# 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 HenryA. Waxman Ranking Member Committee on Energy and Commerce House of Representatives Subject DepartmentqfEnergy: Energy Conservation Program: Energy Conservation Standards forDistribution Transformers
, Pursuant to section 801(a)(2)(A) oftitle 5, United States Code, this is our report o'n a majorrule 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 Registeras 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 thatthe amended energy conserVation standards forthis equipmentwould result in significant conservation ofenergy and are technologically feasible and economicallyjustified, The Energy Policy and Conservation Act of 1975 (EPCA), as amended, prescribes energy conservation stand,ards for various consumerproducts 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. ';

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GAO-13-593RThe final rule has an effective date ofJune 17, 2013. The Congressional Review Act (CRA) requires a 60-day delay in the effective date ofa major rule from the date ofpublicationin the FederalRegisterorreceipt ofthe rule by Congress, whichever is later. 5 U.S.C: 

### § 801 (a)(3)(A). TheTule Was published in the FederalRegisteron 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) oftitle 5 with respect to the rule. Our review of the procedural steps taken indicates that DOE complied with the applicable requirements, with the exception ofthe 60-day delay in effective date requirement. Ifyou have any questions aboutthis report or wish to contact GAO officials responsible for the evaluation work relating to the subject matter ofthe 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'EnergyEfficiency Department of Energy ,

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. ENCLOSURE

. • __. ". 1,:',1" " '. .' ',!", '. '" .-, .REPORT ,ljNI)ElH5U,S,9;§ 801 (a)(2)(A) ONA MAJOR RULE " I$SUED BYTHE

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.' ,. "DEPARTME;.NJOF**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 statesthatthe benefits andcosts ofthe final rule, for equipment sold in 2016- 2045, can also be expressed in terms ofannualized values. The ann,ualized monetary values are the sum of: (1) the annualized national economic value ofthe benefits from customer operation ofequipmentthat meets today'sstandards (consisting primarily ofoperating'G<!st savings from using les,s,energy, minus increases in equipment purchase and installation'costs, which is anotherway of representing cu'stomer net present'value), and (2)**t~e** annual,ized monetary value of the benefits of emission reductions, including CO2emission reductions. DOE also estimated annualized costs and benefits ofthe final rule. According to DOE, using a 7 percent discount rate for benefits and costs (otherthan C02 reduction, for which DOE used a 3 percent discount rate along with the Social Cost of Carbon (SCC) series corresponding to avalue 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 peryear in reduced equipment operating costs, $237 million in CO2reductions, and $8.60 million in reduced NOx emissions. In this case, the net benefit amounts to $561 million peryear. DOE states that using a 3 percent discount rate for all benefits and costs (and the SCC series corresponding to avalue 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 peryear.

GAO-13-593R) 

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

### §§ 603-605. 607. and 609 '.'

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" I' EJOE used the Small Business Administration's small businesssize standards to

.. determine whether any small entities would be subject to 

### the requirements ofthe rule. In the Februaty2012 notice ofproposed rulemaking(NOPR), DOE identified approximately 10 liquid·immersed distribution transformer manufacturers, 14 lowvoltage dry-type (LVDT) manufacturers, and 17 medium-voltage dry-type (MVDT) manufacturers ofcovered equipmentthat 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), ratherthan selecting a highertrial standard level. 

### It is DOE's beliefthat levels at TSL 30r higherwould place excessive burdens on small manufacturers of MVDT transformers, as would TSL 2 or higherfor 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 havebeen 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 2from TSL 3(in the case of MVDTand LVDT) and to TSL1 frqmTSL2 (in the case cifliquid-immersed) was explicitly considered in theweighhlgofoimefitsarid burdens). '.'. • ...

. ;", (iii) AgencyactiotlS relevant to sections'202-205 ofthe 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 bythe private sector. According to DOE, such expenditures may include: (1) investment inresearchand development and in capital expenditures by distribution transformeFmanufacturers in the years between the final rule and the compliance

### dat~ forthe newstandards, and (2)incremental additional expenditures by consumers to purchase higher-efficiency distribution transformers, starting at the compliance'datefor**t~e**.applicable**~tandard**........ '.

. (iv) Other relevant informationor'requirements under acts and executive orders AdministratiVe ProcedureAct, 5 U.S.C. 

### §§ 551 et seq. DOE published aNOPR on February 10, 2012, whichproposed amended standards for alltlireetransformertypes.' 77 Fed. Reg. 7282. 'In the NOPR, DOE sought comment on a number ofissues related to the rulemaking. '. Following publication ofthe NOPR, DOE received several comments expressing a desire to see some ofthe NOPR suggestions extended and analyzed for liquid-immersed distribution transformers. In response, DOE generated a supplementary NOPR
Page 2 GAO-13-593Ranalysis with three additional TSLs

..According to DOE,thethreeTSLs 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 ofthis supplementary qnalysis and of

### a pUblic,meetingto be held on June 20, 2012, topresent and receive feedback on it. DOEalso generated an additional.TSL in q June 18, 2012, analysis published onDOE'swebsite. Paperwork Reduction Act, 44 U.S.C. §§ 3501-3520 Manufacturers ofdistribution transformers must certify to DOE that their equipment complies with any applicable energy conservation standards. In certifying compliance, manufacturers musttest their equipment according to the DOE test procedures for distribution transformers, including any amendments adopted for those test procedures. DOE has established regulations forthe 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 subjectto review and approval by the Office of Management and Budget (OMB) underthe .' '.

. ! • f • Paperwork ReductionAct (PRA). According toDGE,this.requirement has been approved by OMB under OMB control number 1910-1400, DOE notes that public reporting burden forthe 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",

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. Statutory authorization for the

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, f.: , . • .' .,' " EPAstates 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 

### ofherThanAutomobiles," 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 forwhich DOE determines such standards would be technologicqlly feasible, economicallyjustified, and would result in significant energy savings. 42U.S.C. § 6317(a). The Energy Policy Act of2005 (EPACT2005), Public Law 109-58, amendeq EPCAto establish energy conservatiqn standards**fo~** LVDTdistribution**tr~nsformers.** 42 U.S.C. 

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Page 3 GAO-13-593RExecutive 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 pursuantto the Order can be found in the technical support documentforthis rulemaking. Executive Order No. 13,132 (Federalism) On March 14,2000, DOE published a statement of policy describing the intergovernmental consultation process itwould follow in the developmentof regulations having federalism implications. 65 Fed. Reg. 13,735. EPCA governs and prescribes federal preemption ofstate regulations as to energy conservation for the products that are the subject ofthe final rule. DOE explains that states can petition DOE for exemption from such preemption to the extent, and based on criteria, setforth in EPCA. 42 U.S.C. 

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