July 19, 2013—Howard Announces Plan for Implementation of Amended Transformer Efficiency Standards On April 18, 2013, The U.S. Department of Energy’s Office of Energy Efficiency and Renewable Energy published its amended efficiency standards for distribution transformers, Part II, 10 CFR Part 431, Energy Conservation Program: Energy Conservation Standards for Distribution Transformers: Final Rule. In this final rule, DOE is adopting more stringent energy conservation standards than those mandated in its earlier rule published in October of 2007. Compliance with the amended standards in this Part II final rule is required for all covered transformers as of January 1, 2016. A link to the docket web page can be found at: http://www.regulations.gov/#!docketDetail;rpp=10;po=0;D=EERE2010-BT-STD-0048. The table below summarizes Part II amended efficiency standards as compared with existing efficiencies. Single-Phase Transformer Efficiency Amended KVA Existing (%) (%) 10 15 25 37.5 50 75 100 167 250 333 500 667 833 98.62 98.76 98.91 99.01 99.08 99.17 99.23 99.25 99.32 99.36 99.42 99.46 99.49 98.70 98.82 98.95 99.05 99.11 99.19 99.25 99.33 99.39 99.43 99.49 99.52 99.55 Three-Phase Transformer Efficiency Amended KVA Existing (%) (%) 15 98.36 98.65 30 98.62 98.83 45 98.76 98.92 75 98.91 99.03 112.5 99.01 99.11 150 99.08 99.16 225 99.17 99.23 300 99.23 99.27 500 99.25 99.35 750 99.32 99.40 1000 99.36 99.43 1500 99.42 99.48 2000 99.46 99.51 2500 99.49 99.53 Transformer manufacturers and customers should begin now to plan an orderly transition process. Many distribution transformer designs sold today do not meet the amended (Part II) efficiency standards and must be re-designed. The Part II efficiency standards will in some cases result in heavier and larger transformers. Manufacturers must plan and implement design and production changes in order to build these higher-efficiency transformers. In addition, raw material suppliers need sufficient time to plan for changes in demand for core steel, magnet wire and other components parts. Howard Industries has already begun its transition planning process. Our marketing, engineering, purchasing, manufacturing, quality assurance and transportation departments are working to determine what process changes will be necessary. We expect to complete the manufacturing transition in our factory Howard Industries, Inc. 7/19/2013 Page 1 of 2 to Part II-compliant transformers in the latter part of the third quarter of 2015, which will allow adequate time to complete the manufacture of any existing designs that might still be in production at that time and to resolve any contingencies that might occur prior to the January 1, 2016 deadline. In order to accomplish this, our manufacturing facilities will cease production by September 1, 2015 of any covered designs that do not meet Part II standards. Customers should finalize plans for the transition and be prepared to start ordering Part II-compliant transformers prior to the September 1, 2015 production deadline, allowing for individual contract lead-times. Also, customers should complete their evaluation of Part II-compliant quotations and issue awards with sufficient advance notice to allow time for Howard Industries to complete all engineering designs by July 31, 2015. Howard marketing personnel and field sales representatives will be in contact with each of our customers to answer questions and assist in the transition process. Close coordination between Howard Industries, our customers and raw material suppliers is essential to insure a smooth transition and to minimize disruptions in the marketplace. The preliminary transition schedule is summarized below. Date January 1, 2014 March 15, 2015 April 1, 2015 May 1, 2015 July 31, 2015 September 1, 2015 September 30, 2015 January 1, 2016 Howard Industries, Inc. 7/19/2013 Transition Schedule for Covered Designs Begin the Part II re-design process for existing blanket contracts All new blanket-contract quotations must be Part II compliant Begin production of Part II compliant designs (along with existing designs) All new spot-buy quotations must be Part II compliant Complete the Part II re-design process for existing blanket contracts All designs beginning production process must be Part II compliant All designs completing production process must be Part II compliant Official DOE compliance date Page 2 of 2