[Federal Register Volume 62, Number 204 (Wednesday, October 22, 1997)]
[Proposed Rules]
[Pages 54809-54817]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-27948]


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DEPARTMENT OF ENERGY

Office of Energy Efficiency and Renewable Energy

10 CFR Part 430

[Docket No. EE-DET-97-550]
RIN 1904-AA85


Energy Conservation Program for Consumer Products: Determination 
Concerning the Potential for Energy Conservation Standards for Electric 
Distribution Transformers

AGENCY: Office of Energy Efficiency and Renewable Energy, Department of 
Energy (DOE).

ACTION: Notice of Determination.

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SUMMARY: The Department of Energy (DOE or the Department) has

[[Page 54810]]

determined, based on the best information currently available, that 
energy conservation standards for electric distribution transformers 
are technologically feasible, economically justified and would result 
in significant energy savings. This determination initiates the process 
of establishing, by notice and comment rulemaking, test procedures and 
energy conservation standards for this product.

ADDRESSES: Copies of ``Guide for Determining Energy Efficiency for 
Distribution Transformers'' (NEMA Standards Publication TP 1-1996), 
``Determination Analysis of Energy Conservation Standards for 
Distribution Transformers, ORNL-6847,'' and ``Supplement to the 
Determination Analysis (ORNL-6847) and Analysis of the NEMA Efficiency 
Standard for Distribution Transformers, ORNL-6925,'' are available in 
the DOE Freedom of Information Reading Room, U.S. Department of Energy, 
Forrestal Building, Room 1E-190, 1000 Independence Avenue, SW, 
Washington, DC, 20585, (202) 586-6020, between the hours of 9 a.m. and 
4 p.m., Monday through Friday, except Federal holidays.

FOR FURTHER INFORMATION CONTACT:

Kathi Epping, U.S. Department of Energy, Office of Energy Efficiency 
and Renewable Energy, Mail Station EE-43, Forrestal Building, 1000 
Independence Avenue, SW, Washington, DC 20585-0121, (202) 586-7425, 
FAX: (202) 586-4617, email: <a href="/cdn-cgi/l/email-protection#d1bab0a5b9b8ffb4a1a1b8bfb691b9a0ffb5beb4ffb6bea7"><span class="__cf_email__" data-cfemail="7f141e0b1716511a0f0f1611183f170e511b101a51181009">[email protected]</span></a>.
Edward Levy, Esq., U.S. Department of Energy, Office of General 
Counsel, Mail Station GC-72, Forrestal Building, 1000 Independence 
Avenue, SW, Washington, DC 20585-3410, (202) 586-9507, email: 
<a href="/cdn-cgi/l/email-protection#fa9f9e8d9b889ed4969f8c83ba928bd49e959fd49d958c"><span class="__cf_email__" data-cfemail="07626370667563296b62717e476f762963686229606871">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION:

I. Introduction
    A. Authority
    B. Rulemaking Procedures
    C. Background
II. Discussion of ORNL Reports
    A. Purpose and Content
    B. Methodology
    C. Conservation Cases
    1. Base Case
    2. Lowest Total Owning Cost (TOC) Case
    3. Median Total Owning Cost (TOC) Case
    4. Average Losses Case
    5. High-Efficiency Case
    D. Voluntary Programs
    1. NEMA-TP-1 Guide
    2. National Business Awareness Campaign
III. Conclusion
    A. Determination
    B. Future Proceedings

I. Introduction

A. Authority

    The National Energy Conservation Policy Act of 1978, Pub. L. 95-
619, amended the Energy Policy and Conservation Act (EPCA) to add a 
Part C to Title III, which established an energy conservation program 
for certain industrial equipment. The most recent amendments to EPCA, 
in the Energy Policy Act of 1992, Pub. L. 102-486, (EPACT) included 
amendments that expanded Title III of EPCA to include certain 
commercial water heaters and heating and air-conditioning equipment, 
incandescent and fluorescent lamps, electric motors and electric 
distribution transformers.
    Among these amendments is section 124(a) of EPACT, which amended 
section 346 of EPCA, 42 U.S.C. 6317, to provide that the Secretary of 
Energy must prescribe testing requirements and energy conservation 
standards for those distribution transformers for which the Secretary 
determines that standards ``would be technologically feasible and 
economically justified, and would result in significant energy 
savings.'' 42 U.S.C. 6317(a). Section 346 was also amended to require 
the Secretary, within six months after prescribing energy conservation 
standards for distribution transformers, to prescribe labeling 
requirements for such transformers.
    Section 346 requires the Department to make a determination that 
standards for transformers are technologically feasible and 
economically justified, and would save significant amounts of energy, 
before the Department initiates the process for promulgating test 
procedures and specific standards. The section could be read as 
providing that once this initial determination is made, there is no 
further consideration of technological feasibility, economic 
justification, or energy savings, and that the Department must proceed 
to adopt standards. Such an interpretation, however, would be 
inconsistent with the approach in other provisions of EPCA, and would 
be impractical. It is inconsistent, for example, with section 325(o) of 
EPCA, under which economic justification is addressed after specific 
standards have been proposed, based on a detailed evaluation with 
respect to one or more specific standards. It is impractical because, 
even if one or more design options has the potential for achieving 
energy savings, a determination that such savings could in fact be 
achieved cannot be made without first having developed test procedures 
to measure the energy efficiency of transformer designs, and then 
conducting an in-depth analysis of each design option. Such analysis 
might show that no standard meets all three of the prescribed criteria: 
i.e., technologically feasible, economically justified and significant 
energy savings.
    For these reasons, the Department construes section 346 as 
requiring it to: (1) Determine based upon the best information 
available whether standards for transformers would be ``technologically 
feasible and economically justified, and would result in significant 
energy savings,'' and (2) if energy conservation standards appear to be 
warranted under these criteria, to prescribe test procedures and 
conduct a rulemaking concerning such standards. During the standards 
rulemaking, the Department would describe whether and at what level(s) 
to promulgate standards. This decision would be based on in-depth 
consideration, with public participation, of the technological 
feasibility, economic justification, and energy savings of potential 
standard levels. Thus, the initial determination made today that 
standards are warranted under the criteria specified in section 346(a) 
would in effect be reviewed during the rulemaking process, based on 
more complete information than is currently available as to whether 
those criteria are met.

B. Rulemaking Procedures

    EPCA, which provides rulemaking procedures for the promulgation of 
test procedures and standards for appliances and commercial equipment, 
is ambiguous as to whether these procedures apply to rulemakings on 
test procedures and standards for transformers. For the reasons 
discussed below, the Department will nonetheless use these procedures 
in conducting the test procedure and standards rulemakings for 
transformers.
    In conducting rulemakings on all subjects, the Department must, at 
a minimum, adhere to the procedures required by the Administrative 
Procedure Act and section 501 of the Department of Energy Organization 
Act (DOE Organization Act), 42 U.S.C. 7191. Section 501 in essence 
requires the following: (1) Issuance of a notice of proposed rulemaking 
(NOPR), (2) an opportunity for comment, (3) an opportunity for 
presentation of oral comments, if there exists ``a substantial issue of 
fact or law'' or if the rule will have a ``substantial impact,'' and 
(4) publication of the final rule accompanied by appropriate 
explanation. Pursuant to E.O. 12662, the comment period must be at 
least 75 days.
    With respect to test procedures for transformers, the Department 
has

[[Page 54811]]

decided to use the same rulemaking procedures it uses under Part B of 
EPCA, and for other equipment covered under Part C. Thus, in addition 
to the generic procedural requirements described above, the Department 
will provide an opportunity for oral comment (i.e., hold a hearing) on 
all proposed test procedures, regardless of the ``substantial issue'' 
or ``substantial impact'' criteria, as is done in other EPCA test 
procedure rulemakings. See, e.g., EPCA section 323(b)(2), 42 U.S.C. 
6293(b)(2). Hearings have been useful in promulgating test procedures 
in the appliance program, and a hearing can help to identify issues 
that should be addressed and points that should be amplified in the 
written comments. In addition, permitting oral as well as written 
comments will maximize the opportunity for interested parties to 
express their views on the proposed rule. This should give greater 
assurance of the validity and feasibility of the final test procedure 
that the Department adopts.
    As to energy conservation standards, for most other products 
covered by EPCA, EPCA requires the Department to take supplemental 
steps in promulgating standards, including the following, that are not 
required by the Administrative Procedural Act or the DOE Organization 
Act:

    1. An advance notice of proposed rulemaking (ANOPR) must be 
issued, followed by a 60-day comment period;
    2. The notice of proposed rulemaking (NOPR) must set forth the 
maximum efficiency improvement that is technologically feasible and, 
if the proposed standard does not achieve this level, an explanation 
of why; and
    3. A hearing must be held following issuance of the NOPR, 
regardless of the ``substantial issue'' or ``substantial impact'' 
criteria.

EPCA sections 325(p), 336(a), and 345(a), 42 U.S.C. 6295(p), 6306(a), 
and 6317(a). The Department also has a policy, in conducting 
rulemakings on appliance standards, to allow 75 days for comment on the 
ANOPR (rather than the 60 days required by EPCA), with at least one 
public hearing or workshop during this period. Procedures for 
Consideration of New or Revised Energy Conservation Standards for 
Consumer Products, 61 FR 36974, (July 15, 1996) (the ``Interpretive 
Rule'').
    The first sentence of section 345(a) could be interpreted as 
requiring the Department to employ these EPCA procedures in developing 
standards on transformers. In any case, the Department has decided it 
will employ the foregoing procedures set forth in EPCA and the 
Interpretive Rule. It will do so in part for the same reasons it will 
use EPCA procedures to promulgate transformer test procedures. These 
reasons include: (1) EPCA procedures have worked well in the appliance 
program, and (2) they will provide enhanced the opportunity for public 
comment, thereby helping to improve the quality of the final rules. In 
addition, the Department has never developed efficiency standards for a 
product such as distribution transformers. Therefore, the Department 
believes that the development of transformer standards will benefit 
from enhanced opportunities for public participation during the 
standards development process. Such participation can best be achieved 
if the Department employs the full range of procedures used in its 
program to set efficiency standards.

C. Background

    After the passage of EPACT, the Department contracted with the Oak 
Ridge National Laboratory (ORNL) to conduct a study to obtain data and 
assist the Department in making a determination as to whether standards 
for distribution transformers are warranted. ORNL developed and 
published a report, entitled ``Determination Analysis of Energy 
Conservation Standards for Distribution Transformer, ORNL-6847'' which 
was based on information from annual sales data, average load data, and 
surveys of existing and potential transformer efficiencies that were 
obtained from several organizations.
    In the ORNL analysis, transformers with a primary voltage of 480 V 
to 35 kV and a secondary voltage of 120 to 480 V are defined as 
distribution transformers. This definition is consistent with ANSI/IEEE 
C57.12.80-1978 (subsection 2.3.1.1), which defines a distribution 
transformer as ``a transformer for transferring electrical energy from 
a primary distribution circuit to a secondary distribution circuit or 
consumer's service circuit.'' Typical utility primary distribution 
voltages in the U.S. range from 5 kV to 35 kV medium-voltage classes, 
and typical primary consumers' services are 480 V or higher; thus the 
total primary voltage range is 480 V to 35 kV. Typical secondary 
voltages in the U.S. range from 120 to 480 V. ANSI/IEEE C57.12.80-1978 
indicates that distribution transformers usually have a rated capacity 
in the order of 5 -500 kVA. However, ANSI/IEEE C57.12.26-1993 defines 
pad-mounted distribution transformers as transformers with a rated 
capacity 2500 kVA or lower, with primary voltages of 34,500 V (35 kV 
class) or lower and secondary voltages of 480 V or lower. The ORNL 
analysis considered rated capacities ranging from of 10 to 2500 kVA for 
liquid-immersed transformers, because most manufacturers no longer 
produce units smaller than 10 kVA. For dry-type transformers a rated 
capacity range of 0.25 to 2500 kVA was considered; comments from 
manufacturers indicate that this range covers nearly all the U.S. dry-
type transformer market, although the bulk of that market is in the 
range of 10 to 2500 kVA. The ORNL analysis did not consider 
transformers which are not continuously connected to a power 
distribution system as a distribution transformer. For example, 
transformers that are part of machinery which are switched off from 
electrical power were considered by the study as a component of the 
machinery's circuit and not part of the power distribution circuit. 
Also, special-purpose control and signal transformers, as well as bulk 
power transformers, were excluded from consideration because they are 
not classified as distribution transformers.
    In the Department's view, the term ``distribution transformer'' in 
section 346 of EPCA means all transformers with a primary voltage of 
480 V to 35 kV, a secondary voltage of 120 V to 480 V, and a capacity 
of either 10 to 2500 kVA for liquid-immersed transformers or 0.25 kVA 
to 2500 kVA for dry-type transformers, except for transformers 
described in the foregoing three sentences. This definition encompasses 
the transformers considered in the ORNL analysis.
    ORNL collected data from the following organizations and sources: 
The American National Standards Institute (ANSI), Department of 
Commerce (DOC), Department of Energy (DOE), Edison Electric Institute 
(EEI), Institute of Electrical and Electronics Engineers (IEEE), 
National Electrical Manufacturers Association (NEMA), North American 
Electric Reliability Council (NAERC), Office of Management and Budget 
(OMB), various books and phone conversations with interested parties. 
In addition, the ORNL report used data from a survey developed by ORNL 
and circulated by NEMA to NEMA and non-NEMA manufacturers, to obtain 
no-load losses, load losses and selling prices of various sizes and 
types of distribution transformers. Data from these surveys and other 
relevant information were used in the report to show the potential 
energy savings of various conservation case studies such as: (1) Lowest 
Total

[[Page 54812]]

Owning Cost (TOC)\1\ Case, (2) Median TOC Case, (3) Average Losses 
Case, (4) High-Efficiency Case, and (5) Two-Year Payback Case. The last 
of these, the Two-Year Payback Case, was not derived from the survey. 
Rather, a manufacturer developed this case during peer review of the 
report by using a combination of price and design losses, with the 
objective of achieving a two-year payback based on typical transformer 
operation and electricity rates. The efficiency levels used to define 
the conservation cases are based on responses from surveys completed by 
manufacturers.
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    \1\ Total Owning Cost is a capitalized value that permits the 
first cost of the transformer to be compared to the lifetime cost. 
The capitalized values can be converted to the equivalent discounted 
present values of the life-cycle costs by multiplying by the ratio 
of the fixed charge rate over the capital recovery factor. This 
information can be used to more accurately assess the tradeoffs 
between transformer first costs and operating costs, and allow the 
purchaser to compare the total costs of transformers with different 
energy efficiency levels.
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    Two peer reviews of the drafts of the report were performed by 
ORNL. The ORNL peer review consisted of 22 reviewers, including 
representatives of distribution transformer manufacturers, metal 
manufacturers, research institutions/laboratories, private as well as 
municipal electric utilities, manufacturer associations, metal 
associations, and energy conservation groups. After the comments from 
stakeholders were incorporated into the draft, the report (ORNL-6847) 
was published in July 1996. The information contained in this report 
assisted the Department in making this determination on the feasibility 
and significance of energy savings for distribution transformers.
    In September 1996, shortly after publication of the ORNL report, 
the National Electrical Manufacturers Association (NEMA) developed and 
published a voluntary guide entitled ``Guide for Determining Energy 
Efficiency for Distribution Transformers'' (NEMA Standards Publication 
TP 1-1996, referred to ``NEMA TP-1'') to help purchasers choose more 
efficient distribution transformers. The NEMA TP-1 is intended to give 
manufacturers a vehicle to promote the use of high efficiency 
transformers and to assist purchasers/users in the selection of energy 
efficient transformers. NEMA TP-1 offers a simplified methodology to 
help users of utility (liquid-immersed) and commercial/industrial (dry-
type) transformers to understand and calculate the equivalent first 
cost of core and load losses. It also offers an alternative method to 
users who would rather use tables of minimum efficiencies based on 
transformer kVA size, voltage considerations, and type (liquid-immersed 
or dry-type).
    Subsequently, the Department determined that the initial estimate, 
reflected in the initial ORNL report, of the market size for dry-type 
transformers was too high. In addition, it was determined that the 
effective annual loads for liquid-immersed transformers were also too 
high. Consequently, ORNL re-analyzed the energy savings using a more 
accurate disaggregated model including data for all types and sizes of 
transformers. This data had not been available for the original ORNL 
study. Furthermore, the manufacturer that developed the two-year 
payback case advised ORNL that the actual payback will likely be 
substantially longer than 2 years due to higher than anticipated 
manufacturing costs. The two-year payback case was eliminated from the 
analysis because of this misestimation of cost and because this case is 
no longer necessary due to the addition of the TP-1 case. A description 
of the new data and model, ORNL's re-analysis, and an analysis of NEMA 
TP-1 are set forth in a second report, entitled ``Supplement to the 
`Determination Analysis' (ORNL-6847) and Analysis of the NEMA 
Efficiency Standard for Distribution Transformers, ORNL-6925''. The 
purpose of this report is to assess NEMA TP-1 along with the options 
considered in the determination study, using the more accurate analysis 
model and transformer market and loading data developed subsequent to 
the publication of the original ORNL report.
    Data and comments received from stakeholders during the peer review 
of the initial ORNL report have been considered in preparing this 
determination and will be more fully considered during all actions 
taken by the Department when proceeding with the rulemaking process to 
consider conservation standards for distribution transformers. Results 
of the energy savings analyses of the ORNL reports will be discussed in 
detail in the following sections of this determination notice.

II. Discussion of ORNL Reports

A. Purpose and Content

    ORNL assisted the Department by studying the feasibility of 
achieving potential energy savings that could result from energy 
conservation standards for distribution transformers. The potential 
energy savings presented in the ORNL reports are preliminary estimates. 
Subsequent analyses will be performed after test procedures are 
established. These analyses will involve more exact, detailed 
information which will be developed during the standards rulemaking 
process, and will cover the effects of energy conservation standards 
for distribution transformers.

B. Methodology

    The study methodology consisted of four major elements: (1) 
Development of a database, (2) development of conservation options, (3) 
assessments of the energy conservation options, and (4) incorporation 
of feedback from stakeholders. The following is a brief description of 
each element:
    <bullet> Database development. Collecting and processing data was a 
major part of the study. Data on transformer designs, losses, and sales 
were provided by NEMA and individual manufacturers. The Edison Electric 
Institute (EEI), the American Public Power Association (APPA), and 
selected utilities provided utility user information. The database 
includes the results of a survey circulated by EEI and APPA to their 
member utilities. User information on dry-type transformers was 
provided by the American Institute of Plant Engineers. In addition, the 
Federal Energy Regulatory Commission's Form 1, Energy Information 
Administration data and trade journals were used. The basic information 
included historical information on user purchases, and costs and losses 
of new transformers for the various options considered in the study. 
Information on transformer loading factors was obtained from 
discussions with transformer manufacturers, utilities, and surveys of 
commercial and industrial users.
    <bullet> Development of energy conservation options. Technically 
feasible energy conservation cases for distribution transformers were 
based on results of a survey circulated by NEMA, and other information 
provided by non-NEMA transformer manufacturers.
    <bullet> Assessments. The technical analysis provided estimates of 
appropriate transformer loading factors, losses, and energy savings for 
the energy conservation cases.
    <bullet> Stakeholders input. A distribution transformer review 
group consisting of manufacturers, users, material suppliers, and 
public interest groups was formed to provide data, and to review the 
study (see Appendix A of the initial ORNL report). Input from these 
stakeholders was incorporated in the report.
    Much of the data on losses associated with cost-effective 
transformer designs used in this study are from a survey of

[[Page 54813]]

transformers, called the NEMA-ORNL survey, developed by ORNL and 
circulated by NEMA to its members and several non-NEMA manufacturers. 
Utilities usually request that manufacturers submit bids for the lowest 
TOC transformer that they can design by specifying the transformer 
features and their A and B factors. The NEMA-ORNL survey took this 
approach. It included what were believed to be the most common features 
that would be requested for each size and price for the lowest TOC 
transformer they could design. The survey requested that manufacturers 
reveal the transformer design that had the lowest TOC in terms of core 
losses or no load losses (A factor), coil losses or load losses (B 
factor), and transformer price. While both A and B factors reflect the 
capitalized cost of losses, they differ in their cost per watt rates 
for two reasons. First, a watt of core loss represents a continuous 
loss that occurs whenever a transformer is energized, which is normally 
100 percent of the time for most distribution transformers. This 
continuous loss of energy increases the cost per rated watt of core 
loss compared with the rated watt of coil loss, which occurs only while 
power is drawn through the transformer. The second reason for the 
difference in rate for A and B factors is the cost of energy associated 
with the losses. Load losses are proportionally higher during peak 
periods when the per unit cost of producing electricity is relatively 
high.
    Three combinations of A and B factors were requested in the survey. 
The combinations of A/B factors requested were as follows:
    1. A/B=$0/$0, which represents non-evaluated transformers. In the 
$0/$0 design, only the first cost is considered, and the price of the 
transformer is used as the TOC value (i.e., the value of losses is not 
included in the purchase decision). This design was requested in the 
survey to establish a baseline efficiency for non-evaluated 
distribution transformers.
    2. A/B=$3.50/$2.25, with the B factor of $2.25 per watt 
representing a transformer with a relatively high average load.
    3. A/B=$3.50/$0.75, with the B factor of $0.75 per watt 
representing a transformer with a normal to low average load while the 
A factor remains fixed at $3.50 per watt.
    Twelve transformer sizes--six liquid-immersed and six dry-type--
were surveyed:
Liquid-immersed transformers
    1. Single-phase 25-kVA pole-mounted
    2. Single-phase 50-kVA pole-mounted
    3. Single-phase 50-kVA pad-mounted
    4. Three-phase 150-kVA pad-mounted
    5. Three-phase 750-kVA pad-mounted
    6. Three-phase 2000-kVA pad-mounted
Dry-type transformers
    7. Single-phase 1-kVA
    8. Single-phase 10-kVA
    9. Three-phase 45-kVA
    10. Three-phase 1500-kVA
    11. Three-phase 2000-kVA
    12. Three-phase 2500-kVA
    There were 216 transformer designs submitted for the 12 different 
types of transformers. Each type had at least three designs for each of 
the three A and B combinations. Eight designs for each of the three A 
and B combinations were submitted for the liquid-immersed 25-kVA pole, 
50-kVA pole, and 50-kVA pad-mounted transformers.
    Conservation cases were developed to determine if efficiency 
standards are warranted for distribution transformers. These cases were 
based on an economic methodology that is widely used by electric 
utilities in their purchase of distribution transformers: the TOC 
(total owning cost) methodology which considers the life cycle cost of 
owning a transformer. It finds the economically optimal tradeoff 
between the transformer's capital cost and its operating cost. The TOC 
methodology is neutral with respect to the technology and materials 
utilized in the transformer. It is a different approach from 
conservation based standards that are developed through explicitly 
considering energy efficient technologies.
    For transformers, the technologies applied to alter the losses, and 
hence efficiencies, are very interactive and involve multiple 
variables, such as operating current density, flux density, geometric 
ratios and electrical insulation. For example, reducing no-load losses 
by using lower loss core materials generally requires an alteration of 
flux density and core/coil dimensions, which may or may not lower load 
losses. Hence, the ORNL reports used the TOC approach to allow for this 
interaction of design parameters in an optimal manner.
    The TOC approach allows a utility to purchase the optimum 
distribution transformer for the particular set of energy costs and 
operating characteristics that are anticipated over the transformer's 
life. The TOC approach has led to significant increases in utility 
transformer efficiencies since it became widespread in the mid-1970's. 
Because the methodology is neutral with respect to transformer 
technologies and materials, it leads to choosing transformers that take 
advantage of any opportunities to economically improve transformer 
efficiencies.
    The TOC approach was used in developing the conservation cases 
discussed in the ORNL reports. The first step in developing these 
conservation cases was selection of parameters that define the value of 
energy losses over a transformer's life. As previously explained, the 
TOC methodology hinges on the development of the A and B factors which 
represent the expected lifetime value per watt of a transformer's rated 
full load losses using the following formula:

TOC=price+(no-load losses  x  A)+(load losses  x  B)

    A second key for developing these cases was selection of the low-
TOC designs for the selected A and B values. During a typical 
transformer bid process, a buyer submits its required technical 
specifications and A and B values to a manufacturer. The manufacturer 
considers many transformer designs that meet the buyer's technical 
specifications with various load losses, no-load losses, and prices. 
From this large number of designs and costs, the manufacturer submits a 
selection of very low TOC designs for the buyer's consideration. The 
survey of manufacturers requested information on their lowest TOC 
designs for the selected A and B factors.
    The losses and prices for each transformer manufacturer's lowest 
TOC design were used along with the utility surveys to develop the 
database. The database was used to develop the conservation cases for 
the determination study: The base case, the lowest TOC case, the median 
TOC case, the average losses case, and the high-efficiency case. The 
base case consisted of data on non-evaluated dry-type transformers and 
recent utility purchases of liquid-immersed transformers. The average 
losses case was developed by averaging losses from the three lowest TOC 
designs for each transformer size and type. A description of the 
conservation cases and their weighted efficiencies are presented in 
Table 1.
    Amorphous-core transformer designs were excluded from two of the 
conservation cases, the lowest TOC case and the median TOC case. This 
exclusion does not imply that amorphous-core transformers are not 
economical for the A and B factors used in the study. Rather the 
rationale for excluding the amorphous-core transformers was to develop 
moderately high-efficiency cases that do not depend on a particular 
technology.

[[Page 54814]]



  Table 1.--The Conservation Cases, Plus the NEMA TP-1 Case, Listed in  
                     Order of Weighted Efficiencies                     
------------------------------------------------------------------------
                                                               Case     
                                                            efficiency  
             Case                      Description          weighted by 
                                                           sales <SUP>a  (%) 
------------------------------------------------------------------------
Base..........................  Existing mix of                    98.40
                                 transformers.                          
NEMA TP-1.....................  A voluntary efficiency             98.59
                                 guide.                                 
Median TOC....................  Efficiency of the                  98.68
                                 transformer with the                   
                                 median TOC design                      
                                 according to a survey                  
                                 of manufacturers <SUP>b.                    
Average losses................  Efficiency corresponding           98.81
                                 to the average full-                   
                                 load and no-load losses                
                                 for the three most cost-               
                                 effective transformers                 
                                 according to a survey                  
                                 of manufacturers <SUP>b.                    
Lowest TOC....................  Efficiency of the most             98.88
                                 cost-effective                         
                                 transformer according                  
                                 to a survey of                         
                                 manufacturers <SUP>b.                       
High-efficiency...............  Efficiency corresponding           99.21
                                 to highest efficiency                  
                                 according to a survey                  
                                 of manufacturers <SUP>b.                    
------------------------------------------------------------------------
<SUP>a The case efficiencies were recalculated by ORNL for this notice and   
  are also set forth in the supplemental ORNL report.                   
<SUP>b Distribution transformer manufacturers were asked to submit their     
  lowest TOC designs corresponding to economic parameters developed to  
  represent the nation.                                                 

    Three of the conservation cases were based on the transformer 
manufacturers' minimum TOC designs. Use of different criteria to select 
from among the submitted designs provides a range of cost-effective 
transformer designs with different efficiencies. Estimates of the 
potential energy that could be saved if distribution transformers were 
more energy-efficient were developed for the conservation cases. Each 
conservation case is based on maximum load and no-load losses for the 
12 sizes and types that were used to represent all new transformers by 
allocating each design to a range of transformer sizes. This approach 
was used because NEMA reports transformer sales in categories that 
include a range of transformer sizes. To estimate total annual losses 
for each conservation case, the average transformer losses per 
kilovolt-ampere were multiplied by the projected kilovolt-amperage of 
transformer sales. The energy losses (i.e., energy consumed by the 
transformer) for each conservation case were subtracted from the energy 
losses for the base case to provide an estimate of annual savings. The 
base case defines energy use for existing transformer purchasing 
practices. Table 2 represents the possible energy savings results based 
on the surveys circulated by NEMA to several NEMA and non-NEMA 
transformer manufacturers.

Table 2.--Cumulative Energy Savings for Conservation Cases and NEMA TP-1
                                    a                                   
------------------------------------------------------------------------
                                                              Cumulative
                                                               savings, 
           Conservation case by transformer type              2004-2034 
                                                               (quads)  
------------------------------------------------------------------------
NEMA TP-1:                                                              
  Liquid...................................................         0.39
  Dry......................................................         2.12
  Total....................................................         2.51
Median total owning cost (TOC):                                         
  Liquid...................................................         0.95
  Dry......................................................         2.75
  Total....................................................         3.70
Average losses:                                                         
  Liquid...................................................         1.84
  Dry......................................................         3.58
  Total....................................................         5.42
Lowest TOC:                                                             
  Liquid...................................................         1.26
  Dry......................................................         5.04
  Total....................................................         6.30
High-efficiency:                                                        
  Liquid...................................................         5.52
  Dry......................................................         5.18
  Total....................................................       10.70 
------------------------------------------------------------------------
<SUP>a The energy savings were re-calculated by ORNL for this notice and are 
  also set forth in the supplemental ORNL report; these savings have    
  been revised downward from those estimated in the initial ORNL report.

    The savings per kilovolt-ampere and the projections of estimated 
megavolt-amperage of transformer sales have been used to estimate the 
rate of savings in the first year and cumulative savings over 30 years 
if a conservation standard were enacted. Table 2 assumes that both 
utility and non-utility purchases of transformer capacity will grow by 
1.2 percent annually, which is consistent with low-to-moderate growth 
energy scenarios. Sales of liquid-immersed utility distribution 
transformers depend primarily on new housing starts, while gross 
private domestic investments provide a good indicator for the growth 
rate of the non-utility (dry-type) transformer market. Several comments 
during the peer review of the initial ORNL report indicated that higher 
growth rates used in the report, such as 2.5% for the dry-type 
transformer market, were not realistic for the distribution transformer 
industry. The re-analysis on which Tables 1 and 2 are based essentially 
accepts these comments.

C. Conservation Cases

1. Base Case
    Losses for the base case were estimated from the survey of electric 
utilities for evaluated liquid-immersed transformers (i.e., A and B 
factors = $0), and from the survey of manufacturers for the non-
evaluated liquid-immersed and dry-type transformers (i.e., A factor = 
$3.50, and B factor = $2.75 or $0.75). The percentage of evaluated 
transformers was developed from information provided by transformer 
manufacturers. The base case non-evaluated transformers were assumed to 
have the average losses that were reported for the three lowest-priced 
transformers for the $0/$0 evaluation in the NEMA-ORNL survey. It was 
assumed that the evaluated transformers for the base case have the same 
losses as transformers that have been recently purchased by utilities. 
These losses were calculated from the average no-load and load loss 
ratings reported in the EEI-ORNL survey. The weighted average 
transformer efficiency for the base case was calculated at 98.40 
percent.
2. Lowest Total Owning Cost (TOC) Case
    The lowest TOC case measures savings resulting from the use of the 
lowest TOC non-amorphous transformer design for each of the 12 types of 
transformers surveyed in the NEMA-ORNL survey. The potential energy 
savings for this conservation case is 6.30 quads over a period of 30 
years. Liquid-immersed transformers have a potential to achieve 1.26 
quads in energy savings and dry-type transformers 5.04 quads. The 
weighted average transformer efficiency for this case was calculated to 
be 98.88 percent. The annual energy savings of this case is equivalent 
to

[[Page 54815]]

constructing a large coal-fired power plant every four years. Although 
the technology required to meet this conservation case is feasible, 
some retooling might be required for manufacturers of dry-type 
transformers to achieve 5.05 quads of savings over a 30 year period. 
The actual amount and expenses required of retooling, if any, will be 
determined by performing a manufacturer impact analysis during the 
standards rulemaking process.
3. Median Total Owning Cost (TOC) Case
    The median TOC case measures savings from the design that 
represents the median TOC of all submitted designs for each of the 12 
types of transformers surveyed. The potential energy savings of this 
conservation case is 3.7 quads over a 30 year period. Liquid-immersed 
transformers have a potential to achieve 0.95 quads in energy savings 
and dry-type 2.75 quads. The weighted average transformer efficiency 
estimated for this case is 98.68 percent. The technology required to 
achieve savings at this level is feasible and is currently utilized by 
manufacturers of liquid and dry-type transformers. Some retooling might 
be required of dry-type manufacturers to meet this particular 
conservation case. Further analysis will examine this issue.
4. Average Losses Case
    The average losses case measures the average losses for the designs 
with the three lowest TOC's for each of the 12 types of transformers 
that were evaluated. If high-efficiency amorphous-core designs 
qualified as one of the three lowest TOC's, they were included in these 
averages. Because this case incorporates the losses from several 
designs that were averaged, it better represents the diversity in cost-
effective designs than the other cases. It is more representative of 
the transformer market than the cases that are based on selecting a 
single design. It should be reiterated that the transformer losses used 
to represent the average losses case do not represent the losses of a 
specific transformer design. Rather, this case represents an average of 
the losses of the three lowest TOC's for transformers submitted for 
each category in the survey.
    The potential energy savings for this conservation case is 5.42 
quads over a 30 year period. Liquid-immersed transformers have a 
potential energy savings of 1.84 quads and dry-type transformers 3.58 
quads. The weighted average efficiency level of this conservation case 
is 98.81 percent. Although the technology required to meet this 
conservation case is feasible, retooling might be required for 
manufacturers of dry-type transformers to meet 3.58 quads of energy 
savings over a 30 year period. The actual amount and expense required 
of retooling, if any, will be determined by performing a manufacturer 
impact analysis during the standards rulemaking process.
5. High-Efficiency Case
    This case included both amorphous and non-amorphous core 
transformer designs and is represented by the highest-efficiency design 
that was submitted for each of the 12 transformer types surveyed, 
regardless of the technology used to achieve that efficiency and 
independent of any economic evaluation criteria such as TOC. The 
weighted average transformer efficiency for this case is 99.21 percent. 
For transformer categories where no amorphous-core designs were 
submitted, the most efficient of the non-amorphous designs was 
selected.
    Although production of amorphous-core transformers may be less 
process-intensive (i.e., manufacturing involves a smaller number of 
steps) than that of oriented silicon steel transformers, it is very 
labor-and materials-intensive. The lack of cost-effective access to 
this technology by all manufacturers may present an economic hardship 
to both the transformer manufacturers and end users.
    Electric Power Research Institute (EPRI), General Electric (GE), 
and Allied Signal Amorphous Metals hold most of the U.S. patents for 
amorphous metal and amorphous technology. The EPRI patents are 
available under licensing terms and conditions to U.S. manufacturers. 
An important patent on amorphous ribbon manufacturing held solely by 
Allied Signal Amorphous Metals will expire this year. However, a 
critical patent on magnetic field annealing used during transformer 
core manufacturing is held by GE and will not expire until early in the 
next century. At present, GE has licensed Allied Signal Amorphous 
Metals to sublicense transformer manufacturers to use this patent.
    If a standard were set at this conservation case level, the impacts 
on existing liquid-immersed transformer manufacturers that do not 
produce amorphous core transformers would depend on (1) the ease of 
access to the technology, (2) the availability of amorphous core 
material, (3) the level of necessary investments, and (4) the higher 
transformer selling price. Because the quantity as well as the cost of 
raw materials in this case is higher than that of oriented silicon 
steel, the price of these transformers is typically 20 to 40 percent 
higher than the price of silicon steel transformers. The cost of raw 
material for amorphous core transformers is twice that of oriented 
silicon steel. These higher costs are due to the use of ferro-boron, 
most of which is imported from Japan, China, and the United Kingdom. 
The cost of this material has decreased during the past two decades 
from $140 per pound in 1978 to about $1.50 per pound now. By 
comparison, however, the cost of materials for a non-amorphous core 
transformer is considerably lower, ranging from $0.70 to $1.15 per 
pound, depending on the grade of the silicon steel. Although this 
conservation case is technologically feasible, the increased costs of 
retooling and of purchasing amorphous core material as opposed to less 
expensive silicon steel appear to be a potential burden to most 
manufacturers. Further analysis during the rulemaking process will be 
performed to determine the potential costs for manufacturers to meet 
this energy conservation level.
    This conservation case includes proprietary amorphous-core 
technology. Some comments received during the peer review expressed 
concern regarding the limited access to amorphous core technology. The 
Department recognizes that standards which effectively limit 
transformer designs to a particular technology, especially if that 
particular technology is proprietary, may have adverse competitive and 
consumer impacts, and that such impacts must be carefully considered in 
assessing economic justification.

D. Voluntary Programs

1. NEMA TP-1 Guide
    In September 1996, NEMA published voluntary guidelines, ``Guide for 
Determining Energy Efficiency for Distribution Transformers'' (NEMA TP-
1), to help purchasers choose energy efficient distribution 
transformers. Developed by NEMA's Transformer Committee and approved by 
participating manufacturers as a means to promote the purchase of high 
efficiency transformers, the guide recommends the use of the TOC 
methodology to select the most desirable transformer designs and 
provides a table of recommended efficiency levels for buyers that do 
not wish to use the TOC methodology.
    NEMA TP-1 is a significant purchase decision tool. It offers 
utility transformer and commercial/industrial transformer users a 
simplified method

[[Page 54816]]

for determining the equivalent first cost of transformers with 
different efficiency characteristics. This information can be used by 
prospective purchasers to more accurately assess the tradeoffs between 
transformer first costs and operating costs. For those who choose not 
to use this method for analyzing the total operating costs of 
transformers, NEMA TP-1 also provides tables of minimum efficiencies 
based on transformer kVA size and voltage.
    NEMA TP-1's impact on energy savings will depend largely on two 
variables: (1) Manufacturer participation and (2) actual buyer/user 
purchase decisions. In the supplemental ORNL report, the possible 
energy impacts of NEMA TP-1 program were analyzed. ORNL has advised the 
Department that the upper bound of energy savings, with full 
manufacturer participation and universal acceptance by transformer 
purchasers of the minimum efficiency levels recommended in the NEMA TP-
1 tables, would approach 2.51 quads over a 30-year period.
    The ORNL analysis concluded that the efficiency levels recommended 
in the NEMA TP-1 tables would produce roughly a three year payback. The 
Department believes that such efficiency levels would capture the most 
cost-effective energy savings, but may not capture substantial energy 
savings that appear to be economically justified and technologically 
feasible.
2. National Business Awareness Campaign
    The National Business Awareness Campaign was developed by NEMA to 
increase awareness of the benefits of more energy efficient electrical 
products, and to promote purchases of such products. This $1.5 million 
campaign, which has been under development for three years, will be 
directed at chief executive officers and chief financial officers of 
companies that purchase or make electrical products. NEMA is seeking 
support for the campaign from energy interest groups, distributors, 
energy service companies, and utilities. NEMA is also seeking 
partnerships with governmental agencies, such as the Environmental 
Protection Agency and the Department of Energy. NEMA plans to launch 
its campaign in the June/July time frame of 1997.
    The Department seeks to support NEMA's campaign and intends to 
monitor its effectiveness in increasing the manufacture and purchase of 
more energy efficient electrical products.

III. Conclusion

A. Determination

    Based on its analysis of the information now available, the 
Department has determined that energy efficiency standards for 
transformers appear to be technologically feasible and economically 
justified, and are likely to result in significant savings. 
Consequently, the Department will initiate the development of energy 
efficiency test procedures and standards for electric distribution 
transformers.
    All energy conservation cases discussed in today's determination 
notice are technologically feasible. Data from the ORNL reports clearly 
show that current technologies used in the transformer market are 
available to all manufacturers. These technologies include increased 
use of higher grade silicon steels, copper, aluminum, and amorphous 
core materials. The machinery and tools used to produce more energy 
efficient transformers also appear to be generally available to 
manufacturers.
    The cases analyzed in the determination report show that there is a 
large potential for energy savings, especially over a 30-year period: 
the Lowest TOC case has the potential to save 6.30 quads over a 30-year 
period; the Median TOC case could save 3.70 quads; and the High-
Efficiency case could save 10.70 quads. The Lowest and Median TOC cases 
also demonstrate that increased efficiency could reduce significantly 
the total operating costs incurred by users of transformers, which is a 
strong indication that such efficiency levels would be economically 
justified. It also appears that these efficiency levels can be achieved 
without imposing substantial costs on manufacturers, thus providing 
further indication that they are economically justified.
    Although all of the cases analyzed are technologically feasible and 
have significant energy savings, and at least two of these cases appear 
to be economically justified, it is still uncertain whether further 
analyses will reconfirm these findings. For example, the Department has 
not assessed the potential adverse impacts of a national standard on 
manufacturers or individual categories of users. During the course of 
the standards rulemaking process, the Department will perform an 
analysis of the impact of possible standards on manufacturers, as well 
as a more disaggregated assessment of their possible impacts on users.
    The Department supports and commends NEMA's initiative to develop 
voluntary programs that will promote the manufacture and purchase of 
energy efficient distribution transformers. Industry-wide support for 
voluntary programs, such as NEMA's TP-1 guide and the National Business 
Awareness Campaign, could result in significant energy savings that 
might obviate the need for Federal regulatory intervention.
    Based on the results of the analyses that have been completed, 
however, the Department believes it would be inappropriate to conclude 
now that either NEMA TP-1 or the National Business Awareness Campaign 
are likely to result in savings sufficient to eliminate the potential 
of technologically-feasible and economically-justified national 
standards to achieve significant additional energy savings. At this 
time, the Department does not share NEMA's view that the NEMA TP-1 
program will result in efficiency levels that approach the maximum 
technologically feasible and economically justified levels. The 
supplemental ORNL report indicated that the potential energy savings of 
NEMA's TP-1 program is 2.51 quads over a 30-year period, while the 
potential savings from a higher efficiency level that appears to be 
both technologically feasible and economically justified exceeds 6 
quads over 30 years. Furthermore, based on ORNL's analysis of NEMA TP-
1, it appears that many buyers of electric distribution transformers, 
especially in the commercial market (dry-type transformers), are not 
likely to participate in NEMA's voluntary TP-1 program, so the actual 
savings are likely to be below the 2.51 quads estimated. The Department 
will reassess the impact of these voluntary programs during the 
rulemaking on standards.

B. Future Proceedings

    The Department will begin, therefore, the process of establishing 
testing requirements for distribution transformers, which it expects 
will result in the publication of a Notice of Proposed Rulemaking in 
1998. During this rulemaking process, the Department will consider the 
draft test procedure currently being developed through a joint effort 
of NEMA and the National Institute of Standards and Technology (NIST). 
The Department will schedule a public hearing and may also hold 
workshops to receive comments in reference to the test procedures. 
Publication of a Final Rule containing test procedures is anticipated 
during 1999.
    The Department will also begin a proceeding to consider 
establishment of conservation standards for distribution transformers. 
Throughout the

[[Page 54817]]

rulemaking process, the Department intends to adhere to the provisions 
of the Interpretive Rule, where applicable. The Department will 
continue its review and analysis of the likely effects of NEMA TP-1 and 
National Business Awareness Campaign programs during the standards 
rulemaking. There will be workshops early in the standards development 
process to obtain the views of interested parties on design options, 
the conduct of the engineering and life-cycle cost analyses, and the 
expertise needed by the Department to perform such analyses. During the 
rulemaking process, the Department also intends to reevaluate its 
determination that mandatory standards are technologically feasible and 
economically justified, and are likely to result in significant energy 
savings. For example, the Department anticipates that NEMA will 
strengthen its efforts to promote voluntary standards for distribution 
transformers and will submit additional data for the Department's 
review and analysis. The Department welcomes data demonstrating the 
successful market penetration of NEMA TP-1 and/or the National Business 
Campaign. If further analyses reveal that standards are not warranted, 
DOE will revise this determination and will not proceed to promulgate 
standards.

    Issued in Washington, D.C., on September 5, 1997.
Joseph J. Romm,
Acting Assistant Secretary, Energy Efficiency and Renewable Energy.
[FR Doc. 97-27948 Filed 10-21-97; 8:45 am]
BILLING CODE 6450-01-P


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