From: Robert Berman [mailto:bermaneconomics@gmail.com]

Sent: Tuesday, October 11, 2011 10:44 AM

To: Caskey, John

Cc: Brian Coffey; Alex Hofmann; Andrew Delaski; Aris Marantan; Art Rosenfeld; Bob Saint; Bruce Smith;

Caitlin Johnson; Carlos Gaytan; Charlie Drexler; Charlie Stevens; Chris Bolduc; Silcox, Clark; Creevy, Jim;

Dan Cohen; Daniel Young; Eric Peterson; Freeman, Jeremiah; Gary Fernstrom; Greg Coulter; Greg

Rosenquist; Hirsch, Bruce R; Ja mes Lass; Jen nifer Tiedeman; Jerry Corkran; Jerry Hodge; Jerry Schoen;

Joanna Mauer; John Cymbalsky; John Rossetti; Katie Coughlin; Ken Winder; Mahesh P. Sampat; Matt

Miller; Matthew Nardotti; Meg Waltner; Meyers, Aaron; Michael Hyland; Michael Rivest; Millure, Dave;

Phil Harter; Phil Hopkinson; Polinski, Ray m ond; Puesh Kumar; Richard Parker; Rick Anderson; Rob

Greeson; Robert Berman; Robert van Buskirk; Robin Roy; Ryan, Paul; Scott Beck; Simmons, Chuck; Steve

Nadel; Steve Rosenstock; Tim Ballo; Tom Eckman; Wes Patterson; Zhimei Luo

Subject: Re: NEMA transformer section comments regarding DOE negotiated rulemaking process and

analysis for distribution transformers

G ood Morning Joh n, Richard, et. al.

I appreciate your concerns. Change often raises ones anxiety level regarding the future. As an

economist, let me share my view of a more efficient future; and what facts from the past on which I rely.

In particular, I'll comment on points 2 and 5 of your

GENERAL COMMENTS AND RE COMMENDATIONS PERTAINING TO ALL DISTRIBUTION TRANSFOMER

CLASSES:

2. Current Material Supplies And Capacities Should Not Be The Focus.

Manufacturers do not plan for significant excess capacity. I suspect this is also true of NEMA members.

Indeed, except for unusually severe economic conditions, firms tend to operate at or near ca pacity,

expandi ng only when the business outlook so warrants. Thus the relevant question is not whether a firm

or an industry can meet an increase in demand out of current capacity, but can capacity be expanded

and at what cost and in what time frame.

In the case of amorphous, it was stated that Metglas is prepared to expand am orphous capability as

necessary to meet new demand. Metglas did, in fact, significantly expand their US production capacity

in response to the 2007 MEPS rule. Since amorphous is not subject to patent restriction, increases in

amorphous demand could also be expected to draw new or former produ c ers into the market. We note

that amorphous for core steel is being produced by a major Chinese company and that other major

silicon steel manufacturers have produced amorphous in the past in a developmental capacity and could

enter the market with an amorphous p r oduct in the near future. Similarly, CRGO electrical steel is also

sold and produced internationally. One would expect US producers would also expand as required tomaintain market share in a growing US market for more efficient core materials. There is no reason to

believe that any domestic material supplier will opt not to expand and risk to relinquishing market

share to a competitor, domestic or foreign.

Finally, it should be noted that the increased demand for more efficient core ma terials following the

2007 MEPS r ule, and subsequent capacity expansions, were not associated with the sorts of price

increases feared then or now. There is simply no objective, market evidence to suggest that

competition will not continue to work in the future as it has in the past. Indeed, ther e were and are no

shortages of any core materials.

5. Impacts On Small Or Medium Manufacturers Has Improved and Likely Will Continue To Improve.

Expressed fears of adverse impacts on small and medium

‐ sized manufacturers stands in sharp contrast

to the record evidence. Amorphous is more available, in response to the higher demand, and price d

competitively, as a commodity, in the same market as electrical steel. Larger companies enjoy no

preferential access. Indeed, small and medium sized manufacturers enjoy improved access and pricing

now, as compared to the years prior to DOE MEPS standards

– and in part due to those standards. Th is is

due to the fa ct that amorphous has a larger role in the US market, and thus is a more formidable

competitor in the market for core materials. Competition from amorphous helps to keep prices lower,

including to small and medium

‐ sized manufacturers. Moreover, this access has come at no inc r ease in

investment by small and medium sized manufacturers due also to market competition and the entry and

growth of core manufacturers such as LVM. Thanks to LVM, and their competitors elsewhere,

amorphous cores, like amorphous, have also become a commodity. Rather than “drastic changes in

current ma nu facturing processes”, what is more likely to occur is more of the same

– the usual, not the

unusual

– a potential further evolution of the structure of the market to further increase the access to

amorphous cores by small and medium sized manufacturers on an increasingly competitive basis (rather

than a reduced basis), with only that additional inve stment that sm all and medium sized manufacturers

choose to make as part of other strategic business decisions. As a supplier of the amorphous metal

commodity, Metglas has stated that it is prepared to continue to supply the market equally however it

evolves. That is in their in t erests as well.

The story that the real

‐ world data actually tells is one of increased competition and improved

conditions for small and medium sized manufacturers. There are no market facts that support the fears

voiced by NEMA.

Regards,

Robert A. Berman, Principal

Berman Economics

www.BermanEconomics.com

1915 Grand Court

Vienna, VA 22182703

‐ 281

‐ 0490

703

‐ 655

‐ 8398 (cell)

BermanEconomics@gmail.com

On Oct 8, 2011, at 10:20 PM, Caskey, John wrote:

TO: Richard Parker, Brian Coffey, MVDT/LF Committee, LVDT Committee, NEMA Members, DOE

The attached comments are offered to the DOE, Navigant, LBL and the Committee members concerning

the negotiated rulemaking process for distribution transformer energy efficiency standards.

The basic points prese nted in th e comments are:

1. We need to make sure that the analysis results provided by Navigant and LBL are validated against

know data from the manufacturers and users at EACH step of the analysis.

2. Any efficiency levels supported by the committees must provide for the opportunity for multiple

designs, materials and suppliers to me et those level s cost effectively.

3. Detailed technical analysis questions and comments were provided to the facilitator and

consultant directly from the manufacturers.

4. The consultants need to perform sensitivity analyses to better understand what variables are

driving the results of the analysis.

5. The effi ciency levels selected by the co mmittees should not disadvantage the small and medium

‐

sized transformer manufacturers.

More detailed comments and recommendations are provided in the attached document.

Thank you for the opportunity to provide these comments. Please let me know if you have any

questions.Best regards,

John

John F. Caskey, CEM

Assistant Vice President, Industry Operations

National Electrical Manufacturers Assoc. (NEMA)

1300 North 17th Street

‐ Suite 1752

Rosslyn, VA 22209

john.caskey@nema.org

703

‐ 841

‐ 3233 Voice

703

‐ 841

‐ 3333 FAX

703

‐ 350

‐ 6886 Cell

Register now at http://www.nema.org/illuminations for NEMA's 85th annual meeting, Illuminations

Weekend, held October 28 and 29 at The Mayflower Renaissance Hotel in Washington, D.C.

<DOE Transformers negotiated rulemaking comments 2011

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