look at 22 that chart, you can see somewhere between 99.3

### 202-234-4433 Neal R. Gross & Co., Inc. Page 178 1 and 99.4, there is a break point where, all of 2 a sudden, there is only one kind of material 3 available. That's what I can obviously see on 4 that chart by your determination, your data
5 set. 6 MS. COUGHLIN: Right. 7 MEMBER PATTERSON: They're both SA. 8 One is -- 9 MS. COUGHLIN: So those two -- 10 MEMBER PATTERSON: So Andrew's 11 point was maybe there should be -- you know, 12 draw a line down there, right? And consider 13 what is the influence of everything to the 14 left of that line if I understood you 15 correctly. 16 MEMBER DeLASKI: Yes. I am very 17 interested in -- 18 MS. COUGHLIN: Yes. 19 MEMBER PATTERSON: If we can stop 20 talking about the CSLs because I am totally 21 confused with them anymore? 22 MS. COUGHLIN: Okay.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 179 1 MEMBER PATTERSON: And if we talk 2 about an efficiency number, we could say, 3 "Okay. Let's draw a slice of that efficiency 4 number." 5 MS. COUGHLIN: Right. But, again, 6 the way the standard works is that TSL, which 7 is what the law specifics, has to provide 8 efficiency levels for each design line that's 9 included in the equipment class. 10 So what we would need to do -- and 11 this is essentially -- you know, even though 12 we have the criteria, you make the 13 technological break point where you want it. 14 And then you do that consistently on each 15 design line. And then we can assemble a TSL 16 that way. 17 So if you tell us which materials 18 you want, you know, how you want to do that, 19 we can go through and set that up. 20 MR. PARKER: So the question is, 21 how do you define a technological break point? 22 You could do it on the basis of market share.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 180 1 You could do it on the basis of total 2 shipments. It looks to me like from this, you 3 could also do it on the basis of selling 4 price. 5 MS. COUGHLIN: Technology is 6 basically materials, I think. So it's just 7 which materials, how many of the materials you 8 want to look at. 9 MR. PARKER: Right. You could also 10 do it I suppose of the basis of take some 11 average of selling price differential. No? 12 MS. COUGHLIN: When I say 13 technology options, I mean actually just, you 14 know, something about the actual transformer 15 design that determines -- 16 MR. PARKER: Right. 17 MS. COUGHLIN: -- a particular 18 technology needs to be used. So advanced 19 materials is the most important one for -- 20 MR. PARKER: What I'm saying is 21 that this is -- at a certain distance between 22 the blue and the purple or pink, whatever you

### 202-234-4433 Neal R. Gross & Co., Inc. Page 181 1 call it, people just shift over from 2 conventional metal to amorphous. 3 PARTICIPANT: Where would you draw 4 the line? 5 MR. PARKER: Well, at this point, 6 you can't make it, but at this point, you 7 could do both. It just costs more, right? At 8 this point, you could do conventional or you 9 could do amorphous, but it just costs more. 10 So if a TSL is set here, so the 11 question is, at what point is amorphous, in 12 effect, so much cheaper than conventional or 13 in this case it's high-b, that essentially 14 high-b doesn't compete anymore? So you could 15 say, you know, based on the market analysis, 16 competitiveness analysis, at this point the 17 whole market shifts because this differential 18 is too great, right? 19 MEMBER PATTERSON: This is high-b 20 on a TVA round port. You're saying it's 21 high-b material? 22 MR. PARKER: This is high-b on a

### 202-234-4433 Neal R. Gross & Co., Inc. Page 182 1 copper, copper-copper, right? That's the 2 blue? 3 MS. COUGHLIN: Yes. I mean, you 4 can do anything you want. I mean, it's 5 basically not my decision. It's your decision 6 how you would like to see the results broken 7 down. 8 So clearly there is a bit of 9 overlap in terms of -- it's very rare to have 10 an efficiency level or a particular number 11 split completely the design options. So, you 12 know, we need reasonable criteria for dropping 13 those lines at a particular place and 14 combining them. 15 MR. PARKER: Because I think if the 16 utilities are -- they don't really care. 17 They'll go with the best numbers, right, and 18 -- 19 MEMBER ROSENSTOCK: Well, the other 20 issue is it's the other design issue, the 21 installation and the weight and the loading. 22 There are other issues besides the efficiency

### 202-234-4433 Neal R. Gross & Co., Inc. Page 183 1 that are going to make a big difference. 2 MR. PARKER: Right. 3 MEMBER ROSENSTOCK: If some of 4 those designs on the right are significantly 5 bigger in size, heavier, won't fit in current 6 vaults, that's huge -- 7 MR. PARKER: That should be 8 captured by life cycle cost, though, right? 9 MS. COUGHLIN: That is included in 10 life cycle cost. 11 MEMBER PATTERSON: If we can 12 introduce additional product lines, hopefully 13 we could address that in those additional 14 product lines, where we have vaults and we try 15 to put in something that's to the far right 16 that won't fit -- 17 MR. PARKER: Right. 18 MEMBER PATTERSON: -- in the vault. 19 MR. PARKER: Right. 20 MS. COUGHLIN: We have a subgroup. 21 We have a subgroup analysis for that. 22 MEMBER PATTERSON: Cost is

### 202-234-4433 Neal R. Gross & Co., Inc. Page 184 1 ludicrous. 2 MS. COUGHLIN: Yes. 3 MR. PARKER: Right. 4 MS. COUGHLIN: So that's 5 essentially treated separately. And then we 6 already have variability on the loading and 7 all that other stuff. 8 MR. PARKER: It doesn't get 9 captured, the manufacturing selling price, 10 here, but it will be captured downstream or 11 when we do the life cycle cost analysis. 12 MR. FLATEN: A question from David 13 Flaten. 14 MR. PARKER: Yes? 15 MR. FLATEN: If you change that 16 efficiency at 50 percent load and put in some 17 other number, does it completely change that 18 graph? 19 MS. COUGHLIN: Well, yes. I mean, 20 it will move the dots around, but you have to 21 define completely. It's not going to change. 22 Depending on -- yes.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 185 1 Again, this is a two-dimensional 2 flattening of a three-dimensional space. So 3 it's going to have some effect, and it's 4 difficult to anticipate what exactly that 5 would be. 6 MR. KAJA: So you need accurate -- 7 so if you had accurate data about what the 8 average transformer load is, that would be 9 important? 10 MS. COUGHLIN: Well, again, in the 11 LCC, there's a range of average transformer 12 loads in the simulation. So the LCC accounts 13 for the fact that transformers may not be 14 loaded at test procedure conditions. 15 MR. KAJA: Oh, yes. If you had a 16 national average for what the average 17 transformer was loaded at, that would be 18 important. 19 MS. COUGHLIN: I think it needs to 20 be specified by equipment type to be -- so we 21 do have estimates for the different categories 22 of equipment. And any additional information

### 202-234-4433 Neal R. Gross & Co., Inc. Page 186 1 is always useful. 2 MR. KAJA: Okay. Thank you. 3 MR. PARKER: Okay. Bob? 4 MR. BERMAN: Robert Berman, Berman 5 Economics. 6 I think a range of different load 7 factors would be helpful. I know, for 8 example, we have got a number of public power 9 representatives here who would love to see a 10 load factor in their districts of 45 or 50 11 percent but are probably seeing something more 12 like mid to high 20s in a lot of areas. 13 So we probably want to see what -- 14 if there is some way to -- you can take the 15 same designs using the 50 percent design 16 criteria and just use a different load factor 17 to see what the cost -- 18 MS. COUGHLIN: Right. 19 MR. BERMAN: -- to see what the 20 spreads look like. 21 MS. COUGHLIN: We have currently a 22 subgroup analysis from municipal utilities.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 187 1 And that is one of the changes that is made to 2 that subgroup. And if you wanted to define a 3 more general subgroup, we could do that. The 4 main consideration is whether there are 5 particular design lines that correspond to 6 those purchasers or whether you do all of 7 them. 8 MR. PARKER: Guys, listen up. Go 9 ahead, Mike. 10 MR. RIVEST: Mike Rivest. 11 I want to make sure there's no 12 confusion here. So there are two different 13 things: something called a subgroup analysis 14 and something called product class. So we 15 have been talking about both. And sometimes I 16 get the sense that we're talking about both at 17 the same time. 18 So setting a separate product class 19 for vaults, for example, would mean setting a 20 separate standard for transformers that go 21 into vaults, presumably lower. 22 MR. PARKER: Right.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 188 1 MR. RIVEST: What Katie has been 2 talking about is sometimes we look at subgroup 3 of the population to see how the standard will 4 impact them differently from other groups. 5 But we're not setting a separate product class 6 for them. We're setting a separate standard 7 level. 8 MS. COUGHLIN: Right. 9 MR. PARKER: Can DOE actually set a 10 standard that depends upon the end user? 11 MEMBER ROSENSTOCK: They've only 12 done retrofit versus new. That's the only 13 change that's been -- that's the only 14 breakout. 15 MEMBER CORKRAN: Jerry Corkran, 16 Cooper. 17 Regarding the ideas for looking at 18 variations, I find a 30-year life to be maybe 19 extremely optimistic. And I would suggest the 20 IEEE 20.5-year life, you look at that. And 21 that says that the maximum unit is going to 22 last 41 years, instead of right now you're

### 202-234-4433 Neal R. Gross & Co., Inc. Page 189 1 saying 60 years. 2 MR. PARKER: Okay. 3 MEMBER CORKRAN: Our paint is good, 4 but I don't think it's that good. 5 The other thing is the 50 percent 6 load, which is where we're at right now, we 7 have electric ties looming on the horizon. I 8 can't imagine a utility company expecting for 9 the next six years the transformer is going to 10 be loaded at 50 percent. So I would suggest 11 you look at 60 percent load, too, if you're 12 going to do some variations at looking at the 13 designs you have created. 14 MS. COUGHLIN: Actually, we have 15 the LCC can actually specify a low growth rate 16 over the analysis period. So, again, it's 17 just a matter of choosing. 18 MEMBER ROSENSTOCK: Or decline 19 rate. Or decline rate, which is what a lot of 20 our members have been seeing. 21 MS. COUGHLIN: Yes. 22 MR. PARKER: So I think basically

### 202-234-4433 Neal R. Gross & Co., Inc. Page 190 1 the overwhelming direction of what we are 2 hearing is that we really do need a quick and 3 easy sort of cheat sheet of key assumptions. 4 MS. COUGHLIN: There is no quick 5 and easy -- 6 MR. PARKER: Well, it is possible 7 to say -- 8 MS. COUGHLIN: It's not -- 9 MR. PARKER: No, no, no. It is 10 possible to say we are assuming 50 percent 11 load factor. 12 MS. COUGHLIN: We are not assuming 13 50 percent load factor. 14 MR. PARKER: What's that? 15 MS. COUGHLIN: We are not assuming 16 50 percent load factor. 17 MR. PARKER: You're not? 18 MR. COFFEY: No. 19 MS. COUGHLIN: We are not. The 20 test procedure is defined -- 21 MR. PARKER: The test procedure is 22 different. Okay.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 191 1 MS. COUGHLIN: The test procedure 2 is -- 3 MR. PARKER: Right, right, right. 4 I got you. Sorry. Okay. 5 MS. COUGHLIN: So the things that 6 we are assuming are there are lots of 7 complexities in what we are assuming. 8 MR. PARKER: Materials? Prices? 9 MS. COUGHLIN: Materials, prices 10 generate the cloud of designs, but then the 11 cloud of designs has the variability on the 12 purchase price. 13 MR. PARKER: So you can't just 14 specify your key assumptions in a -- 15 MS. COUGHLIN: That's what the TSD 16 -- I mean, we don't write the TSD for fun, 17 right? We try to make it complete but as 18 short as possible. And that is kind of what 19 is in the -- that is what is in the TSD. 20 MR. PARKER: All right. 21 MS. COUGHLIN: So I have to also 22 remind people that every sensitivity will

### 202-234-4433 Neal R. Gross & Co., Inc. Page 192 1 generate a new set of results for each TSL. 2 So, you know, we can do all these things with 3 sensitivities, but then there is going to be
4 -- 5 MR. PARKER: Okay. So the more 6 broad point that I wanted to make before I got 7 shanghaied on my quest for a cheat sheet is 8 that if you have issues about methodology, we 9 need to foreground them. 10 You know, put them forward in a 11 document, send them to us. And at the end of 12 this meeting, we'll try to capture before we 13 leave the stuff that has come up in the 14 meeting, the issues and methodology that need 15 to be explored, the basis for it. 16 And we'll try to recap, I think, 17 you know, what tweaks to the analysis we can 18 do to capture those concerns. I'm going to 19 try to go away from the meeting with that 20 rehash, but let's set that aside for right 21 now, not review questions about methodology 22 and assumptions but just focus on what should

### 202-234-4433 Neal R. Gross & Co., Inc. Page 193 1 be -- if we can go back to the previous slide? 2 There. Great. Thanks. 3 MEMBER CYMBALSKY: Let me say while 4 we are on the topic of TSDs, we do have 5 several chapters of the TSD complete with the 6 new analysis, which we will post. And I will 7 also ask the team to develop maybe a two-page 8 summary on the key changes between the March 9 analysis and the August analysis. 10 MR. PARKER: Okay. Excellent. 11 Thank you. 12 MEMBER ROSENSTOCK: Steve 13 Rosenstock, EEI. 14 Does that include chapters 7 and 8 15 with energy use and then the life cycle cost 16 analysis? 17 MR. PARKER: Yes I am hearing from 18 Katie. Is that right? 19 MEMBER CYMBALSKY: If she is saying 20 yes, she is the one who -- 21 MS. COUGHLIN: Yes. Those have 22 been drafted.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 194 1 MEMBER ROSENSTOCK: Thank you. 2 MR. PARKER: Great. Does that 3 satisfy everybody? 4 (No response.) 5 MR. PARKER: Good. 6 MEMBER PATTERSON: So Andrew made a 7 recommendation a while back about trying to 8 consider a break point related to the core 9 steel supply, right? 10 MR. PARKER: Right. 11 MEMBER PATTERSON: And we never 12 made any kind of a movement or -- 13 MR. PARKER: Well, that is what I 14 am trying to get back to. 15 MEMBER PATTERSON: Okay. 16 MR. PARKER: That is what I am 17 trying to get back to. I was trying to set 18 aside the questions about methodology again 19 that bubbled up. And I'm trying to get back 20 to this issue of how do we define the break 21 point on core steel supply? 22 And I think what we've got so far

### 202-234-4433 Neal R. Gross & Co., Inc. Page 195 1 is you could talk about impact on selling 2 price. When it reaches a certain point, you 3 say that the market has tipped or you could 4 talk about forecasts for absolute shipments 5 when -- 6 MEMBER DeLASKI: Those are 7 different than what I, what you're saying is 8 different than what I, said. 9 MR. PARKER: Oh, sorry. 10 MEMBER DeLASKI: Are you trying to 11 elaborate on my point or are you trying to 12 make a different point? 13 MR. PARKER: I'm trying to say that 14 there are different ways that you could, 15 different specific break point at which you 16 could define a shift form conventional steel 17 to amorphous. Is that right? 18 MEMBER DeLASKI: That's right. 19 MR. PARKER: Your general point was 20 that let's figure out at some point where 21 things tip in a large-scale way from -- 22 MEMBER DeLASKI: No, no. My point

### 202-234-4433 Neal R. Gross & Co., Inc. Page 196 1 was a different point. My point, it's a 2 simpler point, much simpler, -- 3 MR. PARKER: Okay. 4 MEMBER DeLASKI: -- which is that I 5 want to know the maximum level at which there 6 are multiple suppliers of core steel that can 7 make compliant transformers. I don't care 8 which one is the most cost-effective. 9 MR. PARKER: But can make at what 10 price? 11 MEMBER DeLASKI: I don't care. 12 MS. COUGHLIN: As long as it's more 13 than one supplier. Okay. 14 MEMBER DeLASKI: I want more than 15 one supplier. I want multiple suppliers. I 16 don't care what the price is for that. 17 MR. PARKER: Comments? Yes, 18 Carlos? 19 MEMBER GAYTAN: Carlos Gaytan, 20 Prolec GE. 21 I would like to suggest to consider 22 like a bandwidth of ten percent of price in

### 202-234-4433 Neal R. Gross & Co., Inc. Page 197 1 order to have that window of consideration for 2 an equivalency on the designs for the 3 different grades of core steels. 4 MEMBER DeLASKI: So that would be a 5 different -- that might be a different 6 grouping. That would be a little different 7 grouping than what I have suggested. 8 MEMBER GAYTAN: Well, it's trying 9 to elaborate on your proposal, with which I 10 agree, because we said we will look at the 11 graphs and consider looking for the maximum 12 efficiency level where we have a variety of 13 core steel grades that can mean that 14 efficiency. Then comes the question about at 15 what price. 16 And in order to have certain 17 equivalency between the different grades of 18 core steels, I would like to suggest using a 19 criteria on the bandwidth of price of a ten 20 percent. 21 MR. PARKER: So, in other words, if 22 the price of one material is ten percent

### 202-234-4433 Neal R. Gross & Co., Inc. Page 198 1 higher than the price of a -- 2 MEMBER GAYTAN: No. Transformer 3 price -- 4 MR. PARKER: If the price of -- 5 MEMBER GAYTAN: -- on the vertical 6 axis. 7 MS. COUGHLIN: If it's more than 8 ten -- 9 MR. PARKER: Transformer with one 10 material is ten percent higher than the 11 transformer with another material. Is that 12 right? 13 MS. COUGHLIN: If it's more than 14 ten percent, more expensive, you don't count 15 it as a potential substitute. I think that's 16 what you're saying. 17 MEMBER GAYTAN: Yes. If it is like 18 more than ten percent higher than the 19 lowest-price transformer, then you discard 20 that consideration. 21 MR. PARKER: That goes into what is 22 the elasticity of demand for transport.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 199 1 MR. BERMAN: Robert Berman, Berman 2 Economics. 3 It's more than an issue of 4 elasticity of demand. It's also an issue of 5 elasticity of supply. That is to say we've 6 got a set of relative prices at this point. 7 And to do a bandwidth around what 8 Andrew is saying based on today's prices 9 doesn't tell us anything because that's 10 assuming that there will be no additional 11 price competition from the steel industry, 12 that they won't respond in some way to the 13 efficiency levels or we know that they -- you 14 know, as history has shown us in the past in 15 the data, there is this. There is this 16 effect. 17 So what I am saying is, rather than 18 try to guess the -- what the response could be 19 or, worse yet, rather than try to ask these 20 people how they would respond in a public 21 forum and violate the antitrust laws, that we 22 do what Andrew is suggesting, saying, "All

### 202-234-4433 Neal R. Gross & Co., Inc. Page 200 1 right. Can we see some mix of materials, 2 regardless of what the price is? At what 3 point could we technologically see a mix of 4 materials?" 5 MR. PARKER: Okay. Eric? 6 MEMBER PETERSON: Eric Peterson, AK 7 Steel. 8 I think another way of trying to 9 say it would be there is going to be a 10 capability line associated with when a 11 grain-oriented electrical steel could no 12 longer make a transformer and you would have 13 to move in an amorphous metal. There is that 14 line which is strictly associated with 15 technical capability. 16 Then as you begin to walk backwards 17 from that line, you start to introduce issues 18 associated with competitiveness, -- 19 MR. PARKER: Right. 20 MEMBER PETERSON: -- that being 21 that, even though you may take one step back 22 from the line, there is still the ability of

### 202-234-4433 Neal R. Gross & Co., Inc. Page 201 1 an amorphous metal to control price because of 2 size of transform design needs versus relative 3 competition. 4 As you continue to take another 5 step back, then, instead of just having one 6 principal material that could choose which way 7 the market went based upon what price they set 8 their material, if you step back enough, you 9 could essentially have a multiple number of 10 materials that could be competitive with one 11 another such that you could provide a 12 transformer manufacturer with a variety of 13 prices. 14 So I think it's important to 15 recognize there is an issue, one, of 16 capability and then after you step back from 17 capability, to ask the question associated 18 with which material has the ability to set the 19 market based upon whether or not they raise 20 price or lower prices such that their material 21 would be chosen. 22 If you step back one step further,

### 202-234-4433 Neal R. Gross & Co., Inc. Page 202 1 now you've got the ability of several 2 different materials to compete and provide a 3 product variety to transformer manufacturers. 4 MEMBER DeLASKI: I think that's 5 very well put. 6 MR. PARKER: Very well put. 7 MEMBER DeLASKI: And I think you 8 would want to evaluate. I would like to have 9 TSLs that show us, you know, those points. 10 And I don't know whether we -- you suggested 11 ten percent as being the point that -- I don't 12 know what those points are. 13 MEMBER PETERSON: Agreed. I'm not 14 sure. We've got some data for some specific 15 sizes, which we would be willing to share as 16 we continue on. I think that's kind of just 17 the guiding principle, so to speak, of what 18 we're looking at. Exactly how we get it into 19 the model, et cetera, I'll leave to people who 20 are much more intelligent along these details. 21 MR. PARKER: Well, I'm not sure 22 that we can. We need to have a number.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 203 1 MS. COUGHLIN: No. 2 PARTICIPANT: No, we don't. 3 MS. COUGHLIN: We'll talk about it. 4 MR. PARKER: Okay. 5 MS. COUGHLIN: We may need to come 6 back with a proposal about how to do it. And 7 then you guys can -- 8 MR. PARKER: Okay. 9 MEMBER CASKEY: This is John Caskey 10 with NEMA. 11 MR. PARKER: Yes? 12 MEMBER CASKEY: I fully support 13 what Andrew is trying to say and what is Eric 14 is saying or trying to say. I mean, I think 15 that is a good choice. And I would like to 16 see the answer taking that factor into 17 account. 18 MR. PARKER: Absolutely. So what 19 we're talking about, then, is maybe a couple 20 of TSLs, one of which would be focused on the 21 capacity factor that Eric and Andrew -- it 22 sounds like they -- capability factor, excuse

### 202-234-4433 Neal R. Gross & Co., Inc. Page 204 1 me -- that Eric and Andrew have I think agreed 2 on. 3 And so then the next question is, 4 how do we define -- 5 MEMBER PETERSON: The term we've 6 used is -- 7 MR. PARKER: -- competitiveness? 8 MEMBER PETERSON: -- capability 9 versus competitive. 10 MR. PARKER: Do you feel like that 11 there are two lines or it could be found one 12 additional TSL that would satisfy -- 13 MEMBER PETERSON: As we have done 14 some analysis, we can actually see what I 15 would define as two lines, one where our 16 product -- it's not capable anymore to be able 17 to make the efficiency standard. There is 18 only one material that can do it. 19 MR. PARKER: That's the capability. 20 MEMBER PETERSON: And that's the 21 capability side. 22 MR. PARKER: Right. Beyond that.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 205 1 MEMBER PETERSON: If you step back, 2 there's a window associated with 3 competitiveness. When does the relative worth 4 kick in -- 5 MR. PARKER: Right. 6 MEMBER PETERSON: -- enough such 7 that -- 8 MR. PARKER: Right. 9 MEMBER PETERSON: -- more than one 10 supplier has the ability to define the product 11 usage based on upon the price of supply. 12 MR. PARKER: And what would be the 13 proxy for defining the product usage? Would 14 it be a proportionate market share? Would it 15 be -- 16 MEMBER PETERSON: We use something 17 that's called relative worth, a relative worth 18 model, which essentially takes a look at the 19 size of the transformer with one material 20 versus the other material, the core product, 21 versus the price of that. 22 And there's a price cost valuation

### 202-234-4433 Neal R. Gross & Co., Inc. Page 206 1 that you can go through that helps to define 2 where those curves intersect such that they 3 become competitive, so to speak. It's part of 4 really what the industry uses in regards to 5 how we price our product, one product versus 6 another, et cetera. 7 MR. PARKER: So could you all -- 8 and, Ray, I assume that Allegheny wants to be 9 a part of this as well. Did you have any 10 thoughts that you wanted to share? 11 MEMBER POLINSKI: Yes. Ray 12 Polinski of Allegheny Ludlum. 13 I think Eric points it out well. 14 The problem -- and I think Mr. Berman talked 15 about it, too -- is that there are just so 16 many variables, though. What is the -- you 17 know, we talk about market prices. 18 We're not going to talk about that, 19 but there is -- at some price, everything is 20 competitive. There's also a cost factor where 21 the steel companies -- any producer has to 22 make a profit to be sustainable as well.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 207 1 MR. PARKER: Right. 2 MEMBER POLINSKI: You know, there's 3 the other component of -- 4 MR. PARKER: Right. 5 MEMBER POLINSKI: -- puts some 6 limit -- 7 MR. PARKER: Right. 8 MEMBER POLINSKI: -- as to, you 9 know, at some price level; that's just not -- 10 you know, if the price of steel was a penny a 11 pound, that it has the capability issue. Then 12 there is the -- 13 MR. PARKER: Right. 14 MEMBER POLINSKI: We talk about 15 price. We don't talk about profits, just a 16 point. 17 MR. PARKER: Right. Exactly. But 18 you need a TSL to go at some particular point 19 for each design line, right, some particular 20 efficiency for each design line? And so we 21 have to figure out where to put that line, 22 right?

### 202-234-4433 Neal R. Gross & Co., Inc. Page 208 1 MS. COUGHLIN: No. Actually, I 2 mean, again, we don't want to move the 3 efficiency levels too much because, again, 4 they are already trying to take into account 5 some of the manufacturing issues. 6 So, I mean, I can discuss this with 7 the Navigant people, but, really, what we're 8 talking about is picking the existing 9 efficiency levels and dropping them into that 10 table that defines the TSLs. 11 MR. PARKER: Okay. 12 MS. COUGHLIN: And so, you know, 13 it's really, although there are many, many 14 factors that come into it, ultimately it's 15 going to come down to a choice between two or 16 three efficiency levels. And so I think we 17 should probably make a draft proposal of -- 18 MR. PARKER: Okay. 19 MS. COUGHLIN: -- TSLs that attempt 20 to meet these requirements and you reflect on 21 that and then -- I think that might be a 22 better way to proceed.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 209 1 MR. PARKER: Okay. And -- 2 MEMBER DeLASKI: Could I just ask 3 one question for clarification for Eric? 4 MR. PARKER: Andrew DeLaski. 5 MEMBER DeLASKI: Capability I 6 understand. And then I think I many have 7 gotten confused about your next two. 8 Competitiveness. Define that one for me 9 again. 10 MEMBER PETERSON: I would say the 11 next one would be competitiveness. And what I 12 would mean by that, if we just picked an 13 extreme as an example, we understand 14 capability. If you're to step back one size 15 where a grain-oriented electrical steel could 16 be capable of making a transformer, the 17 transformer manufacturer would have to look at 18 the size of the transformer I'm going to have 19 to build with that grain-oriented electrical 20 steel, would require a larger coarse steel. 21 Therefore, I'm going to have to buy 22 a greater degree of volume versus an amorphous

### 202-234-4433 Neal R. Gross & Co., Inc. Page 210 1 metal, where I could decrease the size of the 2 total volume of my coarse steel because of 3 that higher efficiency. 4 So for us to be able to be 5 considered, we would have to price our product 6 -- we couldn't price it equivalent to 7 amorphous material because you could buy less 8 of the amorphous and at the same price -- you 9 know what I'm saying? And so your overall 10 cost would be less. 11 So there has to be a relative worth 12 associated with recognizing that the amorphous 13 metal has superior electrical properties. So 14 with those superior prices, if there is a 15 price level here, we have to have a price 16 level such that is below it so that it would 17 be considered. But, yet, if we price it too 18 low, obviously there is a cost aspect 19 associated for us, regardless of whether or 20 not it is profitable. 21 If we price it too high, the volume 22 of the material that a transformer

### 202-234-4433 Neal R. Gross & Co., Inc. Page 211 1 manufacturer would have to purchase is greater 2 for our actually grain-oriented steel such 3 that they would be better off to go with an 4 amorphous metal. 5 So within that relative pricing 6 between the two is where the question of 7 combativeness gets. And the farther back you 8 go provides a greater ability for electrical 9 steel to have a window of pricing such that 10 they could compete. 11 MR. PARKER: Right, right. 12 MEMBER DeLASKI: So there's some 13 magic point, which is, of course, very hard to 14 put your finger on. 15 MEMBER PETERSON: Well, basically 16 what it is -- 17 MR. PARKER: How much market share 18 do you lose before it's too much? 19 MEMBER PETERSON: It's not only 20 market share. It becomes a question, frankly, 21 just associated with what is my best business 22 opportunity because I've got other markets

### 202-234-4433 Neal R. Gross & Co., Inc. Page 212 1 that I can provide that to. This is a global 2 market for these products. 3 MR. PARKER: Right. 4 MEMBER PETERSON: And so what you 5 have to take an assessment of is if the 6 standard level is high enough here such that I 7 have to price it so low to compete with 8 amorphous metals, I'm going to be looking at 9 my overall market. 10 MR. PARKER: How much U.S. market 11 share. 12 MEMBER PETERSON: Exactly. 13 MR. PARKER: How much U.S. market 14 share do you lose? 15 MEMBER PETERSON: So ultimately 16 what I would end up defining is whether or not 17 I participated in the U.S. market really would 18 come down to where the amorphous material is 19 priced. 20 If it was priced high enough so 21 that I could maintain a relative worth such 22 that a U.S. manufacturer would consider my

### 202-234-4433 Neal R. Gross & Co., Inc. Page 213 1 product, I do it, but the amorphous was priced 2 low enough such that I can get a better 3 business opportunity elsewhere, I wouldn't 4 supply this market. It's just flat out an 5 aspect associated with the business value of 6 my product. 7 MEMBER DeLASKI: That's the 8 competition point. Then there's a third point 9 that you were trying to define. 10 MEMBER PETERSON: No. That's 11 really what I meant. 12 MEMBER DeLASKI: That one 13 competition point. Okay. 14 MEMBER PETERSON: And what I would 15 try to say by that is it's not necessarily a 16 magical number associated with right here, I'm 17 absolutely competitive. There's a degree of 18 competition. 19 MR. PARKER: Right. 20 MEMBER PETERSON: The closer to the 21 cliff I am, amorphous metal would really 22 control my ability of whether or not I am

### 202-234-4433 Neal R. Gross & Co., Inc. Page 214 1 going to compete. The farther back you go, 2 the less influence amorphous pricing has on my 3 ability to compete. 4 MR. PARKER: The problem is, 5 though, that that makes the TSL dependent upon 6 assumptions about amorphous prices under any
7 -- 8 MEMBER PETERSON: I think it does 9 get into some aspects associated -- 10 MEMBER MILLURE: This is Dave 11 Millure, Metglas. 12 MR. PARKER: Yes? 13 MEMBER MILLURE: Maybe I could 14 address that. 15 I agree with Eric. He was talking 16 about the weight. The core weights are about 17 the same, will be competitive. And I'm a 18 little hesitant to use the transformer price, 19 like Carlos suggested, because, quite frankly, 20 a $1.88 a pound for M-3 assumption in this 21 analysis, I'm not so sure that's accurate. It 22 seems a little high to me.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 215 1 But if you go on weight, it's real 2 world, right, instead of the pricing, because 3 I don't know about the pricing and assumptions 4 that went into this. So if we could pick a 5 TSL level where the core weights are within 25 6 percent or 20 percent of each other and then 7 that could put the stake in the ground and at 8 that TSL, we would be competitive. 9 MR. PARKER: How do you feel about 10 that, Eric? 11 MEMBER PETERSON: I would have to 12 think about that a little bit. 13 MR. PARKER: Okay. 14 MEMBER PETERSON: For the exact 15 same weight, I think if you had -- well, then 16 it's just going to come down to pricing. 17 MEMBER MILLURE: At that point, 18 it's a pricing policy. 19 MR. PARKER: Twenty-five percent? 20 Okay. So we're not going to take a vote 21 because people have to think about it. But 22 the idea, the suggestion has been that a 25

### 202-234-4433 Neal R. Gross & Co., Inc. Page 216 1 percent difference in core weight would be a 2 threshold for analysis. 3 Does that make sense from the 4 standpoint of what you can do analytically? 5 MS. COUGHLIN: I have no idea. 6 MR. PARKER: It's a Brian issue? 7 Brian, can you? What's that? Can you deal 8 with that? Okay. Brian is shaking his head 9 yes. 10 MS. COUGHLIN: Okay. 11 MR. PARKER: However, this is still 12 something that Eric has to think about and Ray 13 has to think about. How do you feel, Ray? 14 MEMBER POLINSKI: Ray Polinski, ATI 15 Allegheny. 16 Again, just maybe taking a step 17 back -- and I don't want to -- I think we're 18 trying to -- there are so many variables. And 19 we're trying to make this thing simple, I 20 mean. 21 The one thing that I haven't seen 22 -- and I can honestly say I'm sure I haven't

### 202-234-4433 Neal R. Gross & Co., Inc. Page 217 1 read all of this as thoroughly and as much as 2 everyone around the table here or whatever, 3 but just from the standpoint we're talking 4 about the steel guys. That's the term I 5 think, Richard, that you used or whatever. 6 But going back a step back to the 7 transformer producers, I mean, when I am out 8 there in transformer plants, I see maybe five 9 or ten percent of amorphous material out there 10 today at max. 11 I mean, part of the whole cost 12 analysis, I mean, the cost analysis, we have 13 talked to transformer producers about the 14 capital investments they have to make to go 15 from getting away from using grain-oriented to 16 go a manufacturing process is all amorphous. 17 I mean, the cost analysis, is there 18 something that we can read that shows, you 19 know, also with -- you know, we talked about 20 poles and pole transformers getting so large 21 that you can't -- you've got to place all of 22 the poles in vaults.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 218 1 I mean, there are so many costs 2 that I keep hearing, that seems that -- how 3 did we ever define the cost on some of these? 4 I saw a sheet up there that they would say, 5 18, you know, 16 billion and it cost us 10 6 billion or something. Do we have a pretty 7 good handle on that? 8 MR. PARKER: Katie, do you want to 9 explain it? 10 MS. COUGHLIN: Yes. I mean, 11 currently for the installation issues, such as 12 poles and vaults, those are folded into the 13 existing LCC. And then there's -- I think in 14 the next stage of set of publications -- 15 MR. PARKER: For any given TSL, 16 once the TSL is set, all of those things will 17 be folded in? 18 MS. COUGHLIN: Yes, yes. 19 MR. PARKER: Yes. 20 MS. COUGHLIN: Because you don't 21 need TSLs to do the LCC. 22 MR. PARKER: Yes. Right. Got you.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 219 1 MS. COUGHLIN: So yes. The 2 percentage of installations that are affected 3 by those concerns has already been counted. 4 And then the details are written up in the 5 subgroup analysis, which will be published. 6 So that's for those particular 7 issues. And then things to do with 8 manufacturing and core steel are treated in 9 the manufacturer impact analysis. 10 MR. RIVEST: So it's treated in 11 both places in the sense that part of the 12 manufacturer's sales price includes 13 appreciation costs factored into a markup of 14 raw material costs and then to evaluate the 15 magnitude of the impact of the investment, 16 which is really more like a cash flow impact, 17 if you will. That is done in the 18 manufacturing impact analysis. 19 MEMBER POLINSKI: Ray Polinski, 20 Allegheny. 21 I mean, we have interviewed a lot 22 of people. We have done a lot of work. And,

### 202-234-4433 Neal R. Gross & Co., Inc. Page 220 1 as everyone said, it's a very daunting task. 2 I mean, we have talked to some transformer 3 producers and asked them, "What would be your 4 estimated capital cost to have to go to 100 5 percent amorphous design?" I mean, customers 6 have done that engineering analysis and have 7 given you data on that. 8 MS. COUGHLIN: I think that's the 9 engineering. So yes. Okay. 10 MEMBER POLINSKI: Okay. Well, Ray 11 Polinski again. 12 Just something I'll throw out 13 there, you know, trying to go back to the 14 question about the crossover and capabilities 15 of amorphous and the price performance, you 16 know, relationship. 17 You know, we certainly don't want 18 to talk about it here today, but is there a 19 way we can back-calculate, you know, what is 20 the price? At some point, what does the price 21 of grain-oriented have to be? 22 And then certainly under

### 202-234-4433 Neal R. Gross & Co., Inc. Page 221 1 confidentiality, we could then talk with 2 people about our costs, which we wouldn't do 3 in an open -- you know, we could -- and see if 4 it is -- you know, there's a point in time 5 where, again, we're not in the business 6 because it's not cost-effective for us. 7 And I think we need to work back to 8 find a price point and then come back to us 9 and say, "Hey, at that price point, can you 10 guys invest? And can you be a reliable 11 supplier moving forward?" Maybe that's a way 12 to work backwards. 13 MR. PARKER: Okay. I think the 14 idea was that weight would be a proxy, weight 15 differentials would be a proxy, for price 16 points or -- that was the recommendation? 17 Yes? 18 MEMBER PATTERSON: Not if we 19 consider the product that is sensitive to the 20 weight as a separate product list. If we do 21 that step, then the weight issue does not come 22 into effect across everything.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 222 1 MS. COUGHLIN: I think we're -- 2 MEMBER PATTERSON: If we keep the 3 weight issue in there, right, then we 4 effectively try to take the standard to the 5 lowest common denominator in the marketplace, 6 which is the weight of the pole, what the pole
7 -- 8 MR. PARKER: Yes. Here I think 9 weight is doing something different, isn't it? 10 It's serving as a proxy for the amount of 11 material which affects the price, not -- 12 MS. COUGHLIN: Yes. We have the 13 prices, right. The OPS software generates for 14 the design the weight of the transformer, the 15 materials used, and the price. So we don't 16 need weight as a proxy for price. 17 MR. PARKER: Okay. 18 MS. COUGHLIN: I don't know what 19 the -- 20 MEMBER PATTERSON: And from a 21 technical point of view, when I run my 22 optimization, right, I will vary that weight

### 202-234-4433 Neal R. Gross & Co., Inc. Page 223 1 dramatically based on the price of the steel. 2 MS. COUGHLIN: Okay. So -- 3 MEMBER PATTERSON: The price of the 4 steel relative to the price of the conductor. 5 My operation algorithm will take the weight 6 of the steel in half based on the relative 7 cost between copper and steel costs. 8 MR. PARKER: Okay. 9 MEMBER POLINSKI: We're talking 10 about the relative costs between silicon steel 11 and amorphous in this case. 12 MR. PARKER: Okay. We're going to 13 have to move on very quickly. 14 MEMBER GREESON: Rob Greeson, 15 Federal Pacific. 16 Sort of in follow-up with what Eric 17 was saying and the steel guys and this is just 18 kind of an opinion. If we do not find the 19 common ground with the competitiveness issue 20 or we have this window where there is some 21 participation for all the steel manufacturers, 22 we're going to run into serious problems.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 224 1 The manufacturers, speaking at 2 least for Federal Pacific, we want at Federal 3 Pacific the ability to use different types of 4 steels. 5 And I would say further to the 6 amorphous product, it's an excellent product. 7 And I think, even though the graphs don't 8 show it, they're kind of separated out to the 9 top. They're going to be a very competitive 10 part of the market, no matter where we set the 11 standards. 12 Even now, if you don't change them 13 at all, there's going to be a tendency to 14 shift different segments of the market towards 15 this amorphous metal. So the amorphous guys 16 stand to win, in my opinion, no matter what 17 happens, but we need to find that common 18 ground. Otherwise I think the Committee is 19 going to -- we're going to find some places 20 where we can't really come into agreement. We 21 need to find that sweet spot that Eric 22 discussed.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 225 1 MR. PARKER: Look, we're running -- 2 go ahead, very quickly. Yes? 3 MR. SAMPAT: Yes. Mahesh Sampat, 4 EMS Consulting. 5 I think this very issue has come up 6 quite a few times. And I have got some 7 information I would like to share with the 8 Committee which says weight is not an issue 9 for pole-type transformer. It will not result 10 in pole changeout. 11 So whenever you have an 12 opportunity, I should be given the opportunity 13 to share the information. 14 MR. PARKER: Again, I think weight 15 was being used for a different purpose in this 16 context. 17 MR. SAMPAT: No, no. I'm talking 18 about -- 19 MR. PARKER: Yes, yes. 20 MR. SAMPAT: -- his comment. 21 MR. PARKER: Yes, yes. 22 MR. SAMPAT: Okay?

### 202-234-4433 Neal R. Gross & Co., Inc. Page 226 1 MR. PARKER: Same thing applies to 2 Wes. Let's move on. Let's go ahead, Steve, 3 very quickly. 4 MEMBER ROSENSTOCK: And I won't 5 respond to that, but are we still asking for 6 possible considerations for efficiency levels? 7 MR. PARKER: Yes. Yes, we are. 8 MEMBER ROSENSTOCK: Okay. I would 9 like to go back in terms of -- 10 MR. PARKER: Before we leave 11 noteworthy technologies -- were you going on 12 to something else because -- 13 MEMBER ROSENSTOCK: I'm going on to 14 something else, yes. 15 MR. PARKER: Yes. So did you have 16 something, Tim? 17 MEMBER BALLO: On noteworthy 18 technologies. There are several pages in the 19 August data that concerned the estimated 20 amorphous steel demand for various types of 21 transformers at different efficiency levels. 22 Someone obviously thought this was

### 202-234-4433 Neal R. Gross & Co., Inc. Page 227 1 of enough importance to include it in here. 2 And I know there is a chapter in the TSD from 3 last March on the total amorphous production 4 capacity globally. 5 It seems, even at some of the lower 6 energy levels for liquid-immersed 7 transformers, that the August data projects 8 that we will use up a substantial amount of 9 the total amorphous capacity. 10 And I'm just wondering. I don't 11 know, but is this a constraint that we should 12 be looking at in defining a TSL as far as 13 projecting reasonable assumption -- 14 MR. PARKER: Capacity constraint? 15 MEMBER BALLO: -- about amorphous 16 capacity in 2016 and selecting TSLs that 17 leverage that capacity or project what the 18 capacity might be most advantageously. 19 MEMBER MILLURE: Dave Millure, 20 Metglas. 21 I do have an issue with those 22 tables. Again, I don't know who is paying

### 202-234-4433 Neal R. Gross & Co., Inc. Page 228 1 $1.88 for M-3 these days, but I'm sure that 2 comes into that skew toward amorphous in those 3 tables. 4 But that said, I have talked to our 5 upper management in Tokyo because they will 6 make the investment decisions for Metglas. We 7 can just submit the projects. 8 And they have made a commitment to 9 support this market. They would look at 100 10 kilotons of capacity, which is for the U.S. 11 market, because it's 3 years to do that. It 12 depends on what this Subcommittee does, 13 obviously. 14 So amorphous expansion has been a 15 key element of Hitachi Metals' investment 16 philosophy since they purchased us from 17 Honeywell in 2003. We have gone from two 18 casks to seven. And we would certainly look 19 at adding more depending, again, on what the 20 Subcommittee does. 21 MR. PARKER: Okay. Listen, we're 22 going to have to cut off. I'm going to have

### 202-234-4433 Neal R. Gross & Co., Inc. Page 229 1 -- okay. One more, Steve, very quickly. 2 MEMBER ROSENSTOCK: But wait a 3 minute. What about if people have other 4 ideas? This is very important. 5 MR. PARKER: No, no, no. We're not 6 stopping the other ideas. I just want to cut 7 off on noteworthy technologies. Okay? So 8 what I would like to do is suggest a process 9 for moving forward because I think we have had 10 a long discussion on noteworthy technologies. 11 And I don't want us to get bogged down. 12 What I would suggest is that the 13 steel manufacturers, Eric, Ray, Dave, caucus 14 with Katie and Brian and try to come up with a 15 criterion that they could propose to the 16 group, hopefully electronically. 17 I'll ask them what is a reasonable 18 time frame for doing that? But it could be a 19 price point. It could be a shipments, 20 forecast shipments, gap, whatever works for 21 the manufacturers and for the availability of 22 the data.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 230 1 I gather from Andrew I assume he is 2 speaking for his colleagues that -- 3 MEMBER DeLASKI: Just myself, 4 actually. 5 MR. PARKER: You are speaking for 6 yourself? Okay. All right. So holler if you 7 differ on it, but there is some openness from 8 the standpoint of the advocates to consider 9 competitiveness impacts. I think they have to 10 be considered anyway. So we just have to 11 figure out what is the right variable because 12 there has got to be some kind of quantitative 13 variable. 14 What would be a reasonable time 15 frame for reporting back to the group, 16 hopefully in time for us to respond to it 17 before the next meeting, which is scheduled 18 for October 12th. Any thoughts? 19 MEMBER PETERSON: We've done some. 20 We have some modeling capability. So I've 21 already got some data for like the specific 22 transform design that we can share with the

### 202-234-4433 Neal R. Gross & Co., Inc. Page 231 1 group and then determine some type of means of 2 how to take what we've got. 3 So I think we should be able to 4 certainly provide our rough draft proposal by 5 the end of next week. 6 MR. PARKER: End of next week? So 7 that would be -- 8 MEMBER PETERSON: A week from 9 today, the 23rd. 10 MR. PARKER: The 23rd? 11 MEMBER PETERSON: We've put 12 together a kind of -- 13 MR. PARKER: Supply it to the group 14 or supply it to Katie to be in the discussion 15 with her. 16 MEMBER PETERSON: Katie I would 17 recommend and just to see if this is even 18 within the framework of what you feel 19 data-wise, et cetera, you could pull together. 20 MS. COUGHLIN: Probably it should 21 go to Navigant because -- 22 MEMBER PETERSON: Okay.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 232 1 MS. COUGHLIN: -- I think this is 2 more of an engineering discussion. 3 MR. PARKER: Navigant? Okay. 4 MS. COUGHLIN: It's product price, 5 yes. 6 MEMBER PETERSON: So Brian or -- 7 MS. COUGHLIN: We'll be working 8 together. So yes. 9 MEMBER PETERSON: Okay. 10 MS. COUGHLIN: I also want to 11 remind everybody that there were other issues 12 brought up about the analysis. 13 MR. PARKER: Absolutely. 14 MS. COUGHLIN: So if we were to go 15 back and redo everything to deal with those 16 issues, that's going to push forward. It's 17 going to slow down the process of dealing with 18 this issue. 19 MR. PARKER: Yes. What would be 20 the right order in your view? To deal with 21 the other issues first? 22 MS. COUGHLIN: Well, it's just, you

### 202-234-4433 Neal R. Gross & Co., Inc. Page 233 1 know, there's a feed-through of information. 2 And if you go back to that first slide of the 3 -- 4 MR. PARKER: Get the LCC done. So 5 you need that before -- 6 MS. COUGHLIN: Even a substream of 7 the LCC. 8 MR. PARKER: Okay. 9 MS. COUGHLIN: If there are going 10 to be modifications, that has to be done 11 before we arrive at this. 12 MR. PARKER: Okay. So that will 13 give you a little bit more time, I guess. And 14 that's the other question. Will we get to the 15 net impacts analysis before next meeting? 16 Maybe that could be tabled for a later meeting 17 and focus next meeting on LCC? 18 MS. COUGHLIN: I think if you're 19 going to discuss -- well, I don't know how 20 many meetings you're planning on having. 21 MR. PARKER: Yes. 22 MS. COUGHLIN: But, again, to

### 202-234-4433 Neal R. Gross & Co., Inc. Page 234 1 discriminate between proposed standard levels, 2 you need the national impacts version of the 3 analysis. 4 MR. PARKER: Right. 5 MS. COUGHLIN: I mean, my 6 inclination is to try to meet these criteria 7 for composing draft TSLs with the existing 8 efficiency levels. So it will be somewhat 9 approximate, but you can chose an efficiency 10 level where you've got only amorphous and to 11 compare that to what happens when you choose 12 an efficiency level where you have multiple 13 steels that meet the efficiency. 14 And if we proceed that way, we can 15 look at sort of the net national cost-benefit 16 differences. If they end up being very large, 17 then we can kind of drill down and look in 18 more detail. 19 I think that can move forward to 20 some degree on coming up with, like I said, 21 trial standard levels out of the existing 22 efficiency levels with the existing data that

### 202-234-4433 Neal R. Gross & Co., Inc. Page 235 1 take into consideration the issues that have 2 been raised here but possibly not at the level 3 of detail that -- 4 MR. PARKER: So, in other words, 5 what you could do is you could work on the 6 suggestions from people considering the 7 various assumptions. 8 MS. COUGHLIN: Yes. I mean, we 9 could come back with the -- 10 MR. PARKER: The LTC office. 11 MS. COUGHLIN: No. Forget the LTC. 12 This is just leaving everything alone. 13 MR. PARKER: Okay. 14 MS. COUGHLIN: So come back with a 15 list of proposed TSLs based on the existing 16 analysis. 17 MR. PARKER: Right. 18 MS. COUGHLIN: So there will be the 19 one from LCC. There will be the one for 20 maximum energy savings. 21 MR. PARKER: Right. 22 MS. COUGHLIN: There will be the

### 202-234-4433 Neal R. Gross & Co., Inc. Page 236 1 max tech. And then there will be attempts to 2 take into account these market issues. And 3 that will give us the fastest way of providing 4 information on kind of in the big picture, how 5 much difference does it make? 6 And then once you have that, then, 7 you know, we can decide if we need to focus 8 our attention on which aspect of the problem 9 because the level of detail is so high that I 10 don't think we can do everything in the 11 existing meeting schedule. 12 So I think we need to move to some 13 bigger picture numbers and then kind of go 14 through that loop a couple of times. That is 15 the idea. 16 MR. PARKER: What I guess I am 17 trying to get a handle on is -- sorry if I am 18 being obtuse here, but you said that there 19 were the concerns with the LCC methodology 20 that we discussed earlier that would need to 21 be worked through. And that was one source to 22 work for you.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 237 1 MS. COUGHLIN: There are concerns 2 with the choice of designs that are being 3 used. 4 MR. PARKER: Right, the subgroups, 5 right, and all of that. 6 MS. COUGHLIN: And that is more of 7 an engineering issue. 8 MR. PARKER: Right. 9 MS. COUGHLIN: So if we are going 10 to change the choice of designs that are put 11 into the LCC, we need to do that first. 12 MR. PARKER: First. Okay. All 13 right. So I see what you are saying. That's 14 upstream. Okay. So we need to do that. I 15 guess the question is, can you do that and 16 work with Eric on the TSL issue before the 17 next meeting? Do you guys have the capability 18 to handle both before the next meeting or is 19 that too much work? I guess that's what I'm 20 trying to figure out. 21 MEMBER MILLURE: You mean work with 22 Eric and Ray and Dave?

### 202-234-4433 Neal R. Gross & Co., Inc. Page 238 1 MR. PARKER: What's that? 2 MEMBER MILLURE: Dave Millure, 3 Metglas. 4 You mean work with Eric and Ray and
5 Dave? 6 MR. PARKER: Yes, yes. 7 MEMBER MILLURE: Okay. 8 MR. PARKER: Is it reasonable? Is 9 it a reasonable request from the standpoint of 10 Navigant's and LBL's capacity to have both of 11 those done in time for us to discuss at the 12 next meeting? 13 MS. COUGHLIN: Well, we can 14 certainly -- again, what I would suggest is 15 that we discuss the issues and see if we can 16 come up with a way of representing 17 approximately those concerns within the 18 existing framework that we have. And if we 19 can do that, then we can produce some numbers. 20 But otherwise the problem is you 21 need to go all the way to the NIA to get at 22 what you're after. So we have to sort of

### 202-234-4433 Neal R. Gross & Co., Inc. Page 239 1 carry the whole thing through that we have 2 now, figure out what's wrong with it, and then 3 go back and loop back and do it again. And 4 that I don't think is feasible before the next 5 meeting. 6 MR. PARKER: Okay. I've got it. 7 So what is the best way to handle it? Yes? 8 MEMBER GREESON: Rob Greeson, 9 Federal Pacific Transformer. 10 To what Katie is saying -- and I 11 could maybe get into time to get into this 12 detail later, but on the medium-voltage 13 dry-type of this analysis, I've got a lot of 14 questions about some of the data that I have 15 recently been able to see. That is going to 16 affect everything that Navigant has done, the 17 inputs, the inputs that go into what she is 18 doing. 19 And so she said, you know, first 20 thing, let's straighten out the inputs I think 21 is what I heard you say. Because I sure would 22 hate for Navigant to do a lot of tweaking of

### 202-234-4433 Neal R. Gross & Co., Inc. Page 240 1 everything and then I come to the next meeting 2 and I said, "You know, we need to redo all of 3 this again because I don't agree with the 4 inputs." 5 MR. PARKER: Right, right. 6 MEMBER GREESON: We have got to 7 solve the problem about the designs first, 8 liquids and dries. Are we okay with what OPS 9 has presented with regard to liquid? Are we 10 okay with what OPS has presented with regard 11 to dry? Until we get that straightened out, I 12 think we're spinning our wheels to go further 13 beyond that because that is extremely key to 14 get those inputs correct first. 15 MR. PARKER: Okay. Good. Greg? 16 MR. COULTER: I hate to wander back 17 into this. This is Greg Coulter, Prolec GE. 18 I am still trying to find that 19 point that everybody is trying to find where 20 silicon and amorphous cross over. And I am a 21 transformer guy. I am not real comfortable 22 with the steel guys sitting around deciding

### 202-234-4433 Neal R. Gross & Co., Inc. Page 241 1 where it crosses over for a transformer guy. 2 But I am comfortable with Navigant picking 3 that point. They have all of the technical 4 data. They have all the designs. I think 5 they can define that point. 6 They don't need the steel guys. I 7 have the data, but you wouldn't like it if I 8 picked it. But I think, you know, they have 9 the data. They can pick. And we would be 10 comfortable with Navigant deciding where that 11 point is where silicon-amorphous compete. 12 MR. PARKER: Okay. 13 MR. COULTER: And that's peg the 14 point and let them do it. 15 MR. PARKER: Does the word 16 "compete" have any specificity to -- 17 MR. COULTER: And they don't need 18 these guys doing it. They -- 19 MEMBER MILLURE: Dave Millure, 20 Metglas. 21 You have to define "compete." 22 MR. COULTER: Greg Coulter, Prolec.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 242 1 I agree. You have it on those 2 charts up there. They've got to get the LCC 3 right, but they have -- I mean, I don't like 4 those scatter plots she uses. I mean, I bring 5 them down to single points of that thing. 6 But it crosses over, does an 7 absolute crossover. You can see it on her 8 charts. We've got to go back. I was the one 9 who brought up some questions about all that 10 data. We get that data right, which is what 11 they're going to recycle. That point comes 12 out. 13 You're going to have that point 14 where all the steels kind of cross over. 15 Amorphous can still compete. Silicon can 16 still compete. And that's just -- by the way, 17 Dave, that's just one point. We're not 18 choosing that point as the final thing. 19 MR. PARKER: So in your world, on 20 the left side of the point, you go from your 21 current market share to the right point, you 22 go to zero? I mean, is it really that sudden

### 202-234-4433 Neal R. Gross & Co., Inc. Page 243 1 a jump? 2 MR. COULTER: Well, it's within 3 reason. That's why Carlos was proposing, you 4 know, ten percent. Of course, it's fuzzy, but 5 yeah, it really is that simple. That's 6 exactly right. Within the accuracy of the 7 numbers, it is that simple. 8 MR. PARKER: Yes. 9 MEMBER ROSENSTOCK: Just the bigger 10 picture. You also have to remember as part of 11 this process, later on the Justice Department 12 does do an analysis of the impact on 13 competition. And basically if they write 14 strongly that, yes, they will hurt 15 competition, then DOE really has to consider 16 -- 17 MR. PARKER: Yes. 18 MEMBER ROSENSTOCK: -- its levels. 19 MR. PARKER: Yes. 20 MEMBER ROSENSTOCK: And they have 21 to review the levels. 22 MR. PARKER: Well, they have an

### 202-234-4433 Neal R. Gross & Co., Inc. Page 244 1 antitrust analysis that involves, you know, 2 enough from my private practice days. What is 3 this Herfindahl-Hirschman, HHI, Index, which 4 is reasonably arbitrary. I mean, it could be 5 a little bit more, a little bit less. It's 6 arbitrary in that sense, the point at which 7 they decide that there is significant 8 anti-competitive concerns, right? 9 And we can talk to DOJ and say, you 10 know, "That's the point. You can look at the 11 market share analysis, the shipments 12 analysis." 13 MS. COUGHLIN: Well, again, we're 14 getting way ahead of -- we are just trying to 15 do information, right? The draft TSL is 16 information. And the important thing for the 17 information is that it meaningfully 18 discriminates between different scenarios. 19 So, you know, if we do a draft TSL 20 that's on amorphous, that doesn't mean DOE is 21 going to pass a standard that is on amorphous. 22 That just means that I can present you with

### 202-234-4433 Neal R. Gross & Co., Inc. Page 245 1 numbers that give you the energy savings under 2 that scenario. So the technology options are 3 really -- 4 MR. PARKER: Right. 5 MS. COUGHLIN: It's not a question 6 of whether it's realistic or likely to happen. 7 It's a question of, does it meaningfully 8 discriminate between, you know, TSL-2 and -- 9 MR. PARKER: But I think that's the 10 point. I think the point is that people 11 aren't -- you know, on the one hand, they want 12 to have the capability thing at which market 13 share goes to zero, but they would also like 14 to explore realistic intermediate scenarios. 15 And the question is, what is a good 16 point at which one says there are significant 17 competitive impacts that really have to be a 18 source of concern, right, as between amorphous 19 and conventional steel? 20 MS. COUGHLIN: Competitive impacts 21 are an output of the analysis after you have 22 taken a trial standard level. So, again,

### 202-234-4433 Neal R. Gross & Co., Inc. Page 246 1 we're going in a circle. So we need trial 2 standard levels to work with to generate the 3 information about competitiveness. 4 So what we need is to make sort of 5 possibly crude but kind of informationally 6 useful -- 7 MR. PARKER: I see. I see what you 8 are saying. 9 MS. COUGHLIN: -- distinctions 10 between -- 11 MR. PARKER: I finally get it. 12 Okay. So you have to basically do this 13 iterative thing. You just sort of keep 14 keeping up with the trial standard level, do 15 the run, see what the competitiveness impacts 16 are. And then at some point you say they're 17 too great, we back off. 18 MS. COUGHLIN: Well, yes. And, 19 again, you have multiple criteria that are in 20 the law that define what is an acceptable 21 standard, not just competitiveness. 22 So we don't have a lot of time to

### 202-234-4433 Neal R. Gross & Co., Inc. Page 247 1 keep redoing the analysis over one aspect of 2 one of the seven criteria. So, again, what 3 we're trying to do is map out the sites of 4 possibilities. 5 MR. PARKER: Right. 6 MS. COUGHLIN: And I say, "Compare 7 this TSL and this TSL." We understand 8 meaning. You know, what's the meaningful 9 difference between those two? 10 The question of what will happen 11 once the TSLs have been analyzed, that's a 12 whole different story. 13 MR. PARKER: Except that people are 14 concerned about what happens once a TSL is 15 adopted. And they want to make that a big 16 point. 17 MEMBER DeLASKI: Of course they 18 are. That's what we're all here for, right? 19 MR. PARKER: Yes, yes, right. 20 MEMBER DeLASKI: I guess where I 21 think this is closing -- and maybe we kind of 22 need to figure out --

### 202-234-4433 Neal R. Gross & Co., Inc. Page 248 1 MR. PARKER: Yes. 2 MEMBER DeLASKI: To those this, I 3 would suggest given where we are in time 4 today, but I thought I heard a proposal that 5 Navigant and LBL together should come up with 6 a level that attempts to capture this concept 7 that we have been talking about of a level 8 that supports both core materials, can likely 9 compete knowing that the market is dynamic, 10 right? You know, we can't pick over a long 11 period of time. Bob is shaking his head, but
12 I -- 13 MR. PARKER: I thought Katie's 14 point was that -- 15 MEMBER DeLASKI: I would like to 16 put that on the consultant to come up with 17 that level. I'm not sure whether the -- 18 MEMBER MILLURE: I woke up this 19 morning, and I opened up Mr. Patterson's 20 presentation. And throughout that, it said 21 that the prices in all these analyses of the 22 silicon steel transformers are overstated and

### 202-234-4433 Neal R. Gross & Co., Inc. Page 249 1 the prices of the amorphous, at least in the 2 one case I saw him reference, it was 3 understated. 4 So I have some severe concerns 5 looking for a crossover point using price data 6 for transformers that I don't think is
7 accurate. 8 MR. PARKER: So there are two 9 separate issues here. 10 MEMBER MILLURE: That's why I am 11 looking for some -- 12 MR. PARKER: There are two separate 13 issues here. One is the -- 14 MEMBER PATTERSON: That's a 15 different question. 16 MEMBER MILLURE: No. I'm 17 addressing Greg's question. 18 MEMBER PATTERSON: The discussion 19 here was on, where should we pick appropriate 20 TSL levels? 21 MEMBER MILLURE: That's exactly 22 what I was talking about.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 250 1 MS. COUGHLIN: The issue that I 2 believe is being raised is that if the 3 materials prices that we used to generate the 4 cloud of designs were different, you would 5 have a different set of engineering options. 6 So the question to be decided is, 7 are we going to go back and redo that work? 8 We have different materials prices. And if we 9 are, then that is the first thing we have to 10 do. Everything else is downstream. 11 And so it's partly a practical 12 question of, you know, within the schedule, is 13 it possible for OPS to do that work? And it's 14 partly a question of, would it really make 15 that much difference? 16 MR. PARKER: Right. People don't 17 really know that. 18 Robert? 19 MR. BERMAN: Very quickly. Robert 20 Berman, Berman Economics. 21 It's fine for Navigant to pick the 22 competitiveness range, but for market reasons,

### 202-234-4433 Neal R. Gross & Co., Inc. Page 251 1 you have to do it independent of cost and 2 price. And doing it within a certain boundary 3 based on weight, then you're allowing the 4 material manufacturers, then, to adjust their 5 prices consistent with the TSLs and the 6 pricing and everything else. And you don't 7 have to be concerned with that in picking 8 where they are competitive. 9 If the weights are similar, -- 10 MR. PARKER: Right. 11 MR. BERMAN: -- within 25 percent, 12 then let them in the market deal with what the 13 pricing issue is. You can't predict that. I 14 mean, the market is dynamic. 15 MR. PARKER: Yes. 16 MR. BERMAN: So if you abstract the 17 market dynamics, you can do it. 18 MR. PARKER: Okay. So I think what 19 we should do is basically come upon a process. 20 I agree with Andrew we really, really need to 21 move on here. 22 So I guess the question is -- and,

### 202-234-4433 Neal R. Gross & Co., Inc. Page 252 1 again, we're not leaving your concept, Steve, 2 -- don't be alarmed -- or other concepts. But 3 I am trying to close on noteworthy 4 technologies. 5 So is it feasible for -- and your 6 point about the other stuff is well-taken. 7 Over the next week, what I am going to do is I 8 am going to ask everybody to table by a week 9 from today any concerns you have with the 10 methodology, all concerns you have with the 11 methodology, that had been expressed at this 12 meeting, the life cycle cost analogy, the 13 upstream stuff. Put it online. Send it to 14 us. We will post it on the website. 15 And we can have a -- actually, 16 maybe what we should do is try to resolve that 17 today, get an agreement on, you know, what are 18 the concerns with methodology that really need 19 further analysis. Actually, we should 20 probably do that today before we leave. Is 21 that -- 22 MS. COUGHLIN: I'm going to make a

### 202-234-4433 Neal R. Gross & Co., Inc. Page 253 1 counter-proposal -- 2 MR. PARKER: Okay. Go ahead. 3 MS. COUGHLIN: -- which is that we 4 will go through the issues. I think some 5 measure of quantitative impact on the results 6 should be used in focusing attention on -- 7 MR. PARKER: Okay. How do people 8 around the table know what matters and -- 9 MS. COUGHLIN: We can go through 10 that. 11 MR. PARKER: Okay. 12 MS. COUGHLIN: So we can provide 13 again -- 14 MR. PARKER: Do you mean here today 15 or later? 16 MS. COUGHLIN: Later. 17 MR. PARKER: Later? Okay. 18 MS. COUGHLIN: Yes. 19 MR. PARKER: So, then, you would 20 like the idea of them doing this by email? 21 MS. COUGHLIN: Yes. Make a list of 22 all of the issues. And then for the ones --

### 202-234-4433 Neal R. Gross & Co., Inc. Page 254 1 MR. PARKER: Okay. 2 MS. COUGHLIN: -- where we feel 3 confident that we can say, "This is going to 4 have less than X percent impact on the 5 results," -- 6 MR. PARKER: Okay. 7 MS. COUGHLIN: -- they are going, 8 you know -- 9 MR. PARKER: Okay. So the next 10 meeting is October 12th. That's almost a 11 month away. I'm going to say by the end of 12 next week, that is the deadline for submitting 13 all of the concerns that you have expressed 14 around the table today in writing to 15 everybody. 16 It will be posted. We will figure 17 out the web interface to do this so that 18 everybody can see it, but it will be posted on 19 the website. We may create a space on the 20 website. I don't know. I'm speaking for DOE 21 here. I shouldn't. But figure out a way to 22 post it.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 255 1 Deadline of a week from today. At 2 that point we will shift it over to LBL and 3 Navigant to respond with an initial screening 4 feedback on sensitivity basically and perhaps 5 skew. Those are the two really criteria. 6 Does altering this actually skew the analysis? 7 And does it matter for the market in terms of 8 shipments? 9 And we'll try to conduct sort of an 10 online discussion and see how far we get if 11 it's -- I will make a decision about whether 12 the discussion is productive, whether it's 13 moving forward or now. 14 If we could get closure on that, on 15 what variables really require new analysis, if 16 any, and what concerns with the variables, 17 that would be very helpful. 18 I think the changes analysis, the 19 short memo that John talked about earlier to 20 be posted, what would be a reasonable time to 21 get that posted, the two-pager that John 22 mentioned about the changes from the prior

### 202-234-4433 Neal R. Gross & Co., Inc. Page 256 1 analysis and the chapters for the TSD that are 2 out, the new chapters? How soon could that be 3 up? Anybody? Brian? 4 MR. COFFEY: I think we would want
5 to caucus tomorrow. 6 MR. PARKER: Okay. 7 MR. COFFEY: I would say very 8 shortly. 9 MR. PARKER: Okay. Very shortly. 10 Do people need that in order to do their own 11 submissions on the basis of concerns about 12 methodology? I'm seeing yes? Okay. 13 So the critical path, then, is LBL 14 and Navigant post everything that they can 15 post about updates to the TSD, changes between 16 the TSD, the new TSD and the old TSD, 17 everything that is ready to go. 18 And I guess maybe we should then 19 trigger the timetable. A week from the date 20 of that posting, which we hope will be very 21 soon will be your time frame for getting your 22 critique of the analysis in.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 257 1 This is a proposal for me. I'm not 2 depicted here. I am proposing this. Do 3 people think this is a -- and then after that, 4 once that is in, they can start. We will try 5 to close online. We will try to come up with 6 an agreement online about what changes need to 7 be reflected in further analysis, what 8 concerns need to be reflected in further 9 analysis so that they can get that started 10 before the next meeting and hopefully have it 11 concluded by the next meeting. 12 That would allow us to discuss at 13 the next meeting all concerns with the 14 analysis and hopefully close in the next 15 meeting on the concerns with the analysis. 16 Time permitting, we would continue 17 on a parallel track the discussion about TSLs. 18 I think we have made great progress in 19 getting three of them on board. 20 They can start with that if they 21 have time with the other stuff. Once that's 22 done, once the upstream stuff is done, they

### 202-234-4433 Neal R. Gross & Co., Inc. Page 258 1 can start with the three TSLs that we have and 2 start working those through as well as the 3 capability TSL and the max tech. So we 4 actually have five TSLs now that are already 5 on board. 6 The steel maker TSL still needs to 7 be decided. And I think the remaining 8 question would be what would be the time frame 9 for and the process for deciding on how to 10 define quantitatively that TSL, right? 11 I'm comfortable if others are 12 leaving it up to Navigant and LBL to come up 13 with a proposal for that based upon whatever 14 proprietary consultations they may want to 15 make with the parties. Is everybody 16 comfortable with that as an approach, that 17 we'll just table that? 18 And we still have Steve's point 19 about additional TSL criteria that we might 20 want to table. But does that make sense so 21 far? 22 MEMBER DeLASKI: It makes sense to

### 202-234-4433 Neal R. Gross & Co., Inc. Page 259 1 me. I guess what I would also add to that is 2 that, Katie, I don't think this is for the 3 next meeting. Coming out of that meeting, if 4 we decide we have to make some adjustment to 5 it, then there could be another run between 6 the second and third meeting, right? It isn't 7 like we're locked in now to negotiation. 8 MS. COUGHLIN: Oh, yes. No, no, 9 no. Yes, yes. 10 MEMBER DeLASKI: It's not the end 11 game. 12 MR. PARKER: Remember now we're 13 talking about another run between the second 14 and third meetings. We're only giving 15 ourselves four meetings, Andrew, but okay. 16 MEMBER DeLASKI: You know, you can 17 keep bringing it up, Richard, but -- 18 MR. PARKER: Sorry. 19 MEMBER DeLASKI: -- let's not 20 because this process was started when it was 21 started. 22 MR. PARKER: Yes, yes, yes. Fair

### 202-234-4433 Neal R. Gross & Co., Inc. Page 260 1 enough. Fair enough. 2 MEMBER DeLASKI: There are not 3 fingers to point if you want to -- 4 MR. PARKER: Well, I'm not pointing 5 fingers. 6 MEMBER DeLASKI: Let's not go 7 there. 8 MR. PARKER: Okay. Sorry. Okay. 9 MEMBER CASKEY: John Caskey, NEMA. 10 It seemed like a lot of that you 11 spelled out a process. We have some 12 SharePoint or something like that that we 13 would have access to? 14 MR. PARKER: Yes. 15 MEMBER CASKEY: We would post 16 information there and then comment on it? Is 17 that SharePoint up and running today or when 18 will we get passwords and access? I mean, I 19 can't necessarily post comments a week from 20 now if the SharePoint and that stuff isn't up 21 and running until two weeks from now. 22 MR. PARKER: Well, I don't know

### 202-234-4433 Neal R. Gross & Co., Inc. Page 261 1 that we need password access or anything like 2 that. It is all public, right? What you are 3 submitting for this process is going to be 4 public. It could just go up on the website 5 along with all the other analysis. 6 MEMBER CYMBALSKY: Yes. I think 7 it's just email. We don't have a shared space 8 where people are posting things. So you email 9 it, and we'll post it on the website or share 10 it with -- 11 MEMBER CASKEY: Okay. So we email 12 it to Navigant or you guys? 13 MR. PARKER: Right. 14 MEMBER CASKEY: You guys post it. 15 And then we provide comments back to you 16 directly? And then you post those comments? 17 MR. PARKER: Right. 18 MEMBER CASKEY: And we go back and 19 forth like that? 20 MR. PARKER: Yes. It's crude, but, 21 you know, we can't redesign the DOE website 22 around the table. So we have to do something.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 262 1 And Andrew's point is well-taken. 2 And also I am liking the fact that we have a 3 month until the next meeting because there is 4 a lot of work to be done between now and then. 5 So your point is very, very well-taken. 6 MEMBER CYMBALSKY: May I suggest 7 that since we are going to wrap up here, I 8 think it would be useful if we sort of have 9 closure, go around the table? Maybe people -- 10 MR. PARKER: Well, before we do 11 that, John, there is Steve's point about 12 additional criteria that you wanted to raise? 13 MEMBER ROSENSTOCK: Yes. If we're 14 done with the other discussion about the -- 15 MR. PARKER: Anything on noteworthy 16 technologies? Is that -- 17 MEMBER ROSENSTOCK: -- steel or 18 noteworthy technologies, I don't -- 19 MR. PARKER: Are we satisfied 20 there? 21 (No response.) 22 MR. PARKER: Okay.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 263 1 MEMBER ROSENSTOCK: Okay. One 2 possibility for criteria -- 3 MR. PARKER: Wait a minute. Katie, 4 I'm sorry. You were still -- you're not off 5 the hot seat yet. 6 MS. COUGHLIN: Okay. 7 MEMBER ROSENSTOCK: Because Steve 8 wanted to table some additional possibilities 9 for TSL criteria. 10 MEMBER ROSENSTOCK: I don't want to 11 table them. I wanted to suggest them. 12 MR. PARKER: Suggest them. Right. 13 Put them on the table. 14 MEMBER ROSENSTOCK: Yes. Thank 15 you. 16 Looking at table 3.1 in the revised 17 analysis, it is interesting how the estimate 18 of equipment cost goes up from level 1 to 2. 19 Then it goes down for level 3. 20 So one criterion that could be 21 considered is for levels above the baseline, 22 again, speaking as a customer, representing

### 202-234-4433 Neal R. Gross & Co., Inc. Page 264 1 customers who area actually buying this 2 equipment and installing it, is, could there 3 be one level that shows the minimal equipment 4 cost increase above the baseline I'm saying? 5 That would be kind of important for us as a 6 customer to kind of see that as part of this 7 analysis. 8 MR. PARKER: Minimal equipment 9 cost? Again, I guess the minimal equipment 10 cost increase would be zero. Right? 11 MEMBER ROSENSTOCK: No. Above the 12 baseline, above the baseline. 13 MR. PARKER: Plus a penny. 14 MS. COUGHLIN: Yes, I think 15 technically we can do it. Yes. 16 MR. PARKER: So how do define 17 minimal? 18 MEMBER ROSENSTOCK: Again, it would 19 be, you know, we have these numbers, let's 20 say, from 99.08 to 99.5, let's say, for design 21 line 1, maybe an iteration in between the 22 draft efficiency levels. What happens if you

### 202-234-4433 Neal R. Gross & Co., Inc. Page 265 1 go to 99.12 or 99.2 or 99.24? 2 Maybe there's a sweet spot that 3 minimizes cost. As a customer, as someone who 4 represents customers, that's kind of important 5 because, yes, price is important. And that 6 would be a criterion that would be helpful for 7 some of these discussions. 8 Again, above the baseline, not only 9 penny, but, again, it's a matter of minimizing 10 cost can be very important these days. Thank 11 you. 12 MEMBER DeLASKI: Steve, like I 13 said, I don't still get the concept. I mean, 14 if you -- the key criteria is to minimize 15 cost. And the selection is no change to the 16 standard. 17 MEMBER ROSENSTOCK: Again, I'll 18 reiterate above the baseline. We're saying 19 not using the base case, but is there a level? 20 For example, you are talking anywhere from 21 $7.4 billion in increased costs, up to $33.8 22 billion, table 3.1, for all distribution

### 202-234-4433 Neal R. Gross & Co., Inc. Page 266 1 transformers. That's the estimated 2 incremental cost to the consumers, to the 3 customers. 4 Is there another efficiency level 5 that is less than $7.4 billion significantly? 6 MEMBER DeLASKI: Of course. 7 There's a million, right? 8 MEMBER ROSENSTOCK: Well, again, 9 no. I'm trying to say, is there something in 10 between the base and one or one and two or two 11 and three, where there is a sweet spot, even 12 lower incremental cost? 13 MR. PARKER: I think I take it 14 that's -- 15 MEMBER ROSENSTOCK: Well, again, 16 it's a matter of that somehow, you know, when 17 they chose 99.16, then they did their runs. 18 And they got that equipment cost. Is there 19 another run that shows minimal equipment cost 20 increase? That's what I'm asking for. 21 MR. BERMAN: Robert Berman, Berman 22 Economics.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 267 1 Yes. I think if we focus on the 2 fact that the ultimate customer here is not 3 the person that's buying the transformer but 4 the person who is buying me electricity. And 5 what is the cost of the additional efficiency 6 is effectively what we are talking about from 7 one CSL to the next. That is to say, 8 additional efficiency levels will save 9 additional amounts of energy but may come at a 10 higher cost. 11 So if we look over the 30-year life 12 of the transformer, we save X amount of 13 kilowatt hours per year at a certain cost of 14 capital. So that gives us, then, a cost per 15 kilowatt hour very similar to what is on an 16 appliance standard for the Energy Star 17 appliance, as compared to the standard. 18 So that's one measure. A second 19 measure related to the same thing is when we 20 save energy, we're also saving fuel costs. So 21 what is the effect on the consumer's bill is 22 another thing we can look at with using less

### 202-234-4433 Neal R. Gross & Co., Inc. Page 268 1 fossil fuel to generate? 2 There is a savings there. And 3 there is a savings to the -- and there is a 4 cost to the additional transformer. What is 5 the ultimate effect of that on the customer 6 bill based on standard utility accounting 7 procedures? 8 MEMBER ROSENSTOCK: Steve 9 Rosenstock. 10 That really isn't where I was 11 going, but that is another way to look at the 12 analysis. But I was thinking much less 13 sophisticated than that. 14 Again, it is a matter of is there a 15 way that Navigant can do it, again with these 16 efficiency levels? You are going in between 17 efficiency levels to show the spot that 18 minimizes the increase in equipment costs 19 above the baseline. 20 MEMBER MILLURE: Dave Millure from 21 Metglas. 22 MEMBER ROSENSTOCK: It's not linear

### 202-234-4433 Neal R. Gross & Co., Inc. Page 269 1 because otherwise it would show level 3 being 2 higher than level 2. This shows level 3 being 3 less than level 2 in terms of equipment costs. 4 MEMBER PATTERSON: If you look at 5 the incremental improvement of efficiency for 6 the incremental dollars spent and scatter that 7 over the 40,000 designs, I think you're going 8 to get to what he's trying to achieve. What's 9 the maximum efficiency gain for the smallest 10 dollar spent? 11 MEMBER ROSENSTOCK: Thank you. 12 MEMBER PATTERSON: And this is not 13 a linear number over these 40,000 designs, I 14 can tell you. It's an analysis that needs to 15 be run. It's a very good point. 16 MEMBER ROSENSTOCK: And the NIA 17 shows it. 18 MR. COHEN: Dan Cohen. Dan Cohen, 19 DOE. 20 I just want to remind. We talked a 21 little bit about this yesterday. And I know 22 as the lawyer, I get to be kind of the pesky

### 202-234-4433 Neal R. Gross & Co., Inc. Page 270 1 fly at the picnic or something. 2 But the way we have to do the 3 analysis when we're actually selecting a level 4 is from the top down. And it sounds to me 5 without understanding all of the complete 6 details of the economic analysis that you're 7 talking about here, that you're looking from 8 the bottom up. 9 When we are actually getting to 10 selecting a level here, we do it the other 11 way. 12 MEMBER PATTERSON: His point is not 13 looking at the lowest cost. He's looking at 14 the maximum efficiency gain per dollar spent. 15 MR. COHEN: Right. So that sounds 16 like a comparison as between different levels 17 to decide sort of that maximum amount. But we 18 start at the top and say, "Is it economically 19 justified to be max tech?" If not, go down. 20 MEMBER ROSENSTOCK: We're not 21 required to look at the top here, are we? 22 MR. COHEN: We start at the top.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 271 1 MEMBER ROSENSTOCK: We're not. For 2 this Committee, we're not starting at the top 3 necessarily. 4 MR. COHEN: Right. 5 MEMBER ROSENSTOCK: We're going to 6 decide a number that's out at the top. We're 7 not negotiating the top level. 8 MR. COHEN: No, no. I'm talking 9 about a different thing. What I'm trying to 10 say is just in terms of the legal constraint 11 that we have on us when it comes to actually 12 proposing -- 13 MEMBER ROSENSTOCK: Right. 14 MR. COHEN: -- a standard is we 15 have to do the analysis. 16 MEMBER ROSENSTOCK: But that's not 17 a constraint on our Negotiation -- Steve 18 Rosenstock, EEI. 19 That is not a constraint on the 20 Negotiation Committee, correct? 21 MR. COHEN: Only to the extent that 22 at some point if we want to be able to adopt

### 202-234-4433 Neal R. Gross & Co., Inc. Page 272 1 it, we have to be able to justify it -- 2 MEMBER ROSENSTOCK: To justify it. 3 MR. COHEN: -- to justify it under 4 our standards. 5 MR. PARKER: Right. So we have 6 agreed on max tech being one of the things 7 because it dictates -- so the question is, 8 what are the break points below that at which 9 we want to do analysis? 10 MEMBER DeLASKI: I am not sure I 11 understand the concept. I am not sure. To 12 me, it sounds an awful lot like the minimum 13 LCC point. I'm not sure it's different than 14 that. 15 MR. PARKER: Well, I guess he's 16 looking at the differential, at the slope. At 17 what point does the slope of incremental 18 efficiency for incremental price increase 19 taper off so that you're looking at a 20 sublinear slope? 21 PARTICIPANT: I don't know what the 22 answer is, but I think it's worth looking at.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 273 1 MR. PARKER: Is that conceptually 2 relevant? Do you want to comment on that, 3 Katie? 4 MEMBER ROY: Robin Roy, NRDC. 5 MR. PARKER: Sorry. 6 MEMBER ROY: Is what you are saying 7 sort of what we would call cherrypicking or 8 what you would have as the greatest life cycle 9 cost savings with a higher discount rate? Is 10 that sort of what you are getting to? 11 MR. PARKER: I'm just not sure that 12 that -- 13 MEMBER PATTERSON: Maximum 14 efficiency per dollar spent. 15 MR. BERMAN: Robert Berman, Berman 16 Economics. 17 I think what Wes is saying, if I am 18 understanding correctly -- 19 MR. PARKER: At what point do you 20 reach diminishing returns, right? 21 MR. BERMAN: It's not so much 22 diminishing returns. It's he's looking at

### 202-234-4433 Neal R. Gross & Co., Inc. Page 274 1 marginal cost very marginal benefits for each 2 move. Where does it cost you more? Where do 3 your costs go up higher, as opposed to your 4 benefits? Are your costs going up higher than 5 your benefits at some point? 6 MEMBER DeLASKI: Robert, I hear 7 you, but that's the minimal LLC point the way 8 I see the world. But I am open to seeing it. 9 So I am all for this if you can -- 10 MEMBER PATTERSON: It's something 11 I'll play with for two weeks. 12 MR. BERMAN: There may be some 13 redundancy. 14 MR. PARKER: Okay. I'm just 15 concerned that whatever we put out on the wish 16 list, first, that it not overtax the 17 consultants; second, you know, in terms of how 18 many analyses they run; and, secondly, that it 19 be something that they have data to work with. 20 MEMBER DeLASKI: I think 21 historically the way the government in prior 22 rulemakings has found is that, as the slide

### 202-234-4433 Neal R. Gross & Co., Inc. Page 275 1 shows, between the way that you find places in 2 between here is through a gap fill. And you 3 just pick a middle. You just pick a -- you 4 want to have a couple of points in between. 5 And I think those points in between I think 6 will address Steve's concern. 7 MEMBER ROSENSTOCK: I would like to 8 see a gap in between the base and 1 and 2 just 9 to see if there is a point where the equipment 10 cost relative to the energy savings is 11 minimized. 12 MR. PARKER: Okay. Duly noted. 13 Can you put that into an email that we can 14 share in writing? I think it would help us 15 all absorb it. 16 MEMBER ROSENSTOCK: I'm happy. So 17 you're saying that this is still open. So 18 other people can suggest other TSLs. That's 19 not going to close today. I just want to make 20 sure that we're not closing out. 21 MR. PARKER: No. We are working on 22 the noteworthy technologies, TSL. So that's

### 202-234-4433 Neal R. Gross & Co., Inc. Page 276 1 still open. So we are not closing out all 2 TSLs at this meeting. We are closing out the 3 ones we have agreed on. We are not going to 4 -- I am going to try not to reconsider any 5 that we have agreed on. 6 Any additional TSLs have to be 7 weighed in terms of their value of information 8 compared to the cost of collecting that 9 information, recognizing that we are already 10 spending some effort to get the existing TSLs. 11 But no, the door is not closed to 12 suggestions. That said -- 13 MEMBER PATTERSON: From your 14 understanding, what have we agreed on? 15 MR. PARKER: What we've agreed on 16 is max tech. We've agreed on the top three 17 bullets. 18 MEMBER PATTERSON: Okay. 19 MR. PARKER: We voted on it. We 20 agreed on it. And I think we have agreed we 21 should vote on the large gaps, but I think -- 22 any objection to the large gaps? What's that?

### 202-234-4433 Neal R. Gross & Co., Inc. Page 277 1 MEMBER PATTERSON: What about 2 voting on Andrew's original single vendor 3 space. 4 MR. PARKER: We could do that. I 5 guess -- yes, that's fine. Andrew, do you 6 want to have a vote on your single vendor 7 space, get that adopted? 8 MEMBER DeLASKI: Sure. 9 MR. PARKER: All in favor, aye? 10 (Whereupon, there was a chorus of 11 "Ayes.") 12 MR. PARKER: Any opposition? 13 PARTICIPANT: Rephrase that again. 14 Rephrase it. 15 MR. PARKER: I'm sorry. I'm sorry. 16 PARTICIPANT: We've had a lot of 17 discussion since then. 18 MR. PARKER: Okay. I'm assuming 19 infinite perfect recall. So Andrew's point -- 20 do you want to present your own proposal, 21 Andrew? 22 MEMBER DeLASKI: Sure. Andrew

### 202-234-4433 Neal R. Gross & Co., Inc. Page 278 1 DeLaski, Appliance Standards Awareness 2 Project. 3 So I think it would be useful to 4 have a TSL that shows us the level at which, 5 the maximum cost-effective level at which, 6 there are multiple suppliers capable of 7 providing core material. 8 MR. PARKER: Okay. 9 MEMBER ROSENSTOCK: And any minimum 10 number for that? 11 MEMBER DeLASKI: What do you mean 12 "minimum number"? 13 MEMBER ROSENSTOCK: One? Two? 14 Three? At least three suppliers? At least 15 two suppliers. Does it matter? 16 MEMBER DeLASKI: Two is multiple. 17 So -- 18 MEMBER ROSENSTOCK: I think three. 19 MEMBER DeLASKI: Technologies is 20 what I mean. 21 MEMBER ROSENSTOCK: Oh, three 22 materials or suppliers?

### 202-234-4433 Neal R. Gross & Co., Inc. Page 279 1 MR. RIVEST: Can you bring up the 2 slide with the locusts there, the points? 3 Andrew, can you just go draw it? 4 MEMBER DeLASKI: Sure. I would 5 like to see a TSL that captures this, this 6 line. 7 MR. RIVEST: That line? 8 MEMBER DeLASKI: That is the point 9 where we've got -- I'm assuming this is all 10 amorphous, right? These are all amorphous? 11 MR. PARKER: Somewhat to the left 12 of that line. 13 MEMBER DeLASKI: We've already 14 defined this line a couple -- this is max tech 15 out here somewhere. I'm very interested in 16 the level somewhere that captures this. 17 MR. RIVEST: Not quite two but not 18 three. 19 MEMBER DeLASKI: Yes. I'm 20 accustomed to Katie's point about not always 21 moving these lines around. So I would want to 22 see a TSL that groups up all -- if the designs

### 202-234-4433 Neal R. Gross & Co., Inc. Page 280 1 can't be moved, if the ELs can't be moved, I'm 2 okay with that. Then I would want to have one 3 that groups up the ELs to capture this 4 happening here. 5 MR. RIVEST: Are you okay with the 6 way it is now? 7 MEMBER DeLASKI: What is happening 8 here is that we have got more -- it's not just 9 amorphous. It's amorphous. And there are 10 some silicon steel options. 11 MR. RIVEST: So the line that's 12 there. 13 MEMBER DeLASKI: TSL. 14 MR. PARKER: If the TSL corresponds 15 to a CSL. 16 MEMBER DeLASKI: No. Every TSL 17 groups up CSLs, grouping up CSLs that have 18 this characteristic. 19 MR. RIVEST: Okay. 20 MEMBER DeLASKI: That means the 21 low-cost option is this, the best way to do it 22 according to this model. It's not the only

### 202-234-4433 Neal R. Gross & Co., Inc. Page 281 1 way to do it. I don't have any information. 2 What this tells me is that everyone is going 3 to buy amorphous if they could. 4 MR. RIVEST: And looking at the 5 cost just for fun here, what is the delta on 6 cost? It's not that much. How much is it? 7 MEMBER ROSENSTOCK: Two thousand to 8 2,600. 9 MR. RIVEST: I'm looking at the gap 10 between the technologies. 11 MR. PARKER: That's a great point, 12 Mike. 13 MEMBER DeLASKI: From the minimum 14 to the minimum is like -- 15 MEMBER ROSENSTOCK: So, Andrew, 16 this is Steve Rosenstock, EEI. 17 If you could, you would want to 18 move that line to the right maybe a little bit 19 or -- 20 MEMBER DeLASKI: That's not my 21 proposal. 22 MEMBER ROSENSTOCK: Oh, okay.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 282 1 MEMBER DeLASKI: I thought that 2 Katie said that the lines shouldn't be moved. 3 Katie, are you still here? 4 MR. PARKER: Because this is 5 another thing on design line. You want to 6 have the lines -- 7 MEMBER DeLASKI: I thought the 8 proposal was, how could people -- I mean, I 9 guess we could move the lines, but also in 10 terms of the uncertainty and the analysis, I'm 11 not trying to go to this point, right? To the 12 uncertainty analysis, I'm not trying to say we 13 should go. 14 MR. RIVEST: Okay. That's what I 15 thought you wanted originally, that outer 16 point there. 17 MEMBER DeLASKI: Well, yes. I 18 mean, if we knew 100 percent that that outer 19 point is real, I want to have some robustness 20 of supply, you know, not conceptually, but I'm 21 thinking -- 22 MR. PARKER: It's a concession,

### 202-234-4433 Neal R. Gross & Co., Inc. Page 283 1 yes. 2 MEMBER DeLASKI: It's a chance for 3 -- but I thought we had the ELs. Stuff would 4 be for the ELs. But, you know, that's what I 5 was saying. Those were my words, but I was 6 thinking that they're controlled by the ELs. 7 I am interested in the point, but I 8 am also interested, is this a point? Do we 9 have robust enough confidence in the data that 10 we know that that is, in fact, true? That was 11 the only point I -- 12 MR. PARKER: Okay. How do people 13 feel? Comments on this? This is important. 14 MEMBER PATTERSON: Didn't he say 15 that he would like to have a TSL established 16 where an existing CSL has multiple vendors? 17 If I take CSL-2 as that dotted line, that is 18 the last dotted line with multiple vendors. 19 So he would like a TSL built around existing 20 CSLs, the highest CSL with multiple vendors. 21 MR. RIVEST: Is that what you are 22 saying, Andrew?

### 202-234-4433 Neal R. Gross & Co., Inc. Page 284 1 MR. PARKER: That works for this 2 design line. Is that a generalizable concept? 3 MEMBER DeLASKI: Not right now, but 4 that is what they will do. 5 MR. PARKER: Okay. So that will be 6 a place to start. But that's Andrew's 7 concept. It still doesn't capture, as Andrew 8 pointed out, Eric's point about the 9 competitiveness. 10 MEMBER PETERSON: That would be the 11 immediate point we end up doing because we did 12 an analysis almost similar like that where, 13 although we're capable, we would actually have 14 to write you a check to get you to use our 15 steel. 16 MR. PARKER: Right. But for you, 17 is 250 basically that point anyway? I mean, 18 given how fast this thing moves as you go from 19 one to another, would you end up with a 20 different TSL under your analysis than 99.3? 21 MEMBER PETERSON: Yes. I think my 22 point was that even though if you just pick

### 202-234-4433 Neal R. Gross & Co., Inc. Page 285 1 that CSL-3 as an example, although you've got 2 multiple potential materials you could make -- 3 MR. PARKER: I think that actually 4 is CSL-2. 5 MEMBER PETERSON: Okay. Whichever 6 they'll -- 7 MR. PARKER: Yes. 8 MEMBER PETERSON: I'm looking at 9 the bar, that category right there to the 10 right of that. 11 MR. PARKER: Yes. 12 MEMBER PETERSON: Even though you 13 have multiple materials out there based on -- 14 I don't know which design line it is -- I've 15 got it in my data -- actually shows that we 16 would not be competitive. There's no way 17 based upon the prices and the DOE modeling -- 18 MR. PARKER: Right. 19 MEMBER PETERSON: -- the product 20 would be considered. 21 MR. PARKER: Right. But his 22 criterion of multiple vendors captures that

### 202-234-4433 Neal R. Gross & Co., Inc. Page 286 1 anyway. And your approach wouldn't go to 2 99.2. So for this scale, it sounds like you 3 and he are ending up with the same TSL. 4 MEMBER DeLASKI: And that might be 5 true for this design line but not for another 6 one. 7 MR. PARKER: Right. So we have to 8 do the design line analysis. So maybe that 9 would be a way forward, though, to just look 10 at the other graphs and see to what degree 11 your analysis differs from Andrew's for the 12 other design lines because it looks to me like 13 for this one, it doesn't. Does that make 14 sense? 15 MEMBER PETERSON: I can tell you 16 that we did a price-comparing analysis based 17 on the DOE data versus an amorphous metal for 18 a specific design line. And our data agreed 19 in regards to capability, that once you got 20 past a certain CSL, you would no longer use 21 grain-oriented electrical steel. When you 22 went back one CSL, the price essentially was

### 202-234-4433 Neal R. Gross & Co., Inc. Page 287 1 such that we would have had to write a check. 2 MR. PARKER: Okay. Okay. 3 MEMBER PETERSON: You go back one 4 more. We're not competitive one more. 5 MR. PARKER: Okay. So you're 6 saying for all the design lines, different 7 story? 8 MEMBER PETERSON: Exactly. 9 MR. PARKER: Okay. All right. So 10 that is where we need to -- what you need to 11 do is then focus on those particular design 12 lines, highlight those issues with regard to 13 those design lines where it matters. 14 MEMBER PETERSON: And that's what 15 we'll put together. 16 MR. PARKER: And put together 17 something. Okay. Good. 18 Steve? 19 MEMBER ROSENSTOCK: Steve 20 Rosenstock, EEI. 21 Again, I did print out all the 22 design line graphs. And it does look like for

### 202-234-4433 Neal R. Gross & Co., Inc. Page 288 1 all of them, there is a break point at a 2 certain CSL where afterwards it's just 3 amorphous -- 4 MR. PARKER: Yes. 5 MEMBER ROSENSTOCK: -- across all 6 the design lines 1 through 5. I didn't do the 7 medium-voltage, dry-type. 8 MR. PARKER: Good. And could we 9 get bigger circles on the legend, Brian? I 10 cannot tell what the colors are in those 11 legends. And it's all color-coded. 12 Okay. Anything else? So let's 13 take -- it is now 1:20. I need to do some 14 homework for you guys for the wrap-up. I 15 think people can use a bathroom break or 16 coffee break. Why don't we take a 20-minute 17 break and then come back for a 30-minute 18 wrap-up and then adjourn? The 30-minute 19 wrap-up will consist of basically a rehash of 20 our marching orders going forward. Yes? 21 PARTICIPANT: I just want to see if 22 there's anyone else with other TSL

### 202-234-4433 Neal R. Gross & Co., Inc. Page 289 1 suggestions. I want to be -- I think it's 2 fair to let people give other suggestions. 3 MR. PARKER: I didn't get the sense 4 that there was a burning desire to add other 5 TSLs. Are there any other suggestions for 6 TSLs? 7 PARTICIPANT: Audience members may 8 have some. 9 MR. PARKER: Robert? 10 MR. BERMAN: Robert Berman, Berman 11 Economics. 12 I would like to see something based 13 on cost to the consumer, to the ultimate 14 consumer, whether it be energy savings -- 15 MR. PARKER: Well, that raises the 16 question, who is the consumer under the 17 existing -- can you get back to the -- 18 MR. BERMAN: Each of these 19 transformers -- 20 MR. PARKER: The lowest life cycle 21 cost -- 22 MR. BERMAN: Each of these

### 202-234-4433 Neal R. Gross & Co., Inc. Page 290 1 transformers gets put into a rate base and 2 charged to the consumer. So for additional 3 energy savings, there is a cost of some sort. 4 There is also a benefit in terms of fuel save 5 that gets reflected in the consumer's bill. 6 So ultimately whatever these costs 7 and benefits are, they're passed on to the 8 consumer. 9 MR. PARKER: Yes. 10 MR. BERMAN: So what I would like 11 to see -- to the ultimate consumer, who is -- 12 MR. PARKER: Yes. Fair point. 13 And, actually, from a political standpoint, it 14 may behoove us in selling our results to show 15 that we actually gave some attention to 16 impacts on the Joe Blows who vote for our 17 elected representatives out there. 18 But that raises the question. 19 Katie, could I ask you a question in the back 20 there? In your life cycle cost analysis, when 21 you say with cost savings to the consumer, is 22 the consumer for that purpose the utility --

### 202-234-4433 Neal R. Gross & Co., Inc. Page 291 1 because that's the consumer of the transformer 2 or is the consumer the ratepayer? 3 MS. COUGHLIN: Life cycle cost for 4 the utility. 5 MR. PARKER: Okay. So that 6 existing TSL does not really necessarily 7 capture identically Robert's point because 8 there is the additional question of how much 9 higher cost to utilities are passed through to 10 consumers. Is that the point? 11 MR. BERMAN: Yes. The calculation 12 is a simple calculation that you can do on the 13 existing data. It's just a couple of 14 transformations. 15 MR. PARKER: Katie, would that be 16 hard to factor in to do or -- 17 MS. COUGHLIN: These things are not 18 -- 19 MR. PARKER: I'm sorry. You need 20 to come to the mike. I'm sorry. 21 MS. COUGHLIN: I think the issue is 22 not whether it's hard to do. The issue is

### 202-234-4433 Neal R. Gross & Co., Inc. Page 292 1 that this is a standards rulemaking. And 2 there are many, many rulemakings that follow 3 standardized procedures for calculating 4 cost-benefit metrics. 5 So we are considering within the 6 national impacts analysis looking at these 7 generalized price effects that to date DOE has 8 not come up with a procedure for taking that 9 into account. 10 There are many methodologies we 11 could use, but I think we need to have some 12 discussion within DOE about how they are going 13 to approach this issue because it isn't 14 something that just applies to this product. 15 MR. PARKER: Is there a rule that 16 says that there has to be a standardized 17 approach to it? 18 MS. COUGHLIN: Yes. 19 MR. COHEN: This is Dan Cohen, DOE. 20 So the way we have set up a 21 standardized approach so that we are 22 consistent across our rules that there is a

### 202-234-4433 Neal R. Gross & Co., Inc. Page 293 1 question of methodology as we go into setting 2 up a rulemaking. 3 So Katie is getting at some issues 4 that have been raised recently in some of our 5 rules dealing with consumer welfare. We have 6 asked a bunch of questions around that, and we 7 have gathered some data and whatever. And we 8 are looking into it -- 9 MR. PARKER: Consumer welfare, 10 though, is one step beyond consumer price 11 impacts because -- 12 MR. COHEN: No. 13 MR. PARKER: -- when you look at 14 the impacted prices on welfare -- 15 MR. COHEN: The way we phrased the 16 question, it is sort of considered in this. 17 We haven't come to a conclusion on how we 18 would consider those. 19 MR. PARKER: I guess what I'm 20 puzzled about is if we're bound by DOE policy 21 on that TSL, why aren't we constrained by DOE 22 policy on all bad choices of TSLs?

### 202-234-4433 Neal R. Gross & Co., Inc. Page 294 1 MS. COUGHLIN: We are constrained. 2 That's what I'm saying. We're not talking 3 about a TSL here. We're talking about 4 producing another metric to discriminate 5 between TSLs. 6 To produce another metric, that's 7 something that DOE has to consider in the 8 context of all the rulemaking. 9 MR. PARKER: Does that apply to the 10 competitiveness metric that you're working on 11 with the steel people and -- 12 MS. COUGHLIN: Yes. I mean, if 13 it's going to end up being something that 14 influences the choice, it will have to go 15 through its own process, I think. But, I 16 mean, the issue -- I mean, this is very much a 17 secondary impact on society as a whole, right? 18 So in that sense, it's different from the 19 competitiveness issue. 20 MR. PARKER: Right. I guess the 21 question is, are we prohibited from choosing 22 certain criteria for TSLs because that would

### 202-234-4433 Neal R. Gross & Co., Inc. Page 295 1 conflict with Department policy? 2 MR. COHEN: We have very specific 3 criteria. Dan Cohen, DOE. 4 We have very specific criteria in 5 the statute for how we determine economic 6 justification. We have analyses that we have 7 built over time that get us to be able to 8 answer the questions that are raised by the 9 criteria that are in -- 10 MR. PARKER: Right. 11 MR. COHEN: To the extent that we 12 want to add to those methodologies, we can do 13 that. In fact, we recently have started -- 14 for instance, we used to consider manufacturer 15 cost as a constant over a 30-year time 16 horizon. 17 MR. PARKER: I see. 18 MR. COHEN: And we have recently 19 started dealing with who we refer to as 20 experience codes -- 21 MR. PARKER: I see. 22 MR. COHEN: -- as prices. There's

### 202-234-4433 Neal R. Gross & Co., Inc. Page 296 1 -- 2 MR. PARKER: So you're saying the 3 competitiveness issue we're dealing with with 4 Eric is something for which there is already 5 existing framework within DOE policy -- 6 MR. COHEN: Correct. 7 MR. PARKER: -- because 8 competitiveness is one of the things you are 9 statutorily supposed to look at. 10 MR. COHEN: Yes, yes, yes. 11 MR. PARKER: And consumer welfare, 12 consumer price impact may or may not be 13 something -- 14 MR. COHEN: Well, we can factor it 15 in, but we have to do it in a way that we do 16 it across all of our rules. 17 MR. PARKER: Okay. 18 MR. COHEN: So we have to be 19 consistent about how to do it. 20 MR. PARKER: Okay. Okay. Got it. 21 So does that answer your question? So I 22 think we'll have to ponder it, in fact, and

### 202-234-4433 Neal R. Gross & Co., Inc. Page 297 1 get back on that. 2 MR. BERMAN: Robert Berman, Berman 3 Economics. 4 I think there is a way to do both, 5 if you will. That is to say, there are 6 specific measures that you use for particular 7 appliances that fall within the category. 8 This happens to be one that is specific for a 9 particular product but reflective of a general 10 notion. 11 So while it may not be a defined 12 metric within the policy, it may be something 13 that is of interest to the Committee and in 14 terms of what it may want to consider in 15 adopting a standard is what the impact is 16 likely to be on the consumer, even though we 17 don't have that as a specific category. 18 MR. PARKER: Yes. 19 MEMBER ROSENSTOCK: Steve 20 Rosenstock, EEI. 21 I think that would be a big change 22 because with other commercial industrial

### 202-234-4433 Neal R. Gross & Co., Inc. Page 298 1 products that are analyzed by DOE, I suppose 2 we're talking about a commercial heating 3 system or commercial cooling system. 4 You look at the savings to the end 5 use commercial customer. Say it's a Wal-Mart 6 or another retailer or something like that. 7 There is no other analysis that asks "Okay. 8 They have saved that energy. How much is it 9 going to reduce their prices to the consumer?" 10 That's never done. And it would be 11 very, very hard for anyone to analyze because 12 there are so many other factors involved with 13 that secondary analysis. 14 MR. COHEN: Dan Cohen, DOE. 15 MR. BERMAN: That's specifically 16 done, though, with respect to Energy Star 17 appliances. This is the equivalent, if you 18 will, of the Energy Star appliances. 19 MEMBER ROSENSTOCK: Energy Star 20 appliances are voluntary. They're voluntary 21 for -- 22 MR. PARKER: Well, I don't know why

### 202-234-4433 Neal R. Gross & Co., Inc. Page 299 1 that would matter. I mean, the fact that 2 they're mandatory [sic.] I would think would 3 make you more sensitive to consumer impacts, 4 not less. 5 MEMBER ROSENSTOCK: Well, they're 6 not using any of these methodologies to 7 necessarily -- 8 MR. PARKER: Yes. 9 MEMBER ROSENSTOCK: -- be creating 10 the Energy Star levels. 11 MR. PARKER: I mean, I think 12 estimating pass-through gets you into a kind 13 of a can of worms. And, you know, that's one 14 of the issues that people had in the 15 interviews was the question about how much 16 they pass through. That was one of the 17 reasons that I would discuss bringing NARUCA 18 [National Association of Regulatory Utility 19 Commissioners] into the discussion because 20 there is an issue of how much can utilities 21 pass through red costs, right? 22 So I would think that the utilities

### 202-234-4433 Neal R. Gross & Co., Inc. Page 300 1 would -- this would be something that you 2 would actually want to consider because it 3 would actually -- 4 MR. BERMAN: There's a specific 5 formula. In a regulated industry, there's a 6 specific formula for what they can pass 7 through. 8 MEMBER ROSENSTOCK: And also it 9 depends on the rate case because different 10 rate cases will have different results and 11 different pass-throughs so it can be a huge 12 impact in terms of what happens in the rate 13 case in terms of what is actually passed 14 through. Sometimes the costs are denied. 15 MR. PARKER: Yes. 16 MEMBER ROSENSTOCK: And DC can deny 17 the cost pass-through. 18 MR. BERMAN: Only in the case of 19 management. 20 MR. PARKER: It is. In the stuff 21 that was gathered, do we have data on 22 pass-through? No? Excuse me, guys. Can I

### 202-234-4433 Neal R. Gross & Co., Inc. Page 301 1 ask Katie a question? Okay. Listen, so we 2 don't have data? 3 So I think the answer is that while 4 it might be nice, there are two problems with 5 that. One is the question of DOE policy. 6 The second is that, even if DOE 7 policy permitted it, we don't have data on 8 pass-through. And I don't think we have the 9 time to gather such data in time for our 10 rulemakings. 11 MR. SAMPAT: Yes. Excuse me. 12 Mahesh Sampat. 13 If this is a mandated standard, 14 whatever is the cost increase, the regulator 15 has to pass through if it is mandated. 16 MR. PARKER: Okay. 17 MR. SAMPAT: If it's mandatory, 18 then regulator can question, was that a 19 prudent expenditure or not? 20 MR. PARKER: I'd like to hear that 21 from NARUCA, but is that consistent with your 22 experience?

### 202-234-4433 Neal R. Gross & Co., Inc. Page 302 1 MEMBER HYLAND: This is Mike, APPA. 2 I'll be real clear. We don't have 3 NARUCA, anybody regulating us. We're 4 regulated by ourselves. And 100 percent of 5 all costs of all things are passed on to the 6 consumer. That's not a question. Okay? 7 Everything you spend is paid for. 8 MR. PARKER: Okay. 9 MEMBER HYLAND: So, I mean, it's a 10 great thing to see. Some of the analysis I've 11 seen on the last rule states that some of the 12 dollars you are putting towards the 13 transformers would be better spent somewhere 14 else when you start looking at the actual 15 savings per consumers. 16 MR. PARKER: Well, I don't know 17 what the impacts would be. I mean, the life 18 cycle cost depends -- you know, I don't know 19 which way that cuts. In the absence of the 20 analysis, it could cut one way or the other. 21 So we'll caucus about that. Obviously there 22 are larger issues that we have to discuss.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 303 1 You know, I'm thinking that we may 2 not need to adjourn and reconvene. We might 3 just be able to wrap up. Would people like to 4 try to do that, just leave? 5 I think, actually, we've got our 6 marching orders. We don't have a total 7 blueprint and timetable for all four meetings, 8 which I was kind of hoping, but we're under 9 conditions of some uncertainty here. And we 10 have to kind of work things out as we go. 11 We do have what I hope is a clear 12 plan for preparing for the next meeting. And, 13 just to recap, Navigant and LBL will post 14 their revised -- I'll interrupt a second. I'm 15 just passing around the meeting schedule that 16 came from Jeremiah, going forward. Come back 17 to that at the end. 18 In terms of preparing for the next 19 meeting, Navigant, LBL will post their revised 20 TSD along with a small, a short summary of the 21 differences between the revised TSD and the 22 April TSD. When I say, "revised TSD," I mean

### 202-234-4433 Neal R. Gross & Co., Inc. Page 304 1 those chapters that they have available in 2 draft. I understand that not all chapters are 3 ready to be posted. So whatever they have 4 available will come up. 5 And we will notify you as soon as 6 that is done. That will be their top 7 priority. Let's not bother them with anything 8 else until they can get that done. 9 Once that is done, two things will 10 take place. One is you will then have a week 11 to post all of your -- send in email to me, 12 simultaneously, please, to DOE and to Brian 13 Coffey and to Katie Coughlin. 14 You have all of our emails. Send 15 an email, one sheet, please, that indicates 16 your concerns with the LCC analysis, the 17 upstream analysis, whether it's assumptions 18 about materials prices, assumptions about 19 other variables, methodology, anything that 20 you think is a source of concern. 21 And I will hope that what they post 22 will enable you to do your work that week.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 305 1 All right? And if it doesn't, if the material 2 assumptions aren't clear or whatever, then 3 we're going to have to come back and have this 4 discussion online. But one week to get your 5 concerns in. Okay? Because that's going to 6 be the week that we focus on the LCC 7 methodology. 8 They will then have a week to 9 respond. Is a week enough time or do you need 10 more time? Okay. They will respond as soon 11 as they can about, first, whether the concern 12 is valid from their perspective; secondly, 13 whether it has an impact on the analysis. 14 And, of course, validity is 15 affected by whether it has an impact on the 16 analysis. I mean, it may be conceptually 17 valid but materially irrelevant or trivial. 18 So they will do that. And we hope 19 that that will be done within a couple of 20 weeks. 21 What is a reasonable time frame for 22 getting this stuff posted -- can I put you on

### 202-234-4433 Neal R. Gross & Co., Inc. Page 306 1 the spot a little bit -- the updated TSD 2 chapters as well as the discussion of 3 differences? I'll come back to that. Okay. 4 So, then, after that we will have 5 an online discussion. And we'll try to come 6 up with the right forum for it to make 7 progress between now and the next meeting 8 about what adjustments to the analysis need to 9 be made, what adjustments need to be done to 10 the analysis in order to accommodate the 11 concerns that are shown to be both valid and 12 material. 13 And if we can get concurrence on 14 that, they will go ahead and start the 15 analysis to reflect that. Okay? So that's 16 the end of week two after the trigger date of 17 the posting of the TSD chapters. And that 18 takes us out to, well, two weeks plus a few 19 days, the end of the month basically. 20 Concurrently with that, Navigant 21 and LBL will work with all interested 22 stakeholders. Anybody can weigh in, but I

### 202-234-4433 Neal R. Gross & Co., Inc. Page 307 1 assume the steel makers will weigh in. 2 Anybody can weigh in on what would be an 3 adequate way of defining this competitiveness, 4 TSL criteria. 5 And concurrently with that also I 6 will work with DOE to explore whether there is 7 scope for having an ultimate consumer impact 8 over whether there is not. And if there is 9 not, there is nothing more that needs to be 10 said. We were bound by DOE policy with regard 11 to that. 12 Then the next meeting will be to 13 put to bed all concerns dealing with the 14 methodology, the upstream, and to arrive at 15 closure on the choice of TSLs so that in the 16 following meeting, we can actually have a 17 final analysis of national impact assessment 18 for the various TSL levels that we have chosen 19 and can get into the real business, then, of 20 choosing a standard. This is all to get the 21 framework right. 22 Scott, you are looking puzzled.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 308 1 MEMBER BECK: We're going to pick 2 for TSLs by the next meeting? 3 MR. PARKER: No, no. We're going 4 to pick -- no -- the criteria, the criteria 5 for the TSLs. Right. Once the criteria are 6 put in, it's up to the consultants to actually 7 show, you know, what the numbers are for each 8 design line. 9 Brian? 10 MR. COFFEY: I was just going to 11 follow on the TSD chapters. We'll certainly 12 have them within a week. And I can say that 13 the tweaks to all chapters will be relatively 14 minor. 15 So if you wanted to give yourselves 16 a running head start, there were a lot of 17 issues brought up today. And you could also 18 look at the chapters from the preliminary 19 analysis. They're going to be very, very 20 similar in content and substance. 21 The updated versions would be 22 available before the end of --

### 202-234-4433 Neal R. Gross & Co., Inc. Page 309 1 MR. PARKER: But you're not going 2 to tweak anything based upon what was said 3 today, right? You're just posting them as 4 they are. 5 MR. COFFEY: That's right, leaving 6 them open for discussion. 7 MR. PARKER: Right. Okay. So 9-16 8 is today. By 9-23, post the updated chapters, 9 of the updated TSD. By 9-30, September, your 10 comments on method and assumption are due 11 9-30. And then by -- excuse me. I guess 12 there are no more 9's. Is there? 13 By 10-7, we will try to have, that 14 week, we will try to have our discussion about 15 the September 30th and October 7th. We'll see 16 how it goes within a week, but stay tuned. 17 We will have an online discussion 18 about what changes to the analysis, how the 19 analysis needs to be tweaked in order to -- 20 oh, gosh. I'm not giving us enough time here. 21 Working backwards, 10-7 gets us 22 awfully close to -- our meeting is 10-12,

### 202-234-4433 Neal R. Gross & Co., Inc. Page 310 1 October 12th? That's not quite enough time. 2 So if we can get the TSD posted a few days 3 sooner, that would be great. We'll start it 4 from then. 5 And we may have to compress these 6 times frames a bit. But let's say by -- how 7 much time do you need once we have with 8 different parameters -- it's really hard to 9 know, I guess, until we have really seen what 10 the comments are, right, how much time is 11 going to be required to move on the analysis. 12 So let's just say we can't really 13 game that out, I don't think. I think 14 basically September 30th is the latest date. 15 And it will be a week from whenever we 16 actually get the updated TSD to get your 17 comments in. 18 And then, you know, we'll just have 19 to see on the basis of the comments how long 20 it takes: a) for us to get conclusion on 21 which comments matter and need to be 22 accommodated; and b) to rerun the analysis.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 311 1 Do you have to run the analysis to 2 figure out the sensitivity? I mean, is that 3 -- 4 MR. COFFEY: Which sensitivity is 5 that? 6 MR. PARKER: I'm sorry. Once they 7 have the comments in, then you have to do a 8 sensitivity analysis, I guess, to figure out 9 if these things matter. That's what we agreed 10 or can you tell right away? Brian is saying 11 you can tell right away. 12 MR. COFFEY: You would probably 13 have a good sense right away of what level of 14 rework it would require. I think that based 15 on our schedule, we're probably not going to 16 be able to start from the ground up in very 17 many places. 18 MR. PARKER: Right. 19 MR. COFFEY: But we can look for 20 creative ways to solve the problem without -- 21 MR. PARKER: Right. 22 MR. COFFEY: -- reinventing the

### 202-234-4433 Neal R. Gross & Co., Inc. Page 312 1 wheel at every turn. 2 MR. PARKER: Right. Yes. And the 3 other thing is 9:30 is the -- you know, please 4 don't wait until the last minute. As soon as 5 you have something to submit, submit so that 6 they can get going on a rolling basis and so 7 that we can have a discussion about it. 8 So then I guess for a couple of 9 days, then you could -- within a few days, you 10 can respond on materiality significance. 11 Okay. So maybe we don't need a full week for 12 that. So say by October 2nd, materiality. 13 So after October 2nd, we are kind 14 of in unchartered waters in terms of -- but 15 we'll try to make a decision basically by the 16 5th of October as to what are the areas that 17 need to be tweaked. 18 And then hopefully between the 5th 19 and the 12th, you can get the revised 20 analysis. That's still not going to be enough 21 time, though, is it? I'm struggling, guys. 22 Help me out.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 313 1 Working backwards from the 12th, 2 how much time do we need to look at the 3 revised analysis in order to be ready to 4 discuss it on the 12th? Steve?
5 MEMBER ROSENSTOCK: Steve 6 Rosenstock, EEI. 7 I would say at least a week and a 8 half just to give people enough time to review 9 everything, especially if they're revising the 10 technical support document. You know, there 11 is a lot of information in there, support 12 spreadsheets, so at least a week or a week and 13 a half to be fair to everybody. 14 MR. PARKER: Well, again, the 15 changes to the TSD are going to be relatively 16 small, right? 17 MEMBER ROSENSTOCK: But will we 18 have other suggestions, where we would like to 19 say, "Can you tweak this a little bit just 20 based on this information?" I mean, we don't 21 know. 22 MEMBER CYMBALSKY: I think until we

### 202-234-4433 Neal R. Gross & Co., Inc. Page 314 1 see the list, we've got to -- you know, we 2 really need to keep these changes to a 3 minimum. We really, really do. We have to -- 4 if we're looking at a small tweak and we know 5 it's not going to have a major impact on the 6 way things look, we can't do that. We don't 7 have the time. We're out of time. We'll get 8 bogged down in the analysis and not actually 9 see any results of what we're doing. 10 So let's see the list first. I 11 mean, we're going to sit here all day and talk 12 about if we have enough time to review, I 13 think. We haven't had a break since 9:00 a.m. 14 MR. PARKER: Yes. 15 MEMBER ROSENSTOCK: I have one 16 question. Brian, I am not sure what cost 17 projection you used for all of the 18 transformers going forward. Did you keep it 19 general with the rate of information basically 20 for a lot of the cost projections for the 21 transformers? I mean, that was one of my -- 22 MR. PARKER: Again, are these

### 202-234-4433 Neal R. Gross & Co., Inc. Page 315 1 questions answered in the TSD? I mean, that's 2 the real -- because if so, we can just refer 3 people to the TSD. 4 MR. COFFEY: Katie, the cost 5 projections he's asking about into the future. 6 MR. PARKER: Okay. 7 MR. COFFEY: The methodology should 8 be similar to what is posted in the April TSD. 9 MEMBER ROSENSTOCK: Okay. But what 10 about the number? 11 MS. COUGHLIN: We have looked into 12 the issue, the growth rate. The impact seems 13 to be minimal. So the answer is yes, we have 14 included that effect, but the effect is 15 essentially zero. 16 MEMBER ROSENSTOCK: So, even if the 17 cost increases were faster than inflation, 18 it's no impact on life cycle cost? 19 MS. COUGHLIN: What we have -- 20 okay. It doesn't go into any of the life 21 cycle costs. It goes into the NIA. 22 MEMBER ROSENSTOCK: Right.

### 202-234-4433 Neal R. Gross & Co., Inc. Page 316 1 MS. COUGHLIN: And we base our 2 analysis on TPI data for the electric 3 industry. And according to that -- so this is 4 for the price projections because we haven't 5 done a commodity price projection. We're just 6 looking at the learning effect. 7 MEMBER ROSENSTOCK: So you have 8 already added in a learning effect to the 9 transformers when you did this NIA? 10 MS. COUGHLIN: No. We have looked 11 at what that effect might be quantitatively 12 based on the data. So we're doing the 13 preliminary analysis of the data on the price 14 of electric distribution equipment. 15 And it looks like sort of the 16 experience effect itself is very small based 17 on that data. 18 MEMBER ROSENSTOCK: Okay. 19 MS. COUGHLIN: But since the NIA is 20 still preliminary, we have got no settled 21 answer for that yet. 22 MEMBER ROSENSTOCK: Would you be

### 202-234-4433 Neal R. Gross & Co., Inc. Page 317 1 able to do a sensitivity analysis based on a 2 higher projected cost increase? 3 MS. COUGHLIN: Yes, you can do a 4 sensitivity analysis on a different -- 5 MEMBER ROSENSTOCK: Great. Okay. 6 Thank you. So we can add that to the list 7 that based on -- if we have data that we can 8 show you that shows higher than inflation, 9 then you can add that into your cost 10 projections? 11 MS. COUGHLIN: Yes. 12 MEMBER ROSENSTOCK: Thank you. 13 MR. PARKER: Good. Good. Okay. 14 So as soon as that is up, you have a week to 15 get all of this in. And they will come back 16 within a few days of that with their response. 17 We'll try to reach agreement as quickly as 18 possible. I think that's just what we have to 19 do. 20 We can't really game it or time it 21 exactly and get closure online about what 22 tweaks will be made to the analysis. And we

### 202-234-4433 Neal R. Gross & Co., Inc. Page 318 1 just have to do that in time for them to 2 actually do it and turn it around in time for 3 us to respond to it. 4 We have to be flexible. This can't 5 be done instantly. So the chances are you're 6 going to get the analysis, the revised 7 analysis at the end of the day fairly soon 8 before the last meeting. You're not going to 9 have a week and a half to do it. That's my 10 guess. 11 But we'll do the absolute best we 12 can to get everything back to you as soon as 13 possible. And a lot depends upon the 14 efficiency of this group in working together 15 online between now and the next meeting. So 16 hopefully we'll be able to move forward 17 quickly. 18 Okay. We're a little bit over time 19 but not too bad. I think we made great 20 progress at this first meeting. I hope you're 21 satisfied with how it went. If you have 22 suggestions for me in moderating this or for

### 202-234-4433 Neal R. Gross & Co., Inc. Page 319 1 the process, I'm always happy to hear them. 2 Either publicly or privately is your choice. 3 And I want to thank you guys for 4 coming out. Have a great trip back. We'll 5 get you out of here way before rush hour. So 6 that will be nice. And we'll see you next 7 week, next time, next month. 8 (Whereupon, the foregoing matter 9 was concluded at 1:44 p.m.) 10 11 12 13 14 15 16 17 18 19 20 21 22

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36:10,17 123:22 125:4 130:4,16 131:8 133:12,18 136:10,11 8 8 89:21 193:14 8E-089 1:15 8,760 91:8 8044:3 9 9 136:12 9's 309:12 9-16 309:7 9-23 309:8 9-30 309:9,11 9:00 1:16 314:13 9:094:2 9:29 26:1 9:30 312:3 9:37 26:2 90 61:1 124:3 900 59:2 95 124:2 99.08 162:9 264:20 99.1 162:10 99.12 265:1 99.16 162:9 266:17 99.2 265:1 286:2 99.24 265:1 99.3 177:22 284:20 99.4 178:1 99.5 264:20NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVE., N.W. (202) 234-4433 WASHINGTON, D.C. 20005-3701 www.nealrgross.com C E R T I F I C A T E

This is to certify that the foregoing transcript

In the matter of:

Before:

Date:

Place:

was duly recorded and accurately transcribed under my direction; further, that said transcript is a true and accurate record of the proceedings.

----------------------- Court Reporter 357

Liquid Immersed and Medium Voltage Dry Type Transformers

US DOE

09-16-11

Washington, DC