GAO 

Unlltea States Accountability Office 

Washington, DC 20548 

B-324716 

May 6,2013 

The Honorable Ron Wyden 

Chairman 

The Honorable Lisa Murkowski 

Ranking Member 

Committee on Energy and Natural Resources 

United States Senate 

The Honorable Fred Upton, 

Chairman 

The Honorable Henry A. Waxman 

Ranking Member 

Committee on Energy and Commerce 

House of Representatives 

Subject Department qf Energy: Energy Conservation Program: Energy 

Conservation Standards for Distribution Transformers , 

Pursuant to section 801 (a)(2)(A) of title 5, United States Code, this is our report o'n a 

major rule promulgated by the Department of Energy (DOE), entitled "Energy 

Cohservation Program: Energy Conservation Standards for Distribution 

Transformers" (RIN: 1904-AC04). We (eceived the rule on April 24, 2013. It was 

published in the Federal Register as afinal rule on April 18, 2013.78 Fed. Reg. 

23,336. ' " " ' " 

The final rule adopts more stringent energy conservation standards for distribution 

transformers, DOE has determined that the amended energy conserVation 

standards for this equipment would result in significant conservation of energy and 

are technologically feasible and economically justified, The Energy Policy and 

Conservation Act of 1975 (EPCA), as amended, prescribes energy conservation 

stand,ards for various consumer products and certain cOmmercial and ,industrial 

equipment, including distrib.utjon transfomiers. EPCAalso requires DOE to 

determine whether.l1:1o~e, st~ingent standards would betElchnologically feasible and 

economically jl.l.stifi~cl,: ailclwo'~la save a significant amount of energy. . 

Compliance with the amended standards established for distribution transformers in 

this final rule is requiredf.\~of Ja~uary 1, 2016. '; .. 

GAO-13-593R 
The final rule has an effective date of June 17, 2013. The Congressional Review 

Act (CRA) requires a 60-day delay in the effective date of a major rule from the date 

of publication in the Federal Register orreceipt of the rule by Congress, whichever is 

later. 5 U.S.C: § 801 (a)(3)(A). TheTule Was published in the Federal Register on 

April 18, 2013, but we did not receive the rule until April 24, 2013. Therefore, the 

final rule does not have the required 60"day delay in its effective date. 

Enclosed is our assessment cif DOE's compliance with the procedural steps required 

by sectibh 801 (a)(1 )(8)(i) through (iv) of title 5 with respect to the rule. Our review of 

the procedural steps taken indicates that DOE complied with the applicable 

requirements, with the exception of the 60-day delay in effective date requirement. 

If you have any questions about this report or wish to contact GAO officials 

responsible for the evaluation work relating to the subject matter of the rule, please 

contact Shirley A. Jones, Assistant General Counsel, at (202) 512-8156. 

A'~~if~ Robert J. Cramer " , , ' 

Managing Associate General Counsel , , 

EnclosUre' 

cc: Daniel Cohen " ," , , ,:' 

Assistant General Couhsel for Legislation, 

Regulation,' and 'Energy Efficiency 

Department of Energy , 

" 

"'. " 

Page 2 GAO-13-593R 
, ' 

" 

. ", . ENCLOSURE 

. • __. ". 1,:',1" " '. .' ',!", '. '" .-, 

.REPORT ,ljNI)ElH5U,S,9;§ 801 (a)(2)(A) ONA MAJOR RULE 

" I$SUED BY THE . 

. ' ,. "DEPARTME;.NJ OF E;NE,~OYi 

ENTITLED 

'~E;NER~iACNC:~~~V:6~~I~~~~~~I~:NE~~:~;Fg~~~~~ATION ,(RIN: 1904-AC04) , . 

(i) Cost-benefit analysis 

DOE summarized the national economic costs and benefits, expected to result from 

the final rule. According to DOE, in 2011 dollars total benefits are $10.77 billion, 

discounted at 7 percent, and $22.8 billion, discounted at 3 percent while net 

benefits, including C02 and NOx reduction monetized value, are $7.88 billion 

discounted at 7 percent, and $17.6 billion, discounted at 3 percent. DOE also 

, states that the incremental installed costs in 2011 dollars are $289 billion, 

discounted at 7 percent, and $5.22 billion, discounted at 3 percent. . 

DOE states that the benefits and costs of the final rule, for equipment sold in 2016-

2045, can also be expressed in terms of annualized values. The ann,ualized 

monetary values are the sum of: (1) the annualized national economic value of the 

benefits from customer operation of equipment that meets today'sstandards 

(consisting primarily of operating'G<!st savings from using les,s,energy, minus 

increases in equipment purchase and installation'costs, which is another way of 

representing cu'stomer net present'value), and (2) t~e annual,ized monetary value of 

the benefits of emission reductions, including CO2 emission reductions. 

DOE also estimated annualized costs and benefits of the final rule. According to 

DOE, using a 7 percent discount rate for benefits and costs (other than C02 

reduction, for which DOE used a 3 percent discount rate along with the Social Cost 

of Carbon (SCC) series corresponding to a value of $22.3/ton in 2011), the cost of 

the standards in today's rule is $266 million per year in increased equipment costs, 

while the benefits are $581 million per year in reduced equipment operating costs, 

$237 million in CO2 reductions, and $8.60 million in reduced NOx emissions. In this 

case, the net benefit amounts to $561 million per year. DOE states that using a 3 

percent discount rate for all benefits and costs (and the SCC series corresponding 

to a value of $22.3/ton in 2011), the cost is $282 million per year in increased 

equipment costs, while the benefits are $983 million per year in reduced operating 

costs, $237 million in C02 reductions, and $12.67 million in reduced NOx emissions. 

In this case, DOE notes that the net benefit amounts to $950 million per year. 

GAO-13-593R 
) , 

(ii) Agency actions relevant to the Regulatorv Flexibility Act. 5 U.S.C. §§ 603-605. 

607. and 609 '.' .. 

" I' 

EJOE used the Small Business Administration's small business size standards to 

.. determine whether any small entities would be subject to the requirements of the 

rule. In the Februaty2012 notice of proposed rulemaking(NOPR), DOE identified 

approximately 10 liquid·immersed distribution transformer manufacturers, 14 lowvoltage dry-type (L VDT) manufacturers, and 17 medium-voltage dry-type (MVDT) 

manufacturers of covered equipment that can be considered small businesses. 77 

Fed. Reg. 7282. DOE explicitlyconsidered the impacts on small manufacturers of 

liquid immersed and dry-type transformers in selecting the trial standard levels 

(TSLs), rather than selecting a higher trial standard level. It is DOE's belief that 

levels at TSL 30r higher would place excessive burdens on small manufacturers of 

MVDT transformers, as would TSL 2 or higher for liquid-immersed and MVDT 

transformers .. Because DOE believes that the TSLs selected are economically 

justified (including conSideration of small bUsiness impacts), the reduced impact on 

small businesses that would have been realized in moving to lower effiCiency levels 

was not considered in DOE's decision (but the reduced impact on small businesses 

that is realized ihmoving dowh to TSL 2 from TSL 3 (in the case of MVDT and 

LVDT) and to TSL1 frqmTSL2 (in the case cifliquid-immersed) was explicitly 

considered in theweighhlgof oimefitsarid burdens). '. '. • ... . ;", 

(iii) AgencyactiotlS relevant to sections '202-205 of the Unfunded Mandates Reform 

. Act (UMRA) of 1995,2 U:S.C. §§ 1532-1535' 

On March 18, 1997, DOE published a statementof~olicy on.its procefssfor . 

intergovernmental consultation under UMRA. 62 Fed. Reg: 12,820. DOE has 

concluded that this final rule would likely require expenditures of $100 inillion or 

more by the private sector. According to DOE, such expenditures may include: (1) 

investment in research and development and in capital expenditures by distribution 

transformeF manufacturers in the years between the final rule and the compliance 

dat~ for the new standards, and (2)incremental additional expenditures by 

consumers to purchase higher-efficiency distribution transformers, starting at the 

compliance' date for t~e .applicable ~tandard ........ '. . 

(iv) Other relevant information or' requirements under acts and executive orders 

AdministratiVe Procedure Act, 5 U.S.C. §§ 551 et seq. 

DOE published aNOPR on February 10, 2012, which proposed amended 

standards for alltliree transformer types.' 77 Fed. Reg. 7282. 'In the NOPR, DOE 

sought comment on a number of issues related to the rulemaking. '. Following 

publication of the NOPR, DOE received several comments expressing a desire to 

see some of the NOPR suggestions extended and analyzed for liquid-immersed 

distribution transformers. In response, DOE generated a supplementary NOPR 

Page 2 GAO-13-593R 
analysis with three additional TSLs .. According to DOE,the three TSLs presented 

were based on possible new equipment classes for pole-mounted distribution 

transformers, network/vault-based distribution transformers,.,and those wjth high 

bas,ic i,mpulse level ratings. On June 4,2012, OPE published a notice announcing 

the availability of this supplementary qnalysis and of a pUblic, meeting to be held on 

June 20, 2012, to present and receive feedback on it. DOE also generated an 

additional. TSL in q June 18, 2012, analysis published on DOE's website. 

Paperwork Reduction Act, 44 U.S.C. §§ 3501-3520 

Manufacturers of distribution transformers must certify to DOE that their equipment 

complies with any applicable energy conservation standards. In certifying 

compliance, manufacturers must test their equipment according to the DOE test 

procedures for distribution transformers, including any amendments adopted for 

those test procedures. DOE has established regulations for the certification and 

recordkeeping requirements for all covered consumer products and commercial 

equipment, including distribution transformers, 76 Fed. Reg, 12,422. The collection 

of information requirement for the certificatiqn and recordkeepingis subject to 

review and approval by the Office of Management and Budget (OMB) under the .' '. . ! • f • 

Paperwork Reduction Act (PRA). According toDGE,this .requirement has been 

approved by OMB under OMB control number 1910-1400, DOE notes that public 

reporting burden for the certificaticm is estimated to average 20 hours per response, 

including the time for reviewing instructi9ns;sea~ching exi~ting data sources, 

gathering and maintaining the data needed, and completing and revieWing the 

collection of information", , 

. Statutory authorization for the r~le ...•. ., . 

, f.: , . • .' .,' " 

EPA states that the final rule is authqrized byTi\lelll,PartB of.EPCA,Public Law 

94-163 (42 U:S.C, §§ 6291-6309, <Is codified), '''I'~fch.es\ablisheq ,the,Energy 

Conservation Program for "Consumer Products of her Than Automobiles," 

AdditionallY,Part C qfTitlelli. of EPCA (42 U,S.C. §§6311-6317) established a 

similar program for "Certain Industrial E;quipment," including 9istribution 

transformers. The Energy PolicyActof 1992 (EPACT Hi92), Public Law 102-486, 

amended EPCA and directed the Department of Erwrgy t() prescribe energy 

conservation standards for those distribution transformers for which DOE 

determines such standards would be technologicqlly feasible, economically justified, 

and would result in significant energy savings. 42U.S.C. § 6317(a). The Energy 

Policy Act of 2005 (EPACT 2005), Public Law 109-58, amendeq EPCA to establish 

energy conservatiqn standards fo~ LVDTdistribution tr~nsformers. 42 U.S.C. 

§. 6295() . "" . . ". y. . ,. 

, ,:' 

Page 3 GAO-13-593R 
Executive Order No. 12,866 (Regulatory Planning and Review) 

DOE has determined that the final rule is an "economically significant regulatory 

action." Accordingly, DOE prepared a regulatory impact analysis for OMS review. 

DOE's assessments prepared pursuant to the Order can be found in the technical 

support document for this rulemaking. 

Executive Order No. 13,132 (Federalism) 

On March 14,2000, DOE published a statement of policy describing the 

intergovernmental consultation process it would follow in the development of 

regulations having federalism implications. 65 Fed. Reg. 13,735. EPCA governs 

and prescribes federal preemption of state regulations as to energy conservation for 

the products that are the subject of the final rule. DOE explains that states can 

petition DOE for exemption from such preemption to the extent, and based on 

criteria, set forth in EPCA. 42 U.S.C. § 6297. 

. . 

Page 4 GAO-13-593R