January 11, 2012

The Honorable Steven Chu Secretary ofEnergy Forrestal Building 1000 Independence Avenue, SW Washington, DC 20585

Via e-mail and U.S. Mail

Dear Secretary Chu:

We write to you on behalfofour companies and organizations which representthousands ofU.S. manufacturing employees, and ultimately hundreds ofmillions ofelectricity consumers in the United States. We believe thatthe Department ofEnergy (DOE) could soonpropose efficiency standards for liquid-immersed electric distributiontransformers so stringentthatthey would have the effectofmandating the use ofa single type ofcore material

- amorphous metal

- for the manufacture ofthese transformers in the future. The only U.S. source for such material is a single, foreign-owned company. We are also extremely concerned aboutthe impact ofsuch stringent standards on utility rates, manufacturingjobs and the U.S. economy in general.

A large contingent ofindustry and utility representatives participated in formal Negotiated Rulemaking sessions with DOE and other stakeholders last fall. This contingentproposed an increase to Efficiency Level 1 (ELl) for most liquid-immersed transformer design lines, and offered substantial technological and economicjustification for these efficiency standard increases. A standard ofEL1, in most cases, would yieldtransformers with efficiencies greaterthan 99 percent, which is among the highest inthe world.
However, ifthe DOE proposes standards above ELI for these transformers, it will create a monopoly for a foreign-owned company and essentially eliminate thejobs ofthousands ofAmericans at U.S manufacturing companies who currently produce competing core materials and transformers. Distributiontransformers utilizing electrical steel core material have been produced in the U.S. for more than 100 years and are among the most energy- and cost-efficient in the world. A standard no more stringentthan EL1would allow for both electrical steel and amorphous metal to compete withoutjeopardizingthousands of jobs. Conversely, mandating a standard more stringentthan EL1could increase transformercosts by morethan 40 percent for incremental efficiency gains that may notbe economicallyjustified during the entire useful life ofthe transformer.

In additionto the negative impact on the American economy andjobs, there are other strong reasons not to mandate standards which would result in the exclusive use ofamorphous metal for liquid-immersed electric distribution transformers.
First, such standards would actually create strong financial incentives to rebuild existing transformers to their original specifications. Because oftheir long service life (many are more than 30 years old), such rebuilt transformers couldhave continued useful service for decades, forestalling the very energy efficiency gains sought by new standards. In addition, expert analysis indicates that amorphous metal transformers
are actually considerably Jess efficient at high loads than electrical steel transformers.
Second, directing the use ofamorphous metal for liquid-immersed distributiontransformers wouldviolate Congress's statutory mandate to DOE to establish minimum efficiency standards that are technologically feasible and economicallyjustified. Itwould create a significantmarket disruption for the industries and their employees currently serving the distribution transformer market.For example, thousands ofAmerican steelworkers, who produce highly efficient electrical steels could face the loss oftheirjobs. Transformer makers wouldbe forced to re-tool theirplants orbe forced out of business. In contrast, efficiency standards that allow for the use ofcompeting core materials, such as electrical steels, are technologically feasible and economicallyjustified.
Third, the foreign-owned manufacturerthat would receive monopolistic pricingpower as a result ofa new standard requiringthe use ofamorphous metal acknowledges on its websitethat it exports morethan 90 percent ofits U.S. production. Thus, it is unclearthatthis company could even satisfy the domestic demand by U.S. basedtransformer manufacturers for amorphous metal.

We respectfully urge DOEto propose efficiency standards for liquid-immersed distributiontransformers that are no greaterthan ELl, thereby allowing electrical steels to compete with amorphous metal, promoting a healthy and cost-competitive marketplace to serve the goal ofimproving the United States' electrical efficiency.
Sincerely,

James L. Wainscott Chairman, President & CEO AK Steel Corporation, West Chester, OH

Richard J. Harshman Chairman, President & CEO Allegheny Technologies Incorporated Pittsburgh, Pennsylvania

Mark Thurman President Cooper Power Systems Waukesha, Wisconsin



### CC: Director, Office ofManagement and Budget Leo W. Gerard International President TheUnited Steelworkers (USW) Pittsburgh, Pennsylvania

Bob King President The United Autoworkers (UAW) Detroit, Michigan

R. Thomas Buffenbarger International President International Association ofMachinists and Aerospace Workers Upper Marlboro, Maryland

Dr. Kathleen Hogan, DeputyAssistant Secretary, Energy Efficiency, DOE JenniferTiedeman, Office ofGeneral Counsel, DOE John Cymbalsky, Office ofBuilding Technologies, DOE



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### Background

In October 2007, DOE finalized rules on liquid-immersed electric distributiontransformers that created minimum energy efficiency standards which took effect on January l, 2010. In many cases, the efficiency levels selected were higherthan those proposed by energy efficiency and electricutility experts. However, the standards were challenged in a federal lawsuit filed on behalfofseveral environmental organizations and otherparties. In a court-ordered settlement, DOE agreedto re-evaluatethe standards and determine whether ornot more stringent standards would bejustified.

As part ofits review, DOE embarked upon a formal Negotiated Rulemaking process among affected stakeholders to see ifa consensus onthe standards could be reached. All parties to theNegotiated Rulemaking process actively negotiated in good faith. In most ofthe cases, unanimous consensuses on new efficiency standards were reached. However, the environmental and amorphous metal representatives rejectedthe higher standard ofELl for liquid-immersed transformers proposed by manufacturers and utility representatives. Therefore, DOE has indicatedthat it will propose a standard for these transformers on or before February 1, 2012.


### About The Signatories

AK Steel Corporation produces flat-rolled carbon, stainless and electrical steels, primarily for automotive, infrastructure and manufacturing, construction and electrical power generation and distribution markets. The company employs about 6,200 men and women in Ohio, Pennsylvania, Kentucky and Indiana. Hourly production and maintenance employees are represented by the United Steelworkers, United Autoworkers and International Association ofMachinists international unions. 

### Allegheny Technologies Incorporated has approximately 11,300 full-time employees world-wide who
use innovative technologies to offer global markets a wide range ofspecialty metals solutions. Ourmajor markets are aerospace and defense, oil and gas/chemical process industry, electrical energy, medical, automotive, food equipment and appliance, machine and cuttingtools, and construction and mining. Our products include titanium and titanium alloys, nickel-based alloys and superalloys, grain-oriented electrical steel, stainless and specialty steels, zirconium, hafnium, niobium, tungsten materials, forgings, castings and fabrication and machining capabilities. 

### CooperPower Systems is a global manufacturer ofworld-class power delivery and reliability solutions for the utility, commercial, and industrial markets. Itis a leading provider ofinnovative Smart Grid technologies that optimize electrical grid performance. 

### The International Association ofMachinists and Aerospace Workers (lAM)represents over700,000 active and retired members in the United States, Canada, the Caribbean, Guam, and other locations. lAMrepresented members work in manufacturing, aerospace, transportation, electronics, shipbuilding, steel, woodworking, defense, government and many other sectors. lAM-representedemployees produce steel products atAK Steel in Ohio. 

### The United Autoworkers ofAmerica (UAW) is one ofthe largest and most diverse unions in North America, with members in virtually every sector ofthe economy. UAW-represented workplaces range from multinational corporations, small manufacturers and state and local governments to colleges and universities, hospitals and private non-profit organizations. The UAW has more than 390,000 active members and more than 600,000 retired members in the United States, Canada and Puerto Rico. UAWrepresented employees produce electrical steels in AK Steel plants in Ohio and Pennsylvania. 

### The United Steelworkers (USW) is the largest industrial union in North America and has 850,000 members in the U.S., Canada, and the Caribbean. Itrepresents workers employed in pulp, paperand packaging, metals, rubber, chemicals, oil refining, atomic energy, government and the service sector. USW-represented employees produce electrical steels in Allegheny plants in Pennsylvania.



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### Secretary Chu

From: Sent: To: Cc: Subject: 

### Attachments:

Dear Secretary Chu, Alan.McCoy@aksteel.com Wednesday, January 11, 2012 2:50 PM Secretary Chu ombdirector@omb.eop.gov; Hogan, Kathleen; Cymbalsky, John; Tiedeman, Jennifer Liquid-Immersed Distribution Transformer Efficiency Standards Letter To Secretary Chu Concerning Distribution Transformer Efficiency Standards.pdf

I am forwarding the enclosed letter on behalfofa coalition of industries and labor organizations who are engaged in the manufacture ofelectric distribution transformers and their core materials, in particular grain-oriented electrical steels, and who are concerned about new efficiency standards to be proposed by the Department of Energy on or before February 1, 2012.

On behalfofthe signatories, I am happy to respond to any requests for additional information.

With sincere regards, Alan H. McCoy



## Alan H. McCoy Vice President, Government 

### & Public Relations

AK Steel Corporation 9227 Centre Pointe Drive West Chester, OH 45069
Office: (513) 425-2826 Cell: (513) 594-7500 alan.mccoy@aksteel.com

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