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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 III

DOCUMENT ACTION: Final rule.

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

DATES: Effective Date: The effective date of this rule is November 13, 2007. Standards for liquidimmersed and mediumvoltage, drytype distribution transformers will be applicable starting January 1, 2010.

DOCUMENT SUMMARY: The Department of Energy (DOE) has determined that energy conservation standards for liquidimmersed and mediumvoltage, drytype distribution transformers will result in significant conservation of energy, are technologically feasible, and are economically justified. On this basis, DOE is today adopting energy conservation standards for liquidimmersed and mediumvoltage, drytype distribution transformers. Today's rule does not set energy conservation standards for underground mining distribution transformers.

SUMMARY: Energy Department,

SUPPLEMENTAL INFORMATION

I. Summary of the Final Rule and Its Benefits

A. The Standard Levels

B. Distribution Transformer Characteristics

C. Benefits to Transformer Customers

D. Impact on Manufacturers

E. National Benefits

F. Conclusion
II. Introduction

A. Authority

B. Background

1. Current Standards

2. History of Standards Rulemaking for Distribution Transformers 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 Commercial Consumers and Manufacturers

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 on Methodology

A. Market and Technology Assessment

1. General

2. Mining Transformers

a. Comments Requesting Exemption

b. Mining Transformer Test Procedure Comments

3. LessFlammable, LiquidImmersed Transformers

4. Rebuilt or Refurbished Distribution Transformers

5. Uninterruptible Power System Transformers

B. Engineering Analysis

C. LifeCycle Cost and Payback Period Analysis

1. Inputs Affecting Installed Cost

a. Installation Costs

b. Baseline and Standard Design Selection

2. Inputs Affecting Operating Costs

a. Transformer Loading

b. Load Growth

c. Electricity Costs

d. Electricity Price Trends

e. Natural Gas Price Impacts

3. Inputs Affecting Present Value of Annual Operating Cost Savings

a. Standards Implementation Date

b. Discount Rate

c. Temperature Rise, Reliability, and Lifetime

D. National Impact AnalysisNational Energy Savings and Net Present Value Analysis

1. Discount Rate

a. Selection and Estimation Method

b. Discounting Energy and Emissions

E. Commercial Consumer Subgroup Analysis

F. Manufacturer Impact Analysis

G. Employment Impact Analysis

H. Utility Impact Analysis

I. Environmental Analysis
V. Discussion of Other Comments

A. Information and Assumptions Used in Analyses

1. Engineering Analysis

a. Primary Voltage Sensitivities

b. Increased Raw Material Prices

c. Amorphous Material Price

d. Material Availability

2. Shipments/National Energy Savings

3. Manufacturer Impact Analysis

B. Weighing of Factors

1. Economic Impacts

a. Economic Impacts on Consumers

b. Economic Impacts on Manufacturers

2. LifeCycle Costs

3. Energy Savings

4. Lessening of Utility or Performance of Products

a. Transformers Installed in Vaults

5. Impact of Lessening of Competition

6. Need of the Nation To Conserve Energy

7. Other Factors

a. Availability of High Primary Voltages

b. Materials Price Sensitivity Analysis

c. Materials Availability Analysis

d. Consistency Between SinglePhase and ThreePhase Designs

C. Other Comments

1. Development of Trial Standard Levels for the Final Rule

2. Linear Interpolation of NonStandard Capacity Ratings VI. Analytical Results and Conclusions

A. Trial Standard Levels

B. Significance of Energy Savings

C. Economic Justification

1. Economic Impact on Commercial Consumers

a. LifeCycle Costs and Payback Period

b. Commercial Consumer Subgroup Analysis

2. Economic Impact 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 Net Present Value and Net National 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

D. Conclusion

1. Results for LiquidImmersed Distribution Transformers [[Page 58191]]

a. LiquidImmersed TransformersTrial Standard Level 6

b. LiquidImmersed TransformersTrial Standard Level 5

c. LiquidImmersed TransformersTrial Standard Level A

d. LiquidImmersed TransformersTrial Standard Level 4

e. LiquidImmersed TransformersTrial Standard Level 3

f. LiquidImmersed TransformersTrial Standard Level B

g. LiquidImmersed TransformersTrial Standard Level C

2. Results for MediumVoltage, DryType Distribution Transformers

a. MediumVoltage, DryType TransformersTrial Standard Level 6

b. MediumVoltage, DryType TransformersTrial Standard Level 5

c. MediumVoltage, DryType TransformersTrial Standard Level 4

d. MediumVoltage, DryType TransformersTrial Standard Level 3

e. MediumVoltage, DryType TransformersTrial Standard Level 2 VII. Procedural Issues and Regulatory Review

A. Review Under Executive Order 12866

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

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, 1999

I. Review Under Executive Order 12630

J. Review Under the Treasury and General Government Appropriations Act, 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

N. Congressional Notification
VIII. Approval of the Office of the Secretary
I. Summary of the Final Rule and Its Benefits

A. The Standard Levels

The Energy Policy and Conservation Act (EPCA), as amended, directs the Department of Energy (DOE) to adopt energy conservation standards for those distribution transformers for which standards would be technologically feasible and economically justified, and would result in significant energy savings. (42 U.S.C. 6317(a)(2)) The standards in today's final rule, which apply to liquidimmersed and mediumvoltage, drytype distribution transformers, satisfy these requirements and will achieve the maximum improvements in energy efficiency that are technologically feasible and economically justified. In the advance notice of proposed rulemaking (ANOPR) in this proceeding, DOE had also addressed standards for lowvoltage, drytype distribution
transformers. 69 FR 45376 (July 29, 2004). However, the Energy Policy Act of 2005, Public Law 10958, (EPACT 2005) amended EPCA to establish energy conservation standards for those transformers. (EPACT 2005, Section 135(c); 42 U.S.C. 6295(y)) Therefore, DOE removed lowvoltage, drytype distribution transformers from the scope of this rulemaking.

The standards established in this final rule are minimum efficiency levels. Tables I.1 and I.2 show the standard levels DOE is adopting today. These standards will 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. As discussed in section V.C.2 of this notice, any transformers whose kVA\1\ rating falls between the kVA ratings shown in tables I.1 and I.2 shall have its minimum efficiency requirement calculated by a linear interpolation of the minimum efficiency requirements of the kVA ratings immediately above and below that rating.
\1\ kVA is an abbreviation for kilovoltampere, which is a capacity metric used by industry to classify transformers. A transformer's kVA rating represents its output power when it is fully loaded (i.e., 100%).
Table I.1.Standard Levels for LiquidImmersed Distribution Transformers, Tabular Form
Singlephase Threephase Efficiency Efficiency kVA (%) kVA (%) 10.......................... 98.62 15............. 98.36 15.......................... 98.76 30............. 98.62 25.......................... 98.91 45............. 98.76 37.5........................ 99.01 75............. 98.91 50.......................... 99.08 112.5.......... 99.01 75.......................... 99.17 150............ 99.08 100......................... 99.23 225............ 99.17 167......................... 99.25 300............ 99.23 250......................... 99.32 500............ 99.25 333......................... 99.36 750............ 99.32 500......................... 99.42 1000........... 99.36 667......................... 99.46 1500........... 99.42 833......................... 99.49 2000........... 99.46 ............ 2500........... 99.49 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.
Table I.2.Standard Levels for MediumVoltage, DryType Distribution Transformers, Tabular Form Singlephase Threephase 2045 kV 4695 kV >=96 kV 2045 kV 4695 kV >=96 kV BIL kVA efficiency efficiency efficiency BIL kVA efficiency efficiency efficiency (%) (%) (%) (%) (%) (%) 15........................................ 98.10 97.86 ............ 15........................... 97.50 97.18 ........... 25........................................ 98.33 98.12 ............ 30........................... 97.90 97.63 ........... [[Page 58192]]
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 ........... ........... ............ 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 nameplaterated load, determined according to the DOE test procedure. 10 CFR Part 431, Subpart K, Appendix A.

B. Distribution Transformer Characteristics

The minimum efficiency levels in today's standards can be met by distribution transformer designs that already are available in the market. DOE expects that distribution transformer designs that incorporate different voltages and other design variations will still be able to be manufactured under the new standards, maintaining all the features and utility found in commercially available products today.

In analyzing the benefits and burdens of potential standards, DOE represented the range of possible distribution transformer costs and features by representative engineering design lines. Five design lines (DL1, DL2, DL3, DL4, and DL5) represent the range of features and costs for liquidimmersed transformers, while five design lines (DL9, DL10, DL11, DL12, and DL13) represent mediumvoltage, drytype transformers. Three design lines (DL6, DL7, and DL8) represented lowvoltage drytype transformers and were included in DOE's ANOPR analysis. But as indicated above, DOE subsequently removed these transformers from this rulemaking when the Energy Policy Act of 2005 established minimum efficiency levels for them.

On average, liquidimmersed transformers are already relatively efficient. The annual operating costs for such transformers range from approximately \1/10\ to \1/30\ of the installed cost. Mediumvoltage, drytype transformers tend to have higher losses, and are subject to higher electricity costs. Their annual operating costs tend to be approximately \1/10\ of the installed cost.

C. Benefits to Transformer Consumers

The economic impacts on transformer consumers (i.e., the average lifecycle cost (LCC) savings) are positive for the new energy efficiency levels established by this rule. For liquidimmersed transformers, an increase in first costs of 612 percent is accompanied by a decrease in operating costs of 1523 percent, corresponding to a similar drop in electrical losses. For mediumvoltage, drytype transformers, an increase in first costs of 313 percent is accompanied by a decrease in losses and operating costs of 926 percent. On average, the new standards provides net lifecycle benefits for all categories of distribution transformers, although some liquidimmersed transformers with smaller loads and relatively low electricity cost are likely to incur a net cost from the new standards. For liquidimmersed transformers, DOE estimates that approximately 25% of the market incurs a net lifecycle cost from the standard while 75% of the market is either not affected or incurs a net benefit. DOE also investigated how these standards might affect municipal utilities and rural electric cooperatives. While the benefits are positive for municipal utilities, a majority of smaller, polemounted transformers for rural electric cooperatives will incur a net lifecycle cost. However, because of a relatively large pertransformer reduction in lifecycle cost for some nonevaluating rural electric cooperatives (i.e., those that do not take into consideration the cost of transformer losses when choosing a transformer) rural electric cooperatives as a whole receive an average lifecycle cost benefit.

D. Impact on Manufacturers

Using a real corporate discount rate of 8.9 percent, DOE estimated the industry net present values (INPV) of the liquidimmersed and mediumvoltage, drytype distribution transformer industries to be $609 million and $36 million, respectively, in 2006$. DOE expects the impact of today's standards on the INPV of the liquidimmersed transformer industry to be between an eight percent loss and an eight percent increase ($47 million to $47 million). DOE expects the impact of today's standards on the INPV of the mediumvoltage, drytype transformer industry to be between a 15 percent loss and a 9 percent loss ($5.2 million to $3.2 million). Based on DOE's analysis and interviews with distribution transformer manufacturers, DOE expects minimal plant closings or loss of employment as a result of the standards promulgated today.

E. National Benefits

The standards will provide significant benefits to the Nation. DOE estimates the standards will save approximately 2.74 quads (quadrillion (10\15\) British thermal units (BTU)) of energy over 29 years (2010 2038). This is equivalent to all the energy consumed by 27 million American households in a single year.

By 2038, DOE expects the energy savings from the standards to eliminate the need for approximately six new 400megawatt combined cycle gas turbine power plants. The total energy savings from the standard will result in cumulative greenhouse gas emission reductions of approximately 238 million tons (Mt) of carbon dioxide
(CO2) from a variety of generation sources. This is an amount equal to what would be
[[Page 58193]]
saved by removing 80 percent of all light vehicles from U.S. roads for one year.

The national net present value (NPV) of the standards is $1.39 billion using a seven percent discount rate and $7.8 billion using a three percent discount rate, cumulative from 2010 to 2073 in 2006$. This is the estimated total value of future energy savings minus the estimated increased equipment costs, discounted to the year 2007. The benefits and costs of the standard can also be expressed in terms of annualized 2006$ values over the forecast period 2010 through 2038.

Using a seven percent discount rate for the annualized cost analysis, the cost of the standard is $463 million per year in increased equipment and installation costs while the annualized benefits are $602 million per year in reduced equipment operating costs. Using a three percent discount rate, the cost of the standard is $460 million per year while the benefits of today's standard are $904 million per year.

F. Conclusion

DOE concludes that the benefits (energy savings, transformer consumer LCC savings, national NPV increases, and emissions reductions) to the Nation of the standards outweigh their costs (loss of manufacturer INPV and transformer consumer LCC increases for some users of distribution transformers). DOE concludes that today's standards for liquidimmersed and mediumvoltage, drytype transformers are technologically feasible and economically justified, and will result in significant energy savings. At present, both liquidimmersed and mediumvoltage, drytype transformers that meet the new standard levels are commercially available.
II. Introduction

A. 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. DOE publishes today's final rule 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.

EPCA contains criteria for prescribing new or amended energy conservation standards. DOE 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)(2)) Moreover, DOE analyzed whether today's 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)) \2\
\2\ DOE notes that 42 U.S.C. 6317(c) requires that DOE ``take into consideration'' the criteria contained in section 325(n).'' However, Section 325(n), ``Petition For An Amended Standard,'' does not contain the criteria for establishing new or amended standards, rather as its title states, it contains the criteria DOE must apply for determining whether to grant petitions for amending standards, filed by any person with the Secretary of Energy. Section 325(o) entitled, ``Criteria for Prescribing New or Amended Standards'' contains the appropriate criteria that 42 U.S.C. 6317(c) apparently intends to reference. The reference in section 42 U.S.C. 6317(c) to section 325(n) is an inadvertent error and DOE will apply the criteria in section 325(o) instead.

In addition, DOE decided whether each of today's standards for distribution transformers is economically justified, after receiving comments on the proposed standards, by determining whether the benefits of each standard exceed its burdens by considering, to the greatest extent practicable, the following seven factors that 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 today's energy conservation standards, DOE also has applied certain other provisions of 42 U.S.C. 6295. First, DOE would not prescribe a standard for distribution transformers if interested persons 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 equipment with performance
characteristics (including reliability), features, sizes, capacities, and volumes that are substantially the same as those generally available at the time of the Secretary's finding. (See 42 U.S.C. 6295(o)(4))

Second, DOE has applied 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 rebuttable presumption test is an alternative path to establishing economic justification.

Third, DOE may specify a different standard level than that which applies generally to a 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)) Any rule prescribing such a standard includes an explanation of the basis on which DOE establishes 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)) DOE can, however, grant waivers of preemption for particular State laws or regulations,
[[Page 58194]]
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)) B. 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 amended EPCA to establish energy conservation standards for lowvoltage, drytype distribution transformers.\3\ (EPACT 2005, Section 135(c); 42 U.S.C. 6295(y)) The standard levels for lowvoltage drytype transformers appear in Table II.1.
\3\ EPACT 2005 established that the efficiency of a lowvoltage drytype distribution transformer manufactured on or after January 1, 2007 shall be the Class I Efficiency Levels for distribution transformers specified in Table 42 of the ``Guide for Determining Energy Efficiency for Distribution Transformers'' published by the National Electrical Manufacturers Association (NEMA TP 12002). Table II.1.Energy Conservation Standards for LowVoltage, DryType Distribution Transformers
Singlephase Threephase Efficiency Efficiency kVA (%) kVA (%) 15.......................... 97.7 15............. 97.0 25.......................... 98.0 30............. 97.5 37.5........................ 98.2 45............. 97.7 50.......................... 98.3 75............. 98.0 75.......................... 98.5 112.5.......... 98.2 100......................... 98.6 150............ 98.3 167......................... 98.7 225............ 98.5 250......................... 98.8 300............ 98.6 333......................... 98.9 500............ 98.7 ............ 750............ 98.8 ............ 1000........... 98.9 Note: All efficiency values are at 35 percent of nameplaterated load, determined according to the DOE test procedure. 10 CFR Part 431, Subpart K, Appendix A.

DOE incorporated these standards into its regulations, along with the standards for several other types of products and equipment, in a Final Rule published on October 18, 2005. 70 FR 60407, 6041660417. 2. History of Standards Rulemaking for Distribution Transformers

On October 22, 1997, the Secretary of Energy published a notice stating that DOE ``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 based this determination, in part, on analyses conducted by DOE's Oak Ridge National Laboratory (ORNL). The two reports containing these analysesDetermination Analysis of Energy Conservation Standards for Distribution Transformers, ORNL6847 (1996) and Supplement to the ``Determination Analysis,'' ORNL6847 (1997)are available on the DOE Web site at: http://www.eere.energy.gov/buildings/appliance_standards/commercial/distribution_transformers.html .

As a result of its positive determination, in 2000 DOE developed the Framework Document for Distribution Transformer Energy Conservation Standards Rulemaking, which described the approaches DOE anticipated using to develop energy conservation standards for distribution transformers. This document is also available on the abovereferenced DOE website. On November 1, 2000, DOE held a public meeting to discuss the proposed analytical framework. Manufacturers, trade associations, electric utilities, energy efficiency organizations, regulators, and other interested parties attended this meeting. Stakeholders also submitted written comments on the Framework Document addressing a range of issues.

In the first quarter of 2002, prior to issuing its ANOPR, DOE met with manufacturers of liquidimmersed and drytype distribution transformers to solicit feedback on a draft engineering analysis report DOE had published containing a proposed analytical structure for the engineering analysis and some initial transformer designs. In addition, DOE also posted draft screening, engineering, and LCC analysis reports on its website, and held a live Webcast on the LCC analysis on October 17, 2002.\4\ DOE received comments from stakeholders on the draft reports, and these comments helped improve the quality of the analyses included in the ANOPR for this rulemaking, which was published on July 29, 2004. 69 FR 45376. In preparation for the September 28, 2004, ANOPR public meeting, DOE held a Webcast to acquaint stakeholders with the analytical tools and with other material DOE had published the previous month.
\4\ Copies of all the draft analyses published before the ANOPR are available on DOE's Web site: http://www.eere.energy.gov/buildings/appliance_standards/commercial/distribution_transformers_draft_analysis.html .

On August 5, 2005, DOE posted its draft NOPR analysis for the liquidimmersed and mediumvoltage, drytype distribution transformers on its Web site for early public review, along with spreadsheets for several of these analyses. This early publication of the draft NOPR analysis included the draft engineering analysis, LCC analysis, national impact analysis, and manufacturer impact analysis (MIA), and the draft TSD chapters associated with each of these analyses. The purpose of publishing these four draft analyses was to give stakeholders an opportunity to review the analyses and prepare recommendations for DOE as to the appropriate standard levels.\5\ \5\ Copies of the four draft NOPR analyses published in August 2005 are available on DOE's Web site: http://www.eere.energy.gov/buildings/appliance_standards/commercial/distribution_transformers_draft_analysis_nopr.html .

On April 27, 2006, DOE published its Final Rule on Test Procedures for
[[Page 58195]]
Distribution Transformers. In addition to establishing the procedure for sampling and testing distribution transformers so that manufacturers can make representations as to their efficiency as well as establish that they comply with Federal standards, this final rule also contained enforcement provisions, outlining the procedure the Department would follow should it initiate an enforcement action against a manufacturer. 71 FR 24972; 10 CFR 431.198.

On July 25, 2006, DOE published a NOPR proposing compliance certification procedures for a range of consumer products and commercial and industrial equipment, including distribution transformers. This NOPR included both a compliance statement and a certification report for distribution transformer manufacturers. 71 FR 42178. DOE is currently preparing its final rule for that proceeding, which will establish requirements around the compliance statement and certification report for distribution transformers and other products and equipment.

On August 4, 2006, DOE published the distribution transformer energy conservation standards NOPR. 71 FR 44355. In conjunction with the NOPR, DOE also published on its Web site the complete TSD for the proposed rule, which incorporated the final analyses DOE conducted and technical documentation for each analysis. The TSD included the engineering analysis spreadsheets, the LCC spreadsheet, the national impact analysis spreadsheet, and the MIA spreadsheetall of which are available on DOE's Web site.\6\ Table II.2 presents the energy conservation standard levels DOE proposed in the NOPR for liquid immersed distribution transformers, and Table II.3 presents the energy conservation standard levels DOE proposed for mediumvoltage, drytype distribution transformers.
\6\ The Web site address for all the spreadsheets developed for this rulemaking proceeding are available at: http://www.eere.energy.gov/buildings/appliance_standards/commercial/distribution_transformers_draft_analysis_nopr.html .
Table II.2.NOPR Proposed Energy Conservation Standard Levels for LiquidImmersed Distribution Transformers
Singlephase Threephase Efficiency Efficiency kVA (%) 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.
Table II.3.NOPR Proposed Energy Conservation Standard Levels for MediumVoltage, DryType Distribution Transformers Singlephase Threephase [gteqt]96 2045 kV 4695 kV [gteqt]96 kV 2045 kV 4695 kV kV BIL kVA Efficiency Efficiency Efficiency BIL kVA Efficiency Efficiency 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 ........... ........... ............ 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 nameplaterated load, determined according to the DOE test procedure. 10 CFR Part 431, Subpart K, Appendix A.

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In the NOPR, DOE identified seven issues on which it was particularly interested in receiving comments and views of interested parties. 71 FR 44406.

On February 9, 2007, DOE issued a notice of data availability and request for comments (NODA). 72 FR 6186. DOE published this notice in response to stakeholders who had commented, in response to the NOPR, that DOE's proposed standards might prevent or render impractical the replacement of distribution transformers in certain spaceconstrained (e.g., vault) installations. In the NODA, DOE sought comment on whether it should include in the LCC analysis potential costs related to size constraints of transformers installed in vaults. In the NODA, DOE outlined different approaches as to how it might account for additional installation costs for these spaceconstrained applications. In addition, DOE also published the NODA in response to certain stakeholders who commented that DOE should address the consistency issues for liquidimmersed transformers in the table of efficiency standards. DOE also requested comments on linking efficiency levels for threephase liquidimmersed units with those of singlephase units. Specifically, in the NODA DOE discussed how it was inclined to consider a final standard that is based on efficiency levels that are based on TSL 2 and TSL 3 for threephase units and TSLs 2, 3 and 4 for single phase units. 72 FR 6189. Based on comments on the August 2006 proposed rule and the February 2007, NODA, DOE created new TSLs, including TSL B, which is, generally speaking, a combination of TSL 2 for threephase units and TSL 3 for singlephase units. DOE received more than 20 written comments in response to this NODA on both the space constraint issue and how to set final efficiency ratings, which are discussed in the following sections of this final rule.

In response to the NODA, Cooper Power Systems commented that they were concerned that the NODA did not indicate any specifics regarding the proposed TSL levels for any design lines. Cooper states that DOE needs to publish a new proposed table that represents the mix of efficiency levels being considered in order for interested parties to provide solid feedback on the impact of these proposals. (Cooper, No. 175 at p. 1) \7\ ABB provided a similar comment, expressing that they disagree with DOE's action of indicating that it may adopt a new mix of TSLs derived from a combination of TSLs 2, 3 and 4 as the final standard level without specifying exactly which combination is being considered. (ABB, No. 167 at p. 1) DOE appreciates these two comments, but does not agree with the stakeholders criticism of DOE's actions and the rulemaking process for the following reasons. First, the NODA provided notice to stakeholders that DOE would consider a combination of TSLs for liquidimmersed distribution transformers for the final rule. Accordingly, stakeholders have been given an opportunity to review the existing proposed standard levels and published NOPR analysis, and provide comments to DOE as to the combination of efficiency values they believe are the most justified, and why. Second, DOE did not consider simply one new TSL in today's final rule, but instead created four new TSLs (TSL A, B, C, and D) based on combinations of efficiency values from previously proposed TSL 2, 3 and 4. These four combinations of TSLs enabled DOE to consider several different efficiency values for liquidimmersed transformers for the final rule, decreasing the burdens associated with inconsistencies between threephase and singlephase units and eliminating the discontinuities of efficiency values between design lines. In addition, the four combinations of TSLs attempt to maximize national and consumer benefits and select appropriate, costjustified, efficiency levels across all the design lines. Third, all of the actual efficiency ratings considered in the four new TSL combinations developed for today's final rule were previously published in DOE's August 2006 NOPR. For all of these reasons, DOE believes the NODA provides stakeholders sufficient notice and opportunity for comment concerning the standard level adopted by today's final rule.
\7\A notation in the form ``Cooper, No. 175 at p. 1'' identifies a written comment DOE received and included in the docket for this rulemaking. This particular notation refers to a comment (a) by Cooper Power Systems (Cooper), (b) in document number 175 in the docket of this rulemaking (maintained in the Resource Room of the Building Technologies Program), and (c) appearing on page 1 of document number 175.
III. General Discussion

A. Test Procedures

Section 7(c) of the Process Rule (Procedures for Consideration of New or Revised Energy Conservation Standards for Consumer Products, Title 10 CFR part 430, Subpart C, Appendix A; 61 FR 36974) \8\ indicates that DOE will issue a final test procedure, if one is needed, prior to issuing a proposed rule for energy conservation standards. DOE published its test procedure for distribution transformers as a final rule on April 27, 2006. 71 FR 24972.
\8\ The Process Rule provides guidance on how DOE conducts its energy conservation standards rulemakings, including the analytical steps and sequencing of rulemaking stages (such as test procedures and energy conservation standards).
B. Technological Feasibility

1. General

There are distribution transformers in the market at all of the efficiency levels prescribed in today's final rule. Therefore, DOE believes all of the efficiency levels adopted by today's final rule are technologically feasible.

2. Maximum Technologically Feasible Levels

Applying the requirements of 42 U.S.C. 6295(p)(2), and as discussed in the proposed rule, DOE determined ``the maximum improvement in energy efficiency or maximum reduction in energy use that is technologically feasible.'' 71 FR 44362. DOE determined the ``max tech'' efficiency levels in the engineering analysis (see Chapter 5 in the TSD) and then used these highest efficiency designs to establish the maxtech levels for the LCC analysis (see Chapter 8 in the TSD). DOE then scaled these maxtech efficiencies to the other kVA ratings within a given design line, establishing maxtech efficiencies for all the distribution transformer kVA ratings.

C. Energy Savings

DOE forecasted energy savings in its national energy savings (NES) analysis, through the use of an NES spreadsheet tool, as discussed in the proposed rule. 71 FR 44361, 44363, 4438044381, 44384, 44393, 44401.

One of the criteria that govern DOE's adoption of standards for distribution transformers is that the standard must result in ``significant'' energy savings. (42 U.S.C. 6317(a)) While EPCA does not define the term ``significant,'' 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 section 325 of EPCA to be savings that were not ``genuinely trivial.'' The energy savings for the standard levels DOE is adopting today are nontrivial, and therefore DOE considers them ``significant'' as required by 42 U.S.C. 6317(a).

D. Economic Justification

As noted earlier, EPCA provides seven factors for DOE to evaluate in determining whether an energy conservation standard for distribution transformers is economically justified. The following discussion explains how DOE has addressed each of these seven
[[Page 58197]]
factors in this rulemaking. (42 U.S.C. 6295(o)(2)(B)(i))
1. Economic Impact on Commercial Consumers and Manufacturers

DOE considered the economic impact of the standard on commercial consumers and manufacturers, as discussed in the proposed rule. 71 FR 44361, 4436344364, 44367, 4437644277, 44379, 4438144384, 44385 44389, 4439044393, 44394, 4439644400, 4440144404. DOE updated the analyses to incorporate more recent material price information. One significant change to the MIA was the inclusion of lower conversion capital expenditure estimates for those trial standard levels (TSLs) which require or otherwise trigger manufacturers to switch to amorphous core technology. DOE based the revised estimates on information provided by industry experts (see Section V.A.3 below).

2. LifeCycle Costs

DOE considered lifecycle costs of distribution transformers, as discussed in the proposed rule. 71 FR 4436244363, 4437144376, 44378 44379, 4438544390, 4439544396. It calculated the sum of the purchase price and the operating expensediscounted over the lifetime of the equipmentto estimate the range in LCC benefits that commercial consumers would expect to achieve due to the new standards. DOE also examined the economic justification for its proposed standards for distribution transformers by applying section 325(o)(2)(B)(iii) of EPCA (42 U.S.C. 6295(o)(2)(B)(iii)), which provides that there is a rebuttable presumption that an energy conservation standard is economically justified if the increased installed cost for a product that meets the standard is less than three times the value of the firstyear energy savings resulting from the standard, as calculated under the applicable DOE test procedure. 71 FR 4438844389. Some of the standard levels DOE is adopting today satisfy the rebuttable presumption test but others do not. However, DOE determined all of them to be economically justified based on the abovedescribed analyses. 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, DOE 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)) DOE used the NES spreadsheet results in its consideration of total projected savings. 71 FR 44361, 44363, 4438044381, 44384, 44393, 44401. 4. Lessening of Utility or Performance of Equipment

In selecting today's standard levels, DOE avoided new standards for distribution transformers that lessen the utility or performance of the equipment under consideration in this rulemaking. (See 42 U.S.C. 6295(o)(2)(B)(i)(IV)) DOE sought to capture in the economic analysis the impact of any increase in transformer size or weight associated with efficiency improvements. Specifically when selecting the new standards, DOE considered the installation costs for polemounted transformers and vault transformers that may be incurred with larger, heavier, more efficient transformers. 71 FR 44363, 44394. In addition, DOE recognizes that underground mining transformers are subject to unique and extreme dimensional constraints which impact the efficiency and performance of these distribution transformers. Therefore, DOE is establishing a separate product class for underground mining transformers. In the future, DOE may consider establishing energy conservation standards for underground mining transformers. DOE is not setting a standard for underground mining transformers in today's final rule, rather it is reserving a section and intends to develop analysis that would establish an appropriate energy conservation standard for underground mining transformers in the future. Finally, when selecting today's standard, DOE carefully reviewed the results of an engineering sensitivity analysis on primary winding voltages. This sensitivity analysis considers higher primary voltages than those used in the representative units studied in the engineering analysis. This sensitivity analysis enables DOE to evaluate the impact on cost and efficiency associated with the final rule TSLs. (see Section V.A.1.a in this notice, and TSD Appendix 5D) Thus, the analysis in today's final rule takes into consideration the additional costs associated with spaceconstrained polemounted and vault transformers, and ensures that higher primary voltages are not eliminated from the market. Based on DOE's engineering analysis, DOE concludes that more efficient pole mounted and vault transformers are technologically feasible. However, in some instances, DOE believes that transformer poles and vaults may need to be replaced to accommodate the more efficient transformers as a result of today's final rule. DOE included increased installation costs of such polemounted and vault transformer in its analysis. In this way, DOE has captured the costs and benefits of replacement pole mounted and vault transformers. Details of pole and vault replacement cost estimation methods are provided in sections 7.3.1 and 7.3.5 of TSD Chapter 7.

5. Impact of Any Lessening of Competition

DOE considers any lessening of competition that is likely to result from standards. Accordingly, as discussed in the proposed rule, 71 FR 4436344364, 44394, at DOE's request, the Department of Justice (DOJ) reviewed the proposed standard level (i.e., the NOPR) and transmitted to the Secretary a written determination of the impact of any lessening of competition likely to result, together with an analysis of the nature and extent of such impact. (See 42 U.S.C. 6295(o)(2)(B)(i)(V) and (B)(ii)) DOE addressed the issues raised in the Attorney General's response to the NOPR, as discussed in section VI.C.5 of today's final rule. The letter DOJ submitted to DOE in response to the NOPR appears at the end of this notice of final rulemaking.

Today's final rule, which follows publication of the NODA, adopts a standard level that is higher than the standard proposed in the NOPR for certain liquidimmersed distribution transformers. DOJ was provided draft copies of the notice of final rulemaking and the final rule TSD for review. The Attorney General did not express any concerns about impacts associated with today's final rule. A copy of Attorney General's letter to DOE in response to the final rule also appears at the end of this notice of final rulemaking.

6. Need of the Nation To Conserve Energy

The Secretary recognizes that energy conservation benefits the Nation in several important ways. The nonmonetary benefits of a standard are likely to be reflected in improvements to the security of the Nation's energy system. In addition, reductions in the overall demand for energy will result in reduced costs for maintaining reliability of the Nation's electricity system. Finally, today's standards will likely result in reductions in greenhouse gas emissions. As discussed in the proposed rule, DOE has considered these factors in adopting today's standards. 71 FR 44364, 44384, 4439444395, 44398 44400. (See 42 U.S.C. 6295(o)(2)(B)(i)(VI))
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7. Other Factors

The Secretary of Energy, in determining whether a standard is economically justified, considers any other factors the Secretary deems to be relevant. (See 42 U.S.C. 6295(o)(2)(B)(i)(VII)) The results of the utility impact analysis, and the analysis of national employment impacts are ``other factors'' that the Secretary took into consideration. In addition, for this rulemaking, the Secretary also took into consideration stakeholder concerns 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, as discussed in the proposed rule. 71 FR 44364, 44395. Since issuance of the NOPR, DOE conducted two engineering sensitivity evaluationsone considering current (2006) material prices and a second considering transformers with alternative primary voltages that have higher insulation requirements (and are therefore more expensive and less efficient to manufacture). Also, as it had done in the proposed rule, DOE conducted LCC sensitivities, evaluating engineering analysis costefficiency curves generated using a high material price scenario \9\ and a low material price scenario,\10\ and other variable inputs in the LCC analysis. In selecting today's standards, DOE also took into consideration the need to have consistency in the efficiency requirements between singlephase and threephase liquidimmersed transformers. See section V.C.1 for discussion on development of the final rule TSLs, including how single phase and threephase consistency was maintained between the liquid immersed product classes.
\9\ The high material price scenario is based on using the year with the highest material prices in the fiveyear sample (i.e., 2002 to 2006) of material prices updated for the final rule. In this sample, the year with the highest overall material prices was 2006. See TSD Chapter 5 for a discussion on material prices.
\10\ The low material price scenario is based on selecting the year with the lowest M6 material price in the fiveyear sample (i.e., 2002), and then applying a uniform 15 percent discount to all the material prices from that year. See TSD Chapter 5 for a discussion on material prices.

IV. Methodology and Discussion of Comments on Methodology

DOE used a number of analytical tools that it previously developed and adapted for use in this rulemaking. The first tool is a spreadsheet that calculates LCC and payback period (PBP). The second tool calculates NES and national NPV. DOE also used the Government Regulatory Impact Model (GRIM), among other methods, in its MIA. Finally, DOE developed an approach using the National Energy Modeling System (NEMS) to estimate impacts of distribution transformer energy conservation standards on electric utilities and the environment.

Regarding the analytical methodology, DOE has continued to use the spreadsheets and approaches explained in the proposed rule. 71 FR 4436444384. It revised them, and applied them again to develop the analysis for this final rule. The tables below summarize all the major NOPR inputs to the LCC and PBP analysis, the Shipments Analysis and the National Impact Analysis, and whether those inputs were revised for the final rule. In addition to these updates, DOE also updated the material prices it used for the engineering analysis, as discussed in TSD Chapter 5.
Table IV.1.Final Rule Inputs for the LCC and PBP Analyses Changes for Inputs NOPR description final rule Affecting Installed Costs
Equipment price............... Derived by multiplying No change. manufacturer selling
price (from the
engineering analysis)
by distributor markup
and contractor markup
plus sales tax for
drytype
transformers. For
liquidimmersed
transformers, DOE
used manufacturer
selling price plus
small distributor
markup plus sales
tax. Shipping costs
were included for
both types of
transformers.
Installation cost............. Includes a weight Added a case specific component, with vault derived from RS Means replacement Electrical Cost Data costs as a 2002 and a markup to subgroup cover installation analysis. labor, pole
replacement costs for
design line 2 and
equipment wear and
tear.
Baseline and standard design The selection of No change in selection. baseline and standard percent of compliant evaluators. transformers depended Different on customer behavior. values of For liquidimmersed customer choice transformers, the B parameter was fraction of purchases estimated for evaluated was 75%, small versus while for drytype large liquid transformers, the immersed fraction of evaluated transformers.* purchases was 50% for
small capacity medium
voltage and 80% for
largecapacity medium
voltage.
Affecting Operating Costs
Transformer loading........... Loading depended on Technical customer and improvement was transformer made for liquid characteristics. immersed statistical load model where the 1995 Commercial Building Energy Consumption Survey data was used for load factor estimates. Load growth................... 1% per year for liquid Adjusted to 0% immersed and 0% per per year for year for drytype both liquid transformers. immersed and drytype. Power factor.................. Assumed to be unity... No change. [[Page 58199]]
Annual energy use and demand.. Derived from a No change. statistical hourly
load simulation for
liquidimmersed
transformers, and
estimated from the
1995 Commercial
Building Energy
Consumption Survey
data for drytype
transformers using
factors derived from
hourly load data.
Load losses varied as
the square of the
load and were equal
to rated load losses
at 100% loading.
Electricity costs............. Derived from tariff Adjusted based and hourly electricity based electricity prices for prices. Capacity inflation. costs provided extra
value for reducing
losses at peak.
Electricity price trend....... Obtained from Annual Updated to Energy Outlook 2005 AEO2007. (AEO2005).
Maintenance cost.............. Annual maintenance No change. cost did not vary as
a function of
efficiency.
Affecting Present Value of Annual Operating Cost Savings Effective date................ Assumed to be 2010.... No change. Discount rates................ Mean real discount Discount rate rates ranged from sensitivity 4.2% for owners of added to polemounted, liquid spreadsheet immersed transformers tool. to 6.6% for drytype
transformer owners.
Lifetime...................... Distribution of No change. lifetimes, with mean
lifetime for both
liquid and drytype
transformers assumed
to be 32 years.
Candidate Standard Levels
Trial standard levels......... Six efficiency levels For liquid with the minimum immersed equal to TP 1 and the transformers a maximum from the most set of four efficient designs recombinations from the engineering of the NOPR analysis. standard levels Intermediate were formulated efficiency levels for that have each design line consistency selected using a between single redefined set of LCC phase and three criteria.. phase efficiency levels \*\ The concept of using A and B loss evaluation combinations is discussed in TSD chapter 3, Total Owning Cost Evaluation. Within the context of the LCC analysis, the A factor measures the value to a transformer purchaser, in $/watt, of reducing noload losses while the B factor measures the value, in $/watt, of reducing load losses. The purchase decision model developed by the Department mimics the likely choices that consumers make given

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.

Francine Pinto, Esq., U.S. Department of Energy, Office of General Counsel, GC72, 1000 Independence Avenue, SW., Washington, DC 20585 0121, (202) 5867432, email: Francine.Pinto@hq.doe.gov.