Kelly-led legislation would secure key domestic steel production, electrical grid

WASHINGTON, D.C. -- Today, U.S. Rep. Mike Kelly (R-PA) introduced The Distribution Transformer Efficiency & Supply Chain Reliability Act of 2024, legislation that aims to bolster the U.S. transformer supply chain, an important part of electricity grids, by setting new realistic energy efficiency standards that help stabilize domestic transformer manufacturing to meet increasing demand without exacerbating existing supply chains or undermining American steel production.

In January 2023, the U.S. Department of Energy (DOE) published a proposed rule that risks exacerbating existing supply chain challenges for distribution transformers and creating a shortage of related components. This legislation follows a letter Rep. Kelly sent to U.S. Energy Secretary Jennifer Granholm in December 2023 opposing the Biden Administration's proposed rule to mandate the use of amorphous metal (AM) cores instead of Grain-Oriented Electrical Steel (GOES) cores. GOES cores are used in electrical distribution transformers across the country.

Representative Kelly is leading the bill along with co-sponsors Chris Deluzio (D-PA), Dan Meuser (R-PA), Susan Wild (D-PA), Brian Fitzpatrick (R-PA), Henry Cuellar (D-TX), Guy Reschenthaler (R-PA), and Lloyd Smucker (R-PA).

"This rule would severely limit the ability of our utility providers to ensure grid reliability and security while making us dependent on foreign imports of amorphous metal. Grid security and reliability are vital to our economic and national security," said Rep. Kelly. "The Department of Energy's misguided policy would jeopardize electricity for millions of Americans. This new legislation takes the necessary next steps to strengthen our electrical grid while also protecting American national security and economic interests."

“There’s only one GOES producer left in the US, and they are right here in Western Pennsylvania,” said Rep. Deluzio. “This bill works to ensure this plant and its union workers don’t get choked out by severe standards imposed by the Department of Energy. As we continue to electrify our grid and move into a clean energy future, we’re going to need to beef up the grid – and the best way to do that is with American-made electrical steel.”  

“I commend Congressman Mike Kelly and Congressman Chris Deluzio for their introduction of The Distribution Transformer Efficiency & Supply Chain Reliability Act of 2024 in the U.S. House of Representatives," said Lourenco Goncalves, Chairman, President & CEO of Cleveland-Cliffs Inc. "Cleveland-Cliffs’ continued production of and investment in Grain-Oriented Electrical Steel (GOES) requires common sense policies that promote energy efficiency and maximize utilization of domestically produced GOES.  This legislation will ensure the continued use of highly efficient GOES in distribution transformers that support the electric grid and ensure U.S. energy security, thus preserving good-paying, union jobs in Western Pennsylvania and Ohio.”

“UAW Local 3303 of Butler PA and UAW Local 4104 of Zanesville OH gratefully applaud the efforts of Congressmen Kelly, Deluzio, and all the cosponsors of this bill. Energy efficient transformers are crucial components of our nation’s infrastructure. Equally important is our ability to manufacture them domestically from US sourced electrical steel. This bipartisan bill preserves our nation’s ability to do just that all while protecting good union jobs, national security, and our country’s energy independence," said Jamie Sychak, President of UAW Local 3303.

“A strong supply of distribution transformers is critical to ensuring a reliable grid that delivers electricity to all Americans,” said Debra Phillips, President and CEO, National Electrical Manufacturers Association (NEMA). “In the face of ongoing supply chain challenges, we appreciate the continued bipartisan focus on this important issue. We commend Representatives Kelly (R-PA) and Deluzio (D-PA) for introducing this legislation that will provide domestic manufacturers with the certainty they need to meet the ever-growing demand for transformers and continue to deliver these vital grid components to ensure long-term energy efficiency and reliability for customers.”

“This legislation is a bipartisan antidote to Department of Energy’s unworkable proposal to rapidly tighten transformer efficiency standards, which would exacerbate the already long lead times electric cooperatives face to obtain distribution transformers. The bill would allow for the adoption of an updated standard over a more realistic timeframe while ensuring the appropriate supply of grain-oriented steel that manufacturers need to speed transformer production. We are grateful to Reps. Deluzio (D-PA) and Kelly (R-PA) for championing this effort and for jumpstarting its consideration in the House by introducing this critical bill,” said Jim Matheson, CEO, National Rural Electric Cooperative Association. 

You can read the bill here.

Companion legislation has been introduced in the Senate by Senators Ted Cruz (R-TX) and Sherrod Brown (D-OH).

BACKGROUND

The Distribution Transformer Efficiency & Supply Chain Reliability Act of 2024 would prevent the new DOE rule from taking effect and instead create new standards that increase the energy efficiency of distribution transformers at levels that preserve market opportunities for GOES as well as amorphous steel.

Currently, there is only one facility in the United States producing GOES, located in Butler, Pennsylvania, which is represented by more than 1,300 United Auto Workers (UAW) employees.  Implementation of this proposed rule would jeopardize the Butler, Pennsylvania facility and leave the U.S. electrical grid reliant on imports and potentially cost over 1,500 American jobs.

Moreover, amorphous metal cores rely on imports of raw materials; a dependency that could leave Americans susceptible to a variety of disruptions, from production to shipping. The Department of Commerce has identified this as a threat to national security.

The administration's proposed rule comes when the supply chain constraint for distribution transformers has grown significantly, with demand exceeding current rates of production. The current lead time for procuring a distribution transformer is more than 16 months.

The Proposed Rule increases efficiency standards on distribution transformers, which are already no less than 97.7% energy efficient.

This bill is supported by the National Rural Electric Cooperative Association, National Electrical Manufacturers Association, Edison Electric Institute, National Association of Home Builders, Leading Builders of America, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) Local 3303, UAW Local 4104, and Cleveland-Cliffs Inc.