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UNITED STATES OF AMERICA

DEPARTMENT OF ENERGY

MEETING of the MV WORKING GROUP

Volume II

National Rural Electric Cooperative Association

4301 Wilson Blvd, Rm. C2

Arlington, VA

Thursday

October 13, 2011

Facilitator:

Richard Parker

University of Connecticut Law School

Host:

National Rural Electric Cooperative Association 

(NRECA)
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Participants Identified: 

Rick Anderson

Fayetteville Public Works Commission

Tim Ballo

Earth Justice

1625 Massachusetts Avenue

Suite 702

Washington, DC 20036

Scott Beck

Lakeview Metals

John Caskey 

Electrical Manufacturers Association

Greg Coulter

Consultant 

Prolec GE

Jim Creevy

National Electrical Manufacturers Association

1300 North 17th

Suite 1752

Street

Rosslyn, VA 22209

Andrew deLaski

ASAP

20 Belgrade Ave, Suite 1

Boston, MA 02131

Tom Eckman

Northwest Power and Conservation Council

Gary Fernstrom

Pacific Gas & Electric Company

13055 Parkhurst Dr

Oakland, CA 94619

Chuck Foster

Edison Electric Institute
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Carlos Gaytan

Prolec GE

Bruce Hirsch

Baltimore Gas and Electric

Gerald Hodge

Howard Industries

PO Box 1586 

Laurel, MS 39441

Philip Hopkinson

HVolt, Inc.

3704 High Ridge Rd.

Charlotte, NC 28270

Mike Hyland

American Public Power Association

Aaron Meyers

Cooper Power Systems 

Dave Millure

Metglas Incorporated

440 Allied Drive

Conway, SC 29526

Jim Murkowski

Allegheny Ludlum ATI

Steve Nadel

American Council for an Energy-Efficient Economy

Wes Patterson

ABB, Inc.

Eric Petersen 

AK Steel

Ray Polinski 

Allegheny Ludlum - ATI
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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 Avenue, NW, Suite 400

Washington, DC 20005

Paul Ryan

Hitachi Metals America

800 Grand Avenue, Suite AG-6

Carlsbad, CA 92008

Bob Saint 

National Rural Electric Cooperative Association

Mahesh P. Sampat

EMS Consulting

1180 Brookview Dr

Athens, GA 30606

Jerry Schoen

AK Steel Corporation

705 Curtis Street

Middletown, OH 45043

Chuck Simmons

Progress Energy

Bob Smith

Federal Pacific

Jim Rakowski 

Allegheny ATI

Ken Winder

NRECA

Participants from DOE:

John Cymbalsky

DOE
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Participants from Navigant/LBL:

Brian Coffey

Navigant

Mike Rivest

Navigant

Rob Carmichael

Navigant

Matt Nardotti

Navigant Consulting

Chris Bolduc

Lawrence Berkley National Laboratory

Katie Coughlin

Lawrence Berkley National Laboratory
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AGENDA

 ITEM PAGE

Agenda Review 305

Discussion of Metals and Materials 306

Supply 309

Competitiveness 358

Presentation: Distribution Transformers 

Manufacturing Impact 381

TSL Selection 395

Concepts: The Bigger Picture 400

Take-away Action Items 423
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1 8:47 a.m.

3

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

4 MR. HOPKINSON: And before you start, I plan 

5 not to talk today, but I just wanted to -- (laughter) 

6 -- I just wanted to publicly commend Carlos for his 

7 excellent job of putting our report together with 

8 Greg’s help, and the two of them did really well, and 

9 their data for M3 lies right on top of mine, I think 

10 Carlos would agree, and so we’ve got independent looks 

11 that are coming up with the same picture. Wes also 

12 did a particularly fabulous job with real data of what 

13 he sold. I don’t think that his presentation breaks 

14 out the steels individually. He has the data and he 

15 can do it on separate screens --

16 MR. PATTERSON: (comment off mic)

17 MR. HOPKINSON: Okay. So he will have it. 

18 But he’s done a really good job too.

19 MR. PARKER: Thank you, everybody, we really 

20 appreciate that. So let’s get started. We have a lot 

21 to cover and I’m sorry for the late start. Why don’t 

22 we just -- do we need to go around the table and give 

23 names for the court reporter or can we dispense with 

24 that? Let’s just go.

25
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1 Agenda Review 

2 Great. So three main items on the agenda.

3 • First the presentation on metals and material 

4 prices. That’s one of the key parameters in the 

5 talk, as we all know. So we’ll get down to brass 

6 tacks and we really need to be able to give the 

7 analytical team clear guidance from the group as 

8 to whether we’re comfortable with that, coupled 

9 with the values that they’re using.

10 • As part of that we also need to look at this 

11 illusive variable of the competitiveness break 

12 point of price point for setting that TSL for 

13 analytical purposes. So that’s another outcome 

14 that I hope we will achieve in this meeting, at 

15 least coming up with an analytical concept, a 

16 construct, for how to define that in a clear and 

17 rigorous way.

18 • The third thing we need to do is hear from the 

19 advocates and from Steve Rosenstock and from 

20 anybody around the table who wants to put forward 

21 sort of concepts for moving into the next phase 

22 as we look ahead, to actually develop sort of 

23 broad parameters, guidelines, what have you, 

24 principles to apply, for getting to “yes” in this 

25 talk. We’ve spent a lot of time in the weeds, 
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1 and we’re moving out of the weeds and into the 

2 bigger picture stuff now.

3 • And then the final thing we’ll do, we’ll break at 

4 an appropriate time so that people aren’t 

5 overstressed at the table and then we’ll have a 

6 wrap-up session where we review the action items 

7 leaving this meeting, not only the action items I 

8 think we agreed on yesterday, but those that we 

9 agree on today, and we’re going to try to attach 

10 timelines to that so that we make sure that the 

11 next meeting that we have can really be a very, 

12 very productive meeting.

13 So without further ado, let me turn it over 

14 to Eric, are you presenting?

15 MR. FERNSTROM: So, Richard, Gary from PG&E. 

16 You wanted to point out that we spent a lot of time on 

17 windings and now we should get to the core of the 

18 matter?

19 MR. PARKER: Thank you. The record will 

20 reflect a drum roll.

21 MR. PETERSEN: I promise my jokes won’t be 

22 any better.

23 Discussion on Metals and Materials

24 MR. PETERSEN: One of the things that we 

25 submitted in e-mails which has two different 
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1 documents, one of them, comments on the global supply 

2 of grain-oriented and electrical steels, I have 25 

3 copies here if anyone would like for me to pass them 

4 around, I’ll just start anyone here, get one of these 

5 e-mails, take a couple, if not, I’ll just go around 

6 the table. You should have this in your e-mail as 

7 well, and Jeremiah’s got a document there that he’ll 

8 pull up.

9 Before moving forward on that, the comment 

10 that I wanted to make, just as regards as we finished 

11 up last night with Phil Hopkinson’s presentation. One 

12 of the closing comments that was made last night, I 

13 wanted to make sure did not cause a degree of concern 

14 in regards to Phil Hopkinson’s role, and I wanted to 

15 attempt to address that. 

16 We actually submitted Phil Hopkinson early 

17 on as a sponsor, potentially, to sit at this table. 

18 We were very clear up front in regards to the work 

19 that Phil Hopkinson had done, provided his background. 

20 He had worked with Navigant, et cetera. We’ve also 

21 been very upfront in regards to Phil Hopkinson having 

22 worked with us in regards to helping us put this data 

23 together. So there is a comment that was made last 

24 night, which is the first time that I’ve heard this at 

25 this table, to any of the folks around this room, 
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1 which is essentially, who are you working for, where’s 

2 the dollars coming from? 

3 I wanted to ensure that it’s understood by 

4 this committee that the reason we have been up front 

5 in regards to Mr. Hopkinson’s role with AK Steels as 

6 one of the providers of the dollars behind taking a 

7 look at the analysis he has conducted, as we are a 

8 steel company. We’re not a transformer manufacturer, 

9 and yet we’re here to make decisions on a number of 

10 transformer modeling, information that quite frankly I 

11 have no background in. My background is steel. It 

12 has nothing to do with transformers, and I am looking 

13 to have someone help bring myself, my company, an 

14 understanding that any decision we make moving forward 

15 is based upon data that we have confidence in, which I 

16 know is what this whole organization is for, and we 

17 are utilizing Mr. Hopkinson to help us sort through 

18 that information.

19 As we come to take a look at the direction 

20 that we believe the committee should potentially take, 

21 I’ve appreciated some of the comments that have been 

22 made around this table. I think ultimately steel, for 

23 AK Steel, we are a company that produces carbon, 

24 stainless and electrical steel. Electrical steel is a 

25 critical component of our product mix. I don’t want 
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1 to emphasize that enough in regards to how important 

2 electrical steel is to our company.

3 So this has a very significant potential 

4 impact upon our company, just as Mr. Meyers made the 

5 comment yesterday in regards to the potential 

6 ramifications of where this committee’s decisions 

7 could go.

8 In attempting to define some of the 

9 questions we heard -- we heard two different questions 

10 from the committee. One associated with the supply, 

11 one associated with competitiveness. I’ll address the 

12 supply and then right after, Mr. Schoen will discuss 

13 the competitiveness portion of the presentation we 

14 provided. 

15 Supply

16 On the supply side, just to be able to 

17 provide you a perspective of the industry. Early on, 

18 we had, at the very first meeting, I’m not sure 

19 exactly who the individual was that came in here and 

20 spoke with us and told us about the criticalness of 

21 anything that we bring to this table should not 

22 represent my interest alone, but should represent the 

23 interest of the industry that I am a part of. 

24 So we have attempted to take the supply 

25 document we are providing, and give to you, as a 
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1 electrical steel global supplier, a perspective of the 

2 supply base of steel. So our recommendations are not 

3 based upon a niche market for us, something that we 

4 could provide domestically that others couldn’t 

5 provide. Our intent is to provide something that is 

6 representative of the commission we were given, 

7 associated with conflict of interest, to provide a 

8 recommendation that befits the industry we represent.

9 So having done that, I’m just going to jump 

10 to the results. If you can move down to the table at 

11 the bottom of three, this is a listing of the steel 

12 suppliers, globally. As you can see, this is a small 

13 number of suppliers, but it is the total number of 

14 suppliers of electrical steel. Just for comparison, 

15 if we were to attempt to list carbon steel suppliers 

16 on here, this table would be pages and pages long. So 

17 it is a relatively small number of suppliers. So our 

18 intent in taking a look at understanding what is the 

19 supply base that could provide a product which 

20 represents a multiplicity of potential suppliers for 

21 the transformer industry, directly looks at this 

22 graph.

23 So some of the things to note is that on the 

24 left side we have the first column, which is the 

25 conventional or the regular grain-oriented steels, and 
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1 over on the right side, you have the high permeability 

2 or grain-oriented steels. I would note that the group 

3 all the way on the far right hand side, which is 

4 domain-refined, wound and annealed, these are the 

5 products that we refer to as EMH as well as JFE, JGS -

6 - I don’t remember -- JGSG. Both of those are trade 

7 names associated with their product, but those are the 

8 products that represent that particular class of 

9 material.

10 To cut directly to the chase, as I think 

11 that most of you with transformer background certainly 

12 are familiar with these companies, our intent was 

13 simply to take a look at where could you go and be 

14 able to provide a range of suppliers that would be 

15 able to allow you, as transformer manufacturers to 

16 leverage your supply base against one another such 

17 that you can insure that you can make the best 

18 business decision from a competitive marketplace. 

19 So from that perspective, M3 clearly stands 

20 out, because if you take a look at M2, M2 is supplied 

21 just within the United States by just the two 

22 suppliers here at the table. We talked about ZDMH and 

23 the JFE product, both of those supplied directly out 

24 of Japan, but not here domestically. And we would 

25 also note that we are the only supplier of high 
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1 permeability grain-oriented domestically here in the 

2 United States. So our recommendation associated with 

3 where your broadest opportunity for supply base, 

4 really lands right on M3. So the intent of this first 

5 document is purely to define to the group, because 

6 there have been question that had directly come 

7 forward associated with the supply base. This gives 

8 you a picture of approximate capacity, the relative 

9 size of the “X” is how big of a player they are, so to 

10 speak, and as you can see there’s a very large basis 

11 of suppliers at M3, which is what we make a 

12 recommendation on for those design lines of one to 

13 five, and then considering the amount of supply per 

14 demand that could potentially come on M3, as a result 

15 of DL one through five, we would recommend that 

16 transformer manufacturers should look at M4 to insure 

17 that core materials would be widely available as the 

18 two areas of steels that best represent the steel 

19 industry.

20 So I’ve cut that very short because I know 

21 we’re on a lot of short schedule today. Wanted to get 

22 just directly to the heart of the result in regards to 

23 our intent associated with producing this document, to 

24 give you a background associated with where you can 

25 go, and who -- what suppliers you potentially have, 
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1 the number of suppliers with the various grades 

2 available. Any questions. Please.

3 MR. PARKER: Aaron.

4 MR. MEYERS: Can you explain your last 

5 comment? You said -- what I heard you say is M3 --

6 your recommendation is to consider M3 for design lines 

7 one through five, and you said M4 for -- and I didn’t 

8 follow your point about M4.

9 MR. PETERSEN: The point was that the 

10 concern would be -- I think there’s a question 

11 associated with the total amount of demand associated 

12 with DL one through five, and whether or not there 

13 would be enough supply if DL 1-5 had a specification 

14 that required the use of M3. I think there’s a 

15 question associated with whether or not there would be 

16 enough supply of M3, such would you have to take a 

17 look at M4. So I think that is part of the 

18 consideration that would have to be made. Please.

19 MR. COULTER: This is Greg Coulter. I’m 

20 just trying to understand. If we were to look at that 

21 and let’s just say it came out high B. Could you just 

22 shift all that production, you know, all those tons 

23 and just make high B, big X’s and no X’s for M2, M3, 

24 M4, M5?

25 MR. PETERSEN: Good question and the answer 
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1 is no. These products have unique chemistries, unique 

2 processing. It would require potential capital 

3 investments associated with moving from one to the 

4 other, so there are capacity constraints on existing 

5 equipment. So quite frankly, the MOH product today is 

6 completely sold out, booked out, one of the comments 

7 we made in here. That is a product that is in very 

8 high demand. We’re producing essentially everything 

9 we can today in that category, so it’s not even a 

10 question that, you know, with the weakness here within 

11 the U.S. economy, if we could produce more, we would.

12 MR. SCHOEN: Jerry Schoen, AK Steel. The 

13 MOH, the high permeability steels that we sell, and we 

14 make a lot of them, go into power transformers, ultra15 high voltage transformers, substations, step up, and 

16 that type of thing. Those have their own price 

17 structure in a very high value added for the high 

18 permeability steels because of excitation 

19 characteristics and transformer noise, making 

20 restrictive noise. As a result of that, there’s a 

21 premium on the high permeability steels for that 

22 sector that doesn’t exist in a distribution 

23 transformer. And basically, we play to that. That is 

24 a very strong market and it’s actually a very rapidly 

25 growing market. Most in North America it’s 
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1 replacement transformers, but around the world, 

2 everybody’s putting in systems in the developing 

3 world, and that’s one of the reasons why you see the 

4 10.7 million metric tons of supply. If you go back to 

5 the 20, about 2000, Navigant looked around and saw 

6 what the world of electrical steels was and they 

7 scarcely found 1.6 tons of capacity at that time. So 

8 -- and I also just noticed, Ongon (ph) Steel was not 

9 on there, and there’s another 100,000 metric tons of 

10 capacity that’s coming up this year, also again in 

11 China. So the Chinese have been the main source of 

12 growth, although we have almost doubled our capacity 

13 for making grain-oriented in roughly the last 12 

14 years.

15 MR. HOPKINSON: Could I just add something. 

16 This is Phil Hopkinson, HVolt. What I would say is 

17 being a veteran of large power transformers, as well 

18 as of distribution transformers that when you are 

19 looking at large power transformers, they’re operating 

20 the steel at the highest induction that they can get 

21 away with, and it’s just about a 17 kilogauss. And at 

22 that point they still have an over-voltage capability 

23 of maybe ten percent before they get up to saturation, 

24 so they’re right up on the verge. But the high 

25 permeability steels do especially well when you’re 
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1 operating at high inductions. The low permeability 

2 steels actually do fine when you’re operating at the 

3 inductions that we are for the loss evaluations that 

4 are part of the DOE mix. And many times you’ll see 

5 the M3 designs down under 14 kilogauss. Now why I 

6 mention the 14 is several people have done some 

7 analysis to show that the crossover point where 

8 conventional steel does as well as high-B is right at 

9 14.

10 MR. PETERSEN: I tried to keep him from 

11 talking. It didn’t work. Are there any other 

12 questions? I tried to keep this quick and right to 

13 the point.

14 MR. SIMMONS: Eric, this is Chuck Simmons. 

15 Just a quick question. Are there any other major 

16 users, say, of M3 or M4 core steel, other than 

17 transformer distribution type pieces? Is there -- who 

18 are the other users?

19 MR. PETERSEN: My background’s all carbon 

20 steel. I have this guy behind me to answer all these.

21 MR. SCHOEN: Jerry Schoen, AK Steel. We do 

22 make a heat flattened version for power transformers. 

23 We don’t push it because it competes with our high 

24 permeability steels in that same market segment, and 

25 it doesn’t offer the noise and excitation 
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1 characteristics. The thing about it, to amplify on 

2 what Phil said is, you can get -- you know, 

3 transformers are weight limited for the power units. 

4 Moving them is very difficult and expensive. You can 

5 get more KVA per pound out of the finished transformer 

6 if it’s made with a high permeability steel than with 

7 the conventional grain-oriented type like an M3. So 

8 we’ve expanded our high-B production capacity hugely 

9 in the past ten years to service that need.

10 MR. DeLASKI: I remember in the last docket, 

11 leading up to the 2007 final rule, but at the time AK 

12 had made a number of announcements, or it made some 

13 announcements about capacity that you were adding at 

14 that time, capacity that was coming on. So based on 

15 what you just said, you followed -- that did happen, 

16 you did follow through. Could you have added -- you 

17 said over the past dozen years a lot of capacity?

18 MR. SCHOEN: When the rulemaking -- Jerry 

19 Schoen, AK Steel. When the whole rulemaking process 

20 started back in late 90s, we had a nameplate capacity 

21 of about 160,000 metric tons a year electrical steel. 

22 Today we’re a little over 300,000, but it’s strong 

23 mix-dependent. For example, if we were to rotate 

24 capacity to the high permeability steels, we would 

25 make fewer tons. There is a displacement effect. And 
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1 all the manufacturers worldwide, experience that. We 

2 basically expanded our capacity to make both.

3 MR. DeLASKI: And do you have any plans, 

4 announced plans to increase capacity at this time?

5 MR. PETERSEN: No, we do not. We have a 

6 number of projects that are literally sitting in 

7 engineering forms with ROIs attached to them as we 

8 watch the economy and the projections of demand.

9 MR. DeLASKI: Right. I guess I could ask 

10 the same question of Allegheny. Do you guys have any 

11 announced plans to --

12 MR. POLINSKI: Ray Polinski, ATI Allegheny. 

13 At this time the one item that we are working on is 

14 the gentleman, Jim Rakowski that’s sitting behind me, 

15 we are working to put a few more X’s on our chart as 

16 well, but we’re not there yet. We’re trying to 

17 develop some high permeability steels, not for 

18 distribution, though, for power, and we’re working on 

19 that and if we’re successful in developing that 

20 product, then we would try to do some investment to go 

21 there, but it’s just developmental at this time. So 

22 we don’t have any firm plans for expansion at this 

23 time.

24 MR. FERNSTROM: Gary Fernstrom, PG&E with a 

25 question. One of the variables in these rulemaking 
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1 processes is when the rule might go into effect, 

2 especially from a negotiated consensus point of view. 

3 So my question of you is this, I presume, represents 

4 the current market situation. If some change were 

5 envisioned in the future, how long does it take you to 

6 accommodate that? To get ready for it?

7 MR. SCHOEN: Jerry Schoen, AK Steel. When 

8 the Energy Policy Act of 2005 enacted basically TTP-1 

9 on the dry type distribution transformers, AK Steel 

10 basically invested about $50-60 million dollars to 

11 increase our production of M4 and M5 and M6 to meet 

12 that need. And that took about two and a half to 

13 three years to realize that. But that was expansion 

14 into frankly what was not a huge segment for us. We 

15 had been mostly concentrated on the M3 and high 

16 permeability steels up to that point in our investment 

17 plans.

18 MR. FERNSTROM: So if there is some agreed19 to standard in the future, the market demand is 

20 assured because that’s the standard, of course it’s 

21 subject to variations in the economy and so on, but 

22 that would give you confidence in where the market is 

23 going to be in the future, and should give you some 

24 assurance around return on your investment, provided 

25 market shares stay the same, and so on.
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1 MR. PETERSEN: I think one caveat I’d put on 

2 that -- Eric Petersen, AK Steel -- is that you have to 

3 recognize as you move into the high permeability, 

4 you’re dealing with another market segment, another 

5 group of manufacturers to deal with. As I mentioned, 

6 that product is a premium product that we have sold 

7 out and committed for. So I think that you have to 

8 take a look not just your base associated with the 

9 conventional grain-oriented, but understand all the 

10 pricing aspects associated with where that product is 

11 today as that represents opportunity that if we were 

12 to make investments to look at more into high 

13 permeability, our range of potential customers grows 

14 quite a bit as well under an area that’s in very high 

15 demand, and another price structure.

16 MR. DeLASKI: This is Andrew again, just so 

17 I understand you correctly -- this is back to your 

18 point about the growing economies and the demand from 

19 overseas for this high permeability steel for -- is 

20 that what you’re referring to?

21 MR. PETERSEN: Yes, it is.

22 MR. DeLASKI: Okay. Thank you.

23 MR. PETERSEN: It is very much a global 

24 product.

25 MR. SMITH: Eric, Bob Smith with Federal 
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1 Pacific. I have two questions. One, as I look at the 

2 transformer industry history, the steel manufacturers 

3 over the past century have been terrific at developing 

4 higher permeability steels to allow the manufacturers 

5 of the transformers to make their transformers smaller 

6 and less expensive. With the development of the 

7 higher permeability steels, have come lower Epstein 

8 (ph) by a use of the losses per pound of that steel 

9 have gone down, so we’ve got a double benefit. We’ve 

10 got a higher permeability, and lower losses. I’m very 

11 discouraged to hear that we’re not continuing for 

12 distribution transformers to push the higher 

13 permeability steels which I would assume would allow 

14 us to continue this trend of getting lower cost 

15 product and better efficiencies. 

16 MR. SCHOEN: Jerry Schoen, AK Steel. When 

17 we’ve looked, with our transformer models, crude as 

18 they are, we don’t see a significant difference 

19 between a 9 mil M0H type and an M3 type, down at the 

20 induction ranges around 14 to 16 kilogauss. They’re 

21 just not that light year of a difference. 

22 Now, if you’re a stack ... transformer and you 

23 are putting in an M3 heat flattened product against a 

24 laser-scribed 9 mil high permeability material, the 

25 laser scribing is huge boost. The ... processes are a 
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1 huge boost in the relative performance value of the 

2 high permeability steels. Your point is well taken, 

3 but at the same time, do not think that we have not 

4 invested in the high permeability steels. We’ve 

5 quadrupled our capacity to make them in the last ten 

6 years. We now make more H0 today that we made --

7 actually twice as much H0 as we made all the high 

8 permeability steels in 1995 to 2000.

9 So, no, that has been our development focus 

10 for our business.

11 MR. SMITH: Second question. Bob Smith, 

12 Federal Pacific. If you took an M6 steel that you are 

13 processing, and I guess I ask this of both Allegheny 

14 and AK, and say that the energy to produce however 

15 many tons you want to base it on, let’s say 1000 tons 

16 of M6, is 100 percent. Does the energy to produce the 

17 M3 or the M2 go up or go down?

18 MR. SCHOEN: It goes up.

19 MR. SMITH: And by how much?

20 MR. SCHOEN: I --

21 MR. SMITH: Roughly.

22 MR. SCHOEN: There’s a -- there’s an 

23 additional annealing step to make any M4 and better 

24 grades. There is a very intensive and very slow 

25 annealing step to make the high permeability grades, 
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1 and all of the process cycles downstream are longer. 

2 So we’d have more contact time, therefore more BTUs 

3 per ton in our processing.

4 MR. SMITH: Could you give us just a rough 

5 estimate -- we won’t hold you to it -- as to what that 

6 increase is?

7 MR. SCHOEN: I really don’t have that.

8 MR. PETERSEN: The point is, it’s for us to 

9 be able to follow up and provide that information at 

10 your request.

11 MR. SMITH: That would be great, Eric, thank 

12 you.

13 MR. PETERSEN: So we try, we try.

14 MR. SCHOEN: We’ll certainly look at that 

15 and see what we can do.

16 MR. SMITH: I would like to see that 

17 information published to this committee if you would, 

18 please.

19 MR. SCHOEN: I will look into it.

20 MR. PETERSEN: We will commit to take a look 

21 at it. 

22 MR. SCHOEN: We have had other customers ask 

23 us the same thing, and it is not easy information to 

24 get and separate out, because our plant is processing 

25 all the materials on common units with different 
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1 routings and things like that, so separating that out 

2 accurately and precisely isn’t very easy for us to do.

3 MR. SMITH: And Ray, can I ask Allegheny to 

4 do the same thing for us?

5 MR. POLINSKI: Yeah, Ray Polinski, ATI 

6 Allegheny, and I just -- we will certainly take a look 

7 at it. It’s very difficult. It’s kind of like a 

8 scrambled egg and trying to pick the yolk away from 

9 the whites because, as Jerry points out, a lot of our 

10 equipment -- we’re also making titanium, nickel alloy, 

11 stainless, and we’re sharing a lot of the same 

12 equipment so it’s sometimes difficult to separate your 

13 energy costs. But some of our -- there’s over 20 

14 operations involved in producing the grain-oriented. 

15 It’s a very extensive process. Some are not -- for 

16 different products, but a lot of them, when you start 

17 talking about an M3, they’re much more linear footage, 

18 not only natural gas and those type of energy, but 

19 also electrical energy and coal rolling mills and 

20 things of that nature. But we’ll do our best to try 

21 to put some ratio or factor, comparing M3 and M6.

22 MR. SMITH: I appreciate that very much. I 

23 would ask that the accuracy of your response doesn’t 

24 have to be any higher than our load estimates for the 

25 transformers.
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1 MR. POLINSKI: That should be very easy to 

2 accomplish.

3 MR. SMITH: Thank you, gentlemen.

4 MR. ROSENSTOCK: Hi, Steve Rosenstock, 

5 Edison Electric Institute. Looking over this chart, I 

6 really appreciate this. Just want to double-check. 

7 In this table RGO plus TCH -- what do those acronyms

8 stand for? I couldn’t find them in --

9 MR. PETERSEN: I’m sorry. TCH is our trade 

10 name for high permeability steels. So RGO is our 

11 trade name for the conventional steels.

12 MR. ROSENSTOCK: Gotcha. So again, just 

13 looking at this chart, again, if I’m misstating, 

14 please let me know, it looks like on the RGO plus TCH 

15 that US manufacturers have about a 15 percent market 

16 share for those steels? 405 out of 2690, is that an 

17 accurate number.

18 MR. SCHOEN: Steve, the problem -- Jerry 

19 Schoen, AK Steel. This doesn’t actually show relative 

20 capacities by grade. This shows capability to make a 

21 grade. 

22 MR. ROSENSTOCK: Okay. 

23 MR. SCHOEN: For example, Bio Steel has M3 

24 in their catalog. No one’s ever seen a pound of Bio 

25 Steel M3 as far as we can tell. It’s just in their 
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1 catalog. You can see that, for example, Mittal Steel 

2 VPFM in the Czech Republic, they make M3, they say, 

3 but we’ve never seen any of it. It’s in their 

4 catalog. The actual people that really do supply that 

5 market, which would be M3 and 9 mil M0H types, would 

6 be AK Steel, ATI, Nippon Steel, JFE, ThyssenKrupp, a 

7 little from Kogen (ph), a little from Stal (ph), a 

8 little from Amparamp.

9 MR. ROSENSTOCK: Okay. I’m just trying to -

10 - and is it a similar situation on the high grain 

11 side? The reason I’m asking is I’m just kind of 

12 curious about what is the kind of current domestic 

13 market share for these products out there, and I’m 

14 also kind of curious what the trend has been, 

15 obviously over the last several years, it obviously 

16 seems like overseas manufacturers seem to have ramped 

17 up. So I’m just kind of curious about current market 

18 share, past market share and --

19 MR. SCHOEN: If you go back -- Jerry Schoen, 

20 AK Steel. If you go back to the pre-regulation world, 

21 let’s say around 2000, by our reckoning, about 50 

22 percent of the US distribution transformers were made 

23 using something poorer than M3. M5, M6. A substantial 

24 amount of that was material that came from the former 

25 Soviet Union. We concentrated, and I believe ATI 
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1 concentrated on the M3 market portion. Now as the 

2 rules rotated to require M3 or better in 2007, I 

3 believe our increase in market share went up, because 

4 if you look at Russian import statistics, in fact, all 

5 oriented electrical steel import statistics, imports 

6 dropped, because most of these manufacturers are 

7 supplying M5 and M6 don’t have a good, established 

8 technical capability to make the higher grades. They 

9 are working on that.

10 Now the other problem you have is the market 

11 collapsed. So the contraction in the US new housing 

12 market basically turned the US market into virtually a 

13 replacement transformer market. About 75 to 80 

14 percent of what’s moving out there are replacement 

15 units, not units for new construction. Those are

16 mostly M3 or better. Our shipments of M4, M5 and M6 

17 into that market segment has dropped into single 

18 digits, thousands of tons.

19 MR. PATTERSON: Wes Patterson. I’d like to 

20 make a point on this. Steve, you were asking about 

21 the relative grades and how they’re distributed world22 wide. There is a distinct anomaly with respect to 

23 distribution transformers in the US relative to the 

24 rest of the world. And this is the utilization of 

25 wound core. By and large, the distribution market 
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1 outside the US is a stacked core market, using stacked 

2 core grades of steel. Now the special type of steel 

3 that you have to use for wound core, because you have 

4 an annealing process with the core, so what you’ll 

5 find is that the US is dominated on the wound core 

6 grades, which is different than the stacked core 

7 grades. And this is why you see the dominance with 

8 the M3 and the M4 and the M2, because we can anneal 

9 all these grades. But if I take things like, you 

10 know, the high B’s and the domain refineds, we can’t 

11 anneal them, so we can’t make them with wound core. 

12 And our whole manufacturing base is wound core.

13 MR. ROSENSTOCK: So if I could follow up, 

14 Wes, depending on where the standard goes, that could 

15 have a shift in terms of market share of US steel in 

16 these products?

17 MR. PATTERSON: It could if we shifted to 

18 things that required stack core, we could put a strain 

19 on our production capacity here in the US. But, you 

20 know, most of the conversations so far have been 

21 focused on the amorphous grade. This is an 

22 alternative to wound core, which has its own 

23 constraints compared to stacked when you get to the 

24 bigger MVA units. The 2500 KVAs. So it could have an 

25 impact. 
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1 MR. SCHOEN: Jerry Schoen, AK Steel. Wes’ 

2 exact point is why we recommended M3 for design lines 

3 one through five. Because between AK Steel and ATI, 

4 and imports from Japan and a little from Europe, we 

5 can provide enough M3 and 9 mil M0H to meet the market 

6 needs and provide a competitive market. Then when you 

7 move to the stacked core dry types, the concern we had 

8 was as that market grows, and it’s substantial, the 

9 supply of M3 and better could be strained. So the dry 

10 types, if they were locked to an M3 or better 

11 specification, would be forced to shift to either high 

12 permeability steels, which are available, but 

13 expensive, because you’re competing, not with the 

14 distribution market, but a large power transformer 

15 customer that’s building a two million dollar 

16 transformer and not using as many pounds of core steel 

17 per KVA, versus an M4 which is widely available. 

18 Every single producer on that list can produce M4 

19 abundantly. So you have a very competitive and well20 served market in that situation, and that’s what we 

21 took our charge from at the last committee meeting to 

22 be.

23 MR. ROSENSTOCK: And again, a quick follow 

24 up, if I could. In terms of the M3 and M4 market, 

25 domestic versus overseas manufacturers, can you give 
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1 me a relative market share? In terms of sales for 

2 distribution transformers?

3 MR. SCHOEN: We do have that break out of 

4 what we deliver into the US versus the rest of the 

5 world, but virtually all of our M3 is delivered --

6 PARTICIPANT: (comment off mic)

7 MR. SCHOEN: Yes, total demand of M3 and M4.

8 MR. ROSENSTOCK: Yes, and how much is met by 

9 domestic manufacturers and how much is met by overseas 

10 manufacturers?

11 MR. SCHOEN: M3, probably 75 to 80 percent 

12 is AK and ATI. Because it’s just not a popular 

13 product overseas. For all the reasons that Wes talked 

14 about. They will use an 11 mil high permeability 

15 steel instead of an M3 and make a better, quieter, 

16 more efficient transformer. And it’s also easier to 

17 cut and stack because its’ 20 percent thicker.

18 MR. ROSENSTOCK: And M4?

19 MR. HOPKINSON: They use a lot of M5 too.

20 MR. SCHOEN: They use a lot of M5 for 

21 standard, non-evaluated mostly, transformers.

22 MR. ROSENSTOCK: And M4?

23 MR. SCHOEN: Our sales of M4 to the US 

24 market are limited. It’s mostly stack core types.

25 MR. ROSENSTOCK: So it’s fair to say that 
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1 domestic manufacturers have a much smaller percentage 

2 of that market?

3 MR. SCHOEN: It’s -- the market for M4 is 

4 mostly dry types, and that is a smaller market, 

5 period.

6 MR. ROSENSTOCK: Thank you.

7 MR. SCHOEN: So as a percent of our mix, 

8 it’s a smaller number.

9 MR. ROSENSTOCK: Thank you very much. I 

10 appreciate it.

11 MR. DeLASKI: So a few follow up questions. 

12 So Wes, overseas and the markets that are dominated by 

13 stack core design, how does the efficiency of those 

14 products compare to what we see with wound core 

15 designs?

16 MR. PATTERSON: It varies according to the 

17 KVA, because there’s break points where the wound core 

18 is more efficient than the stack core. But it gets a 

19 little complicated because in the US, we are dominated 

20 with a Y-Y circuit connection, whereas outside the US 

21 they’re dominated with a double-Y circuit connection. 

22 This has an implication on the construction of the 

23 core. So when I look at the electric network in the 

24 US, and try to compare that, then our product is more 

25 efficient when we look at the Y-Y circuit connection. 
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1 You can’t just arbitrarily say I’m going to compare 

2 the US to Germany, because Germany’s working on a 

3 double-Y grid, and by and large our utilities have 

4 installed Y-Y circuits on these types of transformers. 

5 And we are talking, guys, basically the pad-pole 

6 market, the wound core section. We ignore the 15 

7 percent of the distribution market that is stacked 

8 core, which is these network transformers and stuff, 

9 which gets screwed because all this conversation is 

10 focused on the wound.

11 MR. DeLASKI: If I could follow up, I want 

12 to keep going if you don’t mind. So the other 

13 question is, you know, I think the other key to the 

14 steel supply, the point Gary made about time is an 

15 important thing for us to consider. I mean this is 

16 your snapshot of today. Right?

17 MR. PETERSEN: That's correct.

18 MR. DeLASKI: And I think, as we move 

19 forward, we need to be thinking about time as one 

20 variable in our discussions and how time can help 

21 address how this table changes. Given the time it 

22 needs to meet the needs of a growing market. So I 

23 just wanted to reinforce what Gary had said earlier. 

24 And then one other question I had is, the 

25 ranking of the materials. The table that shows us 
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1 the, you know, M2 through M6, I understand as you go 

2 to the lower grade, the efficiency improves as you go 

3 lower. But the M2, the high perme -- what is the 

4 performance of high permeability relative to M2, M3?

5 MR. SCHOEN: I have to be careful because we 

6 do these evaluations with our customers. But where we 

7 have compared our M2 light ... product, which is a 

8 domain refined treatment of our own type, it compares 

9 very, very well to -- it’ll out-perform an M0H type, 9 

10 mil M0H type, which we call H-zero, and it’ll compete, 

11 not as good as EDMH, but it’s reasonably close. The 

12 difficulty is we have limited capacity to make M2. M2 

13 is a subset of our M3 production. We aim everything 

14 to make M2, based on our melt chemistry, but the 

15 chemistry permit limits are tighter. We can analyze 

16 the chemistry with great precision, but when you’re 

17 tossing material into heat sizes that are 175 to 300 

18 tons, the precision of recovery and everything leads 

19 to a statistical distribution. So we aim for that, we 

20 take the stuff we hit the bull’s-eye on all the 

21 different components, constituent elements that go 

22 into making it, that’s stuff is always selected out 

23 and applied to M2. Then the body of it is applied to 

24 M3, M4 or M5, depending on how far away from the 

25 bull’s-eye are we. It’s not an issue of capacity, 
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1 it’s an issue of capability.

2 MR. PATTERSON: The ZDMH is a material 

3 that’s used for wound core also, and it’s used outside 

4 the states. And our experience, from a design 

5 perspective, is that I can interchange and get 

6 comparable performance between ZMH and M2 at any time. 

7 So functionally in the design, there’s not a whole lot 

8 of difference, then it becomes a cost equation, and by 

9 and large, the M2 product, manufactured in the US, 

10 delivered to a US factory, is more economical than a 

11 ZDMH manufactured someplace else and then shipped into 

12 the US. But from a performance perspective in wound 

13 core, they are comparable.

14 MR. DeLASKI: And then can you use H0 in 

15 that situation as well?

16 MR. PATTERSON: You cannot use the H0 in the 

17 wound core.

18 MR. DeLASKI: Okay. 

19 MR. SCHOEN: You can -- Jerry Schoen --

20 PARTICIPANT: (comment off mic)

21 MR. SCHOEN: No, you can’t use H0DR, you 

22 can’t use the laser -- Jerry Schoen, AK Steel. The 

23 laser scribed material for stack core is when you 

24 anneal it, the core loss ... which is about ten percent 

25 or so, it goes away. ZDMH is permanently de... defined, 
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1 so you can’t anneal it. It is very appropriate for 

2 stack cores, but it’s intended for use in wound and 

3 annealed cores, particularly. We never capitalized 

4 that kind of technology because, a, we made M2, and as 

5 Wes said, it competes very well; b, laser scribed 

6 material goes in stacked cores, which is the body of 

7 the transformer market. If you look at global 

8 transformer deliveries, wound and anneal core 

9 transformers are peculiar to Canada, US, Mexico, 

10 Japan, Taiwan, and that’s about it. China’s dabbling 

11 in it. They’re looking at them. India makes some of 

12 them, but of dubious manufacturing -- there are a lot 

13 of issues there. But the wound and annealed core type 

14 is used here, and that constitutes, perhaps in a good 

15 year, maybe ten percent of the global market. The 

16 rest of it is all stacked core. 

17 MR. PATTERSON: The history class, if I can 

18 advertise American technology, this is Westinghouse. 

19 So we can thank Westinghouse for giving us everything 

20 we see on wound.

21 MR. DeLASKI: And just one last clarifying 

22 question if I may. So I understand, Jerry, from your 

23 statement that most of -- you said the sales for you 

24 guys of M4 and higher grade has dropped to the single 

25 digits in thousands of tons.
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1 MR. SCHOEN: In wound and annealed 

2 distribution transformers, yes.

3 MR. POLINSKI: This is Ray Polinski, ATI 

4 Allegheny. Just to, you know, echo what Jerry has 

5 said. Before the new standard took effect on January 

6 1, 2010, I think the number he gave was a wrong 

7 number, 50 percent of the distribution transformers 

8 were made from the M4 grade. But likewise, we’re in 

9 the same boat now where it’s very rare to find the DOE 

10 -- current DOE standard transformer that’s not 

11 produced from M3 or some M2. But M3 is the workhorse 

12 grade. There’s a proven grade that’s consistent, 

13 consistent supply, consistent quality, and likewise, 

14 you know, the M2 is just -- it’s a small cut of the 

15 premium premium product that we make and so it’s not 

16 like we can just shift all of our M3 capacity to M2. 

17 So even in -- right now, which we could argue, is the 

18 worst housing crisis in demand and resident 

19 reconstruction -- residential construction market 

20 certain for the last 20 years or whatever, we are --

21 our equipment is capable of making M3, is pretty full 

22 today, so I’m saying there’s not a lot of excess 

23 capacity even for the M3 grade, and that’s why -- you 

24 know, AK worked on this independently of us, but we 

25 certainly do agree that their analysis is accurate in 
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1 the way they present, certainly our capabilities. And 

2 the last comment it’s also -- it’s good -- I don’t 

3 think we’ve mentioned this, but they did do a nice job 

4 of showing the small X’s for the domain refined ZDMH, 

5 meaning limited capacity. In discussions with 

6 Japanese trading companies and others, I think that 

7 capacity is -- may be 50,000 tons. It’s a very small 

8 amount. And they’re sold out already. So you can say 

9 it’s a grade, but it’s limited supply and it’s not 

10 available today in worst of times, so hopefully, we 

11 think by 2016, hopefully we’re back to building maybe 

12 a million houses a year instead of 300,000 or 

13 whatever.

14 MR. DeLASKI: To make sure I understand. So 

15 then the lines -- what you’re saying is that because 

16 of these constraints on other types of steel, that the 

17 lion share, according to the vast, vast majority of 

18 transformers being sold -- manufactured and sold in 

19 the US today have an M3 core?

20 MR. SCHOEN: Jerry Schoen, AK Steel -

21 MR. POLINSKI: For wound core distribution.

22 MR. PATTERSON: I sent all the committee 

23 members this morning another pie chart that shows for 

24 percent reduction in losses relative of DOE, how the 

25 shift in grades take place. So you can see where 
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1 we’re at with the current standard, and then if I go 

2 up to more than 40 percent reduction in current 

3 losses, I’m going to go over to 100 percent ... right? 

4 And I have buckets there of zero to five, five to ten, 

5 ten to 20, 20 to 30, 30 to 40, and you can see the 

6 shift in the tonnage of the various grades of steel, 

7 at least from the ABB perspective.

8 MR. SCHOEN: Jerry Schoen, AK Steel. 

9 Andrew, to take a different spin on the way Ray was 

10 explaining it. If you take away the market for M3 for 

11 us, we’re out of the M2 business. We’re done. 

12 Because if we don’t manufacture a large volume of M3, 

13 we can’t cull out M2 out of that. 

14 Now, the other issue is, in talking about 

15 ZDMH, there are some peculiar -- even more peculiar 

16 than our transformer efficiency standards around the 

17 world.

18 PARTICIPANT: Goodness.

19 MR. SCHOEN: Taiwan is a very curious one 

20 where they have an efficiency requirement at both 

21 design and overload. In other words, if you design 

22 the transformer to operate at 16 KG, 1.6 tesla, 

23 they’re going to have an efficiency mandate at 1.76 

24 tesla as well as 1.6. That tilts it towards a high 

25 permeability steel, and ZDMH is a very attractive 
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1 product in a situation like that.

2 I’m not sure how the Japanese do the top 

3 runner exactly, because my Japanese is limited, but I 

4 believe the Taiwanese -- my son’s fluent in it, I wish 

5 I could get him to understand an engineering book --

6 what can I say, he was a liberal arts major and it 

7 didn’t go well for him. So he’s a teacher. But the 

8 point was we tried looking at that standard and we 

9 think the Taiwanese standard is kind of based on the 

10 Japanese standard where they’re looking at two 

11 induction points. So you build in a standard that 

12 then favors a high permeability material like a ZDMH. 

13 We are selling M2-like carlide (ph) in the Taiwanese 

14 market and doing very well with it, but we struggle 

15 with that two point standard that they created.

16 MR. MILLURE: Dave Millure. Top runner has 

17 efficiencies at 40 and 100 percent.

18 (discussion off mic)

19 MR. PATTERSON: Andrew, I know ABB somewhere 

20 along the way gave to NAVCAN (ph) a white paper that 

21 ABB had done on all the world efficiency standards on 

22 distribution transformers. And how US standards fall 

23 in the comparison. I don’t know if it’s ever made it 

24 to your -- but NAVCAN (ph) has it, so they should be 

25 able to provide it to you. It wasn’t under the MDA.
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1 MR. POLINSKI: Can you just send that out to 

2 everyone, Wes?

3 MR. PATTERSON: Yeah, I can. I can send it 

4 to the committee.

5 MR. MEYERS: Aaron Meyers, Cooper. We would 

6 support a market where M3 is allowed to be competitive 

7 with the other available core steels, that’s the 

8 desired outcome from our perspective.

9 MR. DeLASKI: Question, I guess, back to Wes 

10 and to the chair here, would it be useful for Wes to 

11 show -- oh, you are? Great.

12 (discussion off mic)

13 MR. NADEL: I was wondering if I could get a 

14 quick question in. I just looked at Wes’ thing. I’m 

15 a little confused. Wes, you talk about SA, but that’s 

16 not on the AK chart. How does that -- 

17 MR. PATTERSON: That’s the amorphous 

18 material.

19 MR. NADEL: Okay. Thank you.

20 MR. PATTERSON: That’s a term for the 

21 amorphous.

22 MR. NADEL: Okay. Thank you. Amorphous.

23 MR. MILLURE: Dave Millure, Metglas. While 

24 we’ve got a little time here, the information that AK 

25 distributed said that the Chinese amorphous was 
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1 limited to 100 millimeters. That’s based on, I guess, 

2 the printed literature. We make three widths of 

3 amorphous metal, 5.6, and 6.7, and 8.4. The Chinese 

4 amorphous producer, Ontai (ph), is making quite a bit 

5 of 5.6 and 6.7, and they’re honing in on the 8.4. So 

6 there is no limitation in the Chinese amorphous 

7 supplier as far as widths go.

8 MR. PETERSEN: Thank you. This is Eric 

9 Petersen, AK Steel. Is that product seen here in the 

10 states? Does anyone have experience with that around 

11 the table that can confirm that?

12 MR. BECK: Scott Beck, Lakeview Metals. 

13 Yes. I have seen it, we have used it.

14 MR. PETERSEN: Okay. So --

15 MR. BECK: It is available.

16 MR. PETERSEN: It’s just not listed in 

17 there.

18 MR. BECK: Correct.

19 MR. PETERSEN: Okay. Thank you.

20 MR. PARKER: Wes, do you want to walk us 

21 through this slide quickly.

22 MR. PATTERSON: So this slide is showing the 

23 colors -- these colors are in this code here, and this 

24 is pretty much -- this chart is for the network and 

25 substation businesses out of our South Boston factory. 
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1 And I can say that about 50 percent of this volume was 

2 network transformers. And to meet the current 

3 standard, we’re having to use H0 and H1. That’s what 

4 this shows. And this zero to five percent, when you 

5 look real close, that says zero to five percent, in my 

6 world, in order to meet the existing standard, if I’m 

7 within five percent of the existing standard on the 

8 south side, that was designed to meet the standard. 

9 Because we have variations, you don’t just go exactly. 

10 So if it’s within five percent of the standard, I 

11 assume that it was designed to meet the intent of the 

12 standard. Then I have --

13 MR. MILLURE: Excuse me, Dave Millure, 

14 Metglas. Are these stacked or wound cores?

15 MR. PATTERSON: These are stacked core.

16 MR. MILLURE: Thank you.

17 MR. PATTERSON: And these grades are stack 

18 grades. 

19 PARTICIPANT: (question off mic)

20 MR. PATTERSON: I think they are H0, I 

21 think. I don’t think we’re using the domain refined 

22 in South Boston. I could be wrong. I could get 

23 confirmation on it. In any case, my point on this 

24 slide is to show that to meet the current standard, we 

25 have to use the high-end grade that’s available today 
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1 in networks. And this is zero to five, and I think 

2 that says five to ten, or ten to 20 -- what’s that say 

3 up there? Five to ten. And then this is ten to 20, 

4 and that’s 20 to 30.

5 So you can see that to get a 30 percent 

6 reduction off the existing losses -- so to get to a 30 

7 percent reduction, we’ve got to go to a very high 

8 grade steel. Go to the next slide.

9 This is dry type, which is stacked core 

10 also. So this color that you’re seeing here is H1, so 

11 to meet this current standard, we’re looking at M4 and 

12 H1 to meet the current standard, and you can see that 

13 as we progress in efficiency, loss reduction, I get to 

14 100 percent, H1, that’s what’s happening.

15 And so you know, this represents the 12 

16 month production run on the factory, actual shipments, 

17 and the pie is MVA shipped, so it’s percent of MVA 

18 shipped in that range.

19 The next slide is the poles that I can see. 

20 And this first line is single phase, and the next line 

21 is three phase poles. And you can see in the pole 

22 business, the factory is only using M2 and M3. 

23 They’re not using amorphous material. And to meet the 

24 current standard, the production is mainly M3. And as 

25 I move across into lower and lower losses, I move from 
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1 M3 more and more into M2. And you can see where it 

2 shifts.

3 MR. MILLURE: Dave Millure, Metglas. As far 

4 as amorphous goes on this, this is one manufacturer’s 

5 decision not to move into amorphous. It does not 

6 necessarily imply amorphous is not competitive in this 

7 market.

8 MR. PATTERSON: Okay. You’re defending your 

9 position. When we go to the next slide, we’ll look at 

10 amorphous because this is pad mount, which is also 

11 wound core, and pretty much the engineering technology 

12 of this applies directly to the pole market. The 

13 impact on the pole market is to change all weight and 

14 mass and size. We don’t have that problem with the 

15 pad market. So you can see that the pad market today 

16 is dominated with M3, and as I progress on up into 

17 higher and higher efficiencies, I get into the highest 

18 efficiency, more than a 40 percent reduction, with 

19 using nothing but amorphous. And this is actual 

20 production data. And as I can go in and tell you how 

21 many MVA I shipped of this, and you can see that --

22 one of the questions that comes up is, where do we get 

23 a mix of grades of steel? And if you look at this 

24 bucket here, I’ve got M3, I’ve got SA, and I’ve got 

25 M2, all participating in a 20 to 30 percent reduction 
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1 in losses. That’s product shipping out the door. And 

2 that’s on single phase.

3 And where do I get that on three phase? 

4 Shows up down here, same basic range. Twenty to 30 

5 percent on three phase, all three products are taking 

6 place. And once I get more than a 30 percent 

7 reduction, I get into pure amorphous shipments.

8 So that’s the chart that I wanted to show 

9 and I think I answered your questions.

10 PARTICIPANT: (question off mic)

11 MR. PATTERSON: Because this is not my firm. 

12 This is a firm that we have an association with, we’re 

13 with their channel of sale. But this is PPI, and PPI 

14 is not owned by ABB. There’s no stock ownership 

15 whatsoever. No management oversight. All we are is a 

16 channel of sales. Right, it’s a separate independent 

17 company, but I did have access to their production 

18 data. So I used their data with their permission for 

19 this committee. They do not have amorphous 

20 production, but what I do know is if they did have 

21 amorphous production, it would look like the pad mount 

22 charts. But I have the complication here that there’s 

23 a weight change taking place. And that market is 

24 impacted by the size and weight. So I cannot just 

25 arbitrarily take a phenomena that I see on pads and 
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1 apply it to the pole market. If we do this, we will 

2 have many other complications.

3 MR. SCHOEN: Jerry Schoen, AK Steel. To pad 

4 to Wes’ point, because we’re Power Partners’ steel 

5 supplier, and I don’t know if Al Traut is on the call 

6 in, but -- I’m guessing he’s not -- he was on vacation 

7 -- Al had told me that one of the problems that they 

8 had was when they went to amorphous, most of their 

9 customers have a diameter specification of a 36-inch 

10 max, and a weight specification, I think it was 900 

11 pounds, or something like that, and they can’t get 

12 there with amorphous units of any kind. So they just 

13 stopped. That’s one of the reasons why you didn’t 

14 have that data on it, because they couldn’t reach a 

15 design solution that would work for their customer 

16 base.

17 MR. FERNSTROM: Garn Fernstrom, PG&E. You 

18 mentioned repeatedly that there’s this size and weight 

19 concern with amorphous for pole mounts. Is there some 

20 subset of the pole mount market, say below a certain 

21 KVA rating, where this isn’t so much a concern?

22 MR. SCHOEN: Jerry Schoen, AK Steel. I 

23 can’t answer that question. You’d need someone who is 

24 in that segment.

25 MR. ANDERSON: Rick Anderson, PWC. Gary, I 
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1 think what it is is an application issue. Some of the 

2 poles are limited by the height of the pole, the grade 

3 of the pole, you start loaded up, put a lot of weight 

4 on it and it’ll break. The other thing we’ve got to 

5 contend with is we’ve got Cablevision, we’ve got 

6 fiber, we’ve got telephone, we’ve got all those 

7 attachments that go on the pole. So nothing against 

8 amorphous, it’s just that the physical constraints of 

9 the pole itself come into play.

10 MR. FERNSTROM: Yeah, so being in the 

11 utility business too, I understand that, but I’d 

12 speculate that say below 75 KVA, it’s, you know, 

13 single transformers for single phase, it’s not going 

14 to be a problem.

15 MR. PATTERSON: If I may? I have a habit of 

16 always looking at the -- Wes Patterson -- looking at 

17 the extremes of things, and testing it with the 

18 extremes. If I take a 5 KVA pole mount, can I build a 

19 5 KVA pole mount with amorphous and hang it on the 

20 pole and not implicate anything? And my instinct, no 

21 facts, instinct is I can. Okay. Can I build an 833 

22 KVA single phase amorphous unit and hang it on a pole, 

23 and the answer is no. So we have these two extremes, 

24 and there is possibilities on the low end, and we 

25 could do a detailed analysis with the help of some 
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1 utility folks, to say wait a minute. At this KVA, 

2 when you increase the weight 30 percent, you can’t be 

3 on the pole. We could put together the dataset to do 

4 this, and then draw the efficiency standard based on 

5 that concept.

6 MR. FERNSTROM: And that’s precisely where 

7 I’m going with my thinking and my suggestion.

8 MR. MILLURE: Dave Millure, Metglas. Do you 

9 know how many amorphous transformers on the grid in 

10 the United States today, and a lot of those are pole 

11 mounts, so this anecdotal evidence from PPI, I think 

12 needs to be tested. We’ve been talking to them and 

13 maybe the story’s a little different, depending on who 

14 they’re talking to. So I wouldn’t say that that 

15 precludes any discussion about amorphous for poles, 

16 because it’s widely adopted.

17 MR. PARKER: Do we have data on amorphous 

18 shipments of pole transformers? In amorphous versus 

19 conventional? Not by material.

20 (discussion off mic)

21 MR. PARKER: I think they’re saying that’s 

22 anecdotal and it’s one company, it’s not for the whole 

23 industry. Do we have data on the size of the 

24 transformers, the proportion, the KVA ratings by -- so 

25 we could get a breakdown of that. Do people have a 
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1 sense of what is the KVA rating at which weight 

2 becomes a major concern? Do people agree that five is 

3 the threshold at which there is a weight issue, or is 

4 there -- is that an extreme.

5 MR. FERNSTROM: Gary Fernstrom, PG&E. So I 

6 was speculating, and it’s just that, 75 might be the 

7 place.

8 MR. ROSENSTOCK: Steve Rosenstock. 

9 MR. PARKER: Can we have a reaction to that 

10 from the other utility people? Steve, did you want to 

11 speak to that?

12 MR. ROSENSTOCK: Yeah, again. We provided 

13 some data in terms of certain poles in certain areas, 

14 you know, the number was either 800 or 900 pounds, 

15 regardless of the KVA of the transformer. I also got 

16 something from Mr. Rosetti of Memphis State Gas and 

17 actually in their specification, the total weight of 

18 finished transformer shall not exceed 2000 pounds for 

19 167 KVA transformers and 4000 pounds for a 250 through 

20 500 KVA transformers. So I don’t know how many -- I 

21 don’t know how widespread that is, but there’s 

22 actually at least one utility that has specific weight 

23 limits on specific KVA transformers in their 

24 specifications that cannot be exceeded. So I don’t 

25 know how widespread it is, but again, and there was 
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1 the -- the PEPCO did about --

2 MR. PARKER: Can you repeat those?

3 MR. ROSENSTOCK: Sure. Again, this is from 

4 Memphis State Gas Water. He said it could be publicly 

5 -- in their specifications, the total weight of the 

6 finished transformer shall not exceed 2000 pounds for 

7 167 KVA transformers -- I’m sorry, it doesn’t say 

8 whether it’s single or three phase -- what? Single. 

9 Single phase. Okay. -- and 4000 pounds for a 250 

10 through 500 KVA transformers.

11 And then there was also issues about 

12 multiple transformers on the same pole, but that’s a 

13 different issue.

14 MR. PARKER: So I guess --

15 MR. ANDERSON: I think what that is is that 

16 John Rosetti is pointing out that up to 167 KVA you’re 

17 probably going to bank the transformers on a pole, so 

18 you have three 167’s, possibly. You better have a 

19 strong pole. You start getting over that size, over 

20 167 KVA, you’re going to be more inclined to go to a 

21 platform type application. So that’s what I think 

22 John is driving at.

23 MR. MILLURE: Dave Millure, Metglas. So if 

24 our modeling shows for -- back to this amorphous 

25 thing, which I’d like to sort of try to resolve here, 
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1 for 50 KVA, the weight of an amorphous transformer at 

2 the current DOE standards is very close to the weight 

3 of an M3 transformer. So this whole amorphous is 

4 heavy thing, is no longer -- it may be in a TP-1, 

5 yeah, but at the current DOE standards, not 

6 necessarily.

7 MR. MEYERS: Aaron Meyers, Cooper. Going 

8 beyond single phase poles, some utilities do limit the 

9 weights of three phase pad units based on their 

10 ability to unload or install the units and the 

11 equipment that they have. I think Rick, yesterday you 

12 pointed out maybe having to bring in a crane once you 

13 exceed a certain weight, so I would like to make that 

14 point.

15 MR. PARKER: Well, I guess -- I think it 

16 might be helpful to have comment on Dave Millure’s 

17 point that for the current standards, as I understand 

18 it David, correct me if I’m misstating it, for the 

19 current standard, not to mention the standard that one 

20 might move to in the future, for up to 50 KVA at 

21 least, amorphous is comparable in weight to 

22 conventional, is that what you said?

23 MR. MILLURE: That was just that one point, 

24 50 KVA, and I can’t talk about above and below. 

25 That’s the only point -- only model we did, one single 
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1 phase.

2 MR. PARKER: I see. Greg.

3 MR. COULTER: Greg Coulter, Prolec GE. If 

4 you noticed in the comments that Carlos made, we 

5 plotted the weights right off the DOE modeling, or the 

6 25 KVA pole type, for all the core steels -- core 

7 materials, and you can see what really happens is, it 

8 varies all over the place. Sometimes one’s up because 

9 of the way you have to meet an efficiency or sometimes 

10 the other one is up. So, while I don’t want to agree 

11 with everything Dave Millure says, what he is saying 

12 is it can be all over the place and you’ve got to look 

13 at it by design. You can’t just automatically rule it 

14 out. You can’t automatically rule it in either, but 

15 it depends on what efficiency level you’re choosing.

16 MR. FERNSTROM: Gary Fernstrom, PG&E. Yes, 

17 but the smaller the transformer gets, the less

18 significant an increase in weight is.

19 MR. COULTER: Absolutely. No argument. We 

20 talked about 25 KVA which is a fairly small 

21 transformer and you can see what the weights are. You 

22 get above 50 KVA poles, the volume falls off so much 

23 it’s a so what anyway, right? Wes? I mean your data 

24 shows there isn’t much volume above 50 KVA on the 

25 pole.
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1 MR. PATTERSON: (comment off mic)

2 MR. COULTER: Oh, I thought you were making 

3 the argument, or somebody was, maybe this is going to 

4 be different efficiency based on --

5 MR. PATTERSON: No, I agree, there could be 

6 different efficiencies based on the KVA, taking into 

7 Gary’s concept here.

8 MR. MILLURE: Dave Millure, Metglas. I 

9 agree, absolutely with Greg. In fact, for this 25 KVA 

10 example at EL-0, the weight of the amorphous was below 

11 that of M3. Barely.

12 MR. SCHOEN: Jerry Schoen, AK Steel. At the 

13 present standard, yeah, there’s no issue with -- well, 

14 there’s not great issues with weights. But as you 

15 raise the standards, that’s where the weight issue 

16 comes in, just to be clear, the point I was trying to 

17 make.

18 MR. DeLASKI: Well, I guess that was the 

19 question, which way does it go? Right. So you’re 

20 saying, Greg, what I hear you say is that you just 

21 have to look at these designs, these are options, and 

22 it may be that amorphous is actually lighter at a 

23 given efficiency level. Maybe the steel is lighter.

24 MR. COULTER: (off mic) It could be, yeah.

25 MR. PARKER: So it’s now ten o’clock so we 
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1 need to keep check of the time. Just a couple very 

2 quick comments on this now because we have to wrap up.

3 MR. MEYERS: This is a comment. Aaron 

4 Meyers from Cooper. I think, in the spirit of Wes’ 

5 history lesson here, if you go back prior to the 2010 

6 standard, amorphous core transformers were 

7 significantly heavier than grain-oriented because you 

8 were unable to drive the flux density higher than 

9 about 14 kilogauss. 13.5. Whereas, grain oriented 

10 transformers were routinely driven at 16 to 17 

11 kilogauss. And today, with the existing efficiency 

12 standard in place, grain oriented silicon steels, you 

13 can’t drive the flux density much higher than that and 

14 still maintain the efficiency, so they’re about at 

15 parity in today’s standards world. 

16 PARTICIPANT: Would you agree, David?

17 MR. MEYERS: Therefore making the weights 

18 comparable.

19 MR. MILLURE: It’s wobbly, dependent on the 

20 size of the transformer.

21 MR. PARKER: Steve, one last comment.

22 MR. ROSENSTOCK: Just real quick. On a 

23 spreadsheets that were done by DOE, they do show 

24 weights so maybe there’s a way to kind of show 

25 equipment weights by design line or by -- it is 
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1 probably possible.

2 MR. PARKER: They’re going to work that out, 

3 yes. That’s one of the action items, I think, from 

4 yesterday, that DOE and Navigant are going to provide 

5 their data on weights, core and total weight 

6 corresponding to each efficiency level for each design 

7 line. We’ll be able to see that, so it might make 

8 sense to wait for that table to come out.

9 I guess one thing that occurs to me is to 

10 what degree is the issue of weight on poles taken into 

11 account already by the life cycle cost analysis done 

12 by LBL that factors in the existing weight data but, 

13 you know, makes some assumptions about the cost of 

14 pole replacement to accommodate higher weights. We 

15 had a discussion about cost of pole replacements and 

16 we’ve got a working group on that, so I guess the 

17 question is -- is that -- do we have an analytical 

18 process to take that into account already?

19 MR. PATTERSON: We indicated yesterday there 

20 was potentially an error in the way DOE applies their 

21 algorithms. They looked at the 25 KVA design as 

22 representative of the entire pole market. Then they 

23 said in this 25 KVA, if there was a certain pan... 

24 change --

25 MR. PARKER: Right, right.
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1 MR. PATTERSON: -- then it was a pole. 

2 Okay. But then they said, okay, so we only had zero 

3 percent pole changes in the 25 KVA, which didn’t apply 

4 at the 833 KVA.

5 MR. PARKER: Right. And I think, speaking 

6 with them afterwards, I think there’s an understanding 

7 around the table that that’s now to be corrected and 

8 they will be working on that. So what I would propose 

9 is that we -- that we -- this is one of the action 

10 items that we will discuss that we have a working 

11 group to work on correcting that, and fold the weight 

12 on poles issue into that analysis to make sure we get 

13 that analysis right. And that life cycle cost 

14 analysis should cover the issue.

15 MR. POLINSKI: Yeah, Ray Polinski. ATI 

16 Allegheny. See, my understanding from that discussion 

17 was that we were looking at two parts, one, was we 

18 extrapolated zero across the whole and so the life 

19 cycle cost analysis didn’t have pole replacement in 

20 there because if you take zero across, it’s zero times 

21 anything is zero. So there’s no cost at all for that. 

22 And then, also I thought that we were going to get 

23 some utility feedback on the $2000 charge, which may 

24 have been understated. So those were the action 

25 items, yeah.
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1 MR. PARKER: It’s agreed. Okay. So what we 

2 need to do then is to really try to zero in on an 

3 analytical construct for coming up with -- and I think 

4 Wes’ slides take us a long way down the road to that, 

5 coming up with a way of defining what are the 

6 potential TSLs that would correspond to the 

7 competitive impacts that would be of concern, 

8 particularly for the steel makers. 

9 We also have concerns about transformer 

10 manufacturers and Rob Carmichael’s going to talk for a 

11 few minutes about that in a separate segment. But I 

12 wanted to just see if there’s an analytical construct. 

13 What I will put out is just a -- just a thing to get 

14 the discussion going, no pride of authorship, but 

15 talking with the consultant staff last night, one 

16 place to look might be the point at which, the 

17 inflection point at which price of amorphous equals 

18 price of conventional steels. Or some kind of -- and 

19 various grades of conventional steel. And look and 

20 see what, you know, define that as sort of an 

21 efficiency level that -- for which selling price can 

22 be calculated, LCC will be calculated, and so forth.

23 You might go beyond that, I think Andrew’s 

24 point was try to find that point at which there will 

25 be more than one supplier, look at that. Or at which 
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1 they will stop -- at which there won’t be more than 

2 one supplier for this steel. But I just, you know, 

3 what we need to do is see if we can come up with what 

4 we tried to do in the previous meeting, which is some 

5 kind of point of analysis that will be just a 

6 benchmark for analysis, not necessarily commitment to 

7 come out there, but just a relevant point to focus on 

8 for calculating life cycle costs while also addressing 

9 the impact on manufacturing. So we will look at that 

10 and then we can address the effect on manufacturing, 

11 and the impact on steel supplies and so forth.

12 Any thoughts on that, just taking up our 

13 conversation from the previous meeting. Eric, did you 

14 want to comment?

15 MR. PETERSEN: I just wanted to say we did 

16 send something out in regards to that competitiveness 

17 question. I don’t know if you wanted to have us go 

18 through that this morning or not, but we can go 

19 through the graph, but we provided in on the price 

20 analysis.

21 MR. PARKER: Please do, yeah.

22 Competitiveness 

23 MR. PETERSEN: So we’ll use that as a 

24 segue. I have about 25 copies and Jeremiah’s -- and 

25 this is also on the PDF that I gave you, so all of you 
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1 should have it on e-mail. Again, our context in 

2 regards to how we approached the competitiveness side 

3 was an attempt to determine kind of where the tipping 

4 point is of the different design lines against the 

5 potential supply opportunities that a transformer 

6 manufacturer would have available to him or her as 

7 they take a look at suppliers out here and pricing.

8 So Jerry Schoen is going to review his model 

9 work, please.

10 MR. SCHOEN: Jerry Schoen, AK Steel. That 

11 is not the correct PDF.

12 JEREMIAH: This is the only one I have on 

13 file.

14 MR. SCHOEN: It should say “Comments on 

15 Competitiveness” on that thumb drive. There you go. 

16 That’s the wireless thumb drive.

17 AK Steel research has a couple of 

18 transformer models. One is a shell-type, single 

19 phase, this model that we use for price parity 

20 analyses. What this model does, and it’s a very 

21 simple model compared to what the transformer makers 

22 use, we are purely looking at the cost, losses, and an 

23 estimated manufacturing cost for the core and coil 

24 assembly. We’re not capturing tanks. We’re not 

25 looking at impedance. We’re not looking at oil. 
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1 We’re looking at the idea of substituting various core 

2 materials into an assembly. Our model then 

3 reoptimizes the conductor windings and induction and 

4 then basically spits out the relative costs of the --

5 what we call the relative worth -- but the relative 

6 values of different core materials for a given 

7 conductor.

8 What we did was we modeled the current 

9 standards using the prices that were in the NOPR. So 

10 the price that we used for amorphous metal was what 

11 was in the NOPR. The prices we used for M3 and M2 

12 were what was in the NOPR. We then took our model and 

13 basically calculated, based on the efficiency 

14 requirements at each point, what the worth of an M3, 

15 and then there’s another slide showing an M2, would be 

16 against SA1. And like I said, again, all of the cost 

17 estimates were what were provided in the NOPR.

18 So if you look at the worth of the materials 

19 -- and this is in dollars per ton on the Y axis versus 

20 the A factor in dollars per watt. So the dashed line 

21 to the leftmost is $4.00 a watt which we would say is 

22 a conservative assumption of where we are today, based 

23 on the current 2007 standard that was implemented in 

24 2010. But it’s somewhere in that four to five dollar 

25 a watt range. With amorphous metal being that solid, 
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1 broad line at zero, you see that what happens is if 

2 you go above $5.00, six, seven and $8.00 a watt, the 

3 relative value of M3 drops very, very quickly, and 

4 frankly amorphous or M2 or something better than M3 

5 would be the material that you would specify for that 

6 application.

7 At DEL-0, at four, you can see that M3 is a 

8 little above, but again, that’s a fuzzy estimate on 

9 our part of how that works out. When you get to DEL10 1, very clearly, amorphous now has price leverage. 

11 When you’re at DEL-2, when you look at the relative 

12 value of M3, it is dropped by thousands of dollars a 

13 ton. It’s not competitive in any application, 

14 compared to amorphous. Amorphous has a significant 

15 price leverage over any type of electrical steel out 

16 there, whether it’s CDMH or M2. 

17 You jump down to the next page, this shows 

18 you how M2 fares in the same analysis. You see it’s a 

19 little better at DEL-1. It just basically kisses the 

20 amorphous line, but at DEL-2, it’s dropped -- it’s 

21 value has dropped by well over $1000 a ton.

22 When you look for a competitive market, that 

23 puts us at a great, great competitive disadvantage to 

24 go above DEL-0. 

25 That’s really the long and short of all of 
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1 it. I expect to be questioned heavily, but I am a 

2 metallurgical engineer. My counterpart who is our 

3 transformer engineer, Rick Light (ph), maybe he’s on 

4 the call, if he is, he may be able to answer some of 

5 the questions about how we have done this. Thank you.

6 MR. SAMPAT: Mahesh Sampat, EMS Consulting. 

7 You are showing amorphous even winning almost all the

8 way down to zero on that chart?

9 MR. SCHOEN: This, based on our model, yes. 

10 Oh, wait, Mr. Sampat. When you go down to zero, 

11 though, you’re not DOE.

12 MR. SAMPAT: Mahesh Sampat, EMS Consulting. 

13 Sorry, excuse me. No, that’s the confusing part is 

14 with M2, you are showing amorphous going all the way 

15 down to zero, but in M3, the previous chart, it 

16 doesn’t start until $5.00, so that’s the confusing 

17 part. I don’t understand why the model changed from 

18 M3 to M2. 

19 MR. SCHOEN: The price of M2 is higher.

20 MR. HOPKINSON: Phil Hopkinson, HVolt. I 

21 don’t believe the chart. The pricing for the A factor 

22 down at zero, if you’re really at a low first cost 

23 design, then M3 and M2 will clearly beat the 

24 amorphous, because of the induction that you can drive 

25 it to. But at the higher valuations, I do believe it, 
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1 so I don’t understand why it comes back down is my 

2 only thought on that.

3 MR. SCHOEN: Again, what we did was we tied 

4 it to an efficiency calculation, and that distorts it 

5 -- that distorts our model. Our model was designed to 

6 input A and B factors, and what we had to do, by 

7 modifying the model to overlay efficiency, when you go 

8 down into these very, very low A factor designs, it 

9 doesn’t run right. I thought of cutting it off at 

10 four, and I thought well --

11 MR. HOPKINSON: Yes, that’s a good 

12 clarification.

13 MR. MILLURE: This is Dave Millure, Metglas. 

14 Jerry, I’m still trying to understand this. Each one 

15 of these points -- pick the EL-0. Each one of these 

16 points meets the current DOE efficiency levels.

17 MR. SCHOEN: Plus. What you’re looking at 

18 is -- Jerry Schoen, AK Steel. What you’re looking at 

19 are people who are evaluating at some dollars per watt 

20 above the minimum. That’s the way our model 

21 functions. It’s really an A, B input model as opposed 

22 to an efficiency calculation model.

23 MR. MILLURE: So at an $8,00 A factor, the 

24 actual efficiency of 50 percent load would be where?

25 MR. SCHOEN: What it shows is that if you’re 
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1 at let’s say DEL-0, if you’re at $8.00 a watt, 

2 amorphous metal would be priced over $1000 a ton over 

3 M3 and be the material of choice.

4 MR. MILLURE: Oh, I understand that, but 

5 $8.00 a watt will give you an efficiency above EL-0.

6 MR. SCHOEN: That’s the point is that this 

7 model can treat those higher applications where 

8 someone -- the efficiency is the minimum point. Then 

9 as you go up in loss evaluation, you drive that up 

10 further and further. So yes, you’re right. It is a 

11 more efficient transformer, but it does meet, the way 

12 our model runs, it meets DEL-0. Then you go to the 

13 next one at DEL-1, then DEL-2. The efficiency 

14 constraints alter the way our -- in fact all 

15 transformer design models run. And you end up picking 

16 different optimums and you end up with different 

17 things. These are questions for the transformer guys. 

18 This is a tool that we have used, and have used it for 

19 decades, and it’s worked very well for us, and we use 

20 it to basically determine what the value of M2 versus 

21 M3 versus M4 is, based on open market loss 

22 evaluations.

23 Now we’re applying efficiency and our model 

24 isn’t quite up to that snuff. But it does show what 

25 will happen in the pricing trends.
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1 MR. DeLASKI: Jerry, this is Andy DeLaski. 

2 Just a question. I presume that this model is very 

3 sensitive to the price assumptions that you made.

4 MR. SCHOEN: We used the price assumptions 

5 from the NOPR.

6 MR. DeLASKI: Which had three scenarios, 

7 2006, 2008, and 2010 prices.

8 MR. SCHOEN: We used the 2010 prices.

9 MR. DeLASKI: And are the 2010 prices 

10 consistent with the prices that your company observed 

11 in 2010?

12 MR. SCHOEN: They were consistent, yes. Now 

13 the thing in here is what you see as you go forward 

14 are the other market effects of the efficiency 

15 standards on our ability to set prices. When I say 

16 that, we basically are matching what the market will 

17 bear. Well, if you increase the standard to say DEL18 0, we would have to pretty much take our price for M2 

19 and lower it by about $1500 a ton to be competitive 

20 with amorphous metal. And on M3 it’s worse than that, 

21 I believe it’s closer -- yeah, it’s about $2000 a ton, 

22 to be competitive. In other words, you’re looking at 

23 reducing the price of M3 by over 50 percent. 

24 (discussion off mic)

25 MR. COULTER: I’m sorry, this is Greg 
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1 Coulter with Prolec. That chart can go either way. 

2 He has to lower his price to be competitive with 

3 amorphous steel or say it another way, the amorphous 

4 guys could raise their price that much and still be 

5 competitive with the silicon steel. And that’s why 

6 we’re very concerned about sensitivity analysis 

7 because there’s opportunity here for major price 

8 adjustments if you pick an efficiency that drives us 

9 into heavy amorphous, because there’s no other product 

10 to compete against it. You look at me like -- you 

11 understand what I’m saying right?

12 PARTICIPANT: Sure.

13 MR. SCHOEN: Jerry Schoen, AK Steel. Greg, 

14 do I take it that this fits with what you -- I mean, 

15 I’m sure you guys have done a similar type of 

16 analysis. Does it fit with this? I mean the reason 

17 why we were actually encouraged to submit this was 

18 when we engaged Phil and Carlos, and we saw Carlos’ 

19 report, after those two came together, we looked at 

20 our work and we said, hey, we might actually know what 

21 we’re doing more than we thought. Because again, 

22 we’re steel makers, not transformer designers. And 

23 this gets complicated.

24 MR. PARKER: Carlos are you --

25 MR. GAYTAN: Carlos Gaytan, Prolec GE. Our 
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1 summary is that our data correlates well with AK 

2 Steel’s report, both on the behavior of the different 

3 ELs and the price differentials for the materials in 

4 that analysis.

5 MR. PARKER: Okay. What -- I think that 

6 what I would suggest that we -- I would suggest that 

7 we do is that we set up a process and a workgroup for 

8 validating basically this model for comparing it to 

9 what Navigant has done with their engineering analysis 

10 and for, particularly, can you supply the model that 

11 you used to generate this?

12 MR. SCHOEN: Yes, we can.

13 (discussion off mic)

14 MR. PARKER: And explain it in different 

15 ways.

16 PARTICIPANT: (off mic) ... is the Navigant 

17 model.

18 MR. PETERSEN: So is ours. Ours is the 

19 Navigant data, just as you mentioned. It’s the 

20 pricing that’s in the NOPR.

21 MR. PARKER: All right. So maybe what we 

22 should -- so the --

23 MR. PETERSEN: We actually had a 

24 conversation with Brian about a week ago. We have 

25 shown this to him already to kind of get a heads up of 
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1 where we were going.

2 MR. NADEL: This is Steve Nadel. Something 

3 is not quite adding up because this chart basically 

4 shows that you should have some pretty -- amorphous 

5 should almost be competing now, but you don’t have 

6 very much market share, that’s one. Two, the Navigant 

7 analysis shows it’s not at least until design -- TSL-3 

8 that you start getting significant amorphous. And 

9 this seems to imply that even at one you would. So 

10 something is not lining up, and I don’t know if 

11 Navigant has had a chance to look at this yet and 

12 maybe comment on it, but it’s not quite computing.

13 MR. COULTER: This is Greg Coulter again. 

14 Because I do want to comment to that. We agree that 

15 amorphous does compete now, and at these lower 

16 efficiencies. But the problem with the Navigant model 

17 is he just can’t look -- the methodology he uses to 

18 get there can’t quite look down there, so he doesn’t 

19 quite come up to the same efficiency we would, or the 

20 same cost data we would at EL-0. However, the problem 

21 you have is, when it’s close to each other, all us 

22 manufacturers are going to go with silicon steel. We 

23 don’t have to make the investment it takes to get into 

24 amorphous manufacture. There’s big investment for 

25 transformer manufacturer, so if they’re close, we’re 
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1 going to be a silicon steel guy. And the data proves 

2 it. There’s very few people making amorphous for 

3 efficiencies today, even though they will compete, 

4 we’re not going to make that investment.

5 MR. PARKER: So what I understand you to be 

6 saying then is that because of the capital investment 

7 required for shifting manufacturing from conventional 

8 steel to amorphous is a built-in advantage for 

9 conventional steel. Then the question is at what 

10 price differential between amorphous and conventional 

11 is that inherent advantage nullified?

12 MR. COFFEY: (off mic response)

13 MR. PARKER: And are you able to supply that 

14 -- would you like to comment.

15 MR. COFFEY: Brian Coffey. I think I missed 

16 the first part of what you said, but I would suggest 

17 that our modeling shows that amorphous is competitive 

18 at some of these lower CSLs, and I think that once you 

19 get a click or two up from where we are today, we show 

20 it as looking pretty good and it’s selected in the LCC 

21 model with gusto.

22 MR. SCHOEN: Jerry Schoen, AK Steel. In the 

23 submission that we sent in, we have a whole series of 

24 pages from the Navigant engineering analysis in there. 

25 We stripped it out just to M3 on a number of these, 
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1 and it shows that when you go to three-phase units, 

2 amorphous metal would be the metal of choice, even at 

3 DSL-0 or DEL-0, excuse me. When you’re into the 

4 single-phase units, it’s close, but it is -- but from 

5 our view and the view, again, as Brian said, we’re 

6 close to that crossover now and competitive.

7 To Greg’s point, one of the issues that they 

8 face as manufacturers is supply. If they can’t get 

9 the steel from AK, they can get it from ATI. If they 

10 can’t get it from ATI, Nippon and JFE can provide a 

11 comparable material, or ThyssenKrupp Steel. The point 

12 is, wide availability and abundant supply. And 

13 attractive cost, because we are all competing with 

14 each other all the time in this global market.

15 MR. MILLURE: Dave Millure, Metglas. I 

16 would contend that we are also competing in the exact 

17 same market in the exact same way that the silicon 

18 steel people compete.

19 MR. PARKER: Steve Nadel.

20 MR. NADEL: Yes. Richard, one of your early 

21 questions and I think what we’re trying to get to is 

22 what type of option do we want to analyze so we can 

23 get more data as opposed to trying to resolve it here 

24 today. I think what this discussion has shown is if 

25 you have an option where amorphous and silicon steel 
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1 are the same price, everybody says they’re going to 

2 use the silicon, so that’s not that balancing point. 

3 PARTICIPANT: (comment off mic)

4 MR. NADEL: Right. Off the top of my head, 

5 looking at these graphs I would say you need to look 

6 at a place where the silicon steel is two to three 

7 dollars more per watt than the amorphous. And I throw 

8 that out as a trial balloon for people to react to in 

9 terms of where is this, quote, “tipping point.” Where 

10 the two can compete, it’s kind of protection against, 

11 well, the amorphous guys want to run the price up, but 

12 it’s enough that a lot of people will say, okay, we’re 

13 really going to look at amorphous here.

14 MR. PARKER: Well, that’s helpful. Let me 

15 posit at that one option. Another would be to 

16 actually work with Navigant and look at the cost of --

17 look at the manufacturing impact and look at the cost 

18 of retooling for amorphous production, and analyze 

19 that point at which the price differential offsets 

20 that cost. If that data -- if I understand that that 

21 data has already been provided, that should be a 

22 fairly easy point to determine, but maybe I 

23 misunderstood. Does that make sense to people?

24 MR. HIRSCH: Bruce Hirsch, PG&E. To answer 

25 one of Steve’s questions, as a user of these products 
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1 of transformers, we also have other specifications 

2 that may require the manufacturers to use the silicon 

3 rather than the amorphous -- weight, size -- we talked 

4 about all those issues. So we need to keep that in 

5 mind. But I guess the thing I just want to say from 

6 the utility industry, we don’t care which steel 

7 supply, we leave that up to the transformer 

8 manufacturers and they work the economics and give us 

9 bids and we buy on competitive bids. So we really 

10 don’t care along those lines. So I think it’s 

11 important to understand, you know, the utility 

12 industry isn’t really driving that part of it.

13 MR. SCHOEN: Jerry Schoen, AK Steel. If you 

14 go back to the charts that I was presenting, if a 

15 specific utility wants to evaluate at six or $8.00 a 

16 watt, or let’s say you have a solar station you want 

17 to evaluate at $18, that’s the highest we’ve heard, 

18 they’re going to want to use amorphous metal 

19 transformers, and they should. If they’re on four, 

20 six, $7.00 a watt, it’s very competitive, and that’s 

21 where the body of the market is. It’s a very 

22 competitive situation with amorphous metal, and a 

23 whole variety of silicon steels from steel 

24 manufacturers. 

25 MR. PARKER: Okay. We need to zero in 
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1 though, because time is very short, we need to zero in 

2 on the things we need to focus on. Ray.

3 MR. POLINSKI: Ray Polinski, ATI. Just to 

4 echo that. I mean I think the task that was put out 

5 there, and I give AK credit, they did a good job. It 

6 was the -- and Mr. Berman, is he not here today? I 

7 kind of miss him, but what he said at the first 

8 meeting was like, hey, steel prices can go up and down 

9 as any price for any product can go up and down, but I 

10 think the challenge was for some of these standards, 

11 prices got to go down like 50 percent, and that’s just 

12 not sustainable. I mean you can’t run a business if 

13 you’re not profitable long term. So I think we’ve 

14 kind of just -- we put the challenge was here as where 

15 do you want to compete, number one, and so it’s like 

16 in some of these liquid filled, it seems it’s like in 

17 the no change or is it one click up from there or 

18 whatever, and so I don’t know why we’re still debating 

19 those issues. And that’s the competitive side of it. 

20 And as far as pricing, Greg Coulter made some good 

21 comments is in our prices go two ways. Prices -- it’s 

22 more likely the prices will go up than prices will go 

23 down 50 percent, because you can’t sustain 

24 profitability and reinvestment in your business.

25 And the next piece is just strategically, as 
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1 a country, I mean we don’t want to have a standard 

2 that requires only one material. I mean, and I would 

3 just -- maybe Dave can comment on just those areas --

4 availability of raw materials for amorphous, like 

5 ferroboron, is there enough ferroboron to -- available 

6 to increase your capacities to meet some of these 

7 demands.

8 MR. HYLAND: I’ve been sitting here quite 

9 quietly trying to get in, and I let you guys attack 

10 each other. I just -- before we came to the first 

11 meeting, I did something that trade associations do 

12 well, you know, I sent a note out to my T&D guys, 

13 about 600 utilities, and I received a plethora of 

14 replies back to questions. And this really goes --

15 Steve something you said got me all fired up. And I 

16 can’t remember what it is. I sat here so quiet and 

17 Bob said you’ve got to jump in and start screaming.

18 But I asked the question, do you purchase 

19 amorphous core transformers, and I would say about 50 

20 percent of the utilities said they had at one point, 

21 it had problems, or they evaluated them, and they 

22 don’t. Now, I’m not going to say their names, but I 

23 can tell you collectively, I can probably get a 

24 percentage if you want to see it. They’ve had bad 

25 reactions from the suppliers when they need to be 
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1 fixed. I have one right in front of me where core 

2 failures on two 750 KVA units and two of their 2000 

3 KVA pole mount units, pad mount units, and they got 

4 bad reviews working with the vendors on it. It’s not 

5 just about pricing, and it’s not just about what’s the 

6 most efficient, there’s an aversion from a lot of the 

7 municipals of amorphous steel. To the point that some 

8 even wrote it’s in their contract, they’re not buying 

9 it because they had problems with it. Now those 

10 problems may have been taken care of, and maybe it’s 

11 the same as the way lighting used to be when you 

12 turned it on it would take 35 seconds for the light to 

13 come on on fluorescents. But it is just something, it 

14 is true, it is out there. Has nothing to do with 

15 price and efficiency. It’s usability.

16 MR. DeLASKI: Just a follow up question, 

17 Mike. You said about 600 utilities you poled.

18 MR. HYLAND: I told Chris K... I was going to 

19 work with Chris because he wanted some real data, and 

20 I said, well, I don’t know exactly what questions he 

21 wants me to ask. So we were going to sit down and ask 

22 questions. I do questions like, you know, how often 

23 do you visit your A and B factors? Have you 

24 purchased amorphous core transformers? What 

25 difficulties have you experienced with pole or pad 
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1 mounts due to increased size? And I’ve got a lot of 

2 utilities that have given me true information. Well, 

3 hey, I bought this transformer, I had to change out a 

4 pole. One guy laughed and said, well, the pole’s a 

5 piece of shit anyway and needed to be changed out.

6 MR. DeLASKI: It’s nice to have that color, 

7 and I -- but I think the challenge for us as this 

8 committee is how do we move from the anecdotal to 

9 understanding -- and I understand so if you got 100 

10 responses, was this three, or was it 50? You know 

11 what I mean? And that’s what I --

12 MR. HYLAND: And that’s what -- I’m going to 

13 work with Chris. I said if we get a list -- one of 

14 the niceties of being in APPA is I have a list of 

15 pretty much about 1000 utility guys out there at my 

16 fingertips. And I’ve been at other meetings -- I’m 

17 the chair of the National Industrial Safety Code. And 

18 I remember having a discussion on FR clothing (ph). 

19 And we discussed whether you treat your generating 

20 stations with NEC or NESC. And I said hold on. And I 

21 sent out an e-mail, and it was about nine o’clock in 

22 the morning, the beginning of the meeting. By noon I 

23 had 250 responses from utilities, true responses from 

24 utilities in the United States. So, as I said to 

25 Chris, if we word the questions correctly on what he 
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1 needs to know to help him with his cases, I will 

2 gladly send that out tonight to try to get 

3 information. Now, I can’t promise it’s going to be 

4 250, it may be 25, it may be 50, but it’s going to be 

5 -- if it’s worded in a way that doesn’t lead them into 

6 an answer, but gives a true answer, I think it would 

7 be helpful.

8 MR. DeLASKI: I think if you go down that 

9 path, it’s important to ask those questions, not just 

10 focused on amorphous, but, you know, the question is, 

11 what’s the relative incidents of these kinds of 

12 problems and again, we have to be careful about 

13 anecdotes, particularly with technologies that are new 

14 technologies. As you said, your analogy to lighting 

15 or other products. Utility T&D guys aren’t known as 

16 sort of the -- you’ve been doing ... in a certain way 

17 for a long time, right, and new technologies do 

18 create, I think, concerns. And I understand that.

19 MR. HOPKINSON: Phil Hopkinson, HVolt, Inc.

20 MR. PARKER: I’m sorry, we’re going to have 

21 to close the discussion. We’re just going to have to 

22 close the discussion. It’s 10:30. I’m sorry, we have 

23 to close the discussion.

24 MR. HOPKINSON: I was going to comment on 

25 the field failures that have occurred with --
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1 MR. PARKER: Phil. We have to close the 

2 discussion. Sorry. What I suggest is we’re going to 

3 reserve some time at the end for action items going 

4 forward, and this is clearly an action item. We need 

5 to validate, to make sure that the advocates are 

6 comfortable with the model being applied, and we need 

7 to come up with -- I reiterate the charge that was 

8 made at the last meeting, which wasn’t accomplished. 

9 We really have to accomplish it this time, we have to 

10 come up with competitive price points. Obviously, not 

11 price of amorphous equals price of silicon. Steve put 

12 out a constructive proposal which is choose a number 

13 that gives people a good gut feel. We need to find 

14 out if there’s a way to make that more rigorous. I’d 

15 like to see if there’s a way to make that more 

16 rigorous. But we need to -- please, talk to me during 

17 the break. I’m eager to have people step forward and 

18 form a working group that will develop this on line 

19 and will come up with recommendations very, very soon, 

20 so that we can give LBL their marching orders. 

21 They can go ahead and do the work for the 

22 other TSLs, and I think they’re doing that, but this 

23 is, I think all agree, this is an important data 

24 point. It’s not anything that anybody’s going to 

25 commit to as driving a decision, but it’s important 
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1 information to have. 

2 So we need to make sure that we have a 

3 robust set, and I’m encouraged by the fact that you 

4 guys are working off Navigant data so we don’t have 

5 two competing datasets. So we should be able to 

6 reconcile that and come up with a constructive way 

7 forward very soon.

8 So again, we’re going to be setting up this 

9 share point electronic interface so that we can have a 

10 dialogue between this meeting and the next and we just 

11 have to basically, I think, agree that we’re going to, 

12 you know, make some decisions. Not some final 

13 decisions, but some analytical decisions, process 

14 decisions on line so that we can have the analysis in 

15 time for the next meeting.

16 So let’s take a five minute break. I’ve 

17 committed to giving Steve Nadel and Andrew and the 

18 advocates a chance to throw out some concepts for big 

19 picture for moving forward. I think, Steve, you had 

20 some concepts you wanted to put forward as well --

21 MR. ROSENSTOCK: And just quick, they did 

22 have certain recommendations in their paper here.

23 MR. PARKER: What’s that?

24 MR. ROSENSTOCK: These manufacturers had 

25 some recommendations, Section four show 
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1 recommendations.

2 MR. PARKER: TSL. The train’s moving, the 

3 ball’s in the air, whatever it is.

4 (Whereupon, at 10:30 a.m., the meeting was 

5 recessed for a 17 minute period.)

6 MR. HYLAND: Before we start, this is Mike 

7 at APPA. A couple people asked if I would put the 

8 answers that I did receive together and send it out. 

9 I’ll try to do that this week. I’ll just pull it out, 

10 because some of the interesting things that also I 

11 didn’t mention is, you know, what is the size of your 

12 annual transformer budget? I’ve got utilities that 

13 are saying $30,000 a year, so you can see maybe their 

14 difficulty is the fact that they buy so few 

15 transformers that the supplier might not be showing 

16 them the love when they do have a problem, versus a 

17 neighbor who has a $5 million dollar a year 

18 transformer budget. So it is an issue for us.

19 MR. PARKER: Okay. Thanks. Let’s go back 

20 on the record here. One thing I heard was -- I was 

21 just asked speakers, remind everybody who’s speaking 

22 to turn on the mics when you speak and turn them off 

23 when you stop. Some of the webinar attendees are 

24 complaining about feedback, which is caused by leaving 

25 mics on, so let’s try to be sensitive to that. 
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1 Thanks.

2 Okay. A couple of things that we need to do 

3 next. We have a short presentation by Rob Carmichael 

4 about manufacturing impact that I think will shed 

5 light on some of the analysis, some of the discussion 

6 that we had before. And when we’re talking about 

7 manufacturing impacts here, we’re talking about 

8 distribution transformer manufacturers. So let me 

9 turn it over to him to walk us through his analysis. 

10 We’ll have a very short discussion of that and then 

11 we’ll open the floor to discussion of concepts.

12 Presentation

13 Distribution Transformer Manufacturing Impacts

14 MR. CARMICHAEL: Thanks, Richard. Rob 

15 Carmichael with Navigant. And it is good timing for 

16 this, I think, after the last discussion. So I’m 

17 going to take us right kind of the meat of the issue, 

18 kind of out of respect for everyone’s time and we have 

19 a lot of things to cover. 

20 So three things I want to cover today. 

21 • First is to discuss the key issues that we 

22 uncovered when you go through manufacturer 

23 interviews. We do dozens of interviews of 

24 manufacturer of distribution transformers, steel 

25 suppliers, equipment suppliers. I want to just 
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1 give an overview of those key issues.

2 • Then I want to explain our methodology for 

3 calculating the conversion costs, and when I say 

4 conversion costs, I’m talking about the capital 

5 expenditures that distribution transformer 

6 manufacturers will incur as a result of any 

7 standard, so it would obviously vary, given the 

8 standard level.

9 • And then I want to get feedback on those 

10 assumptions that we used.

11 So the purpose is to give a quick intro into 

12 the MIA. Obviously the purpose is to assess the 

13 impacts on manufacturers and really the core of that 

14 is to estimate what the costs are. We also look at 

15 certain manufacturer subgroups. Typically we’ll look 

16 at small business manufacturers. Are there any that 

17 are disproportionately impacted by standards. And 

18 we’ll also look at impacts on employment, and look at 

19 impacts on manufacturing capacity, both critical 

20 issues in this rulemaking.

21 What were the key issues? For liquid 

22 immersed transformer manufacturers, you know, we’ve 

23 heard them all before: conversion costs, strain of 

24 assets were a big issue, particularly when you go from 

25 the step change from conventional steel manufacturing 
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1 to amorphous core manufacturing. Core steel 

2 availability, a lot of manufacturers are very 

3 concerned about having a single source, so if you have 

4 a single source, you’re dependent on them for 

5 obviously the key cost driver of your equipment. And 

6 then disproportionate impact on small business.

7 Similar issues for the medium voltage dry 

8 type. There was a little more concern about moving 

9 from stacked core to wound core. You have a slightly 

10 different issue in terms of what drives your capital 

11 costs. Instead of the switch to amorphous, you’re 

12 looking at thinner steels, you’re looking at needing 

13 more steel per transformer, both of those things lower 

14 your throughput, require more capacity, or conversion 

15 costs. And then small manufacturers -- we heard more 

16 concerns related to small manufacturers in this 

17 superclass. Some small manufacturers said they 

18 couldn’t even get price quotes for ZDMH and amorphous. 

19 Some said they’d have to source -- if they had to make 

20 wound cores, so they thought they’d be at a 

21 disadvantage relative to more vertically integrated 

22 larger competitors. And some said they had limited 

23 experience producing stacked cores with higher grade 

24 materials, so anything better than an M6, for 

25 instance.
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1 So really, I mean, what the conversion costs 

2 -- conversion costs are driven by what we’ve been 

3 talking about, and that’s what’s the change in steel 

4 quantity and steel mix? What type of steel are you 

5 using in the base case, compared to the standards 

6 case? And in -- that is driven, we’ve seen LBL’s 

7 analysis, so they put out an analysis estimating what 

8 core steels were used and what quantities by TSL. So 

9 that’s the basis for this analysis.

10 The manufacturer interviews, the equipment 

11 supplier interviews, and some assumptions carried over 

12 from the previous rulemaking drive our understanding 

13 of the production process that distribution 

14 transformers use, and the equipment capacities that 

15 they have. So putting that -- using that in 

16 combination with the steel mix, the change in steel 

17 mix, and then the equipment costs, we were able to 

18 calculate the capital conversion costs.

19 And so for -- this is a slide that basically 

20 tells the story that people are looking to hear. For 

21 the liquid immersed super class, really the change, if 

22 conversion costs were incurred where you have to 

23 produce amorphous cores. We found a wide range of 

24 costs for the big hitters, we’re talking about core 

25 cutting machines, annealing ovens, and then 
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1 miscellaneous equipment. Depending on who the 

2 equipment supplier is, the brand, the capacity, bells 

3 and whistles associated with those, level of 

4 automation, this is the range of costs we found. 

5 Tried to normalize it to the best our ability to. A 

6 line that’s doing about 1100 metric tons of core steel 

7 per year.

8 MR. MILLURE: Rob, Dave Millure, Metglas. 

9 We concur, those are pretty good numbers. We do this, 

10 we work with customers all over the world buying 

11 stuff, so that those look good to us.

12 MR. CARMICHAEL: This is really the take 

13 away, so if there are any other comments, I think this 

14 is what the conversion cost that we see manufacturers 

15 incurring. Wes.

16 MR. PATTERSON: Wes Patterson. If I look at 

17 the high end, I’ve got 600, 250, and 150, so that’s 

18 like roughly a million bucks. And then on the lower 

19 end you’ve got 200 plus 50 plus 50 is $300,000. My 

20 experience has been there’s no way you’re going to get 

21 into that kind of production at a $300,000 number.

22 MR. CARMICHAEL: Okay. 

23 MR. PATTERSON: So in your analysis, what 

24 did you use? Did you use like 300,000 or did you use 

25 a million?
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1 MR. CARMICHAEL: We used the midpoint.

2 MR. PATTERSON: I don’t think the midpoint’s 

3 very accurate either, because that’s saying a $500,000 

4 cap ex and a $500,000 cap ex has not been what we see.

5 MR. CARMICHAEL: So midpoint, I guess we 

6 used $650,000. So you’re saying that sounds low?

7 MR. MILLURE: Dave Millure, Metglas. The 

8 cutting machines are -- they are sold today, a lot of 

9 them are coming out of Taiwan are on the low end of 

10 that and they’re very good machines, and they’re 

11 getting better and better each day. That high end is 

12 potentially a Giorg (ph) machine. They’re just 

13 getting into the business. And also I would like to 

14 point out that floor space is not included, right, 

15 Rob, at these numbers?

16 MR. CARMICHAEL: Floor space -- this assumes 

17 you have --

18 MR. MILLURE: If you’re going to build a 

19 building, obviously your costs will go up.

20 MR. CARMICHAEL: This assumes that floor 

21 space for conventional would be repurposed for 

22 amorphous.

23 MR. ROSENSTOCK: Steve Rosenstock, EEI. And 

24 in terms of this, what percentage of this equipment is 

25 domestically produced versus having to be imported?
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1 MR. CARMICHAEL: The core cutting machines 

2 that we got were all imported. A couple German, one 

3 from Taiwan. The rest is a mix.

4 MR. ROSENSTOCK: Steve Rosenstock, EEI. 

5 Thank you very much. Do you have an idea about the 

6 percentage mix?

7 MR. CARMICHAEL: I couldn’t give you that. 

8 It’s -- no, I’d have to look into that.

9 MR. ROSENSTOCK: Okay. Do you think it’s --

10 are there, I’ll say significant number of overseas 

11 suppliers for the other two types of equipment?

12 MR. CARMICHAEL: Well, yes, so there’s a lot 

13 of small hitters in there, it’s not really an 

14 applicable.

15 MR. ROSENSTOCK: But the core cutting 

16 machines, which is the largest one, it’s all imported?

17 MR. CARMICHAEL: Yes.

18 MR. ROSENSTOCK: Thank you very much.

19 MR. POLINSKI: Ray Polinski, ATI Allegheny. 

20 And maybe Wes or someone else can comment on how many 

21 of these units will you need, like for -- I mean is 

22 this one unit would run all of Jeff’s city’s (ph) 

23 needs or would you need to buy a number of these 

24 units?

25 MR. PATTERSON: His numbers there, if I 
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1 understand them correctly, is for conversion of 1000 

2 metric tons of steel.

3 MR. CARMICHAEL: That’s right.

4 MR. PATTERSON: So that’s what he’s using. 

5 So if you limit the conversation to that dimension, 

6 then the only challenge I have is I think these 

7 numbers are very low compared to reality.

8 MR. MILLURE: Dave Millure, Metglas. As far 

9 as the import question, these kinds of issues are not 

10 rocket science, and a number of our customers design 

11 their own machines, which would actually probably 

12 reduce those costs significantly. This is not a 

13 complicated thing, it’s just a different machine than 

14 used for silicon steel.

15 MR. BECK: Scott Beck, Lakeview Metals. I 

16 don’t know if they’re run of the mill, the cutting 

17 lines, but I would concur with those numbers up there, 

18 and we do produce amorphous cores. We supply both the 

19 large OEMs and the small OEMs competitively, amorphous 

20 cores, and I would agree with those numbers.

21 MR. CARMICHAEL: Yes, I just wanted to make 

22 sure -- Wes, you said these were low. Even the high 

23 end looks low? Or just -- or the midpoint that I 

24 mentioned was low?

25 MR. PATTERSON: I believe the midpoint is 
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1 what I was referring to at 650. I think it would be 

2 closer to a million dollars for cap ex.

3 MR. CARMICHAEL: Okay. Okay.

4 MR. PARKER: But it sounds to me, to cut to 

5 the chase, that whatever the exact number, it’s going 

6 to be -- my take away from you talking at the break, 

7 Rob, is that these are small compared to the big 

8 picture, right? These are -- they’re small numbers 

9 compared to the overall --

10 MR. CARMICHAEL: Those aren’t the words I’d 

11 use. I just -- you’re asking us can that give us the 

12 balance point? Can we almost amortize this over 

13 costs, and I was saying that in the large scheme of 

14 things when we’re talking about price fluctuations of 

15 50 percent, I don’t know as this adds that kind of 

16 granularity.

17 MR. PARKER: That’s what I meant by the big 

18 scheme of things. I guess the question would be does 

19 that give you a different point if you’re talking 

20 about this competitive TSL, is there a significant 

21 difference between price parity as one TSL and price 

22 parity plus conversion costs for amorphous as another 

23 point? It doesn’t sound like that’s going to be a 

24 very significant delta.

25 MR. COULTER: (off mic comment) ... a million 
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1 dollars for 1000 metric tons, so you can --

2 MR. PARKER: Sorry, you need to speak into 

3 the mic.

4 MR. COULTER: So a million dollars -- if you 

5 could round for a million dollars for 1000 metric 

6 tons, just because you can do some quick math, we’re 

7 going to do, if we go amorphous, we’re doing, for our 

8 volume, probably 40,000 metric tons -- help me out, 

9 Carlos, am I right.

10 MR. GAYTAN: For distribution transformers, 

11 25.

12 MR. COULTER: Twenty-five, so you’re talking 

13 two and a half million dollars worth of investment.

14 MR. CARMICHAEL: Twenty-five million.

15 MR. COULTER: Twenty-five million. 

16 MR. GAYTAN: You need a calculator.

17 MR. COULTER: It’s not easy for me, that’s 

18 why Carlos really does this. That’s not a small 

19 number. That’s my count.

20 MR. PARKER: Right. And that was Rob’s 

21 comment. And just to clarify, if you amortize that 

22 over all the units produced in the new facility, would 

23 that produce a major delta in the price per unit, that 

24 is what I was trying to get at. I’m sorry if I wasn’t 

25 very clear. And I’m not saying what the answer is, 
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1 that was my take-away, but I could be wrong.

2 MR. MEYERS: Aaron Meyers, Cooper Power. My 

3 only point here is that the capital expenditure is not 

4 the only cost that needs to be incurred to convert. I 

5 mean these machines show up, you can’t just 

6 automatically start producing amorphous core 

7 transformers. They’re very different, the material 

8 behaves quite differently. There are processes that 

9 are involved that are not involved in processing 

10 silicon steel. There’s training, installation --

11 there are a ton of other costs that are involved. 

12 It’s not like the equipment shows up and you instantly 

13 know how to use it.

14 MR. MILLURE: Dave Millure, Metglas. We’d 

15 be glad to get you up and running in a week. We do it 

16 all the time all over the world. And also, as far as 

17 the amortization, we can’t compete on cost parity with 

18 silicon steel. If we have a customer who does silicon 

19 steel and all of our customers in the world except one 

20 do both silicon steel and amorphous. We have to give 

21 them a better deal, essentially, to talk them into 

22 making this investment in amorphous because they’ve 

23 got to make a return on their money. So you can do 

24 all these modeling all day long, but we’ve got to 

25 develop a new market. We’ve got to be below that 
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1 parity point, otherwise no one, like Greg said, no 

2 one’s going to invest.

3 MR. PARKER: Okay. Did you have anything 

4 else to add on this, Rob?

5 MR. CARMICHAEL: Yes, just to address 

6 Aaron’s point. In the MIA we calculate something 

7 called product conversion costs, so that deals with 

8 the testing, the R&D, kind of some of the engineering 

9 time that you would need to learn to bring that up to 

10 speed. I haven’t put that there because we haven’t 

11 completed that analysis, but that’s something that is 

12 addressed.

13 MR. POLINSKI: Ray Polinski, ATI Allegheny. 

14 This analysis, what’s the impact on employment? I 

15 mean does it take more employees to run this 

16 equipment? Less? So is there -- cost-wise are you 

17 adding cost in labor or are you reducing costs and 

18 eliminating jobs? Just curious.

19 MR. CARMICHAEL: I would answer that by 

20 saying we’ve heard both in interviews. But really, I 

21 think, it depends on whether or not you invest in the 

22 United States or elsewhere, or if you source your 

23 cores. So there are a number of different options 

24 that a manufacturer could choose, could pursue, that 

25 would lead to different employment outcomes. And it’s 
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1 -- I don’t think I can characterize it in one way 

2 based on the interviews.

3 MR. POLINSKI: So an assumption is new tool

4 then? I mean what’s the assumption if the labor cost 

5 is the same or --

6 MR. CARMICHAEL: I think we’d have to get 

7 back -- we haven’t completed that analysis. I mean, 

8 we don’t know -- so we usually go by TSL, and where --

9 what happens to labor content by TSL. So once we have 

10 those situated, then we can get you a better answer on 

11 that.

12 MR. ROSENSTOCK: Steve Rosenstock, EEI. And 

13 you break that out domestic versus overseas?

14 MR. CARMICHAEL: No, we only do domestic.

15 MR. ROSENSTOCK: Thank you.

16 MR. PARKER: Okay. Thank you, Rob. That’s 

17 very helpful. I think that’s a useful analysis to put 

18 in. I think it underscores the need for people, if 

19 they have concerns about these numbers, to get them to 

20 Navigant absolutely as soon as possible so they can 

21 take them on board. Because we’re not going to be 

22 able to keep revisiting that kind of issue. So, 

23 please, if you have concerns, take them on board and 

24 this will factor into -- we’ll fold that into the 

25 discussion about what that competitiveness TSL should 
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1 be.

2 Let me stop there and turn it over to Steve 

3 Nadel, if you would -- excuse me.

4 MR. CYMBALSKY: (comment off mic)

5 MR. CARMICHAEL: I’m sorry, could you use 

6 the microphone?

7 MR. PARKER: Before we do that I think John 

8 thought that it would be helpful for Katie from LBL to 

9 just recap where we are in the TSL selection since 

10 we’ve been talking about that. So I think that’s a 

11 nice suggestion, thank you.

12 Trial Standard Level(TSL) Selection

13 MS. COUGHLIN: Jeremiah is going to bring up 

14 a couple of slides with some text, but basically this 

15 is first of all just to remind you of the terminology. 

16 • So we have the draft efficiency levels, which 

17 are in the current documentation. Those are 

18 defined for each design line.

19 • And then the trial standard levels are 

20 combinations of efficiency levels for each 

21 design line, so they can be selected 

22 independently.

23 • And in the flow of information through the 

24 analysis, the engineering price efficiency 

25 curves don’t really depend on the efficiency 
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1 levels. Those are just produced.

2 • And then the efficiency levels are those 

3 vertical lines that are drawn onto those 

4 engineering diagrams. 

5 • The efficiency levels affect the LCC.

6 • But to move on to the National Impacts analysis 

7 and the manufacturer impacts analysis, we also 

8 need to have the trial standard levels, which 

9 are the choices of particular efficiency levels 

10 for each design line, and then combined into the 

11 impact on the product market using market shares 

12 and all that.

13 In general, for rulemakings, there are a 

14 number of trial standard levels that are now sort of 

15 becoming routine to analyze, and one of those is 

16 referred to as Maxtech. So we take the highest 

17 efficiency that is technologically feasible and we 

18 just go through the exercise of analyzing the 

19 potential energy savings and national and constant 

20 benefits associated with that.

21 A second one is referred to as Maximum MPV, 

22 it more or less translates into the same as Minimum 

23 LCC, so it’s the maximum economic benefit essentially 

24 associated with different efficiency levels for each 

25 design line.
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1 A third one is the maximum energy savings 

2 subject to no negative MPV. So it’s a sort of 

3 economically neutral but maximum energy savings 

4 associated with those set of choices.

5 During the first low voltage dry type 

6 committee meeting, we were asked to include a 

7 standard level that‘s based on a reduction in annual 

8 energy operating costs, because for buildings and 

9 building energy managers, this is becoming a fairly 

10 standard type of target for developing energy 

11 management programs, so we agreed that we would put 

12 in, it’s a nominal 30 percent -- a standard level 

13 associated with a 30 percent decrease in the 

14 operating costs -- energy-only operating costs.

15 As has been discussed, we intend to create a 

16 standard level associated with something to do with

17 the technology breakpoint, that is -- the details of 

18 that are still being sorted out. It can be core 

19 materials and it can also be other constraints 

20 associated with putting a new technology into the 

21 market. So that’s something that we will include 

22 when it gets to the point where it’s sufficiently 

23 well defined.

24 And then finally, once we’ve done all of 

25 these, if there are gaps in the design space, you 
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1 sort of have a big jump from one low level to a high 

2 level, we will just put in something to fill in that

3 gap to kind of complete the information associated 

4 with the analyses.

5 So, I guess -- I mean we can e-mail that to 

6 everybody and you’ll have some notes on what I just 

7 said. 

8 PARTICIPANT: (comment off mic)

9 MS. COUGHLIN: Yes, so that’s essentially, 

10 if you look at the operating cost savings -- sure we 

11 can do that. It’ll be part of the documentation.

12 MR. DeLASKI: So just one point of 

13 clarification, if I may. In the first meeting there 

14 was -- we had a discussion that there was a 

15 technology breakpoint, then there’s this economic 

16 point that we’ve been talking about this morning. 

17 One was strictly defined by, you know, are there 

18 multiple technologies that can be used to comply with 

19 the standard, setting aside question of are they 

20 competitive. So is that the technology breakpoint, 

21 or ... the concept that we were discussing this 

22 morning, which is where are they actually working, 

23 are they competitive?

24 MS. COUGHLIN: That is actually something 

25 for the committee to agree on.
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1 MR. DeLASKI: I thought we had agreed on 

2 that in the first time, but I may --

3 MS. COUGHLIN: Well, I think it’s - you 

4 know, for the purposes of the trial standard level, 

5 if you’re going to -- you can create one that’s 

6 purely technology, but it may not be that informative 

7 in the sense of whether it represents a feasible -- a 

8 feasible option for an actual standard. So we could 

9 create a second one that includes the economic 

10 considerations. There’s no reason technically why we 

11 can’t do both. We’re neutral on the number of trial 

12 standard levels. It’s just -- it takes a certain 

13 amount of time to process the information once 

14 they’ve been selected.

15 MR. DeLASKI: I thought that we had decided. 

16 This is the kind of conversation that Ray and I had -

17 - interchange we had in the first meeting, I think --

18 MR. PETERSEN: If I may, Eric Petersen, AK 

19 Steel, that’s entirely why we put together the 

20 summary we just did with the intent to show that 

21 there is an issue on the technical breakpoint which 

22 is capability, but it doesn’t necessarily mean that 

23 the products are competitive. So the issue was, at 

24 what point do you move from a competitiveness 

25 associated with a grain-oriented electrical steel 
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1 suppliers, a range of suppliers, versus amorphous 

2 metal supplier that can define the price at which one 

3 would become favorable for transformer manufacturer. 

4 That was the attempt of what we tried to do this 

5 morning, and lay out a model which then could be used 

6 by Navigant to do that type of calculation to help us 

7 to see where is the breakpoint, if you will, of 

8 competitiveness.

9 MR. DeLASKI: And that depends on prices, 

10 whereas this other thing I’m talking about wouldn’t 

11 depend on prices. It just would be what the 

12 engineering analysis shows, separate out the price 

13 issues. I think that would be a helpful level for us 

14 to have. And I thought we had agreed on that the 

15 first time around.

16 MR. PARKER: I think we had agreed on the 

17 technological breakpoint, and we had agreed in 

18 concept on the competitiveness breakpoint. We just 

19 hadn’t defined what we mean by competitiveness. We 

20 hadn’t given it a rigorous definition. And that’s 

21 what we’ve been working on all morning, right.

22 MR. ROSENSTOCK: Steve Rosenstock, EEI. I 

23 appreciate Katie’s comments there and I think, I just 

24 want to reiterate that I think, and I know we’re 

25 going to have concepts later, but if people have 
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1 other concepts for TSLs, I think they should be, in 

2 the spirit of negotiation, that any TSL suggested by 

3 this committee, whether as individual members or as a 

4 group, should be analyzed, because I think, in my 

5 mind, the more options the better. Thank you.

6 MR. PARKER: Good. That’s helpful. Okay. 

7 Let’s move on then to the bigger picture before we 

8 wrap up. Steve, it’s all yours.

9 Concepts: The Bigger Picture

10 MR. NADEL: Thanks. I wanted to pick up on 

11 what I briefly said yesterday, and I invite other 

12 suggestions as well. We’ve been talking a lot about 

13 the analysis. We’ve had a lot of good information 

14 sharing. We’re going to get a revised analysis about 

15 a week before our next meeting. 

16 Next meeting is going to be where the rubber 

17 hits the road. And I think we all, those efficiency 

18 advocates of manufacturers, whether it’s steel or 

19 transformer manufacturers, the utilities, everybody’s 

20 going to be thinking creatively about what do they 

21 think they can live with. What can’t they? And so 

22 we wanted to put some concepts on the table so that 

23 people could be thinking about those, so where they 

24 think something is workable, they can start saying, 

25 yeah, we think we can do this, and that will really 
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1 advance the discussion.

2 Ultimately, if we’re going to reach 

3 agreement, we’re all going to have to compromise. 

4 We’re probably going to have to get creative as 

5 opposed to -- I heard one person say yesterday, well, 

6 gee, we really want zero to two. We’re hearing you 

7 say you want six to seven. I hope we’re talking zero 

8 to two. You know, there are median points, and I 

9 just say, I’m not trying to pick up OL as a zero, 

10 two, six, whatever. We can’t be too far apart, we 

11 have to find that meeting point.

12 I think also we need to -- effectively all 

13 of use are going to be keeping a close eye on where 

14 we think DOE is going to go. Effectively, what we’re 

15 each trying to do is do as well or better from our 

16 perspective, as what we think DOE will do on itself. 

17 I don’t think anybody is gong to say, well, gee I 

18 think DOE will do a level three, but I’m going to 

19 hold out for a six. That’d be a lousy position on 

20 our point of view, if these negotiations break down 

21 and we lose. So we all need to keep our eye on what 

22 we think DOE is going to do.

23 I think that having done quite a few of 

24 these negotiations in the past, I think we have to be 

25 realistic about that. Where negotiations have broken 
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1 down in the past, I think one side or the other has 

2 had unrealistic expectations of what DOE would do and 

3 gee, they’ve been surprised when DOE came out with 

4 the final rule.

5 That said, so what are some of these 

6 creative compromises? I wanted to -- actually, before 

7 I do that, from the point of view of advocates, we’re 

8 looking for significant energy savings. Significant 

9 cost-effective energy savings, obviously. In order to 

10 get that we need something more than just, well, we’ve 

11 done everything we can thank you very much. Frankly, 

12 it’s going to mean getting something in volumes as 

13 opposed to, gee, we’re going to do this -- we’re just 

14 going to do 100 KVA pole mounted transformers -- I 

15 just pick up on that because people were talking about 

16 how small the sales are.

17 I would say that we don’t necessarily have 

18 to treat everything the same. There may be certain 

19 product classes that are easier for us, collectively, 

20 to work with, and some that are going to be much 

21 harder to work with, and so we should think about 

22 those. I’m going to mention some concepts and we 

23 really would like your feedback on, yeah, we think we 

24 can do this in this class, this class, and this class, 

25 but actually not that class. So just recognize, you 
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1 know, we have multiple moving parts.

2 We talked about different things with BIL 

3 ratings, to separate certain classes. Earlier today,

4 the concept came up, for pole mounted, maybe we treat 

5 50 KVA and smaller differently from the ones above 

6 that, because of weight, and I use that as indicative 

7 as opposed to saying, well, 50 KVA is the line. That 

8 was just an example.

9 So these are examples of the types of things 

10 we all need to be thinking about. For us, as we look 

11 at the present analysis, and yes, I understand it will 

12 be revised, and we’ll all look at that, there’s a lot 

13 of cost-effective energy savings as you move beyond 

14 the more conventional type steels. We recognize the 

15 challenges thereof. One to two suppliers, the Chinese 

16 supplier now, limited capacity, et cetera. So, a 

17 couple of ways to potentially get at those savings 

18 that we just wanted to put out on the table:

19 • One, and we’ve talked a lot about this, there’s 

20 that blended level, the level where you can do 

21 amorphous, you can also do grain-oriented silicon 

22 steel. We’re discussing exactly where that is. 

23 It’s not that they’re going to be the same cost, 

24 the amorphous would have to have some cost 

25 advantage to justify all the investments and 
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1 trying to figure out where that is, so that’s one 

2 set of options, if you will, and there may be 

3 some slight variations, not just a single level, 

4 but it might be a band, depending on particular 

5 data. Frankly, it may be each manufacturer. I 

6 doubt everybody has the exact same point where 

7 they might switch over or not in a given product 

8 class. I call that blended, you call it the 

9 balancing point, I think that’s something to give 

10 serious consideration to.

11 • Another possibility, and this is what was done 

12 with the DOE water heater standards, is they 

13 broke off certain product classes where the 

14 economics are pretty compelling to go higher, and 

15 in that case it did heat pump water heaters in 

16 certain classes and said for the other classes we 

17 would not. In this case it might be, you know, 

18 we go to the levels that it looks like you need 

19 amorphous, I say looks like, because it could be 

20 other types of steel. We’ve talked about 

21 different types of steels. Just to illustrate 

22 that, we don’t care what the steel is, just like 

23 we’ve gone from M3 to M2. Someone wants to 

24 invent an M1, great, all power to you. I’m not, 

25 you know, I’m not trying to get into a discussion 
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1 on that, I’m just saying there may be different 

2 ways to do that. But there may be some product 

3 classes. I’ve heard some people say, you know, 

4 pad mounted, or something, might be better.

5 • Another approach -- it could be a combination. 

6 We could, for one class do -- we’re going to do 

7 level four -- I’m just illustrating. For another 

8 we’re going to do level two, for another we’re 

9 going to do blended. Let’s try to think 

10 creatively about where different people are 

11 coming from, and is there a sweet spot.

12 • I’d also say there’s a time dimension. I know 

13 Gary and others have referred to this. Normally 

14 the standard goes into effect three years from 

15 date of final rule, so it’ll be three years from 

16 February, I guess of 2012. That’s the proposed 

17 rule. Thank you, right, it’s the end of the 

18 year. Anyway three years. At times we’ve varied 

19 that. In particular at times we’ve also varied 

20 it for different product classes or the one 

21 example I could think of, in the case of clothes 

22 washers a number of years ago, we had a two23 tiered standard, where we agreed to relatively 

24 quickly upgrade, in that case it was to a high 

25 efficiency vertical axis washer, and then we 
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1 pushed back, I think it was three years later, in 

2 that case, and I just use that as an 

3 illustration, where we went to levels that at the 

4 time it looked like people would have to go to a 

5 horizontal axis washer. As it turned out, 

6 manufacturers figured out ways to do vertical 

7 axis at the higher levels, but the point was, we 

8 had a two-tiered, where we pushed back the bigger 

9 redesigns, instead of three years, it was seven 

10 years. I know with ballasts we’ve done that also 

11 where we pushed back certain classes, in that 

12 case it was replacement ballast, actually went 

13 all the way back to 2010. So just to throw in 

14 the time dimension as well as we’re all trying to 

15 think creatively. Yes.

16 MR. MEYERS: I hate to interrupt you, you’ve 

17 got some good momentum here, but isn’t the date of 

18 effectivity of the next standard, isn’t this supposed 

19 to be January 1, 2016, three years from February. 

20 Sorry, this was Aaron Meyers by the way.

21 MR. COFFEY: Yes, so I -- legal counsel is 

22 still looking into the possibility of when the 

23 compliance date could come into effect, so ---

24 MR. DeLASKI: What we hear is that in other 

25 rulemaking DOE has been flexible on implementation 
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1 dates when there’s been a consensus recommendation 

2 from stakeholders. We have had that experience and 

3 it’s been accepted in every prior case where we’ve 

4 recommended it. So I guess what we’re looking to hear 

5 from DOE is can they in this case.

6 MR. MEYERS: All right. If technology

7 changes to the point where amorphous metal -- or if 

8 amorphous metal is going to increase significantly, 

9 there may be more time required than what you’re 

10 having in mind.

11 MR. NADEL: My point right now, I’m not 

12 trying to put a very specific offer on the table, I’m 

13 just saying here’s another dimension that may help us 

14 all get to yes. That’s the point here. So we’d like 

15 your input. If you come back and say, fine, we’ll do 

16 level six but it has to be 2022, I’m just saying, 

17 we’ll consider it. So just recognize these are a few 

18 dimensions of things that I can think of. 

19 So those are the things I just wanted to 

20 float out there. Again, I’m not trying to present 

21 particular levels. Frankly, we -- the advocate 

22 community have to sit down and figure out a little bit 

23 more concretely, particularly after we get the new 

24 analysis, so what do we think is really realistic? 

25 But these are some of the examples of types of 
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1 creative approaches that I wanted everybody to think 

2 about in advance so we increase our chances of 

3 actually getting to yes as opposed to, gee, we all 

4 helped the Washington economy by spending eight days 

5 here in town.

6 If any of the other -- Andrew, Tom, Robin, 

7 Gary, anybody have something to add that I didn’t 

8 quite capture from our discussions?

9 MR. PARKER: Thank you, that’s helpful. I 

10 think there is a lot to be said for taking this time 

11 between now and the next meeting, not only to get the 

12 analysis right, but to really think hard about not 

13 only what you want, but also what you could live with, 

14 what would be an acceptable outcome, because every 

15 negotiation involves give and take, involves 

16 compromise. And in the next session we’re really 

17 going to have to get down to that. So be thinking 

18 really hard on these things as we work on the analysis 

19 and come to the next session ready to be creative and 

20 constructive. Steve, or Bob, did you want to join in?

21 MR. SAINT: Before Steve -- he has quite a 

22 few notes there, but what I’d like to point out is 

23 that one of the options definitely should be, and I 

24 like options should be, leave it the way it is. And 

25 you mentioned cost effective, you want to increase 
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1 efficiency that’s cost effective, and we believe that 

2 we have gone a long ways and more than cost-effective 

3 already. The analysis from the last time showed that 

4 at least for rural electrics, the standards are --

5 that took effect last year -- are not cost-effective. 

6 They’re -- the total owning cost is just out of the 

7 ballpark, and so we’ve gone already farther than we 

8 really should have gone. 

9 • So one of the options should be leave it where it 

10 is and start from there, because we have gone a 

11 long ways already, just a short time ago.

12 Another thing, all this analysis that we 

13 talked about, I’m not sure we’ve really taken into 

14 consideration the fact that in 2007 or 8 when we last 

15 addressed this, there was a huge demand for steel for 

16 transformers worldwide, and since then, we’ve -- the 

17 demand has gone down, so the costs have not reflected 

18 what we expect to see in the future when the economy 

19 picks up. So comparing 2010 data with what we expect 

20 to see in the future is fairly unrealistic, and I 

21 think that reinforces the fact that we’ve gone a long 

22 ways already, and we should take a hard look at not 

23 being unrealistic like, apparently, like frankly I 

24 think we were last time in having an efficiency level 

25 higher than is cost effective. So I think that should 
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1 be one of the options that we consider, we strongly 

2 consider.

3 MR. PARKER: Thanks, Bob. I think as a 

4 matter of law and policy in any cost benefit analysis 

5 in any assessment, one of the alternatives is always 

6 the status quo, right, that’s one of the things you 

7 have to consider in the statutory framework for this 

8 is whether there should be a change or not. So I 

9 think it -- I think that is absolutely a fair point, 

10 that there has to be an option, whether or not we end 

11 up there for any particular DL or any subclass of a DL 

12 is another story, but certainly it’s an option that 

13 will have to be considered. 

14 That said, markets do change and the idea of 

15 the statute is that with time, technology improves and 

16 the marketplace improves and so the question is, can 

17 there be some movement, and that’s what we have to 

18 really look hard at cost. We do have an action item 

19 on material prices. It’s a critical issue that we 

20 will address when we talk about the action items at 

21 the very end of this meeting. So this is the time to 

22 start plugging in your thoughts on that. 

23 PARTICIPANT: (off mic)

24 MR. PARKER: Before -- we let Steve, because 

25 I think Steve had a number of points to make. Yes,
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1 Bob.

2 MR. SMITH: Bob Smith, Federal Pacific. 

3 Steve, I hate to show my naiveté, on the motivations 

4 for the advocates, but would you be kind enough to 

5 list, from the advocates point of view, what you see 

6 the benefits are in our increasing the efficiencies of 

7 the transformers a fraction or two of a percentage 

8 point?

9 MR. NADEL: Yes, this is Steve Nadel. We 

10 see, based on the last DOE analysis, and I don’t have 

11 the numbers right in front of me, substantial cost12 effective energy savings from going to higher levels. 

13 And that’s what we’re looking to maximize, the level 

14 of cost-effective energy savings. So the current 

15 analysis shows, I can’t remember, is more than a quad, 

16 if I recall correctly, of energy savings that are 

17 cost-effective. So that’s what we’re looking for.

18 I also wanted to briefly address Bob’s 

19 suggestion. I think we need to start moving beyond 

20 positions to what would take us to get to a yes and an 

21 agreement. The chances -- I mean, we will look at the 

22 new analysis, and if it is a slam dunk, or absolutely 

23 no change is justified, you got lucky last time, maybe 

24 we’ll think about that. But, based on any analysis 

25 I’ve seen and what I expect to be changes, it’d be 
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1 nothing for us to gain, for no change, because the 

2 odds are very strong that we could do much better and 

3 just say, okay, let DOE decide. So I would encourage 

4 you to think about what could you live with as opposed 

5 to just saying, well no change is all I can support 

6 and therefore it goes back to DOE.

7 MR. SAINT: I never said no change is the 

8 only thing we’d support.

9 MR. PARKER: Do we have -- yes, quick.

10 MR. PETERSEN: Just a quick comment. Eric 

11 Petersen, AK Steel. I think part of the change we 

12 have to ask ourselves is whether or not we’re 

13 considering the standard currently as the change is 

14 ground zero, or the work that was already done to 

15 bring this standard into place. I think there is 

16 already change that has been established, emphasizing 

17 Mr. Saint’s point.

18 MR. PARKER: Aaron.

19 MR. MEYERS: Aaron Meyers, Cooper Power. I 

20 think everyone realizes that the economy isn’t very 

21 healthy right now, and I think that by raising the 

22 efficiency and thus the cost, the first cost of 

23 distribution transformers is disincentivizing 

24 customers from replacing transformers. And it’s been 

25 suggested before that the government endorse sort of a 
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1 cash for clunkers for older transformers, where 

2 customers would then be incentivized to replace the 

3 older, non grain-oriented transformers on their 

4 system, thus improving the energy security, the 

5 reliability of the systems and so forth. But by 

6 making the first cost of distribution transformers 

7 much, much higher, you’re disincentivizing customers. 

8 And I think Gary made the point yesterday that they’re 

9 only replacing transformers now when they blow up, so 

10 there’s an increased safety concern, there’s an energy 

11 security concern, and I think we’re working in the 

12 wrong direction. So thank you.

13 MR. FERNSTROM: Gary Fernstrom, PG&E. I’d 

14 like to comment on that. I didn’t say when they blow 

15 up, I said when they fail. There’s a big difference. 

16 MR. MEYERS: Point well taken. Thank you 

17 for the clarification.

18 MR. PARKER: Okay. Steve, you’ve been 

19 waiting patiently.

20 MR. NADEL: A brief response to that last 

21 thing, or do you want me to --

22 MR. PARKER: Okay. Very quickly.

23 MR. NADEL: Thank you. You actually brought 

24 up another possibility in terms of another moving 

25 part. 
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1 • In some of our agreements, we’ve agreed to 

2 jointly support incentives. You know, go to 

3 utility commissions, work with utilities and if 

4 we need to, encourage more replacement of old 

5 transformers, that could be one part of it.

6 So, you know, sometimes we’ve done stuff 

7 with EnergyStar, we’ve done stuff with tax incentives, 

8 we’ve done stuff jointly going utility commissions, so 

9 more moving parts. 

10 MR. PARKER: Thank you. Steve.

11 MR. ROSENSTOCK: Steve Rosenstock, EEI. I’m 

12 going to give a little summary of concepts that are 

13 based on our conversation with utilities last night, 

14 IOUs, municipals and cooperatives. There are some 

15 areas of agreement. Steve talked about one of the 

16 gaps, I’ll say that blended level that Andrew DeLaski 

17 talked about that kind of area that might be in 

18 between certain design line where you know there would 

19 be good competition among multiple suppliers providing 

20 different metals, and, you know what, we like more 

21 options, we’re fine with that. Add that to the 

22 analysis if there’s a way -- there was that discussion 

23 yesterday and today, we’re fine with that. Show that 

24 in there in the analysis, because that can be a very 

25 big issue.
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1 In terms of gap analysis, I’ve said it 

2 before, and we’ve kind of got agreement that we would 

3 like analysis of a TSL based on -- in between design 

4 line zero and design line one, to see if we can try to 

5 minimize incremental cost to both manufacturers and 

6 end users. We think it’s important because as we’ve 

7 see with higher cost and higher investments, and I 

8 hate to sound like a broken record, a lot of those 

9 investments are going overseas. And we all know what 

10 the state of the economy is these days, and if we’re 

11 doing that, I’d like to try to minimize it because I’m 

12 from this area and Bruce is from Baltimore. We saw 

13 what happened with Bethlehem Steel over the last 30 

14 years, okay. Can we try to reduce that a little bit 

15 if we can? Thank you.

16 Also, in terms of -- so we really do want 

17 the more options because we think that would be very 

18 helpful in terms of our discussions and negotiations.

19 In terms of breaking out products, Steve, 

20 there is still a little bitterness about the heat pump 

21 water heater scenario, but -- (laughter) -- in terms 

22 of breaking out products, based on yesterday, we’re 

23 okay with breaking out by BIL. Again, we talked about 

24 the ranges, zero to less than or equal to 95, greater 

25 than 95 to less than or equal to 150, greater than 
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1 150. We’re okay with that approach, if that’s 

2 amenable to other parties around the table.

3 We’re also okay with breaking out by it’s 

4 either application or location, pole mount versus pad 

5 mount, versus network/vault, versus substation. I 

6 know that Phil Hopkinson sent around some of the 

7 definitions to everybody yesterday, I believe, again, 

8 hopefully that they would meet the DOE criteria in 

9 terms of defining new product categories. I know that 

10 Andrew talked about built in refrigerators that 

11 somehow there was definition needed to be added to the 

12 rule somehow, so maybe we can use those IEEE 

13 definitions as the basis of the definitions for 

14 breakout of categories. 

15 There’s agreement, although I do have to say 

16 I did do the numbers out. Right now there’s 27 

17 efficiency levels for single phase and 3-phase units. 

18 We break it out by BILs and application, 27 times 12 

19 is 324 numbers to look at. So I think we’re okay with 

20 it, I just want to give everybody that there could be 

21 a lot more numbers that we’re talking about here, but 

22 again, we think that in terms of negotiation and 

23 trying to come to consensus is that we think that that 

24 sort of -- we are definitely okay with that concept, 

25 because that way it really gets to some of the issues 
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1 in terms of investments, costs, et cetera.

2 I also wanted to touch base with Steve about 

3 the time dimension. We appreciate the flexibility. I 

4 would note for the record that the standards -- for 

5 the record, for this standard that took effect in 

6 2010, the final rule was announced in November 2007. 

7 For this new standard, manufacturers had less than 

8 three years to get up to speed with the new standard. 

9 Now of course, we agreed to, like 2009, 2013, but 

10 there are other efficiency standards where the lead 

11 time is five years, and in fact, there’s other 

12 products, like gas furnaces, where the lead time has 

13 been eight years. So in terms of applying efficiency 

14 standards, a three year lead time has been basically, 

15 aside from Congressional legislation, or federal 

16 legislation, three years is a minimum, where other 

17 products get five years or eight years lead time. And 

18 some of the other products that get more lead time 

19 have much lower end user cost and possibly lower 

20 manufacturing upgrade costs. But we do agree with, in 

21 terms of time dimension, we do think there could be 

22 some flexibility in terms of when the standards would 

23 be effective.

24 So those are our general concepts that we 

25 got kind of general agreement on for the committee to 
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1 think about. Thank you very much.

2 MR. PARKER: Thank you, Steve. Very

3 helpful. Jerry, Steve. Very helpful. Jerry.

4 MR. SCHOEN: Jerry Schoen, AK Steel. I’m 

5 picking up a point that Steve made and I want to build 

6 on a little bit. You’re talking about these 

7 transformers like they’re appliances, like they’re a 

8 stand alone device not hooked into anything else. 

9 They are part of a network system. They are much more 

10 complicated than any of the appliances that I’ve heard 

11 talked about. Those are all stand alone, disconnect, 

12 isolated. There’s no interaction with a larger world 

13 with a gas furnace, a washer, or a dryer. 

14 With electrical transformers there are. 

15 We’ve heard testimony from several folks in this 

16 meeting that they can’t even buy replacement units now 

17 because of the complexity of matching them into their 

18 systems. 

19 The new rules have only been in place for a 

20 year, and that’s one thing I had question about, and 

21 the market is still seemingly sorting out what to do 

22 with particular specific designs that we’ve heard 

23 about. But if you pass a standard, and that can 

24 Be very disruptive to the market as a whole, because 

25 it would require manufacturers to adjust and users to 
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1 adjust. The electrical utility system is the largest 

2 and most complex machine on the planet.

3 MR. PARKER: Thanks. Andrew.

4 MR. DeLASKI: Thanks Jerry, I appreciate 

5 that. I think you’re right. I also think that you’d 

6 be surprised at the complexity in the gas furnace 

7 docket. But we’ll leave that aside. And Steve, it 

8 might be a bitter point for you as well, the eight 

9 year lead time on gas furnaces. Another point of 

10 concern.

11 One point I want to emphasize or want to 

12 come back to that Steve emphasized in his remarks, 

13 that what we’re interested in are large cost-effective 

14 energy savings. And when we talk about cost15 effective, we look to the DOE analysis, and it goes 

16 back to Steve’s point is well, what we’re looking at 

17 is what’s going to -- just lay our cards on the table. 

18 As we think about this, we’re looking at what’s our 

19 analysis of where the rulemaking’s likely to land, 

20 given lack of agreement, if there is, if this 

21 committee doesn’t come to an agreement. So DOE’s 

22 going to base their decision on their own analysis. 

23 So what we’re going to be seeing going into our next 

24 meeting, not on someone else’s TOC or some other 

25 private analysis. It’s going to be -- so I think if 
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1 you look at cost-effectiveness, as we’ve discussed in 

2 our first two meetings, there are numerous ways to 

3 calculate cost-effectiveness. This is not a -- this 

4 is a science and some art. But the way that matters 

5 in this discussion is what we’re going to see in the 

6 analysis published by -- released to us by DOE.

7 So I urge us to focus on that calculation of 

8 cost-effectiveness as opposed to other calculations of 

9 cost-effectiveness. 

10 MR. PARKER: Steve.

11 MR. ROSENSTOCK: May I follow up on that? 

12 Andrew, I appreciate that but again, for the record, 

13 laying the cards on the table, from my observations, 

14 DOE’s changed the way they’ve done cost-effectiveness 

15 over the last few years, and as a stakeholder, and I 

16 think other stakeholders, they’re very concerned about 

17 how DOE is doing its cost-effectiveness by the new --

18 I’ll say the new variables and the new calculations or 

19 new estimates that it’s doing, and we’re -- we’ve been 

20 concerned and we’ve filed testimony with other 

21 appliances where we’re very concerned that some of the 

22 benefits that DOE is showing in the analysis are not 

23 going to be seen by consumers or the American society 

24 as a whole.

25 The one thing I’ll talk about in particular, 
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1 adding in the, quote, “social cost of carbon,” as a 

2 benefit is -- it might be a nice exercise, but to 

3 count it as a monetary benefit, we’ve had many 

4 problems with it, and it has had a significant impact 

5 on some of the decisions that have been recently made 

6 by the Department of Energy. So I understand how the 

7 Department of Energy, they’ve decided on their course 

8 of analysis, but we have a lot of concerns with how 

9 DOE’s been doing their analysis recently. I’ll just 

10 lay that on the table. Thank you.

11 MR. DeLASKI: I understand, Steve, and 

12 that’s helpful to lay that out, and I guess my 

13 understanding, my reading of the rules is that, on 

14 your specific example, social cost of carbon, it’s 

15 calculated separately, it’s not part of the LCC 

16 analysis. It’s not part of the MPB calculation. It 

17 is a separate line item in their analysis. I don’t 

18 think we’re going to see that even at this stage. Are 

19 we even going to see that?

20 PARTICIPANT: (off mic)

21 MR. DeLASKI: I don’t think that’s going to 

22 be part of anything we’re going to see. You may have 

23 other points of critique. My suggestion is that as we 

24 look at cost-effectiveness, we’re going to be leaning 

25 very hard on the analysis as published. We can’t -- I 
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1 understand that people -- we may want to adjust it in 

2 certain ways as we go forward, and that’s totally 

3 legitimate for discussion. I’m not suggesting -- I’m 

4 not trying to cut off the discussion on the cost5 effectiveness analysis, but I’m suggesting that if we 

6 keep coming forward with new cost-effectiveness 

7 analysis, it’s going to be hard for this conversation 

8 to go forward if we can’t at least work off of one 

9 central analysis with adjustment. 

10 I agree with you on the need for -- I’m not 

11 trying to cut off the need for adjustment as we go 

12 forward.

13 MR. PARKER: Well, I think that’s a perfect 

14 segue into our last item on the agenda, which is the 

15 take-away action items for further work on the 

16 analysis. We have 20 minutes to do that, and I 

17 apologize to Steve for the distraction during his 

18 presentation as we got the slides mounted on the 

19 computer so that our next presenters can speak. 

20 But basically, what I’ve asked Navigant and 

21 LBL to do is just put together a short summary, worked 

22 late in the hours last night to basically put together 

23 a short summary of their takeaway on what we’ve agreed 

24 to do with respect to the analysis going forward, both 

25 with regard to the engineering analysis and with 
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1 regard to the LCC analysis. 

2 So let’s turn to that. The one thing that 

3 I’m going to push for a little bit on the slides, 

4 that’s not on the slides is some agreement on 

5 timetables for getting back, reporting back. We are 

6 at the stage where we need to think about deadlines. 

7 So without further ado, let me turn it over to -- were 

8 we going to start with the LBL or with engineering 

9 analysis.

10 MR. COFFEY: Start with the engineering 

11 analysis.

12 MR. PARKER: Why don’t we start with the 

13 engineering, since that’s upstream of the LBL, of the 

14 manufacturing. Jeremiah, can you get the engineering 

15 analysis up there? The take-aways. Brian, why don’t 

16 you start, we’ll have it up there in a second.

17 Take-Away Action Items

18 MR. COFFEY: I’m sure we sent out --

19 MR. PARKER: Brian, excuse me. You should 

20 have this sheet in front of you also, we passed it 

21 around for the people who were at the meeting, you 

22 should have this sheet with you. If you don’t have 

23 it, let me know.

24 MR. COFFEY: I’m sure after lunch yesterday 

25 we circulated a sheet with some of the take-aways that 
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1 we had heard requested from the morning session, and 

2 so I’ll walk through those just one more time with 

3 everyone.

4 • For data requests, we had core weight and total 

5 weight, both against efficiency, to look at the 

6 effects of higher standards on the weights of the 

7 transformers.

8 (Discussion re: handout)

9 MR. PARKER: That sheet is subsumed in this 

10 sheet anyway, so this sheet contains that sheet, it 

11 just amplifies a little bit, provides a little more 

12 description. So there shouldn’t be any gap.

13 MR. COFFEY: The second point is to 

14 • Supply some engineering data for a few designs at 

15 different efficiencies on a template, and also 

16 solicit input on those same points from 

17 manufacturers, just so everyone can reach a 

18 comfort level with the representative units that 

19 we’ll be looking at.

20 • The third point is to show, instead of cost 

21 versus efficiency, cost versus loss. It’s a 

22 different way of looking at the exact same data, 

23 but some have suggested that it can tell a 

24 different story or lead to some conclusions that 

25 maybe are less obvious from the efficiency plot.
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1 • And then finally, Carlos had sent out an idea for 

2 how we might simplify the cost-efficiency charts 

3 by portraying only what we’re calling the optimum 

4 southeast frontier of each steel type’s ... so 

5 we’ll be delivering those as well.

6 • As far as changes to the analysis, we talked 

7 about a couple of new product classes. I think 

8 we agreed that we’d like to look at liquid 

9 immersed standards by BIL, and we outlined three 

10 different ranges that we’d like to use. 

11 • My take-away from the discussion of whether we 

12 wanted to set standards by different 

13 applications, pads, poles, substations, networks, 

14 vaults, was that it really wasn’t necessary 

15 because those applications had separate cost 

16 curves, but that we would need to pay attention 

17 to the size and weight limitations that were 

18 present for each of those. 

19 So that was my take-away, but if anyone had 

20 a different understanding, now would be the time to 

21 speak up.

22 MR. ROSENSTOCK: Quick one. Steve 

23 Rosenstock, EEI. Your take-away is based on what? 

24 Because the committee never actually made a vote on it 

25 or anything like that. I don’t see where you were 
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1 getting that, quote, “take-away.”

2 MR. COFFEY: So I had proposed in my 

3 presentation a way to look at this, and the response 

4 that I heard from the committee members was that it 

5 wasn’t necessary. I didn’t hear anybody insist on 

6 that.

7 MR. ECKMAN: I don’t think that’s the case. 

8 I think we all said that we wanted to at least see 

9 analysis by --

10 MR. RIVEST: Actually, I recall because I 

11 was caught up in that conversation Someone asked for 

12 analysis, and then I think where we ended up is that 

13 we would not be doing any analysis right now, but kept 

14 it as an open issue whether there should be separate 

15 product classes for these products.

16 MR. ECKMAN: Because the analysis that 

17 wouldn’t be required was a separate engineering 

18 analysis.

19 MR. RIVEST: That’s right. No engineering 

20 analysis, but we would look at it from the life cycle 

21 cost perspective to see whether they ended up 

22 differently because installed costs were different.

23 MR. ECKMAN: Right. 

24 MR. RIVEST: So from the perspective of the 

25 engineering, which is what he’s talking from.
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1 MR. ECKMAN: Okay. 

2 MR. COFFEY: Thank you. That was helpful to 

3 clarify.

4 MR. PATTERSON: Wes Patterson. I’m coming 

5 back to Steve Nadel’s comments. He says we’re looking 

6 for maximum efficiency that’s cost-effective. One of 

7 the challenges that we face is that if we constrain 

8 the standard by certain product groups, we go to the 

9 lowest common denominator. It is technically obvious 

10 that we will be constrained with both the networks and 

11 the poles, to the deference of 30 percent of the 

12 market that is pads. If that’s the position we want 

13 to take, by ignoring them, so be it. But I really 

14 believe it would behoove us to consider their impact 

15 as separate product classes with their own analysis.

16 MR. PARKER: As I recall, the way we left 

17 this was that you would supply data to the group on 

18 volume sales in this category, your data that 

19 indicates that it’s a higher volume than they were 

20 using in the past.

21 MR. PATTERSON: Yes, and I think I have 

22 already given that to Matt ... in the past, but I will 

23 resend it.

24 MR. PARKER: And then as I recall there was 

25 going to be a network/vault work group convened, 
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1 right, that would work on this issue, and people 

2 stepped forward to do that.

3 And as I recall, it was basically, there was 

4 going to be a determination made on a few things. 

5 First, whether this category would require special 

6 treatment in the analysis. You made your case that it 

7 does. 

8 The other issue that was discussed in that 

9 context was whether the increments for efficiency for 

10 network and vault are sufficiently different from the

11 increments for pad mount, that they require special 

12 treatment. So I think that was left as somewhat of an 

13 open issue that this working group would explore, 

14 rather than a firm conclusion.

15 The other issue that the working group is 

16 going to explore was whether it’s possible to define 

17 this category by special physical characteristics that 

18 are unique to the category that distinguish them in 

19 manufacture level from other units. I think that 

20 there was an instinct that there was, and Phil 

21 Hopkinson sent around the IEEE specification for pole 

22 and pad mount as suggestive, but that was another work 

23 item for this working group.

24 And the third would be, assuming conditions 

25 -- the first two conditions are met, you can define it 
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1 physically and it requires special treatment, what 

2 should that treatment be? How do you break it out and 

3 what should be the TSLs for that?

4 DOE was independently going to provide legal 

5 guidance and policy guidance on whether subdivision of 

6 equipment classes is feasible. I don’t think there’s 

7 a huge reason to believe that there’s a problem, but 

8 we need to just confirm that. 

9 So I think that’s the way we left it. Does 

10 that square with people’s recollections around the 

11 table?

12 MR. DeLASKI: Yeah, I think I’m on the 

13 committee with Wes and I think Tim volunteered later, 

14 and someone else was on that subcommittee too to work 

15 on this. But I think Wes’ point -- there’s two 

16 different things going on here. One is, what are the 

17 analysts doing? And then, I think what you’ve heard 

18 is an openness -- I haven’t heard anybody -- we ... 

19 yesterday, right, and I haven’t heard anybody object 

20 to the notion that we would need to look at the 

21 products separately and consider a different standard 

22 because of the very reason that Wes is describing. I 

23 haven’t heard anyone contest that. So that I think is 

24 a settled question that we need to look at them 

25 separately and consider, as Steve said, you know, 
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1 we’re interested in large energy savings and if that 

2 means something different for the treatment of these 

3 products, that’s something that we’re, at least I 

4 think I speak for our -- the folks I work with, that 

5 we’re very open to that.

6 Then there’s the analytic question, we’ve 

7 got to get a little separate, which is, can the 

8 analysts at this point separate them out, or is that 

9 something that you guys just can’t do yet because you 

10 don’t have the inputs that you need. I think that’s a 

11 question for you guys to answer -- maybe you can do it 

12 between now and the meeting, maybe you can’t. I think 

13 what we said yesterday -- I used the word “punt” --

14 they punt on the analysis for now, based on whether 

15 it’s something that can be delivered in the short 

16 term.

17 MS. COUGHLIN: Yeah, I mean, I’d like to 

18 clarify that for the purpose of segregating certain 

19 types of products for different efficiency levels it 

20 doesn’t have to be a product class. So since we 

21 already have design lines that separate a pole mounted 

22 from pad mounted, we can certainly consider different 

23 efficiency levels for those types of products.

24 The product class distinction is far more 

25 severe and would be far harder to implement, but we’re 
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1 able to do different efficiency levels by application 

2 effectively. So we can do that. And we have -- Chris 

3 is going to go over our action items, and we have this 

4 issue of dealing with pole weight constrains. We’re 

5 going to approach that in a lot more detail. So I 

6 think we’ll be able to determine whether or not that 

7 is going to be an effective constraint on the standard 

8 level for that category.

9 MR. PARKER: But for network and vault, 

10 which I understand is a subset of pads, do you have 

11 that data?

12 MS. COUGHLIN: DOE has to come back on that 

13 one.

14 MR. DeLASKI: What do you mean DOE -- on 

15 what?

16 MS. COUGHLIN: On the legal niceties of 

17 separating that out as a product class. Because I 

18 think we agreed on that one it would make sense to be 

19 a separate product class, but there’s a certain 

20 functional differences between the product types that 

21 have to be met in order for it to be a separate 

22 product class.

23 MR. PARKER: Well the legal question depends 

24 upon the physical issue of can you specify a physical 

25 design that’s distinct, and that’s what --
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1 PARTICIPANT: I believe I heard .. exploring 

2 this and then, more than exploring, but something that 

3 we think is necessary, it sounds like, to be able to 

4 achieve the kinds of objectives at least some of us 

5 are interested in.

6 MR. NADEL: Right. I believe I heard 

7 Michael Rivest say that while we wouldn’t do the 

8 engineering analysis separately, we can do the life 

9 cycle cost analysis for the different things, and 

10 that’s what we’re asking for, to look at these 

11 different things, and where there’s no difference, 

12 there’s no need for a product class, but that may be 

13 the type of data that helps us get to yes.

14 MR. PARKER: Absolutely.

15 MR. PATTERSON: The networks are not a 

16 subclass of the pads, which is a statement that you 

17 just made.

18 MR. PARKER: I stand corrected.

19 MR. PATTERSON: In the design lines. When 

20 these things were created, there was one design line 

21 that specifically was a pole. There was another that 

22 was specifically a pad. And the others were a 

23 rectangular box, or a round box. If we’re going to 

24 say that it’s a subclass of something, then the 

25 network folds in to being a subclass of design line 
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1 three, which is pads are also a subclass of it, and 

2 substations are also a subclass of it, and any other 

3 fool thing that’s rectangular is a subclass of it.

4 MR. RIVEST: Mike Rivest. What my take-away 

5 yesterday was that the incremental cost of -- the

6 incremental cost of all of those was similar, so from 

7 an engineering point of view, there wouldn’t be a need 

8 to develop a separate cost efficiency relationship for 

9 each of them. But they had different physical 

10 constraints which could be handled in the life cycle 

11 cost analysis. Is that what --

12 MR. PATTERSON: Wes Patterson. I fully 

13 agree with what Mike just presented.

14 MR. RIVEST: Okay. And it has been in the 

15 previous analysis as a subgroup analysis, and it still 

16 is, so the question is how you then morph a subgroup 

17 into a class, I guess, if you were to set a separate 

18 standard.

19 MR. DeLASKI: Well, for all our purposes, we 

20 need now just the analysis.

21 MR. RIVEST: Right.

22 MR. DeLASKI: And if we have a ... analysis, 

23 then we have it.

24 MR. RIVEST: Right.

25 MR. PARKER: Great. Good. Let’s move on. 
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1 We have a charge. I think we’re in agreement. And 

2 one issue that someone will look at is whether there 

3 are differences in the increments, such that 

4 separating might be indicated. Brian, go ahead.

5 MR. COFFEY: So I think we have an action 

6 item there, and I think it sounds like the committee 

7 is interested in leaving the door open to continue 

8 looking at this. 

9 Just looking at this list here, I think the 

10 final thing that we took as a deliverable was to

11 provide this steel price changer so that people could 

12 play with the cost efficiency clouds under different 

13 steel price scenarios, and come to the conclusion that 

14 they thought was accurate and constructive in 

15 arguments. So, we’ll be sending that out also.

16 MR. PARKER: Let me say also, though, that 

17 there needs to be a base case material price scenario, 

18 and there needs to be a sensitivity material price 

19 scenario for LBL to do their work and for engineering 

20 to do its work more accurately. So we need to, if you 

21 have issues with the current framework, we need to 

22 hear from you. My sense is that there hasn’t been, 

23 recognizing that everything is unpredictable and what 

24 we’re in the business of doing is predicting, the 

25 question is, do these represent reasonable central 
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1 tendencies and reasonable upper and lower bounds for 

2 price forecasting. Any dissent from doing that? If 

3 so, you need to let Navigant know, and if not, I think 

4 that’s the way they will proceed. And I think it’s 

5 very helpful for them to provide the tool that people 

6 can use to do their own calculations. Greg.

7 MR. COULTER: We have that and will be 

8 giving ours to Navigant. We think it’s not a broad 

9 enough range. But we’ll give it to Brian.

10 MR. PARKER: Okay. Material prices are 

11 really important factor, and so it’s important people 

12 feel comfortable with that, and if we need to form a 

13 working group on that, we will, because of all the 

14 working groups we’re forming, that would be one of the 

15 more material ones, so to speak. 

16 Great. We have to wrap up very quickly now. 

17 Brian you want to just -- anything else on this chart 

18 we need to cover?

19 MR. COFFEY: No, only that some of these 

20 items required input from different committee members 

21 and helping us look at what are the right ranges of 

22 certain parameters. What’s the -- a conversation 

23 about what physical characteristics we could use to 

24 define product classes if we were to do it, and I 

25 think everybody has expressed willingness to work with 
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1 us on that, so we’ll be in touch on those matters.

2 MR. PARKER: Great. Yes, and we’ll get up 

3 on the share points slide that we’re creating a space 

4 between those committees to correspond to work 

5 together so they can -- it’ll be available to 

6 everybody who wants to see it, but the committee 

7 members will have a single space where they can 

8 communicate in an organized and consolidated way to 

9 pursue the work between now and the next meeting.

10 Okay, thank you, Brian. Turn it over to 

11 Chris very quickly.

12 MR. BOLDUC: Chris Bolduc, LBL. Just want 

13 to go over quickly to get people out of there, the 

14 take-away points from yesterday regarding the LCC 

15 analysis. The first one -- is that five points --

16 • evaluation rates, 

17 • pole replacements, 

18 • changes to the LCC subgroups, 

19 • hourly load model validation, and 

20 • distribution transformer price trends.

21 The first one, evaluation rates is -- we’re 

22 going to change the evaluation rates for liquid 

23 immersed transformers from 50 to ten percent. We’re 

24 expecting some support from committee members and 

25 we’ve received some data already. Likewise for the 
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1 medium voltage dry type, drop it down to two so it’s 

2 in the same ball park as the low voltage dry. If 

3 anybody else would like to volunteer any data on this 

4 subject, if you could please raise your hand, I’d 

5 appreciate it. 

6 Pole replacement. We will correct the pole 

7 replacement algorithm. Some members said they were 

8 going to supply data on pole replacement costs and 

9 procedures, if you could please just shout your name 

10 out so we can get it down.

11 MR. SIMMONS: Chuck Simmons.

12 MR. BOLDUC: Thank you. Next?

13 MR. ANDERSON: Rick Anderson, Fayetteville. 

14 Fayetteville PWC.

15 MR. BOLDUC: Thank you very much.

16 MR. HIRSCH: Bruce Hirsch, Baltimore Gas and 

17 Electric.

18 MR. BOLDUC: Thank you very much. Anybody 

19 else? Next slide please. Changes to the LCC 

20 subgroups. It was discussed yesterday that we should 

21 segregate the transformer purchase market according to 

22 line density of customers. This will be something, if 

23 we can get this data from members, we will roll it 

24 into the LCC and ideally we will be able to remove the 

25 rural subgroups and municipal utilities from the 
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1 specific LCC subgroups. Again, this is wholly 

2 dependent on receiving data on your customer accounts 

3 per line mile, and so for participating members who 

4 are willing to submit data I have Kenneth Winder, Rich 

5 Anderson, Tom Eckman, is there anybody else or are 

6 there any errors in this member list? Okay, thank you 

7 very much.

8 Hourly load model validation. Some members 

9 yesterday said they could provide us with hourly load 

10 data for transformers. Given the situation of your 

11 loading, your load diversity, doesn’t matter, we’d 

12 like to see the data. We’d like it to validate our 

13 model. Again if you could just shout your name out if 

14 you agreed to provide data.

15 MR. SIMMONS: I agree. Chuck Simmons.

16 MR. ANDERSON: (off mic) Rick Anderson.

17 MR. PARKER: Richard Anderson has agreed, 

18 for the court reporter.

19 MR. BOLDUC: And Ken I have your name up 

20 there, is that okay? Thank you.

21 MR. WINDER: (comment off mic)

22 MR. PARKER: We need the analysis completed, 

23 which means we need your data within the next few 

24 days.

25 MR. BOLDUC: Yeah, we’re going to be on you 
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1 on Monday.

2 MR. PARKER: Besides the slides will be 

3 sent around to people --

4 MR. BOLDUC: Yes, we can send them.

5 MR. PARKER: We’ll get the website set up 

6 and that’ll be put on the website.

7 MR. BOLDUC: Yeah, we’ll put your names in 

8 there. Share the pain a bit.

9 And last, I will circulate the draft 

10 methodology we used to project transformer prices into 

11 the future. And that’s the last slide. Thank you all 

12 very much.

13 MR. PARKER: We have one minute for 

14 discussion. Steve.

15 MR. ROSENSTOCK: And Chris, you’re going to 

16 send out some more information on the sensitivity 

17 analysis results, right?

18 MR. BOLDUC: Sorry. Chris Bolduc, LBL. In 

19 that appendices, the sensitivities -- results are 

20 imbedded in there.

21 MR. ROSENSTOCK: Perfect. Thank you.

22 MR. PARKER: Great, we are at the end of our 

23 time and we are at the end of our agenda. I think 

24 we’ve got a roadmap for going forward.

25 MR. POLINSKI: Just one comment. Anytime 
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1 something is updated, until we have this share thing 

2 working, could we make sure it’s e-mailed to everyone 

3 until we -- because sometimes we’re looking for stuff 

4 in different places --

5 MR. PARKER: Yes. Until we have sharepoint 

6 up, we will e-mail --

7 MR. POLINSKI: Any updates.

8 MR. PARKER: -- anything to everybody. Then 

9 we will try to lighten your load by putting stuff on 

10 the sharepoint and letting you choose what your e-mail 

11 preferences are for notifications.

12 MR. ROSENSTOCK: Steve Rosenstock, EEI. 

13 Just also, it might also help the people to keep their 

14 files under five megabytes for certain e-mail systems. 

15 A couple e-mails were like 12 megs, and --

16 MR. PARKER: Use reduce file size feature. 

17 (laughter) Thank you guys, have a good trip back. 

18 We’ll see you next time.

19 (Whereupon, at 12:06 p.m., the meeting in 

20 the above captioned matter was adjourned.) 

21

22

23

24

25
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REPORTER'S CERTIFICATE

This is to certify that the attached proceedings 

before:

U.S. DEPARTMENT OF ENERGY

VOLUME I

In the Matter of:

MEETING OF THE MV WORKING GROUP

Were held as herein appears and that this is the 

original transcript thereof for the file of the 

Department, Commission, Board, Administrative Law Judge 

or the Agency.

Further, I am neither counsel for or related to any 

party to the above proceedings.

 Official Reporter

Wendy Greene 

Dated: October 18, 2011