January 19, 2024

Arlington, Va.— Today, a bipartisan group of Senators introduced legislation which would stabilize the supply chain and ensure long-term energy efficiency for the production of distribution transformers, following recommendations from the National Electrical Manufacturers Association (NEMA). The Distribution Transformer Efficiency & Supply Chain Reliability Act, led by Senators Sherrod Brown (D-OH) and Ted Cruz (R-TX), signals a desire from both parties to secure this critical grid component. NEMA was joined by utility trades and domestic steel producers in endorsing the legislation. The bill is in response to a Department of Energy (DOE) rulemaking which will disrupt this critical and already strained supply chain by requiring manufacturers to shift from using grain oriented electrical steel (GOES) to amorphous steel.

“We appreciate Senators Brown and Cruz responding to the electroindustry’s call to prioritize and strengthen our distribution transformer supply chains,” said Debra Phillips, President and CEO, NEMA. “Distribution transformers are essential to delivering electricity to consumers everywhere and we’re currently staring at backlogs of two years or more. This bipartisan group of senators understands the record high demand and ongoing supply chain challenges facing manufacturers and are responding by providing legislative direction and much-needed regulatory certainty.”

Currently, more than 95% of distribution transformers are made with GOES. Furthermore, there is only a single domestic producer of amorphous steel, and it cannot scale production to meet current or future demand. DOE’s proposed rule, set to take effect by June, would further exacerbate the two-plus year lead time to produce distribution transformers, and create bottlenecks in planned grid resiliency, residential construction and e-mobility projects across the country.

Bipartisan cooperation on the distribution transformer shortage has been a hallmark of NEMA’s advocacy efforts. The Distribution Transformer Efficiency & Supply Chain Reliability Act builds upon another bipartisan Senate endeavor last June. In a letter penned by Senator Bill Hagerty (R-TN) to DOE Secretary Jennifer Granholm and cosigned by 13 Democrats and 33 Republicans, the upper chamber then urged the agency to refrain from promulgating a final rule which would significantly disrupt supply chains by requiring manufacturers to shift to amorphous steel. This bill would limit DOE’s ability to establish efficiency standards for distribution transformers above a plane known as trial standard level (TSL) 2. Products made to specifications higher than TSL 2 increasingly require the sole use of amorphous steel to achieve efficiency gains, whereas TSL 2 levels can be achieved with GOES and amorphous steel. DOE already requires these critical grid components to be highly efficient; currently, such products are made to be no less than 97.7% efficient.