Executive Court Reporters (301) 565

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UNITED STATES OF AMERICA

DEPARTMENT OF ENERGY

**MEETING of the MV WORKING GROUP** 

Volume I

National Rural Electric Cooperative Association 4301 Wilson Blvd, Rm

. C2 Arlington, VA

Mon day
Novem ber 8 , 201 1

**Fa cilitator**  **:**

Richard Parker University of Connecticut Law School

**Host :** 

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

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**Participants Identified:**

Rick Anderson Fayetteville Public Works Commission

Tim Ballo Earth Justice 16 25 Massachusetts Avenue Suite 702 Washington, DC 20036

Scott Beck Lakeview Metals

Robert Berman Berman Economics 1915 Orchid Court Vienna, VA 22187

John Caskey Electrical Manufacturers Association

Jerry Corkran Cooper Power Systems

Greg Coulter
Consu ltant Prolec GE

Jim Creevy (Scott Lewinsky (ph)) National Electrical Manufacturers Association 1300 North 17 th Suite 1752 Street

Rosslyn, VA 22209

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

Tom Eckman Northwest Power and Conservation CouncilExecutive Court Reporters (301) 565

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

Chuck Foster Edison Electric Institute

Carlos Gaytan Prolec GE

Robert Greeson Federal Pacific Company

Bruce Hirsch Baltimore Gas and Electric

Gerald Hodge
Ho ward Industries PO Box 1586 Laurel, MS 39441

Alex Hoffman American Public Power Association

Aaron Meyers Cooper Power Systems

Dave Millure Metglas Incorporated 440 Allied Drive Conway, SC 29526

Steve Nadel American Council for an Energy

- Efficient Eco nomy

Wes Patterson ABB, Inc.

Eric Petersen AK Steel

Ray Polinski Allegheny Ludlum

- ATIExecutive Court Reporters (301) 565

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

- 2696

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

Paul Ryan Hitachi Metals America 800 Grand Avenue, Suite AG

- 6 Carlsbad, CA 92008

Bob Saint National Rural Electric Cooperative Association

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

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

Chuck Simmons Progress Energy

Bob Smith (via telephone) Federal Pacific Jim Rakowski Allegheny ATI

Ken Winder
NRECA

**Participants from DOE:**Executive Court Reporters (301) 565

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John Cymbalsky DOE

**Participants from Navi**  **gant /LBL**  **:**

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

Mike Rivest Navigant

Rob Carmichael Navigant

Matt Nardotti Navigant Consulting

Chris Bolduc Lawrence Berkley National Laboratory 1 Cyclotron Rd Ms 90

- 4000 Berkeley, CA 94720 Washington, DC 20006

Katie Coughlin Lawrence Berkley National Laboratory

Art Rosenfeld (via phone)
LBLExecutive Court Reporters (301) 565

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**AGENDA**

**ITEM PAGE** 

Welcome, Mr. Parker 7

Self

- Introductions 9

Agenda Review 1 4

Clarifying Question s, Liquid Immersed 18

Proposals and Presentation s

Mr. Nadel 70

Mr. Caskey 90

Mr. Petersen 109

Review and Moving Forward 120

Discussion: Special Cases 215Executive Court Reporters (301) 565

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9:13 a.m. 1

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

MR. PARKER: Greetings everyone . Welcome 4

to the rubber meets the road session of our process. 5

We have a lot to cover today, and I hope everybody 6

had a good trip here, for those coming from out of 7

town and the rest. Let me just begin b y thanking 8

Steve Rosenstock and EEI for hosting us here today 9

in his beautiful and conveniently located 10

facilities. It’s really nice of him to do that. 11

And I thought maybe we should begin by having Steve 12

say a few words about the layout here and so forth 13

and then we’ll move on to the items on the agenda. 14

MR. ROSENSTOCK: Okay. Just a few 15

logistics for the people in attendance here. Did 16

everybody see the network password and network name 17

and able to access internet. They’re on the table 18

and it was on the screen earlier. The network name 19

is mine in all caps and the password was shown on 20

A1B2C3D4E5, and so everyone has access to internet 21

access. A few logistical items. Restrooms, if you 22

go out these doors the men’s room would be on the 23

right, and then the first left. Ladies’ room you go 24

towards the receptionist and you’ll make a left. 25Executive Court Reporters (301) 565

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Our food is in the meeting room out that 1

way. I think it will make things easier if people 2

could leave out of conference room A or conference 3

room C, that way we won’ t be necessarily disturbed, 4

but the food, the breakfast was in Memo Park Meeting 5

Room out past Room C over here. That’s where lunch 6

will be set up later on today, and then

-- what else 7

was I going to say. 8

Oh, in terms of caucus rooms, basically 9

that roo m over there we call it just conference room 10

A. There’s some chairs there if people want to 11

caucus in room A or you can caucus in Memo Park 12

where food is going to be, it’s your choice. So 13

basically there’s two areas where people can go and 14

meet during ce rtain times, or breaks, or during the 15

day. And I think that just about covers it. If 16

there’s any other logistical questions anyone has? 17

Okay. Thanks. 18

MR. PARKER: Thanks, Steve. So I’m just 19

trying to zoom in here, if this will zoom. So 20

basically a lot to cover today. Why don’t we go 21

around the table and everybody give your name and 22

affiliation please, for the record and then we’ll 23

turn to the people on the phone as well. Starting 24

around the table, to my left. 25Executive Court Reporters (301) 565

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**Self**

**- introductions**  1

MR. GREESON: Rob Greeson, Federal Pacific 2

Transformer. 3

MR. GAYTAN: I’m Carlos Gaytan, Prolec GE. 4

MR. COULTER: Greg Coulter, I’m a 5

consultant supporting Prolec GE. 6

MR. FERNSTROM: Gary Fernstrom, PG&E 7

representing Pacific Gas and Electric Company, 8

Southern Califor nia Edison, and Semper Utilities. 9

MR. ECKMAN: Tom Eckman, Northwest Power 10

and Conservation Council. 11

MR. NADEL: Steve Nadel, American Council 12

for an Energy Efficient Economy. 13

MR. DeLASKI: Andrew DeLaski, Appliance 14

Standards Awareness Project. 15

MR. CO R KRAN: Jerry Co r kran, representing 16

Cooper Power Systems, Waukesha, Wisconsin. 17

MR. CASKEY: John Caskey, National 18

Electrical Manufacturers Association. 19

MR. BECK: Scott Beck, Lakeview Metals. 20

MR. BALLO: Tim Ballo, Earth Justice. 21

MR. HIRSCH: B ruce Hirsch, Baltimore Gas 22

and Electric, representing EEI. 23

MR. SIMMONS: Chuck Simmons, Progress 24

Energy, part of the EEI contingent. 25Executive Court Reporters (301) 565

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MR. ANDERSON: Rick Anderson, Fayetteville 1

PWC, Fayetteville, North Carolina, representing 2

APPA. 3

MR. SAINT: I’m Bo b Saint with the 4

National Rural Electric Cooperative Association. 5

MR. HOFFMAN: Alex Hoffman with the 6

American Public Power Association. 7

MR. ROSENSTOCK: Steve Rosenstock, Edison 8

Electric Institute. 9

MR. PETERSEN: Eric Petersen with AK 10

Steel. 11

MR. P O LINSKI: Ray P o linski with ATI 12

Allegheny Ludlum. 13

MR. PATTERSON: Wes Patterson, ABB, Inc. 14

MR. RYAN: Paul Ryan, Hitachi Metglas. 15

MR. MILLURE: Dave Millure, Metglas. 16

MR. ROY: Robin Roy, Natural Resources 17

Defense Council. 18

MR. HODGE: Gerry Ho dge from Howard 19

Industry. 20

MR. CYMBALSKY: John Cymbalsky, DOE. 21

MR. CARMICHAEL: Rob Carmichael, Navigant. 22

MR. NARDOTTI: Matt Nardotti, Navigant. 23

MR. RIVEST: Mike Rivest, Navigant 24

Consulting. 25Executive Court Reporters (301) 565

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MR. LEWINSKI (PH): I’m Scott Lewinski 1

(ph) with Na tional Electrical Manufacturers 2

Association. 3

MR. RUSH: (off mic) 4

(several intros not on mic 5

MR. SAMPAT: Mahesh Sampat, EMS 6

Consulting. 7

MR. FOSTER: Chuck Foster, representing 8

Edison Electric Institute

. 9

MR. BOLDUC: Chris Bolduc, LDL. 10

MR. ME YERS: Aaron Meyers, Cooper. 11

MS. COUGHLIN: Katie Coughlin, Lawrence 12

Berkley National Laboratory. 13

MR. COFFEY: Brian Coffey, Navigant. 14

MR. PARKER: Great. On the phone, could 15

you please let us know if you’re there. 16

PARTICIPANT: (inaudible) 17

M R. PARKER: Welcome, Eric. Anyone else. 18

(Phone intros not audible) 19

MR. PARKER: Gotcha Rick, thanks. Great 20

all right. Thank you 21

What I thought we would do was really try 22

to focus today on the proposals I know we all came 23

here for, which is the

-- which is negotiating 24

Energy Efficiency Standards for distribution 25Executive Court Reporters (301) 565

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transformers. We’ve had an extraordinary exchange 1

of views and information and data on both the 2

engineering analysis and the economic analysis. I 3

know that Mike Rivest and Brian Coffey and Matt 4

Nardotti and many others on the Navigant team have 5

been working with you all many hours and weeks, and 6

as we approached this meeting, late into the night 7

and weekends, to make sure that you are

-- your data 8

is received, your input is received, that i t’s 9

reviewed, that it’s carefully discussed, that it’s 10

considered, that it’s brought into the analysis 11

where it can be, and that everybody has a chance to 12

be heard on this. 13

I think if you compare this

-- the process 14

that we’ve gone through to what happen s in a normal 15

rulemaking, you’ll appreciate the extraordinary 16

difference between this process and what happens 17

normally, and it’s really a great opportunity, not 18

only for the people in this room, the stakeholders 19

in this room, but also for the analysts to improve, 20

to refine the analysis, to make it better, and to 21

make it more responsive to your input. 22

Much of the input came in very recently, 23

that’s the way it is with deadlines, that they tend 24

to attract input at the very last minute, and some 25Executive Court Reporters (301) 565

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came in afte r our internal deadlines in prior 1

meetings, but we tried to do everything possible, 2

nonetheless, to accept it and to use it. 3

There is, of course, only so much that one 4

can do. One can’t please everybody, and one, you 5

know, the DOE staff are constrained to write a 6

proposal and do analysis for industry, not for any 7

individual company. And so they have to work within 8

that constraint. So, they have taken all this and 9

produced their engineering analysis and they’ve 10

produced a set of price sensitivity tools which 11

they’ve made available to you, to help explore, in a 12

very efficient way I think, the impact of varying 13

certain assumptions and we can certainly have that 14

discussion

-- varying certain assumptions about 15

materials prices on the economics of the industr y. 16

But I think we, at this point, need to 17

declare the engineering analysis pretty much in the 18

can, pretty much done. We will review, as needed, 19

the changes that have

-- that need to be made, but 20

we have to focus today on really working with what 21

we have in terms of the engineering analysis and 22

making the best possible use of it in our 23

negotiations. 24

The life cycle cost analysis, of course, 25Executive Court Reporters (301) 565

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is really tied into various assumptions. That 1

methodology is pretty well established. I think 2

that, again, it’s a question of doing various runs 3

that are necessary, that are required to sort of 4

support the negotiations. We have to realize that 5

there are transaction costs for those runs. They 6

are expensive and difficult

-- not expensive, but 7

difficult and time

- consu ming to do, and so we need 8

to figure out the most strategic use of that time as 9

we go forward, and think about, you know, what are 10

the key items of the analysis that we may need that 11

you don’t have, that are coming from the 12

discussions. 13

**Agenda Review** 14

So what I thought we would do, what I 15

propose for an agenda is simply this, that we start 16

off with liquid immersed

-- and I put an agenda up 17

there . This is a draft agenda, so this is

-- and 18

this is a group discussion and I’m happy to 19

entertain suggestions fo r change and so forth for 20

this agenda. 21

But what I thought we would do is begin 22

with any kind of clarifying questions you may have 23

about the analysis on liquid immersed. There hasn’t 24

-- there have been no changes to the engineering 25Executive Court Reporters (301) 565

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analysis, so this woul d really be just any questions 1

that you have about the LCC and NIA runs that have 2

been done. And again, basically just clarifying 3

questions at this point. 4

And then turn to a short discussion of an 5

issue that we’ve talked about in prior meetings, 6

which i s the question of whether there is a need for 7

a new product class for DL2, for round tanks, and we 8

have, you know, I know that Wes Patterson has been 9

working very closely with Navigant staff and others 10

have as well, and we have a proposal for handling 11

that that I want to make sure that people understand 12

and are comfortable with, because there’s been a lot 13

of discussion about that. 14

Then from ten to

-- I’m sorry this is not 15

fitting all on one screen

-- but from ten to 16

basically 12:30, open the floor to you all to 17

present your take on where things

-- where you’d 18

like to see these negotiations end up, or what 19

you’re proposing. So we’ll just open the floor to 20

anybody who wants to step forward and present a 21

proposal on how they see the liquid immersed now 22

worki ng out. And the focus on liquid immersed is 23

simply driven by the fact that while all these 24

products are important, there is a great amount of 25Executive Court Reporters (301) 565

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shipments data forward

-- items one through five 1

indicate that, both in terms of potential energy 2

savings and MG consumption, and also in terms of 3

just product value, commercial value, these are 4

very, very large categories and we’ve had a lot of 5

discussion about them in the past, and so we would 6

lead off with that. 7

If we can work through that faster, than 8

expecte d, and get where we want to sooner, we’ll 9

move on to medium voltage dry sooner, but I would 10

propose we give the morning and the early afternoon 11

to that. Take a break, and then in mid

- afternoon 12

come back and talk about what’s been done on the 13

analysis on t he medium voltage dry and any proposals 14

on medium voltage dry. I’m aware that the analysis 15

on medium voltage dry has been later coming to you, 16

and so people may need more time to take that on 17

board. I’ve heard that said in a couple of cases. 18

Four

- thirt y to five, we would discuss 19

plans for treating special cases, thoughts, 20

networks, et cetera that are low volume but that 21

represent unique design difficulties. So my goal 22

there would be to just set up the process and time 23

table for having those categories. And then wrap up 24

for the last hour with priorities for going forward 25Executive Court Reporters (301) 565

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and work plan for going forward to the next meeting. 1

So that’s just a draft, absolutely no 2

pride of authorship. Do people feel like this is a 3

reasonable way to proceed? By the way, I have not 4

put out

-- put in, you know, try to micromanage the 5

process to talk about, you know, when we would want 6

to break into work groups or caucuses and so forth. 7

I think we’ll see that as it comes up in the 8

discussion, and we can do that, but this is just a 9

very rough and ready outline. 10

Comments, thoughts on the agenda? 11

Steve ?

. 12

MR. ROSENSTOCK: , Steve Rosenstock, EEI. 13

Just a quick one. And again, it’s up to the group, 14

but I was wondering if we could possibly make some 15

time for any clarifying qu estions about the 16

sensitivity analyses that were sent around by LBL 17

and Navigant over the last few days? Just

-- there 18

might be some numerical questions. I had a couple 19

of questions, so again, if people wanted to do that 20

because there’s a lot of informat ion, and I really 21

appreciate all the work that they did, but there’s 22

probably at least four analyses that were done over 23

the last few days and just if people wanted to ask 24

some clarifying questions, take some time to do 25Executive Court Reporters (301) 565

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that. It’s up to the group, just in case people 1

want

-- 2

MR. PARKER: Sure. I’ve allocated 15 3

minutes, but it may be more if people feel that 4

that’s really important to have. Other comments? 5

Andrew. 6

MR. DeLASKI: I agree, but it’s a pretty 7

short time for that, but we may need that. A t some 8

point, just cut it off if we

-- we could get 9

clarifying questions all day long. Let’s not do 10

that. 11

MR. PARKER: Right. 12

MR. DeLASKI: So I would suggest we set 13

some time limit on it. Again, I’m not sure what 14

that’s going to be, so that we can g et to where the 15

rubber meets the road, as you said. And I think 16

also

-- I found the consultants to be generally 17

available at breaks if we have questions we need to 18

ask, do it at breaks

-- sometimes that’s useful too. 19

MR. PARKER: Other comments on the a genda? 20

Does it seem like an acceptable way to use the day? 21

Okay. Agenda adopted. 22

**C larifying**  **Q uestions**  23

**Liquid Immersed** 24

Let’s move on to clarifying questions and 25Executive Court Reporters (301) 565

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discuss first if we need more time, let’s try on 1

bringing it in in 15 minutes, but if we ne ed more 2

time we will. Again, the focus here is on LCC and 3

NIA analysis for liquid immersed since the 4

engineering analysis has remained unchanged. Any 5

questions for Katie or Chris? Steve. 6

MR. ROSENSTOCK: Okay. This is in 7

reference to the draft life c ycle cost payback 8

period sensitivity results where ZDMH, HO, and SA

- 1 9

core materials were excluded. It’s in the November 10

6 th

MR. PARKER: What are we looking for? 15 presentation. It’s 15 pages. I don’t know if 11

you can pull that up, or I’m just going off my 12

screen, but I don’t know if you want to pull it up 13

or

-- 14

MR. ROSENSTOCK: Well, it’s a 16

presentation, it’s dated November 6, 2011 and it’s 17

on Page 2. The title of it is, “Draft life cycle 18

cost payback period sensitivity results. ZDMH, HO, 19

and SA

- 1 c ore materials exclusion.” 20

MR. PARKER: Let me see if I can get this. 21

This is it here? 22

MR. ROSENSTOCK: Page two. No, it’s the 23

other one. But this is where only ZDMH was 24

excluded. It was the other one where it looked like 25Executive Court Reporters (301) 565

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three materials were exclud ed. 1

MR. PARKER: You want the three all 2

excluded? 3

MR. ROSENSTOCK: That analysis. That’s 4

where I think clarifying

-- that’s the one. 5

MR. PARKER: Okay. 6

MR. ROSENSTOCK: Okay. I’m going to Page 7

7 of the presentation, design line five, LCC 8

result s. 9

MR. PARKER: So many people

-- let me see 10

if I can zoom in on this. 11

MR. ROSENSTOCK: Thanks. Okay. Just a 12

quick question for that one, for efficiency level 13

two, if you go up to the other one, basically 14

everything kind of close to 100 percent, but it says 15

net increase 36 percent, and then net savings, 20 16

percent. I’m just wondering what happened to the 17

other like 44 percent there to add that up to 100 18

percent for EL2? 19

MR. PARKER: Katie or Chris, did you want 20

to respond? 21

MS. COUGHLIN: They wou ld be unaffected by 22

the standard. 23

MR. PARKER: That was Katie. Everybody 24

please announce your name for the court reporter 25Executive Court Reporters (301) 565

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before you speak. 1

MS. COUGHLIN: Yeah, there’s always a 2

fraction of the purchasers who are purchasing above 3

the efficiency, the ba seline efficiency, and they’re 4

unaffected by the standard. So that presumably 5

accounts for that remaining percentage. 6

MR. ROSENSTOCK: Okay. It was higher than 7

the other slides when you went over

-- you know, 8

pretty much everything else was closer to 1 00 9

percent, so that one was just so much lower, I just 10

figured I’d ask that question. So thank you very 11

much. 12

MR. PARKER: Okay. Yes, Andrew. 13

MR. DeLASKI: Really two questions, one 14

has to do with the pole costs, so Chris, I guess 15

this is the questio n for you because it affects the 16

LCC. I think it’s a question for LBL, which is that 17

in the summary you sent out over the weekend of 18

changes, I’m looking at the

-- I guess it’s the work 19

point on the summary for the utility pole change

20

outs. Reading point A, it says that “In the LCC 21

calculation it is assumed that a pole change

- out 22

will only be necessary if the weighted increase is 23

larger than 15 percent of the weight of the baseline 24

unit.” So my question is, did you apply that 25Executive Court Reporters (301) 565

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criterion regardless of the weight of the base case 1

transformer? 2

MS. COUGHLIN: Yes. 3

MR. DeLASKI: So it could be a 13 KVA 4

transformer, it could be a much larger transformer, 5

and you’re using that 15 percent as a trigger for 6

pole change

- out, even if the transformer is rather 7

sma ll, the baseline transformer? 8

MS. COUGHLIN: Yes, it reflects the 9

assumption that the pole and the

-- the sizing of 10

the pole and in a sense, the sizing of the 11

transformer are linked. Because there are a variety 12

of pole classes that are sustaining a vari ety of 13

weights. 14

MR. DeLASKI: Okay. So you’re saying your 15

assumption is that that relationship just scales 16

perfectly? Okay. Thanks for the explanation. 17

MR. NADEL: And a question, where did that 18

15 percent criteria come from? 19

MS. COUGHLIN: It is

-- it’s based on

-- 20

there’s a, for wood poles, there’s a distribution 21

strength associated with a given manufacturer

22

specified median strength, and

-- which is based on 23

the fact that wood is not a perfectly homogeneous 24

material. So it’s really kind of base d on a 25Executive Court Reporters (301) 565

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estimate of looking at the degree of leeway you 1

might have in that sizing, based on the shape of 2

that distribution. It is beyond that, somewhat of 3

an arbitrary number. 4

MR. FERNSTROM: Gary Fernstrom from PG&E. 5

If I could just comment on that? I n the smaller 6

sized pole

- mounted transformers, pole replacement is 7

simply not an issue, so it wouldn’t scale until you 8

probably get above 75 KVA. Thank you. 9

MR. PARKER: Yes. 10

MR. HIRSCH: Bruce Hirsch, Baltimore Gas 11

and Electric. I want to comment on that too. When 12

we’ve installed a pole new, new job, that pole was 13

sized based on the equipment that was going to go on 14

that pole and what the load is. So the poles are 15

sized, really, to the transformer size, so I think 16

some of your assumptions are good. I don’t know if 17

the 15 percent number is good or not, but I will 18

tell you in the denser areas

-- not in the denser 19

areas, but in the urban areas where you’ve got a lot 20

of other utilities that are jumping on that pole, 21

Verizon, Comcast in our case, and a l ot of others of 22

those types of utilities, they will load them up 23

pretty heavy, so I’m not sure I agree 100 percent 24

that on the smaller poles it’s not an issue, because 25Executive Court Reporters (301) 565

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in some of these heavy areas, it is, just mainly 1

because of the fact that we size the po le, really, 2

to the initial load. 3

MR. DeLASKI: Just a follow question for 4

Bruce. Bruce, do you guys have a

-- does BG&E have 5

a minimum pole strength? 6

MR. HIRSCH: We have a minimum size pole. 7

MR. DeLASKI: Is that minimum in such a 8

place that you wouldn’t get, on a small transformer, 9

you wouldn’t get to a change until you got to 10

something above 15 percent? 11

MR. HIRSCH: I do agree that when other 12

utilities are not on the pole, that minimum would be 13

very sufficient for the smaller sized transformer s, 14

yes. 15

MR. DeLASKI: Yes. Thanks a lot. 16

MR. HOFFMAN: I

-- 17

MR. PARKER: Identify yourself. 18

MR. HOFFMAN: I’m Alex Hoffman from APPA, 19

and I had a question regarding the draft life cycle 20

cost payback period sensitivity results. It says 21

ZHMD steel exclusion. Is there any way that you 22

could bring that up on the screen so everyone could 23

see? 24

MR. PARKER: What page are you? 25Executive Court Reporters (301) 565

- 0064 25

MR. HOFFMAN: Page 8. Yeah. Okay. So, 1

you know, I was looking at this and maybe

-- and 2

this question is just if I could ge t just a general 3

step through. I saw a few things here that kind of 4

confused me. I noticed, for instance, from one to 5

two the costs increase, but operating cost savings 6

are higher. And I was just wondering if someone 7

could

-- and it seems like the opera ting cost 8

savings drive the payback and

-- but yet the 9

efficiency

-- the actual efficiency increase is sort 10

of

-- it’s a fraction of a percentage, so I was 11

wondering if someone could just, you know, kind of 12

break it down for me in Sesame Street language or 13

something. I need some help, that’s all. 14

MS. COUGHLIN: This is Katie Coughlin, 15

Lawrence Berkeley Lab. So the

-- let’s see, the

-- 16

MR. ANDERSON: He said between one and 17

two , and two and three are flat. What happened? 18

Two and three are flat. 19

PART ICIPANT: Right. 20

MR. ANDERSON: What happened? 21

MS. COUGHLIN: No. Okay, typically when 22

that type of thing happens, it’s because of the 23

shape of the engineering curve. So if the 24

engineering curve is very flat between say, EL1 and 25Executive Court Reporters (301) 565

- 0064 26

EL4, you’re not going to see much of a distinction 1

between EL2 and EL3, because most of the 2

transformers are selected on first cost. So if 3

you’re in a region where the slope is very flat, 4

you’re not going to see much of a change due to 5

placing the efficiency level somewhere in that flat 6

area. I’m not sure

-- it’s sort of

-- if the 7

efficiency curve goes sort of up, and then you have 8

the EL1 here, and then it’s flat, and I have EL2 9

here, well I’m not going to see any difference 10

between choosing EL2 and EL3 because I’m choosing 11

t he same first cost is essentially it. 12

So typically when you see a lack of 13

difference going from one EL to the next, it’s 14

because the cost efficiency curve is very flat in 15

that region of the engineering diagram. 16

MR. BOLDUC: Chris B o lduc, LBL. Also t o 17

follow up for Alex. If you scroll down to Page 13 18

of the presentation, the materials selection for 19

design line 1, we can see between EL1 and 2 where we 20

have the large drop in paybacks, the LCC has 21

switched from picking an M3 steel to an amorphous 22

steel, and the lower losses are a reflection of the 23

lower payback of the higher efficiency levels. 24

MR. ROSENSTOCK: May I ask

-- Steve 25Executive Court Reporters (301) 565

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Rosenstock, EEI

-- so in that case, going from EL2 1

to EL3, there was no

-- exactly the same costs? I 2

think it surprises a lo t of people that the numbers 3

were exactly the same even though the efficiency 4

changed. 5

MR. BOLDUC: To answer your question, 6

Steve. Yes, the same units were selected in both 7

cases from the engineering for design line one. 8

MR. ROSENSTOCK: Okay. 9

MR . ANDERSON: Rick Anderson, Fayetteville 10

PWC. So design line one, the base case has got M3 11

steel. Efficiency level 1 has got 90 percent M3 and 12

ten percent amorphous, and efficiency level 2 is 100 13

percent amorphous? 14

MR. BOLDUC: Yes, that is what the LC C 15

selected from the engineering based on first cost. 16

MR. PARKER: Which slide are you on, Rick? 17

MR. ANDERSON: I’m on 13. 18

MR. PARKER: Thirteen. 19

MR. HOFFMAN: If you could go back to Page 20

8, just one more clarifying question for me is the 21

increment al first cost, the additional cost for 22

purchasing the transformer at that efficiency level. 23

Go to the estimated additional cost. 24

MS. COUGHLIN: Yes, so the incremental 25Executive Court Reporters (301) 565

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first cost is the difference in cost between the 1

base case selection and the standard s case 2

selection. So again, but because in the LCC you’re 3

always selecting from the full range of designs, you 4

may select the same unit under many standard levels, 5

in which case there would be no incremental first 6

cost. 7

MR. PARKER: Can you explain why you would 8

use the same

-- why you would select the same unit 9

under different standard levels? Is it because of 10

limited choices available? 11

MS. COUGHLIN: No, it is entirely driven 12

by the shape of the price efficiency curve. So

-- I 13

don’t know if you can find that rapidly, but 14

essentially what happens is there’s two sets of 15

curves, one for conventional M3 steels, and one for 16

the amorphous. And the shape of the amorphous core 17

curve is a bit of a parabola out beyond, I guess, 18

EL2 or 3. So the cheapest uni t over several 19

standard levels is an amorphous unit. So if you’re 20

picking on first cost, you’re going to pick the same 21

unit under several standard levels 22

MR. PARKER: J erry. 23

MR. CO R KRAN: Some general questions on 24

design level one. 25Executive Court Reporters (301) 565

- 0064 29

MR. PARKER: Jerr y Co r kran. 1

MR. CO R KRAN: Yeah, my name’s Jerry 2

Co r kran, Cooper Power. The printed outputs you have 3

there, is that based on a three percent cost of 4

money? And if so, did you do the same thing for the 5

seven percent cost of money? 6

MS. COUGHLIN: No, the three percent and 7

the seven percent are used in the NIA. In the LCC 8

we have a distribution of discount rates. I think 9

the median is about 4.7 percent real, and then 10

there’s a higher value and a lower value. 11

MR. CO R KRAN: So the second question. The 12

d esigns that you make, do they all have taps in 13

them? Most of the products of the distribution 14

lines do have what we call no

- load taps, which are 15

typically plus and minus five percent. Do your 16

designs contain those taps? 17

MR. COFFEY: They would. None o f the 18

performance data would reflect operation in any of 19

those taps. 20

MR. CO R KRAN: But is the physical winding 21

there which does increase the core losses and the 22

size of the transformer, is a physical winding built 23

with the tap? 24

MR. COFFEY: Yes, it is. 25Executive Court Reporters (301) 565

- 0064 30

MR. CO R KRAN: And are there tolerances in 1

the designs for a normal production variation which 2

we always have when we produce transformers. We 3

have a bell

- shaped curve which may average out 4

somewhere, but if we’re going with an iron

- clad 5

maximum losses, we’d have to back off from a design 6

value. 7

MR. COFFEY: That’s not modeled in the 8

engineering simulation, but that is addressed in the 9

certification and compliance. 10

MR. CO R KRAN: So it’s not addressed in the 11

efficiencies that you’re showing? 12

MR. COF FEY: We just show the efficiencies 13

just sort of in an ideal case, if you built it 14

without manufacturing variability. When the 15

standard is

-- the test procedure, rather, is

-- the 16

current test procedure does have a mathematical 17

allowance for statistical v ariation. 18

MR. PARKER: Andrew. 19

MR. DeLASKI: Andrew DeLaski. In the last 20

meeting, ABB shared some

-- Wes

-- shared some pie 21

charts that showed the transformer that ABB had 22

shift over a year period by losses or sorted by 23

losses and sorted by

-- two set s of pie charts, one 24

sorted by losses and one sorted by efficiency and 25Executive Court Reporters (301) 565

- 0064 31

metals used in the core. We looked that over and 1

the results that ABB shows comes from the 2

transformers that they sold are different than the 3

results that the Department shows and the material 4

selection charts to shoot it in the reference case 5

analysis last week. 6

So, in general, ABB shows they’re using M3 7

for efficiency levels in the market today that are 8

above the levels that the DOE analysis showed as 9

doable. So in other words, t here’s a real world 10

experience, the way I read the data that’s in 11

conflict with the modeling. And the conflict shows 12

that M3 is being used at higher levels in the market 13

today than the model shows is even doable. So I 14

guess the question to Navigant, sinc e they did the 15

engineering, did you corroborate, or did you compare 16

the model results with the data that ABB provided in 17

the last meeting? 18

MR. PARKER: I’m going to turn that over 19

to Wes first. 20

MR. PATTERSON: Andrew, this relates back 21

to

-- Wes Patter son. This relates back to the 22

earlier question on this analysis also where you 23

have two points with exactly the same unit. The two 24

questions, your question and that question are 25Executive Court Reporters (301) 565

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exactly the same question. The DOE analysis was 1

based on a family, a discre te family of AB factors. 2

So they had so many points, A factors for no

- load, 3

so many B factors for load loss, and it’s a family 4

of discrete points, and they ran optimized designs 5

for those points. Those points, in reality, have 6

nothing to do with efficien cy. They are an 7

economic, life cycle cost analysis, and not an 8

efficiency analysis. 9

If you’re looking at efficiency, you would 10

have said, I want to optimize the design for this 11

efficiency level and you would have made a family of 12

efficiency curves. N ow the results of the analysis 13

with the way it was done is it forms a series of 14

dots on the scatter diagram which tend to be sloped, 15

like a parabola. But in reality, these would have 16

been a straight line on a log

- log curve that all of 17

a sudden become asym ptotic at the upper limit of 18

that particular grade of steel. 19

So what you’re seeing is the reason why 20

ABB has M3 at lower efficiencies is because we were 21

designing for an efficiency and not an A/B factor. 22

So where the DOE data curves up, our data was sti ll 23

running in that straight line. Does this make sense 24

to everybody? So it’s a fallacy in the data set 25Executive Court Reporters (301) 565

- 0064 33

that exists in the DOE data. 1

That said, the DOE data, if one recognizes 2

the characteristics of a transformer, can be used to 3

perform the analysis at hand. But you should not be 4

basing these results on discrete points. You should 5

be basing them on the indicated trend of the data 6

that’s available. But the fallacy is the LCC 7

reaches in and says, I’ll grab this explicit 8

particular design, and so you end up with, for 9

efficiency level 2 and efficiency level 3, the exact 10

same design being selected, when in the real world, 11

there’s actually two designs. 12

MR. RIVEST: So kind of to add on to what 13

Wes said, the analysis is based on certain prices. 14

So there are two issues, you know, is the

-- can the 15

design be built at all, but also at what cost can it 16

be built, and which is the most cost

- effective to

-- 17

at a given efficiency? 18

The analysis can be thought of as really 19

two curves. There’s a curve for, like K atie 20

mentioned, for grain

- oriented steels, and then 21

there’s a curve for the amorphous steels. The

-- 22

we’ve already established standards whereby we are 23

in a fairly exponential portion of the capabilities 24

of grain

- oriented steel, so small changes in 25Executive Court Reporters (301) 565

- 0064 34

effici ency come at a larger cost. And if you 1

suddenly are moved onto the amorphous curve, once 2

you are on the amorphous curve, then you are on the 3

linear portion and it’s a fairly flat curve and you 4

have to push further in efficiency to get onto that 5

exponentia l. So you have two intersecting lines 6

here, two intersecting curves, if you will. 7

The point of intersection and efficiency 8

depends on the relative pricing of amorphous and the 9

conventional steels, and a lot of the sensitivity 10

runs have been centered aro und that differential. 11

So if the grain

- oriented steels were less expensive 12

than what we modeled, and amorphous was more 13

expensive than we modeled, we would be on the grain

14

oriented steel curve longer. And so, you know, 15

depending on the design line, we se em to be hitting 16

that intersection in different, you know, at a 17

different point, and a different efficiency level. 18

The other thing to notice is that there 19

isn’t consistency between the design lines and the 20

amount of energy savings in terms of percentage of 21

losses. They’re actually quite different. So EL1 22

is not the same stringency equivalent across design 23

lines. So I wanted to point that out. 24

In terms of the A and B factors, the idea 25Executive Court Reporters (301) 565

- 0064 35

there was to have a lot of A and B factors 1

generating different des igns. Those designs are 2

then kept in a database, and as we update material 3

prices, we can use those designs and re

- cost them. 4

Sort of like a manufacturer would have a whole 5

database of designs they built, and based on 6

material prices, they would then det ermine which is 7

the least cost. 8

MR. PATTERSON: Wes Patterson again. 9

There’s also a fallacy in that because manufacturers 10

don’t maintain a database of discrete designs and 11

just choose the price when material cost changes. 12

There is

-- transformer design is driven very hard 13

from the cost of the core steel and the cost of the 14

conductor. As these commodities change, every time 15

they change, we reoptimize the design, make a 16

completely new design, not take a physical design 17

and just put new prices on it. 18

MR . RIVEST: That’s true. You are in the 19

sophisticated side of the industry, though. 20

MR. DeLASKI: So, just to follow

-- 21

Richard, can you pull up the reference case 22

analysis? Slide 15. 23

MR. NADEL: And while you’re doing that, 24

let me try to interpret wh at I heard Michael and Wes 25Executive Court Reporters (301) 565

- 0064 36

said. I heard you both say that there’s going to be 1

a flat part of the curve and then a knee and then it 2

turns up. What I heard Michael say is he thinks 3

they found that knee. What I heard Wes say is no, 4

you should have continu ed that curve going for 5

longer, that you weren’t at the knee. Am I 6

interpreting this correctly? 7

MR. DeLASKI: Okay. So, and back to the 8

same point I think I’m asking here, but can you go 9

to slideshow so you can see it a little better? 10

MR. PATTERSON : While they’re chasing it, 11

Steve, just as a comment, I mean just conceptually, 12

I mean we’re all fairly intelligent folks. It makes 13

no sense that we would have an efficiency level to

- 14

- an efficiency level 3 where the exact

-- where the 15

most optimized de sign was exactly the same price. 16

This is illogical. For sure there’s some slope. 17

MR. DeLASKI: So, question for Mike, I 18

think. So this slide, if you’re looking at, say, 19

design line, just for simplicity, design line 1, 20

does this tell us that at efficie ncy level 3 that 21

the model picked 100 percent amorphous core 22

transformers? A couple points

-- to make sure I got 23

the first step right here. 24

MR. RIVEST: I believe so, yes. 25Executive Court Reporters (301) 565

- 0064 37

MR. DeLASKI: But there were designs 1

available in the database that used ZMH M2 and M3, 2

but they weren’t being picked because they were 3

higher cost. 4

MR. RIVEST: Exactly. 5

MR. DeLASKI: So then what they think, at 6

EL4, that the

-- so at EL4, this is saying that 7

there are no M3 or M2 or ZDMH designs available. Is 8

it saying that? 9

MR. RIVEST: That’s exactly right, yeah. 10

That’s a reflection of the engineering, there’s no

- 11

- only amorphous at EL4. 12

MR. DeLASKI: So what we observed is, 13

again, I think this is consistent with what Wes just 14

said, is what we observe is that the ABB da ta 15

submitted on what they sold in the market populated 16

some of those cells to the right. So we’re seeing 17

in the market, transformers are being sold with M3 18

and M2 in the various design lines as you go across, 19

where you’re seeing M3 not just available, but 20

actually competing in the market observed today, at 21

least as of the day submitted to this group. 22

MR. RIVEST: I mean I’ll take you on your 23

word, but I didn’t check back to see what the 24

efficiency level was for four and see if on the plot 25Executive Court Reporters (301) 565

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it was being de signed or not. 1

MR. DeLASKI: Did you check the data 2

against the ABB submission? 3

MR. RIVEST: I

-- when you say check the 4

data, in terms of seeing if we could have come up 5

with M2 designs to reach that level, if we had maybe 6

changed the A and B factors or

-- no, we didn’t do 7

that. 8

MR. DeLASKI: Thanks. 9

MR. PATTERSON: So

-- Wes Patterson

-- so 10

this is pointing out, as I said, we have the real 11

world, and we have the model world and there’s a 12

spot here in between, and given that, people should 13

recogniz e that transformers are a custom

- engineered 14

product. We average about 1.2 physical units per 15

physical design. A tremendous amount of variation. 16

So last year I made 10,000 designs, right, and on 17

average, I get 1.2 units per design, which is not a 18

whole l ot. What this indicates is that the design 19

space is essentially intimately variable. And any 20

analysis is looking at a subset of the real world, 21

and then the trick is to leverage that subset for 22

purpose of your analysis. And where I see this 23

thing has a potential gap is that we are selecting 24

discrete points and assuming that those points 25Executive Court Reporters (301) 565

- 0064 39

reflect the trend. Given that, we can still pull 1

knowledge out of this data. 2

MR. RIVEST: Yeah, I mean the way I’ve 3

come to think about this is every design that we‘ve 4

done, so every design line we have a number of, 5

quote, “design options,” if you will, combinations 6

of steel with conductor which would be primary 7

aluminum or secondary copper. And we’re certainly 8

down

- selecting from reality the number of possible 9

ways of constructing a transformer. You know, even 10

our cores, there are multiple ways of designing 11

cores. So by down

- selecting the number of options, 12

we are creating a lumpiness in the analysis that 13

wouldn’t exist, necessarily, in the real world where 14

you have more design possibilities. So when you’ve 15

incorporated more designs what you’re doing is 16

you’re creating a more flat design space, if you 17

will. So, in economics, it’s sort of the difference 18

between those short run marginal cost curves and the 19

long run ma rginal cost curve. One creates an 20

envelope to the individual ones. 21

And Wes’ observation would be that we 22

would be better off, possibly, doing a curve fit 23

through the data and creating a smooth

-- more 24

smooth transition. It would always have positive 25Executive Court Reporters (301) 565

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sl ope for one, so we would avoid the situation where 1

we’re selecting the same design. But that said, I 2

don’t think that there is anything inherently wrong 3

here except the fact that it’s creating these all or 4

nothing scenarios that even within design line 1 may 5

be incorrect, but when you take into account that 6

the representative unit is just one KVA rating and 7

it’s just one application and in the real world 8

you’re going to have a much greater diversity of 9

cost effectiveness, which means you’re never going 10

to get this complete built

- over from zero steel to 11

100 steel. 12

MR. MEYERS: Aaron Meyers, Cooper Power 13

Systems. I just want to make a point that the 14

design lines that we’ve chosen are one specific 15

primary voltage, one specific secondary voltage, 16

it’s one co nfiguration. When you look at the 17

variability in design, I mean the primary voltage 18

typically can range from 2400 volts up to 34,500 19

volts; the secondary voltage could be 120 volts; it 20

could be up to 600 volts, so there are

-- there’s 21

this huge matrix of designs and just because there’s 22

one design or a few designs , a handful of designs, 23

maybe, that are built at a certain efficiency level 24

that are achievable with M2 and 3 steel, don’t 25Executive Court Reporters (301) 565

- 0064 41

confuse that with the fact that it’s a viable 1

solution for that entire en velope of requirements in 2

the marketplace. So when I look at Wes’ data, you 3

know, I acknowledge that there is a design that can 4

be achieved with M3, but it doesn’t say that all 5

designs can be achieved with M3. 6

MR. NADEL: Well, I mean, I’m fine to say 7

w e’re simplifying the world and have tens of 8

thousands of options, we’re only looking at 9

thousands. I feel you’re filling in things. Where 10

I’m troubled is that there appear to be some designs 11

that go beyond your analysis, and they’re not just 12

one or two Z ’s

-- Wes’ data shows 15 percent market 13

share, significant market share for some of these. 14

So I wonder whether you artificially truncated the 15

analysis. 16

MR. RIVEST: There’s nothing

-- there’s 17

actually nothing to artificially truncate, and I 18

think what’s been

-- Wes’ argument about As and Bs, 19

I haven’t explored to see if we were to increase the 20

number of As and Bs being inputted into the design 21

model, if we would come up with some more designs. 22

But that said, the data that Wes has, at least that 23

he prese nted, is all pads, all poles, all KVAs. And 24

we already know, looking across design line one and 25Executive Court Reporters (301) 565

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design line two or three, that the stringency of 1

today’s standard isn’t the same. So, I mean, I 2

think we recognize that the existing standard is 3

more stringen t on the small KVA ratings than on the 4

large KVA ratings. So what might be achievable at 5

one

-- in one KVA rating with M3, is not achievable 6

in another. 7

MR. PARKER: Jerry. 8

MR. CORKRAN: Jerry Corkran, Cooper. And 9

even if it’s achievable, it may be t hat the dollars 10

per wall is very much. I was looking at a 150 KVA 11

three phase last night and comparing it to the 12

present 2007 standard, and I calculated out $22 a 13

watt at the 50 percent load, which is pretty high

14

priced cost reduction. So you need

-- the utility 15

people need to look at the different loss levels and 16

what their watts reductions are in dollars per watt 17

between the different loss levels. 18

MR. RIVEST: It seems

-- Mike Rivest

-- it 19

seems to me that there is far more uncertainty with 20

regards to other things than to this, such as the 21

relative price of amorphous to conventional steels. 22

Whether

-- as opposed to whether the outer envelope 23

of the possibilities of these steels is half a 24

percentage point or a quarter of a percentage point 25Executive Court Reporters (301) 565

- 0064 43

to the left or the right, because the cost 1

effectiveness point would have been crossed long 2

before that. 3

MR. NADEL: We’ll get to this later, but 4

if you have a 15 percent market share for something, 5

it doesn’t imply you’re way past your cost

6

effectiveness point. We wonder

-- we’re not saying 7

that it was intentional, but somehow an artifact of 8

this analysis is to miss some significant options. 9

MR. RIVEST: Steve, we may not have missed 10

anything. We don’t know if that sales data was for 11

this KVA rating. You can’t make those conclusions 12

from the data we have. 13

MR. NADEL: And what we’re saying is that 14

further investigation is needed. That’s why we were 15

first trying to clarify. 16

MR. HOFFMAN: Are you saying, Mike,

-- 17

this is Alex

-- are you saying that

-- and I thi nk I 18

heard this correctly, but this common sense in 19

modeling for DOE to sort of scale this back to 20

reflect all the risks in making really wide, large 21

assumptions and trying to include every point of 22

data? I’m asking just to clarify, it sounds, you 23

know, t here’s some back and forth here, and I’m sort 24

of trying to draw what I think is the key point here 25Executive Court Reporters (301) 565

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and that is that not all these points can be 1

captured, and it’s sort of common sense, you know, 2

if you’re dealing with what is it, variability of 3

supply of m etals and what not, it makes sense to 4

scale the model back accordingly. Stop me if I’m 5

totally out in left field. 6

MR. PARKER: Wes, did you want to respond 7

to that? 8

MR. PATTERSON: Yeah. It is impractical

- 9

- Wes Patterson

-- it is impractical and pro bably 10

impossible to calculate every design option for 11

every transformer rating in the space that we’re 12

talking about. This cannot be done. Okay. So 13

given that, the DOE, from my understanding, selected 14

a design tool which had the capability to run an 15

opt imization given an A, B input. It did not have 16

the capability to run an optimization given an 17

efficiency input. So they have a design tool and 18

they need to use that tool to model the problem. 19

But the problem at hand was not coming up 20

with the most ec onomic design to meet an A/B factor, 21

it was coming up with the relationship of the change 22

in price with respect to the change in losses with 23

an efficiency specification. These are two totally 24

separate problems. Now the data from one can be 25Executive Court Reporters (301) 565

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used for the d ata from the other. But it will not 1

produce perfect data. You have to interpret the 2

data. If a, you know, in a utopian world

-- I 3

always like to look at extremes, you know, what 4

would it be if I took it all the way to one end, and 5

what is it if I take i t all the way to the other? 6

In the perfect world, the DOE would have modeled 7

every conceivable rating for distribution 8

transformer space in North America against an 9

optimization

-- an engine that optimized on 10

efficiency specification. That would be in a 11

perfect world. They don’t have that. We can’t 12

afford it. It’s too expensive. 13

So they worked with the tools that they 14

had. The data is good, sound data. The problem is 15

the interpretation of the results. When I jump in 16

here and I say there’s no price change between EL2 17

and EL3, it’s wrong. Recognize it’s wrong. May be 18

a small price change. You might have to infer this. 19

If you had a graphical representation rather than a 20

numeric number representation, our minds would 21

understand the picture better. You know, if you had 22

a few more data points on the picture. 23

So I think we have enough data to move 24

forward with what our purpose is at hand. But we 25Executive Court Reporters (301) 565

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have to do it, recognizing interpretations of the 1

data. 2

MR. DeLASKI: I agree. We have enough 3

data to move forward, and I think also the key thing 4

I’m taking away from you, Mike, is you look at a 5

particular design line, a particular analysis, 6

whereas Wes is going to get data for his entire 7

dales. So that’s a much different analysis because 8

it’s real ma rket data from his entire sales 9

contingent across all KVA, poles and pads, and it’s 10

the whole kit and caboodle. Whereas you looked at a 11

particular transformer, so somehow we’re working 12

apples

-- comparing apples to oranges comparison, or 13

an apple to a bas ket of apples. 14

MR. RIVEST: I mean, yes, and there are 15

other factors than KVA. There are a lot of other 16

design considerations that come into play, that’s 17

right. But the main take

- away here is the world 18

would not toggle automatically from zero amorphous 19

to 100 amorphous at that level. People should 20

recognize that. That’s what our models are saying 21

based on the engineering we have, based on the 22

selection criteria of the LCC. The world won’t

-- 23

that’s not how the world’s going

-- is going to 24

happen. It will be much more gradual, different 25Executive Court Reporters (301) 565

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niches, we’ll turn more quickly in different parts 1

of the country, and, you know, eventually it would 2

have to be amorphous. I think your data shows that 3

at 40 percent loss reduction there’s no other 4

option. But there’ s a continuum there, and that 5

crossover point is most of all determined by the 6

relative price of amorphous and conventional steels. 7

And when you start filtering out steels, then you’re 8

creating even more lumpiness. 9

MR. PARKER: Steve. 10

MR. ROSENSTOCK: Steve Rosenstock, EEI. 11

Again, just looking at slides 13, 14, and 15, based 12

on the analysis that was done, the results of this 13

analysis

-- I’ll just go with what’s on here now

-- 14

basically says that for pretty much any design line, 15

if you go above EL1, th eir analysis is based on 16

results with the information on amorphous 17

transformers. Is that stating it in a correct 18

manner, Mike? 19

MR. RIVEST: Sometimes it’s EL2, I 20

believe, right, depending

-- so the transition in 21

these models between conventional steels and 22

amorphous steels is typically anywhere from EL0 to 23

EL2. 24

MR. ROSENSTOCK: Okay. Thank you. 25Executive Court Reporters (301) 565

- 0064 48

MR. RIVEST: And we can change that by 1

changing the prices, which is what a lot of these 2

sensitivity runs have been about. 3

MR. HIRSCH: Bruce Hirsch, BG&E. Just a 4

clarifying point on that. And that’s based on the 5

model run with respect to cost, what was cost

6

efficient. It’s not based on whether the unit

-- I 7

mean you could say at efficiency level 3, we could 8

build it with M3, but it might not work size

- wi se, 9

weight

- wise, those type of issues are not taken into 10

account in this model. 11

MR. RIVEST: I’m sorry, Bruce, could you 12

please repeat your question? 13

MR. HIRSCH: The question was, and I think 14

the point has been made that looking at this chart, 15

at effi ciency level 3, we could build a transformer 16

with M3 steel. There are designs available. My 17

question is, does the model take into account that 18

yeah, the design is available. It might not be 19

cost

- effective, but it also might not physically 20

work for us, s uch as weight, size, that type of 21

thing. 22

MR. BOLDUC: The LCC model doesn’t take 23

into account the physical characteristics in terms 24

of unit selection in the LCC. We track volume and 25Executive Court Reporters (301) 565

- 0064 49

weight, but we don’t use it as a selection criteria. 1

MR. CYMBALSKY: So we’re ready to 2

negotiate, it sounds like. 3

MR. ANDERSON: John, Rick Anderson. Can 4

you go to slide eight? Back up here. Okay. What I 5

want to do

-- Rick Anderson, PPA

-- what I want to 6

do is do a little bit of what Wes said, interpret 7

the data, and what Jerry said, look at the cost per 8

watt. Now, design line one

-- now I’m going to be a 9

user, so I’m trying to understand what I’m getting 10

ready to buy. Design line one, this is a 50 KVA 11

pad, a single

- phase, pad

- mounted transformer. If I 12

go from the b ase case

-- well, let me back up. If I 13

look at the watts loss on a 50 KVA pad at the 50 14

percent test point, this is actual data that I got, 15

my core losses for a 50 KVA pad are like 102 watts, 16

and my winding losses are 591 watts, so at the 50 17

percent test point, my winding losses are 148 and my 18

core losses are 102, so my total losses for a 50 KVA 19

pad

- mounted transformer is 250 watts. 20

Now if I go from an efficiency level, the 21

base case, 99.08, to efficiency level one, which is 22

99.16, what I see at the sa me test point is a 23

reduction of approximately point two watts. So if I 24

look at efficiency level one and my incremental 25Executive Court Reporters (301) 565

- 0064 50

first cost as a user, I’m going to pay $343 more and 1

get point two watts? That doesn’t make any sense to 2

me. That’s the equivalent of paying $1700 for a 3

watt. I could give away light bulbs and save money. 4

So I’m just trying to get clarity with the data. 5

I’m using real 50 KVA pad

- mounted

-- 6

single phase pad test data. I’m at 250 watts at the 7

test point. I move up from 99.08 to 99.1 6, I pay 8

$343 more and I save two

- tenths of a watt. I don’t 9

get it. See what I’m talking about? 10

MS. COUGHLIN: Yes, but the numbers in the 11

LCC are not

-- 12

MR. ANDERSON: I’m talking about

-- 13

MS. COUGHLIN: Yeah, I know. The design 14

that you’re refe rring to

-- these numbers are based 15

on the designs that are in the LCC so they have a 16

different range of loss and no

- load loss parameters. 17

MR. ANDERSON: It’s going to be 100 watts. 18

It’s going to be around 100 watts. It’s not going 19

to be

-- you know, t hose designs

-- what’s the range 20

of variability on the designs for 50 KVA pad? Plus 21

or minus ten percent, Wes? Jerry? I mean, if I’m 22

seeing 100 watts on the core for a 50 KVA pad, 23

what’s the spread? Even if it spreads at 50 24

percent, I’m still not going to even save one watt. 25Executive Court Reporters (301) 565

- 0064 51

MR. COCKRAN: Well, a spread wouldn’t be 1

50 percent because

-- the steel people probably have 2

a good number on it. I would say about ten percent 3

is probably

-- would encompass most of those 4

production variations , ten, fifteen per cent. 5

MR. PARKER: Okay. Any other comments on 6

this before we move to proposals? Yes, Bob. 7

MR. SAINT: Yes, moving on to other areas 8

of the analysis, the loading data

-- we’re still not 9

satisfied with that, and we’ve been talking to LBL 10

about that an d they’ve acknowledged that there’s 11

some problems with the loading. One is the peak 12

load of the transformers, and also the load factor 13

of the transformer. And we think both of those are 14

too high, they’re different numbers, but both of 15

those are too high. And they’ve acknowledged that 16

there’s some problems with it, but we haven’t seen 17

the analysis yet. So, I’d like to discuss that a 18

little bit and acknowledge that, you know, the 19

loading of the transformer are, we think, are high 20

as presented, so the payb ack costs

-- that first one 21

efficiency level, the payback of 32 years, we think 22

will be longer than that. 23

So, just for the record, and maybe Ken 24

Winder can address some of the issues that we have 25Executive Court Reporters (301) 565

- 0064 52

with those. 1

MR. PARKER: Okay. Thanks. Wes. 2

MR. PA TTERSON: I’d like to come back to 3

Rick’s analysis here. The data from the DOE design 4

data, not what is used in the LCC, just looking at 5

the designs. For that 50 KVA single phase pad, 6

their lowest cost unit is a $2000 unit, 234 watts. 7

The peak design, t heoretical, just extrapolating off 8

of it, is 108 watts for $3500, so you’re paying 9

$1500 for 126 watts. Right. This is strictly off 10

the DOE data. That number is consistent with ABB’s 11

pad mount curve. But for pole mount data, the price 12

increase is more than twice. 13

Now Mike and I have had discussions on 14

this and I think he’s still working on trying to 15

explain the difference between the design data and 16

the LCC data, and Mike might shed light on it 17

because this rate of change

-- you had a chart

-- it 18

was showing how you believe they are closer in line. 19

MR. PARKER: Sorry, I’ve got to also at 20

this point, I got a note passed to me that we need 21

to have everybody give their names, including the 22

DOE staff for the court reporter before they speak, 23

so Mike did you want to respond to that? 24

MR. RIVEST: So Wes was generous enough to 25Executive Court Reporters (301) 565

- 0064 53

provide his design information, his actual database 1

if you will, for us to analyze the incremental cost 2

of efficiency. And my analysis of that basically 3

shows that when I normalize for the same set of 4

assumptions, and there’s good agreement, the issue 5

here is that as you pointed out, they have greater 6

design space and more, if you will, of a continuous 7

curve. Their incremental cost is more linear than 8

what we’re showing here. 9

So , you know, I feel that the differences 10

can be explained. We had a conversation about the 11

rate of change for poles and pads, but when we had 12

that normalized to dollars and watts, things were 13

coming much more in line

-- and when I was looking 14

at it

-- when we were looking at it as change in

-- 15

percentage change in price, things were confusing 16

because the base price was quite different. But I 17

would say, based on my examination of your data and 18

our costs as captured by the LCC, a regression 19

through those wou ld show the same trend. 20

The problem is that we’re not using a 21

regression. We’re using discrete points of 22

efficiency and selecting designs at those discrete 23

points, so it’s creating a lumpiness that wouldn’t 24

exist if we had a regression. 25Executive Court Reporters (301) 565

- 0064 54

MR. PATTERSON : Mike, on this 50 KVA 1

single phase unit, you do agree that we’ re talking

- 2

MR. PARKER: This is Wes Patterson. 3

MR. PATTERSON: Yes, Wes Patterson. You 4

do agree we’re talking roughly a $1500 increase for 5

126 watts? Or you could confirm that? 6

MR. R IVEST: I’m sorry, are you talking 7

about the LCC says or

-- 8

MR. PATTERSON: Yes, based behind the LCC 9

finding, which is Rick’s analysis. We’re looking at 10

$1000 for 100 watts. So we’re paying $1000 for 100 11

watt light bulb. 12

MR. RIVEST: Is that what

-- I mean, I saw 13

the LCC had

-- it could change an operating costs, 14

right, those are not based on a discrete design, 15

they’re based on a selection of hundreds of designs. 16

Actually, the efficiency of those transformers 17

selected at that efficiency level is not at that 18

efficiency level. It’s actually significantly 19

higher. So that’s what the LCC’s doing, right. 20

It’s saying if the standard is at that level, what 21

will people buy, and how much will they save. But 22

what they buy is not all transformers at the 23

mini mum, so that calculation you’re doing assumes 24

that everyone buys at exactly that level. That’s 25Executive Court Reporters (301) 565

- 0064 55

why the numbers aren’t adding up. And that’s also, 1

as I pointed out, there’s not a whole lot of change 2

in the price of two, and three, and four, because 3

they’ re consistently buying at higher efficiency and 4

saving more money. 5

MR. PARKER: Richard Parker. We’re going 6

to have to move on. Mahesh, a quick comment. Would 7

you state your name for the record, please. 8

MR. SAMPAT: Mahesh Sampat, EMS 9

Consulting. D id the calculation on the example that 10

you are describing going from base level to level 11

one for design line one, and I get 20 watt 12

reductions. Going from

-- 20 watts

-- and I will 13

compare the notes, okay, it’s not like half a watt 14

or something like that. We’ll have that corrected, 15

okay. 16

**Question: Separate Product Class for Pole** 

**- Mounted**  17

MR. PARKER: Thank you. Okay. We’re 18

going to have to move on to the proposals. The last 19

exchange between Wes Patterson and Mike, though, 20

does raise our next agenda it em, which is to 21

discuss, hopefully, very briefly, and perhaps we’ve 22

already covered it, but very briefly the question of 23

whether there should be a separate product class for 24

design line two, which is pole

- mounted transformers. 25Executive Court Reporters (301) 565

- 0064 56

This is different from the v ault issue, I think. 1

And if so, how that would be treated. Let’s turn to 2

that discussion now and perhaps

-- Wes, you and I 3

had a conversation as we were walking up here, 4

perhaps you’d just like to walk people through your 5

sense of what you’ve been discus sing, and what an 6

approach to take care of that might be. 7

MR. PATTERSON: Wes Patterson. So, from 8

our perspective, the poles have a lot of issues that 9

are question marks that the pad and the substation 10

market do not. So there’s

-- the big issue with th e 11

poles is the problems with hanging them on the pole, 12

the physical dimensional size, they’re taking more 13

space on the pole and there’s other utilities trying 14

to occupy that space on the pole. The question of 15

the pole change

- out. There’s a lot of other i ssues 16

related. And also in the analysis of the poles A to 17

B data, the rate of change of increase in price with 18

reduction in losses is higher in a pole than a pad. 19

Given all these factors, it may warrant 20

that the poles be a separate equipment class. Giv en 21

that, the question is, how could we make this 22

simple? And I believe that a simple solution would 23

be we arrive at a standard for the core of the 24

market, and then simply have a simple multiplier 25Executive Court Reporters (301) 565

- 0064 57

that says if it’s this equipment class you move the 1

losses by X amount. 2

MR. PARKER: So the proposal on the table 3

is to basically not alter the analysis, but have a 4

group convene to work out, on a technical level, the 5

idea of a multiplier that would be applied to the 6

analysis for pads that would enable a separat e 7

standard to be able to be created for poles, but 8

that the increments, as I understand it, would be 9

analyzed equally

-- the same, in other words, the 10

slopes would be the same, but there would be a 11

different standard set at the end of the day for 12

poles and pads that would presumably be somewhat 13

more ambitious for pads and somewhat less ambitious 14

for poles. Is that correct? 15

MR. PATTERSON: That would be my proposal. 16

MR. PARKER: Comments? 17

MR. COULTER: Yes, this is Greg Coulter, 18

GE Prolec. I’m not su re you want to do that before 19

we know what efficiency levels you might set. You 20

might come up with efficiency levels that you don’t 21

care whether they’re different between pads and 22

poles. We agree they have a different shape . I 23

think the data shows that, but in the end, the 24

question is, what is the efficiency level. Some of 25Executive Court Reporters (301) 565

- 0064 58

us build all these things in the same plant. We 1

would prefer to not have a change between pads and 2

poles. And if the efficiency level comes out where 3

you can get there, why bother h aving a separate one 4

for single

- phase pads and single

- phase poles? 5

MR. PARKER: Yeah, I think we can 6

stipulate that we’re not going to make work. If 7

there’s not a relevance to it, we won’t do it, but 8

we’ve opened the option of doing that if there is a 9

n eed for it. Andrew. 10

MR. DeLASKI: So this Andrew DeLaski. I 11

think we indicated in the last meeting, or maybe 12

even the first meeting, that we were open to the 13

notion of separate analyses for pole and pad

- type 14

transformers. We’re certainly open to this idea. 15

We acknowledge that there are some cost differences 16

going on here and that

-- but in the

-- again, the 17

final, we’re going to look to the cost

- effectiveness 18

analysis to help us look to what that relationship 19

should be, I mean, what is the scaling, wh at is the 20

multiplier. And if the cost

- effectiveness analysis 21

says it should be one, then that’s what we will look 22

to. If it says it should be point nine, then we 23

would look to that. So we’re certainly open to 24

exploring the stats. 25Executive Court Reporters (301) 565

- 0064 59

MR. RIVEST: Mike Riv est, Navigant. 1

Currently we do analyze a pole and a pad, and 2

combine that analysis to arrive at a standard level. 3

So I believe the analysis is in place that would 4

allow us to do that. From the perspective of

-- if 5

I understand Wes, the driver here, the 6

differentiation, has to do more with the 7

installation costs. So those can be handled in the 8

LCC through the pole change

- outs which would be 9

applied to that product class, but not to the pad. 10

So, all else being equal, adding in the pole change

11

outs would drive you to a lower efficiency for the 12

poles than for the pads at equal capacity. And I 13

don’t know what the multiplier is, but there is 14

analysis in place that would allow us to do that. 15

MR. PARKER: Jerry. 16

MR. COCKRAN: Wes’ reasons are technical 17

and not really opinions, it’s a technical

-- correct 18

technical stance. And another factor, the higher we 19

push the efficiencies, the more the rebuilding 20

market is going to boom, and the percentage of new 21

transformers will go down. And the nation will use 22

mor e energy because there’s no energy standards on 23

the rebuilt ones. 24

MR. ANDERSON: Rick Anderson, PWC. 25Executive Court Reporters (301) 565

- 0064 60

Jerry’s right. I did some checking on rebuilding, 1

and you can rebuild a transformer just slightly less 2

than what you pay for a transformer today. So i f 3

you push the efficiency levels up, you know, and 4

charge more for a single

- phase pad, the economics 5

become pretty good to look at rebuilding 6

transformers. And if you really think about it, 20 7

years ago we threw away our beer cans, and look what 8

Waste Ind ustries did, okay, they created an enormous 9

recycling business. So if the cost of transformers 10

become cost

- prohibitive, we’ll begin to

-- the users 11

will begin to look towards recycling or rewiring 12

transformers. W e’ ll avoid purchasing a new 13

transformer fr om the manufacturers at all costs. 14

In addition to that, we can take, using 15

the 50 KVA pad as an example, that means we can 16

spend $350 beefing up our protection to make sure 17

that the transformers do not fail, and extend the 18

life. So if we do that and e xtend the life and it 19

finally does blow up, we can go to the rewinding 20

manufacturers and have it rewound cheaper than I can 21

buy it from Cooper, ABB, or General Electric. 22

MR. PARKER: Okay. I’m going to take 23

Steve, go ahead, and then Wade and then we’ll wind 24

up. 25Executive Court Reporters (301) 565

- 0064 61

MR. ROSENSTOCK: Thanks. Just a quick 1

one. In terms of the concept of separating out 2

poles and pads from the utility side, I think we’re 3

fine with that concept. I just wanted to mention, 4

some of Wes’ multipliers, I think we have to look at 5

ot her efficiency levels outside of the 1, 2, 3, 4, 5 6

because if you’re using multipliers, you’re going to 7

be in between zero and one, one and two, et cetera. 8

So I think everybody has to be open to the idea of 9

other numbers being on the table. Otherwise, yo u 10

may not be able to break out the poles and pads 11

because it sounds like a different analysis will 12

lead to different results, which are different than 13

the numbers being shown in all of these 14

presentations. 15

MR. PARKER: Well, I think Wes’ proposal 16

was n ot to do a full new analysis, but to try to do 17

a single analysis, right, that would

-- more of a 18

standard for poles and pads together, but then at 19

sort of the end stage of the operation, separate 20

them by an amount that equals whatever the agreed 21

multiplier is, so that you would end up having a 22

different standard for poles in the equipment class, 23

but you wouldn’t completely redo a new analysis of 24

those two things. I put that as your proposal, 25Executive Court Reporters (301) 565

- 0064 62

right? 1

MR. PATTERSON: That is correct, Richard, 2

and I would ha ve exactly the same proposal for all 3

difficult areas

-- the network transformers, the 4

over 200 BIL and others, to try to keep the 5

standards as simple as possible. 6

MR. ROSENSTOCK: Steve Rosenstock, EEI. I 7

understand that, but still at the end of the day

, 8

there’s still going to be different numbers. 9

MR. PATTERSON: Right. That’s right. 10

MR. ROSENSTOCK: Which some of us have 11

proposed all along to allow other numbers. 12

MR. PARKER: That’s right, and we have 13

taken your proposal. 14

MR. ROSENSTOCK: Yes, I appreciate that, I 15

saw the other presentation, yes. 16

MR. PARKER: Thank you. Ray. 17

MR. P O LINSKI: Ray Polinski, ATI Allegheny 18

Ludlum , and before I ask one more question, I just 19

want to go on record that from being relatively new 20

to this process and s itting here now through two and 21

a half meetings, just go on the record that I think 22

the DOE did an excellent job in developing the 23

current standard. I think they pushed the seven 24

criteria that they have to meet based on Energy 25Executive Court Reporters (301) 565

- 0064 63

Policy and Conservation Act as it relates to 1

lessening the impact and lessening the competition, 2

the pole weights, et cetera, I think they got it 3

right. But again, that’s just a comment there. 4

But the one other question, we touched on 5

it here, is the refurbished transformer issue, which 6

I think is very real, and I hear a lot of it out 7

there from

-- dialogue when I visit transformer 8

customers. Was there any

-- is there any factoring 9

anything in the analysis for cost analysis and 10

energy savings? Do they factor in 20 percent, 25 11

per cent of transformers may be refurbished, is that 12

in the analysis or not? And what the impact on 13

manufacturing? I mean, it’s a pretty big issue and 14

do we account for it at all or has it just been, you 15

know, submitted? 16

MR. CYMBALSKY: This is John Cymbal sky, 17

DOE. So how this is handled is in the shipments 18

forecast. So, I’ll let LBL speak to the specifics, 19

but I know for other rulemakings, that’s in fact 20

true. So for central air conditioners, one standard 21

goes up, people

-- the life gets extended, they 22

repair more than they buy new, and so how this is 23

impacted is that the number of shipments of 24

transformers will go down than what it would have 25Executive Court Reporters (301) 565

- 0064 64

been without the standard in place. And then when 1

you do the whole national impacts, that’s when you 2

get the fe edback there. And if I’ve misstated 3

something, Katie can correct me, but that’s how it 4

works. 5

MS. COUGHLIN: This is Katie Coughlin, 6

LBL. That's correct. So the forecast of how the 7

overall market will shift under a standard will be 8

affected by the deg ree of refurbishments. And this 9

comes out in the national impacts analysis. And we 10

do have a

-- we call it a repair/replace decision in 11

there. The issue for us is that currently the 12

refurbishment market is so small that we don’t have 13

any data that will allow us to characterize those 14

costs with any degree of accuracy. And if we had an 15

accurate characterization of the relevant cost 16

savings of a refurbishment versus a new purchase, 17

then we can put that in the model. 18

MR. SCHOEN: Jerry Schoen, AK Steel. To 19

further complicate this, was there not to be an 20

examination of the different efficiency levels for 21

design lines one through five at different BILs? 22

Because that was a complicating factor. 23

MR. PARKER: Wes. 24

MR. PATTERSON: yeah, that’s still being 25Executive Court Reporters (301) 565

- 0064 65

d iscussed, how to manage the liquid filled at the 1

200 BIL level. 2

MR. SCHOEN: Thank you. Second point I 3

would make is we have a market analysis at this 4

point in time, going here forward 50 percent of the 5

distribution transformers

-- somewhere between 5 0 6

and 60, depending on the market

-- will be 7

replacement units. Now those are units that are 8

currently in service that can be taken out and 9

rewound. A distribution transformer, unlike an air 10

conditioner, is not a mechanical device. It’s a 11

static piece o f equipment and the main replacement 12

item is the coil assembly because the insulation 13

fails. As you’ve made the point, rewinding them is 14

-- well, there’s a rule of unintended consequences. 15

It’s very easy to rewind a transformer. It’s just 16

when transform ers contain in g PCBs, there’s an 17

inherent limit to doing that. People were afraid of 18

opening the can. They typically were incinerated or 19

we would get the incinerated stuff and we’d make new 20

steel out of it. 21

The second point to be made, though, is 22

most of the equipment out there that’s failing today 23

is PCB

- free. It’s all basically mineral oil, clean, 24

un

- PCB

- contaminated mineral oil, and it can be 25Executive Court Reporters (301) 565

- 0064 66

reused. 1

PARTICIPANT: Since 1970s. 2

MR. SCHOEN: Exactly, and that’s the 3

vintage is coming out of service today. There’s 4

literally tens of millions of these units out there 5

and I would submit to you that today, you know, 6

we’ve run our model

-- our model shows us that at 7

this moment in time, 80 percent of the transformer 8

market is replacement, when? Because the housing 9

virtually collapsed. But that’s what

-- we didn’t 10

really ever validate this model until we hit this 11

recession. We were using it for forward

- looking, 12

you know, what the demands and requirements of the 13

various market segments we serve would be. 14

I would submit to you that if a refurb 15

market has a cost advantage

-- I think several 16

meetings ago Wes said we were 10 to 15 percent close 17

to that tipping point for that to take off. Is that 18

-- my recollection right on that? 19

MR. PATTERSON: Pretty cl ose. I think 20

what I’ve said many times is that when the price 21

differential hits 20 percent, by and large, the 22

customer will opt to rebuild. And I’m in an 23

industry where rebuilding is now common practice. 24

Replacement is much more expensive than 25Executive Court Reporters (301) 565

- 0064 67

refurbish ment. 1

MR. PARKER: Bob, very quickly. 2

MR. SAINT: I can’t help but quantify in 3

the refurb market, but another piece of anecdotal 4

evidence is that we’ve been getting lots of pressure 5

from our membership, the co

- ops, to lobby RUS into 6

loaning money on re furbished equipment. Currently 7

they will not loan money on used equipment, but 8

we’ve been under pressure, and they’re considering 9

changing that policy so that they will be loaning 10

money

-- they could be loaning money for refurbished 11

transformers which wil l increase the purchase of 12

those types of transformers. I can’t tell you how 13

much, but it will increase. 14

MR. PARKER: Thank you. This is helpful. 15

At some point we have to simply say this is our 16

analysis and we have to make a decision based on the 17

analy sis. The analysis has been out there for quite 18

a while. There is a model for trying to

-- there is 19

an approach that John described and that Katie 20

confirmed for trying to take this situation into 21

account in that analysis. They have been open for 22

comment for that, and I would expect that they have 23

taken those comments as they have come in. 24

At this point, I think we have to really 25Executive Court Reporters (301) 565

- 0064 68

work with the data that we have and the analysis 1

that we have to base a decision on, because our 2

decision needs to be based on the analysis before 3

us. So let’s turn to the proposals then, the people 4

that will have

-- and I’ll take a sense of the 5

group. So people

-- we’re an hour behind schedule 6

now because of the issues raised. I think they were 7

some important issues that ne eded to be raised and 8

discussed, but do people want to take a short break 9

now and then come back and hear proposals? Does 10

that make sense? So why don’t we take a ten minute 11

break, a 15 minute break, and then we’ll reconvene 12

for the proposals. 13

(Whereupo n, at 10:58 a.m., the meeting was 14

recessed for a 32 minute period.) 15

MR. PARKER: Okay. If we could get 16

started again, please. Okay. I let the break go on 17

a little bit longer because I think there was some 18

really fruitful sidebar discussions going on a nd I 19

wanted to give them a chance to work their way 20

through. 21

We’re now at the point where it’s time to 22

take proposals and in no particular order, I will

-- 23

why don’t we start off

-- I know the advocates have 24

proposals that they want to put on the table, that 25Executive Court Reporters (301) 565

- 0064 69

they’ve been working through, so why don’t I just 1

start with them. Why don’t we plan on working 2

through until

-- does it make sense to work through 3

until one, or people want to break at 12:30 as 4

scheduled? 5

PARTICIPANT: When’s lunch time? 6

MR. ROS ENSTOCK: 12:30. 7

MR. PARKER: 12:30. 8

PARTICIPANT: 12:30 then. 9

MR. NADEL: We should also see

-- I don’t 10

know how many proposals there are to put on the 11

table, let the different proposals come out so 12

people can be discussing them at lunch. We have o ne 13

but I don’t know whether there is one, two, eight

-- 14

MR. PARKER: I know that John Caskey has a 15

proposal, right, or at least some presentation

-- 16

something he’d like to put forward, and Eric, did 17

you want to

-- 18

MR. PETERSEN: Yes, we’d certainly be 19

willing to put a proposal forward. 20

MR. PARKER: Okay. So we have three. Why 21

don’t we try to make sure that they’re all out on 22

the table before we break for lunch. So shall we 23

say

-- how much time do you need for yours? 24

MR. NADEL: Five, ten

-- call it ten 25Executive Court Reporters (301) 565

- 0064 70

minutes. 1

MR. PARKER: Okay. Why don’t we plan on 2

say, ten minute presentation max. We’ll get all the 3

proposals out there and then we’ll have a discussion 4

of them. Does that make sense? Okay, take it away. 5

**Proposals** 6

MR. NADEL: Okay. Thanks. I’m going to 7

start it, and then Andrew’s going to pick it up at 8

the end. First we think there’s been a lot of very 9

fruitful discussions. We’ve certainly learned a 10

lot. I think we’ve helped, collectively, improve 11

DOE’s analysis and I think working from the analysis 12

we have a solid foundation to go forward. So we’re 13

trying to build on that. 14

In particular, we wanted to focus in on 15

trial standard level four in the most recent DOE 16

analysis, which is the analysis where M3 and the 17

other more advanced stee ls can compete. However, as 18

we noted earlier, while we like the concept of them 19

competing, we think DOE or the analysis drew the 20

line in the wrong place, that basically a little bit 21

higher is actually where the M3 and the amorphous 22

and other types of stee ls will compete. And we’d 23

like to see an analysis revised on that basis. 24

But as we look at the ABB data, look at 25Executive Court Reporters (301) 565

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the DOE data, it appears that that point will be 1

about 25 percent lower losses than the current 2

standard, and we’d like reaction to that a nd we can 3

all try to refine that. 4

The reason we selected that level is 5

because there appear to be very substantial energy 6

savings, substantial consumer savings as well. If 7

you look at trial standard level four, Andrew and I 8

had different versions, both dated November 3 rd

We also believe that the analysis under

21

estimates the benefits, uses prices for M3 that are 22

significantly higher than what you find in the 23

market today, so we are looking forward to those 24

sensitivity analyses wit h scenarios where it uses 25 , of

9

the same analysis, so we’re not sure which was the 10

more recent one and which is the less. One of them 11

had $11 billion dollars of net consumer benefits at 12

a three percent discount rate, the other had $13 13

billion. So what’s a few bil lion among friends? 14

But double

- digit billions of dollars in terms of net 15

benefits. Energy savings are

-- its shows about 1.4 16

quads at trial standard level four. It was a little 17

bit stronger than that, meaning revising analysis it 18

will probably go up to 1.5, 1.6 quad, something in 19

that range. 20Executive Court Reporters (301) 565

- 0064 72

more current prices, rather than elevated prices. 1

We do believe that it has far too many pole 2

replacements, an extra 15 percent increase. We 3

think it’s calling for too many new poles. So if 4

you call for less new poles, again, t he net benefits 5

will increase. 6

So the DOE analysis shows net benefits of 7

$11 to $13 billion. We suspect that will grow 8

significantly as well. So I know in the e

- mail 9

traffic people said, so why do you

-- how can you 10

justify this extra expense of these things? Well, 11

we think, you know, 11, 13, even higher billions of 12

net benefits is a justification as well as the 1.4 13

or more quadrillion BTUs of savings. 14

I’d also note that all of this is based on 15

the 50 percent loading, which is the test standard. 16

In fact, as a lot of people discussed, probably the 17

loading is a bit lower. Since the discussion is 18

really focusing on what type of steel at lower 19

loadings and the no

- load losses becomes even more 20

important as well. Don’t want to revise the 21

analysis end, ju st noting that the no

- load losses 22

becomes particularly important. 23

While this is our proposal to work from 24

but improve trial standard level four, we are open 25Executive Court Reporters (301) 565

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to suggestions on ways to tweak things. We’ve 1

already said we’re open to modifying the standards 2

for different BIL ratings, to modify standards for 3

pole

- mounted, the round transformers, although we 4

think if you correct the pole price you don’t need 5

as much of an adjustment as the current analysis 6

might show. 7

We also are open to, as we mentioned l ast 8

time, the assumption is it’s a three year effective 9

date, but we can potentially play with protective 10

dates, or you could potentially do a two

- tier 11

standard where we do a more modest thing at first 12

and then if people think what our proposal is a 13

little too big to consider, that we’re open to 14

considering these type of things, but we’d want some 15

concrete proposals that we could react to. 16

We’re open to, is there any possibility of 17

trying to find some type of money for incentives to 18

help, you know, help w ith transitions during some 19

type of transition period, though finding that money 20

could be challenging, we’re more than happy

-- and I 21

know this is something that came up last time, to 22

work with the utilities and go into NARUC and the 23

commissioners in parti cular, to help make sure that 24

the utility commissions will be supportive of cost 25Executive Court Reporters (301) 565

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recovery on new higher minimum efficiency standards 1

that have an up front cost, but have long term 2

benefits for consumers. I know that was an issue 3

some utilities raised last time and we’re more than 4

happy to do it. I know our organization and a 5

number of others regularly presents before NARUC on 6

that, or can talk to individual commissions. 7

So, those are the outlines of our offer. 8

I think Andrew wanted to say a little bit about how 9

we came up using the ABB data on the 25 percent 10

lower losses and one more point I forgot. A lot of 11

people have been mentioning, oh, gee, should we just 12

go up one half of a trial standard level. Really 13

minor savings. We’ve talked about that, an d 14

frankly, we don’t see it. We’d be

-- what we’d do 15

is just say, make your argument to DOE, we’ll make 16

our counter

- argument. We don’t see going up half a 17

standard level being a basis for a consensus 18

agreement as opposed to positions that people would 19

tak e to DOE and DOE would get to decide. 20

So, with that, Andrew. 21

MR. DeLASKI: Richard, if you can pull up 22

the reference case analysis and go to slide 18. 23

We’re thinking about the proposal ... at our last 24

meeting. We’re looking at well, what do we think 25Executive Court Reporters (301) 565

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th e Department would do in a contested rulemaking? 1

We think the Department has to move towards 2

standards that maximize MPV and that’s kind of the 3

way we’re looking at this. And that sort of to see 4

a point five level, is that we just don’t think 5

that’s wher e the Department would land in a 6

contested rulemaking. It’s just not the history of 7

how the Department has made their decisions in our 8

experience. So that’s not a basis for that

-- that 9

argument. 10

So we’re looking at

-- 11

MR. PARKER: Sorry, I’ve been told we need 12

to use a mic and I don’t know if we have any 13

portable mics

-- 14

MR. DeLASKI: What we’re looking at here 15

is the decision criteria in TSL

- 4. Okay. So this 16

is the decision criteria that I think we put on the 17

table in the first place, so gray, LCC was M3 design 18

option. We’re trying to maintain options in the 19

market place for core materials

-- that’s the 20

criteria that we think is an important one and we’re 21

working to maintain it with this proposal. 22

TSL

- 4, as Steve noted, we think that 23

correcti ons to the analysis would show us that 24

slightly higher levels actually meet that criteria. 25Executive Court Reporters (301) 565

- 0064 76

So if you would go back to slide 13, and slide 13, 1

what I want to show people is what the ABB submitted 2

data, and how, if you populate these tables with the 3

ABB dat a

-- and again, we’re comparing the ABB data 4

for the whole market, for all their sales, whereas 5

the

-- the ABB data is for the whole market, for all 6

their sales in a given calendar year, whereas the 7

DOE data is for a specific design line. Okay, so we 8

reco gnize that and we’re doing a bit of a comparison 9

here that’s not a perfect comparison. But if we 10

accept the ABB data as indicative of the design 11

line, what you would see is that this cell and this 12

cell would both show M3 being sold by ABB in the 13

market to day at that efficiency level. Up to 14

efficiency level four. So we think that for design 15

line one, efficiency level four beats that criteria 16

of multiple materials available in the market today, 17

based on the sales data from ABB. 18

For design line two, you p opulate these

-- 19

MR. PATTERSON: Andrew, could you wait 20

just a second. I’m a little confused about the 21

information being presented. This thing is coming 22

back from April 2011? 23

MR. DeLASKI: What thing? 24

MR. PATTERSON: The document that he’s 25Executive Court Reporters (301) 565

- 0064 77

looking at. 1

MR. DeLASKI: It’s November 4 th . November 2

4 th

MR. PATTERSON: This is November 4 document. 3

th

MR. DeLASKI: What I asked to be pulled up 5

was that it was the referen c e case, the main 6

analysis case distributed by the group last week. 7

Distributed by the consultant, the DOE last week. 8 ? 4

So I think the engineering data might have 9

changed since the summer, since September analysis, 10

so I think you’re shaking your head “yes”? It has 11

not. It has not changed. So we see also then, that 12

moving on, that the sales experience

-- the sales 13

data shows that there’s products that using M3 and 14

M2 out to efficiency levels

-- out to efficiency 15

level four for design line two. All the way out to 16

four, so three more cells at M2 all the way out to 17

five. 18

MR. PARKER : Does it make sense to put up 19

the slides? 20

MR. PATTERSON: Yeah, Andrew could you

-- 21

MR. PARKER: I’m sorry, do we have a 22

question on the phone? 23

MR. ROSENFELD: I can’t hear you. 24

MR. PATTERSON: Andrew, could you bring up 25Executive Court Reporters (301) 565

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also the slides that sh ow how you interpreted them 1

to say four and five are

-- 2

MR. DeLASKI: Yeah, that’s on there, so 3

I’ll show how I did that. 4

MR. PARKER: Andrew you have to

-- people 5

on the phone can’t hear, so we’re going to have to 6

try to really hold the mic up. 7

MR. DeLASKI: I’m too tall to lean over. 8

MR. PARKER: So let me get the data up 9

there. Is this public? 10

MR. PATTERSON: Yes, this is public. 11

MR. PARKER: Okay. Andrew, I’m all ears, 12

what do you want me to do. 13

MR. DeLASKI: So what we did is

-- 14

MR. P ARKER: I’m just waiting for 15

instruction here. 16

MR. PATTERSON: This is probably the right 17

one. Andrew on this one, if I look at this row and 18

move over to the far right, at the top

-- 19

MR. DeLASKI: Yep. 20

MR. PATTERSON: Okay. So there I have a 21

mix of grades of coarse steel. 22

MR. DeLASKI: Very good. 23

MR. PATTERSON: And the percent reduction 24

in that bubble there is 20 to 30 percent. 25Executive Court Reporters (301) 565

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MR. DeLASKI: Correct. 1

MR. PATTERSON: Which matches the earlier 2

comment, we’re talking about 25 percent. 3

MR. De LASKI: Right. 4

MR. PATTERSON: But the energy efficiency 5

level four and five that they have done the analysis 6

on, I believe is in the 40 to 50 percent reduction 7

level. It’s much higher. 8

MR. DeLASKI: So my indication that EL4

-- 9

and I checked this wit h the Navigant team during the 10

break to make sure my calculations were consistent

- 11

- is that at EL4, 25 percent reduction in losses for 12

-- depends on the design line at EL4, but this is a 13

-- looking at pads here, so pads are DL1 and DL3

. 14

MR. PATTERSON: I don’t think that’s 15

correct. 16

MR. DeLASKI: That pads are

-- 17

MR. PATTERSON: Bring up the detail

-- 18

look at the numbers. I don’t think that’s correct. 19

You’re quoting the wrong number. 20

MR. DeLASKI: DL1 and DL3 are the pads. 21

MR. NADEL: Wes, this is Steve Nadel. I 22

think what we are both saying is 25 percent lower 23

losses

-- 24

MR. DeLASKI: Is correct. 25Executive Court Reporters (301) 565

- 0064 80

MR. NADEL:

-- is correct, and then we 1

have to go back and confirm is that at level four or 2

three or whatever. 3

MR. PATTERSON: Okay. Stop talki ng about 4

the four and five because I think that’s misleading 5

a bunch of folks. 6

MR. NADEL: Twenty

- five percent lower 7

losses. 8

MR. PATTERSON: Twenty

- five percent lower 9

losses. 10

MR. DeLASKI: Yeah. Which is the punch 11

line, 25 percent lower losses. 12

MR. PATTERSON: Where you at? 13

MR. DeLASKI: So if you can go back

-- 14

MR. PATTERSON: He’s saying this is 25, 15

that’s not 25. 16

MR. SAMPAT: No, he’s saying four is 25. 17

MR. PARKER: Maybe over lunch we can get 18

the actual ELs accurate

-- 19

MR. DeLASKI: But the principle

-- we need 20

the data

- I agree we need to make sure we’re 21

interpreting it correctly, but the principle is that 22

we’re looking at the sales data to see where is 23

there diversity of supply, and we’re seeing that 24

that’s happening at ELs that a re higher than what 25Executive Court Reporters (301) 565

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the Department shows. Okay. And then we’re picking 1

those levels

-- those are levels that satisfy the 2

decision rule of having multiple materials 3

available, not that’s available, but as this slide 4

shows, having

-- competing. The fact t hat this 5

supplier provides half, roughly half of their supply 6

using the two different materials, to us indicates 7

that the materials compete. And we can go through 8

this exercise for each of them, but that gives you 9

the

-- that tells you the basic decision rule that 10

we’re applying. 11

Now if you go back to the prior

-- to the 12

slides that we were on before, the DOE slides

-- 13

(Several speaking at once.) 14

MR. DeLASKI: If you go to the next slide, 15

please. 16

MR. PARKER: I’m trying to get there. All 17

right. 18

MR. DeLASKI: So the way we saw it for 19

design line three, that the data was the same, but 20

there was no ABB designs, so we found this to be 21

consistent with the sales data. For design line 22

four, we found designs out to

-- this is for four, 23

the three

- phas e transformers out to EL5, so out to 24

five we found designs. And for five, we found 25Executive Court Reporters (301) 565

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designs out to five as well, but in the case of five 1

it was a very small portion of the market, of the 2

sales, so we’re really to four in terms of something 3

-- like for five it was two or three percent, so I 4

think for four it was a measurable market share, a 5

more significant market share. So we discounted 6

that. 7

So what that leads you to, what that leads 8

us to is, for the design lines, the efficiency 9

levels adjusted would b e as follows: 10

**•** For DL1, it would be efficiency level 4 11

**•** For DL2, it would be efficiency level 4 12

**•** For DL3, it would be efficiency level 3 13

**•** For DL4, four, and 14

**•** DL5, four. 15

That works out to be about a 25 percent 16

reduction in losses across the board. The closes t 17

TSL to this is TSL

- 5. TSL

- 5 is a little bit lower, 18

is a step down for some of the transformer

-- for 19

some of the design lines, but again, the DOE sets a 20

standard for these two classes, maybe three classes, 21

not by design line, so that’s why the 25 percen t 22

number, we think is the crucial number to focus on. 23

But to back up to the natural benefits, 24

TSL

- 5 which is our closest proxy to get to the 25Executive Court Reporters (301) 565

- 0064 83

national impact, is about one and a half quads of 1

savings, a net present value of about eight billion 2

dollars. 3

And I think it’s also important to look at 4

the consumer impacts with DOE’s analysis shows at 5

these ELs is that for DL1 that 99 percent of 6

consumers have a positive LCC impact, so virtually 7

everybody’s better off according to the DOE analysis 8

at this leve l. The mean payback is ten years. For 9

DL2, the portion of consumers who are better off is 10

74 percent, with a mean payback of 25 years. So 11

these are the pole transformers, so that long 12

payback and that lower percentage benefit is the 13

pole costs kicking i n and showing up in the 14

analysis. For DL3, 99 percent are better off with a 15

mean payback of five years. For DL4, 99 percent are 16

better off, with a mean payback of four years. And 17

DL5, 97 percent are better off with a mean payback 18

of eight years. So we think those portion of 19

consumers who benefit and the mean paybacks are 20

slam

- dunks, frankly, for

-- to justify a DOE 21

standard. 22

So we look at those numbers, and those, to 23

us, point to a space where you can land that 24

benefits the purchasers of the transfo rmers per the 25Executive Court Reporters (301) 565

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analysis, with the pole type an area for discussion, 1

and that maintains the diversity of supply of core 2

material in the market. Is there anything else to 3

add, Steve? 4

MR. ROSENSTOCK: Question. Okay. I guess 5

I’m confused here. Are you proposing TSL

- 4 as shown 6

on slide 18, or a modification of TSL

- 5? I just got 7

lost there. 8

MR. NADEL: We are proposing the TSL

- 4 9

criteria but it needs to be modified. At this point 10

it’s closer to TSL

- 5, but we really believe that the 11

criteria in TSL

- 4 i s what should be used, where you 12

want real competition between M3 and the amorphous. 13

MR. DeLASKI: And I guess this is the 14

difference between

-- you know, we’re not now 15

negotiating DOE’s analysis. We think we should 16

negotiate standard levels, and the st andard levels 17

are a table of efficiencies that can be converted to 18

losses. So what we’re suggesting is a 25 percent 19

reduction in losses across the board. And the DOE 20

can figure out

-- if we were to agree to this as a 21

consensus, then it’s up to the team t o figure out 22

how they would analyze it, but I’m not trying to 23

negotiate what they analyze, I want to negotiate 24

what I think the next standard should be. 25Executive Court Reporters (301) 565

- 0064 85

MR. ROSENSTOCK: Okay. Again, so you’re

- 1

- because I got confused

-- Steve Rosenstock, EEI

-- 2

so you ’re proposing, based on slide 18, your 3

proposal is TSL

- 4. I just want to be clear that 4

that

-- because you talked a lot about these other 5

levels, the other efficiency levels, you were 6

talking about the metals, so I just want to be sure 7

to be clear. 8

MR. DeLASKI: Our proposal is the ELs that 9

I stated. And that is, to simplify that further, is 10

a proxy is for

-- another way to put it would be 25 11

percent reduction in losses. That’s the proposal. 12

Now we think the connection to TSL

- 4 is that we’re 13

using tha t decision criteria, using that decision 14

criteria, though, we get to a different set of ELs 15

than the Department’s analysis shows. 16

MR. ROSENSTOCK: So again

-- again, just 17

for clarification, you’re proposing

-- you’re 18

proposing basically another version o f TSL

- 5, can I 19

put it that way, just so

-- but basically you’re 20

saying it would be design line 1, EL4; design line 21

2, EL4; design line 3, EL3, design line 4, EL4, and 22

then design line 5, EL4. That’s your proposal, not 23

TSL

- 3. Not TSL

- 4, excuse me. 24

MR. D eLASKI: That’s right. 25Executive Court Reporters (301) 565

- 0064 86

MR. NADEL: TSL

- 4 concept. 1

MR. DeLASKI: We’ll call it TSL

- A. Which 2

is often what the Department’s done in their 3

decision

- making, is to pick a TSL that is based on 4

the input of stakeholders that’s different from what 5

was analy zed in the first place. 6

MR. NADEL: Steve Nadel, call it TSL

- 4R 7

for revised. 8

MR. PARKER: So it’s EL4 across the board 9

except for DL3 where it’s El3 as written, right, for 10

TSL

- 4. 11

MR. PETERSEN: Eric Petersen, ATI. Could 12

you just walk through one m ore time, design lines 13

and efficiency levels so we make sure we’re on the 14

same page for one last statement please? 15

MR. DeLASKI: 16

**•** DL1, is EL4 17

**•** DL2, efficiency level 4 18

**•** DL3, is efficiency level 3 19

**•** DL4, efficiency level four, and 20

**•** DL5, efficiency level four. 21

MR. PARKER: Rick Anderson. 22

MR. ANDERSON: Okay. Andrew, one more 23

time, I’m a little slow. 24

MR. PARKER: It’s four across the board 25Executive Court Reporters (301) 565

- 0064 87

except for three. 1

MR. ANDERSON: I’m going to go back to my 2

50 KVA pad. If I go to DL4, right now the 3

standard’s at 99.08, and I’m going to go to 99.31 4

and I’m going to pay an additional $660 for that 5

transformer which translates to a little bit over 6

$1100 per watt. That’s the way I see what you just 7

said. 8

MR. DeLASKI: So Richard, your math and 9

the Department’s mat h just don’t match. So I’m not 10

sure what to do about that. Right, so the 11

Department’s math shows simple paybacks, less than 12

ten years, and yours isn’t, so I’m not going to

-- 13

we’re not going to solve that over this space right 14

here. 15

MR. ANDERSON: So i s there some way 16

someone could quickly explain the Department’s math? 17

MR. DeLASKI: This was published as an 18

analysis in March and we’ve had many

-- stakeholders 19

have had enormous opportunity to give feedback on 20

the model and I think it’s been discussed 21

extensively. I think we’ve got to move on as 22

Richard just said. 23

MR. PARKER: Listen, I want to

-- excuse 24

me, sorry. I want to give everybody a chance to 25Executive Court Reporters (301) 565

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make their presentations and make sure that 1

everybody gets their presentations out on the table 2

bef ore lunch, so I don’t want to have

-- we’re going 3

to have an extensive discussion of this afterwards, 4

but I don’t want to bog us down. Ray, do you want 5

to say something really

-- 6

MR. POLINSKI: Ray Polinski, ATI 7

Allegheny. I just have a

-- we’ll talk a bout it 8

further, but you can’t pick and choose. You can’t 9

say I like the LBL analysis for this stuff because 10

it supports my needs, but I don’t like this part 11

where it says amorphous for these standards, 12

amorphous goes from 25,000 tons a year to like 13

160,0 00. Well, I don’t believe that part. I don’t 14

believe this part of it, I’ll discount that, but the 15

part that supports my thing, that’s the bible, and 16

three percent discount

-- so, I think there’s room 17

for a lot of debate or whatever, but it was kind of 18

st range how you’re picking and choosing. This 19

doesn’t seem to be proper. 20

MR. DeLASKI: Richard, just to clarify. I 21

just want to be clear. So those are the levels, and 22

when we translate the levels, those ELs into percent 23

reduction in losses, it ends up b eing 25 percent 24

reduction in losses for DL1, 24.8 percent for DL2, 25Executive Court Reporters (301) 565

- 0064 89

25.9 percent for DL3, 25 percent for DL4, and 25.9 1

percent for DL5. So, although they’re different 2

efficiency levels, they’re all about 25 percent 3

reduction in losses. I want to be clear and that’s 4

another easy way to wrap your mind around what we 5

think is the

-- a good answer. 6

MR. PARKER: One issue here, Andrew, is 7

you have a different EL for DL1 and DL3, but they’re 8

going to be in the same equipment class and so 9

unless they’re broken out, they’re going to have the 10

same standard, right, because standards are set by 11

equipment class. 12

MR. DeLASKI: Yeah, and that’s when I come 13

to the 25 percent reduction in losses, because 14

that’s how you translate that into a standard. 15

MR. PARKER: Rig ht, so there would have to 16

be one

-- we’d have to settle on one EL or one 17

standard for one and three, that might come between 18

one of those two ELs. Right? 19

MR. DeLASKI: So my point there is that 20

those two ELs for both one and three, are the 25 21

percent re duction in losses. 22

MR. PARKER: Right. Okay. Next 23

presentation. John, do you want to go? 24

MR. CASKEY: Sure. 25Executive Court Reporters (301) 565

- 0064 90

**Presentation** 1

MR. CASKEY: John Caskey, NEMA. 2

MR. PARKER: And I have your slides if you 3

need them. 4

MR. CASKEY: Okay. Before you get t o 5

that, can we go to slide 13 here. Scroll down just 6

a hair. Right there is great. Okay. So, first of 7

all, thank you guys, for making that presentation 8

and for sort of putting your stake in the ground, if 9

you will. I think that’s very helpful as a sta rting 10

point, and it takes guts for the first group to do 11

that, from my perspective. Also want to thank LBL 12

and Navigant and DOE and all the stakeholders for 13

the opportunity to do this. I certainly think that, 14

as you said, the end result will hopefully b e 15

something better than what might have occurred 16

otherwise, so we certainly appreciate the 17

opportunity to review the analysis and provide 18

feedback on the analysis so far. 19

I guess one of the issues that I think 20

still remains is the accuracy of the analysi s and 21

the life cycle cost analysis in particular. So it’s 22

still hard to grapple with that. I think we made 23

some progress on the technical part of it. I think 24

on the life cycle cost analysis there’s still some 25Executive Court Reporters (301) 565

- 0064 91

weaknesses. And sort of getting to that poi nt, I 1

mean, as Andrew and others have talked about, along 2

here, I mean we agree that there are opportunities 3

to use M3 out to at least EL4. Okay. When it was 4

discussed whether it was cost

- effective or not, or 5

competitive, the reason customers are buying, and 6

correct me if I’m wrong, Wes, the reason customers 7

are buying out here is not related to energy 8

efficiency, but it’s some other reason that 9

coincidentally produces a higher efficiency design 10

in a transformer. Is that correct? 11

MR. PATTERSON: Yes. In a number of 12

cases. 13

MR. CASKEY: Okay. So thank you. So 14

that’s

-- so there is an opportunity from a 15

technical perspective to get out here. We clearly 16

admit that. And I certainly and we, as NEMA 17

manufacturers, certain agree fundamentally that you 18

wa nt to have choices in the design so that you can 19

use, hopefully, silicon steel as well as amorphous 20

or something else in order to basically use two 21

different materials to produce a design that meets 22

an efficiency level. So we fundamentally agree with 23

that , and maybe your perspective is that’s sort of

- 24

- well, we just fundamentally agree with that as the 25Executive Court Reporters (301) 565

- 0064 92

upper bound on the EL relationship. 1

Okay. So the other thing that’s pretty 2

critical is we’ve talked about their being technical 3

feasible to produce tran sformers with M3 up in that 4

area, fundamentally this analysis has been 5

concluding that amorphous is the right choice for, 6

in this case, EL2, 3 and 4 and up. And even over 7

here for EL1, that amorphous is the right answer. 8

And from that point forward, all the analysis is 9

assuming the price of amorphous and the whole basis 10

for the cost

- effectiveness analysis rests on the 11

availability and the pricing of amorphous. So we’ve 12

sort of locked ourselves into one thing. 13

So we’re saying that technically we can 14

us e silicon steel with M3, but in reality the whole 15

premise of the analysis is that it’s locked us into 16

amorphous. Okay. So that’s a fundamental point. 17

Beyond that now, if you can go to the 18

other charts. 19

PARTICIPANT: This is from Carlos this 20

morning

. 21

MR. CASKEY: Okay. So can you blow them 22

up

-- in a good way? Probably the one to the left 23

first would be helpful. Okay. This is

-- if you 24

scroll down a hair, just for a second, or scroll up, 25Executive Court Reporters (301) 565

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I’m sorry, give me this up here. A little bit 1

further

. 2

So these data points are coming directly 3

from the DOE designs, basically in September, and 4

the further analysis on November 6 th , so these are 5

basically

-- these should jive with the DOE analysis 6

as we know it now. So if you go down to basically

- 7

- s o the question is, where are there multiple cores 8

that can be used in the design? So you need to go 9

down a hair further. So what we’re looking at is 10

sort of the upper boundary, and here you see that 11

there are some room for competition, essentially, in 12

th is DEL

- 1, in this particular case, or over here, 13

it’s really DEL

- 0. So, I mean, we need to refine 14

that some. We agree the shape of some of these 15

curves, like over here for M3, is probably different 16

than what’s reflected here. I mean that’s basically 17

wha t ABB has taught us. But still, we’re looking at 18

a point where you can have, and I don’t know what 19

this price

-- reasonable price differential might 20

be, maybe it’s ten percent different

-- but 21

fundamentally, I think the manufacturers agree that 22

there need s to be some competitive forces at play so 23

we’re not entirely locked in with amorphous, and 24

that we can compete in that particular design using 25Executive Court Reporters (301) 565

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other steels. And this is true for all

-- design 1

lines one through five. 2

So some of the other points that I w anted 3

to make dealing with vault and network transformers. 4

Typically these are, as the name implies, in vaults 5

and there’s physical constraints in terms of 6

changing them out. You can only do so much. So it 7

may be appropriate, and we think it is appropri ate 8

to deal with vault and network transformers 9

differently. 10

Similarly , between single

- phase and three

11

phase, the work that’s always been done in the past 12

is normalized single

- phase and three

- phase 13

efficiency ratings, essentially. And in reality, 14

it’s more difficult to go to higher level 15

efficiencies on three

- phase than it is on single

16

phase. So we thing that it’s reasonable to have a 17

different efficiency level, even normalized for 18

single

- phase and three

- phase. 19

We talked about the BIL, that’s maybe 20

something that we an bring in later, but we talked 21

about the higher BILs being separated out 22

differently, and we requested that analysis a while 23

back, and I’m not sure that we’ve seen the final 24

results of that. 25Executive Court Reporters (301) 565

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The other point that we’ve talked about a 1

little bit today, is just dealing with this as

-- 2

you know, it’s easy to talk about the delta price 3

increase versus a delta efficiency improvement, but 4

in reality that delta price increase still means 5

dollars that somebody’s got to pay for along the 6

way. And in some cases we’ve talked about that will 7

get to the point where, instead of buying it from a 8

newly manufactured unit, basically people will 9

resort if they get to this 80 percent factor, 10

whatever, where they can pay 80 percent or less for 11

the remanufa ctured replacement, than they will go 12

with that. 13

So, we’re concerned about that also, that 14

you’ll get to some point where people will be 15

looking at remanufactured units as opposed to new 16

units. And then we’ll

-- clearly that’s going to 17

impact the new ma nufacturers, but in addition to 18

that it’s going to impact net efficiency, and I’m 19

not sure where that’s effectively

-- or I don’t have 20

confidence that that has effectively been integrated 21

into the analysis. 22

And the other thing is, certainly NEMA 23

represen ts 450 manufacturers, of which there are 24

about 22 manufacturers in the transformer arena, and 25Executive Court Reporters (301) 565

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we certainly want to avoid knowing ahead of time 1

that we’re going to eliminate some of those small or 2

medium manufacturers from the mix of manufacturers, 3

and we f eel that as you get up in higher 4

efficiencies, certainly you risk that. 5

So I liked your idea about

-- you 6

mentioned the idea about a two

- tiered approach. We 7

would consider something like that as well as one of 8

the fundamental things is, you know, when I take off 9

my hat as a NEMA person and put on my hat as a 10

citizen or a rate

- payer, certainly I think there are 11

other areas in the transformer industry to gain 12

bigger bang for the buck in terms of improvements, 13

and certainly we would be happy to work for t he 14

utilities and the advocates and others to go to 15

congress and to look for opportunities to change out 16

some of the poor efficiency transformers that are in 17

the marketplace. They’re still functioning, but 18

basically there are possible replacements for that 19

that would be cost

- effective. I mean that’s another 20

area where independent of this, we’d like to work 21

with you on. 22

So with that, if I will say, to me the 23

bottom line is really the picture up here, and 24

whether we feel that going like to DEL

- 1 in this 25Executive Court Reporters (301) 565

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pa rticular case, and here it’s questionable. 1

Certainly we agree, I mean I’m mature enough to 2

comprehend that ending up with this whole analysis 3

and saying we’ll zero is the right answer is, I 4

don’t think is going to be palatable to you or to 5

DOE or probably others. So in spite of the fact 6

that this analysis really shows that there’s some 7

competition around here, but that here it starts to 8

break down a little bit. I think certainly going to 9

this level might be something reasonable. So that’s 10

sort of my ten minutes worth of whatever. I don’t 11

know if any of the other

-- you know, Wes or

-- 12

MR. PARKER: Do you have a specific

-- 13

MR. CASKEY: Yes, do you want to go to the 14

other slide, further down. 15

MR. PARKER: No, that’s the end of that. 16

It’s the secon d slide. 17

MR. CASKEY: Oh, sorry. Okay. So this is 18

four

-- design line 4 and design line 5, and this 19

again shows a similar situation. Where you see a 20

lot of competition at the DEL

- 1 area, maybe a little 21

at the

-- well, even here you’re getting a pretty 22

big spread between amorphous and M3 or M2. And then 23

you see a similar situation over here. So that’s 24

more or less where we’re starting with, where we 25Executive Court Reporters (301) 565

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don’t see

-- I think we’re going to have a general 1

discussion later on

-- but basically we don’t see 2

ge tting to that EL4 level and still being able to 3

provide this open competition between two different 4

materials to be used in the design to meet a certain 5

efficiency level. 6

MR. PARKER: Question? Yes, Steve. 7

MR. ROSENSTOCK: Again, Mr. Caskey, I 8

appre ciate this presentation, but based on these 9

graphs, it looks like, for I’m say the M2 and M3 10

basically the costs really just pretty much 11

skyrocket above level one, based on this information 12

presented, and would you say this is a fair 13

representation of all the manufacturers that this is 14

what they would see for these design lines? 15

MR. CASKEY: I think the consensus among 16

the manufacturers is that the Navigant analysis does 17

not properly reflect the shape of the curve as you 18

get to higher efficiencies and yes , there is a 19

pretty radical steep increase as you go to higher 20

efficiencies. 21

MR. ROSENSTOCK: Thank you. 22

MR. PARKER: I guess what we’re seeing 23

here though on these slides is a pretty radical 24

increase at pretty low efficiencies, right? At EL

- 25Executive Court Reporters (301) 565

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zero and one. Andy, did you want to comment? 1

MR. DeLASKI: Andrew DeLaski. Thanks, 2

John, that’s very helpful. I think you’re quite 3

clear how your approaching this and it’s a very 4

useful way to frame it. And I think it brought us 5

back to our very first meeting , you talked about 6

this, I think, economic

-- where’s your economic 7

options. You know, and I think the shape of that 8

curve is one thing that we’re going to have to be 9

talking about. The shape of that curve is really a 10

critical part of this discussion ove r the range of 11

efficiencies for the conventional silicon steel. 12

MR. SCHOEN: Jerry Schoen, AK Steel. To 13

introduce more matter, as the advocates did, outside 14

what Navigant analyzed, Jerry can you comment on the 15

effect of loading on losses of these differ ent types 16

of transformers from the excellent report you put 17

together a couple days ago? Because I think that’s 18

significant. And one of the assumptions is, we’re 19

not going to build power plants by having more 20

efficiency transformers, and I think your anal ysis 21

said that throws that into question as well. 22

MR. COCKRAN: What we’re talking about is 23

the amorphous and the silicon core transformers, if 24

they both have the same losses at 50 percent load, 25Executive Court Reporters (301) 565

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which is what’s going to happen if we have an 1

efficiency st andard, the

-- of course the core watts 2

are much less on the amorphous transformer, so at 3

full load they’re going to be that differential 4

which

-- between the amorphous and the silicon core, 5

but there’ll be four watts higher at full load for 6

each watt lowe r at 50 percent. So the utility 7

companies will be saving watts at night when power 8

is cheap, and then when their demand is at the peak, 9

the amorphous transformers will have four times 10

whatever that core watts differential is higher 11

peaking losses at 100 p ercent. And distribution 12

transformers are available for taking and start up

- 13

- they take some very heavy loads. If you look at 14

the standards, they’re supposed to be able to take a 15

half hour at

-- Wes, what is it, about 200 percent 16

load, I can’t remember

-- and so the differential 17

when you get up there is very significant. And 18

heating in the transformer and all, sort of wasting 19

watts. There was a paper put out to the group which 20

demonstrated that. I don’t know how many of you 21

read it. 22

MR. PARKER: Aga in, I think I’m going to 23

turn to Katie for just a second, but I think you’ll 24

clarify that the analysis takes account of a lot of 25Executive Court Reporters (301) 565

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this stuff already, right? Katie, do you want to 1

talk about that, just briefly? 2

MS. COUGHLIN: Yeah, I just want to make 3

sur e that everybody understands that the loading in 4

the LCC analysis is not the test procedure load. 5

There’s a distribution of load factors. For the 6

liquid immersed, the distribution is centered at 35 7

percent, except for the subset of utilities that 8

have

-- that serve a low density of population, in 9

that case the median of the distribution is set at 10

25 percent. The LCC also uses fairly complicated 11

simulation of the correlation between loads and 12

marginal production prices that takes into account 13

the higher p roduction prices that occur during the 14

times of day when loads may be high. 15

MR. PARKER: Okay. Wes. 16

MR. PATTERSON: Wes Patterson. So did 17

you, in taking into account the load profile, 18

separate the no

- load losses from the load losses and 19

correct the t wo elements appropriately? 20

MS. COUGHLIN: Yes. 21

MR. PARKER: Steve. 22

MR. ROSENSTOCK: Steve Rosenstock, EEI. 23

Were you able to run the sensitivity analysis with 24

the

-- because I know these were based on some of 25Executive Court Reporters (301) 565

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the 2008 prices, and I had asked about a sensitivity 1

analysis with the 2010 prices. Was that ever able 2

to be done? 3

MS. COUGHLIN: The short answer is yes. 4

MR. ROSENSTOCK: Was it done? 5

MS. COUGHLIN: The prices are scaled using 6

AEO historical and forecast data. The shape of the 7

price

- load correlation was verified that it hasn’t 8

changed substantially between 2008 and 2010, and 9

that’s what goes into this analysis. 10

MR. ROSENSTOCK: Steve Rosenstock, EEI. I 11

find that very hard to believe since natural gas 12

prices were so much higher in 2008 than 2010, I find 13

that rather extremely surprising. I’ve looked at 14

some of the data from the wholesale, like Arcott 15

(ph) and some of the others, and the prices in 2010 16

were significantly lower because the gas prices were 17

so much lower. 18

MS. COUGHLIN: Th e issue for this is the 19

shape of the correlation between prices and loads, 20

not the absolute price. 21

MR. PARKER: I think we can

-- let’s have 22

the logical discussion off line or at the break. 23

Anybody else want to put forward a proposal? 24

MR. NADEL: Can I make one comment while 25Executive Court Reporters (301) 565

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this slide is up? 1

MR. PARKER: Okay. 2

MR. NADEL: John, if I heard you 3

correctly, you were saying, gee, maybe a ten percent 4

difference in costs is okay, but not a 50 percent, 5

or something like that. You have two very 6

interest ing examples. One thing I point out is that 7

the lower half of the left graph is missing, and the 8

bottom five

- sixths of the right graph is missing. 9

It kind of implies it’s two and three times. I did 10

some math based on reading things off the graph. 11

The l eft graph is actually by far the steepest, 12

where M3 ends it’s about 30 percent more expensive, 13

but that was by far the most extreme. On the right 14

graph, it’s just over ten percent. And a couple of 15

the other ones are just over ten percent. So we 16

should l ook at the percentage change

-- and these 17

graphs tend to exaggerate it. But definitely the 18

one on the left is by far the most extreme. 19

MR. CASKEY: (Answer off mic) 20

MR. NADEL: So in that case, see I’m 21

reading the amorphous price is roughly $6000 and the 22

competition is roughly $7700, it says 1700 divided 23

by 6000, at least when I did the math, is roughly 30 24

percent. I think it’s 31 or something like that. 25Executive Court Reporters (301) 565

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And I’m saying the left one is by far the most 1

extreme, and many of the other cases, it’s 11, 13, 2

something like that. And again, I was reading off 3

the graph, and now that we have the actual numbers, 4

we can calculate it more closely. The version I had 5

when I did this yesterday morning, didn’t have the 6

numbers. 7

MR. PARKER: Aaron. Go ahead. 8

MR. M EYERS: Aaron Meyers, Cooper. I 9

think what’s important to note in these graphs, and 10

of course we agreed to exclude ZDMH, if you look at 11

M2 and M3 and where the line stops, relative to the 12

proposal on the table for EL4, there’s not a point 13

out there, and I can confirm that for some of these 14

ELs, that there is no available design using grain

15

oriented silicon steel that will achieve EL4. And 16

the design lines use very simple, single voltage 17

requirements. They don’t represent what’s out in 18

the market as far as dual voltage, high BIL and so 19

forth and so on. So they’re very rudimentary 20

designs that are common in the marketplace are not 21

even achievable at the proposed level. 22

MR. PARKER: John, can I ask, are these 23

simplified curves? You said they were based on DOE 24

data. Is there

-- do you take issue with the 25Executive Court Reporters (301) 565

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simplified curves that have been posted and I 1

believe sent around from the engineering analysis 2

that DOE staff did generate previously? 3

MR. CASKEY: I’m not sure which ones

-- I 4

mean I go back to the s catter diagrams and these 5

relate to those scatter diagrams. Beyond that, it’s 6

been hard for me to keep up with all this stuff, so 7

I’m not sure. If you bring it up, I can tell you 8

whether I recognize it, but off

- hand, I don’t know 9

if I’ve seen what you’re talking about. 10

MR. PARKER: Completely understandable. 11

MR. DeLASKI: This is Andrew. I’m not 12

sure if I have either. 13

MR. PARKER: What’s that? 14

MR. DeLASKI: I’m not sure I’ve seen it 15

either. These are graphs that NEMA produced? 16

MR. CASKEY: T hese are graphs that Prolec 17

GE

-- 18

MR. DeLASKI: So could these be made 19

available to all of us through e

- mail? Maybe we 20

already have them. 21

MR. CASKEY: They were e

- mailed out there, 22

just this morning. 23

MR. COULTER: We sent these out 24

previously. 25Executive Court Reporters (301) 565

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MR. DeLASKI: I think I’ve seen them. 1

MR. COULTER: It’s the same data, the same 2

graphs. The data hasn’t changed. We found we had 3

an error

-- because the efficiency levels are the 4

same as

-- 5

MR. PARKER: Greg Coulter, excuse me. GE. 6

MR. COULTER: Ok ay, this is Greg Coulter. 7

The simple answer is you have the new graphs. We 8

sent

-- you only got those today. The old graphs we 9

sent out earlier, and you have those, and the basic 10

difference between those two graphs is we’ve changed 11

the definition of cer tain efficiency levels now 12

versus where we were

-- you know, we were at CSLs 13

and now we’re just using draft efficiency levels. 14

The definition of, you know, what that efficiency 15

level was is changed, so these charts have been 16

replotted showing the new EL l evels, versus the old 17

CSL levels, and that’s basically the only change 18

you’re seeing between then and now. 19

We do recognize, and we didn’t point this 20

out before, and we’ve only recently recognized 21

ourselves on the 25 KVA, there has to be some 22

problem with the data for the ZDMH, because it’s 23

showing so much lower than everything else, and it 24

shouldn’t be that way. We don’t believe it’s that 25Executive Court Reporters (301) 565

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way. I believe if we had spent enough

-- if we had 1

recognized this sooner and had conversations with 2

Navigant, we pr obably could have corrected it. We 3

didn’t so maybe sometime later today we could show 4

our own data. This is DOE data. Prolec has their 5

own data they’d be willing to at some point, show. 6

MR. DeLASKI: This is Andrew again. 7

That’d be great. It would b e wonderful to see all 8

that data. And just to be clear, what you’re 9

showing here is

-- you’re showing the bottom right

- 10

- you’re showing the border of the DOE scatter 11

plots. 12

MR. COULTER: Essentially. What we’re 13

showing is the lowest price transformer that meets 14

that efficiency level. 15

MR. DeLASKI: Got it. 16

MR. COULTER: It might not be the lower 17

left, but it’s certainly the lower. You know those 18

-- these bell shapes say that it’s not necessarily 19

at the lower left, and it might not even be in that 20

e fficiency level. You may have to go up a couple of 21

efficiency levels, that’s why the amorphous is a 22

straight line in a lot of cases, because it’s the 23

same thing LBL was saying, they get the same design. 24

We agree with Wes, you know, and ourselves, you 25Executive Court Reporters (301) 565

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pro bably wouldn’t get the same design, but the 1

general shape of the curve is still pretty close. 2

It’s going to have some slope to it rather than 3

being straight. The methodology they use to find 4

that point is not the same methodology we would use. 5

MR. PARK ER: Chris did you want to? So I 6

will over the lunch try to get the simplified curves 7

that Navigant produced on line. If we can print 8

them out, I’ll do that as well. I think if they’re 9

coming from the same data they should correspond to 10

these, but they would be graphed in a way that 11

starts with zero at the x and y axis. 12

Steve, did you want to

-- 13

MR. ROSENSTOCK: Just a quick comment on 14

the graphs on the right, one there we’re still 15

seeing 20, 30, 40 percent increases going up

-- 16

whether you’re goi ng across or in the same design 17

line. It’s not

-- yeah, the increments are 18

different but still on a percentage basis, you’re 19

still seeing 30 or 40 percent. Again, just looking 20

at the table above and the graphs below, we’re still 21

seeing some of those delt as on both sides. Again, 22

this is design line four and five, but again, that’s 23

just looking at the graphs. 24

MR. PARKER: Let’s see if we can get some 25Executive Court Reporters (301) 565

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copies of these made. Any other proposals. Eric? 1

MR. PETERSEN: Yes, we do. 2

**Proposal** 3

MR. PETERSEN: Eric Petersen , AK Steel. I 4

guess within a negotiation it’s important to paint 5

the full spectrum of both sides, so we’ve certainly 6

heard one side painted, so I guess I’ll paint the 7

other side of the perspective. Ray Polinski started 8

this a few

-- some mi nutes ago, made the comment 9

that the DOE had done an excellent job associated 10

with this current study that placed us at the base 11

case which is where we are today. 12

We would echo that point. As you can see, 13

the key question continues to come up of capab ility 14

versus competitiveness. That’s the point we’ve 15

talked about all along. Although you may be able to 16

make a grain

- oriented electrical steel transformer 17

at very high efficiency levels, the question is, 18

will you? And associated with the competitivenes s 19

aspect, as you can see from the charts the DOE has, 20

and from this data which is up on the board, the 21

answer is you will not. 22

So the perspective that we would bring to 23

the table is a couple different points. I think 24

one, is there have been some quest ions associated 25Executive Court Reporters (301) 565

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with the cost associated with the watts that we’ve 1

gained that Richard brought to the table. I know 2

there’s questions there associated with the math, 3

but it certainly brings, at least to my mind, points 4

that clarification need be made asso ciated with 5

whether or not there’s a justification as we move 6

forward on that cost. 7

For us, we’re representing the steel 8

industry. There is a significant position which is 9

essentially whether or not US steel companies will 10

be able to provide product f or the US market. And 11

as you can see, associated with where these 12

efficiency levels is going, the answer is no. We 13

would not be able to provide steel for this market 14

here within the US. 15

Essentially we’ve talked quite a bit about 16

the need to be able to find an efficiency level at 17

which there is a myriad of suppliers within the best 18

free market position, but which transformer 19

manufacturers and the entire industry really, can 20

best compete, is to be able to have a myriad of 21

suppliers by which a transformer manufacturer can 22

leverage against one another. In the last meeting 23

we heard Dave Millure make the comment that we are 24

already at that position in regards to 25Executive Court Reporters (301) 565

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competitiveness today, that the current standard 1

allows Metglas to be competitive. And I think th at 2

emphasizes the job that the DOE did to move us to 3

the level that we’re at today, that we are 4

competitive, that’s what the current baseline level 5

shows. 6

And as you begin stepping forward, it’s 7

not a teeter

- totter effect, it is a cliff. Right 8

now, if you look at the data that has come forward, 9

basically if you move into efficiency level one, you 10

will still, on design line one, you still have an 11

opportunity for amorphous metal and electrical steel 12

to compete. But once you move to design lines two, 13

thr ee, four and five, by the data that’s presented 14

within the chart, you essentially are at a zero 15

percent usage of an M2 or an M3 product. 16

For US steel companies, obviously that’s 17

not a position that we would support in regards to 18

something that best serve s the marketplace, that 19

best serves the needs of the industry, or certainly 20

that best serves the needs of our employees within 21

the US steel industry. 22

Another discussion that has been brought 23

to the table that I think bears much more 24

investigation is the issue of recycling. There have 25Executive Court Reporters (301) 565

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been some points that have been made that the size 1

of the replacement market today or what is driving 2

the demand is the replacement transformers is 3

significantly high. We’ve heard today as much as 80 4

percent could potential ly be the current size. The 5

economics of the decisions that we make to move an 6

efficiency level forward could essentially push the 7

decision point that rather than replace a 8

transformer, simply to recycle the transformer, thus 9

anything we intend to do asso ciated with improving 10

our efficiency, we’re not going to accomplish, we’re 11

actually going to take a potential step backwards 12

in improving the electrical efficiency for our 13

country. 14

So I think it’s very important that we 15

take that piece of consideration into this 16

discussion topic, as what is the unintended 17

consequences of increasing the efficiency level upon 18

the transformer market in regards to essentially 19

recycling. We already heard a comment by Mr. Saint 20

today that there is advanced activity in terms o f 21

beginning to look at the financing structure, et 22

cetera, that may go into place, associated with 23

moving efficiency levels forward and how we would 24

recycle transformers. 25Executive Court Reporters (301) 565

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So our proposal would be to recognize the 1

work that the DOE has already done and st ate that 2

the standards that we’re at accomplish the best 3

position for a manufacturing industry that allows a 4

multiplicity of materials that can be used to supply 5

the US industry in transformers and utilities, while 6

still insuring that the transformers are going to be 7

replaced are being replaced as opposed to recycled. 8

MR. PARKER: Questions, comments, 9

reactions? 10

MR. PETERSEN: Ray, did you want to

-- 11

MR. POLINSKI: I was going to add

-- 12

MR. PARKER: Ray. 13

MR. POLINSKI: Ray Polinski, ATI Alleghe ny 14

Ludlum. And just to add a few comments to Eric’s 15

comments, and I think we’re certainly in agreement, 16

fully with his comments on this. We discussed the 17

data that’s out there says that if you go above

-- 18

and we can’t

-- while I respect Wes’ data and if we 19

had time and we elected to have time and get the LBL 20

to change their analysis, but we can’t do that. We 21

have the data, the LCC was based on the data, so you 22

can’t say, well, here’s a savings of 11 to 13 23

billion and 1.4 quads, but hey, we’re using M3 to 24

get there. So we believe that for competitiveness, 25Executive Court Reporters (301) 565

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which is a very key item in the DOE criteria, that 1

they have to consider that it’s very simple that 2

we’ve been

-- we’ve said this before and, you know, 3

some of the advocates

-- I don’t know, they didn’t 4

maybe hear it, but I think zero

- one is where the 5

competitiveness, in that zero

- one range is where the 6

competitiveness exists, and I agree with Mr. Berman 7

who’s the economist here with us that when you have 8

competition, the free market works, supply and 9

de mand. But when you mandate a standard for our 10

country where you have no US producers that

-- no US 11

companies that produce it, and you mandate one 12

material, then I would argue the supply and demand 13

doesn’t

-- factors don’t apply. I mean, and I know 14

when e veryone’s lived through this with us, so when 15

we were just in a five percent shortage of geo

- grain 16

oriented steel which occurred maybe back in the 2007 17

time frame because of a lot of growth in Asia, and 18

things of that nature, and it took the

-- the market 19

drove the prices of grain

- oriented up very high. 20

And that was a five percent shortage and it took a 21

long time for the market to supply and demand to get 22

back in balance and recover. 23

So what’s going to

-- when amorphous 24

demand is going to go up based on the standards that 25Executive Court Reporters (301) 565

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are being proposed by the advocates, by a factor of 1

six or seven, I just

-- it’s unreasonable. I just 2

can’t believe we’re even considering that. But we 3

believe that DOE did a great job, they pushed up 4

against all these ceilings and the se limits the last 5

time. They followed their seven criteria. We’re in 6

that zero

-- we think the base case is fine. Maybe 7

the point six between zero and one, the point six 8

proposed, we certainly would look at that. Thank 9

you. 10

MR. PARKER: Any other cl arifying 11

questions. 12

MR. NADEL: I have a question. 13

MR. PARKER: Steve. 14

MR. NADEL: I understood what you were 15

saying

-- 16

MR. PARKER: Give your name, please. 17

MR. NADEL: Steve Nadel ACAAA. You think 18

the current situation is adequate competition. If I 19

understand, it’s probably more than 90 percent M3 20

and less than ten percent amorphous. So are you 21

basically arguing that’s plenty of competition ? 22

MR. PETERSEN: I’m simply emphasizing the 23

point that Mr. Millure made last time, which was 24

that they can’t compete. You made the comment, then 25Executive Court Reporters (301) 565

- 0064 116

why wasn’t it being done, and Mr. Millure made the 1

comment that it is competitive. 2

MR. POLINSKI: Ray Polinski, ATI 3

Allegheny. When you talk about competition, Steve, 4

there are, you know, at last count, there are 13 5

producers world

- wide for grain

- oriented electrical 6

steel, and so it’s not one producer or two 7

producers. It’s a global market and there’s plenty 8

of competition at this point in time for transformer 9

core steel, globally. 10

MR. NADEL: I wasn’t argui ng about 11

competition for M3, I was talking about competition 12

between amorphous and M3, and so I just want to 13

understand your position. But you think we already 14

have enough competition. Thank you. 15

MR. PARKER: Okay. Steve. 16

MR. ROSENSTOCK: Just a qui ck thought on 17

the utilities side. Steve Rosenstock, Edison 18

Electric Institute. We like the idea of competition 19

and multiple suppliers and multiple metals, and 20

that’s one of the reasons I said maybe we should 21

look at a level between zero and one, based on the 22

DOE data, but unfortunately was dismissed as a 23

pipedream by certain parties, and said no, there’s 24

absolutely no way to consider it, so I guess that’s 25Executive Court Reporters (301) 565

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unfortunately off the table. So I’m very sorry to 1

see that, but, you know, that’s what it seems like 2

we’re going forward that other options are just not 3

going to be considered. I’m very sad to see that. 4

MR. PARKER: Okay. Well, I think we’ve 5

got the presentations out there, and we have the 6

proposals out there. During the break

-- I think we 7

should b reak for lunch and think your positions 8

through. During the break I will try to get this 9

simplified cost curves that DOE put together that 10

have been posted on the Sharepoint site, and I 11

thought they had been sent to people and I apologize 12

if they haven’t. But I’ll see if we can get those 13

not only downloaded, but if we can, print it out so 14

you can take a look at them, because I think that 15

would be a helpful point of reference. Steve. 16

MR. NADEL: I wanted to maybe frame what 17

we should all be thinking abo ut as we break for 18

lunch and come back afterwards. Basically I’ve 19

heard some people say kept the current standard, do 20

between zero and one. We’ve rejected that, which is 21

not to say you can’t make your case to DOE. We will 22

make our case to DOE and DOE de cides. 23

We put in another proposal. We’d like 24

reactions to that proposal. We’d like suggestions 25Executive Court Reporters (301) 565

- 0064 118

or alternatives, and basically comes down to do we 1

feel that there’s something we can work on that we 2

can all agree or basically if both of our 3

flexibilities is two non

- overlapping Venn diagrams 4

and in which case we just throw it to DOE. 5

So I ask people to think in those terms 6

and we’ll have an interesting conversation after 7

lunch. 8

MR. PARKER: Also, what we can do after 9

lunch, I think is we can explore the results of 10

doing some material price sensitivity runs, because 11

I think what’s really going to be, I think, very 12

important to people here is what are the possible 13

price scenarios that might result from various 14

efficiency standard choices. And so I thin k it 15

might be instructive to actually look through some 16

material price sensitivity runs. I know we’ve 17

gotten requests for those and have worked very hard 18

to accommodate those, and so let’s

-- we will try to 19

have a presentation on that right afterwards as well 20

so we can get a perspective on what happens in a 21

couple different scenarios. 22

MR. ROSENSTOCK: This is Steve. Room A 23

and Room C and Memo Park are all available for 24

caucusing or if people want to break down into 25Executive Court Reporters (301) 565

- 0064 119

groups for lunch, that’s your choice w here you’re 1

going to eat. 2

MR. DeLASKI: This is Andrew. I just hope 3

that we can reserve some time to discuss medium 4

voltage dry type too. I hope the day doesn’t go by 5

and it gets to be five o’clock and we didn’t even 6

discuss the medium voltage dry type

. 7

MR. PARKER: Yes, I think we should 8

definitely try to do that. I agree, thanks. 9

Okay, let’s reconvene here at 1:30 if we 10

could. 11

(Whereupon, at 12: 36 p.m., the meet ing in 12

the above captioned matter was adjourned for lunch 13

recess , to reconvene at 1: 30 p .m.) 14

15Executive Court Reporters (301) 565

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2:05 p.m. 2 AFTERNOON SESSION 1

MR. PARKER: Hello. Okay, everyone, 3

welcome. I hope you had a good lunch. 4

**Review and Moving Forward** 5

What we did over the lunch break was download from 6

the Sharepoint site, the simplified design curves 7

that DOE ha d produced as part of the latest

-- as a 8

result of the latest engineering analysis. This is 9

for one through five and 11 and 12. So I think what 10

would make sense now is

-- let me just brief you on 11

sort of some of the things that are in the works. 12

We h eard a lot of talk this morning about 13

the suddenness of the transition to amorphous, the 14

point at which it takes place and so forth. I think 15

there’s widespread recognition that that doesn’t 16

exactly and accurately capture the way it would work 17

in the marke t place in real life. One way that we 18

can, I think, help deal with that concern is to 19

explore what happens if you vary the relative price 20

of materials, because the model sort of assumes 21

constant relative prices and I think there’s been 22

widespread concerns raised that if one moves towards 23

a standard that favors amorphous over conventional 24

steels that there will be a big ramp

- up in amorphous 25Executive Court Reporters (301) 565

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prices and so forth, and that the gap between 1

amorphous prices and conventional steels will widen. 2

And what we’ ve tri ed to do is

-- and that’s not 3

currently reflected in the analysis

-- so what we’ve 4

tried to do is to capture some of that with regard 5

to

-- in the sensitivity runs that are now in the 6

works, and so we will be presenting basically a 7

couple of scenarios for what might happen if 8

concerns are raised

-- if concerns are realized, if 9

it turns out that amorphous prices were to go up 10

relative to silicon steel, and so I think that will 11

be instructive. So we have that in the works. 12

And we have these simplified curv es in 13

front of us, and I think what might make sense now 14

is just to reopen the discussion to the differing 15

points of view

-- reopen the discussion of the 16

proposals and if there is

-- by the way, the other 17

thing is I heard over lunch a concern that we not 18

l ose track of medium voltage dry type and that we do 19

have a discussion about that. 20

So another thing that we might want to do 21

since we have these material price sensitivity runs 22

that are currently being prepared now, is we could 23

move up the discussion of m edium voltage dry type at 24

a certain point and have a basic presentation 25Executive Court Reporters (301) 565

- 0064 122

proposals on that. And then return to liquid 1

immersed once the runs are in. So that’s an option 2

that we have. 3

But why don’t I, at this point, just turn 4

back to the advocates and ask if they want to 5

present a response, anything that happened over 6

lunch break that you want to

-- around the table? 7

Or any other sort of thoughts that you want to add 8

following up from industry? 9

MR. NADEL: No, we have no thing to add at 10

this point. W e’re waiting for reactions to what we 11

put out there. Beyond

-- and when I say reactions, 12

you know, as is there some basis for moving forward? 13

Are there any counterproposals or what not, or are 14

we just too far apart? 15

MR. PARKER: Well, why don’t we look at 16

these simplified curves, if we could, that are the 17

DOE curves for the various design lines and get 18

people’s reactions to these. Is this not what you 19

are seeing? Is your group

-- this is not something 20

reflected

-- this is not captured by the ABB data 21

and these curves are inaccurate, or is there

-- 22

MR. SAINT: Just a clarification. 23

MR. PARKER: Yeah, sure. 24

MR. SAINT: This is Bob Saint from NRECA. 25Executive Court Reporters (301) 565

- 0064 123

Just a clarification of what we’re looking at here. 1

These are the same

-- are these the same curves that 2

DOE analysis

-- the LBL analysis that we saw this 3

morning in a more expanded view? This is a little 4

bit harder to decipher the numbers in this view, 5

since the grades are huge here. So is this the same 6

chart that we looked at this morning? That’s t he 7

question. 8

MR. CASKEY: This is John Caskey from 9

NEMA. I’m not sure if you’re

-- this should be the 10

same data that we showed you shortly before lunch, 11

that I presented and tried to explain, so this is 12

just a different scaling. 13

MR. SAINT: Okay. Gre at. Personally I 14

like the scaling that we saw this morning better. 15

MR. CASKEY: Well, we were criticized like 16

we were hiding part of the picture or something, but 17

I think the numbers are the same. 18

MR. SAINT: Okay. 19

MR. ROSENSTOCK: Mr. Parker? 20

M R. PARKER: Yes, Steve. 21

MR. ROSENSTOCK: Hi. Steve Rosenstock, 22

EEI. And I appreciate these graphs, and I’m just 23

kind of

-- in terms of the efficiency advocates 24

proposal, I’m just looking at the design line one, 25Executive Court Reporters (301) 565

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and again, the theory was that there woul d be M3 1

steel at DEL

- 4, but again, I’m just thinking about 2

the life cycle cost. Suppose you extrapolate what’s 3

there and you say DEL

- 4, would it be at least

-- I’m 4

going to throw it out

-- at least $3000. Again, I’m 5

not trying to make any market pricing or anything 6

like that. Again, based on the slope that the 7

M2/M3 would likely be above the 3000 mark, again, 8

just extrapolating, not having any idea, I’m not a 9

steel maker or anything. Compared to, let’s say, 10

2400 for the amorphous at DEL

- 4 I’m talking a bout 11

right there. So that’s probably like a 25 percent 12

price increase. 13

If they were to get a significant market 14

share, wouldn’t that have a significant impact on 15

some of the life cycle cost results? Because the 16

life cycle cost results are based on am orphous 17

having 100 percent market share. So if a higher 18

priced item got a significant market share, wouldn’t 19

-- at basically the same efficiency level, wouldn’t 20

that have a significant impact on the eventual all 21

the net present values and the paybacks and 22

everything? 23

MR. DeLASKI: Yes, of course it would. 24

The point that I

-- I mean I don’t think we need to 25Executive Court Reporters (301) 565

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spend a lot of time hashing over this again, but 1

it’s our view that the ABB experience, as shown by 2

the graphs by the ABB pie charts, shows that this 3

curve is not shaped properly, that it’s flatter as 4

we discussed this morning, and that further analysis 5

will show that the curve is too steep, and in fact 6

it would flatten out. That’s our view that that 7

would be the case. 8

MR. ROSENSTOCK: Just a quick follow

- up, 9

Andrew. This is Steve Rosenstock. Andrew, flatten 10

out between three and four? 11

MR. DeLASKI: Flatten out over the range. 12

And the reason why is because if you look at the ABB 13

sales, they show that for the period 2010

- 2011, for 14

pad

- mount tran sformers which is what we’re talking 15

about here, that have 20 to 30 percent losses, which 16

is in the range of EL4, they sold half of them were 17

amorphous core transformers, and half of them were 18

M3 transformers. 19

Wes, you want to correct me? Am I reading 20

i t

-- I’m looking at Wes’ data, so

-- 21

MR. PATTERSON: What I’d like to do is 22

display something on that screen, if I may. 23

MR. RIVEST: Before you do, can I

-- Mike 24

Rivest

-- I spoke earlier about how you can 25Executive Court Reporters (301) 565

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characterize this as two intersecting curves, one 1

for conventional steels and one for amorphous. What 2

you’re looking at has locked into time pricing for 3

each of those steels, and this is the picture based 4

on 2010 pricing survey we got on these various 5

materials. Over the last several days, people ha ve 6

asked us to run scenarios of different steel 7

pricing. 8

Two things happen as you vary the steel 9

prices: slopes change and absolute values

-- 10

absolute levels change as well. So if we were to 11

decrease the price of all conventional steels by 30 12

percent, t hat would lower the price curves of the 13

steels, of the transformers, not by 30 percent 14

because there’s more material in there than just the 15

steel, obviously. The curves all come down on the 16

conventional steels. The slopes would also become 17

more shallow. Okay. 18

On amorphous, if you were to increase the 19

price of amorphous 20 percent, the curve would lift 20

and it would become more steep. So when we say the 21

DOE curves are different from the ABB, that doesn’t 22

mean that the underlying modeling is any diffe rent. 23

What it means is that what we’re inputting in terms 24

of material prices into those designs could be 25Executive Court Reporters (301) 565

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wrong, or could be simply different than the 1

experience of ABB’s pricing over a one year period. 2

And what I would like to do is show how 3

DOE’s curve s change in appearance, both in height 4

and in slope, looking at simply those scenarios that 5

this group has asked to model. And you’ll find that 6

in some situations, under some scenarios, it looks 7

like a lot like the ABB experience, except that we 8

don’t get DL4. 9

MR. DeLASKI: Do you have that yet? 10

MR. RIVEST: Do we have that yet? I can 11

e

- mail that to Richard if that’s the easiest way to 12

do it, or I can throw it on a thumb drive. 13

MR. PARKER: Why don’t you bring it on a 14

thumb drive, that will be goo d, thanks. 15

MR. RIVEST: Sorry, Wes, for preempting 16

you. 17

MR. ROSENSTOCK: Mr. Rivest, based on what 18

we have

-- 19

MR. RIVEST: What we have is many things, 20

Steve. We have sensitivity scenarios that I think 21

need to be considered in decision

- making. Othe rwise 22

we did all that for nothing. 23

MR. ROSENSTOCK: But again, was my initial 24

premise correct? 25Executive Court Reporters (301) 565

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MR. RIVEST: Which was? 1

MR. ROSENSTOCK: Looking at the graph 2

that’s now not here, extrapolating the M3s up to 3

DEL

- 4, which was a proposal, using that

-- a gain, 4

since there’s no models made I have no other way of 5

doing that. If you extrapolate the cost of the 6

M2/M3 from DEL

- 3 to DEL

- 4, and you say that they 7

have a certain percentage market share, again, 8

without changing the cost of the amorphous, wouldn’t 9

t hat have a pretty significant impact on the life 10

cycle cost results? Because the life cycle cost 11

results are based on 100 percent market share for 12

amorphous

-- 13

MR. RIVEST: Oh, I see

-- absolutely. If 14

the price of amorphous goes up relative to 15

everythi ng else, then the controlling line is the 16

conventional steel line. 17

MR. ROSENSTOCK: Steve Rosenstock, EEI. 18

What I was also saying is if

-- if you still have 19

the conventional steel at a higher price point, but 20

it has a 20 percent market share for example , that 21

will have an impact on life cycle cost results at 22

DEL

- 4. 23

MR. RIVEST: Yeah, we’re actually saying 24

the same thing. 25Executive Court Reporters (301) 565

- 0064 129

MR. ROSENSTOCK: Thank you. 1

MR. RIVEST: Brian, can you come operate 2

the slides since you put them together. 3

MR. PATTERSON: (n ot at mic) It’s a very 4

good chart to show why the data is not showing an M3 5

at that CSL

- 3 level, look inside there, you don’t 6

see it. 7

MR. RIVEST: Yeah, there’s no DL

- 4. 8

MR. PATTERSON: Because the dots all curve 9

up to the right. 10

MR. RIVEST: So this is the reference case 11

for DL1, and this is with the pricing that we have 12

in the technical support document, so you see on the 13

left is the conventional steel line and on the right 14

are the amorphous, one with copper windings, and the 15

other one with aluminum . And the switchover point, 16

the way to visually see it is, you take the least 17

cost amorphous and you go to the left and see where 18

it intersects the conventional steel, and that 19

becomes the switchover for this design of 20

competitiveness, if you will. 21

Now, changing scenarios of steel pricing 22

to some of the scenarios that we discussed. This is 23

a different

-- very different look. What did you do 24

to pricing to get this? 25Executive Court Reporters (301) 565

- 0064 130

MR. COFFEY: This is using, for the 1

conventional steels, the 2006 prices that we had, 2

minus 25 percent, and keeping the amorphous the 3

same, so here’s the reference, and you can see that 4

all of the designs that use conventional steel 5

decline in price and also in steepness. 6

MR. RIVEST: So this could be a Wes curve. 7

This is a much more gr adual slope as you increase 8

the efficiency, it’s much more gradual. And the 9

crossover point for amorphous versus conventional is 10

now happening at the high end of CSL

- 3, basically. 11

PARTICIPANT: If I may, though, I thought 12

we were keeping pipe dreams for transformer 13

manufacturers of 2006 minus 25 percent. 14

MR. RIVEST: This is not about pipe 15

dreams, this is about having

-- we’re just looking 16

at scenarios of pricing and trying to explain why 17

one set of results on the surface may seem 18

inconsistent, but it’ s just a matter of pricing. 19

PARTICIPANT: So it’s nothing we’ve 20

actually can make a conclusion from then. 21

MR. RIVEST: Oh, I’m not asking for any 22

conclusion. I’m simply showing how significant our 23

assumptions about pricing are. 24

MR. POLINSKI: Ray Po linski, ATI 25Executive Court Reporters (301) 565

- 0064 131

Allegheny. What is the

-- do we have a curve, then, 1

for when amorphous goes up by 50 percent? 2

MR. RIVEST: So do we have other scenarios 3

there? 4

MR. COFFEY: Yes, this next scenario is 5

keeping the same prices for conventional steel

-- 6

Brian Coffey, Navigant

-- this next scenario is 7

keeping the same prices for conventional steel and 8

then taking for amorphous the 2008 price plus 25 9

percent. So low sensitivity for conventional, high 10

sensitivity for amorphous. 11

MR. RIVEST: So if you were to l ook at the 12

LCC results for this, for CSLs 1 through 3, 13

amorphous wouldn’t come into the mix, so it would be 14

all the conventional steel curves that would be 15

dictating the results of the LCC. And when I 16

compare the 2007 analysis to the analysis today, 17

this is actually kind of what it looked like in ’07. 18

So that’s

-- no conclusions, just wanted 19

to share with you how important those assumptions 20

about pricing are in terms of determining the cost 21

effectiveness of the lower standard levels and in 22

terms of deter mining the switchover point of 23

competitiveness. 24

MR. PARKER: Bob? 25Executive Court Reporters (301) 565

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MR. BERMAN: Robert Berman, Berman 1

Economics. One question, Mike, are these prices

-- 2

are these repricings or are these reoptimizations? 3

MR. RIVEST: These are repricings, which 4

is a good point. So we’re taking existing 5

transformer designs, say there’s 2000 in this design 6

line. 7

MR. BERMAN: So if we actually did 8

reoptimization what we would expect is a flatter and 9

lower line on the low price

-- actually on both, the 10

high and low pri ce. If we did a reoptimization we 11

would expect a flatter and lower line, is that 12

right? 13

MR. RIVEST: Potentially. I mean we’re 14

running As and Bs up to 15 or something, so I don’t 15

-- it would change slightly. We actually did that 16

when we took the origi nal designs from 2007 and ran 17

new prices for steel in it, and then we ran new 18

optimization, we were seeing like a three percent 19

difference on the slope. 20

MR. PARKER: Carlos. 21

MR. GAYTAN: Carlos Gaytan, Prolec GE. I 22

would like to have the opportunity o f showing our 23

design exercise in order to provide the reference 24

from another manufacturer on how the design 25Executive Court Reporters (301) 565

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competitiveness for silicon steel and amorphous 1

designs behaves across the different efficiency 2

levels. If you would like to please show the charts 3

that I sent you. 4

MR. PARKER: Sure. 5

MR. GAYTAN: It will only be a few 6

minutes. We were using design plots November 8, 7

2011 is the name of the file. 8

MR. PARKER: Oh, it’s on a different

-- is 9

it on your

-- 10

MR. GAYTAN: No, I sent you in a PDF fil e 11

by e

- mail around lunch time. (Pause.) 12

Okay. Yes, in that view you can see in 13

green the

-- this is design line one and design line 14

two on the right. This is the

-- in green you see 15

the best option for the silicon steel designs that 16

we can optimize to for the different efficiency 17

levels starting from the base line of the EL

- zero, 18

and we made the exercise all the way up to EL4, and 19

as you can see there’s the crossover point for most 20

of the cases is between levels 1 and 2, between

- 21

this is the shaper of the amorphous metal designs, 22

and for design line two, the 25 KVA pole, you can 23

also see that the crossover point for the best 24

silicon steel design, and the best amorphous design 25Executive Court Reporters (301) 565

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is a little bit before level two. And we go down to 1

the two other design lin es for three

- phase. This is 2

the design line four on the left, and we have again 3

the crossover point between levels one and two. 4

Another relevant thing is that with 5

silicon steel we can design all the way up to the 6

efficiency level four, but as you can see in the 7

relative pricing, the increasing pricing compared 8

with the reference, 100 percent of the lowest price 9

according to efficiency regulation designs up to the 10

levels of 70 to 100 percent higher than the current 11

levels. So that means that we can pr oduce designs 12

with silicon steel that can meet these efficiency 13

levels, but the competitiveness level of those with 14

current material price will be of a high concern for 15

us. So in general we can say for any levels above 16

level three, the gap between the bes t silicon steel 17

design and the amorphous designs widens 18

significantly. 19

MR. PARKER: Carlos, excuse me, what 20

prices were you using for this? 21

MR. GAYTAN: We were using 2011 material 22

prices that we have for our quotation system. 23

MR. PARKER: Okay. Bun ch of hands around 24

the table. Andrew first. 25Executive Court Reporters (301) 565

- 0064 135

MR. DeLASKI: Thanks. Help me out with 1

the left hand axis. 2

PARTICIPANT: Relative price. 3

MR. GAYTAN: Yes, the axis is the relative 4

price of the designs if we were to quote those 5

designs to a customer, an d we are normalizing all 6

the charts so that the lowest current design, 7

meaning the EL

- zero level is always equal to 100 8

percent, so we can have a sensitivity over the range 9

of price variation for the different efficiency 10

levels for both materials. In the silicon steel, we 11

have a variety of silicon steel grades that we were 12

using. The best

-- the lowest price, efficiency 13

level compliant designs, and we were comparing that 14

to the lowest price amorphous design for that same 15

efficiency level. 16

MR. PARKER: A aron. 17

MR. DeLASKI: So just to make sure that 18

I’m interpreting it right. So in this case

-- 19

MR. PARKER: This is Andrew DeLaski. 20

MR. DeLASKI: So DL4, for design line 4, 21

EL3, you’re looking at something, it looks like it’s 22

115 percent for the amorp hous line and call it 135 23

percent for the steel line. So if I’m interpreting 24

this correctly, it means that your

-- the steel line 25Executive Court Reporters (301) 565

- 0064 136

-- to make that transformer with a steel core is 1

costing an additional 20 percent over the base. 2

MR. GAYTAN: That is corre ct, an 3

additional 20 percent over the base line at the 4

level zero. 5

MR. DeLASKI: So the 20 percent cost, the 6

manufacturing cost, MSP, whereas for design line 2, 7

you’re looking at a difference of a couple percent, 8

a couple, three

-- four, five

-- three pe rcent, 9

something in that order. For EL2, excuse me. 10

MR. GAYTAN: For EL2, yes, the differences 11

are generally within ten percent difference compared 12

with the current baseline. 13

MR. DeLASKI: Say that again, please. 14

MR. GAYTAN: For efficiency level 2 the 15

differences that we found in selling prices were in 16

the range of ten percent for the different design 17

lines. That is true for design line 1, design line 18

2. That is also true for design line 4, and with 19

the only exception of design line 5 where the 20

di fference is

-- that chart on the right, the 21

difference is more in the order of a little bit more 22

than ten percent, probably 13, 15 percent. 23

MR. DeLASKI: And then for three, do you 24

have the range

-- this is Andrew again

-- do you 25Executive Court Reporters (301) 565

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have the range for three ? 1

MR. GAYTAN: For level three the 2

differences are up in general, higher than 20 3

percent

-- 4

MR. PARKER: Could people on the phones 5

please mute your phones. Excuse me, whoever is on 6

the phone, could you please mute your phone. 7

PARTICIPANT: We can a ll hear your other 8

conversation. 9

MR. GAYTAN: For efficiency level 3, the 10

difference are between 20 and 25 percent with 11

silicone steel designs being higher than the lowest 12

price amorphous design, with the only exception of 13

design line 5, where

-- no excu se me,

-- with the 14

only exception of design line 2, 25 KVA where the 15

difference is lower than 20 percent. That chart on 16

the top right. 17

MR. MEYERS: Aaron Meyers, Cooper Power 18

Systems. Since this data is up, I would like to 19

point out for DL1, there is n’t a silicon design 20

beyond EL3. This coincides with the DOE’s data, and 21

it coincides with Cooper’s data. There is not a 22

viable designed silicon steel that can be built. 23

And the others are at the very extreme of what’s 24

possible, technology

-- 25Executive Court Reporters (301) 565

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MR. PARK ER: Sorry, for which DL is this? 1

MR. MEYERS: DL1, there’s not a viable 2

design at EL4. There are no designs that are 3

possible there with silicon steel. And for the 4

others, you’re at the steepest part of the silicon 5

steel curve, and you’re at the very extreme of 6

what’s even technologically possible to build. So 7

that’s the point that I wanted to make, thank you. 8

One further thing, sorry, Richard. 9

MR. PARKER: Yes, Aaron. 10

MR. MEYERS: With regard to the 11

sensitivity analysis, I wasn’t really looking to see 12

what happens when you raise amorphous and keep M3 13

the same, but when you raise amorphous pricing to 14

the levels which would bring the two to competitive 15

situation, what happens to the payback periods? So 16

is there still an economic justification for raising 17

the efficiency levels? If we raise the efficiency 18

levels such that amorphous could raise their price 19

50 percent and still be competitive with silicon 20

steel, what happens to the

-- the benefit, 21

economically, for the nation? 22

MR. PARKER: Yes, I t hink that LBL is 23

actually doing that analysis. That’s part of the 24

material price sensitivity analysis that we’re 25Executive Court Reporters (301) 565

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breaking out now. Wes? 1

MR. PATTERSON: If I can get the stick

-- 2

MR. PARKER: Wes Patterson. 3

MR. PATTERSON:

-- the thumb drive. 4

PA RTICIPANT: If I may

-- could we get 5

copies of the two presentations we just saw on here 6

sent to us via e

- mail? 7

MR. PARKER: Sure, I think we could do 8

that. 9

PARTICIPANT: Before this goes down

-- so 10

as I’m interpreting this, Carlos is that you’re 11

showi ng that something in the neighborhood of EL2 is 12

where your data shows that the manufacturing ... price 13

is about the same, in the same ball park? And that 14

if you go to EL3, you start getting out of the same 15

ballpark. Is that kind of a fair summary of it? 16

MR. GAYTAN: Carlos Gaytan. That’s a fair 17

statement, for three out of the four design lines, 18

EL2 is where we have the smallest difference between 19

the two types of core materials. The only exception 20

to that is design line 5 where we have like a ten 21

percen t difference at EL2. 22

MR. PARKER: Jerry? 23

MR. COCKRAN: Could we go back to the 24

charts which were handed out at lunch time, design 25Executive Court Reporters (301) 565

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line one, cost

- effective efficiency curves and where 1

we have the multiple core steels plotted? Can you 2

put that on the bo ard? The one that was handed out 3

I can

-- 4

MR. PARKER: Oh, the simplified plots? 5

MR. COCKRAN: Simplified plots, yeah. 6

Everybody has those

-- handed it out right after 7

lunch. But if we look at design line one, if we 8

consider if we want an even playi ng field between 9

silicon steel and amorphous, design line one, the 10

crossover point is at number one efficiency level. 11

And then if you go to design line two

-- can you go 12

down to two

-- again, they’re even, or relatively 13

even. 14

PARTICIPANT: At design lin e one. 15

MR. COCKRAN: At efficiency number one. 16

Even playing field, both materials are competitive. 17

If we go to design line three, and again it’s even, 18

or relatively even at number one efficiency. 19

Design line four, pretty much the same 20

thing, even at number one efficiency. Five, 21

amorphous has a little advantage on five. So it’s 22

not as even as some of the others. 23

So we jump up to design line 11

-- again, 24

a little advantage for amorphous at number one 25Executive Court Reporters (301) 565

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efficiency, but it’s not

-- it’s there. And then we 1

go to the last one, design line 12, and we see 2

they’re even again. So that’s where we’re coming 3

from that it’s an even playing field at efficiency 4

number one. Both materials are competitive and we 5

can make designs there. And as you go up in the 6

effi ciency levels, there may be some designs 7

possible and some designs impossible, but they’ll 8

probably be very expensive. 9

MR. NADEL: This is Steve Nadel. Just to 10

react to that. I mean we actually think that the GE 11

data is probably more realistic, and tha t shows it’s 12

more at level two that they start being even, and 13

the other thing, as we said last meeting, if M3 has 14

a slight cost advantage, then we’re not going to get 15

much change in the market. We were looking for a 16

place where the amorphous may have a s light cost 17

benefit because that would bring another 18

manufacturer in and help bring more competition in 19

there, as opposed to just having an overwhelmingly 20

dominant M3. So we’re looking to push it a little 21

bit farther, and actually comparing the DOE data and 22

the GE data, the GE data does show the crossover 23

point happening higher. 24

MR. ROSENSTOCK: Steve Rosenstock, EEI 25Executive Court Reporters (301) 565

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But I think, and I appreciate the presentations from 1

GE and ABB, but again, they’re two of the largest 2

players, so there might be some econo mies of scale 3

with their transformer prices. Maybe this is 4

showing all the transformer prices for all the 5

manufacturers, so yes, the largest players might 6

have a higher crossover point, but the smaller 7

players might not, so there might

-- some of that 8

mig ht be going on with this graph as well with some 9

of their data. Again, I’m speaking just looking at 10

the data here, and I just remember the spreadsheet 11

of about, like 6000 prices for

-- or 2000 data 12

points for design line, but there’s big 13

manufacturers and small manufacturers, and they 14

might have different price points at each of the 15

design lines. So, again, there’s that issue as 16

well. 17

MR. PATTERSON: Wes Patterson. Richard, 18

if you could put that PDF up, and before I start I’d 19

like to thank General Elec tric, Carlos, because your 20

presentation, I think, helps demonstrate potential 21

error I saw in Steve and Andrew’s selection of EL4. 22

They correctly interpreted the data that we can 23

build at EL4, but hopefully I can illustrate how it 24

matches. It’s a very com plicated drawing. 25Executive Court Reporters (301) 565

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PARTICIPANT: Crystal clear. 1

MR. PATTERSON: Take it back to where you 2

can see the whole thing. Where you can see all the 3

dots. This is the discussion I have going on with 4

Mike. These colored dots are the DOE data. And 5

this is on log

- log scale. These are not linear 6

relationships, they are power relationships. And do 7

me a favor and just toggle to the next slide. Put 8

it in display mode and just flip. 9

This is without all my garbage clouding it 10

up. And here you’ll see this bright spot here that 11

exists, and this is conventional grain

- oriented 12

steel from the OPS calculations, and this is the 13

amorphous steel from the OPS calculations. And this 14

line represents the reduction in loss versus the 15

change in price. So the slope of this li ne is the 16

key driver to the economic analysis. 17

My understanding is that the LCC 18

calculation walks along this bottom curve here, so 19

it comes up here and it says, okay, at EL3, I don’t 20

find any conventional grain

- oriented steels. The 21

bottom

-- when you select these bottom points, these 22

bottom points have no CGO steel in them. Back to 23

the one with the red dots. 24

Now when you look at the actual design 25Executive Court Reporters (301) 565

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space that the market place drives, it’s all these 1

red dots, and this is our DOE level and if you look 2

a t the scaling, you’ll see that the pricing is an 3

order of 300 percent from the cheapest thing to the 4

most expensive thing. And if you scale this thing 5

out, you’ll see that as the losses go up, because of 6

the market that we see today, this thing converges. 7

It converges on the SA’s material, on the Metglas 8

material. 9

And if I look into this EL3 space, you see 10

all these red dots here, right, those red dots, if 11

you look real close, none of them are round dots. 12

And on this red chart, every round dot is an 13

amorphous unit and every non

- round dot is a 14

conventional grain

- oriented design that we shift 15

into the market place. And there are no round dots 16

from ABB at this level. I don’t start using 17

amorphous until I get close to EL5 levels. That’s 18

where today, it is an economic benefit. Is this 19

clear? 20

MR. ROSENFELD: Excuse me, this is Art 21

Rosenfeld. I can’t hear whoever’s speaking, so can 22

you speak a little closer to some microphone? 23

MR. PATTERSON: Sorry about that, Art. I 24

am saying that when you examine this chart, the 25Executive Court Reporters (301) 565

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round dots that are on this chart are amorphous 1

material. And we do not see an economic benefit to 2

building amorphous until I start to approach EL5. 3

And the market place variety of orders that I have 4

received have not really given me any design 5

requirements to fall between the EL4 barrier and 6

close to the EL5 barrier. It’s just a white space. 7

There were no requirements to fit into that space. 8

However, as soon as I hit the EL4 barrier, 9

I start producing with conventional grain

- oriented. 10

So, to me, this says we can build at this level, but 11

it’s stretching the limit. It is reaching the upper 12

level of what is achievable. 13

So my position would be we should not 14

advocate EL4 because I can build a unit that fits 15

there, we should find the e conomic sweet spot, which 16

is somewhere below EL3. 17

MR. PARKER: Below EL3 and above what? 18

MR. PATTERSON: It’s EL3 and

-- well, pick 19

your spot. Make your arguments back and forth, but 20

from producing transformer perspective, I can go 21

south of the EL3 li ne. 22

The other thing I want to point out here, 23

one more thing. The one concern that I have in the 24

entire analysis that remains unresolved is the slope 25Executive Court Reporters (301) 565

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of this line. And on this chart, this solid line is 1

the line produced by the OPS designs. Mike has 2

pointed out that they put together a Monte Carlo 3

analysis in selecting these points and it’s not 4

really that line, it’s some other line. But this is 5

the critical factor in figuring out the cost benefit 6

of our discussion. Using just the design data, the 7

s olid line here is ABB’s pad mounted line. And this 8

dotted line is ABB’s pole mounted line. And the 9

pole mounts increase at a much higher rate, cost 10

versus efficiency level, than the pads. That’s the 11

physics of it. 12

MR. PARKER: We discussed that. So f rom 13

your standpoint, what would be the sweet spot? What 14

would be your proposal? 15

MR. PATTERSON: I’d pick in here, See all 16

these dots in here. 17

MR. PARKER: Could you say that for the 18

record, though, because

-- 19

MR. PATTERSON: EL1 to EL2. 20

MR. PARKE R: Between EL1 and EL2. 21

MR. PATTERSON: My perspective is where I 22

have all these dots, which is EL1, EL2, in that 23

space. 24

MR. PARKER: And is this for

-- does this 25Executive Court Reporters (301) 565

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same analysis apply to all the design lines, or are 1

they separate? You would have a dif ferent point for 2

each design line, right? 3

MR. PATTERSON: My slopes are changing, 4

but the scatter spread of the points in this area 5

are laying in the same general area. So from my 6

perspective, I would say we’re still looking at an 7

EL1 to an El2 split. 8

MR. PARKER: Okay. Thank you. Ray, did 9

you have something? 10

MR. POLINSKI: Ray Polinski, ATI Allegheny 11

Ludlum. Just to

-- for Wes’ point, he’s saying that 12

the ones in the upper

-- to the left there in the 13

three and four are exceptions to the rule and I say, 14

again, I hate when we start

-- I still don’t like 15

when we look at different

-- this part of this 16

database, and this part of another database, because 17

so many variables change. Wes, does your company 18

have an inherent, maybe higher cost, associated w ith 19

making an amorphous transformer than maybe the base 20

case that was studied by LBL? I think we can never 21

-- we can’t compare different data sets. We’ve kind 22

of said that the LBL dataset is the one we are going 23

to use, and it’s good looking at this stuf f, and 24

until the LBL database changes, I believe our 25Executive Court Reporters (301) 565

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decisions of this committee have to be made based on 1

the LBL data which shows the efficiencies in the 2

zero to one. 3

MR. PATTERSON: Richard, if you could flip 4

the next slides. If we were to discuss onl y LBL 5

data, then we’re discussing this dataset. This 6

dataset is a subset of what the market place 7

procures. This is not something that can be argued 8

otherwise. It’s an arbitrary subset, not selected 9

by a consideration of efficiency, but selected by a 10

co nsideration of A, B, life cycle owning cost. 11

Given that, we have this hole here, and it’s that 12

hole that has to be resolved in the LBL analysis if 13

we are to base it on the DOE data, which I think we 14

can do. I think if we

-- just engineering

-- 15

general en gineering principles, this hole can be 16

filled in. It’s illustrated in GE’s data. It’s 17

illustrated in ABB’s data. We can base the entire 18

analysis on the DOE data once we confirm these 19

slopes. 20

MR. RIVEST: Mike Rivest. I wasn’t going 21

to say it, but I’v e got to say something about this. 22

I think that

-- so the slope that’s drawn there for 23

the OPS modeling is essentially is the slope of the 24

amorphous, and I think what we’ve seen all along is 25Executive Court Reporters (301) 565

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that the way the modeling is done, there’s two 1

slopes, there’s o ne for the grain

- oriented steel, 2

which is steeper, and sort of matches the ABB dotted 3

line. And then there’s the amorphous line which is 4

lower and flatter. I think it’s just a reflection 5

of the pricing assumption we have for amorphous 6

relative to grain

- o riented to the large part. 7

MR. PATTERSON: Mike, if you recall, I 8

sent you a chart where I have shown just the grain

9

oriented dots. 10

MR. RIVEST: No, I don’t remember that

-- 11

it must have been really late that one. 12

MR. PATTERSON: It’s in the same dec k, and 13

when you look at just the grain

- oriented, it’s 14

filling in all these holes right in here. Following 15

the same basic slope. 16

MR. PARKER: Chuck 17

MR. SIMMONS: Yes, Chuck Simmons, Progress 18

Energy. Wes, is there any way that you can say what 19

the cost difference would be, say, from the base 20

case up through design line 3? Is this indicated on 21

the Y axis of this chart? 22

MR. PATTERSON: The answer to that is yes. 23

Pressing the edge of proprietary information here. 24

MR. SIMMONS: Okay. 25Executive Court Reporters (301) 565

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MR. PATTERSON : And which is why I put 1

this bar here, this gray bar, locking out the 2

selling prices. But this does reflect it, and if I 3

could, I would like to have DOE determine this slope 4

and put in for efficiency level 1, from zero to one, 5

it meant so much change in price for so much change 6

in watts. 7

MR. SIMMONS: We would very much like 8

that. 9

MR. PATTERSON: From zero to two, so much 10

change in price for so much change in watts, just 11

simple chart for each of these E levels. And then 12

we can confirm it. And this would be the numbers 13

that are used in the LCL analysis, not the ones that 14

are from the OPS designs. 15

MR. RIVEST: Which line are you talking 16

about, Wes? 17

MR. PATTERSON: Where I’ve drawn this blue 18

line

-- 19

MR. RIVEST: The ABB line? 20

MR. PATTERSON: N o, the blue line for the 21

OPS data

-- 22

MR. RIVEST: But that’s

-- see, that’s

-- 23

they really are

-- when you think about it, there 24

really are two lines, so every time we do our price 25Executive Court Reporters (301) 565

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sensitivity, we’re varying the slope and the height 1

of the two lines inde pendently, so we’d be losing 2

that if we just did one regression. 3

MR. PATTERSON: Yes, but I believe this is 4

a flaw in the dataset that you have selected. There 5

is not really a line here and a line here. 6

MR. RIVEST: You mean in the real world? 7

MR. PATTERSON: In the real world, there 8

is a continuum that will run. 9

MR. RIVEST: That’s based on your designs 10

on the previous slides, right? 11

MR. PATTERSON: Yes, there is a continuum. 12

If you were to filter this data for just pads, you 13

will find that t he bottom end of the pads followed 14

that line, and the bottom end of those pads matches 15

this blue line. But that’s not what you used in 16

your calc. You told me that you used a Monte Carlo 17

analysis

-- 18

MR. RIVEST: Oh, no, no. Right. I mean 19

we supplied, from the engineering, the dots, if you 20

will, and the dots are down

- selected to a lower 21

number which hugs the bottom of the curve. 22

MR. PATTERSON: And if we could get the

-- 23

MR. RIVEST: What that looks like? 24

MR. PATTERSON:

-- what the

-- to go to 25Executive Court Reporters (301) 565

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EL 1 from EL

- zero, what the change in price was for 1

those dots. I think that

-- 2

MR. RIVEST: I think that’s on the LCC

-- 3

isn’t that on your summary table? 4

MR. COFFEY: It’s in the results. 5

MR. RIVEST: It’s in the results, right. 6

So it’s MSPs

-- 7

MR . PATTERSON: We’ll take a look and see 8

if we can find it. Anyhow, my whole point of this 9

discussion wasn’t to get into this, was to point out 10

that this is the critical issue, to note that we 11

have a bunch of red dots in this area, with 12

conventional grain

- orienteds that don’t show up in 13

the calcs from DOE, and if I was to select 14

something, I would select something in this spot, in 15

here with these red dots. 16

MR. RIVEST: This is Mike again. I know 17

what I was going to say. So when, a while ago, when 18

we sat down and picked those ELs, there was a 19

rationale, but as the analysis gets refined, things 20

move around. EL4 was maxed at conventional steel. 21

That was the definition of it. So it was the line 22

that was

-- EL4

-- it was the line that represented 23

the furth est dot. That’s why you don’t need to be 24

off a little bit, we just reran our optimization 25Executive Court Reporters (301) 565

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again and we’re just off a bit, but the idea was it 1

was back step conventional. 2

MR. PARKER: Steve. 3

MR. ROSENSTOCK: Steve Rosenstock, EEI. 4

Two follow up questi ons. I really appreciate the 5

data, Wes, but is this US data or international data 6

for some of these? 7

MR. PATTERSON: Wes Patterson. This is 8

data strictly from our factories in the US. One 9

factory is an ABB factory, one is Power Partners, 10

Incorporated. 11

MR. ROSENSTOCK: But are these shipped 12

domestically or are they shipped internationally? 13

MR. PATTERSON: This has all shipments in 14

it. 15

MR. ROSENSTOCK: So could

-- so some of 16

these

-- some of the ones that you circled

-- again 17

-- Steve Rosenstock, E EI,

-- could be going to 18

international locations with much higher cost, or 19

the very specific requirements for

-- 20

MR. PATTERSON: They would have a 21

different requirement set, potentially. Most of 22

them go to 60 cycle countries. We don’t ship much 23

50 cycl e at all. 24

MR. ROSENSTOCK: Okay. Second question 25Executive Court Reporters (301) 565

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is, again, you said, again, this was a logarithmic 1

scale, as you said, so really it’s a linear scope 2

but really in reality you put it on a plain piece of 3

graph paper, it would show exponential types of

-- 4

MR. PATTERSON: This is correct. This is 5

a power equation and it ramps up very fast as you 6

move to the left. 7

MR. ROSENSTOCK: Thank you very much. 8

MR. PARKER: Andrew. 9

MR. DeLASKI: I’m moving off the data. 10

MR. PARKER: Yes. 11

MR. DeLASKI: So I think this is really 12

helpful, both from the GE data and what Wes has 13

presented. I think it helps us understand what’s 14

happening at EL4, so I really appreciate that. 15

I also

-- Wes, you had me on the edge of 16

my seat there for a moment, I thought you wer e going 17

to say EL3. So, sorely disappointed when you said 18

EL1. 19

MR. PATTERSON: Andrew. To me, I believe 20

we can build

-- 21

MR. DeLASKI: So where’s that sweet spot 22

is my question. 23

MR. PATTERSON: Up in this level, in 24

there. 25Executive Court Reporters (301) 565

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MR. DeLASKI: Right, so

-- 1

MR. PATTERSON: You can bring it up

-- if 2

I

-- let’s be clear, engineering

- wise, if I set the 3

standard at EL3, means I will start to engineer at 4

five percent better than EL3 to insure my production 5

gets beamed. Okay. So I’m actually building, 6

desig ning, down in this

-- to the left side of EL3. 7

That’s stretching the limit when you look at the red 8

dots. If I was to draw the line here, I’ve got a 9

whole lot more red dots to the left side of EL2. 10

MR. DeLASKI: For the record, you’re now 11

pointing to E L2 as being

-- giving you more

-- 12

MR. PATTERSON: For the record, we will 13

say I would support EL2 as the preferred point. 14

MR. DeLASKI: Okay. Thank you. 15

MR. ROSENSTOCK: Didn’t you say between 16

one and two? 17

(Laughter) 18

MR. PARKER: He speaks for h imself, Steve. 19

MR. ROSENSTOCK: That’s why I was asking. 20

MR. DeLASKI: Just to continue

-- Wes, you 21

know, I’m reminded as Wes did this process of 22

walking down from the left to the right, I’m 23

reminded of the process the Department has to do in 24

making t hese decisions for what a rule has to be. 25Executive Court Reporters (301) 565

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That’s

-- your mindset here is very similar to the 1

mindset

-- your process of how you walked us back is 2

very similar to what the government has to go 3

through in deciding what is a justified standard, 4

which is what we did when we looked at the data that 5

was vented over the weekend, or last week, was to 6

start with the higher levels and say well, where do 7

you stop? As you go down, where do you stop? And 8

where we stopped was TSL

- 4, the concept of TSL

- 4. 9

And as I lis ten to you here, you’re suggesting that 10

you would stop at something like two, to give you 11

the comfort that you have multiple suppliers of core 12

material in that market. 13

What I don’t think this leads us to is 14

saying that you go back to something like zer o or 15

one. The data just doesn’t support it. It doesn’t 16

support that, and that’s what I want to be clear on 17

is that there’s nothing in the criteria for the 18

decision

- making by DOE that says the magic thing is 19

that the price of two steels is the same, part of 20

the walk

- down criteria for DOE. So I want to be 21

cautious about sort of getting locked into this 22

notion that this parity in price is somehow the 23

magic answer. 24

Because it’s not necessarily the magic 25Executive Court Reporters (301) 565

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answer for happens in a contested rulemaking. 1

There, it’s the seven criteria. It’s not something 2

that is not

-- this holy grail that we seem to be 3

focused on this afternoon, it is not the only 4

decision criteria. So I think we have to keep that 5

in mind while we talk about how to move forward. 6

MR. PARKER: Yeah, I think we’re really at 7

the point where we need to think about proposals, 8

okay. So if you have a proposal. Bob. 9

MR. SAINT: Yes, I’d like to react to your 10

statement, and I agree with your statement, although 11

I think my conclusion may be a littl e bit different 12

than yours. In that, what we’re talking now is the 13

highest level of efficiency where the 14

competitiveness of the steel is there. So, this

-- 15

what we’re talking about now is arguing about the 16

highest level that

-- of efficiency where there is a 17

competitive market. We’re not talking about

-- we 18

haven’t started talking yet about the total cost and 19

the price

-- the cost for the user. We’re talking 20

about the

-- where it starts to become competitive, 21

and so that’s the highest level that we can ever 22

consider. We’ll go down from there with regard to 23

the life cycle cost and the first cost, and those 24

kind of costs. 25Executive Court Reporters (301) 565

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MR. DeLASKI: I guess, Bob

-- Bob, right? 1

MR. SAINT: Yes. 2

MR. DeLASKI: I guess I don’t see it that 3

way. I

-- life cycle cost i s certainly part of the 4

decision, it’s a big part of the decision. It is 5

one of the seven criteria. But when I look at the 6

DOE data at the end of last week, I mean on 7

something else

-- on the mean LCC basis, we’re right 8

up to EL6, according to DOE data. So, I think this 9

is not where we start, this is where we potentially 10

end. Where we start, where I start, is where it’s 11

cost

- effective for the user, and I know you 12

represent users, so this is

-- look at the data 13

that’s before us, it’s cost

- effective, you know, way 14

above the levels that we’re talking about. And the 15

mean pay

- backs are less

-- at EL2, I mean, the data 16

given by the government, the mean paybacks at EL2 17

are 7.5 years

-- 18

MR. SAINT: Yes, but that’s

-- 19

MR. DeLASKI: I could read through the m. 20

There’s 7.5 years, 4.1 years, 3.6 years, 17.3 for 21

the poles, and 4.9 for the last one, so those 22

paybacks look pretty good. 23

MR. SAINT: And as we said this morning, 24

we’ve been working with LBL, Lawrence Berkeley 25Executive Court Reporters (301) 565

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National Lab and we don’t agree with th eir analysis 1

of the load that they’ve used. 2

MR. DeLASKI: So you have to go to the 3

bottom

-- the right

- most. 4

MR. SAINT: Right. And they have 5

acknowledged that those may be wrong, but they 6

haven’t given us the data yet. And probably won’t, 7

because it ’s been cut off. 8

MR. DeLASKI: (not at mic) But I think the 9

thing we have to ask ourselves, how much. ... could 10

be wrong by ten percent

-- could be wrong by 50 11

percent, still have a payback ... unless they’ve off 12

by a factor of more than 100 percent it’s un likely 13

that it will tip it to the point where the LCC’s are 14

not going to be a payback within the Department’s 15

life. 16

MR. PARKER: I think we have a load factor 17

sensitivity analysis that people can look at. I’m 18

not sure that it’s been circulated yet, but we will 19

circulate it this evening and you can take a look at 20

that and see how much of a difference it makes to 21

the analysis. Jerry. 22

MR. SCHOEN: Jerry Schoen, AK Steel. Wes, 23

I know the Y axis is proprietary, but what percent 24

increase is it in the typic al cost of going from 25Executive Court Reporters (301) 565

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DEL

- zero to D EL

- 2 as a rough percentage in the first 1

cost of the transformer ? 2

MR. PATTERSON: Some rough percentages. 3

The interim price increase going from 99.5, which is 4

what I take as my design point, I don’t design 100 5

percent o f the standard because of manufacturing 6

tolerances, so I don’t go over the standard. So 7

you’ll see that that is point four percent, and 8

that’s point five percent , and we’re in good 9

alignment. That’s this line back in here. At ten 10

percent reduction in lo ss, I am at eight percent 11

increase according to the DOE data, and I’m 11 12

percent increase according to ABB data. At a 20 13

percent reduction in loss, I’ve got 18 percent 14

versus 25 percent. 15

Now, Mike has come back and said when he 16

looked at this same kind of analysis, his 17

percentages here were closer to my percentages. 18

They were in better alignment, I think. 19

MR. DeLASKI: And what is that increase in 20

first cost as a percent? 21

MR. PATTERSON: This is the percent

-- 22

MR. DeLASKI: Twenty

- five percent? 23

MR. PATTERSON: This is the percent 24

increase. If we’re looking at DOE, you’re looking 25Executive Court Reporters (301) 565

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at eight percent, and if you’re looking at ABB, 1

we’re looking at 11 percent. Increase in unit 2

selling price. 3

MR. DeLASKI: Right. So, Wes and I have 4

been correspondi ng and Wes calculated the 5

incremental DOE based on that regression there, 6

which is really a line through the amorphous. And I 7

recalculated it based on the MSPs in the LCC, but 8

it’s not the most recent LCC, it’s the LCC that was 9

available at the time. And when I calculated it the 10

same way, I was getting very close to the ABB 11

numbers, which, you know, made me feel good at the 12

time and I didn’t know you’d share this with the 13

world. I wasn’t allowed, but it was a good sanity 14

check on our stuff. 15

MR. PATTERS ON: But I hoped th at it helped 16

you move forward the discussion. 17

MR. DeLASKI: Yes, yes, it did. And it 18

also, you know, the way it’s prepped here, it’s 19

improvement and percentage increase in price, so 20

your base price assumptions

-- and that’s part of 21

th e reason why the scope would be quite different 22

for a pad than a pole, because the base price is 23

different. 24

MR. PARKER: So I guess, Chris, do we have 25Executive Court Reporters (301) 565

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that

-- do you have ready the delta, the percentage 1

price increase versus percentage

-- we don’t. 2

MR. RIVEST: No, that’s not what we were 3

doing. Chris was going

-- I think he was reworking 4

the LCC results tables for the sensitivity analyses. 5

MR. PARKER: Right. I was just wondering 6

if it was possible to get

-- do we have

-- I thought 7

you mentioned ea rlier that there was

-- was a 8

calculation made of the

-- at each EL what the 9

percentage

-- what the incremental cost of

-- 10

MR. RIVEST: No, Chris has actual dollars. 11

The has the MSP at each EL as part of the standard 12

outputs. 13

MR. PARKER: Is it hard to convert that

-- 14

MR. RIVEST: You know, you don’t set up a 15

comparison or we’re going to have to compare dollars 16

because we can’t be sharing the dollars here. 17

MR. PARKER: Right, that’s why I was 18

thinking about looking at it in terms of 19

percentages. 20

MR. RIVEST: All right. But is this 21

necessary? I mean, we’re stepping back into the 22

engineering. 23

MR. POLINSKI: Ray Polinski, ATI 24

Allegheny. Just again, we’re continually trying to 25Executive Court Reporters (301) 565

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compare apples and oranges with these different 1

studies, and so, Mike , I heard you saying that this 2

here

-- Wes, excuse me, is showing that the cost 3

penalties or the increased costs are much greater 4

than the LBL analysis. So if you would use Wes’ 5

numbers then the savings would be less than are 6

shown by the other. 7

MR. RIV EST: Okay. Have a look at that 8

graph. All right. Have a look at the line that Wes 9

bases his numbers on for DOE. It starts at the 10

lowest first cost transformer for OPS , and it goes 11

through the amorphous

- aluminum

- aluminum line. Okay. 12

Now, truncate tha t and just look at the asymptote 13

where the ... steel

-- it’s a much sharper line. SO 14

for

-- so in fact, OPS predicted prices are higher, 15

are steeper for the grain

- oriented steels, and what 16

that

-- and that line, that blue line, really, is 17

applicable only fo r the amorphous levels. 18

PARTICIPANT: But Mike though

-- excuse 19

me, I’m sorry if you were not finished. 20

MR. RIVEST: Okay. So the exercise I did 21

earlier, where I was moving two curves, one is the 22

grain

- oriented, and the other one is C

- amorphous. 23

Both those have different slopes. And I talked 24

about which was the controlling line in the LCC, so 25Executive Court Reporters (301) 565

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as

-- the controlling line is the one that yields 1

the lowest first cost. So the incremental cost up 2

to amorphous parity is the grain

- oriented, and then 3

the con trolling slope is the one of the amorphous. 4

MR. PATTERSON: Mike, right here I have 5

amorphous designs kicking up and showing that they 6

are considerably cheaper than the grain

- oriented

-- 7

MR. RIVEST: Right. 8

MR. PATTERSON:

-- between EL2 and EL3. 9

M R. RIVEST: Right. Exactly. 10

MR. PATTERSON: But my data says that’s 11

not reality. Reality says that these grain

- oriented 12

designs are much closer to this line here. 13

MR. RIVEST: So what you’re saying, Wes, 14

is that you think there’s only one slope. T here 15

isn't two slopes? 16

MR. PATTERSON: That is correct. That’s 17

what I said. 18

MR. RIVEST: And that OPS is too sharp a 19

slope in the grain

- oriented section and too shallow 20

in the amorphous. 21

MR. PATTERSON: This is correct. 22

MR. RIVEST: We’re agreeing

. 23

MR. PATTERSON: Mike, and the reason why 24

is because they don’t have

-- OPS doesn’t have any 25Executive Court Reporters (301) 565

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dots in this space. 1

MR. RIVEST: Right. But essentially if I 2

were to run a straight line regression through 3

those, we get the slope in between. And that’s w hat 4

I get when we use the actuals. 5

MR. PARKER: So the question is what do we 6

do about that now for purposes of arriving

-- moving 7

forward today? And the question is what , you know, 8

would it make sense to go through and look at

-- 9

excuse me, could we ha ve everybody’s attention 10

please

-- would it make sense to go through and look 11

at what the max

-- 12

MR. RIVEST: I don’t think

-- there’s 13

nothing to do. You can make the OPS grain

- oriented 14

steel more shallow by reducing the price of grain

15

oriented, that wi ll make it more shallow, and you 16

can increase the slope of the amorphous by 17

increasing the price of amorphous. That was my

-- 18

how I started all this by saying that it is my sense 19

by comparing this data to real world data, is that 20

the incremental cost of a morphous relative to the 21

grain

- oriented that we’ve modeled, are not 22

representative of the market. That would be, in my 23

mind, confirmed also by the GE data. 24

MR. ECKMAN: What I take from Wes’ data 25Executive Court Reporters (301) 565

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and from GE’s data is that at least EL2 and 3 are 1

certain ly, for EL2, that the grain

- oriented prices 2

that are in the LBL model are higher than they are 3

reflecting in terms of their products. That the 4

slope is shallower for the grain

- oriented. Or 5

amorphous is more expensive. But there’s less 6

differential in th e price of the two steels, 7

whatever they are, whether they’re higher or lower. 8

MR. RIVEST: Yes, there’s less in the DOE 9

analysis than there is in the real world. Which, 10

you know, if we did that would change the overall 11

slope to be more consistent with Wes’ because the 12

amorphous would go up, but the grain

- oriented would 13

come down, and the slope of the grain

- oriented would 14

come down, and the slope of the amorphous would go 15

up. And you would get that convergence I showed 16

earlier, which becomes a straight line. 17

MR. PARKER: So, Aaron. 18

MR. MEYERS: Aaron Meyers, Cooper. I’m 19

not fully understanding why there’s only one curve 20

and not two. From our perspective, the grain

21

oriented slope is quite steep, so the speculation 22

that the grain

- oriented slope is sh allower than 23

what’s the data showing, I have not seen anything

-- 24

MR. RIVEST: Well, it’s very steep right 25Executive Court Reporters (301) 565

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now. Remember, this is an exponential

- this is a 1

log graph, and it’s exponential on a log graph. 2

MR. MEYERS: Yeah, on a log graph, the 3

bell s hape becomes linear. I’m just saying the 4

slope of that linear line is not shallower than 5

what’s shown, or I’ve not seen anything to 6

substantiate that claim. People are speculating, 7

and I just want to point that out. The space there 8

in no man’s land, I’m not quite clear how or why 9

there are ABB designs that are in there and since 10

we’re speculating, if you had an amorphous design 11

that you could build there, why would you sell it 12

for the price that coincides with the purple line, 13

when your next best alterna tive

-- is much higher. 14

So if you did sell an amorphous design there you 15

could get more money for it, wouldn’t you do that? 16

MR. PATTERSON: This is OPS data, not ABB 17

data. 18

MR. RIVEST: Right. These are not scales. 19

MR. PATTERSON: ABB data has no am orphous 20

designs in all of this space, starting from about 21

the middle of between EL4 and EL5, and down, 22

amorphous is not economical for any combination of 23

ratings that we have seen. 24

MR. MEYERS: Is it strictly economics, 25Executive Court Reporters (301) 565

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Wes, or is it

-- is there some oth er dynamic at 1

play? And I don’t need to know what it is, but

-- 2

MR. PATTERSON: No, guys, we’re all in the 3

same market place. We all compete in the same game. 4

So you get a spec from a customer, and there’s a lot 5

of variety of requirements in the spec. And then 6

you run it through your engineering systems to get 7

the lowest possible offering price to give to this 8

guy to meet his requirement. Then you hand it to a 9

marketing guy who either jacks it up or takes it 10

down, depending on what he thinks the guy’ s going to 11

buy. I mean, this is the game that’s played. So 12

the data I show is the end result of that entire 13

process. 14

MR. PARKER: So let me just see if we can 15

come up with an approach for narrowing the 16

differences. We started off with the advocates 17

pr oposing EL4 almost across the board. And others 18

saying that at least for certain design lines, that 19

is just not technologically feasible, right, that’s 20

just

-- or at least you’d have to pay people to take 21

the transformer. 22

So I’m wondering if we might just work 23

through the design lines and see if we can at least 24

agree on that upper bound, and then do the same 25Executive Court Reporters (301) 565

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thing is and see if there is any light we can shed 1

on the lower bound so that we can at least put 2

brackets on the range of disagreement. 3

With the analysis that we have, and I want 4

to emphasize that I wasn’t really proposing more 5

analysis, I got excited when I thought the analysis 6

for the delta efficiency over delta price had 7

already been done for each EL, but if it’s not, it’s 8

not. Does this ma ke sense as a way to go forward to 9

just look at what is the sort of

-- I guess there 10

was the point that you raised in the prior meeting, 11

Andrew, is that the point at which there really is 12

no technological choice, or at least no practical 13

choice of metals, and see if we can get closure on 14

that and then do the same thing on the other end. 15

And see if there’s any way that we can explore that 16

there might be overlap. 17

MR. DeLASKI: I think it could be useful. 18

I think what

-- I think we had this conversation 19

fr om after lunch is that, as I said before, we hear 20

the arguments around EL4, and we hear

-- what we had 21

talked about at our very first meeting, this notion 22

of looking at a design, looking at levels where 23

they’re technically feasible, and then looking at a 24

l evel where there is a level of competition and what 25Executive Court Reporters (301) 565

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I’m hearing from ABB and from GE is that here’s a 1

level where they see competition among the suppliers 2

of core materials. 3

So, now is that

-- and again, the walk 4

down from, you know, because the purpose of the law 5

is energy savings, and as you do the walk down, so 6

okay, so just thinking about EL3, so the question 7

for us then in our mind for EL3 is, well, what is 8

that price differential

-- and again, we can keep 9

feeding it all kinds of assumptions, but ba ck to 10

Aaron’s point, there is a point at which, you know, 11

the speculation about prices over a very long 12

analysis period and you’ve got to

-- you’ve just got 13

to make some assumptions. 14

So we think that

-- as I think about these 15

price differentials that, you know, EL3 may pan out. 16

I’m not sure, but that seems like something that may 17

very well pan out. But what I’ve heard, there’s a 18

pretty strong case from two manufacturers that EL2 19

does pan out the way they see the world. So I guess 20

I’m curious what oth er people around this table 21

think about that concept of EL2. That would be 22

helpful for me to hear. 23

MR. PARKER: Okay. This is for

-- this is 24

for one design line, this slide, right? 25Executive Court Reporters (301) 565

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MR. DeLASKI: I think we can go across the 1

board. 2

MR. PARKER: It’s across the board? 3

MR. NADEL: This is Steve Nadel. I’m 4

basically hearing everybody focusing on EL levels, 5

rather than TSL levels which kind of mix and match 6

across ways that I

-- I didn’t hear between the 7

lines, maybe didn’t quite make sense. 8

MR. DeL ASKI: EL2 is what I believe we’re 9

talking about, which I think EL2 works out to about 10

15 percent cut in losses relative to the baseline. 11

We had suggested EL4, which is a 25 percent. In 12

rough, round terms, EL3 is about a 20 percent cut in 13

losses. So tha t’s kind of what we’re talking about. 14

So, I’ve heard, you know, some pretty strong case 15

for EL2, and I wonder what other people around the 16

table think about it. 17

MR. PARKER: Rob. 18

MR. GREESON: Rob Greeson, Federal 19

Pacific. Hats off to the presenta tion of the data, 20

I think that’s a pretty slick way to represent the 21

information and I appreciate the effort that Wes has 22

put in, and also Navigant to do all this. But, you 23

know, as far as a dry type person looking at this, 24

one of the concerns, and it str uck me again this 25Executive Court Reporters (301) 565

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morning, from the utility guys saying hey, if my 1

prices go up 15, 20 percent, the rebuild market’s 2

going to go through the roof. I can’t get that out 3

of my head. And when the question was asked a 4

minute ago, what would it take to get to the EL2

-- 5

to EL1, ABB’s number was 11 percent, and to get to 6

EL2, it was approximately 25 percent. You’re in 7

that area of shifting an industry into the rebuild 8

market, it seems like to me, and I’d just like

-- I 9

haven’t heard the advocates side kind of address 10

that concern. Although I did hear the Navigant 11

consultant say they modeled it

-- I’m not sure that 12

-- in other words, it may be a bigger effect than 13

people realize and I think if I was a utility, I’d 14

be looking at that pretty hard. I’d just like to 15

hear other people’s comments on that, thank you. 16

MR. NADEL: This is Steve Nadel. We’re 17

now talking about the liquid immersed, the utility 18

market, basically. As someone who used to work for 19

utility and does a lot of work with utility 20

regulators, yes , some utilities will try to save 21

costs, but as soon as the regulators realize that 22

their life cycle cost savings, and we can educate 23

them, I imagine there would be a lot of pressure 24

from the regulators to say no, you need to minimize 25Executive Court Reporters (301) 565

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consumer costs not ju st take the short term thing. 1

As someone pointed out to me over lunch, 2

you rewind something, it’s probably to decrease the 3

efficiency, not increase it, and so there’ll be an 4

even bigger efficiency gap there. 5

MR. GREESON: Rob Greeson, Federal 6

Pacific . I’d like to get a rebuttal from the 7

utility guys, but I think that they would be better 8

equipped to answer the question, but I don’t know 9

that the economics, from their standpoint, they can 10

justify those long, long term savings like some of 11

the assumpti ons in the analysis, but I’ll defer 12

that. Thanks. 13

MR. ANDERSON: Bob, you’re exactly right. 14

We’re right at that point where we’re seeing 20 to 15

25 percent increase in the first cost, and what we 16

talked about over lunch was that we probably would 17

pursue the rebuilding market in that initially maybe 18

our losses would be poorer than buying a new 19

transformer today, but as those rebuilding guys got 20

educated and became better at what they did, 21

hopefully we would get rewound transformers that are 22

closer or have maybe not exactly as well as a brand 23

new transformer, but pretty close. And I think 24

you’re right. You go a little bit

-- at EL2, 25Executive Court Reporters (301) 565

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Andrew, 20 or 25 percent, so that makes us really 1

take a step back and say, do we really need to push 2

for that rebuild market . And I think we’re at that 3

edge. At EL2, it begins to make sense. 4

MR. DeLASKI: The number 25 percent, I 5

believe, was tossed out by Wes. This is Wes’ 6

number. A lot of these numbers are coming from you. 7

MR. ANDERSON: I was thinking of using 8

that e arlier example on a 50 KVA pad, and somebody 9

corrected my math during lunch. But they use the 10

same example with the corrected math at EL2, you 11

know, we’re at

-- we’re over 20 percent. 12

MR. DeLASKI: Right, so right now there’s 13

no market to speak of in re winding transformers. 14

MR. ANDERSON: (off mic) There is a 15

substantial ... in the power transformers. 16

MR. DeLASKI: In the power transformers, 17

but in distribution transformers in the sizes 18

covered by this rulemaking

-- 19

MR. ANDERSON: Not substantial. You have 20

the indication of what will happen. 21

MR. DeLASKI: Yeah, based on power 22

transformers, so you’re, you know, I began this 23

conversation by saying can we move this to a 24

discussion of trying to get to “yes.” If this group 25Executive Court Reporters (301) 565

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is moving in that directio n, then we can probably 1

figure out where we’re going to go from here. So we 2

came here to try to see if we could find a way 3

forward, okay. Now, maybe there’s no way forward. 4

But we’re suggesting that

-- that if you look at 5

what you’re hearing major manuf acturers say can be 6

done, and is a crossover where there is competition 7

in the market place, that gives you a pretty good 8

indication of where a standard is going to go, or 9

better. Now, the notion that you’re going to come 10

out and make a speculation that t he market’s going 11

to flip, that there’s going to be this incipient 12

market for rewind services, doesn’t exist today and 13

therefore convince the agency not to do a standard? 14

It’s not going to happen. 15

So I would suggest that either we’re going 16

to talk abo ut levels, or we can

-- or we probably 17

need to figure out, moving on to the medium voltage 18

dry type. So that would be my suggestion. 19

MR. PARKER: I think that we need to talk 20

about levels. I think we need to talk about levels 21

for just a few minutes. W e don’t want to

-- it’s 22

3:30 now, and I do want to emphasize one thing that 23

Andrew said that is that, you know, in the absence 24

of an agreement, the Department is going to move 25Executive Court Reporters (301) 565

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forward with a rule on the basis of the analysis 1

that they have, that I think ha s been greatly 2

improved by the input of this group, but it will be 3

on the basis of the analysis that they have. So we 4

really need to see what we can do with this analysis 5

to try to get to yes. So, let’s

-- let’s really 6

think now about what we can propose that would move 7

the ball forward. Richard. 8

MR. ANDERSON: EL1, I think that’s the 9

edge for us. I’m just going to cut right to the 10

chase and

-- but it has to do with cost and it’s 11

EL1, and I’ll probably going to get yelled at for 12

agreeing

-- flip to th at. 13

MR. PARKER: Steve. 14

MR. ROSENSTOCK: Just a quick one to 15

follow up

-- Steven Nadel talked about the TSLs and 16

that’s on slide 18 of your number four, and I just 17

want to point out, I think it would be much better 18

to talk about ELs rather than TSLs, j ust for the 19

fact that looking at the TSLs that are shown in the 20

slides here, there’s TSLs one, two, three, four, 21

five and six, and they show equipment classes for

-- 22

I think it’s

-- well, it’s just a single phase/three 23

phase. The fact is, all the TSLs exc ept for TSL

- 4 24

all contain an efficiency level of four or higher. 25Executive Court Reporters (301) 565

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So, again, I think it would be better if we just 1

talk about ELs because of the TSLs that are shown on 2

this chart

-- yeah, that’s the one

-- the only one 3

that shows levels below four is TSL

- 4 . So, again, I 4

think we’re much better off as we go forward, 5

ignoring this TSL chart

-- I’m sorry to say that, 6

but we’ve got to ignore this TSL chart, because some 7

of the levels in here, there’s just no way that we 8

can get consensus on most of these TSL l evels. At 9

least one, two

-- as far as I can tell

-- one, two, 10

three, five, and six contain some

-- just levels 11

that I don’t think we can get consensus on, based on 12

the DOE analysis. 13

MR. NADEL: Steve Nadel. First, Steve 14

Rosenstock, you and I agreed tha t what you just said 15

was similar to what I said about five minutes ago. 16

Let’s focus on ELs , not TSLs. I just did a quick 17

little poll

-- thank you Richard for suggesting EL1. 18

We just said we’ll take our chances at DOE. We 19

think DOE will wind up higher, and I would encourage 20

you to think not what you’d do if you were the 21

decision

- maker, but whether you think you can do 22

better with a contested rule versus not. And I’d be 23

curious what other people think. 24

MR. PARKER: Eric? 25Executive Court Reporters (301) 565

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MR. PETERSEN: Eric Petersen , AK Steel. 1

Not being familiar with this type of meeting, this 2

is my first one, one of the things that I heard 3

early on was that the benefit of this negotiating 4

committee is you can bring a number of different 5

perspectives to the DOE outside of what is no rmally 6

considered. While I recognize that recycles is not 7

something that’s normally considered, we have 8

sitting at this table those people that would make 9

the decisions associated with what they would do if 10

an efficiency level was enacted. 11

So I would think that we, as consumers, 12

that want to see whatever goes into place actually 13

be of benefit, would seriously consider the position 14

of the people that are making the decision as to 15

whether or not they replace, or whether or not they 16

recycle. So I think t hat the position associated 17

with the utilities choosing to tell us that this 18

would create a market for recycling which would thus 19

not enact any efficiency standard that we think 20

we’re going to get, would be something that we would 21

truly want to consider an d appreciate the value of 22

this negotiating committee, because it brought the 23

points to the table so that we could seriously 24

consider it. 25Executive Court Reporters (301) 565

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So as opposed to throwing it out, I 1

thought that was the benefit of why we had the 2

negotiating committee in the fir st place, so that we 3

could hear points like this. So personally, I think 4

that those points should well be understood. 5

Because if we’re going to make a decision that could 6

potentially push an efficiency level beyond what we 7

can actually get, that’s the in formation that we’d 8

certainly want our Department of Energy to 9

understand. 10

MR. ROSENSTOCK: And may I add one more 11

point. Again, based on this analysis where, again, 12

economically you’re pretty much

-- anything about 13

efficiency level one for most design lines, people 14

are going to choose amorphous, again, based on this 15

analysis, based on these slides, and if it has an 16

impact on domestic steel makers and domestic jobs, 17

where people are going to be thrown out of work or 18

there’s more factories moving overseas , sorry , 19

apologies all the NEMA members here, that, to me, is 20

not a good result. I’m sorry. Speaking for myself, 21

not for EEI, for myself. Seeing what’s happening to 22

our manufacturing industry over the last 20 years, 23

and also remembering what happened wi th Whirlpool 24

last week, announcing that they’re closing a plant 25Executive Court Reporters (301) 565

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in Arkansas that made refrigerators, and that the 1

production is moving to Mexico, you know, these 2

things are happening and these decisions do have 3

impacts domestically. So, again, I think we all 4

want to negotiate but we also want to think about 5

some of the other impacts that could be happening as 6

a result of these decisions, and again, based on 7

this data. I’ll stop there. 8

MR. FERNSTROM: This is Gary Fernstrom 9

from PG&E. I’d like to respon d to Steve ’s comments. 10

I heard the news reports last week about the 11

Whirlpool plant closure, and we do need to be 12

concerned about jobs in this country. But I also 13

heard a debate or an economic analysis from a 14

professor of economics at a university nearby , and 15

he made the point that we can all relate easily to 16

the burden that these plant closures place on 17

individual Americans who are having their jobs 18

displaced. And those incidences are very visible 19

and very painful. 20

But he went on to say we may not see the 21

benefit that reduced prices bring to all Americans 22

in household appliances. All Americans are less 23

organized and less visible than the unfortunate ones 24

that become the victims of these closures. So I’d 25Executive Court Reporters (301) 565

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like to make the point that pretty much every 1

A merican family is a purchaser of electricity for 2

their home and it’s important that we make the right 3

investment decisions in terms of standards for the 4

country so that we can have the lowest price for our 5

electricity. I think the

-- 6

MR. PARKER: Gary, we’re going to have to 7

-- finished? Okay. First, I think, you know, DOE 8

is going to have to think about an array of factors, 9

right. One of them is energy efficiency and 10

consumer costs, and one of them is manufacturing 11

impacts as well. Those are all cri teria that will 12

be considered. And I think what we should focus on 13

is the things that we have in common, which I think 14

I’ve heard around the table that there is a 15

consensus that we do want to preserve competition in 16

the steel industry, that this is not so mething that 17

the advocates are insisting not happen. They’re not 18

insisting on pushing towards a monopoly for 19

amorphous. 20

And the question is, how can we find that 21

sweet spot. And it’s not a question of, you know, 22

just of LCCs. If you look at the LCCs, you see it, 23

it pushes you

-- at least if you take those numbers, 24

it pushes you to very high ELs. But I think there’s 25Executive Court Reporters (301) 565

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a recognition, a realistic recognition that there 1

has to be a concern with manufacturing impacts, so I 2

think that is stipulated. And the question is, how 3

can we find what that spot is? That’s where we were 4

in September when we were talking about this, and 5

we’re still struggling with that, but I think that 6

we should really focus on trying to find what that 7

spot is and see if

-- if the data can get us there, 8

or horse trading can get you there. But what I 9

understand is that so far today we have concluded 10

that there are some models where EL4 is definitely 11

not viable. And there are some levels where moving 12

beyond EL1 might be possible. That’ s what I’m 13

hearing so far. And I guess the

-- what I would 14

like to throw out there is

-- is there a way that we 15

can just work in a workman like way through these 16

design lines and bracket the range of disagreement, 17

bracket the range of possibilities, not b y focusing 18

on what the DOE analysis ought to be, but on what it 19

is. Because if this group dissolves, it will be 20

what it is. 21

MR. CYMBALSKY: John Cymbalsky, DOE. So 22

obviously I can’t presuppose an outcome here, and I 23

won’t do that. But everyone should know that 24

everything that was said here is a matter of public 25Executive Court Reporters (301) 565

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record, and if this process does break down, this is 1

the public record on this rulemaking and that is

-- 2

we know a couple companies came out and said, this 3

is what happens at number two, this i s what happens 4

at number four, whatever the numbers are. But just 5

so that you know, if this does break down, we don’t 6

get a yes, everything that was said here goes into 7

our NOPR, into our proposed rulemaking. So, from 8

what I’ve heard today, I’ve got a go od running start 9

on my analysis, if we don’t get it here in the room. 10

So I would encourage everyone to try to get to a yes 11

before we get off this product. Because I think me 12

and my group have a good head start on what we need 13

to do. 14

MR. POLINSKI: Ray Polinski, ATI 15

Allegheny. John, again, the point is, you know, 16

Steve makes his comments over there and he kind of 17

suggests he knows what the DOE’s going to determine, 18

and again, based on the data, it’s

-- one’s max. I 19

mean based on the data, my experience , and Richard 20

used the terminology

-- not my words, Richard used 21

the terminology monopoly or whatever, but I’m 22

familiar usually where the government is working to 23

try to bring down non

- competition and saying AT&T 24

and T

- Mobile, you guys you can’t join toget her. And 25Executive Court Reporters (301) 565

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so I’m not used to the government mandating a 1

monopoly or whatever. So it’s in the charter, 2

impact of lessening the competition. So again, we

- 3

- it seems that zero

-- we should vote on 4

negotiating between zero and one, where I think a 5

lot of pe ople have been, based on the data. Now if 6

the data changes and if it says based on the data

-- 7

you know, based on the data, my interpretation, 8

we’re set between zero and one. 9

MR. DeLASKI: Our interpretation of data 10

is totally different as you know. We can keep going 11

back and forth, but I’m not sure

-- 12

MR. POLINSKI: But we’re

-- 13

MR. DeLASKI: But see, you

-- but the data 14

suggests that there is competition, that there is 15

multiple steel beyond level zero and one. So we can 16

keep

-- you can keep asser ting it, but that’s not 17

what we’re seeing on the screen and on the record. 18

MR. PETERSEN: But we’re talking about the 19

DOE data. Eric Petersen, AK Steel. DOE data on 20

pages 13, 14 and 15 shows that the efficiency level 21

1 is the only efficiency level at w hich a grain

22

oriented electrical steel would still compete. So 23

we agree, we’re talking about the data. All the 24

data says on design line one it’s the only one 85 25Executive Court Reporters (301) 565

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percent M3; at design line 2 for efficiency level 1, 1

100 percent amorphous. And design line 3, 19 2

percent ZDMH, 80 percent amorphous. That’s the 3

information we’re looking at in regards to this 4

data. As Mr. Saint emphasized, we’re looking at the 5

upper range at which you could potentially compete. 6

But when it comes down to it, what was actually 7

used, and the DOE did a very good job of laying that 8

out on pages 13, 14, and 15. 9

MR. DeLASKI: Yeah, I think what we heard 10

earlier today, what I heard is that that cliff is 11

not accurate and that the

-- like I showed you what 12

is the model we’re showing a s the least cost option 13

based on the prices that were input and that that’s 14

not observed in the market today. So, frankly, what 15

that data shows you is that M3 has the market at 16

zero and one. That’s all it shows you is that the 17

M3, the M3 suppliers have t he market, and there’s 18

not competition from the advanced materials. We 19

would think a market in which the advanced materials 20

compete is what’s achieved by the higher levels. We 21

can keep arguing back and forth, but that’s

-- we 22

see the world differently o n this score. 23

MR. PETERSEN: I’m just simply looking at 24

the data. 25Executive Court Reporters (301) 565

- 0064 186

MR. NADEL: It comes down to do you want 1

to believe the DOE analysis which is set up where as 2

long as there’s a $2.00 difference in the cost of 3

$1000 transformer, it kicks it over and it kicks 4

over. Or do you believe the market data which shows 5

that people are selling at these different levels, 6

many different designs at efficiency level 2, 7

there’s lots of M3 being sold. It’s not all 8

amorphous. In fact, very little of it is amorphous. 9

Do you go with the model? Do you go with the 10

market? But it comes down to, do we each have faith 11

enough in what our views are that we just leave it 12

to DOE, or do we each say, no, don’t want to leave 13

it at DOE and therefore there’s going to need to be 14

som e open. 15

MR. PARKER: Eric. 16

MR. PETERSEN: Yesterday transformer 17

manufacturers met with NEMA in an effort to get a 18

consistent agreement on how to go forward, and I 19

think that what we were attempting to determine was 20

to determine what the maximum efficie ncy level was 21

that could be built. And we were leaving the 22

economics up to the DOE. So Wes, earlier you were 23

commenting about efficiency level 2, and we concur 24

that you can build a transformer there, but as 25Executive Court Reporters (301) 565

- 0064 187

evidenced by the slope of the grain

- oriented co st 1

curves, there would have to be some significant 2

economics that come into play in order to make that 3

a competitive landscape with amorphous. And we’ll 4

leave that

-- I’ve heard some testimony here from 5

the steel guys, and my reaction from those guys is 6

t hey can’t get there at those efficiency levels. 7

So, I think you need to consider the slope of the 8

grain

- oriented cost curve in determining where you 9

can get. 10

My next point regarding efficiency levels 11

two and the data that Wes shows, and Wes said it a 12

co uple times, that it’s all of ABB’s data. It’s not 13

limited to DOE

- compliant units. So you could have a 14

unit in there that’s 14,400 volts, dropping to 7200 15

volts, and that might be way more efficient than a 16

DOE

- compliant design, and you might build it out of 17

M3. You can’t tell from that data whether it fits 18

within the scope of the DOE context or not. So use 19

caution in evaluating the ABB data. I’m not saying 20

that it is or it isn’t, but reverting back to the 21

DOE’s data which limits the scope to units that 22

comply, I’m seeing evidence that supports an 23

efficiency level more in the zero to one range as 24

well. 25Executive Court Reporters (301) 565

- 0064 188

MR. PARKER: Ray. 1

MR. POLINSKI: Ray Polinski, ATI 2

Allegheny. And again, the group recognizes this, 3

but we’re developing as standard that has to stand 4

the test of time of 30 years. You know what I mean? 5

So I’m not saying that

-- but the data that we have 6

in the study, the LBL data was actual data for a 7

period of time that occurred in the past and will 8

occur again in the future. And so, you know, not to 9

say that in the next 30 years there might not be one 10

year where the dynamics change a little bit, but for 11

-- this has got to

-- if we make this change it’s 12

got to apply 30 out of 30 years, and we’re saying 13

that that’s why zero to one is the only choice. 14

MR. PARKER: I wonder whether it would be 15

useful to take a break and think about our 16

positions. One thing that I will throw out is that 17

it may be helpful to actually look at the results of 18

some of the material/price sensitivity runs and just 19

explore a few price scenarios and see what might 20

happen under various scenarios that people might be 21

worried about. Particularly, prices in the

-- 22

differences in the relative prices between amorphous 23

and silicon steel. If the concern of course is 24

just you can’t a ccept any

-- more than ten percent 25Executive Court Reporters (301) 565

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increase in the transformer, and that’s the end of 1

the story, or 20 percent increase, that’s one thing 2

we should know, but even there I’m not sure that 3

we’ve really in this data looked at what those 4

deltas are and looked at whether

-- whether going 5

beyond EL1 would produce a more than 20 percent 6

increase in every point. 7

PARTICIPANT: (off mic) 8

MR. PARKER: Increase in price. Under 9

every material/price scenario? Those levels? And 10

so if that’s the case, you know, we just have to 11

have that discussion. I mean, why don’t we take a 12

five minute, ten minute break and come back and talk 13

about medium voltage, I guess, dry type and see if 14

this helps. Is that going to make it worse? 15

(Whereupon, At 3:49 the meeting was 16

re cessed for a 49 minute period.) 17

MR. PARKER: Real quick

. 18

MR. ROSENSTOCK: This is Steve Rosenstock, 19

E dison E lectric Institute

. And just wanted to kind 20

of where we left off, and I guess kind of following 21

up. We don’t want negotiations to end today, an d it 22

sounded like it almost seemed like

-- the impression 23

that maybe I’m being the one, if I’m mistaken please 24

forgive me, it seemed like DOE was ready to start 25Executive Court Reporters (301) 565

- 0064 190

the NOPR if we didn’t decide something today. I 1

hope that’s not true. So I’d kind of like it 2

clarified that we do have another meeting set up for 3

November 30 th and December 1 st

MR. PARKER: Would you like to add ress 8

that? 9 , and I’m hoping that 4

we don’t have to be decided today, because I don’t 5

know if we can because we’re still looking over all 6

this stuff. 7

MR. CYMBALSKY: John Cymbalsky, DOE. So 10

I’m on the hook to have a NOPR out and published by 11

February 1 st

MR. ROSENSTO CK: So you’re okay with us 20

keeping the talking going, right? 21 . So whether I write one one way and 12

write one another way, I could still write a NOPR, 13

and we can still negotiate. Having said that, I 14

think given all the information we’ve heard today, I 15

think there’s lots of good information on the public 16

record for us to hopefully to come to some sort of a 17

negotiation quickly. And I say that as a member of 18

the group, certainly, and DOE. 19

MR. CYMBALSKY: As a member of this 22

committee, I think we can vote now, really. 23

MR. ROSENSTOCK: You say vote now? 24

MR. CYMBALSKY: Why don’t we try? 25Executive Court Reporters (301) 565

- 0064 191

MR. ROSENSTOCK: You mean like straw 1

polls? 2

MR. CYMBALSKY: Sure. 3

MR. PARKER: So, we could vote now. I had 4

been talking to people during the break, and I 5

apologize, Steve, I think I buttoned up everybody 6

but you, but let’s

-- actually I did not buttonhole 7

anywhere near everybody but yo u, but I managed to 8

talk to a few people and what was discussed was 9

simply this. And I just throw this out there for 10

the group as a possible way of going forward to 11

another meeting. And possibly getting to yes. And 12

when we get the whole package out ther e and we can 13

just sort of discuss it. 14

But the idea would be to first recognize 15

that today, despite the fact that we are nowhere 16

near an actual agreement, we have made progress. 17

The advocates put forward a proposal that came in at 18

EL4, and they’ve been willing to show some 19

flexibility on that, and at least consider, although 20

I emphasize nothing is agreed until everything is 21

agreed in a negotiation, but for purposes of 22

discussion, consider moving forward

-- moving to 23

EL3. 24

On the other side, we’ve heard that there 25Executive Court Reporters (301) 565

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is reason to believe that at least some distribution 1

transformer makers can achieve EL1 and some may be 2

even able to achieve EL2, and that that could be 3

something that would be within their sweet spot, but 4

not everybody who’s at this table has been heard 5

from. Not all the transformer makers have been 6

heard from, and therefore going from one to two is 7

distinctly problematic, particularly for them. 8

So, what we discussed was saying, let’s 9

provisionally bracket a range from EL1 to EL3, and 10

then t he various parties will take this back to 11

themselves, to their own groups and to the people 12

that they represent in the industry

-- remember 13

you’re here in sort of a representative capacity, 14

and NEMA in particular, and see what movement is 15

possible. And th ere are

-- during that time there 16

are a couple of things that could happen. One is 17

that we can explore a range of material prices that 18

allow amorphous and silicon steels to diverge in 19

price, and we can talk about that in a second, but 20

explore a range of material sensitivity scenarios 21

that may enable you to see what would happen under 22

various pricing scenarios. 23

And for the distribution transformer 24

makers, what I’m hearing is that for them it’s 25Executive Court Reporters (301) 565

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really the question of at what

-- what is the 1

highest EL tha t you can reach and still maintain 2

leverage over your suppliers, so that you’re not a 3

captive of amorphous and you’re not a captive of M3, 4

but what is the highest sensitivity range that you 5

can achieve that gives you sort of leverage vis

- à

6

vis your supplie rs. 7

And I heard during the discussions, during 8

the break, a reasonable amount of support for that 9

as a question for transformer makers, that they need 10

to address. We’ve heard from one or two at the 11

table today. We need to hear more broadly on that. 12

F or the utilities, the question would be, 13

you know, what his the most efficient level that you 14

could reach that would enable you to convince your 15

customers and your regulators that they are getting 16

a good deal from replacing a transformer as opposed 17

to refu rbishing it. We cannot, unfortunately, and I 18

stressed on this, we do not have the data to sort of 19

model refurbishment rates because it’s been such a 20

small tiny phenomenon in the past. So we don’t have 21

a lot of empirical data on this. But we have to 22

thin k about them in more the real world scenario 23

that, you know, how do you persuade your regulators 24

and your customers that they’re getting a good deal 25Executive Court Reporters (301) 565

- 0064 194

by paying a little more

-- paying more for a new 1

transformer as opposed to refurbishing, and at what 2

point is that actually reached. We just need to 3

have that discussion, and we’d like to hear more, 4

you know, particularly in writing on that if we can. 5

Because, as the advocates have pointed out, it’s not 6

just a first cost thing, there are also other costs 7

to c onsider

-- operating costs to consider. So two 8

separate questions for utilities and for the 9

industry. 10

And the last thing I would say is to 11

facilitate that, a number of people have expressed 12

an interest in having more analysis of a couple of 13

issues, one would be sort of the incremental prices 14

-- excuse me, the delta in price as a

-- the dollars 15

per watt saved, if you would. There’s been a lot of 16

talk about that at the table today, you know, the 17

dollar per watt savings may be too high. Without 18

much diffi culty at all, we can generate and will, 19

very early on, a chart that will give people under 20

the curve analysis of what those would be, for each 21

-- the incremental cost of going to each efficiency 22

level as

-- in the numerator, and the incremental 23

watts saved in the denominator. So it’s a fairly 24

simple calculation, not hard to produce. 25Executive Court Reporters (301) 565

- 0064 1 95

There may be some other ways that we can 1

refine the analysis. We’ve heard a lot of talk 2

today about how it doesn’t model the real world 3

accurately, and so I think the staf f will be looking 4

at ways to just, in a general way, to see if there’s 5

ways we can improve on the analysis to make it more 6

reflective of the reality. 7

So the combination of the material price 8

sensitivity runs, the improvements the method, if we 9

can come u p with that, and the charts on the dollars 10

per watt are three anal ytical things that I think 11

might enrich the discussion between now and the next 12

meeting and we can take it up at the last meeting. 13

So that’s the proposal that was discussed, 14

and I welcome any reactions to it. Steve. 15

MR. ROSENSTOCK: Steve Rosenstock, EEI. 16

What about Mr. Petersen’s proposals? 17

MR. PARKER: Excuse me? 18

MR. PETERSEN: Do you have that

-- we gave 19

you a

-- Eric Petersen

-- we gave you a thumb drive 20

with a graph on it. 21

MR . PARKER: So you see it up there? 22

MR. PETERSEN: Which one is it, Jerry? 23

MR. SCHOEN: It’s a PDF

-- can you widen 24

the column out

-- the name? I mean make it wider. 25Executive Court Reporters (301) 565

- 0064 196

MR. PETERSEN: Okay. Eric Peterson, AK 1

Steel. We’ve had some discussions here

-- R ichard, 2

you made the comment about what is the sweet spot, 3

so to speak. This was the analysis by which we took 4

a look at defining a DEL

- 0.6, and really what you’ll 5

see here is a number of curves from $4.00 a watt in 6

red, $5.00 a watt in green, $6.00 a wat t, and $7.00 7

a watt. So we’re looking at different dollars per 8

watt ratings and a comparison of price parity of M3 9

RGO versus amorphous metal in design line one, 10

distribution transformers. And the intent here is 11

to show at what point is there equivalence between 12

cost on an M3 versus an amorphous metal for a 13

transformer manufacturer. 14

So if you look at the red line, it 15

essentially shows that the red line crosses the zero 16

line which is the amorphous metal at roughly about a 17

0.8, so essentially at a point e ight, and this was 18

based off of the data that came out of the DOE. 19

That at roughly point eight, the amorphous metal and 20

M3 was at the same price. 21

For $5.00 a watt, the green line, you can 22

see it roughly falls off at about a point three, and 23

at six and s even dollars a watt, the preferred 24

design is amorphous metal. So the intent there was 25Executive Court Reporters (301) 565

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to try to find the, quote, “sweet spot” as you said. 1

Where could you get this place of essentially trying 2

to find a transformer design that from a cost 3

perspective woul d be equivalent between an amorphous 4

metal or M3, and as you can see, kind of right in 5

between that $4.00 and $5.00 a watt was the 0.6. 6

So our attempt at doing this was utilizing 7

the model that we held for design line one, 8

utilizing the DOE data of ess entially trying to find 9

where is the, quote, “sweet spot” where you can 10

build a transformer with either M3 or amorphous 11

metal. This was our attempt at that in trying to 12

find where that sweet spot is and how we came up 13

with those numbers. 14

I don’t know, Jerry, if you want to make 15

any other comments on that? 16

MR. SCHOEN: Jerry Schoen, AK Steel. The 17

thing that you notice is that if you have a range of 18

A factors going up to $7.00 a watt, when you really 19

get out to six or seven, the choice right now is fo r 20

amorphous metal, irrespective of the efficiency 21

level. As you raise the efficiency standard, you’ll 22

notice all these lines converge, and then really to 23

amorphous metal at DEL

- 2. 24

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

- 0064 198

Allegheny . And I thought that maybe wha t Steve was 1

talking

-- I don’t want to speak for Steve, but I 2

think when you said

-- I was going to say the same 3

thing, when you said that one to three were at just 4

for talking points, and I think we’re like, more 5

like zero to three or point six to three, just to be 6

clear. But, I mean, with one to three

-- the good 7

news is appears the range

-- the gap has narrowed to 8

your point. 9

MR. SCHOEN: Jerry Schoen, AK Steel. One 10

other comment I should make was that this is only 11

for design line one. It’s a single phase design. 12

When you talk about a price differences and price 13

parity, this is the discount that you would have to 14

have to maintain M3 as an equivalent cost final 15

design. Our model doesn’t capture everything. Ours 16

is a core coil model primarily. It d oesn’t have all 17

the sophistication that the ABB models would have, 18

for example. 19

MR. PARKER: So that raises a good point, 20

which is I think that from the standpoint of 21

competitiveness between steel and amorphous, I think 22

what I heard during the break that it made sense to 23

really hear from the transformer manufacturers at 24

what point they fell they would be competitive from 25Executive Court Reporters (301) 565

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the standpoint of their cost curves, because they’re 1

the actual customers. And I thought I heard that 2

that would be an acceptable way o f proceeding, is 3

that right? 4

MR. PETERSEN: Yes, if I may , yes. Eric 5

Peterson, AK Steel. We’re using, to attempt to 6

project our position is our ability to model and 7

what was in the DOE data in front of us. So 8

obviously an important point for us, as we try to 9

find that sweet spot, is where can a transformer 10

manufacturer design the transformer and for the same 11

cost, utilize either M3 or amorphous metal. That 12

seems to be the quote, “sweet spot.” At least it 13

gives us some framework of understanding where the, 14

quote, “real competitiveness” would be on pure peer

15

to

- peer level. It is a frame of reference, not 16

meant to be a decision point, simply a frame of 17

reference. 18

MR. PARKER: Thank you. Steve. 19

MR. NADEL: Yes. I mean, yes, we’re 20

looking for a swee t spot. We define the sweet spot 21

slightly differently where there may be a little bit 22

of a price difference, but something that’s within 23

range. I’m just pointing that out. One other 24

thing, I think, that would be useful and I talked to 25Executive Court Reporters (301) 565

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someone about this at the break, is currently the 1

DOE analysis is very sensitive to very small 2

differences in prices, and it basically shows you go 3

-- at a certain point is all M3, then all of a 4

sudden you make a slight improvement and boom, it’s 5

all amorphous. And everybo dy I’ve talked to, no one 6

really believes that, but there may be ways for DOE 7

to check its models, and particularly if I 8

understand, DOE assumes that every manufacturer 9

always gets the exact same price for copper, steel, 10

as opposed to
, I assume you have so me volume 11

pricing, for example, or prices vary over time . We 12

may not be capturing that. So if DOE could look at 13

its model and say is there really a cliff or is it 14

more of a variability, and if so, how would we model 15

it. That may be helpful because a num ber of people 16

keep pointing to the fact, oh, we see a cliff. 17

MR. SCHOEN: Jerry Schoen, AK Steel. The 18

prices that were used in here for the M3 is about 19

$3700 a ton. You move to DEL

- 2, that price drop is 20

about $2000 a ton. That’s pretty precipitous 21

bec ause, again, we want to make a profit at this 22

business too. 23

MR. PARKER: Dollar per pound, right. 24

John. 25Executive Court Reporters (301) 565

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MR. CASKEY: Hi. John Caskey, NEMA. Got 1

three points. One is that in the past we’ve had 2

meetings, you sort of summarize stuff, but I don’t 3

rem ember seeing the document itself. So are you 4

publishing anything like minutes of these meetings 5

and where are they that I can go to and find them? 6

MR. PARKER: Yes, my apologies. I have 7

not gotten them all drafted yet, but I will get them 8

up very soo n after the meeting. 9

MR. CASKEY: So is there some

-- I hate to 10

put you on the spot, but I can’t help but do it. So 11

for this meeting, do you have any idea when you’ll 12

have some summary available that we can then share 13

with some people who may not be at the table? 14

MR. PARKER: Yes. The transcripts will 15

come in within three days. 16

MR. CASKEY: Okay. 17

MR. PARKER: And I will commit, this time, 18

meet the commitment, and my apologies again, I’ll 19

have it to you within five days. 20

MR. CASKEY: Okay. Gre at. I’ve got two 21

other points. One of them is that when I met with 22

the manufacturers that are NEMA members, of liquid 23

filled distribution transformers, basically the 24

general attitude of that group was that they could 25Executive Court Reporters (301) 565

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go to like EL1, but they really didn’ t feel that 1

they could go cost

- effectivenessly and still stay in 2

business at EL2. So I’m willing to take the action 3

item

-- I mean we’ve heard from Wes and from Prolec 4

that they’ve done a great job of sharing information 5

with us, which I think has been ex tremely valuable 6

for the education of everybody at the table, but I’d 7

like to go contact some of those other members, 8

inherently are smaller members, and see if there is 9

something fundamentally different about those other 10

five or six manufacturer that aren ’t at the table, 11

to see if they have a different perspective that 12

they could bring, or I could summarize and bring to 13

the table. So I’ll take that action item to contact 14

them and find out if I can learn more about that 15

process relative to, say, EL1 versus EL2. 16

MR. PARKER: I assume since these slides 17

are presented at this meeting on the record that 18

they are something that he could share with his 19

members. Wes, is that the case? 20

MR. PATTERSON: Sure, he’s already done 21

that. 22

MR. PARKER: Okay. 23

MR. CASKEY: If I can, the final point is 24

one of the things that I’ve been thinking about 25Executive Court Reporters (301) 565

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relative to what we’ve discussed between this

-- and 1

I’m really not negotiating, I’m offering an idea

-- 2

is that we talked about being somewhere between 0.6 3

or one and th ree, and it seems like even when I gave 4

my earlier remarks, the issue was that going to high 5

BILs is sort of difficult and expensive to do, to go 6

to three

-- to increase efficiency in three

- phase 7

transformers is more difficult and roughly more 8

expensive to do than single phase. So I’m wondering 9

if there is, at least for people to think about the 10

concept, for the high BILs and for the three phase, 11

to consider EL1, and for the single phase, if I’ve 12

said this all correctly, for the single phase and 13

for the lo ad below 95 BILs, to remain, or to be at 14

EL1

-- excuse me, to be at EL2. So high BILs and 15

three

- phase at the easier EL1, and the low BILs and 16

the single phase at EL2. Just as a way to start 17

thinking about that. 18

MR. ANDERSON: John, Rick Anderson

-- 19

M R. PARKER: Any reactions. 20

MR. ANDERSON: Yes, John

-- Rick Anderson, 21

APPA. I want to make sure I understood what you 22

said. On three phase you’re saying EL1 and 95 KV 23

BIL, is that what you said? 24

MR. CASKEY: There’s high BILs and low. 25Executive Court Reporters (301) 565

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MR. ANDERSON: Right. 1

MR. CASKEY: So 95 BILs being the 2

crossover point between, quote, “high and low” BILs. 3

MR. ANDERSON: Okay, so EL1 for three 4

phase, so what we’d have to do then, Steve and Bob, 5

is order a 95 KV BIL and then just beef up our 6

lining protection, and we can get an EL1. 7

MR. CASKEY: In essence, yes. 8

(Discussion off mic) 9

MR. ANDERSON: Well, since I also 10

represent lightning arrester manufacturers, I would 11

argue that you should be doing that today to protect 12

your high dollar transformers. 13

MR. CASKEY: Richard, excuse me. A good 14

point, though. The point is this, you know, when 15

prices really get out of hand, we can invest money 16

in other distribution products like enhanced 17

lightning protection, and current limiting fuses, 18

that completely protect the transformer from ever 19

being hurt, and extend the life indefinitely and 20

totally avoid new transformer purchases. So there’s 21

other things we can do rather than spending money on 22

-- like right now, to go back to what Wes said 23

earlier in the day, we’re l ooking at $12.00 per 24

watt. Our mentality is, our A factor is in the 25Executive Court Reporters (301) 565

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order of $4.00. Why would I pay $12? That doesn’t 1

make any sense for us to do that. 2

Anyway, there are other ways to skin the 3

cat, right? 4

MR. PARKER: Gerry. 5

MR. HODGE: Yes, Gerry Hodge from Howard 6

Industry. Well, first of all let me just say that 7

we hope, from Howard Industry point of view, we hope 8

we can find a solution in this committee. We really 9

don’t want it to end without a decision, without an 10

agreement. So we hope very much that this group of 11

people right here at this table can come together 12

and find a solution that’s reasonable for everybody 13

and uses a lot of common sense. 14

Now we’re a major manufacturer of 15

distribution transformers. We buy a lot of silicon 16

core. We buy a lot of amorphous core. We think 17

that’s good for the industry. We think that the 18

industry should have a combination of both. We’re 19

not here to eliminate one or the other. We think 20

they can both work together, and we can work 21

together for them. 22

And so I think it’s important that we come 23

to an agreement where we don’t make it so high that 24

the silicon people can go home and start selling on 25Executive Court Reporters (301) 565

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their product out of the country, instead of in the 1

country. That’s silly. And on the other side of 2

the co in, amorphous is a growing product. It’s a 3

good product, and we need to make more use of it. 4

And so we’ve got to come together, and it looks to 5

me from what I’ve seen all these charts here today, 6

that somewhere around going up one level or maybe 7

slightly more than one level, we can make it active 8

for all the steel people to participate. And I 9

think that’s where we need to be is somewhere right 10

in that area. 11

And the other side of it too, is you’ve 12

got a lot of little manufacturers out there that are 13

not going to be able to afford to get into this 14

amorphous. We got into it. We’re getting into it. 15

We’re on the learning curve. We’ve spent a lot of 16

money. I won’t say how much, but we spent a lot and 17

we’ve got a lot of money to spend, So if you’re 18

going to go into amorphous

-- these little guys are 19

not going to be able to have the capital to do that. 20

You’re going to eliminate them, and I don’t think 21

that’s good for the industry. 22

So we need to look out and see, you know, 23

this is a very critical indus try

- transformer

-- 24

the utility industry is, and transformers are a 25Executive Court Reporters (301) 565

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major component of that. And we owe it to the 1

people who are going to use these things to do this 2

right. And so I, you know, I just don’t see going 3

in with a TSL

- 4 or something and driv ing this thing 4

strictly to an amorphous side, and I don’t see 5

eliminating the silicon people. I just don’t see 6

that. And so somehow, we’ve got to come together 7

and keep everybody in the game, and I thought we 8

agreed to that early in

-- maybe it was the f irst 9

meeting where we said

-- I think it’s important we 10

keep all the major players in the game. Well, I 11

think it is very important we do that. And so I 12

recommend somehow we come together and reach that 13

type of conclusion. 14

MR. PARKER: I think we’re agr eed in 15

concept. The question is how to implement the 16

concept. Yes. 17

MR. HIRSCH: Bruce Hirsch, Baltimore Gas 18

and Electric. I just wanted to add from the utility 19

standpoint, and I’m doing a lot of talking to 20

utilities about this team and what we’re work ing on 21

here. And the idea of going to amorphous steel is 22

not a problem with the utility industry in general. 23

There are a few people that had some bad run

- ins 24

with some of the amorphous

-- early designs of 25Executive Court Reporters (301) 565

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amorphous and whatever, and you’re going to have 1

that in any industry, but I think it also points out 2

that there is some learning curves with respect to 3

the use of amorphous steel. Gerry just mentioned 4

it, they’re still learning about how to utilize it 5

and build good transformers with it. 6

So from the utility standpoint, I think 7

our position is we don’t want to go cold turkey to 8

100 percent amorphous. We don’t want to turn off 9

silicon three years from now and go 100 percent 10

amorphous. We would like to work into it gradually, 11

in other words, build up t he use of amorphous so 12

that we get some more experience with it, the 13

manufacturers get some better experience with 14

building amorphous core transformers, and hopefully 15

then we can eliminate some major problems downstream 16

that may occur if they’re not built properly. I 17

think I just wanted to get on the record with that. 18

MR. PARKER: Okay

-- yeah. 19

MR. MILLURE: Dave Millure, Metglas. 20

Gerry, you said one thing about the small guys out 21

of business. The DOE’s analysis was based on 22

purchased cores, and I kn ow you know this, but you 23

don’t have to make the capital investment to get 24

into amorphous. We have your Lake

- E (ph) Metals and 25Executive Court Reporters (301) 565

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there’s some other core makers, and NAFTA (ph) that 1

will make you cores and you can be competitive, so 2

just because you can’t ma ke the capital investment 3

doesn’t mean you can’t go amorphous. Thank you. 4

MR. HOFFMAN: Alex, Alex Hoffman, APPA. 5

I’d just like to say that I do appreciate the 6

discussion, the tone of discussion, the idea of a 7

negotiation in general. But also, Richard , your 8

idea of producing documents that have these dollars 9

per watts saved, some sort of relative metric, 10

really helps us, especially small utilities who are 11

looking at this kind of decision and trying to 12

figure out how does a decision that’s made here 13

imp act our operations. 14

MR. PARKER: Great. We should have that 15

in a day or so. We should have that very soon, at 16

least based on the current analysis. Now, if it 17

gets refined that may change also. 18

MR. NADEL: Steve Nadel. A couple of 19

comments on some things that have been said. John, 20

you asked about BIL levels. We had previously said 21

we’re open to considering that. Frankly, I prefer 22

Wes’ proposal of first trying to agree on the basic 23

standard and saying what deviation, what percentage 24

deviation may be appropriate rather than stick with 25Executive Court Reporters (301) 565

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these hard five percent. I’d be surprised if we 1

need as much as a five percent difference in losses, 2

but let’s do an analysis on those BIL levels to 3

determine that. Let’s first try to see if we can 4

reach agreement, span this chasm, if you will, on 5

the basic standard. 6

In terms of three phase, that would 7

probably be more problematic for us. I took at look 8

at this data on shipments, and there’s more 9

shipments in the three phase than there are in the 10

one phase, so tha t would cut the savings down 11

dramatically. So, you know, again, we’re open to 12

data, but we haven’t seen the data thus far, whether 13

it’s GE data, the ABB data, or the DOE data that 14

shows a big difference on those. So those are a 15

couple of responses. 16

MR. PARKER: Steve, quick one. 17

MR. RO SENSTOCK: Answer to the three phase 18

or single phase, are you talking MVA shipments or 19

numerical shipments? You’re talking MVA? 20

MR. HOFFMAN: MVA. Yeah. 21

MR. ROSENSTOCK: Thank you. 22

MR. HOFFMAN: Yes, and numerica l is far 23

less. 24

MR. PARKER: Okay. So, I think we have a 25Executive Court Reporters (301) 565

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path forward for this area and we will continue this 1

discussion either on line between now and then, 2

hopefully. Please, particularly for the transformer 3

makers, get us your input on this, on your sort of 4

crossover point, if you can, as soon as possible, 5

and we can do it either confidentially if you want, 6

or otherwise, but we just need to hear from you, and 7

any supporting information you can give to 8

substantiate that would be very helpful. Jerry. 9

MR. CORKRAN: Jerry Corkran, Cooper. Mr. 10

Anderson reported a few minutes ago that looking at 11

charges, incremental charges for the watts saved 12

from the basic DOE 2007 version was $17.00 a watt. 13

My question, I guess, would be to the people, both 14

the DOE a nd the environmentalists, how much a watt 15

are they willing to charge the public to go to this 16

more efficient transformer? Richard said something 17

about $4.00, $1.00 is the present A/B factor, and 18

$17.00 sounds astronomical. So even though the 19

manufacturer s have said we could build certain 20

designs, are we doing anybody a favor? That’s my 21

question. 22

MR. PARKER: Well, do you want to respond? 23

MR. DeLASKI: I don’t have the dollar per 24

watt figure. I hope the DOE LCC analysis will show 25Executive Court Reporters (301) 565

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this, mean paybacks under ten years. And I look to 1

an LCC analysis that shows 99 percent of the 2

customers are better off. And that gives me good 3

comfort. We’re going to see what that translates 4

into in dollars per watt is what they’re going to 5

produce for us. But I see 99 percent of customers 6

better off, and that gives me comfort that that’s a 7

good deal for the consumer in paybacks under, in 8

this case, 17.5 years is the longest on a 35 year 9

product. Most of them are under ten years, and 10

those are numbers that are acceptab le to us. Not 11

acceptable, but I think well within the norm of DOE 12

rulemakings. 13

MR. NADEL: Richard. 14

MR. DeLASKI: And we’re going to see the 15

dollars per watt numbers. 16

MR. PARKER: We’ll see the dollars per 17

watt because it’s been

-- there’s been a lo t of 18

requests for it, so we’ll see it. Absolutely. And 19

yes, the LCC is also relevant. We need to really

-- 20

we’re at 5:20, 5:15 now, so why don’t we wrap up 21

this discussion and reserve the rest of our time for 22

discussion of medium voltage. Do we have t ime or do 23

we not want to do that? 24

MR. NADEL: This is Steve Nadel. We have, 25Executive Court Reporters (301) 565

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actually, a discussion tomorrow with a group that 1

about half overlaps with this, that deals with low 2

voltage dry type. I don’t know if the analysis for 3

that has been completed yet. I know those of us on 4

e

- mail haven’t gotten it yet. But I was wondering, 5

since I think many of the people who do the medium 6

voltage dry type will be there, can we pick up that 7

discussion then? But that was just one thought. 8

But John, or someone, c an you make sure that that 9

analysis has been sent down, because we haven’t 10

received it, and it’s going to be very hard to have 11

a discussion tomorrow if at six o’clock tonight we 12

haven’t gotten anything. 13

MR. CYMBALSKY: So you’ll be up late 14

tonight with the rest of us, I guess. But

-- I’ll 15

just be at the hockey game, though. Chris actually 16

has shared the analysis with me. He’s going to 17

review it, scrub it tonight and send it out tonight, 18

so yes, you will have it. 19

MR. PARKER: I should say, by the way
, 20

that the consultants got the data very recently, and 21

they’re really, really been working very hard to 22

deal with it when they got it. It came in long 23

after it was asked for, and better late than never, 24

but it’s very useful and they’re working valiantly 25Executive Court Reporters (301) 565

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t o try to process it and get it out. So, sorry 1

about the delay, but we’ll give people time also 2

tomorrow morning to just look at it. I’m not sure 3

about discussing medium voltage tomorrow. Do you 4

have a thought? 5

MR. RIVEST: Can you show some summary 6

sl ides in case people

-- I don’t know, there’s some 7

people here today who might not be here tomorrow, so 8

for them, I don’t know. 9

MR. PARKER: Right. It sounds like the 10

committee members will be here, right, Wes and Rob, 11

so that might be something we could do, if that’s 12

acceptable to people. Does that make sense? Take 13

this up tomorrow? 14

MR. DeLASKI: It makes good sense to me, 15

personally. I think starting a new topic, whole new 16

technology at 5:15 is a bit

-- 17

MR. PARKER: I agree with you. ... talks 18

un til midnight, and we’re not going to do that here. 19

MR. SAINT: So let me get a clarification. 20

So we’re shifting the dry type discussion to

-- the 21

medium voltage dry type discussion to low voltage 22

dry type group

-- is that what we’re doing? Either 23

way, that’s fine with me, because I’m not a dry type 24

user at all. 25Executive Court Reporters (301) 565

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MR. PARKER: Is there anybody who has a 1

problem with that course of action

-- around the 2

table? So let’s do that, then. That sounds good. 3

Somebody on the phone? 4

(Pause.) 5

MR. PARKER: Oka y. Well, I think we’re 6

committed to doing that, but I think there’s just a 7

sense around the table that we can’t take that on 8

this evening. So I think we should, with apologies 9

to our exclusive low voltage members who will be 10

here tomorrow, reserve some t ime for that at the 11

meeting tomorrow, even if it means starting the 12

formal low voltage talks a little bit later. 13

Our pattern, by the way, in the past has 14

been that the low voltage is a much smaller group 15

and ends up not using all the time that it’s been 16

allocated to them, or not needing it at that point, 17

in part because the analysis hasn’t been as far 18

along and so we’ll make the progress that we can 19

tomorrow on the low voltage, but people will need 20

time to review that in any case, so the discussion 21

on me dium voltage may help them with that. 22

**Discussion of Special Cases** 23

Okay, why don’t we spend a few minutes 24

then talking about the issue, just developing a plan 25Executive Court Reporters (301) 565

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for the subgroup analysis, whatever you want to call 1

it, for vaults, networks, and I think we ca n discuss 2

how to handle the BIL issue as well as part of that 3

discussion. But basically, these are the

-- this is 4

the special cases category. 5

We discussed in earlier meetings that 6

vault transformers faced certain constraints that 7

others don’t and theref ore face not only higher cost 8

but higher increases in cost per unit of efficiency 9

gain than other transformers. And I think there was 10

an agreement that it should be possible to specify 11

distinct product characteristics of vault 12

transformers, or performance characteristics, that 13

would justify legally and practically separating

-- 14

setting a new level for them. 15

So what we haven’t done is actually get a 16

working group going to define that class, and 17

establish, come to agreement on how it will be 18

defined and what the delta would be, what the 19

differential would be between that class and the 20

other. It might just be a carve

- out, if people are 21

comfortable with that, or if might be a differential 22

standard. But it would have to be defined and 23

specified. 24

So why d on’t we

-- I’m open to suggestions 25Executive Court Reporters (301) 565

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on how to handle that issue now. Greg. 1

MR. COULTER: I know

-- this is Greg 2

Coulter from Prolec GE. I know Wes has done a lot 3

of work on this, and we’ve supplied a lot of 4

information to him

-- down in Shreveport

-- wh ich we 5

thought, because we thought Wes was leading it out 6

of the last meeting. And he has sent it out. I 7

mean I’m not too sure with the massive data 8

anybody’s even had time to look at it or not. 9

But it would seem to me that the key issue 10

is, is this a big enough pie that we care about? 11

You know, the volume is so small, it ought to be 12

easy to carve it out, I would think, and that’s one 13

of the key things that Wes did. We have some data 14

on what GE’s side of that is, between GE and ABB, 15

that’s got to be 90 percent of the market. That 16

would be really easy to do. So if it’s just a GE

17

ABB issue, we’d be willing to do this if we had 18

somebody else who knew like we had a repository. 19

Some of this data we can’t share back and forth, you 20

know, we’ve got to sha re it in a different 21

direction. 22

MR. PARKER: Well, I’m sure Navigant would 23

be willing to serve as a repository for that and to 24

sort of midwife those discussions. What we need 25Executive Court Reporters (301) 565

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from the group is a recommendation , not data, but a 1

recommendation, a proposal , for how to treat this 2

category, which would include, as I understand it, 3

**•** first, how to define it in terms of physical 4

and performance characteristics so that you can 5

distinguish it; 6

**•** any information that you can give on what its 7

market share would be, if that’s possible, so 8

you get a sense of the magnitude of the carve 9

out; and 10

**•** third, why it would make sense, you know, what 11

the proposal is for the special treatment of 12

it. 13

There may be other elements of the 14

proposal that it would need to have also, but I can 15

think of those three obviously, and we just need to 16

have a group of people who are designated to work on 17

that. We need a timetable for producing that 18

proposal and a process for dealing with it 19

afterwards. So first, do we agree that those are 20

the bas ic elements of what the proposal, what the 21

charge to the group would be, and secondly, who 22

would like to be on the group? 23

PARTICIPANT: (off mic) 24

MR. PARKER: You need to announce yourself 25Executive Court Reporters (301) 565

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and speak into the mic, please. Sorry. 1

MR. PATTERSON: Wes P atterson. As Greg 2

had indicated, most of this market, I believe, is 3

jointly shared between ABB and General Electric, at 4

least on the networks. There’s more players, I 5

think, on submersibles which fell into the same 6

problem. So

-- 7

MR. COULTER: Wes, I’ m not too sure what a 8

submersible is, but, you know, if it isn’t in a 9

vault, I think we ought to exclude it, just because 10

it’s submersed. The issue is vaults. 11

MR. PATTERSON: It’s in a vault. Any 12

constricted area. 13

MR. COULTER: Okay. 14

MR. PATTERSO N: So you’ve got vaults and 15

networks. But I think that joint activity between 16

GE and ABB can put it all together. 17

MR. COULTER: And a third party. 18

MR. PATTERSON: A third party? 19

MR. PARKER: Okay. This is

-- 20

MR. NADEL: This is Steve Nadel. 21

MR . PARKER: A third party, great. 22

MR. NADEL: We have to figure out who, but 23

we can probably find someone to join the group so 24

you have a third person. From our point of view, 25Executive Court Reporters (301) 565

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the key thing is to define

-- if this is a very 1

small niched product class, t he key thing will be 2

defining it tightly enough so you don’t have people 3

who buy these transformers to take advantage of a 4

lower efficiency level and use them in other types 5

of classes. We don’t get the BIL with lightning 6

protection issue. That’s going t o be our key thing, 7

but we’ll find someone. I’m not sure who yet, to 8

join that group. 9

MR. PARKER: So if we could

-- is it 10

agreed that the proposal will address that issue in 11

terms of the specification of the new product class, 12

whatever it’s going to be ? What would be the anti

13

circumvention measures? Yes, Steve. 14

MR. ROSENSTOCK: Steve Rosenstock, EEI. I 15

think, from our perspective, I think we would like 16

kind of a carve

- out for these types of transformers, 17

especially for utilities that have urban are as who 18

are going to face this a lot more. Again, hopefully 19

someone from

-- with expertise

-- I’ll definitely 20

send an e

- mail out. Of course the problem is we’ve 21

got three weeks before the next meeting, but I think 22

we are interested in doing things. And a gain, maybe 23

think out of the box a little bit, kind of what they 24

did with fluorescent lamp ballast, maybe do one for 25Executive Court Reporters (301) 565

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new versus one for replacements. I don’t know. 1

Again, just throwing it out there. But again, just 2

wanted to say that we think it’s impor tant and there 3

are some very specific issues that should be 4

addressed for these, for the vaults and the 5

networks. I’m not going to talk about the BIL 6

issue. I’m not as familiar. But I think we 7

definitely get one utility rep to serve on this

-- 8

hopefull y serve on this subgroup so to provide some 9

input and then feedback. 10

MR. PARKER: Just let us know as soon as 11

possible who you’ll put forward, okay. 12

MR. HOFFMAN: Yeah, we’d like to do the 13

same thing

-- Alex, APPA. We’ve had a number of 14

utilities appr oach us regarding vault transformers, 15

space constraints and other things. 16

MR. ROSENSTOCK: I think Rick just 17

volunteered us. We just volunteered Rick. Bruce, 18

if you want to be in on it

-- that’s a yes. Okay. 19

MR. SMITH: Richard, this is Bob Smith at 20

Federal Pacific. 21

MR. PARKER: Yes, Bob 22

MR. SMITH: ( discontinuous phone) One of 23

the ... and I hope that ... 24

MR. PARKER: Well, that’s exactly the kind 25Executive Court Reporters (301) 565

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of analysis that needs to go into the report, so 1

does that mean that you’re volunteering to work in 2

that committee? Don’t mean to put you on the spot 3

or anything. 4

MR. SMITH: ... I’ll do that. 5

MR. PARKER: Great. Wes, could I ask you 6

if you would chair that committee for us and 7

coordinate the report? 8

MR. PATTERSON: Yeah, I’ll take it. 9

MR. PAR KER: Thank you so much. I know 10

you have nothing else to do with your time. I 11

appreciate that. And what would be a reasonable 12

timeframe for getting a report from you, assuming I 13

come through and get the minutes out to you. 14

MR. PATTERSON: Next meeting. 15

MR. PARKER: Oooo. Okay. I’m trying to 16

build in as much time for the next meeting as we 17

can, but

-- Tim. 18

MR. BALLO: Tim Ballo, Earth Justice. I’m 19

happy to be involved to the extent we’re searching 20

for a regulatory definition for those products. I 21

think I volunteered earlier and Phil Hopkinson, I 22

believe after the last meeting sent around an ANSI 23

specification for subway and vault transformers. I 24

looked at it and didn’t see something that I thought 25Executive Court Reporters (301) 565

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we could use as a regulatory definition, but if 1

t here’s a switching issue that’s specific to those 2

transformers, you just need some way to define them 3

so that it’s specific to those transformers. 4

MR. ROSENSTOCK: Steve Rosenstock, EEI. I 5

think that’s a good starting point, that using ANSI 6

and IEEE def initions as a starting point, because 7

there’s been an industry consensus around what the 8

definition is, so start there at least and see if 9

you need to tweak it a little bit for DOE’s 10

regulations. I think we’re all okay with that

. 11

MR. PATTERSON: Tim, jus t so I understand, 12

you did say that you had difficulty with the IEEE 13

standard definition? 14

MR. BALLO: I don’t have the specific page 15

in front of me right now, but I think it actually 16

just

-- in discussing the scope of the ANSI 17

standard, it talked about t he standard would apply 18

to subway and vault transformers, but it didn’t 19

actually provide any more specific language to 20

identify what is a subway or vault transformer. 21

What makes it a subway transformer? What makes it a 22

vault transformer? 23

MR. PARKER: I think we can delegate to 24

the group a charge to work through those details. 25Executive Court Reporters (301) 565

- 0064 224

So please, if you’re interested, if you volunteered 1

to be on this group, please let me know by e

- mail, 2

just confirm by e

- mail by the end of the week, and 3

hopefully within the next day or so, so that we can 4

get the group formed and then I will be in touch 5

with the group about a schedule for delivering your 6

report and so forth for the next meeting. Remember 7

the next meeting is our last scheduled meeting, so 8

we’re going to have to ha ve things done farther in 9

advance of that meeting than we did in this case. 10

Richard, any other issues

-- yes. 11

MR. CASKEY: For some reason in my 12

calendar I think I have like somewhere around 13

December 12 th or 13 th

PARTICIPANT: That was cancelled. 16 , like the fifth meeting. Was 14

that

-- 15

MR. CASKEY: Okay, so those dates were 17

cancelled. 18

PARTICIPANT: November 30 th

MR. CASKEY: And those two are the last 21

ones, basically. 22 at APPA is the 19

next one. 20

PARTICIPANT: November 30 th and December 23

1 st

MR. CASKEY: Is that right? 25 . Y es. 24Executive Court Reporters (301) 565

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MR. PARKER: The next meeting is the last 1

currently scheduled meeting. If people are open to 2

it, if there seems a point, a need for it, I think 3

we can look at additional meetings, but they’re hard 4

to schedule and so we would need to decide that 5

fairly soon. It’s much easier for low voltage than 6

for medium voltage. There are some options if we 7

need to do that that we might be able to explore. 8

Eric. 9

MR. PETERSEN: Just want to make a final 10

comment just in regards to

- - I appreciate the 11

position that Mr. Hodge made the comment that our 12

interests, obviously, are associated with defining 13

an efficiency level that we could live with as a 14

steel industry, is an efficiency level at which we 15

participate with in supplying. So a s we look at how 16

we would base that decision, we’re going to come 17

back to something like this

-- it doesn’t have to be 18

this data, but there’s got to be something that 19

gives us a confidence level at the different design 20

lines that we can participate. I onl y have the 21

ability to be able to put something like this up on 22

the board so whatever can be given to be able to 23

help define an assurance that there is an efficiency 24

level at which it accomplishes transformer 25Executive Court Reporters (301) 565

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manufacturers use a range of supply that include s 1

grain

- oriented electrical steel, is going to be a 2

key component for us to make a decision on whether 3

or not we would move past the zero to the one, the 4

0.6 range essentially, that we’ve done. We are 5

simply trying to find where does steel continue to 6

be a viable supplied product for the transformer 7

industry. So we need help in understanding where 8

that would be. So I would not want to go past 9

emphasizing that point because that’s the only 10

position that we’re obviously going to be making a 11

decision is ba sed upon is what protects the interest 12

of the steel industry so that we participate. So 13

again, I just want to emphasize, whether it’s an 14

analysis like this, however it might be, please make 15

sure that is available to help us understand where 16

we can partici pate. 17

MR. PARKER: Great. Anything else we need 18

to cover before we wrap up? All right. 19

MR. ROSENSTOCK: Real quick, Steve 20

Rosenstock, EEI. We’ve had our discussions at our 21

utility caucus and John Caskey through out 22

something. I think we’re okay w ith

-- again, at 23

least right now, as a starting point, for EL1. I 24

forget, which year did we say

-- four years

-- four 25Executive Court Reporters (301) 565

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years after the announcement of the final rule. Not 1

sure about the step after that, but again, you know, 2

DOE has to look at

-- relook at rules every six 3

years, so again, based on all the data that we’ve 4

seen and the charts like this, I think we were

-- 5

unless we see some other data that really convinces 6

us, we’re a little bit queasy about going beyond 7

level one at least for now. Maybe in a few years, 8

maybe after we see a lot more market share of 9

amorphous core, lot more suppliers, but at this 10

point with all the data that we’ve seen to date, 11

we’re a little

-- very worried about going beyond 12

level one for a lot of reasons in terms of 13

competi tiveness and suppliers. But again, if 14

there’s other data that shows that we can, we’re 15

open to it. But at least as of right now, as of 16

today, after all the things we’ve seen, and all the 17

presentations, we’re a little worried about going 18

beyond

-- again, without all the breakouts and 19

everything, obviously, before all the breakouts and 20

any carve outs or BIL stuff, based on all the data 21

and all the things that we’ve seen going above a 22

level EL1 we’re right now a little concerned with. 23

Again, just as an info rmation point, just to give 24

you an idea kind of where we are. point, just to 25Executive Court Reporters (301) 565

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give you an idea kind of where we are. 1

MR. PARKER: And that’s because your view 2

is that the shift to amorphous would be too 3

pronounced if you go beyond that and that you’ll be 4

hostage to the amorphous suppliers? 5

MR. ROSENSTOCK: I don’t want to say 6

hostage, you know, we’re in DC, we don’t like that 7

word. 8

MR. PARKER: But is that the nature of 9

your concern just so we know what underlies your 10

nervousness? 11

MR. ROSENSTOCK: Well, it’s not

-- it’s 12

the cost and the potential, you know, what happens 13

to, you know, are we going to have fewer transformer 14

manufacturers to choose from? So it’s a little of 15

both. Yes, that’s underneath it, but on the bigger 16

picture is like are we goi ng to have as many 17

suppliers, yes or no? Are we going to have as much 18

choice, yes or no? What happens to the prices? And 19

based on this, where is the asymptote really start 20

to skyrocket for us? So that’s

-- 21

MR. PARKER: Okay. Thank you. 22

MR. MEYER S: Aaron Meyers, Cooper Power 23

Systems. So, for example, I have the same concern 24

beyond EL1, and it’s really primarily driven by the 25Executive Court Reporters (301) 565

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fact that EL1

-- well any of the design lines, 1

actually, are just a single design configuration 2

that’s supposed to represe nt an entire family of 3

designs. And it was an unintended consequence , I 4

think, of the DOE efficiency standard that took 5

effect in 2010, but it essentially killed off 2000 6

KVA three

- phase transformers with a 120 secondary. 7

So the current in the secondary is too high, you 8

can’t make the efficiency. It essentially killed 9

off that product from the product scope. 10

And so in reference to Steve’s comments, 11

if we take too big of a step, there might be 12

unintended consequences that shake out that were 13

never con sidered going into it. And to add to what 14

Steve’s list of current concerns are, we’re also 15

concerned about the viability of the rebuilding 16

market and by taking a small step, we’ll be able to 17

feel that out and potentially model it more 18

accurately in consid ering a higher level beyond EL1. 19

But at this point in time, I think we stand with EEI 20

on that conclusion. 21

MR. NADEL: This is Steve Nadel. I mean, 22

we previously stated our position that we’re 23

rejecting EL1. We’re open to considering another 24

level, so I think it’s going to be critical to come 25Executive Court Reporters (301) 565

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up with some analyses that help things move. If we 1

get to we’re not moving off of EL1, period, I’m not 2

sure it’s worth getting together, so we need to get 3

the analyses out and enough time, and people need to 4

come here to this next meeting knowing that we’re 5

going to need flexibility or else we can all save 6

ourselves some time. 7

MR. PARKER: And I think, you know, and I 8

think the principle of this group has to be that you 9

support your positions with arguments and t hat we 10

explore the arguments through further refinements. 11

So I’m hoping that the work that we’re doing on 12

material price sensitivities explores what happens 13

when prices between amorphous and other metals start 14

diverging. I hoping that will shed light on things, 15

and we’ll try to get that out as soon as we can. 16

MR. ROSENSTOCK: And there’s this 17

information right here as well. Steve Rosenstock, 18

EEI. 19

MR. PARKER: What’s that? 20

MR. ROSENSTOCK: The information that was 21

presented by AK Steel that

-- 22

MR . PARKER: Yes. 23

MR. ROSENSTOCK:

-- it’s out there and I’m 24

not in a position, you know, whether that’s 25Executive Court Reporters (301) 565

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specially

-- again

-- 1

MR. PARKER: Again, we need this kind of 2

input from the transformer makers. We’ve gotten it 3

now on the record from two major m akers, and that’s 4

now part of the record. And we just need to know 5

how it looks for others and why. And hopefully 6

we’ll get some analysis of that. Rick. 7

MR. ANDERSON: Steve, we really do want to 8

reach a consensus, we really do. We consider what 9

you guys said earlier about the tiered approach, and 10

we kind of discussed it amongst ourselves. To 11

Steve’s point, one of the bigger concerns is the 12

cost, you know, to implement. And we had discussed 13

internally about, you know, moving

-- starting at 14

EL1 in th e future and then reaching for EL2 later on 15

in that second tier. And in the meantime, between 16

EL1 and two, we do a sanity check. Because we just 17

don’t want to jump off that cliff and have things 18

change and regret that we’ve done that. 19

So we’ve kind of tabled the notion of the 20

tier because we know that John you’ll relook at this 21

in six years, is that right? This transformer 22

efficiencies, DOE will? 23

MR. CYMBALSKY: Yes, we

-- 24

MR. ANDERSON: Is that true? 25Executive Court Reporters (301) 565

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MR. COHEN: This is Dan Cohen, DOE. Yeah, 1

we have an obligation, a legal obligation to look 2

back at every one of our standards within six years 3

of issuance, so this would be no different from any 4

other standard. 5

But if I could, just on one other point, 6

which is you were talking about the tiered st andard. 7

That came up in the ’07 rulemaking, and we said we 8

didn’t have legal authority to do that. So I just 9

want to put that out there, that was a statement we 10

made in the ’07 rule. 11

MR. ROSENSTOCK: Quick response? Then how 12

did the clothes washer rul e become a two

- tier 13

standard in 2001? 14

MR. COHEN: So there are

-- if you look 15

in the statute

-- 16

MR. ROSENSTOCK: Is that illegal? 17

MR. COHEN: No. The opinion

-- we would 18

never do anything illegal, Steve. So our opinion is 19

if you look

-- the reason for that is if you look 20

through the statute at various different products, 21

there are certain places where Congress authorized a 22

tiered standard, and in those instances, we have the 23

authority to do that. But the flip of that is, 24

since Congress knows how t o authorize a tiered 25Executive Court Reporters (301) 565

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standard, and did in certain instances, our view is 1

that where they didn’t, we don’t have the authority. 2

MR. DeLASKI: And just to follow up on 3

that. I asked you at our first meeting and you got 4

back to us later about the notion of, I think just 5

flexible effective dates. Are we committed to the 6

three year lead time? And what I think the response 7

back was, you know, that the Department has been 8

flexible in recent rulemakings where there have been 9

a joint recommendation by stakehold ers using the 10

direct final rule authority, and that’s new 11

authority that’s given to you since 2007 that you 12

didn’t have when you issued the transformer rule in 13

2007, because it was enacted late in the year. So 14

I’d ask you to think about that, whether that 15

authority, under the DFR provision, gives you the 16

flexibility to consider tiered standards. 17

MR. COHEN: So we’ll be happy to take it 18

back and look at it. There are two different 19

questions you’re asking there. One is about the 20

flexibility on the compli ance date itself, and the 21

second is whether you can have essentially two 22

compliance dates. 23

MR. DeLASKI: Which is a new question for 24

you. 25Executive Court Reporters (301) 565

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MR. COHEN: Yes. 1

MR. DeLASKI: I recognize it’s a new 2

question. 3

MR. COHEN: But in this case, as I said, 4

this was asked and answered in the ‘07 rule, so it’s 5

a little harder to move off of that. 6

MR. DeLASKI: Again

-- right. 7

MR. COHEN: So we have a public statement 8

out there on this very issue. 9

MR. DeLASKI: Except that Congress changed 10

the law in the inter im on this

-- 11

MR. COHEN: In a generic provision as 12

opposed to

-- so. 13

MR. DeLASKI: And you can maybe use that. 14

MR. ROSENSTOCK: Mr. Cohen, for clothes 15

washers, which

-- which federal law allowed tiered 16

standards for the clothes washers? 17

MR. COHE N: It would have been under REPCA 18

(ph), I just

-- I will claim the I wasn’t here at 19

the time

-- 20

MR. ROSENSTOCK: 1975? 21

MR. COHEN: It’s basically, yes, the 22

Energy Policy and Conservation Act, which gives the 23

authority for this rulemaking as well. It ’s the 24

same statute, just different

-- so there are 25Executive Court Reporters (301) 565

- 0064 235

different

-- the way it’s set up, there’s one whole 1

section that deals with residential products; one 2

whole section that deals with commercial products, 3

clothes washers is under both, actually, because 4

th ere are both residential and commercial clothes 5

washers. They have separate provisions that govern 6

those and those are regulated. 7

PARTICIPANT: So John, for clarity, you 8

will

-- let’s just say for laughs we decide, we come 9

to agreement on EL1. Six ye ars from now you can 10

come back and say, okay, time to take a second look 11

at this. And six years from now you could say, 12

well, you settled on EL1. The manufacturers have 13

figured out how many EL2 designs, so six years from 14

now you could say, EL2, is that r ight? Okay. 15

MR. DeLASKI: Just to be clear, so that’s 16

different than a tiered standard. 17

MR. COHEN: Yeah. 18

MR. DeLASKI: That’s just a right

-- they 19

have a look back

-- a provision to look every six 20

years. On the tiered standard we took the view w ith 21

Steve in 2007, with EEI and APPA, that DOE could do 22

a tiered standard in 2007. As Dan said, DOE 23

considered that view, rejected it. Doesn’t mean 24

that DOE would reject it again. We think that they 25Executive Court Reporters (301) 565

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could do it again and we think they have a new 1

provisi on authority to do it. 2

MR. COHEN: The point, Andrew, is that we 3

listened to what you said, and then we do want to 4

reach consensus. That was the point. 5

MR. DeLASKI: And I guess the thing is 6

that we look at tiers

-- so keeping the time frame 7

in mind, that they’re going to look back in six 8

years whether we agree to it or not. 9

MR. COHEN: Right. 10

MR. DeLASKI: So, let’s

-- in thinking 11

about tiers, we would want to try to keep them 12

within a relatively

-- a time frame in which we’re 13

getting to the savin gs happening within, you know, 14

our working lives. 15

MR. PARKER: Bob. 16

MR. SAINT: Yeah, this is Bob Saint from 17

NRECA. What always comes

-- is coming to my mind is 18

I recollect in 2007 when we, you know, the original 19

standard, and we were, when the effici ency levels 20

were raised higher than DOE recommended, we were 21

afraid that by now that the predictions of steel not 22

being available, at a very high price, we’d be here 23

today with transformers, like we have seen before, 24

lead times, six, eight months, a year, prices going 25Executive Court Reporters (301) 565

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sky high. 1

That didn’t happen because the economy 2

tanked, and the demand for transformers went down 3

worldwide. The demand for steel went down 4

worldwide, so the manufacturers were able to produce 5

enough steel so we could buy transformers on a 6

timely basis at a very effective cost. 7

If we raise the efficiency level too much 8

too fast, I’m just afraid that we’re going to go 9

back to what we saw in 2005, 2006, where 10

transformers were not available, they were sky

- high, 11

and so assuming

-- I have to assume that some day 12

the economy will recover and we’ll get back to some 13

kind of a growth and some kind of a demand. I hope 14

that happens. 15

But I also hope that we’ll be able to buy 16

transformers when we need them at that point. So 17

that’s one of the t hings we need to think about when 18

we look at the cost, the future cost, is the steel 19

going to be available, this

-- at the levels that we 20

predict may happen, not the demand today. 21

MR. PARKER: Great. So I think that’s a 22

good place to stop for today. On e thing that we did 23

not cover in depth is the break

- out, the sub

24

division of one of the product classes into 25Executive Court Reporters (301) 565

- 0064 238

different BIL ratings. That again is a technical 1

issue, so we’ll be in touch with you by e

- mail after 2

this meeting to discuss how to resolve that and 3

nominations to work on that group to come up with a 4

proposal. We discussed that at previous meetings 5

and also summarize that discussion and let that be 6

the basis for the working group. So just please not 7

that that will be going forward as well on a f airly 8

fast time track now, since we only have a few weeks 9

left. 10

Well, nobody thought this would be easy, 11

and it hasn’t been easy, and it won’t be easy. But 12

I think we actually made some progress today and I 13

just appreciate the frankness, the candor, and the 14

civility and the good will that was evidenced around 15

the table. 16

We’ll see some of you tomorrow and for 17

everyone, we look forward to seeing you in a few 18

weeks and we will definitely be in touch sooner than 19

that by e

- mail. 20

Are people, by the way , able to get out of 21

the Sharepoint site? Have there been problems 22

logging on? I h ave not tried. So, we’ll be in 23

touch. We’ll try to put everything together there, 24

so if you get a chance, explore it, because you’ll 25Executive Court Reporters (301) 565

- 0064 239

find kind of a one

- stop shopping. An d if you’re 1

having trouble getting on, please let us know. It 2

should be used as a resource going forward. 3

Take care. 4

MR. CYMBALSKY: Thank you. 5

(Whereupon, at 5:49 p.m., the meet ing in 6

the above captioned matter was adjourned .) 7

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25Executive Court Reporters (301) 565

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**REPORTER'S CERTIFICATE**

This is to certify that the attached proceedings

before:

**U.S. DEPARTMENT OF ENERGY**

**VOLUME II**

In the Matter of:

**MEETING OF THE MV WORKING GROUP**

Were held as herein appears and that this is the

original transcript th ereof for the file of the

Department, Commission, Board, Administrative Law

Judge or the Agency.

Further, I am neither counsel for or related to

any party to the above proceedings.

Official Reporter 

### Wendy Greene

Dated: November 14, 2011