Browse: Departments   Dates   Agencies  

DEPARTMENT OF ENERGY

Western Area Power Administration

CFR Citation: 10 CFR Part 431

Docket ID: [Docket Number: EE-RM/STD-00-550]

RIN ID: RIN 1904-AB08

NOTICE: Part II

DOCUMENT ACTION: Notice of proposed rulemaking and public meeting.

SUBJECT CATEGORY: Energy Conservation Program for Commercial Equipment: Distribution Transformers Energy Conservation Standards

DATES: The Department will hold a public meeting on Wednesday, September 27, 2006, from 9 a.m. to 4 p.m., in Washington, DC. The Department must receive requests to speak at the public meeting before 4 p.m., Wednesday, September 13, 2006. The Department must receive a signed original and an electronic copy of statements to be given at the public meeting before 4 p.m., Wednesday, September 13, 2006.

The Department will accept comments, data, and information regarding the notice of proposed rulemaking (NOPR) before and after the public meeting, but no later than October 18, 2006. See section VII, ``Public Participation,'' of this NOPR for details.

DOCUMENT SUMMARY: The Energy Policy and Conservation Act (EPCA or the Act) authorizes the Department of Energy (DOE or the Department) to establish energy conservation standards for various consumer products and commercial and industrial equipment, including those distribution transformers for which DOE determines that energy conservation standards would be technologically feasible and economically justified, and would result in significant energy savings. In this notice, the Department is proposing energy conservation standards for distribution transformers and is announcing a public meeting.

SUMMARY: Energy Department, Energy Efficiency and Renewable Energy Office,

SUPPLEMENTAL INFORMATION

Table of Contents
I. Summary of the Proposed Rule
II. Introduction

A. Consumer Overview

B. Authority

C. Background

1. Current Standards

2. History of Standards Rulemaking for Distribution Transformers

3. Process Improvement
III. General Discussion

A. Test Procedures

B. Technological Feasibility

1. General

2. Maximum Technologically Feasible Levels

C. Energy Savings

D. Economic Justification

1. Economic Impact on Manufacturers and Commercial Consumers

2. LifeCycle Costs

3. Energy Savings

4. Lessening of Utility or Performance of Equipment

5. Impact of Any Lessening of Competition

6. Need of the Nation To Conserve Energy

7. Other Factors
IV. Methodology and Discussion of Comments

A. Market and Technology Assessment

1. Product Classes

2. Definition of a Distribution Transformer

B. Engineering Analysis

1. Engineering Analysis Methodology

2. Engineering Analysis Inputs

3. Engineering Analysis Outputs

C. LifeCycle Cost and Payback Period Analysis

1. Inputs Affecting Installed Cost

a. Equipment Price

b. Installation Costs

c. Baseline and Standard Design Selection

2. Inputs Affecting Operating Costs

a. Transformer Loading

b. Load Growth

c. Power Factor

d. Electricity Costs

e. Electricity Price Trends

3. Inputs Affecting Present Value of Annual Operating Cost Savings

a. Standards Implementation Date

b. Discount Rate

4. Candidate Standard Levels

5. Trial Standard Levels

6. Miscellaneous LifeCycle Cost Issues

a. Tax Impacts

b. Cost Recovery Under Deregulation, Rate Caps

c. Other Issues

D. National Impact AnalysisNational Energy Savings and Net Present Value Analysis
[[Page 44357]]

E. Commercial Consumer Subgroup Analysis

F. Manufacturer Impact Analysis

1. General Description

2. Industry Profile

3. Industry CashFlow Analysis

4. Subgroup Impact Analysis

5. Government Regulatory Impact Model Analysis

G. Employment Impact Analysis

H. Utility Impact Analysis

I. Environmental Analysis
V. Analytical Results

A. Economic Justification and Energy Savings

1. Economic Impacts on Commercial Consumers

a. LifeCycle Cost and Payback Period

b. RebuttablePresumption Payback

c. Commercial Consumer Subgroup Analysis

2. Economic Impacts on Manufacturers

a. Industry CashFlow Analysis Results

b. Impacts on Employment

c. Impacts on Manufacturing Capacity

d. Impacts on Manufacturers that are Small Businesses

3. National Impact Analysis

a. Amount and Significance of Energy Savings

b. Energy Savings and Net Present Value

c. Impacts on Employment

4. Impact on Utility or Performance of Equipment

5. Impact of Any Lessening of Competition

6. Need of the Nation to Conserve Energy

7. Other Factors

B. Stakeholder Comments on the Selection of a Final Standard

C. Proposed Standard

1. Results for LiquidImmersed Distribution Transformers

a. LiquidImmersed Trial Standard Level 6

b. LiquidImmersed Trial Standard Level 5

c. LiquidImmersed Trial Standard Level 4

d. LiquidImmersed Trial Standard Level 3

e. LiquidImmersed Trial Standard Level 2

2. Results for MediumVoltage, DryType Distribution Transformers

a. MediumVoltage, DryType Trial Standard Level 6

b. MediumVoltage, DryType Trial Standard Level 5

c. MediumVoltage, DryType Trial Standard Level 4

d. MediumVoltage, DryType Trial Standard Level 3

e. MediumVoltage, DryType Trial Standard Level 2 VI. Procedural Issues and Regulatory Review

A. Review Under Executive Order 12866

B. Review Under the Regulatory Flexibility Act/Initial Regulatory Flexibility Analysis

1. Reasons for the Proposed Rule

2. Objectives of, and Legal Basis for, the Proposed Rule

3. Description and Estimated Number of Small Entities Regulated

4. Description and Estimate of Compliance Requirements

5. Duplication, Overlap, and Conflict With Other Rules and Regulations

6. Significant Alternatives to the Rule

C. Review Under the Paperwork Reduction Act

D. Review Under the National Environmental Policy Act

E. Review under Executive Order 13132

F. Review Under Executive Order 12988

G. Review Under the Unfunded Mandates Reform Act of 1995

H. Review Under the Treasury and General Government Appropriations Act of 1999

I. Review Under Executive Order 12630

J. Review Under the Treasury and General Government Appropriations Act of 2001

K. Review Under Executive Order 13211

L. Review Under Section 32 of the Federal Energy Administration Act of 1974

M. Review Under the Information Quality Bulletin for Peer Review VII. Public Participation

A. Attendance at Public Meeting

B. Procedure for Submitting Requests To Speak

C. Conduct of Public Meeting

D. Submission of Comments

E. Issues on Which DOE Seeks Comment
VIII. Approval of the Office of the Secretary

I. Summary of the Proposed Rule

Pursuant to the Energy Policy and Conservation Act, as amended, the Department is proposing energy conservation standards for liquid immersed and mediumvoltage, drytype distribution transformers. The Department believes these standards will achieve the maximum improvement in energy efficiency that is technologically feasible and economically justified, and will result in significant energy savings. In the advance notice of proposed rulemaking (ANOPR) for distribution transformers, the Department had also conducted analysis on low voltage, drytype distribution transformers. 69 FR 45376 (July 29, 2004). However, the Energy Policy Act of 2005 (EPACT 2005) established energy conservation standards for lowvoltage, drytype distribution transformers. (42 U.S.C. 6295(y)) Because of these amendments, DOE removed lowvoltage, drytype distribution transformersproduct class 3 (lowvoltage, drytype, singlephase) and product class 4 (low voltage, drytype, threephase)from this rulemaking. Table I.1 shows the proposed standard levels for the product classes that are still within the scope of this rulemaking.
Table I.1.Proposed Standard Levels for Distribution Transformers Superclassesproduct classes
(PC) Proposed standard levels Liquidimmersed.............. Trial Standard Level 2.

Singlephase (PC 1)

Threephase (PC 2)
Mediumvoltage, drytype..... Trial Standard Level 2.

Singlephase, 2545 kV
BIL (PC 5)

Threephase, 2545 kV BIL
(PC 6)

Singlephase, 4695 kV
BIL (PC 7)

Threephase, 4695 kV BIL
(PC 8)

Singlephase, >=96 kV BIL
(PC 9)

Threephase, >=96 kV BIL
(PC 10)
Note: PC stands for product class; kV is kilovolt; BIL is basic impulse insulation level.

Tables II.1 and II.2 show the specific efficiency levels for the various kilovolt ampere (kVA) sizes, within each product class, that reflect the Department's proposed standards.

The Department's analyses indicate that the proposed standards, trial standard level 2 (TSL2) for liquidimmersed transformers and TSL2 for mediumvoltage, drytype transformers, would save a significant amount of energyan estimated 2.4 quads (quadrillion (10¹⁵) British thermal units (BTU)) of cumulative energy over 29 years (2010 2038). This amount is roughly equal to the total energy consumption of the Commonwealth of Virginia in 2001. The economic impacts on commercial consumers (i.e., the average lifecycle cost (LCC) savings) are positive.

The national net present value (NPV) of TSL2 is $2.52 billion using a sevenpercent discount rate and $9.43 billion using a threepercent discount rate, cumulative from 2010 to 2073 in 2004$. This is the estimated total value of future savings minus the estimated increased equipment costs, discounted
[[Page 44358]]
to the year 2004. Using a real corporate discount rate of 8.9 percent, the Department estimates the liquidimmersed and mediumvoltage, dry type distribution transformer industry's NPV to be $558 million in 2004$. The impact of the proposed standard on liquidimmersed transformer manufacturers' industry net present value (INPV) is expected to be between a 2.4 percent loss and a 2.0 percent increase ( $12.9 million to $10.7 million). The mediumvoltage, drytype transformer industry is estimated to lose between 10.1 percent and 13.4 percent of its NPV ($3.3 million to $4.3 million) as a result of the proposed standard. Based on the Department's interviews with the major manufacturers of distribution transformers, DOE expects minimal plant closings or loss of employment as a result of the proposed standards.

The proposed standards will lead to reductions in greenhouse gases, resulting in cumulative (undiscounted) emission reductions of 167.1 million tons (Mt) of carbon dioxide (CO2). Additionally, the standards would generate 46.4 thousand tons (kt) of nitrogen oxides (NOX) emissions reductions or a similar amount of NOX emissions allowance credits in areas where such emissions are subject to emissions caps. The Department expects the energy savings from the proposed standards to eliminate the need for approximately 11 new 400megawatt (MW) power plants by 2038.

Therefore, the Department concludes that the benefits (energy savings, commercial consumer LCC savings, national NPV increases, and emissions reductions) to the Nation of the proposed standards outweigh their costs (loss of manufacturer NPV and commercial consumer LCC increases for some users of distribution transformers). The Department concludes that the proposed standards of TSL2 for liquidimmersed and TSL2 for mediumvoltage, drytype transformers are technologically feasible and economically justified. At present, both liquidimmersed and mediumvoltage, drytype transformers are commercially available at the TSL2 standard level.
II. Introduction

A. Consumer Overview

The Department is proposing to set energyefficiency standard levels for distribution transformers as shown in Tables II.1 and II.2. The proposed standard would apply to liquidimmersed and medium voltage, drytype distribution transformers manufactured for sale in the United States, or imported to the United States, on or after January 1, 2010. In preparing these tables, the Department identified some areas where the analytical methods used to develop the efficiency values resulted in discontinuities in the table of efficiencies. Generally, larger transformers will have greater efficiency than smaller transformers, all other factors being equal. Not all efficiency ratings that result from the Department's analysis fit this pattern. The Department invites comment on all the efficiency ratings. Table II.1.Proposed Standard Level, TSL2, for LiquidImmersed Distribution Transformers Singlephase Threephase Efficiency kVA Efficiency (%) kVA (%) 10......................................... 98.40 15................................ 98.36 15......................................... 98.56 30................................ 98.62 25......................................... 98.73 45................................ 98.76 37.5....................................... 98.85 75................................ 98.91 50......................................... 98.90 112.5............................. 99.01 75......................................... 99.04 150............................... 99.08 100........................................ 99.10 225............................... 99.17 167........................................ 99.21 300............................... 99.23 250........................................ 99.26 500............................... 99.32 333........................................ 99.31 750............................... 99.24 500........................................ 99.38 1000.............................. 99.29 667........................................ 99.42 1500.............................. 99.36 833........................................ 99.45 2000.............................. 99.40 2500.............................. 99.44 Note: All efficiency values are at 50 percent of nameplaterated load, determined according to the DOE Test Procedure. 10 CFR Part 431, Subpart K, Appendix A; 71 FR 24972. Table II.2.Proposed Standard Level, TSL2, for MediumVoltage, DryType Distribution Transformers Singlephase Threephase 2045 kV 4695 kV 4695 kV >=96 kV BIL kVA efficiency efficiency >=96 kV 2045 kV efficiency efficiency efficiency kVA (%) (%) efficiency (%) (%) (%) (%) 15............................... 98.10 97.86 ............... 15.................. 97.50 97.19 .............. 25............................... 98.33 98.12 ............... 30.................. 97.90 97.63 .............. 37.5............................. 98.49 98.30 ............... 45.................. 98.10 97.86 .............. 50............................... 98.60 98.42 ............... 75.................. 98.33 98.12 .............. 75............................... 98.73 98.57 98.53 112.5............... 98.49 98.30 .............. 100.............................. 98.82 98.67 98.63 150................. 98.60 98.42 .............. 167.............................. 98.96 98.83 98.80 225................. 98.73 98.57 98.53 250.............................. 99.07 98.95 98.91 300................. 98.82 98.67 98.63 333.............................. 99.14 99.03 98.99 500................. 98.96 98.83 98.80 500.............................. 99.22 99.12 99.09 750................. 99.07 98.95 98.91 667.............................. 99.27 99.18 99.15 1000................ 99.14 99.03 98.99 833.............................. 99.31 99.23 99.20 1500................ 99.22 99.12 99.09 [[Page 44359]]
2000................ 99.27 99.18 99.15 2500................ 99.31 99.23 99.20 Note: BIL means basic impulse insulation level.
Note: All efficiency values are at 50 percent of nameplate rated load, determined according to the DOE TestProcedure. 10 CFR Part 431, Subpart K, Appendix A; 71 FR 24972.

B. Authority

Title III of EPCA sets forth a variety of provisions designed to improve energy efficiency. Part B of Title III (42 U.S.C. 62916309) provides for the Energy Conservation Program for Consumer Products other than Automobiles. Part C of Title III (42 U.S.C. 63116317) establishes a similar program for ``Certain Industrial Equipment,'' and includes distribution transformers, the subject of this rulemaking. The Department publishes today's NOPR pursuant to Part C of Title III, which provides for test procedures, labeling, and energy conservation standards for distribution transformers and certain other products, and authorizes DOE to require information and reports from manufacturers. The distribution transformer test procedure appears in Title 10 Code of Federal Regulations (CFR) Part 431, Subpart K, Appendix A; 71 FR 24972.

EPCA contains criteria for prescribing new or amended energy conservation standards. The Department must prescribe standards only for those distribution transformers for which DOE: (1) Has determined that standards would be technologically feasible and economically justified and would result in significant energy savings, and (2) has prescribed test procedures. (42 U.S.C. 6317(a)) Moreover, as indicated above, the Department analyzed whether today's proposed standards for distribution transformers will achieve the maximum improvement in energy efficiency that is technologically feasible and economically justified. (See 42 U.S.C. 6295(o)(2)(A), 6316(a), and 6317(a) and (c)) In addition, DOE will decide whether today's proposed standard is economically justified, after receiving comments on the proposed standard, by determining whether the benefits of the standard exceed its costs. The Department will make this determination by considering, to the greatest extent practicable, the following seven factors which are set forth in 42 U.S.C. 6295(o)(2)(B)(i):
(1) The economic impact of the standard on manufacturers and consumers of the products subject to the standard;
(2) The savings in operating costs throughout the estimated average life of products in the type (or class) compared to any increase in the price, initial charges, or maintenance expenses for the covered products that are likely to result from the imposition of the standard;
(3) The total projected amount of energy savings likely to result directly from the imposition of the standard;
(4) Any lessening of the utility or the performance of the products likely to result from the imposition of the standard; (5) The impact of any lessening of competition, as determined in writing by the Attorney General, that is likely to result from the imposition of the standard;
(6) The need for national energy conservation; and

(7) Other factors the Secretary considers relevant.

In developing energy conservation standards for distribution transformers, DOE is also applying certain other provisions of 42 U.S.C. 6295. First, the Department will not prescribe a standard for the product if interested persons have established by a preponderance of the evidence that the standard is likely to result in the unavailability in the United States of any type (or class) of this product with performance characteristics, features, sizes, capacities, and volume that are substantially the same as those generally available in the United States. (See 42 U.S.C. 6295(o)(4))

Second, DOE is applying 42 U.S.C. 6295(o)(2)(B)(iii), which establishes a rebuttable presumption that a standard is economically justified if the Secretary finds that ``the additional cost to the consumer of purchasing a product complying with an energy conservation standard level will be less than three times the value of the energy * * * savings during the first year that the consumer will receive as a result of the standard, as calculated under the applicable test procedure * * *'' The rebuttablepresumption test is an alternative path to establishing economic justification.

Third, in setting standards for a type or class of equipment that has two or more subcategories, DOE will specify a different standard level than that which applies generally to such type or class of equipment for any group of products ``which have the same function or intended use, if * * * products within such group(A) consume a different kind of energy from that consumed by other covered products within such type (or class); or (B) have a capacity or other performancerelated feature which other products within such type (or class) do not have and such feature justifies a higher or lower standard'' than applies or will apply to the other products. (See 42 U.S.C. 6295(q)(1)) In determining whether a performancerelated feature justifies such a different standard for a group of products, the Department considers such factors as the utility to the consumer of such a feature and other factors DOE deems appropriate. Any rule prescribing such a standard will include an explanation of the basis on which DOE established such higher or lower level. (See 42 U.S.C. 6295(q)(2))

Federal energy efficiency requirements for equipment covered by 42 U.S.C. 6317 generally supersede State laws or regulations concerning energy conservation testing, labeling, and standards. (42 U.S.C. 6297(a)(c) and 42 U.S.C. 6316(a)) The Department can, however, grant waivers of preemption for particular State laws or regulations, in accordance with the procedures and other provisions of section 327(d) of the Act. (42 U.S.C. 6297(d) and 42 U.S.C. 6316(a))
C. Background

1. Current Standards

Presently, there are no national energy conservation standards for the liquidimmersed and mediumvoltage, drytype distribution transformers covered by this rulemaking. However, on August 8, 2005, EPACT 2005 established energy conservation standards for lowvoltage, drytype distribution transformers that
[[Page 44360]]
will take effect on January 1, 2007. (42 U.S.C. 6295(y))
2. History of Standards Rulemaking for Distribution Transformers

On October 22, 1997, the Secretary of Energy published a notice stating that the Department ``has determined, based on the best information currently available, that energy conservation standards for electric distribution transformers are technologically feasible, economically justified and would result in significant energy savings.'' 62 FR 54809.

The Secretary's determination was based, in part, on analyses conducted by the Department's Oak Ridge National Laboratory (ORNL). In July 1996, ORNL published a report entitled Determination Analysis of Energy Conservation Standards for Distribution Transformers, ORNL6847, which assessed options for setting energy conservation standards. That report was based on information from annual sales data, average load data, and surveys of existing and potential transformer efficiencies obtained from several organizations.

In September 1997, ORNL published a second report entitled Supplement to the ``Determination Analysis'' (ORNL6847) and NEMA Efficiency Standard for Distribution Transformers, ORNL6925. This report assessed the suggested efficiency levels contained in the then newly published National Electrical Manufacturers Association (NEMA) Standards Publication No. TP 11996, Guide for Determining Energy Efficiency for Distribution Transformers, along with the efficiency levels previously considered by the Department in the determination study.\1\ In its supplemental assessment, ORNL6925, the ORNL research team used a more accurate analytical model and better transformer market and loading data developed following the publication of ORNL 6847. Downloadable versions of both ORNL reports are available on the DOE Web site at: http://www.eere.energy.gov/buildings/appliance_standards/commercial/distribution_transformers.html_____________________________________ \1\ Note: NEMA later updated TP 1 in 2002 (NEMA TP 12002), in which it increased some of the efficiency levels. The latest version of TP 1 is available at the NEMA Web site: http://www.nema.org/stds/tp1.cfm#download .

As a result of its positive determination, the Department developed the Framework Document for Distribution Transformer Energy Conservation Standards Rulemaking in 2000, describing the procedural and analytic approaches the Department anticipated using to evaluate the establishment of energy conservation standards for distribution transformers.\2\ This document is also available on the aforementioned DOE Web site. On November 1, 2000, the Department held a public meeting on the Framework Document to discuss the proposed analytical framework. Manufacturers, trade associations, electric utilities, environmental advocates, regulators, and other interested parties attended the Framework Document meeting. The major issues discussed were: Definition of covered transformer products, definition of product classes, possible proprietary (patent) issues regarding amorphous material, ties between efficiency improvements and installation costs, baseline and possible higher efficiency levels, base case trends (i.e., trends absent regulation), transformer costs versus transformer prices, appropriate LCC subgroups, LCC methods (e.g., total owning cost (TOC)), loading levels, utility impact analysis visavis deregulation, scope of environmental assessment, and harmonization of standards with other countries.
\2\ The Department published a notice of availability of the Framework Document in the Federal Register. 65 FR 59761 (October 6, 2000). The Framework Document itself is available on the DOE Web site: http://www.eere.energy.gov/buildings/appliance_standards/commercial/pdfs/trans_framework.pdf .

Stakeholder comments submitted during the Framework Document comment period elaborated on the issues raised at the meeting and also addressed the following issues: Options for the screening analysis, approaches for the engineering analysis, discount rates, electricity prices, the number and basis for the efficiency levels to be analyzed, the national energy savings (NES) and NPV analyses, the analysis of the effects of a potential standard on employment, the manufacturer impact analysis (MIA), and the timing of the analyses.

As part of the information gathering and sharing process, the Department met with manufacturers of liquidimmersed and drytype distribution transformers during the first quarter of 2002. The Department met with companies that produced all types of distribution transformers, ranging from small to large manufacturers, and including both NEMA and nonNEMA members. The Department had three objectives for these meetings: (1) Solicit feedback on the methodology and findings presented in the draft engineering analysis update report that the Department posted on its Web site December 17, 2001, (2) obtain information and comments on production costs and manufacturing processes presented in the draft engineering analysis update report, and (3) provide to manufacturers an opportunity, early in the rulemaking process, to express specific concerns to the Department.

Seeking early and frequent consultation with stakeholders, the Department posted draft reports on its website as it prepared for the publication of the ANOPR. The reports included draft screening analysis findings, and draft engineering analysis and LCC analysis reports on 50 kVA singlephase, liquidimmersed, padmounted transformers and 300 kVA threephase, mediumvoltage, drytype transformers. The Department also held a live, online Web cast on October 17, 2002, giving an overview of the LCC analysis and a tutorial on the use of the LCC spreadsheet. The Department received comments from stakeholders on all the draft publications, which helped improve the quality of the analysis included in the ANOPR published on July 29, 2004. 69 FR 45376.

In the ANOPR, the Department invited stakeholders to comment on the following key issues: Definition and coverage, product classes, engineering analysis inputs, design option combinations, the 0.75 scaling rule, modeling of transformer load profiles, distribution chain markups, discount rate selection and use, baseline determination through purchase evaluation formulae, electricity prices, load growth over time, lifecycle cost subgroups, and utility deregulation impacts.

In preparation for the September 28, 2004, ANOPR public meeting, the Department held a Web cast on August 10, 2004, to acquaint stakeholders with the analytical tools (spreadsheets) and other material published the previous month. During the ANOPR comment period, which ended on November 9, 2004, stakeholders submitted comments on the 13 issues listed above, as well as on other issues. These comments are discussed in section IV of this NOPR.

On August 5, 2005, the Department posted on its Web site several draft NOPR analyses for early public review, including draft technical support document (TSD) chapters on the engineering analysis, the energy use and enduse load characterization, the markups for equipment price determination, the LCC and payback period analyses, the shipments analysis, the national impact analysis, and the MIA. The Department also posted draft NOPR spreadsheets for the engineering
[[Page 44361]]
analysis, LCC analysis, national impact analysis, and MIA on its Web site.

On August 8, 2005, President Bush signed into law EPACT 2005, Public Law 10958. Section 135(c)(4) of this Act establishes minimum efficiency levels for lowvoltage, drytype transformers manufactured, or imported into the U.S., on or after January 1, 2007. (42 U.S.C. 6295(y)) The levels are those appearing in Table 42 of NEMA TP 12002, Guide for Determining Energy Efficiency for Distribution Transformers. The Department incorporated this standard along with efficiency standards for several other products and equipment in a Federal Register Notice. 70 FR 60407 (October 18, 2005). Because EPACT 2005 established standards for lowvoltage, drytype distribution transformers, the Department is no longer considering standards for the single and threephase, lowvoltage drytype distribution transformers in this rulemaking.

In conjunction with this NOPR, the Department also published on its website the complete TSD and several spreadsheets. The TSD contains technical documentation of each analysis conducted under this rulemaking, providing specific information on the methodology and results. The spreadsheets, discussed in the relevant TSD chapters, represent the analytical tools and results that support today's proposed rule. The engineering analysis spreadsheets represent the Department's design database, providing the costefficiency relationships for the 10 specific distribution transformer units analyzedfive liquidimmersed and five mediumvoltage, drytype units. The LCC spreadsheet calculates the LCC and payback periods at six standard levels for these representative units. The national impact analysis spreadsheet tool calculates impacts of efficiency standards on distribution transformer shipments, as well as the NES and NPV of the standard levels considered. The MIA spreadsheet evaluates the financial impact of standards on distribution transformer manufacturers. All of these spreadsheet tools are posted on the Department's Web site, along with the complete NOPR TSD, at http://www.eere.energy.gov/ buildings/ appliancestandards/ commercial/ distribution transformersdraft analysisnopr. html.

3. Process Improvement

The ``Process Rule,'' Procedures, Interpretations and Policies for Consideration of New or Revised Energy Conservation Standards for Consumer Products, Title 10 CFR Part 430, Subpart C, Appendix A, applies to the development of energyefficiency standards for consumer products. While distribution transformers are considered a commercial product, the Department decided to apply some of the provisions of the ``Process Rule'' to this rulemaking.

In today's notice, the Department describes the framework and methodologies for developing the proposed standards. The framework and methodologies reflect improvements made, and steps taken, in accordance with the Process Rule, including DOE's use of economic models and analytical tools. Since the rulemaking process is dynamic, if timely new data, models, or tools that enhance the development of standards become available, the Department will incorporate them into the rulemaking.
III. General Discussion

A. Test Procedures

Section 7(b) of the Process Rule requires that the Department propose necessary modifications to the test procedure for a product before issuing a NOPR concerning efficiency standards for that product. Section 7(c) of the Process Rule states that DOE will issue a final, modified test procedure prior to issuing a proposed rule for energy conservation standards. The test procedure for distribution transformers was published as a final rule on April 27, 2006. 71 FR 24972.
B. Technological Feasibility

1. General

The Department considers design options technologically feasible if they are in use by the respective industry or if research has progressed to the development of a working prototype. The Process Rule sets forth a definition of technological feasibility as follows: ``Technologies incorporated in commercially available products or in working prototypes will be considered technologically feasible.'' 10 CFR Part 430, Subpart C, Appendix A, section 4(a)(4)(i).

In each standards rulemaking, the Department conducts a screening analysis, which is based on information gathered regarding existing technology options and prototype designs. In consultation with manufacturers, design engineers, and other stakeholders, the Department develops a list of design options for consideration in the rulemaking. Once the Department has determined that a particular design option is technologically feasible, it then further evaluates each design option in light of the other three criteria in the Process Rule. 10 CFR Part 430, Subpart C, Appendix A, section 4(a)(3) and (4). The three additional criteria are: (a) Practicability to manufacture, install, or service, (b) adverse impacts on product utility or availability, or (c) health or safety concerns that cannot be resolved. 10 CFR Part 430, Subpart C, Appendix A, section 4(a). All design options that pass these screening criteria are candidates for further assessment.

As discussed in the ANOPR for this rulemaking, the Department is not considering the following design options because they do not meet one or more of the screening criteria: Silver as a conductor material, hightemperature superconductors, amorphous core material in stacked core configuration, carbon composite materials for heat removal, high temperature insulating material, and solidstate (power electronics) technology. 69 FR 45387. For the NOPR, there were no changes to the list of technology options screened out of the ANOPR analysis. Discussion of the application of the screening analysis criteria to the design options appears in Chapter 4 of the TSD.

The Department believes that all of the efficiency levels evaluated in today's notice are technologically feasible. The technologies incorporated in the transformer design database have all been used (or are being used) in commercially available products or working prototypes. The designs all incorporate core steel and conductor types that are commercially available in today's transformer materials supply market. Any one manufacturer may not be using all the materials considered by the Department for a given model analyzed, but these materials could be purchased from multiple suppliers today if design changes warranted it.

In addition, to prepare transformer designs for evaluation, DOE used transformer design software that is also used by manufacturers in the U.S. and abroad. The Department evaluated the transformer design software by comparing the software's designs against six transformers it purchased, tested, and disassembled. For these units, the software accurately predicted the performance and manufacturer selling prices when using the same material cost, labor cost, and manufacturer markup assumptions that were used in the engineering analysis for the NOPR (see TSD Chapter 5, section 5.7).

For liquidimmersed distribution transformers, the designs prepared by the software were all woundcore designs. The least efficient design used M6 core steel and the most efficient used amorphous material. All designs
[[Page 44362]]
contained in the Department's design database could be built today. For mediumvoltage, drytype transformers, DOE used commercially available core steels, ranging from M6 through domainrefined 9mil (0.009 inch) high permeability, grainoriented steel (HO DR). Coreconstruction techniques included buttlap, mitered, and cruciform construction. The conductors and insulation types used were all conventional, and are commercially available in distribution transformers today. Thus, the Department believes that all the efficiency levels discussed in today's proposed rule are technologically feasible.

2. Maximum Technologically Feasible Levels

In developing today's proposed standards, the Department followed the provisions of 42 U.S.C. 6295(p)(2), which states that, when the Department proposes to adopt, or to decline to adopt, an amended or new standard for each type (or class) of covered product, ``the Secretary shall determine the maximum improvement in energy efficiency or maximum reduction in energy use that is technologically feasible.'' The Department determined the maximum technologically feasible (``max tech'') efficiency level in the engineering analysis (see TSD Chapter 5) using the most efficient materials not screened out and applying design parameters that drove the transformer design software to create designs at the highest efficiencies achievable. The Department then used these highestefficiency designs to establish the maxtech level for the LCC analysis (see TSD Chapter 8). In the national impact analysis (see TSD Chapter 10), the Department then scaled these max tech efficiencies to the other kVA ratings within a given design line, establishing maxtech efficiencies at all the distribution transformer kVA ratings. Tables III.1 and III.2 provide the complete list of max tech efficiency levels considered for all kVA ratings within each product class.
Table III.1.MaxTech Levels for LiquidImmersed Distribution Transformers Singlephase Threephase Efficiency kVA Efficiency (%) kVA (%) 10......................................... 99.32 15................................ 99.31 15......................................... 99.39 30................................ 99.42 25......................................... 99.46 45................................ 99.47 37.5....................................... 99.51 75................................ 99.54 50......................................... 99.59 112.5............................. 99.58 75......................................... 99.59 150............................... 99.61 100........................................ 99.62 225............................... 99.65 167........................................ 99.66 300............................... 99.67 250........................................ 99.70 500............................... 99.71 333........................................ 99.72 750............................... 99.66 500........................................ 99.75 1000.............................. 99.68 667........................................ 99.77 1500.............................. 99.71 833........................................ 99.78 2000.............................. 99.73 2500.............................. 99.74 Note: All efficiency values are at 50 percent of nameplate rated load, determined according to the DOE Test Procedure. 10 CFR Part 431, Subpart K, Appendix A; 71 FR 24972. Table III.2.Max.Tech Levels for MediumVoltage, DryType Distribution Transformers Singlephase Threephase 2045 kV 4695 kV 2045 kV 4695 kV >=96 kV BIL kVA efficiency efficiency >=96 kV (%) kVA efficiency efficiency efficiency (%) (%) (%) (%) (%) 15............................... 99.05 98.54 ............... 15.................. 98.75 98.08 .............. 25............................... 99.17 98.71 ............... 30.................. 98.95 98.38 .............. 37.5............................. 99.25 98.84 ............... 45.................. 99.05 98.54 .............. 50............................... 99.30 98.92 ............... 75.................. 99.17 98.71 .............. 75............................... 99.37 99.02 99.22 112.5............... 99.25 98.84 .............. 100.............................. 99.41 99.09 99.28 150................. 99.30 98.92 .............. 167.............................. 99.48 99.20 99.36 225................. 99.37 99.02 99.22 250.............................. 99.42 99.42 99.42 300................. 99.41 99.09 99.28 333.............................. 99.46 99.46 99.46 500................. 99.48 99.20 99.36 500.............................. 99.51 99.51 99.52 750................. 99.42 99.42 99.42 667.............................. 99.54 99.54 99.55 1000................ 99.46 99.46 99.46 833.............................. 99.57 99.57 99.57 1500................ 99.51 99.51 99.52 2000................ 99.54 99.54 99.55 2500................ 99.57 99.57 99.57 Note: BIL means basic impulse insulation level.
Note: All efficiency values are at 50 percent of nameplate rated load, determined according to the DOE TestProcedure. 10 CFR Part 431, Subpart K, Appendix A; 71 FR 24972.
[[Page 44363]]

C. Energy Savings

One of the criteria that govern the Department's adoption of standards for distribution transformers is that the standard must result in ``significant'' energy savings. (42 U.S.C. 6317(a)) While the term ``significant'' is not defined by EPCA, a U.S. Court of Appeals, in Natural Resources Defense Council v. Herrington, 768 F.2d 1355, 1373 (D.C. Cir. 1985), indicated that Congress intended ``significant'' energy savings in a similar context in Section 325 of the Act to be savings that were not ``genuinely trivial.'' The energy savings for all of the trial standard levels considered in this rulemaking are nontrivial, and therefore the Department considers them ``significant'' as required by 42 U.S.C. 6317.

D. Economic Justification

As noted earlier, EPCA provides seven factors to be evaluated in determining whether an energy conservation standard for distribution transformers is economically justified. The following discusses how the Department has addressed each of those seven factors thus far in this rulemaking. (42 U.S.C. 6295(o)(2)(B)(i))
1. Economic Impact on Manufacturers and Commercial Consumers

The Process Rule established procedures, interpretations, and policies to guide the Department in the consideration of new or revised appliance efficiency standards. The provisions of the rule have direct bearing on the implementation of the MIA. First, the Department used an annualcashflow approach in determining the quantitative impacts of a new or amended standard on manufacturers. This included both a short term assessment based on the cost and capital requirements during the period between the announcement of a regulation and the time when the regulation comes into effect, and a longterm assessment. Impacts analyzed include industry NPV, cash flows by year, changes in revenue and income, and other measures of impact, as appropriate. Second, the Department analyzed and reported the impacts on different types of manufacturers, with particular attention to impacts on small manufacturers. Third, the Department considered the impact of standards on domestic manufacturer employment, manufacturing capacity, plant closures, and loss of capital investment. Finally, the Department took into account cumulative impacts of different DOE regulations on manufacturers.

For commercial consumers, measures of economic impact are the changes in installed (first) cost and annual operating costs. To assess the impact on first cost, the Department considered the percent increase in the consumer equipment cost before installation. To assess the impact on lifecycle costs, which include both consumer equipment costs and annual operating costs, the Department conducted an LCC analysis of the equipment at each candidate standard level (CSL) (see below).

2. LifeCycle Costs

The LCC is the sum of the purchase price, including the installation, and the operating expenseincluding operating energy consumption, maintenance, and repair expendituresdiscounted over the lifetime of the equipment. To determine the purchase price including installation, DOE estimated the markups that are added to the manufacturer selling price by distributors and contractors, and estimated installation costs from an analysis of transformer installation cost estimates for a wide range of weights and sizes. The Department assumed that maintenance and repair costs are not dependent on transformer efficiency. In estimating operating energy costs, DOE used the full range of commercial consumer marginal energy prices, which are the energy prices that correspond to incremental changes in energy use.

For each distribution transformer representative unit, the Department calculated both LCC and LCC savings from a basecase scenario for six candidate standard efficiency levels. The six candidate standard levels were chosen to correspond to the following:

NEMA TP 12002;

\1/3\ of efficiency difference between TP 1 and minimum LCC;

\2/3\ of efficiency difference between TP 1 and minimum LCC;

Minimum LCC;

Maximum energy savings with no change in LCC; and

Maximum technologically feasible.

In order to calculate the appropriate efficiency levels for kVA ratings that were not analyzed (i.e., all the kVA ratings other than the ten representative units), the Department applied a scaling rule to extrapolate the findings on the ten representative units to these other ratings. For information on the scaling rule, see section IV.B.1 and TSD Chapter 5, section 5.2.2.

The Department presents the calculated LCC savings as a distribution, with a mean value and range. The Department used a distribution of consumer real discount rates for the calculations, with mean values ranging from 3.3 to 7.5 percent, specific to the cost of capital faced by purchasers of the representative units. Chapter 8 of the TSD contains the details of the LCC calculations. The LCC is one of the factors DOE considers in determining the economic justification for a new or amended standard. (See 42 U.S.C. 6295(o)(2)(B)(i)(II)) 3. Energy Savings

While significant conservation of energy is a separate statutory requirement for imposing an energy conservation standard, in determining the economic justification of a standard, the Department considers the total projected energy savings that are expected to result directly from the standard. (See 42 U.S.C.
6295(o)(2)(B)(i)(III)) The Department used the NES spreadsheet results in its consideration of total projected savings. The savings figures are discussed in section V.A.3 of this notice.

4. Lessening of Utility or Performance of Equipment

In establishing classes of products, and in evaluating design options and the impact of potential standard levels, the Department avoided having new standards for distribution transformers that lessen the utility or performance of the equipment under consideration in this rulemaking. None of the proposed trial standard levels reduces the utility or performance of distribution transformers. (See 42 U.S.C. 6295(o)(2)(B)(i)(IV)) The Department's engineering options do not change the utility and performance of distribution transformers. The impact of any increase in transformer weight associated with efficiency improvements is captured by the economic analysis. Specifically, installation costs for polemounted transformers include estimates of stronger pole and pole changeout costs that may be incurred with heavier, more efficient transformers.

5. Impact of Any Lessening of Competition

The Department considers any lessening of competition that is likely to result from standards. Accordingly, DOE has written to the Attorney General to request that the Attorney General transmit to the Secretary, not later than 60 days after the publication of this proposed rule, a written determination of the impact, if any, of any lessening of competition likely to result from the proposed standard, together with an analysis of the nature and extent of such
[[Page 44364]]
impact. (See 42 U.S.C. 6295(o)(2)(B)(i)(V) and (B)(ii))

6. Need of the Nation To Conserve Energy

The nonmonetary benefits of the proposed standard are likely to be reflected in improvements to the security and reduced reliability costs of the Nation's energy systemnamely, reductions in the overall demand for energy will result in reduced costs for maintaining reliability of the Nation's electricity system. The Department conducts a utility impact analysis to show the reduction in installed generation capacity requirements. Reduced power demand (including peak power demand) generally reduces the costs of maintaining the security and reliability of the energy system.

The Department has determined that today's proposed standard should result in reductions in greenhouse gas emissions. The Department quantified a range of primary energy conversion factors and estimated the emissions reductions associated with the generation displaced by energyefficiency standards. The environmental effects from each trial standard level for this equipment are reported in the TSD environmental assessment. (See 42 U.S.C. 6295(o)(2)(B)(i)(VI))

7. Other Factors

The Secretary of Energy, in determining whether a standard is economically justified, considers any other factors that the Secretary deems to be relevant. (See 42 U.S.C. 6295(o)(2)(B)(i)(VII)) For today's proposed standard, the Secretary took into consideration a factor relating to several comments received at the ANOPR public meeting, during the comment period following the meeting, and in the MIA interviews. Stakeholders expressed concern about the increasing cost of raw materials for building transformers, the volatility of material prices, and the cumulative effect of material price increases on the transformer industry (see section IV.B.2, Engineering Analysis Inputs). The Department conducted supplementary engineering and LCC analyses using firstquarter 2005 material prices and considered the impacts on LCC savings and payback periods when evaluating the appropriate standard levels for liquidimmersed and mediumvoltage, drytype distribution transformers. The results of the engineering and LCC analyses for the firstquarter 2005 material pricing analysis are in TSD Appendix 5C.
IV. Methodology and Discussion of Comments
A. Market and Technology Assessment

1. Product Classes

In general, when evaluating and establishing energyefficiency standards, the Department divides covered products into classes by: (a) The type of energy used, or (b) capacity, or other performancerelated features, such as those that affect both consumer utility and efficiency. Different energyefficiency standards may apply to different product classes. As discussed in the ANOPR, the Department received some guidance from stakeholders on establishing appropriate product classes for the population of distribution transformers. 69 FR 45385. Originally, the Department created 10 product classes, dividing up the population of distribution transformers by:

Type of transformer insulationliquidimmersed or dry type;

Number of phasessingle or three;

Voltage classlow or medium (for drytype units only); and

Basic impulse insulation level (for mediumvoltage, dry type units only).

EPACT 2005 includes provisions establishing energy conservation standards for two of the Department's product classes (PC3, low voltage, singlephase, drytype and PC4, lowvoltage, threephase, dry type). (42 U.S.C. 6295(y)) With standards thereby established for low voltage, drytype distribution transformers, the Department is no longer considering these two product classes for standards. Table IV.1 presents the eight product classes that remain within the scope of this rulemaking.
Table IV.1.Distribution Transformer Product Classes for the NOPR PC No.* Insulation Voltage Phase BIL rating kVA range PC1............................... LiquidImmersed...... ..................... Single............... ..................... 10833 kVA. PC2............................... LiquidImmersed...... ..................... Three................ ..................... 152500 kVA. PC5............................... DryType............. Medium............... Single............... 2045 kV BIL......... 15833 kVA. PC6............................... DryType............. Medium............... Three................ 2045 kV BIL......... 152500 kVA. PC7............................... DryType............. Medium............... Single............... 4695 kV BIL......... 15833 kVA. PC8............................... DryType............. Medium............... Three................ 4695 kV BIL......... 152500 kVA. PC9............................... DryType............. Medium............... Single............... >=96 kV BIL.......... 75833 kVA. PC10.............................. DryType............. Medium............... Three................ >=96 kV BIL.......... 2252500 kVA. *Note: Although the PC3 and PC4 product classes are no longer included in this rulemaking, for consistency with prior material published under this rulemaking, the Department has not renumbered the liquidimmersed and mediumvoltage, drytype product classes that remain.

DOE received no comments that requested modifications to the Department's product classes as proposed in the ANOPR. However, Howard Industries commented that it supported the independent categorization of liquidimmersed and drytype transformers. It pointed out that the applications and type of customers for these two types of transformers can vary widely. (Howard, No. 70 at p. 2) The Department agrees with this comment and continues to treat liquidimmersed and drytype transformers separately in its analysis.

Concerning the use of three basic impulse insulation level (BIL) groupings for mediumvoltage, drytype transformers, Federal Pacific Transformer (FPT) noted that BIL levels do affect cost and efficiency, and agreed that DOE should conduct its analysis by BIL grouping. It commented that the efficiency levels should be modeled according to the BIL levels as much as possible. (FPT, No. 64 at p. 3) NEMA commented that it was willing to change the BIL groupings in TP 12002 from two to three, so TP 1 would have the same BIL groupings for mediumvoltage, drytype transformers as the Department's proposal. (NEMA, No. 60 at p. 2) The Alliance to Save Energy (ASE) commented that the Department's refinement of BIL classifications over TP 1 is justified and should result in more appropriate efficiency levels. (ASE, No. 52 at p. 2 and No. 75 at p. 2) Finally, the Oregon Department of Energy (ODOE) commented that it supports the refinements that created three BIL groupings for these transformers. (ODOE, No. 66 at p. 2) The Department did not receive any comments critical of the three BIL
[[Page 44365]]
groupings for mediumvoltage, drytype transformers, and therefore continues to use these same BIL groupings in today's proposed rule.

Howard Industries and ASE commented on whether DOE should regulate the efficiency of liquidimmersed transformers. Howard commented that, for liquidimmersed transformersespecially for the utility, municipal, and cooperative segmentsenergyefficiency standards should be voluntary because these transformer customers are already considering lifecycle costs in their purchasing decisions. (Howard, No. 70 at p. 4) Howard commented that it feels a voluntary program would be better for the whole utility market than a mandatory standard. Howard believes a mandatory program would contribute to standardization of liquidimmersed transformer designs, and encourage manufacturers to move to countries with lower labor costs. Howard suggested that the ballast and electric motor industries are two examples of products where mandatory standards were implemented and domestic manufacturing declined. (Howard, No. 70 at p. 2) ASE agreed with the Department's decision that liquidimmersed transformers fall within the scope of the standard. (ASE, No. 75 at p. 2) Under 42 U.S.C. 6317, the Department is charged in this rulemaking with determining whether standards for distribution transformers are technologically feasible and economically justified and would result in significant energy savings. Based on the Department's analysis and information available to date, standards for liquidimmersed transformers appear to be technologically feasible and economically justified, and would result in significant energy savings. The Department considered a voluntary program, NEMA TP1 in its Determination Analysis, but concluded that the ``efficiency levels would capture the most cost effective energy savings but may not capture substantial energy savings that appear to be economically justified and technologically feasible.'' 62 FR 54816. In addition, the Department considered the impact of voluntary programs in its regulatory impact analysis (see the report in the TSD ``Regulatory Impact Analysis for Electrical Distribution Transformers''), and found that a voluntary program would not result in standards that achieve the maximum efficiency level that is technologically feasible and economically justified. Thus, in accordance with 42 U.S.C. 6317, the Department intends to continue to consider liquidimmersed distribution transformers for energy efficiency standards. To gain a better understanding of the concern raised by Howard Industries about minimum efficiency standards leading to design standardization, the Department requests that other stakeholders comment on this issue.

2. Definition of a Distribution Transformer

The Department received several comments from stakeholders on the definition of a distribution transformer. The Department has established the definition (and scope of this rulemaking) in its final rule on the test procedure for distribution transformers. 10 CFR Part 431, Subpart K; 71 FR 24972.

EPCA directed DOE to develop standards for those ``distribution transformers'' for which energy conservation standards would be technologically feasible and economically justified, and would result in significant energy savings, but did not specify a definition for a distribution transformer. (42 U.S.C. 6317(a)) Thus, the Department began developing a definition in the determination analysis, and refined that definition through the test procedure rulemaking and this rulemaking. This process was obviated to a substantial extent by the enactment of EPACT 2005, which amended EPCA to, among other things, include a definition of a distribution transformer. (42 U.S.C. 6291(35)) The existing statutory definition establishes the scope of coverage for this rulemaking.

Before the passage of EPACT 2005, stakeholders had submitted comments on the definition of a distribution transformer presented in the ANOPR. These comments are summarized here with discussion on whether or not the new EPCA definition of a distribution transformer, promulgated in EPACT 2005, addresses the issues raised by the stakeholders. For more detail on the definition of a distribution transformer, please see the test procedure final rule notice. 71 FR 24972.

PEMCO and Southern Company commented on exclusions for dimensionally or physically constrained transformers. PEMCO noted that an exclusion for replacement or retrofit transformers is needed because they must have exactly the same physical dimensions as the ones they are replacing. (PEMCO, No. 57 at p. 1) Southern Company agreed, noting that in retrofit installations, size and weight are a factor. Southern commented that, as transformer efficiency increases, the units become larger and obstructions and required minimum clearances are more difficult to achieve. Southern noted that this is true for both liquid immersed, padmounted units and drytype transformers installed in buildings. It concluded that the increased size is likely to cause both delivery and installation problems in many locations. (Southern, No. 71 at p. 2) At the ANOPR public meeting, Ameren commented that the Department should consider the impact of different size/configurations resulting from increased efficiency on the speed and ease of emergency replacement transformers. (Public Meeting Transcript, No. 56.12 at pp. 255256) The Department accounted for generally applicable dimensional and physical constraints on transformer installation through the inclusion of size and weightdependent installation costs in its LCC model. These costs include potential pole changeout costs for large overhead transformers, and the size and weightdependent labor and equipment costs associated with installing larger transformers. The costs estimated by the Department do not include the costs of rehabilitating confined spaces that may have to be modified for the installation of larger transformers. This issue is similar to the situation that arises when utilities and contractors need to increase transformer size due to load growth. One method of modeling such costs would be to include a spaceoccupancy cost to the cost of transformer operation. The Department invites comment on whether spaceoccupancy costs should be included in transformer cost estimates and which methods are appropriate for estimating such costs.

Howard and

FOR FURTHER INFORMATION CONTACT Antonio Bouza, Project Manager, Energy Conservation Standards for Distribution Transformers, Docket No. EERM/ STD00550, U.S. Department of Energy, Energy Efficiency and Renewable Energy, Building Technologies Program, EE2J, 1000 Independence Avenue, SW., Washington, DC 205850121, (202) 5864563, email:
Antonio.Bouza@ee.doe.gov.

Thomas B. DePriest, Esq., U.S. Department of Energy, Office of General Counsel, GC72, 1000 Independence Avenue, SW., Washington, DC 20585, (202) 5869507, email: Thomas.Depriest@hq.doe.gov.