Executive Court Reporters (301) 565

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UNITED STATES OF AMERICA

DEPARTMENT OF ENERGY

**MEETING of the**  **LV WORKING GROUP** 

Volume I

American Public Power Association

1875 Connecticut Ave., NW 12 th Washington, D.C. 20009 Floor

Thurs day
Dec em ber 1 , 201 1

**Facilitator :** 

Richard Parker University of Connecticut Law School

**Host :** 

American Public Power Association 1875 Connecticut Ave., NW 12 th Washington, D.C. 20009 FloorExecutive Court Reporters (301) 565

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**Participants Identified:**

Gene Andert
R E A Magnet Wire

Rick Anderson Fayetteville Public Works Commission

Tim Ballo Earth Justice 1625 Massachusetts Avenue Suite 702 Washington, DC 20036

S cott Beck Lakeview Metals

Chris Brown Cogent Power

John Caskey National Electrical Manufacturers Association

Scott Choinski Nation al Electrical Manufacturers Association 1300 North 17 th Suite 1752 Street

Rosslyn, VA 22209

Greg Coulter Consultant Prolec GE

Jim Creevy National Electrical Manufacturers Association 1300 North 17 th Suite 1752 Street

Rosslyn, VA 22209

Andrew deLaski
A SAP 20 Belgrade Ave, Suite 1 Boston, MA 02131Executive Court Reporters (301) 565

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Tom Eckman Northwest Power and Conservation Council

Gary Fernstrom Pacific Gas & Electric Company 13055 Parkhurst Dr Oakland, CA 94619

Chuck Foster Edison Electric Institute

Robert Greeson Federal Pacific Company

Michael Hyland American Public Power Association

Don Lewis Alconex

Dave Millure Metglas Incorporated 440 Allied Drive Conway, SC 29526

Wes Patterson ABB, Inc.

Thomas Patzner Schneider Electric

Eric Petersen AK Steel

Eduardo Robles Eaton Co rporation

Steven Rosenstock Edison Electric Institute 701 Pennsylvania Avenue NW Washington, DC 20004

- 2696Executive Court Reporters (301) 565

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Mahesh P. Sampat EMS Consulting 1180 Brookview Dr Athens, GA 30606

Jerry Schoen AK Steel Corporation 705 Curtis Street Middletown, OH 45043

Mi ke Shannon RSA Magnet Wire

**Participants from DOE:**

Sarah Butler (via webinar)

John Cymbalsky

Jim Raba

**Participants from Navigant**  **/LBL :** 

Brian Coffey Navigant

Mike Rivest Navigant

Matt Nardotti Navigant Consulting

Chris Bolduc Lawrence Berkley Nati onal Laboratory Berkeley, CA 94720

Katie Coughlin Lawrence Berkley National Laboratory

Luo Zhimei Navigant ConsultingExecutive Court Reporters (301) 565

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**Webinar Attendees**

Jerry Allen Metglas, Inc.

Jay Ballard Schneider Electric

Dale Corel
NEMA

Pam Costello Navigant Consulting

Kenne th Harden Schneider Electric

Chad Kennedy Schneider Electric

Philip Ling Powersmiths International Corp

Richard Lyke AK Steel

Dhiru Patel Hammond Power Solutions Inc.

Art Rosenfeld
ERAC

John Rosetti Memphis Light Gas and Water

Jeff Schneider Coop er Power SystemsExecutive Court Reporters (301) 565

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**AGENDA**

**ITEM PAGE** 

Welcome, Mr. Parker 7

Self

- Introductions 7

Engineering Analysis Mr. Coffey 11

LCC Analysis and NIA Mr. Bolduc 15

Manufacturing Impacts Mr. Carmichael 22

Proposals

Manufacturers: Mr. Caskey 38

Steel Makers: Mr. Petersen 52

Advocates: Mr. Delaski 53Executive Court Reporters (301) 565

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2:17 p .m. 1

MR. PARKER: Okay. Welcome everyone to 3

our (people continue speaking.) If I can have 4

everyone’s a ttention, let’s get started. We have a 5

lot to cover today. Let’s go around first and 6

identify who we are. 7 P R O C E E D I N G S 2

**Self**

**- introductions**  8

MR. PARKER: My name is Richard Parker
, 9

facilitator

. 10

MR. PATZNER: Thomas Patzner, Schneider 11

Electric. 12

MR. ROBLES: Eduar do Robles, Eaton 13

Corporation. 14

MR. TENDULKAR: Vijay Tendulkar, Onyx 15

Power. 16

MR. CASKEY: John Caskey, NEMA. 17

MR. PETERSEN: Eric Petersen, AK Steel. 18

MR. PATTERSON: Wes Patterson, ABB. 19

MR. GREESON: Rob Greeson, Federal Pacific 20

Transformer. 21

M R. DeLASKI: Andrew DeLaski, Appliance 22

Standards Awareness Project. 23

MR. PARKER: Can we ask people on the 24

phone to please mute their phones until you’re 25Executive Court Reporters (301) 565

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giving your name, that’d be great. Thank you. 1

MR. SCHOEN: Jerry Schoen, AK Steel. 2

MR. ROSENF ELD: (phone) This is Art 3

Rosenfeld from the ERAC

. 4

MR. ALLEN: (phone) Jerry Allen, Metglas. 5

MR. PARKER: Anybody else on the phone 6

while we’re at it? 7

MR. COULTER: John Coulter. 8

MR. LYKE: Rick Lyke, AK Steel. 9

MR. PARKER: Anybody else on the phone? 10

MR. ROSETTI: John Rosetti
, Memphis Light 11

Gas and Water

. 12

MR. MILLURE: Dave Millure, Metglas.

. 13

MR. FERNSTROM: Gary Fernstrom, PG&E 14

representing PG&E, Southern California Edison and 15

Semper Utilities. 16

MR. ECKMAN: Tom Eckman, Northwest Power 17

and Conservation Council. 18

MR. BECK: Scott Beck, Lakeview Metals. 19

MR. BALLO: Tim Ballo, Earth Justice. 20

MR. RIVEST: Mike Rivest, Navigant 21

Consulting. 22

MR. CYMBALSKY: John Cymbalsky, DOE. 23

MR. CARMICHAEL: Rob Carmichael, Navigant. 24

MR . COFFEY: Brian Coffey, Navigant. 25Executive Court Reporters (301) 565

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MS. COUGHLIN: Katie Coughlin, Lawrence 1

Berkley National Labs. 2

MR. BOLDUC: Chris Bolduc, LBNL. 3

MR. SAMPAT: Mahesh Sampat, EMS 4

Consulting. 5
MR. BROWN: Chris Brown, Cogent Power. 6

MR. ANDERT: Gene Andert, Rea Magnet Wire 7

Company. 8

MR. SHANNON: Mike Shannon, Rea Magnet 9

Wire Company. 10

MR. ROSENSTOCK: Steve Rosenstock, Edison 11

Electric Institute. 12
MR. FOSTER: Chuck Foster, representing 13

Edison Electric. 14

MR. RUSH: Ned Rush, consultant. 15

MR. LEWIS: Don L ewis, Alconex. 16

MR. CHOINSKI: Scott Choinski, National 17

Electrical Manufacturers Association. 18

MR. CREEVY: Jim Creevy, NEMA. 19

MR. HYLAND: Mike Hyland, APPA. 20

MR. RABA: Jim Raba, Department of Energy. 21

**Proposed Agenda** 22

MR. PARKER: Great, thank you . What I 23

propose to do is first we do have updated 24

engineering analysis using 2011 materials prices 25Executive Court Reporters (301) 565

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prepared by Navigant, so I propose that Navigant 1

walk us through the latest analysis, which we 2

received a couple of days ago. We had a chance to 3

at least look at it briefly and digest it since 4

then. Then we’ll ask LBNL to walk us through their 5

life cycle cost assessment. Shift back to Navigant 6

to talk about

-- briefly about the manufacturing 7

impacts, findings, because I know manufacturing 8

impacts are a ke y part of this discussion. 9

And at that point, we’ll see where we are 10

in terms of the time. I hope we can keep this 11

session brief, because we have negotiating to do at 12

this meeting, so let’s ask only clarifying questions 13

of the analysis and then we wil l turn to proposals 14

from anybody who wants to propose a proposal. And 15

then we will break once we have the proposals and 16

discuss

-- and let people reflect on the proposals 17

and come back and talk about them. 18

We’ll see how the time goes, but let’s 19

move as quickly and expeditiously as we can through 20

that. So without further ado, I’ll turn it over to 21

Brian Coffey of Navigant to talk about the updated 22

engineering analysis. 23

**Engineering Analysis** 24

MR. COFFEY: This is Brian Coffey with 25Executive Court Reporters (301) 565

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Navigant. I’ll keep this short and sweet. We 1

really didn’t

-- since the last time we talked, we 2

didn’t implement what I’ll call technical changes to 3

the analysis. What we did develop is a 2011 4

materials price case. And the primary

-- those are 5

the results that are up on the sc reen right now. 6

The primary feature of this is that all 7

steels have come down in price relative to our 2010 8

case. The grain

- oriented steels , well, I guess the 9

non

- grain

- oriented steels too, the conventional 10

steels, much more so than the amorphous. So t hat 11

will generally have the effect of finding out the 12

conventional product to some extent, but at the same 13

time steepening the curve as it starts from the 14

conventional to the amorphous so that, I suppose, 15

the differential between the conventional steels a nd 16

the amorphous steels will be higher. 17

So there should have been a design line 18

six

-- on the next slide, so here’s design line six. 19

This is our single

- phase, 25 KVA. 20

MR. DeLASKI: Brian, this is Andrew. So 21

this is the presentation you gave on Novemb er 28 th

MR. COFFEY: That’s right. 23 ? 22

MR. PARKER: Please wait until you have a 24

mic for the people on the phone. There’s a mic

-- 25Executive Court Reporters (301) 565

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MR. DeLASKI: Thanks. I’m just confirming 1

that he did this 11/28. 2

MR. COFFEY: This is 11/29 actually. 3

MR. DeLASKI: Okay. 11/28 on the 4

Sharepoint is probably the same? 5

MR. COFFEY: They’re the same results, 6

yes. 7

MR. DeLASKI: Okay. Thanks. 8

MR. COFFEY: So this is design line six. 9

Flip forward to design line seven now. 75 KVAs. 10

We’ve got a sparse patch in th e middle that we saw 11

last time, and that’s the result of filtering for 12

induction. It’s not to say that the design couldn’t 13

be built there, but we’ll get to that in response to 14

feedback that industry induction levels are 15

sometimes lower. Overall turn of t he curve is 16

preserved. 17

MR. PARKER: (pause while searching for 18

slide.) It cut off at design line seven. All 19

right. I have no idea. I’ve never seen this 20

before. I don’t know why it doesn’t come up. Do 21

people have this in paper, though? People have the 22

handouts, right? It might be easier to just walk 23

them through. 24

MR. DeLASKI: We don’t have the handouts, 25Executive Court Reporters (301) 565

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Richard. 1

MR. PARKER: You don’t have the handouts? 2

MR. DeLASKI: I have it on my screen on 3

Sharepoint. 4

MR. PARKER: Okay. (Pause.) Okay. 5

MR. COFFEY: And desig n line eight . It’s 6

similar. It’s moved a little bit relative to the 7

last result we presented. If everyone’s okay with 8

this, I can show you the materials prices that were 9

used to create these curves. 10

MR. CASKEY: Can you say

- - e xcuse me

-- 11

this is John Caskey, NEMA. On this particular 12

graph, the lines for CSL

- 2 and three are sort of 13

missing. Do you know what the percentages

-- 14

equivalent percentage along this axis is for CSL

- 2 15

and three? 16

MR. COFFEY: Not off the top of y h ead. 17

They would

-- I mean, those haven’t changed. 18

MR. CASKEY: I still want to know what 19

they are. 20

MR. COFFEY: Yeah. I’ve got them on other 21

slides. 22

MR. ROBLES: 99.02 for CSL

- 2 and CSL

- 3 is 23

99.14. 24

MR. COFFEY: Thank you. And so here are 25Executive Court Reporters (301) 565

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the p rices that were used to create those results. 1

MR. PARKER: C an everybody see them? 2

PARTICIPANT: No. Can you go to 3

presentation mode so

-- key prices? 4

MR. COFFEY: Sure. I can read through 5

some of them if some people are having trouble 6

seeing them. M36 is 66 cents a pound. M19 is 91. 7

M12 is 78, and six is $1.04. And five, $1.10. 8

Four, $1.20. Three, $1.30 and two $1.40. And H

- 0 9

is $1.70. Amorphous is $2.20. So again, this is 10

just another case that we developed for the benefit 11

of the committe e to discuss, and so if there’s 12

feedback on it. 13

MR. PARKER: Any questions so far? 14

MR. CASKEY: John Caskey, NEMA . Did you 15

do any of those simplified line graphs like you did 16

for the oil filled? 17

MR. COFFEY: They should be on Sharepoint. 18

I can try to call them up. 19

MR. DeLASKI: They are. They’re on 20

Sharepoint. 21

MR. COFFEY: Here, John. Here’s the 2010 22

pricing result. Not a whole lot of difference. 23

It’s not that, which is 2011, but there’s not much 24

difference. (Pause.) 25Executive Court Reporters (301) 565

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MR. PARKER: We wer e trying to get the 1

simplified plots but

-- I thought they were already 2

on the system. They seem to have disappeared. I 3

don’t know why. But let’s walk through the LCC 4

results and get those and the manufacturing impacts, 5

and we can get the simplified des igns a little bit 6

later. 7

**LCC Analysis and NIA**  8

MR. BOLDUC: Good afternoon. My name is 9

Christopher Bolduc and I’m from Lawrence Berkley 10

National Lab. I’ll presenting the LCC NIA results 11

this afternoon. In front of you we have the

-- so 12

in front of us i t’s slide six for anybody who’s 13

following on the phone. This is the design line six 14

LCC results. You can see there’s a similar pattern 15

of the 2010

- 11 data that we saw. In 2011 we have a 16

bit of a solitude pattern of the LCC as we move from 17

EL

- 1 to EL

- 3. EL

- 3

-- EL

- 4 is the transition point 18

between standard steels and amorphous steels. 19

Again, the LCC results peak on the first 20

two at $301 at EL

- 2, and they peak at $300 on the 21

second two on the chart, at EL

- 5. Next slide, 22

please. 23

This is design line se ven LCC results. 24

The unusual thing that we’re seeing here is that 25Executive Court Reporters (301) 565

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we’re seeing the same units selected in ELs one 1

through three. This is clearly visible in the 2

engineering where we have a large gap in the design 3

space from base case up to EL

- 3. So the LC C is 4

picking up on lowest first cost, actually selecting 5

way above the standard level that it would normally 6

select at. 7

And then we see increasing LCC up to max 8

tech and then it comes back down as we push the edge 9

of amorphous. Next slide please. 10

DL

- 8 , again, sort of what we saw in the 11

2010 prices. It looks like we have two curves here, 12

and again, it represents two transitions. EL

- 1 and 13

EL

- 2, I can’t remember off the top of my head. 14

Scratch that. It’s M3 through EL

- 4 and then we 15

transition to SA

- 1, EL

- 5, 6 and 7. And that gives 16

us kind of the two bumps in the curve. 17

If we move on to the payback. Again, we 18

can almost see inverse only this is a little more 19

exaggerated, where we have a long payback on the 20

first two, at EL

- 3, close to 14 years, and then when 21

we move into the amorphous designs, we see a bit of 22

a dip and then it increases up to max tech at 35 23

years. Next slide. 24

In design line seven, we have the low 25Executive Court Reporters (301) 565

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paybacks from EL

- 1 through four, or actually, one 1

through three, which represents the gap in 2

engineering that I alluded to before. And we slowly 3

transition up to amorphous at EL

- 5 through seven. 4

Next slide. 5

Again, this is design line eight. The 6

short sawtooth (ph) kind of pattern on the paybacks 7

as we transition to amorphous around EL

- 5. So then 8

at EL

- 5 we have a payback period around 11.2 years, 9

and a max tech, 25 years. 10

Steel selection is going to be

-- I think 11

it’s going to be mostly M

- grade steels up to EL

- 4, 12

and then EL

- 5, 6, 7, I think the LCC starts to pick 13

almost exclusively amorphous steels. 14

MR. DeLASKI: Chris, this is Andrew . A 15

question for clarification. Earlier you said mostly 16

-- you said M selects M3, and now you say selects 17

mostly M

- grade, and in our last discussion M4 versus 18

M3

-- so could you be more specific? C an you? If 19

you can’t, I understand, but that’s the

-- 20

MR. BOLDUC: It’s a little tough with the 21

engineering. The engineering for DL

- 8 is very 22

mixing of steels at ELs two through four, so if 23

there’s a decent amount of M3

-- just the different 24

grades of steel with different manufacturing 25Executive Court Reporters (301) 565

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techniques. 1

MR. DeLASKI: At EL

- 2 through four you 2

said? 3

MR. BOLDUC: Yes. 4

MR. DeLASKI: Okay. 5

MR. BOLDUC: You can see that

-- 6

MR. DeLASKI: The scatter plot will show 7

us that. 8

MR. BOLDUC: It should. So t he next set 9

of slides is the NIA, the National Impact Analysis 10

results based on the seven TSLs that were used in a 11

previous meeting. And this is the blend of 12

efficiency levels for each TSL. Now for those on 13

the phone, I’ll describe the TSLs. 14

The first TSL is minimal LCC or max MPB. 15

TSL

- 2 is maximum energy savings with ... at three 16

percent discount rate. Is there a question on the 17

phone? Could you please mute your phones if you’re 18

not asking questions? Thank you. 19

TSL

- 3 is a 30 percent reduction in 20

op erating costs. TSL

- 4 is the highest efficiency 21

level where M3 steels are available. TSL

- 5 is the 22

gap filled between TSL

- 4 and six. And TSL

- 7 is NEMA 23

premium. 24

Now, you can see here the composition of 25Executive Court Reporters (301) 565

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these TSLs, there’s a lot of repetition of the 1

effic iency levels. It’s because when we mix the 2

efficiency levels with the new equipment class to be 3

consistent. So TSL

- 1 is DL

- 4 for design lines six, 4

seven and eight. TSL

- 2 is the efficiency level 4 5

for equipment class three, which is DL

- 6. And 6

equipment class four, which is a combination of DL

- 7 7

and eight. TSL

- 3 is again, fours across the board. 8

TSL

- 4 is again fours across the board. TSL

- 5 is 9

fives across the board. TSL

- 6, which is max tech, 10

is EL

- 7. And TSL

- 7, which is NEMA premium is three, 11

three, two. That’s in there as a benchmark. 12

Now, what I’d like to add is for the 13

negotiation purposes that if the committee wishes to 14

change these trial standard levels, we can, and we 15

will run numbers for you. These are not carved in 16

stone. 17

MR. PARKER: Le t me also just add to 18

clarify and that’s in the past, I think, the other 19

groups, and I think in this group as well, we have 20

recognized that these TSLs don’t rank very well, 21

comport very well systematically in terms of maximum 22

efficiency. So for purposes o f fulfilling our 23

mandate to walk down from max tech to the cause

24

justified standard, we’ve agreed to really negotiate 25Executive Court Reporters (301) 565

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on the basis of ELs, rather than TSLs, and I 1

understand that that’s an acceptable way to proceed, 2

both legally with the Department, and al so for this 3

group. So I think that might be something to keep 4

in mind . I don’t think we need to worry overmuch 5

about TSLs if we proceed in that way. 6

MR. BOLDUC: Chris Bolduc, LBL. Thanks, 7

Richard. Next slide is slide 13. So here are the 8

combined N IA shipments and National level impacts 9

for all level dry type equipment classes. We can 10

see here that the cumulative source savings, the 11

quads peak at TSL

- 6, which is max tech, but are 12

substantially

-- we still have gains at EL

- 2 which 13

is max savings wit h power ... near zero and PB. And 14

we have max MPV at seven percent discount rate at

-- 15

again, at TSL

- 2. Next slide. 16

And here are the

-- the next slide 17

represents the summary results by equipment class. 18

The equipment classes three and four. Again, it’s 19

the same thing, wherever you see the maximum

-- 20

sorry, maximum energy savings at max tech, which is 21

TSL=6, and then the max MPV at seven percent occurs 22

at TSL

- 7 which is NEMA premium. And for equipment 23

class four, maximum energy savings again at max 24

tech, and then max MPV at seven percent occurs at 25Executive Court Reporters (301) 565

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TSL

- 2. 1

That would conclude the presentation of 2

results. Do people have any questions? Thank you. 3

MR. PARKER: Thank you, Chris. I think we 4

have the simplified design lines now on the slides. 5

The question is do people want to see those now or 6

would you prefer to go ahead and hear the 7

manufacturing impact analysis and then sort of go 8

back to that? 9

MR. CASKEY: That’s fine. We don’t need 10

to see them now. 11

MR. PARKER: Great. 12

MR. DeLASKI: I just have a comment. 13

Andrew. So my one comment is that in our prior call 14

the other day with this group, I think we did agree 15

to focus on the wound core exclusion scenario, a 16

useful scenario for discussion purposes. I think 17

that was the point of general consensus. So this 18

analysis does not exclude wound cores, right? 19

MR. BOLDUC: No

-- Chris Bolduc, LBL. I 20

recall in the discussion that wound core was a 21

possible side option for the low voltage dry. 22

That’s why I did not run the wound core exclusion. 23

MR. DeLASK I: No, I understand that and I 24

think for DOE purposes, for purposes of rulemaking 25Executive Court Reporters (301) 565

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that we agreed, you have to look at all the 1

engineering possibilities. As my recollection, I’m 2

trying to get us sort of where we were, given that 3

call. For analytic purpos es, what you’ve done is 4

correct. It is a scenario. It is what the 5

Department has to do for its rulemaking obligation. 6

But if we agreed amongst the committee members that 7

we were going to focus, for discussion purposes, on 8

the wound core exclusion scenar io, manufacturers 9

indicate that wound cores in this technology space 10

is not something that’s happening in the timeframes 11

we’re talking about. So I just want to make that 12

observation. You may remember it differently than I 13

do, but if you do, that’s how I remember it. 14

MR. CARMICHAEL: This is Rob Carmichael, 15

Navigant. I think part of the confusion is the 16

wound cores that are excluded from these are the M3 17

wound core design options. What is in here is the 18

wound core amorphous, which also could be exclude d 19

based on the discussion from your leaflet. The M3 20

wound core option is excluded. 21

MR. DeLASKI: Okay. 22

MR. CARMICHAEL: All but amorphous. 23

MR. DeLASKI: All right. Thanks for that 24

clarification. 25Executive Court Reporters (301) 565

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MR. CARMICHAEL: Still, these numbers 1

reflect the amorphous. 2

MR. DeLASKI: Okay. I also, in comparing 3

these numbers to numbers from a prior analysis, 4

without the wound core exclusions, the 2010 pricing, 5

without wound core exclusion, I’m struck that the 6

results are a bit different, but not terribly 7

dif ferent. I’m struck that in general we’re seeing 8

similar results off by changes of ten, 15, maybe 20 9

percent in some cases. And I went through it pretty 10

quickly, but I don’t see any sort of big changes 11

going from 2010 prices to 2011 prices. Just an 12

obser vation. 13

MR. PARKER: Any other comments or 14

questions on the LCC analysis before we turn to the 15

manufacturing impact? 16

MR. DeLASKI: I’m sorry to belabor it, but 17

then

-- so the 2010

-- this is Andrew again

-- the 18

2010 scenario of last time, did that excl ude wound 19

cores other than amorphous? 20

MR. RIVEST: (off mic) 21

MR. PARKER: Mike Rivest. 22

MR. RIVEST: Mike Rivest. I think the 23

exclusions ... 24

MR. BOLDUC: Chris Bolduc, LBL. The 25Executive Court Reporters (301) 565

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exclusion scenarios for the 2010 prices excluded 1

ZDMH and SA

- 1. SA

- 1 ha ppened to coincide with 2

designs that were all wound core. 3

MR. RIVEST: So I don’t think there was a 4

decision to exclude wound cores ... (off mic) 5

MR. DeLASKI: I hear you, but what I just 6

heard Chris say is that wound core M3 is excluded 7

from this analys is. 8

MR. RIVEST: But that was not for the 9

reasons that ... done. It was simply a decision that 10

both stack and lapped were both technologies and 11

both offered ... and that if we mixed the lapped and 12

the stacked, that created issues on our differential 13

capita l costs. That’s not like when we decided to 14

exclude the ... because those technologies were not ... 15

the units were getting very big. 16

MR. DeLASKI: Okay. What I want to 17

understand is so then that being consistent all the 18

way along. Okay. Thank you. That was my question. 19

MR. BOLDUC: And Andrew

-- Chris Bolduc, 20

LBL. You can hear me. I can prepare that 21

sensitivity curve tonight for tomorrow morning to 22

help your negotiations, if you feel that will help. 23

MR. DeLASKI: No, I don’t understand where 24

we are , what we’re looking at. 25Executive Court Reporters (301) 565

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MR. BOLDUC: Oh, great. 1

MR. PARKER: Okay. Let’s turn to then the 2

manufacturing impact analysis, and Rob Carmichael. 3

**M anufacturing**  **I mpact**  **A nalysis**  4

MR. CARMICHAEL: So last time there were 5

some requests to see some more detai l on the 6

manufacturing impact analysis for this space in 7

particular. And so just as a table for that, some 8

basic market characteristics that we found. So 9

obviously, first cost appeared in customer base. 10

One of the important things to keep in mind throug h 11

this is about 50 percent of the volume is outside of 12

the DOE scope. There are several exemptions that we 13

find here, and many of those offer niche markets for 14

small businesses to plug in. And then particularly 15

outside of DOE’s scope, it’s a highly fragm ented 16

market, even more so than within the DOE covered 17

area. 18

So a number of manufacturers that we found 19

within the DOE scope, we’ve identified 25 20

manufacturers of low voltage distribution 21

transformers, dry types. Eighteen of those we found 22

to be small b usinesses, less than 750 employees. 23

Again, that’s on the DOE covered side, on the 24

uncovered side, there are many more. 25Executive Court Reporters (301) 565

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Market shares. We estimate about five 1

large manufacturers for 87 parts of the market. And 2

in terms of shipments, 22 percent of all 3

d istribution transformers covered space by DOE, the 4

local ... covered space. 5

So one of the things we’ve heard 6

particularly in these meetings, and also in our 7

interviews, are the concerns that small businesses 8

play ... disproportionate to this space, compared to 9

the others. And typically, as you move up in 10

efficiency, one of the first things, one of the 11

design options you have is to go to higher. Small 12

businesses, in general, small manufacturers, low 13

volume manufacturers don’t have higher end 14

capability, as w e’ve heard from our capital 15

expenditure, to buy the machine, whether it be a ... 16

or another machine to achieve that capability. 17

And then the other key issues with small 18

businesses come down to ... scale, when you do 19

purchase that machine, you’re depreciati ng it over 20

fewer units, fewer cuts. Same thing with 21

engineering resources. First of all, there are 22

fewer engineering resources, and you have to spread 23

that cost over fewer units. 24

Small manufacturers also expressed that 25Executive Court Reporters (301) 565

- 0064 27

they are less experienced than th e larger 1

manufacturers in dealing with the higher grade 2

steels. Again, typically, I think it’s more 3

difficult when you deal with thinner steels which is 4

associated with moving to higher grades. And so 5

both of those, as I said, have the associated 6

scales. 7

And then lastly, the lack of person

- power 8

for the grain

- oriented steels. So one of the major 9

concerns we heard was that small businesses, and 10

even frankly, some of the larger players in the low 11

voltage space

-- about the quality of scale that 12

they get compared to perhaps others in distribution 13

transformers. 14

And so some

-- here are preliminary 15

conversion cost estimates. Again, we don’t have 16

updated shipment numbers based on some of the 17

revisions, but I think the trend and magnitude 18

wouldn’t change th at much. One thing I noticed, 19

these are not the TSLs that Chris showed on the 20

final slide of his presentation. These are ordered 21

sets, so for CSL

- 1 or six, seven, and eight, these 22

are estimates of the costs. And again, the large 23

driver is the impact tha t mitering thinner steels 24

have on capacity, the need to expand capacity when 25Executive Court Reporters (301) 565

- 0064 28

you’re dealing with better machines, because a true 1

... of the machinist is less and takes longer to stack 2

them. 3

MR. PARKER: Robert, are these cumulative 4

converging costs compare d to CSL

- zero as you go 5

down? 6

MR. CARMICHAEL: No. 7

MR. PARKER: These are incremental 8

conversion costs? 9

MR. CARMICHAEL: Oh, yes, I’m sorry. 10

These are cumulative, so from baseline to CSL

- 3, 11

which is the closest approximation to meet. 12

MR. PARKER: So eight million in the 13

difference between CSL

- 0 and CSL

- 3? 14

MR. CARMICHAEL: That’s right. And in 15

terms of nomenclature, capital conversion cost play 16

a part in the equipment, whereas product conversion 17

cost is research and development, the testing, the 18

prototyping, engineering time. That’s

-- 19

MR. SCHOEN: Jerry Schoen, AK Steel. I 20

did have one question. Are military transformers 21

exempted in this? ... spec transformers? And the 22

reason why I say that is there’s one company that we 23

supply the mix, low voltage, medium voltage dries 24

for naval vessels. They have a whole different set 25Executive Court Reporters (301) 565

- 0064 29

of specifications out there, you know, ... steels, 1

their planes and ... systems

-- are they put in this 2

rulemaking? 3

MR. PATZNER: From Schneider Electric’s 4

perspective, since they’re not in the patch to the 5

US grid

-- 6

MR. PARKER: This is Tom Patzner. 7

MR. PATZNER: Thomas Patzner, Schneider 8

Electric. From our perspective, since those are on 9

a ship and they’re not actually being attached to 10

the grid, they would not be inclu ded. DOE is 11

worried about the US grid and energy consumption on 12

the grid. I could be wrong, but that’s how we look 13

at those units. A ship has its own generation 14

point. 15

MR. PATTERSON: If I may? There was a 16

question raised on this with the existing ro lling, 17

and we had to get legal determine to figure out what 18

is a US power point. They traced this thing way 19

back, and in their interpretation, if it’s a 20

military base sitting somewhere, then it’s 21

considered to be under the scope of this regulation. 22

So sh ipboard is hooked to the scope, I believe. We 23

need a lawyer to tell us. 24

MR. PATZNER: Is a ship considered a base? 25Executive Court Reporters (301) 565

- 0064 30

MR. DeLASKI: The sale, not the 1

installation. It’s the sale. 2

MR. PATTERSON: But I would highly 3

recommend that we get the DOE lawyer to make a 4

statement on this

-- a clarifying statement. 5

(Discussions off mic) 6

MR. PATZNER: Tom Patzner, Schneider 7

Electric. In regards to the slide that’s up, where 8

are the loss assets? 9

MR. CARMICHAEL: They are not here. 10

That’s a good point. That is something that we did 11

capture and they’re not here. Obviously, they were 12

scaled as you go up. When you get to the bottom 13

line, it’s all amorphous. Everything that you have 14

in place is lost. 15

MR. CASKEY: This is John Caskey, NEMA. 16

First, thank you for doing all this. Having a lot 17

of your comments sort of support what I found. I 18

mean I just go out to talk to our members almost 19

randomly and what you’ve collected seems to be in 20

line with what I had collected over the last couple 21

of years in talking to them and meeting with some of 22

the manufacturers. My question really relates to 23

the numbers that are up here. In the case of going 24

from zero to CSL or EL

- 1, it looks like a total of 25Executive Court Reporters (301) 565

- 0064 31

four million dollars for that particular facility. 1

Is that correct? 2

MR. CARMICHAEL: No, that’s for total 3

industry, for everything. 4

MR. CASKEY: Yeah, that doesn’t jive

-- I 5

would picture it per facility, and it seemed like 6

that was in the right ball park, but to think of 7

that across the industry, whatever you said, 25 8

individual manufacturers

-- I mean that’s almost 9

nothing per manufacturer when you look at it that 10

way. 11

MR. CARMICHAEL: Yeah, John, I think you 12

may

-- one of the things that you might

-- Rob 13

Carmichael

-- is that if you look at the charts 14

where the volu me is, you can get to one where the 15

flat line starts, so you don’t have that capital 16

investment. 17

MR. CASKEY: Okay. So the magnitude is 18

different, but my question sort of remains similar. 19

So whatever it is you pick, then how do you factor 20

that back int o the analysis? I mean do you put this 21

on a per unit basis at some point, or is this in the 22

analysis as far as you’re concerned, relative to the 23

manufacturer’s impact. 24

MR. CARMICHAEL: So it sounds like this 25Executive Court Reporters (301) 565

- 0064 32

might be

-- if we look at the cost to convert the 1

volume of the industry, or the cost of every 2

manufacturer to convert their own volume. Because 3

if we talk to manufacturers that sell five covered 4

units a year, they’re not going to buy a ... They 5

don’t need it. So these numbers reflect the cost to 6

co nvert the volume of the industry. 7

MR. CASKEY: Okay. So that answers sort 8

of, one of the pieces of information

-- this is John 9

Caskey from NEMA again. The other piece of 10

information is how is this information factored into 11

the analysis going forward? I mean, does this in 12

any way change the selection of the designs or is it 13

factored in in terms of

-- is this factor in at all 14

and in the cost analysis? And I think the answer to 15

that is no, is that correct? 16

MR. CARMICHAEL: Well, we do have an 17

appreciat ion factor for the capital costs in the 18

curve themselves. 19

MR. CASKEY: Okay. For me, personally, I 20

just need to think through this a little bit more to 21

make sure I was comprehending what we have here. 22

MR. RIVEST: This is Mike Rivest. So if 23

you think of the total capacity of the industry if 24

it was served by one or two players, ... so they buy 25Executive Court Reporters (301) 565

- 0064 33

one or two pieces of equipment, and that’s why the 1

numbers don’t seem that enormous. If all the 2

existing 25 manufacturers invest a million dollar to 3

go in, the nu mber would be a lot larger. That 4

wasn’t assumed here. 5

When we do an actual cash flow analysis, 6

that’s

-- typically we do it for the whole industry, 7

and then we’ll do a case for a small manufacturer. 8

And the decision become the manufacturer’s

-- the 9

c ash flow for that small manufacturer would be 10

impacted by either their buying a piece of equipment 11

which, again, a, poor on cash flow, or, b, couldn’t 12

have enough hits to appreciate his pricing, or 13

remodel that they no longer make the cores, that 14

they purc hase them. And the value added to the 15

profit on that core that is being manufactured is 16

lost revenue, and therefore reduces their 17

profitability. 18

But that’s something that we’re not ready 19

to

-- we just haven’t had a chance to do yet, that 20

cash flow imp act that we’re talking about. 21

MR. CASKEY: So this is John Caskey, NEMA, 22

again. Again, we talk about this industry and 23

certainly in this area, in the low voltage dry type, 24

this is one of the most critical issues we’ve got as 25Executive Court Reporters (301) 565

- 0064 34

far as I’m concerned, is wha t does this industry 1

look like in the year 2016 or 2020 or something like 2

that. And you said we’ve got 25 members that 3

produce low voltage dry type transformers within the 4

DOE scope, and of that, 18 of those are classified 5

as small businesses. So it seem s like to me that 6

going forwar d, some analysis needs to look at those 7

18 businesses. Do 50 percent of them sort of close 8

their doors? Do 50 percent survive on prefabricated 9

cores? Do 50 percent of them try to come up with 10

enough capital to invest and ac tually make the 11

conversion? We know there’s some pretty big issues 12

to me and if 50 percent of them, or 20 percent of 13

them or some percentage of them do decide to stay in 14

the industry, and do decide to try and find the 15

capital to make the improvement to co ntinue their 16

business, then these numbers are pretty far off. 17

And the industry doesn’t function

-- the 18

individual members or the individual manufacturers 19

don’t function like one corporation, and gee, we’re 20

just going to put in three million and we’ve go t 21

the answer fixed. Really you’re going to have five 22

or ten, or 20 or some X number of small businesses 23

basically deciding to make that decision or not make 24

that decision. 25Executive Court Reporters (301) 565

- 0064 35

That’s what I’m trying to get to. It’s 1

realistically, what does this mean in t erms of 2

manufacturers, again, in the year 2016 or beyond. 3

MR. PARKER: Let me try putting that a 4

slightly different way which may help sharpen the 5

issue a bit. You said that there were 18 small 6

businesses who are manufacturing covered product in 7

space. But some of them only sell a miniscule 8

number of covered products, so they were not 9

included in your calculation of capital conversion 10

because you estimate that they would not judge it 11

prudent to stay in that space. 12

So do you have

-- can you give us a s ense 13

of

-- do you know how many companies actually make 14

the cut in terms of your estimate that they would 15

elect to stay in this market and basically invest 16

the capital and converting for making major decision 17

to leave

-- to leave the major area. Do you ha ve 18

some sort of de minimus threshold at which point you 19

said, below which you said these people

-- these 20

companies don’t factor into our analysis because 21

they’re not going to choose to remain players. How 22

many did you decide would stay in, and what share do 23

they have? 24

MR. CARMICHAEL: Rob Carmichael. There 25Executive Court Reporters (301) 565

- 0064 36

was no threshold so Mike’s point that we were 1

comparing the small businesses

-- what would be the 2

impact if they did buy that machine versus what is 3

the impact if they source their cores. That would 4

reduce profitability. That’s something that we can 5

do later. We haven’t done that now. 6

What this represents is our estimation of 7

the costs to convert

-- for the industry to convert 8

its current volume. So it predominantly reflects 9

those costs that co me from large manufacturers. And 10

there was no

-- there’s no set that qualified or 11

that we estimated would

-- is part of this. 12

MR. PARKER: Thank you. 13

MR. CYMBALSKY: Sorry, John Cymbalsky, 14

DOE. Dan Cohen got on the phone

-- he had gotten 15

that Navy is sue. If it’s sold as a transformer it 16

doesn’t matter where it goes. It’s covered. 17

MR. CASKEY: You may need to get him back 18

on the phone because I don’t think that can be 19

correct, because if it’s sold as a transformer and 20

it’s going to be installed in Italy or someplace 21

else, then it is not covered by the DOE regulations. 22

So only if it’s sold in the United States and US 23

territories. 24

MR. CYMBALSKY: Okay. Of course. Sorry. 25Executive Court Reporters (301) 565

- 0064 37

MR. PARKER: And I think most naval 1

vessels are made in the US. 2

MR. CASKE Y: I know of some made in 3

Australia, believe it or not. 4

MR. PARKER: That’s a different story. So 5

that concludes, unless there are further questions, 6

our presentation of the analysis, engineering, life 7

cycle cost, and capital conversion manufacturing 8

i mpacts. People who have proposals want to propose 9

now, or do people want to take a break at this 10

point? 11

MR. CASKEY: I think we’re close to a 12

proposal, but we need

-- this is John Caskey, NEMA, 13

and I think we’re close to a proposal. We need to 14

talk abo ut it a little bit prior to we come to the 15

table with it. 16

MR. PARKER: Let’s take a break, then. 17

(Whereupon, at 3:11 p.m., the meeting was 18

off the record for a 39

- minute period.) 19

MR. PARKER: Okay. If we can get started. 20

Welcome everyone. We’re a t the phase where we are 21

ready to take proposals from the various 22

stakeholders. John Caskey has kindly offered to 23

lead us off today, so we will turn the mic over to 24

John, and here’s the podium. 25Executive Court Reporters (301) 565

- 0064 38

**Proposals** 1

MR. CASKEY: This is John Caskey from 2

NEMA, and w e’re here to talk about low voltage dry 3

type transformers, and just wanted to give you a 4

quick proposal, hopefully a quick proposal, from 5

NEMA, National Electrical Manufacturers Association. 6

And basically I wanted to give a little bit of an 7

overview relat ed

-- similar to what we did with the 8

liquid

- filled, and medium voltage dry type 9

discussion. 10

But first I just wanted to touch base and 11

thank the Department of Energy and others for 12

basically allowing this negotiated process to be 13

considered. I think i t was also a good idea to go 14

ahead and incorporate the low voltage dry type with 15

the other discussions on liquid filled and medium 16

voltage dry type because, you know, once we’re into 17

a rhythm of understanding what

-- where the numbers 18

are coming from and t he work that Navigant is doing, 19

and the work that LBL is doing, it makes sense to 20

keep in that rhythm and go ahead and do all three of 21

these sort of concurrent with one another. 22

I also wanted to thank all the people at 23

then table for all of their contrib utions, all the 24

way along, and also all the stakeholders that are 25Executive Court Reporters (301) 565

- 0064 39

participating with this. And I also wanted to thank 1

the manufacturers for all their work and all of the 2

analysis and supporting information that they’ve 3

provided that’s all been a big help. 4

The other thing I wanted to note is that 5

NEMA’s certainly committed to distribution 6

transformer efficiency standards and higher 7

efficiencies, and that as people know in this area, 8

in the area of low voltage dry type, we’re actually 9

the DOE standard real ly keyed off of the NEMA TP

- 1 10

standard, as well as in this arena we do have the 11

premium efficiency transformer program for low 12

voltage dry type transformers. 13

What we tried to do is be consistent with 14

our principles in all three of the different areas, 15

l ow voltage dry type, medium voltage and liquid 16

filled. And basically our three primary principles 17

are: 18

**•** One is that we support high efficiency 19

standards, provided that they can be cost

20

justified, or cost

- effective. 21

**•** Item two is that we feel that it’s very 22

important to have substitution of materials
, 23

particularly steels, in the transformers 24

themselves as well as certainly it’s critical 25Executive Court Reporters (301) 565

- 0064 40

in any industry to have a multitude of 1

suppliers, other products, and the n it’s also 2

very important to have the

-- I think the 3

flexibility in the design s to substitute one 4

material for another as the prices change 5

relative to one another. 6

**•** And then the third area, and this is the area 7

that comes in the strongest play in this 8

particular area, low voltage dry type, rally 9

deals w ith the impact on the small 10

manufactur ers , and the small manufacturing 11

facilities

. We’re trying to get a handle on 12

that, and that’s exactly what Navigant has 13

tried to do with the manufacturers impact 14

assessment. 15

So in the other areas of medium voltage 16

d ry type and liquid filled, it seems like we really 17

keyed a lot of

-- or NEMA really keyed a lot on the 18

sort of substitution of materials and 19

competitiveness of that market. In this particular 20

area I think our greatest concern deals with trying 21

to make sur e that it’s a viable market going 22

forward, and particularly to be inclusive of the 23

small manufacturers, which currently make up a large 24

portion of the manufacturers in this type of 25Executive Court Reporters (301) 565

- 0064 41

product, the low voltage dry type product. 1

So in terms of our specific recommendation 2

-- and this is, I should have said, like a two part 3

presentation. I’ll do part and then Thomas Patzner 4

is here from Schneider Electric, and then he’ll do a 5

part also. So basically, what we are recommending 6

is, because of the small amount o f volume in the 7

design line six, we basically have ignored design 8

line six, so in essence our recommendation is to 9

leave that at efficiency level

- 0 for design line 10

six. And Thomas will explain a little bit more of 11

that logic later. 12

The primary part of t he presentation, or 13

the proposal, is really for design line seven and 14

eight, to adopt the EL

- 2.0 or the two energy 15

efficiency level. And the reason we arrived at that 16

presentation, part of it was sort of economic 17

justification and we feel that there conti nues to be 18

some uncertainty in the analysis itself, however, we 19

feel that the EL

- 2 level, it’s a reasonable level to 20

adopt and even that represents a 25 to 35 percent 21

increase in first costs over the EL

- 0 level. 22

In terms of the with that, we have gone 23

ba ck and looked at the Navigant analysis , we 24

continue to get reports from the manufacturers where 25Executive Court Reporters (301) 565

- 0064 42

the curve after the EL

- 2 period, the curve increases 1

more steeply than what’s reflected in the analysis 2

that we’ve seen so far. 3

We talked a little bit about the NEMA 4

premium program, which is basically we have 11 5

manufacturers now that have signed onto that 6

program, but there’s very, very few products being 7

sold in that category now. So part of it just means 8

that we’re the early learning stages of that 9

effic iency which basically has 30 percent less load 10

loss than what

-- excuse me, 30 percent less loss 11

than what’s in the TP

- 1 standard. 12

The other thing that we talked about 13

before is the idea that the manufacturers, when, you 14

know, the standard is set at a c ertain level, the 15

manufacturers basically have to over

- design above 16

that level in order to make sure that through the 17

testing procedures, that they can make sure that all 18

of the products actually meet the required 19

efficiency level. 20

The other area that I wanted to bring up 21

briefly deals with the data center transformers and 22

that there’s been a team put together to try and 23

investigate that more fully. I don’t know that 24

they’re ready to report on any sort of proposal or 25Executive Court Reporters (301) 565

- 0064 43

consensus yet, but certainly we want to hold off

-- 1

we want to allow for an opportunity to consider 2

their input at a later date, to make sure that we 3

reflect that, particularly in the low voltage dry 4

type sector. 5

So, with that I’d like to go ahead and 6

turn it over to Thomas, and then he’s got some 7

additional slides to show you. 8

MR. PARKER: Before we turn to that, just 9

one small, I think actual verification. I believe 10

we heard in prior meetings, or in e

- mail traffic, I 11

don’t remember exactly where, was that the test 12

procedures are not su bject to our discussions, but 13

the factual matter, test procedures continually 14

allow for statistical variation. So I don’t know if 15

that means you still have to over

- design or not, but 16

... test procedures, but that was what I recall from 17

our prior discussions . May be wrong

-- Wes. 18

MR. PATTERSON: The test procedure does 19

have in its calculations a variance measurement, but 20

the reality is that when you actually design for the 21

standard, you have to accommodate in the design, a 22

margin level because if you desig n right at the 23

level, you’re going to miss the standard, there is 24

no doubt. So at least in the medium voltage world, 25Executive Court Reporters (301) 565

- 0064 44

we’re seeing somewheres around five percent 1

reduction in losses, just from the design process. 2

MR. TENDULKAR: The statistical data in 3

t he analysis ... 10,000 transformers, but for one or 4

two transformers, you have to design ... so that you 5

can pass. If you look at the in... standards ... you’re 6

going to market a plus ten percent, but if you’re 7

making more units, then of course you can reduce the 8

losses and get ... So manufacturers like us, where we 9

are not making 10,000 transformers, we have to make 10

the losses much lower than what the standard says. 11

MR. PARKER: Thank you. Okay, Mr. 12

Patzner. 13

MR. PATZNER: Thomas Patzner, Schneider 14

Electric. I did not update my analysis from the 15

2011 costs. All my data here are based on the 16

efficiency levels and they’re using the curves 17

without amorphous because I agree, based on our last 18

conference call, that the committee agreed to 19

exclude the amorphous

- ty pe core. So my analysis and 20

my recommendation was based on that product being 21

removed. 22

So those are the curves for the efficiency 23

levels. The next slide, if we look at class three, 24

which is design line six, it’s two of the 62, so 25Executive Court Reporters (301) 565

- 0064 45

it’s only 3.2 percent of the shipments. However, if 1

you look at the quads that would be saved at the two 2

keys, which at this one is EL

- 2 and EL

- 1, it would 3

only save 1.4, 1.6 percent. So it’s got a three 4

percent volume, but it would only save half of the

- 5

- it would only incl ude the one and a half percent 6

of the benefits. So our suggestion would be we 7

leave class three at the base level, mostly so as 8

manufacturers would not have to focus on three 9

percent of the market transition. 10

So the manufacturing impact analysis would 11

b e less because we would not need to try to 12

transition three percent of the market at the same 13

time that we have to transition 97 percent of the 14

market. 15

So now if we look at class four, which is 16

96.8 percent of the shipments, there’s two peaks. 17

There’s a peak at EL

- 2 and a peak at EL

- 4. At three 18

percent discount rate, there’s a 6.5 percent 19

increase for EL

- 4. However, at the seven percent 20

discount rate, which is what us manufacturers use, 21

the EL

- 2 is actually higher, it’s actually 1.6 22

percent higher tha n EL

- 4. So these leads us, as a 23

manufacturer, to want to use EL

- 2 instead of EL

- 4. 24

So we continue on. In regards to computer 25Executive Court Reporters (301) 565

- 0064 46

model, we believe that there’s differences and the 1

analysis is questionable. However, Schneider 2

Electric believes we would ba sically be able to get 3

to that flat curve if you gave us ten years. Or 4

five years. But you’re not going to give me that 5

amount of time, you’re going to require me to comply 6

with the product starting January 1, 2016. I cannot 7

start the process until Janu ary 1, 2016 of 8

optimizing the design. 9

The reason being is, is today less than 10

five percent of the market wants higher efficiency 11

products. So I have to support 95 percent of the 12

market, so all of my manufacturing resources and my 13

engineering resources cannot start focusing on cost 14

reducing and hitting the computer model curve until 15

after the law is actually implemented. So we will 16

start designing towards the most cost

- effective 17

design and actually be able to hit it three to five 18

years after the law. 19

Go to the next slide. We’ve already done 20

this conversion once. When we did the conversion in 21

2007, because of the state of Massachusetts, the 22

state of California, the state of Minnesota, the 23

city of Seattle, the state of Oregon, we had 30 24

percent of the market already using TP

- 1. So we 25Executive Court Reporters (301) 565

- 0064 47

could attain and design the TP

- 1 products in advance 1

before the law. So we were a lot faster getting to 2

the cost optimization from an earlier analysis. 3

What will impact us is our capacity, our 4

materials and tolerances d ue to operation. So, 5

those entities cannot be determined until I’m 6

actually sending 175 KVA down my line every day. 7

I’m not going to know the impact of operations until 8

after we’ve actually started the law. 9

Also, on January 1, 2007, the price of the 10

TP

- 1 products from where they were the day before, 11

jumped up 60 percent. Those prices have not come 12

down yet. They’re just starting to come down and we 13

are now six years after the implementation. So we 14

expect a similar product. So the analysis based on 15

a price being very flat, and we agree that that will 16

occur, but it’s going to be after five or six years 17

in the analysis. 18

To lessen the impact on us manufacturers 19

as we stated, we’d like equipment class three to not 20

be included. However, if you did inclu de equipment 21

class three, which is the DL

- 6, it’s only three 22

percent of the market, I am not going to optimize 23

those designs. So all that computer modeling is not 24

going to occur. I’m going to take however I design 25Executive Court Reporters (301) 565

- 0064 48

DL

- 7 and use that material and that proc ess. So 1

those two curves, they’ll end up with the same 2

material and the same process. The analysis in DL

- 6 3

is actually going to be overstated. 4

We already showed it’s only 1.4 percent 5

beneficial, and that’s an overstated value because 6

we will not build that to the computer model. I 7

just can’t justify resources for three percent of 8

the business. Next slide. 9

We’ve also discussed the scaling factor, 10

so I had my engineer do a lot of analysis on the 11

entire range for both DL

- 7 and DL

- 8, and we compared 12

wei ghts, we compared total cost, we compared cost of 13

just the winding, we compared cost of different 14

cores, and the .75 scaling factor works for the 30 15

through the 500 KVA. The 15 KVA, however, we would 16

like to change the scaling factor to a .6. On the 17

750 and the 1000, we’d like to change the 750 to a 18

.69, and the 1000 to a .68. 19

So we go to the next curve, we’re not 20

actually making a recommendation for EL

- 2, we’re 21

making recommendation for EL

- 2 for 30 KVA to 500, 22

and then we’re modifying the scaling fac tor for the 23

15 KVA and the 750 and the 1000. This is not the 24

first time this has come up in the meeting, the 25Executive Court Reporters (301) 565

- 0064 49

scaling factor was questioned. We actually took 1

some time to look at it. We only believe three KVA 2

sizes are affected, that can’t use the .75 sc aling 3

factor. 4

MR. PARKER: Could we just go back to the 5

prior slide just a second so I can get that down? 6

MR. PATZNER: So we’re happy for this 7

presentation to be posted to the Sharepoint. 8

MR. PARKER: Just for our discussions 9

today. Okay. Than k you. 10

MR. PATZNER: So to finalize our 11

manufacturing impact. EL

- 2 compared to EL

- 4, which 12

were the two peaks on the analysis, it would cost us 13

as a manufacturer, 100 percent increase to go from 14

EL

- 2 to EL

- 4. So EL

- 2 will only cost $8.3 million, 15

EL

- 4 c ould cost us $16.4. That’s 100 percent 16

increase. If you look at the quad of benefits, 17

there’s only a 14 percent increase in the quads 18

saved. So you’re putting a large burden on us 19

manufacturers for initial out of pocket and cash 20

flow for just a very sma ll overall quad benefit. 21

The small manufacturers, if we stay at EL

- 2, would 22

still be able to design the butt lap, so those 18 23

manufacturers that are just building less than 100 24

units a year could continue to do so. They would 25Executive Court Reporters (301) 565

- 0064 50

not be as cost

- competitive a s us, but they’re not as 1

cost

- competitive today. 2

The materials which meets our request, M6, 3

could be done both as a miter and butt lap and 4

miter, and four miter and three miter, and most 5

importantly, us large manufacturers would start 6

playing with the other processes and materials. We 7

would go to those dots in the computer model with 8

amorphous, if that was the appropriate material, or 9

distribute gap or so forth. 10

So by going to EL

- 2, in six years from now 11

when we’re doing this again because the proces s 12

requires us to look at it, the technology available, 13

we will have a lot more information to share with 14

everybody involved. Thank you guys for your time. 15

MR. PARKER: Thank you. Any clarifying 16

questions? 17

MR. SCHOEN: Jerry Schoen, AK Steel. The 18

c apital cost summary that you put up there , 8.2 and 19

16, is that just for Schneider Electric? 20

MR. PATZNER: No, that’s from their data 21

and adding them together. 22

MR. SCHOEN: Thank you. 23

MR. PATZNER: My biggest concern with the 24

data was that it matched what we were seeing, so my 25Executive Court Reporters (301) 565

- 0064 51

expenses would be

-- so I took from the data they 1

supplied

-- it’s the hundred percent add, so the 2

hundred percent add to DOE is what’s critical. So 3

my numbers would be EL

- 2, let’s say would cost me a 4

million, EL

- 4 would cost me two million. So the 5

delta actually aligned with what we had. 6

MR. PARKER: Any other clarifying 7

questions? Rob Greeson. 8

MR. GREESON: Rob Greeson, Federal 9

Pacific. I just want to thank Tom for a good 10

presentation

-- 11

MR. PARKER: Speak a little lou der. 12

MR. GREESON: Okay. I just want to thank 13

Tom for that presentation. I think he did a good 14

job, and we share his views on pretty much 15

everything in that slide, and I think he covered it 16

very logically and methodically, and I would 17

recommend to the committee to take heart when he 18

talks about the 2:1 cost, that’s exactly what we got 19

in our estimations too. To go from two to four is 20

going to cost us twice as much capital to do that, 21

and he’s 100 percent right on materials. The 22

industry is

-- it’s goo d for the industry to go for 23

an incremental increase. You’re going to get 24

significant energy savings, I think it’s

-- EL

- 2, is 25Executive Court Reporters (301) 565

- 0064 52

it

-- I think it’s 20

-- it’s at least 20 percent. 1

That’s pretty significant and it is going to look to 2

the industry to start t o get into these other 3

materials as well, and then, as Tom said, the next 4

time around, we’re going to know a whole lot more. 5

It takes a long time to turn a big boat around, and 6

I think the industry has shown consistent increases 7

in efficiency and we’re st ill headed in that 8

direction, and hopefully we can improve on how fast 9

and how quickly we can go up in our efficiency. 10

MR. PARKER: Any other comments, 11

questions? Okay. We have not heard from the steel 12

makers yet, or the advocates, so my question would 13

be whether either wishes to propose now, or propose 14

something at the break? 15

MR. DeLASKI: You have heard from us, last 16

meeting. 17

MR. PARKER: At the last meeting, but not 18

in response to this. And so one option would be for 19

you to reiterate your propos al of the last meeting 20

if that’s your choice, or you might wish to alter 21

that, alter your choice. But

-- Eric, you have the 22

mic, you want to

-- 23

**Proposal**

**- industry**  24

MR. PETERSEN: Sure. Eric Petersen, AK 25Executive Court Reporters (301) 565

- 0064 53

Steel. Our position would be

-- is that our 1

inte rest is in being able to provide a range of 2

products as John Caskey has identified already, t hat 3

will insure the transformer manufacturers have a 4

range of supply. The concern that we would express 5

as the steel industry is there’s only one domestic 6

supplie r, AK Steel, behind some of these products, 7

so we would encourage that a standard not be 8

established that results in a single source of 9

supply. We would encourage a position that 10

essentially results in both of the domestic steel 11

suppliers having a competi tive position and it 12

sounds like that’s what NEMA has proposed, so we 13

would be in agreement with the NEMA position. 14

MR. PARKER: Okay. 15

MR. DeLASKI: If it’s useful, we can 16

reiterate our position, but we might have a new one. 17

MR. PARKER: Yes, why do n’t you reiterate 18

your position. 19

**Proposal**

**- Advocates**  20

MR. DeLASKI: Our position, as we made it 21

at the last meeting was EL

- 5. EL

- 5 is the maximum 22

cost effective level under the exclusion scenario. 23

And at the last meeting, that was the level we had 24

our support for. And we indicated that we had some 25Executive Court Reporters (301) 565

- 0064 54

flexibility on the scaling factors. I appreciate 1

the detail now that NEMA has come forward with, with 2

some detail on how that could be addressed. But 3

that’s where we were at the last meeting. 4

MR. PETERSEN : Clarifying question. 5

MR. PARKER: Yes, Eric. 6

MR. PETERSEN: Eric Petersen, AK Steel. 7

Andrew, I just wanted to confirm that’s EL

- 5 for all 8

three design lines. 9

MR. DeLASKI: We didn’t focus on six. 10

MR. PETERSEN: Okay. 11

MR. DeLASKI: So just f or seven and eight. 12

MR. PETERSEN: Seven and eight is EL

- 5. 13

MR. DeLASKI: Under the exclusion 14

analysis. 15

MR. PATZNER: Andrew, was that before or 16

after the amorphous was removed? 17

MR. DeLASKI: After the amorphous was 18

removed. 19

MR. PATZNER: We did have the data at the 20

meeting, the amorphous

-- 21

MR. DeLASKI: We didn’t have the national 22

impact analysis data. We had the LCC analysis. 23

What I’m looking at is the LCC, saving, you know, 24

where is a customer have a positive LCC result, and 25Executive Court Reporters (301) 565

- 0064 55

that’s what I ’m looking at that break. So my 1

standing is that at that level we’ve got

-- that’s 2

it. 3

MR. FERNSTROM: Richard? 4

MR. PARKER: Yes, Gary Fernstrom. 5

MR. FERNSTROM: Gary Fernstrom, PG&E. I 6

found Thomas’ comments to be pretty interesting 7

because this i s a business where consumer buy the 8

lowest first cost products. So whatever the 9

standard, you obviously have the problem of going 10

from the present to the future in very little time. 11

My question is how have you dealt with that in the 12

past and is there som e better way to do it so that 13

we don’t have so much of a problem as you outlined 14

would take place? 15

MR. PATZNER: Thomas Patzner, Schneider 16

Electric. The last time the low voltage

-- the last 17

time the low voltage converted, there was already 30 18

to 35 per cent using the products, so we were able to 19

leverage that. 20

MR. FERNSTROM: That was on account of

-- 21

MR. PATZNER: State mandates. 22

MR. FERNSTROM: Thank you. Gary 23

Fernstrom. That was on account of state mandates? 24

MR. PATZNER: Yes. So without a market 25Executive Court Reporters (301) 565

- 0064 56

for it, as a manufacturer, I cannot seek how we get 1

around the fact that we can’t get to the computer 2

model until we start physically building the 3

product. 4

MR. FERNSTROM: Okay, so now that there’s 5

a federal standard, the states aren’t going to be 6

able unless it’s provided for in the regulation, 7

won’t be able to adopt it early and provide any kind 8

of bridge at all? 9

MR. PATZNER: So the NEMA premium program 10

-- Thomas Patzner, Schneider Electric. The NEMA 11

premium program came out in May 2010. DOE announced 12

in April 2011 this process and the regulation. And 13

in October they announced it, so at this present 14

time no states are evaluating. However, I believe 15

wholeheartedly that the state of California would 16

have mandated the NEMA premium if the DOE was not 17

moving forward with the overall law. 18

So, to actually help the process, us 19

manufacturers need to be more proactive in creating 20

above the law efficiencies so that on January 1, 21

2016 we already have the next level and states will 22

then take that prog ram and probably mandate it. 23

That’s a whole separate problem for us 24

manufacturers. But I’m assuming it would be the 25Executive Court Reporters (301) 565

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same five states. Actually there was

-- ended up 1

being like nine states in total because Maryland, 2

Connecticut, New Jersey all had plans in place that 3

they put on hold. But that could be like 40 percent 4

of the market, so it would allow us to be able to 5

stage it moving forward, if we could end up having 6

that same type of time line where the NEMA premium 7

program came out at the exact same ti me. That’s 8

more of a question for John than an individual 9

manufacturer, but that would be a way to get around 10

it, and by having it available right away, AS H RAE 11

would be able to mandate it and it would give us the 12

staging effect of going to the next market

. 13

MR. FERNSTROM: Okay, then, I think that 14

establishes the importance of allowing states to

-- 15

the few states that wish to, to adopt this 16

regulation early to smooth the transition. 17

(Discussions off mic) 18

MR. CASKEY: This is John Caskey at NEMA. 19

And I think, Gary, that’s a good question, and to be 20

honest with you, when we introduced the NEMA premium 21

program, I was in contact with a few utilities and 22

the utility for looking at adopting the NEMA premium 23

program, their point for providing incentives for 24

commercial building, managers, and building 25Executive Court Reporters (301) 565

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companies, and basically I think because of the 1

economy and other things, that just really never 2

materialized. But I was in some pretty strong 3

discussions, I would say, with, again, some 4

utilities adopting that and then just at the 5

eleventh hour they chose not to, for whatever 6

reason. But that’s the other way, that if utilities 7

decided to say that they’re going to give rebates to 8

commercial building developers to install premium 9

products, whatever that might be, including 10

transformers, then that would be an incentive to 11

sell more products before the 2016 implementation of 12

this standard, and get more experience with other 13

types of ways to meet that higher efficiency. 14

MR. FERNSTROM: Gary Fernstrom. I totally 15

ag ree with you, however, I think we need to 16

recognize that utility incentive programs are not 17

going to provide the volume that a state entity 18

would. 19

MR. CASKEY: Right. 20

MR. FERNSTROM: So, it would help, but it 21

wouldn’t be as effective. 22

MR. PATZNER: T homas Patzner, Schneider 23

Electric. Also in the work of the NEMA premium 24

program was a couple bills in Congress. One was for 25Executive Court Reporters (301) 565

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retrofitting the pre

- 2007 transformers with the NEMA 1

premium transformer and you would get your labor 2

paid for, so it was part of the Labor Act, to get 3

electricians in the door. So I don’t believe that’s 4

gone anywhere besides committee. But there were 5

other entities besides just the utility work in 6

regards to the NEMA premium program. 7

MR. CASKEY: John Caskey with NEMA again. 8

No w that you’ve refreshed my memory, I also talked 9

to ACEEE and they had proposed

-- I saw a document 10

that was in draft form, probably two months or so 11

ago

-- and they included the NEMA premium program as 12

their base recommendation for efficiency, and then 13

th ey had another version higher than that, but at 14

least they talked to me and asked, you know, could 15

they use our paperwork and adopt as their base. I 16

don’t know if that document’s been approved yet by 17

their organization, but that was a draft document. 18

So, I mean, there are things being done to try and 19

get more premium transformers out there, but it’s 20

just slow in coming, particularly during this poor 21

economy. 22

MR. PARKER: Andrew. 23

MR. DeLASKI: I’ve got a few points and 24

questions. First of all, we were involved in the 25Executive Court Reporters (301) 565

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various states standards and I think that the ... law 1

may be

-- the question of public reaction, so this 2

is an argument that federal law does not preempt the 3

states. And the presumption is that the federal law 4

preempts the states now. The states can’t come back 5

-- that’s sort of my working presumption. We think 6

that there might be an argument that they could, but 7

transformers are covered under a part of law that 8

are tacked on the end

-- there is some vagueness 9

there that we should be pursi ng perhaps, but not the 10

focus of discussion today. 11

MR. FERNSTROM: Gary Fernstrom. Well, 12

Andrew, unless a state exemption is allowed in the 13

regulation or in the law. 14

MR. DeLASKI: Right. That could be done 15

by rule, I think. So the pivotal question, my 16

working presumption is this is not ... for the states. 17

That’s the general approach to federal standards. 18

Unless there’s a specific exclusion in there, and 19

there’s no specific exclusion in here, you’d be 20

looking for something kind of general, and that’s 21

what a lawyer would have to figure out. That’s the 22

general feel, you get national standards. 23

The issue of

-- you raised a question, 24

Thomas

-- if you could go back

-- maybe if you don’t 25Executive Court Reporters (301) 565

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mind sending these slides around, it may help us 1

later in the day an d this evening, to be able to do 2

that through Sharepoint. 3

MR. PATZNER: I don’t mind, you have them 4

to do that? 5

MR. PARKER: Yes. 6

MR. DeLASKI: And I really do appreciate 7

the thoroughness of your presentation, and the fact 8

that you leaned on the DOE analysis, I think will be 9

helpful for all of us in terms of getting 10

constructive conversations. 11

You had a slide there, we’ve already 12

talked about five years and ten years

-- I didn’t 13

follow that discussion . So if you can go back

-- 14

step me back through your comment about, if I had 15

more time I could do X. 16

MR. PATZNER: So the three to five years 17

is for

-- so all the analysis is based on the 18

computer ... cost. As a manufacturer, we’re actually 19

going to step to that computer model. So it’s going 20

to take m e five years from the

-- it’s going to take 21

me five years as a manufacturer to get to the low 22

cost dot on the dot plots, because on January 1, 23

2016, I have to be able to service my customers. I 24

do not have the resources to service my customer 25Executive Court Reporters (301) 565

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pre

- law and the same product for after law. So I 1

won’t be able to start having it run through my 2

facility until I have volume. I’m not going to tie 3

up cash by stocking them in advance. 4

So we’re not going to start building this 5

product until

-- if it’s January 1, 2016, we’ll 6

start building this product in November of 2015. 7

Based on what we learned when we converted to TP

- 1 8

product in mass production, I will be constantly 9

reducing my cost based on how it actually flows 10

through my facilities, and I’ll get to that c omputer 11

dot, based on the TP

- 1 timeframe, that will take me 12

three to five years. 13

Now, we have a lot more resources than 14

smaller manufacturers. So the ten years is what 15

it’s probably going to take some other manufacturers 16

to get to the computer low cos t effective design. 17

This includes me doing six signa (ph) projects, con 18

button blitzes (ph)

-- we will be weighing 19

everything that goes through our facilities to make 20

sure that our coils don’t have any extra losses in 21

them, and so forth. But I can’t star t that process 22

until I have volume. Does that answer the question? 23

MR. DeLASKI: It does. So, and my last 24

question, on a whole different topic, which is, I 25Executive Court Reporters (301) 565

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appreciate your thoughts on the energy savings, and 1

looking at the delta, you chose? 2

MR. PATZN ER: EL

- 2 and EL

- 4. 3

MR. DeLASKI: EL

- 2 and EL

- 4, and of course 4

I’m looking at TSLs here, but it’s

-- you said it 5

was .14 quads was your take on that analysis? 6

MR. PATZNER: So it’s in the data, so if 7

we go back to the slide, so just go to the slide 8

whe re class four is on the top, so third slide

-- so 9

if you blow this slide up, so the quad savings are 10

across there. So it’s one quad for EL

- 1, and 1.09 11

for EL

- 2, 1.13 quads for EL

- 3, 1.24 for EL

- 4. 12

MR. DeLASKI: So additional point

-- 13

again, the addition al quads, you used 2.4 for five, 14

but you used two to four

-- 15

MR. PATZNER: So that was a 14 percent 16

increase in quads, but I’d have to double my 17

capital. 18

MR. DeLASKI: And the question I have

-- 19

the change in losses for that one from two, four. 20

At tw o for design line seven, the loss reduction is 21

23.5 percent, whereas at four, the loss reduction is 22

40 percent. And then for design line eight, the 23

loss reduction is 30 percent at two, and it’s 46.4 24

percent loss reduction at four. So maybe this is a 25Executive Court Reporters (301) 565

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ques tion more for the consultants, which is that 1

change in losses is significantly

-- we’re talking 2

about 50 percent additional cut in losses to get 3

only 14 percent ... I’m wondering how that

-- how 4

those things square up. What would be

-- some 5

reason why thos e

-- or we don’t see a more direct 6

relationship between those two changes? 7

MS. COUGHLIN: The problem with this

-- 8

this is Katie Coughlin, Lawrence Berkley Labs. The 9

biggest impact, because the test procedure load, 10

which is what gives you the change in losses 11

according to the LCC estimate is significantly 12

higher than the loads in the real buildings. So the 13

LCC is using an RMS load of about 20

-- a little 14

over 20 percent, as opposed to 35 percent. So the 15

energy savings is going to be lower. 16

MR. DeLAS KI: But excuse me,

-- 17

MR. RIVEST: The baseline

-- 18

MR. DeLASKI: Yeah

-- 19

MR. RIVEST: The baseline

-- this is Mike 20

Rivest

-- I have a ... hypothesis, though. It would 21

be that some amorphous is being selected, so you’re 22

getting benefits of designs at EL

- 4 showing up in 23

the numbers for two

-- this is a market mix. 24

MR. DeLASKI: But this is an exclusion 25Executive Court Reporters (301) 565

- 0064 65

scenario, right, Thomas? 1

MR. PATZNER: I used the exclusion 2

scenario so there was no amorphous in the design. 3

MR. RIVEST: So there is no amorph ous. 4

MR. PATZNER: These tables are amorphous 5

being excluded. 6

MR. RIVEST: So it’s something else. 7

MR. DeLASKI: Thomas, do you have a 8

theory? 9

MR. PATZNER: I believe it’s 100 percent 10

due to loading. I still believe it’s 15 to 20 11

percent is the lo ading factor, so what ends up 12

happening is it’s all in core losses, so the savings 13

is not going to

-- it’s all based on the core losses 14

and when you look at the lowest cost point on the 15

delta, chances are those are higher core losses, so 16

you don’t get as m any deltas when you switch 17

products. So the constant

-- the only constant is 18

the A loss, right, ... core

-- so it’s the A and B 19

based on the fact that A is constant throughout, and 20

B is based on a 20 percent loading factor. So I’d 21

have to know the mix on t he other to be able to 22

actually ask what the design was. So you could see 23

the delta A and delta B. 24

MR. PARKER: So would it be fair to say 25Executive Court Reporters (301) 565

- 0064 66

then that if the test procedure were modified to 1

reflect the loading that is more realistic for the 2

market, that t hat discrepancy would

-- 3

MR. PATZNER: No, I believe actually

-- I 4

believe that 20 percent is what’s going to stay. I 5

believe the 14 percent is an accurate number, even 6

though we’re reducing the losses on the units by 30. 7

MR. PARKER: Yes. 8

MR. SAMP AT: Mahesh Sampat, EMS 9

Consulting. If the loss reduction is coming from 10

core loss, it’s saying that there is zero percent 11

load factor or 35 percent load factor? Use core 12

loss one watt is there regardless of load, okay. So 13

all the savings descending fro m reduction in core 14

loss should be the same, irrespective of load 15

factor. So if the losses are reduced by 40 percent, 16

then the balance has to be due to load factor. Is 17

that what we are saying? It’s not that big an 18

impact. 19

MS. COUGHLIN: Again, the dif ference 20

between the assumption of a 35 percent RMS in the 21

test procedure and a field loading that is something 22

around 20 percent, it’ s very large, in terms of the 23

energy savings. 24

MR. SAMPAT: Okay. 25Executive Court Reporters (301) 565

- 0064 67

MS. COUGHLIN: So if

-- and there are a 1

decent numbe r of cases in the LCC selection process 2

where you’re picking a unit that will actually have 3

a lot of efficiency gain through the load loss. 4

When you put that unit in at a lower loading, you 5

will not see the energy savings, and I think that 6

that’s what’s g iving the difference. 7

MR. SAMPAT: Yeah, that would explain if 8

the selection at a high E level is resulting from 9

load loss reduction rather than core loss reduction, 10

then that could explain what we are seeing. Thank 11

you. 12

MR. PARKER: Does that answer your 13

question, Andrew? 14

MR. DeLASKI: I’m not sure it answers it, 15

but it’s progress. 16

MR. GREESON: Rob Greeson, Federal 17

Pacific. I guess another way of saying it is, at 18

EL

- 4 you’ve got transformers that achieve their 19

efficiencies by a lot more ...or, but you didn’t get 20

the benefit because at 20 percent load ... five 21

percent of your losses at that point. So the fact 22

that it’s all in the no load losses, NEMA premium or 23

the other products might have been more than

-- the 24

scatter plot data is not optimized on efficiency, 25Executive Court Reporters (301) 565

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they were optimized on A,B factors. I’m looking at 1

the scatter plots that I downloaded from Sharepoint, 2

and another thing I’m noticing is as far as butt 3

laps go, there’s an M12 butt lap, which you can 4

really do much with M12 where we are now. Then 5

there’s an M12 copper

- aluminum butt lap, so you can 6

maybe go a little higher. And then they’ve got an 7

M6 aluminum

- aluminum butt lap. And then there’s no 8

M4 butt laps. Everything’s mitered from that point 9

-- either a wound core or mitered from that point 10

forward. And the manufacturers have already stated 11

their concerns about the mitered cores. Even if you 12

go out and buy a mitered core cutting machine, those 13

things are enormously expensive to maintain. 14

They’re not as fast as cutting

-- the whole i ndustry 15

is set up on butt laps. 16

If you pick the standard that we 17

recommended, it allows the industry to react in a 18

more natural way. If you can build the things butt 19

lap, you could build a miter. You could build them 20

-- some people might even choose to do the wound 21

cores. But if you look at choosing EL

- 5, you don’t 22

have much of a choice. You can’t even

-- with butt 23

lap technology, you’re going to be hard

- pressed to 24

even get a bove an EL

- 3, so you’re essentially 25Executive Court Reporters (301) 565

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saying, we’re going to choose EL

- 5, an d you’re going 1

to buy step

- lap miters, or core cutters, or you’re 2

going to invest in wound core. That’s what EL

- 5 3

means to us when we hear EL

- 5. You’re going to buy 4

a miter core cutter because the DOE raised the 5

efficiency beyond three and you’re going t o spend 6

one and a half to two million dollars in the next 7

five years. That’s a big deal. 8

MR. PARKER: And you’re saying that 9

transition occurs at EL

- 3? 10

MR. GREESON: Rob Greeson, Federal 11

Pacific. I’m saying that from our design 12

experience, anything a bove EL

- 3, you’re going to get 13

into different types of core construction 14

technologies by miter or wound cores. That’s been 15

my experience. And I’d welcome anybody else’s input 16

on that. But we like the EL

- 2 efficiency level 17

because it sort of addresses a lot of concerns with 18

the investment issues. But at the same time, there 19

probably will be manufacturers that may do some 20

estimates over time and then maybe the next time we 21

come back and evaluate this, we’ll be in a better 22

position to go higher. It’s kind of a big step 23

forward right now. 24

MR. PARKER: Okay. Just a clarifying 25Executive Court Reporters (301) 565

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question for Thomas, circling back to the compliance 1

date issue. Would those observations part of the 2

proposal to delay the compliance date

-- is that 3

part of your proposal? Or is it an observation 4

about EL

- 2 and 2016 compliance date. 5

MR. PATZNER: So we need to be able to 6

have volume to do it. So pushing up the date does 7

not change the fact that we’re not going to be at 8

the computer model designs until three to five years 9

after it goes into effect. We will start working on 10

the product, we will do approximately 18 designs, 11

and we’ll figure out how cost

- effective we can do 12

that. But until they actually start going through 13

my facilities and I actually complete the compliance 14

testi ng on that, I’m not going to know if those cost 15

targets are actually feasible to do. So because of 16

cash flow, which have been shown, we have not been 17

able to do. Cash flow for us is I’m not going to 18

tie up inventory. I am not going to put two months 19

to three months worth of product in the facility ... 20

MR. PARKER: So then your concern will 21

arise

-- that issue will arise whether the effective 22

date is 2014 or 2018, it doesn’t matter. 23

MR. PATZNER: That’s correct. 24

MR. RIVEST: Mike Rivest. Your experie nce 25Executive Court Reporters (301) 565

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with introductions, this is sort of cost reduction 1

over time ... five or ten year ... 2

MR. PATZNER: So since your analysis are 3

based on purchase price, it will be 100 percent be 4

based on how the other manufacturers follow us. So 5

we will, the price will not go up or down

-- 6

MR. RIVEST: I’m sorry, I probably phrased 7

that improperly. So are you saying there’s a cost 8

reduction over time, some learning process, 9

optimizing your designs, and that means early on you 10

have a cost penalty. Are we talking abou t a ten 11

percent

-- you would be cutting ten percent of the 12

costs over time, or twenty percent cost over time? 13

MR. PATZNER: So I’m not going to be able 14

to answer that question due to the fact that in 2008 15

all materials spiked. So we have a huge cost 16

red uction for 2008 until now, but a lot of that is 17

due to the fact that M6 became our matrix. So the 18

only experience we have with regards to this type of 19

item where I can’t go below a certain efficiency, is 20

from 2007 to now, and due to the huge material pric e 21

doubling between 2008 and nine and today, I can’t 22

answer how much we actually designed down. But I 23

can tell you that we’ve done a lot of processes 24

changes so that I can get product out of my facility 25Executive Court Reporters (301) 565

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faster, which has been my number one concern, not 1

imp acting my capacity. Even as large as my company 2

is, I cannot pour concrete. 3

MR. PARKER: Okay. Jerry Schoen had his 4

hand up next. 5

MR. SCHOEN: Jerry Schoen, AK Steel. 6

Mike, I can talk in a more general way through 7

Schneider’s point of view, but also from other 8

customers. The kind of issues they’ve got into are 9

thickness of material, they were changing to 10

different types of steels that had different 11

coatings on them, that were more abrasive. Shear 12

knives didn’t last long, shearing tolerances 13

changed . Forced ... productivity, the thinner the 14

material, the more stacking core productivity, they 15

had to do much more careful job of machine 16

alignment. We’re talking about systems that index 17

and miter, and index and miter. All those ... have 18

changed and you pr obably end up upgrading shear 19

material, shear blade materials on all of your 20

mitering equipment. But that’s stuff you don’t 21

actually need until you go into that and know what 22

the grade of wear and tear is going to be on your 23

equipment. 24

Shear ing thinne r materials is actually 25Executive Court Reporters (301) 565

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harder on your equipment than heavier gauge stuff. 1

And a lot of people don’t appreciate that. They 2

think it’s thinner, it should cut more easily, but 3

all those tolerances tighten up so the rate of wear, 4

particularly mitering, goes up drastically as you go 5

thinner. It’s not just a linear three puts going 6

down, but the maintenance is going up. Those are 7

the types of things that until you are into it, you 8

don’t know what you’re going to get into. 9

Many of these folks will be usin g 10

probably materials with thicker coatings that they 11

used to use. Those coatings that we put on the 12

steel are quite abrasive. And basically, they’re 13

magnesium silicate, sand. So you’re basically 14

grinding

-- you’re cutting through a layer of 15

glassified sand on the surface of the steel. 16

There’s the wear and tear issue. And if you think, 17

the thinner you are, we put the same amount of 18

coating on a nine mm material as we put on a 14 mm 19

material. You’re cutting more individual sheets per 20

stack, the wear’s just going to go up. The di...s 21

come down, that fine powder that comes off the steel 22

is that much more abrasive. I think those are the 23

kind of things you may end up ... They’re very 24

tangible, but ... can’t pick them. 25Executive Court Reporters (301) 565

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MR. PARKER: John Caskey. 1

MR. CASKEY: John Caskey, NEMA. Can we go 2

back to, I think it was slide number three there? I 3

want to see if my math works out. So I’m looking at 4

the difference between efficiency level 2 and 5

efficiency level 3, and what I understand from 6

looking at the equipment c ost savings, which are 7

really the costs, if you will, of the equipment, 8

we’re going from roughly $2.5 billion to all the way 9

up to $5.6 billion

-- that’s a three billion dollar 10

increase in cost to accomplish that, if I’m reading 11

that correctly. And then i f we go down below there 12

in terms of operating cost savings, we’re going from 13

$10 billion in savings, to $13 billion in savings. 14

So basically you’re investing $3 billion of dollars 15

to produce $3 billion of dollars in savings. And 16

we’re going from 1.09 qu ads

-- if you believe any of 17

these numbers

-- to 1.4. (Laughter.) 18

So you’re basically paying $3 million 19

dollars, if you will, to get point three quads of 20

savings, and we’ve got a lot of energy experts in 21

this room or energy efficiency experts. Do you h ave 22

any idea, compared to other things, like converting 23

from incandescent to fluorescent or to LEDs, you 24

know, what does that three billion dollars of 25Executive Court Reporters (301) 565

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investment

-- is there some factor that you guys 1

know, like a million dollar investment normally gets 2

you a quad or a half a quad, or anything like that 3

over a 30 year period? Can you say whether this is 4

looking

-- 5

MR. DeLASKI: You’re looking at me, John. 6

MR. CASKEY: Well, or anybody. Can 7

anybody tell me whether this looks like a good 8

investment or a bad investment? 9

MR. DeLASKI: I can’t off the cuff. What 10

I can say is that we care about point three quads. 11

Point three quads is not an insignificant number. 12

There are many rulemakings that DOE does that are 13

about point three quads. This is a substan tial 14

number. It’s not three quads, but it is a number 15

that we care about. 16

MR. CASKEY: Okay. 17

MR. DeLASKI: I think we could look at 18

other rulemakings that say that three quad cost 19

about three million dollars

-- point three quads. 20

I’d have to find i t. 21

MR. CASKEY: Okay. 22

MR. DeLASKI: And I also come back to the 23

-- this isn’t about having, you know, the speech we 24

heard from Dan Cohen yesterday, that

-- some folks 25Executive Court Reporters (301) 565

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didn’t get to hear that

-- it may be worth redoing 1

that, Richard, for folks who wer en’t here. I know 2

both of us were, but not everybody was. Again, he 3

did a really nice job of explaining the Department’s 4

process when thinking about a decision, which I 5

thought was very instructive to all of us. To 6

understand that this isn’t about a cho ice, are we 7

going to do this or are we going to spend this three 8

million dollars on fluorescent lights and retrofits. 9

It doesn’t work that way. 10

MR. PARKER: ... a portfolio investment. 11

Period, so

-- 12

MR. DeLASKI: And we don’t do it that way. 13

MR. CAS KEY: And we, as NEMA, arrived at 14

two, and the way we explained it to you, and we 15

didn’t do that comparison that I’ve been talking 16

about between two and five, but

-- 17

MR. DeLASKI: What I

-- I’m still struck 18

by

-- and trying to wrap my mind around, is tha t

-- 19

that

-- is how we get both of the savings very 20

quickly, even though we’ve got

-- so at EL

- 1, we’ve 21

got a whole quad at EL

- 1, right. And then getting

- 22

- after that getting, you know, ten percent 23

increase, and getting the EL up, that the loss 24

reduction at EL

- 1 is much lower than the loss 25Executive Court Reporters (301) 565

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reduction at those higher ELs. 1

MR. CASKEY: Right. I got you. 2

MR. DeLASKI: So that’s what I’m trying to 3

wrap my mind around is to get back to do I believe 4

these numbers? Do I believe the increment is indeed 5

that small and that’s what I’m trying to wrestle 6

with. That small

-- that size. 7

MR. CASKEY: That’s been a consistent 8

issue, as I’ve said over the last two months is 9

trying to, you know, can I go home and get out my 10

little calculator and verify that 1.0 is i n the 11

right ball park? I really can’t do that. 12

MR. DeLASKI: Yeah. For some reason, 13

we’re getting all those savings, the designs are 14

being chosen, Katie, it’s a question for you

-- 15

what’s happened the designs that are being chosen 16

here are getting the core savings at one and then we 17

seem to be getting

-- the coil seems to be proving

- 18

- why are the savings

-- the savings seem to ramp up 19

very quickly then they kind of tail off. 20

MR. CASKEY: So I think

-- 21

MS. COUGHLIN: In the

-- you look at the 22

engine ering, this DL

- 7, the engineering cost curve 23

is also pretty flat, so if you go to EL

- 2, you’re 24

actually jumping up to the higher efficiency designs 25Executive Court Reporters (301) 565

- 0064 78

right away. So I don’t know if you got that cost 1

curve somewhere

-- we could show it

-- 2

MR. PATZNER: So, in other words, if you 3

look at the life cycle cost, one, two, and three for 4

design line

- 7s all the threes. 5

PARTICIPANT: Exactly. In their analysis 6

it’s always EL

- 3. 7

MR. DeLASKI: I see. So basically at EL

- 1 8

you’re getting EL

- 3 savings. 9

MS. COUGH LIN: And EL

- 2, essentially, 10

you’re seeing everything you can see at EL

- 4. 11

MR. DeLASKI: Because you’re using a 12

transformer that gets

-- 13

MS. COUGHLIN: It’s cheaper. 14

PARTICIPANT: According to their analysis. 15

MS. COUGHLIN: According to ... that ... it ’s 16

only EL

- 1 ... 17

MR. DeLASKI: Right, but the problem we 18

face is that if you believe any slope to the curve ... 19

market, then practice

-- we have to conserve ... And 20

what can be saved

-- that’s the challenge here. 21

MR. RIVEST: This is Mike Rivest. If you 22

we re to fit at a normal exponential curve there, 23

what you would be seeing is decreasing marginal 24

benefits. So although the savings benefit are 25Executive Court Reporters (301) 565

- 0064 79

coming, once you get to that next plateau, it’s ... 1

If you fit an exponential curve on the cost, which 2

is what you ’re getting on these, you’ll probably get 3

more representative results I would think. 4

MR. DeLASKI: ... is embedded in that. 5

MR. RIVEST: It’s embedded, but I think 6

what’s skewing it is

... one of the realms ... 7

MR. DeLASKI: We have the EL, we have the 8

sa vings by

-- we don’t do we? So maybe

-- we 9

probably need to caucus, Richard, when the time’s 10

right. 11

MR. PARKER: Yes. Okay. It is now ten 12

until five, so what we might

-- I think it’s too 13

late to start a new item of business. So perhaps 14

this would b e a good time to break for the day and I 15

would encourage people to caucus with your own 16

groups and talk to each other afterwards tonight or 17

tomorrow morning, and we’ll take up bright and early 18

in the morning with follow

- on discussion about these 19

proposals, and of course we still have the issue of 20

data centers, which we did not get to today. So 21

that is something that we definitely need to 22

discuss. And we might, if we can, if we can come up 23

with a specific proposal for data centers, we can 24

refine that in so me way, make as much progress as 25Executive Court Reporters (301) 565

- 0064 80

possible, that would be a very positive. In any 1

case, give us what you have and we will discuss it. 2

I would remind everybody that the next 3

meeting is at DOE, in the Forrestal Building

-- 4

8E089 Forrestal Building. We’ll try to start bright 5

and early at nine, so please allow time to clear in, 6

because you will need to go through security. 7

MR. DeLASKI: Can you give the room number 8

again? 9

MR. PARKER: 8EO89. 10

MR. DeLASKI: So will there be a table for 11

us like at other m eetings? 12

MR. PARKER: Yes. There will be a table. 13

MR. DeLASKI: How early can we get there? 14

8:30? Eight? 15

MR. PETERSEN: I’ve been there early and 16

they have never got there before eight o’clock. 17

MR. DeLASKI: Okay. 18

PARTICIPANT: But our doors open before 19

eight o’clock. I’ve been sitting in the lobby 20

waiting for you to come in. Well, they let me sit 21

in the lobby at a quarter to eight. 22

MR. PARKER: Okay. 23

MR. DeLASKI: Okay. So DOE, at the 24

building we were at the last time or

-- 25Executive Court Reporters (301) 565

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MR. GR EESON: The main building ? 1

MR. PARKER: The main building, not the 2

one down the pike. It’s the main building. And 3

we’ll have a registration type protocol. 4

Registration should be near the security desk. 5

MR. GREESON: At nine? 6

MR. PARKER: Yes, nine o’clock, let’s 7

start. Enjoy your evening. We’ll see you tomorrow 8

morning. 9

(Whereupon, at 5 : 52 p.m., the meet ing in 10

the above captioned matter was adjourned , to 11

reconvene the next day, Friday, December 2, 2011 at 12

the DOE Forrestal Building at 9:00 a.m

. ) 13

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25Executive Court Reporters (301) 565

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**REPORTER'S CERTIFICATE**

This is to certify that the attached proceedings

before:

**U.S. DEPARTMENT OF ENERGY**

In the Matter of:

**MEETING of the LV WORKING GROUP** 

Were held as herein appears and that this is the

original transcr ipt thereof for the file of the

Department, Commission, Board, Administrative Law

Judge or the Agency.

Further, I am neither counsel for or related to

any party to the above proceedings.

Official Reporter 

### Wendy Greene

Dated: Decembe r 9, 2011