Austin News

Yesterday, Senators Ted Cruz and Sherrod Brown introduced new legislation called The Distribution Transformer Efficiency & Supply Chain Reliability Act of 2024. The bill aims to strengthen the U.S. transformer supply chain and protect American energy independence by setting new energy efficiency standards for distribution transformers.

The proposed rule by the U.S. Department of Energy (DOE) in January 2023 could potentially exacerbate existing supply chain challenges for distribution transformers and create a shortage of related components. The rule would require a shift from the industry standard grain oriented electrical steel (GOES) cores to amorphous cores, which could negatively impact U.S. steel manufacturers. GOES currently accounts for more than 95 percent of the domestic distribution transformer market, and manufacturers' production lines are designed for GOES. Moreover, this shift would further delay manufacturing timelines, which are already estimated to take at least 18 months to two years.

Moving to amorphous cores, as proposed by the DOE, could disadvantage U.S. manufacturers and pose a threat to the nation's grid and national security. To prevent the new rule from taking effect, The Distribution Transformer Efficiency & Supply Chain Reliability Act of 2024 would establish new standards that increase the energy efficiency of distribution transformers while preserving market opportunities for both GOES and amorphous steel.

Senator Cruz expressed concerns over the DOE's proposed rule, stating, "DOE's rule would actually jeopardize electricity distribution for millions of Texans and Americans, with potentially disastrous results during extreme weather." He emphasized the need for a reliable and affordable supply of distribution transformers to meet the growing demand for energy in Texas.

Senator Brown highlighted the importance of a strong domestic supply of transformers for the electric grid and energy independence. He stated, "We need to meet increasing demand for transformers, while keeping this critical supply chain in the U.S. and make sure the Department of Energy gets it right."

The bill has garnered support from a bipartisan group of senators, including Bill Hagerty, Joe Manchin, Pete Ricketts, John Fetterman, Marco Rubio, Bob Casey, Todd Young, Krysten Sinema, Ted Budd, and Jon Tester. It is also supported by various organizations, such as the National Rural Electric Cooperative Association, National Electrical Manufacturers Association, Edison Electric Institute, National Association of Home Builders, Leading Builders of America, American Public Power Association, United Automobile Aerospace and Agricultural Implement Workers of America, and Cleveland-Cliffs.

Jim Matheson, CEO of the National Rural Electric Cooperative Association, commended the legislation as a "bipartisan antidote" to the DOE's proposed rule, which would exacerbate the existing supply chain challenges for electric cooperatives. He expressed gratitude to Senators Brown and Cruz for championing this effort.

Debra Phillips, President and CEO of the National Electrical Manufacturers Association, appreciated Senators Brown and Cruz for prioritizing and strengthening the distribution transformer supply chains. She highlighted the high demand and ongoing supply chain challenges facing manufacturers and emphasized the need for legislative direction and regulatory certainty.

Dan Brouillette, President and CEO of Edison Electric Institute, praised the bill for establishing a stronger and more sustainable domestic market for high-efficiency distribution transformers. He urged Congress to act quickly to enact this bill into law.

The bill has also garnered support from various Texas organizations, including Denton Municipal Electric, Texas Electric Cooperatives, Entergy Texas, CPS Energy, Electric Research and Manufacturing Cooperative (ERMCO), CenterPoint Energy, Texas Association of Business, and American Electric Power.

Gerard Hudspeth, Mayor of the City of Denton, Texas, expressed his support for the bill, stating that it sets reasonable and attainable energy efficiency standards for electric distribution transformers without negatively impacting supply chain issues.

Mark Williams, CEO of Texas Electric Cooperatives, appreciated Senator Cruz's leadership on the bill and acknowledged the concerns about the DOE's proposed rule and its potential negative effects on economic development and natural disaster response in Texas.

The bill addresses the ongoing supply chain challenges faced by the transformer industry and aims to ensure a reliable and efficient supply of distribution transformers for the nation's electric grid. It provides a longer and more practical transition period, allowing manufacturers to adapt to the new energy efficiency standards without disrupting production or causing further delays.

The Distribution Transformer Efficiency & Supply Chain Reliability Act of 2024 is a bipartisan effort to protect American energy independence and strengthen the U.S. transformer supply chain. It aims to strike a balance between energy efficiency goals and the needs of domestic manufacturers, ensuring a reliable and affordable supply of distribution transformers for the nation's electricity grids.