Date: October 7, 2011

TO: Richard Parker, DOE, Navigant, LB L and Negotiated Rulemaking Committee
Members and NEMA Transformer Section Members

SUBJECT: Comments on First Sessions of DOE Negotiated Rulemaking process for
MVDT/LF and LVDT Distribution Transformers

First, NEMA would like to thank the DOE and the Facilitator for providing an opportunity for NEMA to participate in the distributi on transformer energy efficiency standards rulemaking process. We are confident that the Committee will arrive at a consensus on the best path forward that pr omotes energy efficiency and carbon reduction while still maintaining a reasonable payback for the co nsumers and keeping a vibrant transformer manufacturing industry in the United States.

As you may know, NEMA is a leader in Sm art Grid and Energy Efficiency. We hold leadership positions in the Smart Grid Interoperability Panel and High Performance Buildings related organizations. In addition, we spearheaded energy efficiency advancements by developing and promoting NEMA Premium Efficiency programs for motors, ballasts and low voltage dr y-type distribution transformers.

NEMA believes that a negotiated rulemaking can create a win-win situation for all the stakeholders. However, in order to be successful in the long run, we need to start with an engineering cost model and input assump tions that have been fully vetted by the stakeholders. At this point, there is a lot of confusion as to whether we have a
reasonable model or not. We feel that validating the existi ng model and input assumptions is a critical starting point.

NEMA, various transformer manuf acturers, H-Volt and others have documented serious errors and problems with the OPS model and the technical analysis results reported in both March 2011 and August 2011. The transfo rmer manufacturers have been working aggressively with Navigant and DOE to resolve the di screpancies and create a model that accurately estimates the cost effect iveness of various proposed energy efficiency
levels.

As Raymond Polinski of ATI Allegheny Lud lum stated in his written comments of September 23, 2011, “ Until the committee’s transformer design specialists and utility engineering experts sign-off on the analysis ( basis on which the committee will make our recommendation) it is difficult to propose or debate new efficiency standards. “Several transformer manufacturers and ut ility organizations have already provided specific comments and recommendations concerning needing greater clarity on the input assumptions used in the modeling. We support those requests and will not repeat them here. The general observation is that the entire appr oach and analysis is extremely complicated and only a few people on the committee fu lly understand the entire analysis process or the re sults. However, these resu lts will drive the discussion that may ultimately become a consensus position for the industry and the committee. NEMA therefore requests that the DOE and its consultants ta ke extra care to validate the results and explain the results in a logical, simple manner.

RECOMMENDED VALIDATION PROCESS:

NEMA recommends the following validati on process for developing a consensus position on the energy efficiency leve ls for distributi on transformers:

1. Have the transformers manufacturers and users validate the results of the OPS model and the Navigant analysis in terms of price per efficiency level for Medium Voltage Dry-Type (MVDT), Liquid Filled (LF) and Low Voltage Dry-type (LVDT) transformers. Currently, a least a few liqui d-filled transformer manufacturers feel that the most resent Navigant results ar e “in the right ball park”. However, the MVDT and LVDT results have not been validated yet.

2. Once the price per efficiency level resu lts of the three transformer classes have been validated, then the input assumptions for the life-cycle cost analysis need to be reviewed and approved by a consensus of the negotiated rulemaking committee. These input assumptions should in clude: electricity costs, load factor, average lifetime of tr ansformers, etc.

3. Review and validate the results of the life-cycle cost analysis performed by Lawrence Berkeley Lab. Verify that t he concerns noted in this document are considered in the LCC particularly with r egard to ensuring that selected efficiency levels provide multiple desi gns and multiple suppliers.

4. Review and validate the results of the National Impacts Analysis.

5. Review and validate the results of t he Manufacturers Impacts Analysis. Verify
that the concerns noted in this document are considered in the MIA.

GENERAL COMMENTS AND RECOMME NDATIONS PERTAINING TO ALL
DISTRIBUTION TRANSFOMER CLASSES:

1. Sensitivity Analysis - We feel str ongly that a selling-price sensitivity analysis needs to be performed on any design lines w here the analysis results indicate that efficiencies higher t han the existing rules are warranted. This is particularlyimportant in situations w here the most cost effectiv e design includes amorphous
materials or ZDMH.

2. Core Material Supply Availability - We are concerned that some of the core steels, like amorphous, that seem to fi t the “best efficien cy answer” cannot be produced in the foreseeable future in adequate supply to satisfy the demand precipitated by some of the higher proposed DOE efficiencies.

3. Core Material Price Concerns - Due to concerns about supply limitations, single or too few suppliers, and the resulting pot ential for significant price increases related to the very highest efficiency core materials such as Hi-B steels and Amorphous metal, NEMA members believe an Efficiency Level that allows grades of silicon steel with proven global su pply capacity such as M3 to compete economically with Hi-B and Amorphous would be the Efficiency Level that would meet the requirements for t he best technology that is economically justifiable. Anything higher, in our opinion, could result in a serious disconnect between the material prices used in the DOE econom ic analyses and what could actually happen in the market. In that case, t he projected economic benefits would not be realized and the higher standards woul d lead to supply issues that would
affect distribution transfo rmer manufacturers' ability to meet customer demands
for critical US transformers.

4. Multiple Designs and Suppliers - We f eel strongly that any efficiency levels mandated by the DOE should ensure that t here are multiple suppliers that can provide the materials needed for the lowest cost designs. In addition, it is important to be able to reach the same efficiency levels with multiple designs using multiple metal combinations. Idea lly, these different designs and material combinations will have relatively small price bands of less than 20%.

5. Impact on Small and Medium-sized Manuf acturers - Small and medium-sized
manufacturers are concerned that desi gns requiring amorphous metal or wound cores will require large investments, drastic changes in current manufacturing processes, and potentially much higher futu re transformer cost s. In addition, small and medium-sized manufacturers may have difficulty obtaining some of the
less conventional materials. Manufacture rs with the most access to the limited supply materials (e.g., ZDMH, Amor phous) would have an unfair competitive advantage which at higher EL’s, could not be offset by the use of conventional high efficiency core steels such as M3.

6. The Institute of Electrical and Elec tronics Engineers (IEEE) assumes an average life for distribution transformers of 20.5 years. What research does Navigant or the DOE have that supports the 32 year average life assumed in the currentNavigant analysis. NEMA recommends us ing the 20.5 years average life from
IEEE.

7. The DOE should ensure a logical consist ency in the final regulation that does not provide an artificial econom ic benefit for moving bet ween kva ratings within a given equipment class or between equipment classes. The relations between
kva and losses should maintain the fundament al power relationship as closely as practical.

COMMENTS AND RECOMMENDATIONS BY SPECIFIC TRANSFORMER CLASSES:

LIQUID IMMERSED

1. We support dividing liquid immersed transformers into pole mounted, pad mounted, network/vault, and substation categories because each of these categories has different limitations on weight, height and size. In particular, in many cases, larger transformers can not fit into existing vaults and still maintain required safety and maintenance clearances.

The DOE noted in the first MVDT/LF negot iated rulemaking session that their analysis indicated that the higher efficiency levels for pole mounted transformers could be met without exceeding the weight and height restrictions on existing poles. This finding is not supported by manuf acturers’ or utilities’ experience. The DOE needs to provide the analysis that s upports the conclusion that existing poles would not need to be replaced to support higher efficiency transformers.

The potential height and weight restrictions on existing poles needs to be taken into account before setting the efficien cy levels for pole mounted liquid filled transformers. In addition, si nce many manufacturers use the same transformer core design for both the pad mounted and the same sized pole mounted transformers, the efficiency levels for both units may need to be the same.

2. The BIL (Basic Impulse Rating) rating of a transformer has a significant impact on the losses of the product. This is so because the clearance between the windings and the core must increase as the BIL increases resulting in a greater volume of core steel and thus a greater amount of no load losses.

This impact was recognized by the DOE for the MV Dry-Ty pe (MVDT) efficiency standards established in 2010. However the DOE did not recognize this impact with the MV Liquid-Filled (MVLF) standards. The MVLF efficiency standards cover a range of BIL ratings up to and including 200 KV. The DOE representative designs, upon which the st andards were developed, included 95,125, and 150 BIL for single-phase and 95 and 125 BIL for three-phase.

But the standard was written independent of the BIL rating which meant that it had to be applicable to all ratings (inclu ding up to 200 BIL). The market is dominated by 95BIL which may then have op portunities for further improvements in the efficiency specification if it is segmented as a separate equipment class. However, without separation, it may prove to be difficult to significantly improve the standard and still accommodate t he 200BIL ratings. We recommend consideration be given to defining separat e standards in MVLF for significant BIL groups: <= 95 BIL and >95 BIL. These should be defined in such manner as to ensure movement from one BIL rati ng to another is not economically advantageous from an effici ency regulation perspective. 3. Currently, a least a few liq uid-filled transformer manufact urers feel that the most resent Navigant results are “in the right ball park”.

MEDIUM VOLTAGE DRY TYPE

1. At this point, there are many questi ons from the manufacturers and others concerning the current analysis output. As noted earlier, additional work needs to
be done to validate the results of t he price vs. efficiency analysis.

LOW VOLTAGE DRY TYPE

1. There are some LVDT transformers that are used in specialty applications such as in datacenters and uninterruptible pow er supplies (UPS’s). The loading on these transformer applications is signi ficantly different than the average
transformer. NEMA recommends that a lim ited number of specialty applications be analyzed to determine if these applicat ions warrant different efficiency
standards.

2. The recent Navigant analysis indicates that the curve between transformer price and efficiency for low voltage dry type transfo rmers is relative flat. This result doesn’t seem reasonable and requires furthe r validation. At least two of the manufacturers attending the first LVDT se ssion indicated that their prices will increase roughly 60% between t he base case (EL0 and EL3).EXCERPTS OF OTHER COMMENTS FROM NEMA TO DOE (EERE-2010-BT-STD0048) DATED APRIL 18, 2011 CONCERNIN G CONSERVATION STANDARDS FOR
DISTRIBUTION TRANSFORMERS.

ES.3.1 Efficiency Requirements for Dual/Multiple-Voltage Secondaries

DOE should align its requirements with t hose of IEEE standards (C57.12.00 for liquid-filled, NEMA ST20-1992: 3.3 for low voltage), requiring testing in the “as sh ipped” condition. For units with multiple (series-parall el) low voltage ratings, the effici ency standard should be based on the highest voltage (series) connection, wh ich matches the IEEE standard and industry practice. To do otherwise would be counter to the current indust ry standards and practices of testing and shipping multiple low voltage rated un its at the higher voltage (series) rating. For example, the most popular low voltage rating fo r single-phase US Liquid-Filled DT’s is the 120/240 volt rating consisting of two half-capacity low voltage windings connected internally in series. IEEE standards require such units to be connected and tested at the higher 240 volt (series) connection. For 240/480 vol t ratings, the series connecti on would be at 480 volts. Our recommendation is that DOE match this requireme nt for efficiency standards compliance.

ES.3.2 Dual/Multiple-Voltage Transformers with Varying Basic Impulse Levels

DOE should align its requirements with t hose of IEEE standards (C57.12.00 for liquid-filled, NEMA ST20-1992: 3.3 for low voltage), requiring testing in the “as sh ipped” condition. For units with two or more high voltage ratings, th e efficiency standard should be based on the highest voltage (highest BIL) connection, which matches the IEEE standard and industry practice. To do otherwise would be counter to the current stan dards and industry practices of testing and shipping D/V units at the higher volta ge rating. For example, the most popular D/V rating for US LFDT’s would be the 12470G rdY/7200 x 24940GrdY/14400 rating (95 kV BIL x 125 kV BIL). IEEE standards requir e such units to be connected a nd tested at the higher voltage rating – 24940GrdY/14400. Our recommendation is that DOE match this requirement for efficiency standards compliance.

ES.3.11 Scaling Methodology

The 0.75 scaling rule is imperfect, as would be any scaling methodology. While the scaling rule is sufficiently accurate when applied to units w ith a kVA value close to the kVA value of the representative unit, as the distance between the re presentative unit and the scaled unit increases, so does the inaccuracy of the scaling rule. NE MA’s recommendation is to retain the 0.75 scaling rule and to simply add more design lines to its an alysis, as a reality check, to ensure the scaling rule keeps its integrity.ES.3.17 Trial Standard Levels – Substitution Impact

Medium voltage three-phase liquid-filled and dry- type transformer compete in certain markets. Some users will pick a transformer type (liquid-fill ed or dry-type) based on total installed costs, which include any requirements associated with the cooling used. For some applications, additional costs are involved for liquid-filled for li quid containments or fire protection. If liquidfilled transformers have efficiency requirements that are significantly more stringent than drytype transformers, the cost equation could shift such that users might st art installing dry-type transformers where previously liquid-filled tran sformers were used. This could have the unintended consequence of lowering the efficiency for that instal lation (as dry-type have lower efficiency requirements than liquid-filled), rather that raising the efficiency as DOE rules are intended to make happen.

ES.3.18 Impact on Manufacturers – Pote ntial for Increased Refurbishments

NEMA urges DOE to discuss the supply of core steels and other mate rials with individual manufacturers, both large and small, to unders tand the full perspective on material supply.

It is our contention that higher standards will lead to an increased amount of refurbishment of the existing inventory of transformers, which are not required to comply with new standards. We believe the analysis, by not taking this into account, may be overestimating how quickly new transformers are adopted in the field. We reco mmend that the analysis, at each CSL/TSL, ought to include the impact of the “buy vs. repair” decisions made as the cost of a new piece of equipment increases.

To help predict what the supply a nd cost of steel may be in the future, DOE should take lead in forecasting these values at each CSL/TSL.

ES.3.19 Supply of Core Steels

NEMA urges DOE to discuss the supply of core steels with individual manufacturers, both large and small, to understand the full perspective on stee l supply.

To help predict what the supply a nd cost of steel may be in the future, DOE should take lead in forecasting these values at each CSL/TSL.

ES.3.20 Valuing Air-Borne Emission Reductions

NEMA does not disagree with the proposed a pproach but recommends the analysis pair a quantified CO2 impact with each TSL level and th at the CO2 impact be reasonable, repeatable, and based on quality data.ES.3.25 Replacement and Maintenance Practices

It is our contention that higher standards will lead to an increased amount of refurbishment of the existing inventory of transformers, which are not required to comply with new standards. We believe the analysis, by not taking this into account, may be overestimating how quickly new transformers are adopted in the field. We reco mmend that the analysis, at each CSL/TSL, ought to include the impact of the “buy vs. repair” d ecisions made as the cost of a new piece of equipment increases.

ADDITONAL TECHNICAL COMMENTS:

Exclusion of Mining Transformers We understand mining transformers are not requi red to comply with current conservation standards. However, we also note that mi ning transformers are not named on the list of exempted products. Therefore, we recomm end mining transformers be included on the exemption list to clarify that the standa rds shall not apply to mining transformers.

Step-Up Transformers If step-up transformers are going to be included within the scope of applicability, we recommend segregating “modulation transformers” from the broader group of step-up transformers, and exempting them from the efficiency requirements. Modulation transformers do not represent an opportunity for signifi cant energy savings.