In January 2023, the U.S. Department of Energy (DOE) proposed a rule to amend the energy conservation standards for distribution transformers. DOE’s proposal would require that distribution transformer equipment meet a threshold energy conservation standard that is higher than 99 percent in some instances. In the proposed rule, DOE stated that distribution transformers would require amorphous steel cores as opposed to the current grain-oriented steel cores to meet these new energy efficiency standards.
The Office of Advocacy (Advocacy) visited a small rural electric cooperative in February 2023 and held a small business roundtable on this topic on March 14, 2023. During the visit and roundtable, small entities spoke about concerns with the proposed rule. Those concerns included burdensome costs that were not considered by DOE, market competition issues with requiring one type of core, and the justification for the proposed rule under the Energy Policy Conservation Act (EPCA).
In addition, small entities raised concerns about the impact this rule would have on overloaded electrical systems that are trying to keep up with significantly increased demand due to electric vehicles (EVs). Many cited significant challenges and delays due to supply chain shortages. Others spoke about the additional costs that would be incurred from switching to amorphous steel cores. Several also raised concerns about indirect impacts from the proposed rule, including increased costs to home builders.
Advocacy submitted public comments to DOE highlighting its concerns and urged DOE to consider all the impacts the rule would have on small entities, consider the comments received from small entities on the proposed rule, and reconsider whether the rule met the stated objectives of EPCA.
Advocacy also argued that DOE’s proposed rule was deficient under EPCA because DOE failed to adequately discuss how the proposed rule was economically justified. EPCA requires any new or updated standard that DOE implements to be designed to achieve maximum improvement in energy efficiency that is technologically feasible and economically justified.
In the end, DOE listened to the concerns of small electric utilities and extended the compliance deadline from three years to five years, giving all firms longer to comply with the stricter rules. This flexibility will significantly reduce the economic impact this rule will have on four distinct groups of small businesses: three groups of manufacturers and the buyers of distribution transformers (mainly electric utilities). In total, small firms have cost savings of $60.8 million over 10 years. This annualizes to $8.2 million per year.
Advocacy greatly appreciates the collaboration of small businesses in the rulemaking process. The insights and perspectives small entities bring to the table not only enhance the rulemaking process but also ensure the needs and challenges of small entities are thoughtfully considered. Your efforts truly make a difference.
AUTHOR:
Shanerika Flemings, Assistant Chief Counsel
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