12A-0 

## APPENDIX 12A. MANUFACTURER IMPACT ANALYSIS INTERVIEW GUIDES: LIQUID-IMMERSED AND MV DRY-TYPE
TABLE OF CONTENTS 12A.1 Liquid-Immersed MIA Interview Guide 12A-1 12A.2 Medium-Voltage Dry-Type MIA Interview Guide 12A-10

12A

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### 12A.1 Liquid-Immersed MIA Interview Guide 

## Liquid-Immersed Distribution Transformer Energy Conservation Standards Rulemaking Manufacturer Impact Analysis Interview Guide

Navigant Consulting, Inc. May 2005

12A-11. KEY ISSUES The Department of Energy (DOE) is currently consid ering six Trial Standard Levels (TSLs). The TSLs are presented below as they apply to the representative units selected for detailed analysis. In responding to this questionnaire, please refer to the table of TSLs below. Product Class Product Class 1 Product Class 2 (1-phase) (3-phase) Design Lines DL1 10-167 kVA (rectangular tank) DL2 10-167 kVA (round tank) DL3 250-883 kVA DL4 15-500 kVA DL5 750-2500 kVA Representative Unit 50 kVA 25 kVA 500 kVA 150 kVA 1500 kVA Base Case None None TSL1 / TP-1 98.90% 98.70% 99.30% 98.90% 99.30% TSL2 99.04% 98.73% 99.38% 99.08% 99.36% TSL3 99.19% 98.76% 99.46% 99.26% 99.42% TSL4 99.33% 98.79% 99.54% 99.45% 99.47% TSL5 99.49% 98.96% 99.74% 99.58% 99.71% TSL6 99.59% 99.46% 99.75% 99.61% 99.71% Note: Efficiencies are specified at the NEMA TP1 temperature and loading conditions. 1.1 What are the key issues for your company regardi ng the distribution transform er energy conservation standard rulemaking? 1.2 How significant are the above key issues at each Trial Standard Level? 1.3 How can we most effectively incorporate these issues in the Manufacturer Impact Analysis?

2. COMPANY OVERVIEW AND ORGANIZ ATIONAL CHARACTERISTICS The Department’s interest concerning manufacturer imp act is focused at the plant or profit center level directly pertinent to transformer production. Howeve r, the context within which the plant operates and the details of plant production and costs are not r eadily available from the published literature, so the Department invites you to provide these details confiden tially in your own words to the extent practical. The organizational setting around the transformer profit cen ter is of interest to round out the Department’s understanding of the probable future of the transformer manufacturing activity with and without energy efficiency standards. 2.1 Do you have a parent company, and/or any subs idiaries relevant to the transform er industry? 2.2 Where are your production facilities located, and what is the product mix manufactured at each location? 2.3 What are your employment levels at these facilities? 2.4 What are your product lines, niches and relative strengths in the liquid-immersed market?

12A-23. FINANCIAL PARAMETERS Navigant Consulting has built a model of industry fi nancial impacts called the Government Regulatory Impact Model (GRIM), using publicly available data on distribution transformer manufacturers. This questionnaire attempts to understand how your company’s financial situation differs from our industry aggregate picture. 3.1 Please compare your financial parameters to the GRIM param eters tabulated below. GRIM Input Definition Our Industry Estimate Your Industry Estimate (if significantly d ifferent) Your Business Segment’s Actual

(if significantly d ifferent) Income Tax Rate Corporate effective income tax rate (percentage of earnings before tax) 30.0% Weighted Average Cost of Capital (W ACC) Inflation-adjusted weighted average of corporate cost of debt and return on equity 8.9% Working Capital, net Current assets less current liabilities (percentage of revenues) 15.4%

SG&A Selling, general, and adm inistrative expenses (percentage of revenues) 12.5%

R&D Research and development expenses (percentage of revenues) 1.4% Depreciation Amortization of fixed assets (percentage of revenues) 1.7% Capital Expenditures Outlay of money to acquire or im prove capital assets (percentage of revenues, not including acquisition or sale of business units) 1.9%

PPE, net Plant, Property, and Equipment less accum ulated depreciation 16.6%

3.2 How might new efficiency standards a lter y our company’s financial parameters?

4. MORE EFFICIENT DESIGNS The Department’s engineering analysis models impr ovem ents in efficiency by considering alternative combinations of design factors such as core steels, winding conductors, and join t configurations. The Department would like to understand what changes may be necessary in your product designs for the production of higher efficiency liquid-immersed distribution transformers.
12A-34.1 What are your current design features? For each d esign line, which m aterials are used to build your non-evaluated transformers? What joint types are used? 4.2 Does your company build TP1-compliant transformers? How do these designs compare to your nonevaluated transformers? 4.3 Does your company build transformers that signi ficantly exceed TP1 efficiency levels? Which designs are used to exceed TP1? Which designs would you likely use to meet the various TSLs? 4.4 Are there any other manufacturing issues that DOE should be aware of in terms of producing more energy efficient transformers at your facility? 4.5 Do you currently fabricate your own cores and coils? Would the standard level change y our business practices with respect to such make vs. buy decisions?

5. MATERIAL PRICES AND AVAILABILITY 5.1. In its revised Engineering Analysis, the Department updated its price assumptions for material inputs. The Departm ent considered two price scenarios: 1) 5-year average for the years 2000-2004 (2004 US$), and 2) typical first quarter 2005 prices. The prices assumed to be paid by transformer manufacturers are shown in the table below. In your experience are these prices representative of the industry as a whole? Are the prices that your co mpany pays significantly different? If so, does this confer a disadvantage to your firm? Item and Description Material Price (2000-2004) Material Price (Q1 2005) M2 core steel $0.95 $1.71 M3 core steel $0.80 $1.63 M4 core steel $0.76 $1.56 M6 core steel $0.70 $1.42 ZDMH (mechanically-scribed core steel) $1.47 $2.75 SA1 (amorphous) – finished core, volume production $1.80 $2.50 Copper wire, formvar, round #10-20 $1.55 $2.25 Copper wire, enameled, round #7-10 $1.51 $2.21 Copper wire, enameled, rectangular sizes $1.76 $2.65 Aluminum wire, formvar, round #9-17 $1.43 $1.56 Aluminum wire, formvar, round #7-10 $1.46 $1.58 Copper strip, thickness range 0.02-0.045 $2.32 $2.92 Copper strip, thickness range 0.030-0.060 $2.24 $2.84 Aluminum strip, thickness range 0.02-0.045 $1.54 $1.66 Aluminum strip, thickness range 0.045-0.080 $1.45 $1.69 Mineral Oil $1.71 $2.40 * Five year average (2000 through 2004) for materials expre ssed in 2004$ per lb. Average compiled by Paul Goethe, Optimized Program Service, January 2005.

12A-45.2. In the Department’s analysis, material costs are m arked up to determine the manufacturer sales price. In light of the large increases of material costs, have you changed your material markup factors or practices? 5.3. Are the materials necessary to build more energy efficient transformers readily available? 5.4. Have your company’s procurement practices ch anged in response to recent com modity price volatility? 5.5. Have recent material price changes affected your company’s business?

6. SHIPMENT PROJECTIONS 6.1 An efficiency standard can affect shipments by changing product attributes, m arketing approaches, product availability, and price. For the ANOPR and NOPR, a small sensitivity of liquid-immersed shipments to price is modeled. Do you consider this to be appropriate? 6.2 What is your company’s approximate market share in each of the liquid-immersed design lines? Within each design line, is y our proportion of sh ipments at each kVA rating the same as the industry average? 6.3 Would you expect your market share to change on ce standards become effective? Does your outlook change with higher efficiency levels?

7. CONVERSION COSTS An increase in efficiency standards may cause your company to incur one-time costs. We call these conversion costs because they are the costs of cha nging your business to comply with new efficiency standards. The GRIM considers three types of conversion costs:

• Conversion Capital Expenditures—One-time investme nts in plant, property , and equipment (PPE) necessitated by an efficiency standard. These may be completely incremental to existing PPE or they could involve replacement of existing PPE. • Product Conversion Expenses—One-time expenses in research, product developm ent, testing, and marketing necessitated by an appliance efficiency standard. • Annual Compliance Costs (not technically a c onversion cost) – On-going expenses incurred to comply with efficiency standards, typically to meet testing requirements.

12A-57.1 What level of conversion costs do you anticipate in curring under the different Trial Standard Levels? Refer to the tables below to provide your comp any’s estimates. Please provide additional qualitative information to help us understand th e nature of your investments.
Trial Standard Level Liquid-Immersed – Conversion Capital Expenditures (thousands U.S.$) Building Equipment Tooling Other TSL1 (TP-1) TSL2 TSL3 TSL4 TSL5 TSL6

Trial Standard Level Liquid-Immersed – Product Conversion Expenses (thousands U.S.$) Research &

Product Development Testing Marketing Other TSL1 (TP-1) TSL2 TSL3 TSL4 TSL5 TSL6
7.2 What portion of your conversion capital expenditu res will go towards replacing existing assets that would becom e obsolete under an efficiency st andard? Does your answer depend upon the TSL?
7.3 What are the depreciation periods for the three ty pes of capital expenditures (building, equipm ent, tooling)?
7.4 What specific annual compliance costs (after the e ffective date) do y ou anticipate incurring to comply with standards? Will they vary with standard le vel? Would they vary over time (e.g., increase with sales)?

12A-68. PRODUCT MIX Current differences in product mix (distributi on of product sales by efficiency level) among manufacturers can lead to different reactions to and impacts from new efficiency standards. The GRIM calculates financial results at each efficiency level to capture some of these effects. 8.1 What is the typical efficiency of a non-eval uated transform er for each representative unit? 8.2 What percentage of product in each design line is TP1-compliant (industry-wide)? Do significant fractions of product exceed TP1 efficiency leve ls (industry-wide)? Comment on any differences between the industry’s distribution of product efficiencies and your company’s. 8.3 Do you expect the product efficiency mix to shift over time in the base case? Why or why not? 8.4 For each design line and corresponding TSL, please comment on the potential for marketing premium products (i.e., those with efficiencies significantly above of the TSL). What might be the percentage of premium efficiency products sold at each TSL?

9. MARKUPS AND PROFITABILITY One of the primary objectives of the Manufacturer Im pact Analy sis is to assess the impact of Trial Standard Levels on industry and s ub-group profitability. In this section, we would like your assistance understanding how the Trial Standard Levels would impact your company’s markups and profitability. 9.1 The non-production cost markup is defined as the factor applied to the full production costs to arrive at the Manufacturer Selling Price. The Manufacturer Selling Price allows the company to recover all costs, both production and non-production, and to earn a profit. The Department used a nonproduction cost markup of 1.25 for SG&A, R&D, inte rest, and profit. This represents a 20% gross margin on sales price. 9.1.1 How does the industry average of 1.25 compare with your non-production cost markup? 9.1.2 Has the average mark-up changed as a result of higher material costs? 9.1.3 Is the mark-up on a TP1 product different?
9.2 What other factors might change the industry’s profitability? 9.3 Has recent commodity price volatility affected the industry’s profitability?

10. REFURBISHMENT 10.1 How do you expect new standards to impact the size and profitability of the refurbished distribution transform er market?

12A-711. CUMULATIVE REGULATORY BURDEN Cumulative regulatory burden refers to the burden th at industry faces from overlapping effects of new or revised DOE standards and/or other regulatory ac tions affecting the same products or industry. 11.1 Are there other recent or impending regulations that distribution transformers face (from DOE or otherwise)? How might an energy efficiency sta ndard impact the cumulative regulatory burden faced by your company? 11.2 Are there any other DOE standards that would pose a significant impact on your company (any division) within three y ears of the proposed e ffective date for efficiency standards (2010)? 11.3 Under what circumstances would you be able to coordinate any expenditures related to metrification, other regulations, and distribution transform er effi ciency standards, thereb y lessening the cumulative burden?

12. EXPORTS / FOREIGN COMPETITION / OUTSOURCING Disparity between domestic and foreign efficiency st andards could im pact exports or imports. Labor content and material changes - resulting from efficiency standards - may impact sourcing decisions. 12.1 Does the bulk of your company’s transformer production occur domestically? Absent standards, are production facilities being relocated to foreign countri es? Would standards impact your domestic vs. foreign manufacturing decision? How? 12.2 Could a new standard affect your export sales? What would the resulting impact be, if any, on your manufacturing operations and profitability? 12.3 What percentage of the U.S. market has been captured by foreign competition? Would standards have an impact on foreign competition? How?

13. DIRECT EMPLOYMENT IMPACT ASSESSMENT The impact of new energy efficiency standards on employment is an important consideration in the rulem aking process. This section of the interview gui de seeks to explore current trends in transformer production employment and solicit manufacturer views on how domestic employment patterns might be affected by new energy efficiency standards. 13.1 Would your domestic employment levels cha nge under new energy efficiency standards? 13.2 Would the workforce skills necessary under new energy efficiency standards require extensive retraining or replacem ent of employees?

14. CONSOLIDATION New efficiency standards can alter the competitive dy nam ics of the market. This can include prompting companies to enter or exit the market, or to merg e. The DOE and the Justice Department are both

12A-8interested in any potential reduction in competition that would result from a new efficiency standard. 14.1 Please comment on industry consolidation a nd related trends over the last 5 y ears. 14.2 In the absence of new standards, do you expect any industry consolidation? Please describe your expectations. 14.3 How would new standards affect your ability to compete? 14.4 Could new standards disproportionately advance or harm the competitive positions of some firms (e.g., sm all businesses)? 14.5 Could new standards result in disproportionate econom ic or performance penalties for particular consumer subgroups? 14.6 Could new standards result in products that will be less desirable to consum ers (not considering price effects)? Which attributes could be affected?
15. NICHE PRODUCTS The definition of a distribution transformer excludes cer tain ty pes of transformers from this rulemaking. For transformers that are covered, DOE is interested in whether new standard levels for some sub-groups of products might threaten their viability because of either technical or commercial considerations. 15.1 Do you have any products whose viability could be threatened by a higher efficiency standard? If so, please identify the threatened products and the threshold Trial Standard Level that poses a threat. 15.2 What would you have to do in order to ensure the viability of those products? 15.3 For the purposes of the GRIM, DOE has separated the distribution transform er industry into three main groups – liquid-immersed, low voltage dry, a nd medium voltage dry. Are there other industry groupings that might be meaningful?

16. EFFECTIVE DATE OF STANDARDS The effective date for new standards after the regula tion is prom ulgated is currently expected to be 2010 (final rule to be published in 2007). 16.1 Is this 3-year lead time for retooling, red esign, and compliance demonstration feasible/adequate? If the answer depends on the new standard level, please explain. 16.2 If the effective date were postponed, woul d the burden of the standard on y our company be reduced?
17. MISCELLANEOUS 17.1 Are there any federal tax credits or other incen tive program s to encourage you to produce energy efficient transformers?

12A-9

### 12A.2 Medium-Voltage Dry-Type MIA Interview Guide


## MV Dry-Type Distribution Transformer Energy Conservation Standards Rulemaking Manufacturer Impact Analysis Interview Guide

Navigant Consulting, Inc. May 2005

12A-101. KEY ISSUES The Department of Energy (DOE) is currently consid ering six Trial Standard Levels (TSLs). The TSLs are presented below as they apply to the representative units selected for detailed analysis. In responding to this questionnaire, please refer to the table of TSLs below. Product Class Product Class 6 (MV 3-phase, 20-45 kV BIL) Product Class 8 (MV 3-phase, 60-95 kV BIL) Design Lines DL9 15-500 kVA DL10 750-2500 kVA DL11 15-500 kVA DL12 750-2500 kVA Representative Unit 300 kVA 1500 kVA 300 kVA 1500 kVA Base Case None None TSL1 / TP-1 98.60% 99.10% 98.50% 99.00% TSL2 98.82% 99.20% 98.67% 99.12% TSL3 99.04% 99.30% 98.84% 99.23% TSL4 99.26% 99.39% 99.01% 99.35% TSL5 / TSL6 99.41% 99.51% 99.09% 99.51% Product Class Product Class 10 (MV 3-phase, 110-150 kV BIL) Design Lines DL13 225-2500 kVA Representative Unit 2000 kVA Base Case None TSL1 / TP-1 99.00% TSL2 99.15% TSL3 99.30% TSL4 99.45% TSL5 / TSL6 99.55% Note: Efficiencies are specified at the NEMA TP1 temperature and loading c onditions. Also, efficiency standards for the MV dry-type single-phase transformers will be based on the corresponding three-phase analog (e.g., the 100 kVA single-phase efficiency standard will be based upon the 300 kVA three-phase standard).

1.4 What are the key issues for your company regardi ng the distribution transform er energy conservation standard rulemaking? 1.5 How significant are the above key issues at each Trial Standard Level? 1.6 How can we most effectively incorporate these issues in the Manufacturer Impact Analysis?

12A-112. COMPANY OVERVIEW AND ORGANIZ ATIONAL CHARACTERISTICS The Department’s interest concerning manufacturer imp act is focused at the plant or profit center level directly pertinent to transformer production. Howeve r, the context within which the plant operates and the details of plant production and costs are not r eadily available from the published literature, so the Department invites you to provide these details confiden tially in your own words to the extent practical. The organizational setting around the transformer profit cen ter is of interest to round out the Department’s understanding of the probable future of the transformer manufacturing activity with and without energy efficiency standards. 2.5 Do you have a parent company, and/or any subs idiaries relevant to the transform er industry? 2.6 Where are your production facilities located, and what is the product mix manufactured at each location? 2.7 What are your employment levels at these facilities? 2.8 What are your product lines, niches and relative stre ngths in the m edium-voltage dry-type market?
4. FINANCIAL PARAMETERS Navigant Consulting has built a model of industry fi nancial impacts called the Government Regulatory Impact Model (GRIM), using publicly available data on distribution transformer manufacturers. This questionnaire attempts to understand how your company’s financial situation differs from our industry aggregate picture. 3.1 Please compare your financial parameters to the GRIM param eters tabulated below. GRIM Input Definition Our Industry Estimate Your Industry Estimate Your Business Segment’s Actual Income Tax Rate Corporate effective income tax rate (percentage of earnings before tax) 33.9% Weighted Average Cost of Capital (W ACC) Inflation-adjusted weighted average of corporate cost of debt and return on equity 8.9% Working Capital, net Current assets less current liabilities (percentage of revenues) 10.6% SG&A Selling, general, and administrative expenses (percentage of revenues) 13.5% R&D Research and development expenses (percentage of revenues) 1.1% Depreciation Amortization of fixed assets (percentage of revenues) 1.8% Capital Expenditures Outlay of money to acquire or im prove capital assets (percentage of revenues, not including acquisition or sale of business units) 2.1%

PPE, net Plant, Property, and Equipment less accum ulated depreciation 16.1%

12A-123.2 How might new efficiency standards a lter y our company’s financial parameters?

4. MORE EFFICIENT DESIGNS The Department’s engineering analysis models impr ovem ents in efficiency by considering alternative combinations of design factors such as core steels, winding conductors, and join t configurations. The Department would like to understand what changes may be necessary in your product designs for the production of higher efficiency medium-volta ge dry-type distribution transformers. 4.6 What are your current design features? For each d esign line, which m aterials are used to build your non-evaluated transformers? What joint types are used? 4.7 Does your company build TP1-compliant transformers? How do these designs compare to your nonevaluated transformers? 4.8 Does your company build transformers that signi ficantly exceed TP1 efficiency levels? Which designs are used to exceed TP1? Which designs would you likely use to meet the various TSLs? 4.9 Are there any other manufacturing issues that DOE should be aware of in terms of producing more energy efficient transformers at your facility? 4.10 Do you currently fabricate your own cores and coils? Would the standard level change y our business practices with respect to such make vs. buy decisions?

5. MATERIAL PRICES AND AVAILABILITY 5.6. In its revised Engineering Analysis, the Department updated its price assumptions for material inputs. The Departm ent considered two price scenarios: 1) 5-year average for the years 2000-2004 (2004 US$), and 2) typical first quarter 2005 prices. The prices assumed to be paid by transformer manufacturers are shown in the table below. In your experience are these prices representative of the industry as a whole? Are the prices that your co mpany pays significantly different? If so, does this confer a disadvantage to your firm?

12A-13Item and Description Material Price (2000-2004) Material Price (Q1 2005) H-O DR core steel (laser-scribed) $0.99 $1.85 M3 core steel $0.80 $1.63 M4 core steel $0.76 $1.56 M5 core steel $0.72 $1.47 M6 core steel $0.70 $1.42 M19 core steel (26 gauge) $0.56 $0.82 M36 core steel (29 gauge) $0.50 $0.69 M36 core steel (26 gauge) $0.45 $0.65 M43 core steel (26 gauge) $0.43 $0.58 Copper wire, rectangular 0.1 x 0.2, Nomex wrapped $2.00 $2.69 Aluminum wire, rectangular 0.1 x 0.2, Nomex wrapped $2.06 $2.05 Impregnation (per gallon) $17.80 $19.00 * Five year average (2000 through 2004) for materials expre ssed in 2004$ per lb. Average compiled by Paul Goethe, Optimized Program Service, January 2005. 5.7. In the Department’s analysis, material costs are m arked up to determine the manufacturer sales price. In light of the large increases of material costs, have you changed your material markup factors or practices? 5.8. Are the materials necessary to build more energy efficient transformers readily available? 5.9. Have your company’s procurement practices ch anged in response to recent com modity price volatility? 5.10. Have recent material price changes affected your company’s business?

6. SHIPMENT PROJECTIONS 6.4 An efficiency standard can affect shipments by changing product attributes, m arketing approaches, product availability, and price. In the ANOPR, the Department assumed that industry-wide dry-type shipments do not vary by standard level (i.e., ther e is no consumer sensitivity to price). For the NOPR, a small sensitivity of dry-type shipments to pr ice may be introduced. Do you consider this to be appropriate? 6.5 What is your company’s approximate market share in each of the medium-voltage design lines? Within each design line, is y our proportion of sh ipments at each kVA rating the same as the industry average? 6.6 Would you expect your market share to change on ce standards become effective? Does your outlook change with higher efficiency levels?

12A-147. CONVERSION COSTS An increase in efficiency standards may cause your company to incur one-time costs. We call these conversion costs because they are the costs of cha nging your business to comply with new efficiency standards. The GRIM considers three types of conversion costs:

• Conversion Capital Expenditures—One-time investme nts in plant, property , and equipment (PPE) necessitated by an efficiency standard. These may be completely incremental to existing PPE or they could involve replacement of existing PPE. • Product Conversion Expenses—One-time expenses in research, product developm ent, testing, and marketing necessitated by an appliance efficiency standard. • Annual Compliance Costs (not technically a c onversion cost) – On-going expenses incurred to comply with efficiency standards, typically to meet testing requirements.
7.5 What level of conversion costs do you anticipate in curring under the different Trial Standard Levels? Refer to the tables below to provide your comp any’s estimates. Please provide additional qualitative information to help us understand th e nature of your investments.
Trial Standard Level MV Dry-Type – Conversion Capital Expenditures (thousands U.S.$) Building Equipment Tooling Other TSL1 (TP-1) TSL2 TSL3 TSL4 TSL5 / TSL6

Trial Standard Level MV Dry-Type – Product Conversion Expenses (thousands U.S.$) Research &

Product Development Testing Marketing Other TSL1 (TP-1) TSL2 TSL3 TSL4 TSL5 / TSL6
7.6 What portion of your conversion capital expenditu res will go towards replacing existing assets that would becom e obsolete under an efficiency st andard? Does your answer depend upon the TSL?
7.7 What are the depreciation periods for the three ty pes of capital expenditures (building, equipm ent, 12A-15tooling)?
7.8 What specific annual compliance costs (after the e ffective date) do y ou anticipate incurring to comply with standards? Will they vary with standard le vel? Would they vary over time (e.g., increase with sales)?

8. PRODUCT MIX Current differences in product mix (distributi on of product sales by efficiency level) among manufacturers can lead to different reactions to and impacts from new efficiency standards. The GRIM calculates financial results at each efficiency level to capture some of these effects. 8.5 What is the typical efficiency of a non-eval uated transform er for each representative unit? 8.6 What percentage of product in each design line is TP1-compliant (industry-wide)? Do significant fractions of product exceed TP1 efficiency leve ls (industry-wide)? Comment on any differences between the industry’s distribution of product efficiencies and your company’s. 8.7 Do you expect the product efficiency mix to shift over time in the base case? Why or why not? 8.8 For each design line and corresponding TSL, please comment on the potential for marketing premium products (i.e., those with efficiencies significantly above of the TSL). What might be the percentage of premium efficiency products sold at each TSL?

9. MARKUPS AND PROFITABILITY One of the primary objectives of the Manufacturer Im pact Analy sis is to assess the impact of Trial Standard Levels on industry and s ub-group profitability. In this section, we would like your assistance understanding how the Trial Standard Levels would impact your company’s markups and profitability. 9.4 The non-production cost markup is defined as the factor applied to the full production costs to arrive at the Manufacturer Selling Price. The Manufacturer Selling Price allows the company to recover all costs, both production and non-production, and to earn a profit. The Department used a nonproduction cost markup of 1.25 for SG&A, R&D, inte rest, and profit. This represents a 20% gross margin on sales price. 9.4.1 How does the industry average of 1.25 compare with your non-production cost markup? 9.4.2 Has the average mark-up changed as a result of higher material costs? 9.4.3 Is the mark-up on a TP1 product different?
9.5 What other factors might change the industry’s profitability? 9.6 Has recent commodity price volatility affected the industry’s profitability? 10. REFURBISHMENT
12A-1610.1 How do you expect new standards to impact the size and profitability of the refurbished distribution transform er market?

11. CUMULATIVE REGULATORY BURDEN Cumulative regulatory burden refers to the burden th at industry faces from overlapping effects of new or revised DOE standards and/or other regulatory ac tions affecting the same products or industry. 11.1 Are there other recent or impending regulations that distribution transformers face (from DOE or otherwise)? How might an energy efficiency sta ndard impact the cumulative regulatory burden faced by your company? 11.2 Are there any other DOE standards that would pose a significant impact on your company (any division) within three y ears of the proposed e ffective date for efficiency standards (2010)? 11.3 Under what circumstances would you be able to coordinate any expenditures related to metrification, other regulations, and distribution transform er effi ciency standards, thereb y lessening the cumulative burden?

12. EXPORTS / FOREIGN COMPETITION / OUTSOURCING Disparity between domestic and foreign efficiency st andards could im pact exports or imports. Labor content and material changes - resulting from efficiency standards - may impact sourcing decisions. 12.1 Does the bulk of your company’s transformer production occur domestically? Absent standards, are production facilities being relocated to foreign countri es? Would standards impact your domestic vs. foreign manufacturing decision? How? 12.2 Could a new standard affect your export sales? What would the resulting impact be, if any, on your manufacturing operations and profitability? 12.3 What percentage of the U.S. market has been captured by foreign competition? Would standards have an impact on foreign competition? How?

13. DIRECT EMPLOYMENT IMPACT ASSESSMENT The impact of new energy efficiency standards on employment is an important consideration in the rulem aking process. This section of the interview gui de seeks to explore current trends in transformer production employment and solicit manufacturer views on how domestic employment patterns might be affected by new energy efficiency standards. 13.3 Would your domestic employment levels cha nge under new energy efficiency standards? 13.4 Would the workforce skills necessary under new energy efficiency standards require extensive retraining or replacem ent of employees?

12A-1714. CONSOLIDATION New efficiency standards can alter the competitive dy nam ics of the market. This can include prompting companies to enter or exit the market, or to merg e. The DOE and the Justice Department are both interested in any potential reduction in competition that would result from a new efficiency standard. 14.1 Please comment on industry consolidation a nd related trends over the last 5 y ears. 14.2 In the absence of new standards, do you expect any industry consolidation? Please describe your expectations. 14.3 How would new standards affect your ability to compete? 14.4 Could new standards disproportionately advance or harm the competitive positions of some firms (e.g., sm all businesses)? 14.5 Could new standards result in disproportionate econom ic or performance penalties for particular consumer subgroups? 14.6 Could new standards result in products that will be less desirable to consum ers (not considering price effects)? Which attributes could be affected?
15. NICHE PRODUCTS The definition of a distribution transformer excludes cer tain ty pes of transformers from this rulemaking. For transformers that are covered, DOE is interested in whether new standard levels for some sub-groups of products might threaten their viability because of either technical or commercial considerations. 15.1 Do you have any products whose viability could be threatened by a higher efficiency standard? If so, please identify the threatened products and the threshold Trial Standard Level that poses a threat. 15.2 What would you have to do in order to ensure the viability of those products? 15.3 For the purposes of the GRIM, DOE has separated the distribution transform er industry into three main groups – liquid-immersed, low voltage dry, a nd medium voltage dry. Are there other industry groupings that might be meaningful?

16. EFFECTIVE DATE OF STANDARDS The effective date for new standards after the regula tion is prom ulgated is currently expected to be 2010 (final rule to be published in 2007). 16.1 Is this 3-year lead time for retooling, red esign, and compliance demonstration feasible/adequate? If the answer depends on the new standard level, please explain. 16.2 If the effective date were postponed, woul d the burden of the standard on y our company be reduced?

12A-1817. MISCELLANEOUS 17.1 Are there any federal tax credits or other in centive program s to encourage you to produce energy efficient transformers?

12A-19