EPA 230/1 - 76 - 068
ECONOMIC ANALYSIS OF PROPOSED TOXIC POLLUTANT STANDARDS
FOR POLYCHLORINATED BIPHENYLS:
TRANSFORMER, CAPACITOR, AND PCB MANUFACTURERS
Prime Contact No. 68-01-3259
Subcontract No. 474-1
OFFICE OF WATER PLANNING AND STANDARDS
ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
October, 1976
u s Protection «•*•»
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This document is available in limited quantities through the
^O U.S. Environmental Protection Agency, Economic Analysis
•> Staff (WH - 586), 401 M Street, S.W., Washington, D.C. 20460.
f\ Telephone: (202) 755-6906 ^
^
This document will subsequently be available through the
: National Technical Information Service, Springfield, VA
22151.
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PREFACE
The attached document is a contractor's study prepared for the Office of Water
;Planning and Standards of the Environmental Protection Agency (EPA). The purpose of
the study is to analyze the economic impact which could result from the application of
alternative toxic pollutant effluent standards to be established under Section 307 (a) of
the Federal Water Pollution Control Act Amendments (_Ref. 25j.
The study supplements the technical study prepared by Versar, Inc. [Ref. 1^ supporting
the issuance of proposed regulations under Section 307 (a). The technical study surveys
existing and potential waste treatment control methods and technology within
particular industrial source categories and supports proposal of certain toxic pollutant
effluent standards; the study is an assessment of the feasibility of these standards. The
technical study presents the investment and operating costs associated with various
alternative control and treatment technologies. This document supplements the EPA's
information by estimating the broader economic effects which might result from the
application of various control methods and technologies. This study investigated
alternative control options primarily in terms of effects on product; prices and
curtailments in production.
The study has been prepared with the supervision and review of the Office of Water
Planning and Standards of EPA. This report was submitted in fulfillment of Prime
Contract No. 68-01-3259 by Versar, Inc. and in fulfillment of Subcontract No. 4741 by
Jack Faucett Associates, Inc .
This report is being released and circulated concurrently with the public hearing,
required under Section 307 (a). The study is not an official EPA publication. It will be
considered along with the information obtained during proposed rule making proceedings
necessary to establish final regulations. Prior to final promulgation of regulations,, the
accompanying study shall have standing in any EPA proceeding or court proceeding only -
to the extent that it represents the views of the above mentioned contractors who
studied-the subject industry. It cannot be cited, refereneedr or represented in: any_-
:respect in-any such proceeding as a statement of EPA's views regarding the subject
industry.; - - -
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The criteria by which the necessity of performing an Inflation Impact Statement is
judged as established by the Administrator are not expected to be exceeded by the
promulgation of this regulation. However, this study meets all the requirements of an
Inflation Impact Statement.
11
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TABLE OF CONTENTS
PREFACE ....... i
EXECUTIVE SUMMARY - vii
LIST OF TABLES v
LIST OF FIGURES vi
CHAPTER ~~ " PAGE
1 INTRODUCTION ..................... , 1-1
Objective and Scope of This Study ............ 1-1
Definition of Economic Impact ............. _ . 1-3
Impact on Timing of Producer Decisions ......... 1-4
2 METHODOLOGY ..................... 2-1
3 DESCRIPTION OF INDUSTRY ............... .- . 3-1
Types of PCB-Insulated Transformers .......... ,3-3
Types of PCB-Insulated Capacitors ........... 3-5
4 FINANCIAL PROFILE OF THE INDUSTRY .......... 4-1
5 BASELINE MARKET CONDITIONS: : :
DEMAND, SUPPLY AND PRICE .............. 5-1
Capacitors ..................... 5-3
Transformers .................... r ^ , 5-3
Effect of PCB Effluent Controls on Sales ......... 5-9
6 SUMMARY OF ALTERNATIVE ;
TREATMENT TECHNOLOGIES ............... 6-1
Treatment Cost Estimates ............... ...
Annualized Costs for the Investment Analysis ....... 6-3
INVESTMENT ANALYSIS ................. ._, . _7rl
Background and Uses of Cash Flow Analysis ...... ._ . . J7-1
Assumptions Underlying Model Pro Forma . -:: ~ -
Income Statements 7-2
Explanation of the Methodology Used in the .
Income Statements 7-3
111
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TABLE OF CONTENTS (Con't)
Alternative A 7-4
Alternative B 7-5
Alternative C 7-6
Zero Discharge . r'- 7-6
8 ; ECONOMIC IMPACT . . 8-1
Introduction 8-1
Economic Impact of Effluent Control Alternatives. . . . r - 8-2
Delayed Impacts on Repair and Insurance Rates 8-7
Estimated Economic Impact for Individual Plants . . . . r-~-' 8-8
9 LIMITS OF THE ANALYSIS . . 9-1
APPENDIX A: SPECIFIC TECHNICAL ISSUES . . A-l
APPENDIX B: EXCERPTS FROM FINANCIAL STATEMENTS .". ..,.-. -" :: B-l
REFERENCES .;..... R-l
IV
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LIST OF TABLES
TABLE NO. PAGE
£•1 Financial Profile of Companies With
Direct Discharger Plants, 1974 and 1975 . .......... 4-5
4r2 Additional Costs and Tax Data 4-7
5-1 U.S. Imports and Exports of Electronic Products 5-10
6-1 Alternative Technologies 6-2
6-2 Annual Costs of Treatment Technologies 6-5
7-1 Pro Forma Income Statement and Discounted Cash Flow
Analysis for PCB Using Production of Model Plant #1 7-8
7-2 Pro Forma Income Statement and Discounted Cash Flow
Analysis for PCB Using Production of Model Plant #2 . . . . . " 7-9 J
7-3 Pro Forma Income Statement and Discounted Cash Flow
Analysis for PCB Using Production of Model Plant S3 . ... . 7-10~
7-4 " Pro Forma Income Statement and Discounted Cash Flow
Analysis for PCB Using Production of Model Plant #4 . . . . .""" - T-ll~
7-5 Pro Forma Income Statement and Discounted Cash Flow
Analysis for PCB Using Production of Model Plant #5 . . . . . 7-12 ^
A-l Energy Conservation for Appliances with Capacitors A-2
B-l AVX Corporation B-2
B-2 Federal Pacific Electric Company B-2
B-3 General Electric Company . . B-3
B-4 Pollution Control-Walther, Inc.
for Helena Corporation (Subsidiary) B-4 ~
B-5 Research-Cottrell, Inc B-5
B-6 Sangamo Electric Company B-6
B-7 Sprague Electric Company _ B-6
B-8 Westinghouse Corporation B-7
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LIST OF FIGURES
FIGURE NO. PAGE
5-1
5-2
5-3
Value of Shipments of Electronic Systems and
Components
: Annual Capacitor Sales and Trend ......;..
Capacitor Sales bv Tvoe ; . .
. . . .~j 5-2
. . . . ». 5-4
..... 5-5
VI
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EXECUTIVE SUMMARY
This report presents an objective and comprehensive assessment of economic impacts
from PCB effluent controls. Numerical estimates are as accurate as possible given the
data," the forecasts, and the technological assessments available for this specific
evaluation. Estimates can undoubtedly be improved if the data and opinions withheld
for proprietary and other reasons could be included in a reassessment. Nevertheless,
this report reflects every attempt to identify all relevant impacts and present unbiased
estimates.
The investment analysis in Chapter 7 indicates that considering effluent controls only, a
minimum of nine and maximum of all eleven direct discharging plants will stop using
PCBs depending on the particular regulation issued. Industry opinions and actions
indicate that the estimated minimum is very unlikely, possibly because there are other
PCB controls and actions that encourage them to stop using PCBs.
Decisions against investment in control equipment does not mean, however, that the
impacts of this regulation are zero. Company decisions to cease PCB use will have
impacts, particularly with regards to the timing of the decision to stop using PCBs. The
earlier the switch to substitutes the more likely that product prices and performance
will change in the transition.
BASIC INFORMATION AND PCB CONTROL OPTIONS
Evidence for pending decisions to cease PCB use prior to implementation of Section 307
(a) controls comes from three sources: investment analysis of probable effects on
company profits, announced decisions such as those by General Electric and Monsanto,
and capacitor/transformer users expectations of and preparations for PCB substitutes.
These decisions are significant in light of the range of government alternatives that
were considered. A major force in government controls affecting PCB use is the Toxic
Substances Control Act that will prohibit the use of PCBs in capacitors, and
transformers^ 1980. The EPA proposed toxic pollutant effluent standards, for PCBs iS
•^uly 1976, and EPA is scheduled to promulgate regulations in January 1977, subsequent
"to the public hearing record.
vii
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Depending on the final standard, the affected plants which continue PCB use are likely
to install one of the treatment technologies presented below. Circumstances at each
plant could cause deviations in technology or costs from the following summaries:
Government
Regulatory Average Investment
: Options Potential Technology Cost/Plant
A Process Change & Carbon Treatment 527,000
B Maximum Carbon Treatment 1,207,000
C Minimum Carbon Treatment 392,000
Discharge Process Change and Recycle 555, 000
The cost of each of the technologies varies considerably among plants, but the above
costs are an average of investment costs for model plants that were considered.
*
Since few if any plants will actually install effluent control equipment in response to
Section 307 _(a) directly, economic impacts can be viewed as em mating from timing^ of
decisions. Monsanto's voluntary ban on PCB production and the new Toxic Substances
Control Act will effectively terminate PCB use by 1980 independent of Section^ 307 (a)
provisions (Refs. 26, 33^ • -..-,_
ESTIMATED ECONOMIC IMPACTS FROM INVESTMENT ANALYSIS -
Conclusions in this section are from the Investment Analysis :of model plants, as
discussed in Chapter 7. Total investment costs and total annual costs for each of the
four treatment technologies are given in the Table below. Our analysis focuses on the
11 direct discharging plants of the 37 plants that manufacture PCB transformers and
capacitors.
following summaries are based on analysis of investment— i.eM investment to meet-
only- Federal effluent controls under Section 307 (a)— for model plants. Conclusions <3n
whether .companies with plants similar to each model would actually install Ihe
specif ied:treatment are based on a comparison of net present- values of the expected^
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Alternative A Treatment Costs
EPA standards which would lead firms to invest in Alternative A would cause 5 direct
discharge capacitor plants and all 5 direct discharge transformer plants to stop using
PCBs in January 1978 rather than by 1980 as would otherwise occur. The one remaining
direct discharging capacitor manufacturer could comply with the regulation by
installing the necessary treatment equipment. These early curtailments in production
would reduce industry-wide production capacity of PCB capacitors by about 35 percent
and of PCB transformers by about 50 percent. Industry-wide investment for control
equipment would be $ .26 million with annual costs of $ .14 million.
Alternative B Treatment Costs
EPA standards which would lead firms to invest in Alternative B would cause all
capacitor and transformer plants among the direct discharges to stop using PCBs in
January 1978 rather than by 1980 as would otherwise occur. These early curtailments in
production would reduce industry-wide production capacity of PCB capacitors by about
45 percent and of PCB transformers by about 50 percent.
Alternative C Treatment Costs
EPA standards which would lead firms to invest in Alternative C would cause 4 direct
discharge capacitor plants and all 5 direct discharge transformer plants to stop using
PCBs in January 1978 rather than by 1980 as would otherwise occur. The two remaining
direct discharging capacitor manufacturers could comply with the'regulation "by
installing the necessary treatment equipment. These early curtailments in production
would reduce industry-wide production capacity of PCB capacitors by about 30 percent
and of PCB transformers by about 50 percent. Industry-wide investment for control
equipment would be $ .23 million with annual costs of $ .10 million.
Zero Discharge Treatment Costs
EPA standards which would lead firms to invest in zero discharge would" cause all but 1
direct discharge capacitor plant and all 5 direct discharge transformer plants to stop
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using PCBs in January 1978 rather than by 1980 as would otherwise occur. The one
remaining direct discharging capacitor manufacturers could comply with the regulation
by installing the necessary treatment equipment. These early curtailments in
production would reduce industry-wide production capacity of PCB capacitors by about
35 percent and of PCB transformers by about 50 percent. Industry-wide investment for
control equipment would be $ .31 million with an annual cost of $ .19 million.
ADDITIONAL IMPACTS
The following, economic impacts for the eleven direct discharge plants are based on
industry trends as well as data collected from transformer and capacitor users and
producers directly.
Average transformer price increases due solely to PCB effluent controls will be minimal
because (1) PCBs used by direct discharge plants represent less than 10 and possibly only
5 percent of total transformers and (2) other expected controls and voluntary bans will
already have caused a further shift to non-PCB units. The price adjustment for the less
effective non-PCB transformers could be significant, but little of this increase can
objectively be attributed to Section 307 (a) controls. - - . .- - -
The dollar value of all transformer sales is likely to increase more because of higher
costs with PCB substitutes than they decrease because of demand response to higher
prices. However, recent data indicates that larger imports could easily offset any
increase from higher prices, leaving domestic producers with slightly lower dollar sales.
Industry-wide^ capacitor price increases due solely to changes resulting from PCB
effluent .controls are likely to be less than 5 percent in 1977Tand decrease to less than 2
percent as PCB substitute technology improves by 1980. All environmental controls
combined, can generate up to a 20 percent increase in average capacitor prices.
However, only part of that increase can be attributed to Section 307
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There are no significant effects on energy consumption, balance of payments, or
employment. The announced and apparent shifts to non-PCB units and the expected
demand for capacitors and transformers are likely to increase rather than decrease
-: sales and industrywide employment. However, to prevent losses to foreign competition,
: domestic producers might have to absorb some cost increases in lower profits. Since all
of the raf fected plants are either part of a much larger company or have a reasonably
-good PCB alternative, reduced profits will not necessarily lead to significant reductions:
in employment. There will be no reductions if sales in fact do increase and if similar
numbers of people are needed to manufacture non-PCB units. . : -
:The above summary of economic impacts should be interpreted carefully prior to a
detailed review of the report. The real world operation of economic markets is so
complex, and projections into the future are so risky, that accurate estimates of
specific economic impacts from government action are generally difficult.
Xll
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CHAPTER 1
INTRODUCTION
OBJECTIVE AND SCOPE OF THIS STUDY
The-purpose of this study is to evaluate the economic impact of effluent standards on
transformer, capacitor, and PCB manufacturing plants—i.e., the proposed toxic
pollutant effluent standards for polychlorinated biphenyls (PCBs) under Section 307 (a)
of PL 92^500 Ref. 25*! , as published in the July 23, 1976, Federal Register,
40 CFR. Part 129. The overall industry impacts as well as impac^ on a single plant
basis are analyzed. Estimated changes in product prices and changes in sales and profits
are the best possible from data available for this research. Estimates are also made for
related impacts on energy requirements, employment, balance of payments, and possible
curtailment of production.
The scope of effort includes review of financial profiles, wastewater discharges, and
patterns of PCB use and production for the following sectors:
1. Transformer industry " - - - ; ~ '-
• Four transformer producing companies with a total of five direct
discharge plants
• Users of transformers
2. Capacitor Industry - ..-.:-.:-.
- _ - - • Five companies with a total of six direct discharge plants
• Users of capacitors
3. PCB production and distribution - . :
• One company with no direct discharge plants - ~. .:
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A direct discharge plant is a facility that presently uses, or has recently used, PCBs and
which discharges waste materials containing PCBs into navigable waters as defined in
PL 92-500.
The review of Item 3—PCS production—was minimal because it is unlikely that there
will be any direct dischargers when controls become effective. The only producer—the
Monsanto Company—discharges into municipal sewers only. Furthermore, they have
announced a complete termination of PCS production by October 31, 1977 which is prior
to the probable January, 1978 date for enforcement of regulations under
Section 307 (a); [Ref. 33l.
One aspect of the analysis is determining the effect of pollution control costs (one time
investment costs and annual operating costs) on each of the direct discharge plants.
Data were collected from the plants through telephone and written responses.
Literature and the technical study by Versar were utilized, as appropriate.
Many plants declined to give any information due to proprietary reasons and
uncertainties about PCB controls which will be imposed under the provisions of the
"Toxic Substances Control Act" which was only recently signed. Section 6 (e) states,
"Within six months after the effective date of this Act the Administrator shall
promulgate rules to—impose specific restrictions and regulations pertaining to the
manufacture, use, distribution and disposal of PCBs and units containing PCBs."
Despite any reluctance shown by some of the plants contacted, every effort was made
to organize and develop a sound data base which will reflect the financial condition for
each of the plants. The reader should bear in mind the following points:
• To maintain confidentiality, names of the plants are withheld; specific
plants are referenced only by number.
• All of the estimates are made on model plants fashioned after the actual 11
direct discharge plants.
• Wherever specific information about a plant was not available, it has been
so stated. In some cases, estimates were made using relationships developed
from plants providing data.
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There are 18 plants that manufacture transformers and 19 plants that manufacture
capacitors, but the economic analysis for this report focuses on only those plants which
presently discharge, or have recently discharged, PCB waste directly into navigable
waters. The direct discharging plants, as of 1976 are as follows:
Company Name
Plant
Location
PCB-Containing
Product
1. AVX Corporation
2. ~ Federal Pacific Electric Co.
(Cornell-Dubilier Electric Co.
subsidiary)
3. General Electric Company
4. General Electric Company
5. General Electric Company
6. General Electric Company
7. Research-Cottrell, Inc.
8. Sangamo Electric Company
9. Sprague Electric Company
10.' Westinghouse Electric Corp.
11. ~ Pollution Control-Walther, Inc.
(Helena Corporation, subsidiary)
New Bedford, Mass.
New Bedford, Mass.
Hudson Falls, N.Y.
Ft. Edwards, N.Y.
Pittsfield, Mass.
Rome, Ga.
Boundbrook, N.J.
Pickens, S.C.
North Adams, Mass.
Sharon, Pa.
Helena, Ala.
Capacitor
Capacitor
Capacitor
Capacitor
Transformer
transformer
Transformer
Capacitor
Capacitor
transformer
Transformer
DEFINITION OF ECONOMIC IMPACT
Impact is defined as the difference with and without a specified condition. In this
study, the condition whose impact is being examined is effluent standards under
Section 307 (a) for PCBs. The condition for purposes of impact analysis is defined in
terms of estimated costs of four alternative treatment technologies Is shown" in Tables
6-1 and 6-2. The following terminology will be used throughout the report. '"r
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Alternative A. Process changes; maximum recycle
Alternative B. Maximum carbon treatment
Alternative C. Minimum carbon treatment
Zero Discharge. Process changes; total recycle
Since the cost of each treatment alternative varies with plant condition, there is no
attempt to arrange the alternatives in any sequence of cost or effectiveness. A plant
may choose one of these alternative technologies or some modification to meet the
final toxic pollutant effluent standard on PCBs since it is not required by the regulation
'. to install any specific technology.
This economic impact analysis is concerned with the likely transitional economic
effects for each of four possible alternative effluent standards. These effects include
changes in prices, production, employment, balance of trade and energy consumption;
estimates of each effect are presented in this report. This economic impact analysis
does not consider changes in the economic welfare of the nation due to changes in
pollution damage.
IMPACT ON TIMING OF PRODUCER DECISIONS
Effluent controls under Section 307 (a) will generally effect "the timing of producer
decisions, only; that is, the shift away from PCBs by capacitor and transformer
producers is likely to occur within the next few years even if Section 307 (a) did not
exist. The., shift would be forced by Monsanto's announced ban on PCB
f— . —•* .— —• - -
production Jlef. 3 3j, provisions in the new Toxic Substances Act,'Ref.26 !, and
industry's own concern for potential dangers from PCBs.
. Estimates of economic impact have been developed from best appraisals of the
-incremental effect of Section 307 (a) controls. This section of the report merely
suggests that readers can gain perspective by viewing these controls as generally
, affecting the timing of producer decisions. Termination of PCB use might be necessary
in 1978 or 1979 rather than the probable 1980 effective data without Section 307 (a).
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CHAPTER 2
METHODOLOGY
overall approach was to identify basic company options as shown on the upper-right
- of;Figure 2-1 and then evaluate each option in light of potential market response shown
.in the lower part of Figure 2-1. There is considerable room for estimation error
because of the complicated interactive process in the real world—i.e., the iterative
process where, (1) each company selects a tentative long-range policy, (2) the market
responds to the combination of all company actions, (3) each company reacts to the
market response, and (4) subsequent round effects. -
- Despite estimation difficulties, this report presents the best estimates in light of
available data and industry forecasts. It presents these estimates in a manner that will
allow industry's reaction to the analysis to provide a means for improving the estimates.
The sequential analysis to determine industry options resulting from proposed PCB
effluent standards is shown in Figure 2-1. The major factors affecting a plant's
decisions are: -
- • Market supply and demand and competition prior to new controls '-
• All government regulations prior to PCB effluent controls :
• PCB effluent controls and possible new PCB regulations
• Incremental capital required to meet pollution control requirements
- • Public image of manufacturing facilities in a specific community ~.: ~
: : • Foreign competition, particularly in view of Japanese experience with PCB
substitutes. ;
"These factors lead to choosing one of the options shown in Figure 2-1: (1) continue use
^ of PCB* (2) introduce one to one PCB substitutes, or (3) terminate present production of
PCB type products. :: : : :
2-1
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Basic information on industry options and probable decisions came from two sources:
(1) investment analysis using the pro forma income statements discussed in Chapter 7
and (2) opinions of industry representatives and reactions of companies to date.
Industry opinions and reaction were obtained from interviews, phone calls, news
articles, and submissions to EPA. The investment analysis using pro forma income
statements is a useful but limited guide for anticipating industry response to the
probable effects of section 307 (a) controls. On the one hand, it is a review of the
*
logical course of industry action; on the other hand, there are circumstances, for
example, market structure, which cannot be directly factored into an investment
*
analysis based on pro forma income statements. Conclusions drawn from industry
opinions and actions to data, which reflect these other factors, have been used as a
check on the investment analysis. ;
The basic objective in developing and distributing this report is to identify the primary
industry options and estimate the associated economic impacts on industry as a whole
and on the individual direct discharge plants. The economic impact analysis is based on
the following assumptions and estimates:
1. .The remainder of the industry—the plants which do not have a direct
discharge—will have similar treatment costs due to regulations within one
year of the effective date of controls considered in this report, as stated by
EPA.
2. ... Financial profile data reflects the ability of transformer and capacitor
plants to finance treatment costs of proposed PCB effluent regulations.
. .3. Operating costs in 1976 for model plants are assumed to be a fixed
• ;._. percentage of estimated sales of products containing PCBs. Specifically,
_\ . operating costs are estimated to be 95 percent and before-tax profits 5
.percent of sales based on analysis of financial statements. Sales for model
- plants are based on the annual consumption of PCBs. Again, estimates could
be better if companies were willing to provide actual data.
,4. ^Alternative treatment technologies and the required capital investment are
- as described in Versar reports and information obtained directly from EPA. :
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5. Monsanto's publicized halt of PCB production and the passage of the Toxic
Substances Control Act justify a 3-year amortization of investment costs.
6, Stockpiling of PCBs and products with PCB units will not be significant as
indicated by evidence of only minor, if any, stockpiling as of October, 1976.
The methodology was designed to estimate the incremental impact of these standards
based on likely decisions for each affected plant.
There are many possible impacts for various company responses, but it is appropriate to
consider only the most rational company response. Likewise, there are many impacts
associated with different combinations of environmental controls, but only the
increments due to action under Section 207(a) of PL92-500 are relevant for this study.
Step 1 was to compute the most rational company response for each plant, for each
control alternative. The most rational response is dependent on projected market prices
and sales and estimated treatment costs for PCB effluent controls only. This step is
described in Chapter 7.
Step 2 was to verify the investment analysis with insights from industry reactions and
industry opinions.
Step 3 was to analyze the individual plant decisions to determine the following
economic effects:
The Industry
Producer costs
Production levels
Consumers
Price changes
Product performance
The City or Surrounding Area
Employment.
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• The Nation
Balance of payments
Foreign competition
Many of these impacts were determined to be insignificant, but were initially included
in the attempt to identify all possible impacts. Categories with insignificant impact are
discussed in Appendix A. :
There is considerably more detail to the methodology, but it is reserved for more
efficient presentation in later chapters. Chapters 1 and 2 present the basic approach
for objectively presenting significant differences with and without PCB effluent
controls.
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CHAPTER 3
DESCRIPTION OF INDUSTRY
-The economic sectors that could be impacted are divided intb-the transformer industrys
; the; capacitor industry, and the customers of each. As stated earlier,: the PCS
manufacturing, sector will have no significant impacts because Monsanto—the only
producer—is not covered by 307 (a) controls since it is an indirect discharger. -
There are thirteen companies in the United States which manufacture transformers in
18 plant locations. Some of these plants make both PCB and non-PCB transformers.
The amount of PCB used in a transformer varies from 40 to 500 gallons, with an average
of about 232 gallons (3,000 Ibs.).
There are seventeen companies in the United States which manufacture capacitors in 19
: plant locations. The amount of PCBs contained in various types of capacitors varies
from 0.05 to 80 Ibs.
Only 11 of the 37 plants discharge PCB wastes directly into navigable waterways. This
study is focused on these 11 plants. Basic effluent data for these plants were developed
f ~^
by Versar, Inc. (Ref. 11. Plants are referred to by number to preserve confidentiality.
There are a variety of transformers and capacitors produced by the industry. These
products range from a little over an ounce to several thousand pounds in weight. Their
ratings differ widely depending upon their applications. -;:-.--:..:- :- - ----•:.--.-
A transformer is a device for transferring electrical energy from one alternating
- current circuit to another by electromagnetic means. It has no moving parts and
performs its function by linking two electric current-carrying circuits (the coils, usually
^copper wire) via a common magnetic flux carrying-circuit tthe core, usually a Special'
:grade of iron).- A transformer may be designed to effect a change in voltage
3-1
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from one circuit to the other, or simply to obtain electrical energy from one electrical
circuit to a second electrical circuit without making a conductive connection between
them.
The transmission of electrical energy from one point to another is essentially the
transmission of a required number of kilovolt-amperes (kva). By means of transformers,
the kvas may be generated at a low voltage suitable for the windings of generators,
-^stepped up to the higher voltages and lower currents suitable for transmission of
electricity over long distance wires, and then stepped down to a lower voltage and
larger current suitable for utilization by electrically powered equipment at the desired
'- destination.
The almost universal use of the alternating current system for the transmission and
distribution of electrical energy is largely due to this ability of transformers to link
circuits of different voltages and currents. Thus the generator,.the transmission lines,
the secondary distribution system, and finally the great variety of ultimate loads can
each be operated at the voltage most suitable to its particular function. Without the
t ' . . . -
use of transformers to adapt circuit voltages to individual requirements of different
parts of the system, the enormous development and progress in the transmission and
distribution of electrical energy during the past 80 years would not have been possible.
A capacitor is a device that stores electrical energy. It consists of two metal surfaces
or electrodes separated by an insulating medium such as air, paper, plastic film, or oil.
When a voltage is applied across the electrodes, electrostatic energy is-stored in the
insulating medium. The proportion of different types of capacitors is discussed in
Chapter 5.-
In typical industrial capacitors the electrode material is aluminum foil and the
insulating medium or dielectric is paper tissue and/or plastic film, which - for, many
applications is impregnated with a liquid dielectric. A liquid impregnant is used to (1)
'fill the voids within the paper or plastic film structure, (2) fill the voids-between sheets,
and (3> contribute to the capacitance or charge-carrying ability of the composite. Voids
-must-cbe eliminated within capacitors used above 200-300 yo.lts, which exceeds .the
dielectric ^breakdown strength of air.
3-2
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Major use of transformers is in the transmission and distribution of electrical power
(kilovolt-amperes) from the generating plant to the ultimate load? If the load were
purely resistive (e.g. an electric heating element) no further modification of the power
supply delivered to it would be required. Other loads (e.g. induction motors) may
require that a portion of the delivered kilovolt-amperes be used to provide a
magnetizing current which does not contribute directly to the useful power output of
the-load. This portion of the total kva delivered to the load is designated as reactive
Idlovolt-amperes (kvars). It has been found more economical to-produce kvars from
total kvas near the point of load rather than near the point of kva generation, and
capacitors provide the most efficient way of effecting this transformation at the point
of load. :
The following outline helps indicate the range of economic sectors that could have
impacts from PCB effluent controls:
TYPES OF PCB-INSULATED TRANSFORMERS ' i: I
The two major types are distribution and power transformers with the sub-categories
shown below:
1. Distribution Transformers
a. Network Transformers (500 KVA to 2500 KVA) : - L-: :
b. Single and Three-Phase Transformers (500 KVA to 2500 KVA)-: .--------.-
c. Pole-Mounted and Station Transformers (up to 500 KVA) -- : ~
-T-T These transformers are used in power distribution systems and, therefore,.
their reliability and high overload capacity (which they share with
: comparable oil-insulated units), are extremely critical. The amount of PGE
. -. : used in these transformers varies from 400 Ibs. to 6000 Ibs. per transformer."
d. Precipitation (high voltage DC) Transformers :; :;.: :;.: . r
3-3
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2. Power Transformers
a. Secondary Substation Transformers
Load center units
Secondary substation generation units
Switchboard units
Integral units
Motor control units
These five sub-types of transformers comprise the largest group of
PCB-insulated transformers and they are widely used in the -
automobile, chemical, paper, textile, steel, cement, mining and
petroleum industries. They are also used in commerical'and public
buildings, defense and nuclear energy installations, and the supply of
electricity.
b. Master unit substation
c. Primary unit substation
d. Limited ampere substation
e. Industrial furnace
_ - These transformers are used in high current, low voltage power supplies
(more than 2500 KVA at no more than 13.8 KV); viz. in "the vicinity of
furnaces.
f. Rectifier
These transformers are used to obtain DC industrial power supplies. " : - :
g. Transportation
Third rail
These transformers are used for rapid transit systems; they basically:
serve a rectifier function. ?~" •'- :-::.:
3-4
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Locomotive ~ - " "
These transformers are used on trains. The changes in locomotive
design since the 1930s would not now accommodate open dry-type
transformers as replacements for PCB units.
Multiple-unit car (MU) " "
These transformers are mounted under the flat-bed of passenger cars.
The transformer must be ruggedly built to withstand vibrations and
impacts.
TYPES OF PCB-INSULATED CAPACITORS " -
There are five major types of capacitors with varying performance characteristics as
shown below:
Power Capacitors
1. High Voltage Power
Generally AC capacitors are used to improve the power factor of a circuit. Power
factor is the ratio of true power in watts to the apparent power as obtained by
multiplying the current flowing to the load by the circuit voltage. The power
factor correction can be made directly at the load or at utility substations. In the
latter case high voltage units will be designed for 4,800 to 13,800 volt service. To
the utility engineer the use of capacitors is purely a matter of economics. The
two main benefits that result from the use of capacitors: (1) reduction of losses
associated with the delivery of electrical power to the point of use, and (2)
reduction of the investment required in equipment for delivering electrical power
to the point of use, this benefit may be broken down as follows:
3-5
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Reduction of current for the same kilowatt load.
Reduction of the KVA rating of equipment required to handle the same
kilowatt load.
Reduction of the voltage drop for a given kilowatt load.
Control of delivered voltage if the capacitor KVA is varied.
- Electric utilities also use banks of capacitors in series with distribution circuits to
improve voltage regulation. High voltage utility capacitors are manufactured at the
'rate, of 200,000 per year, about 2 to 3 percent of which are for replacements; the
balance is for new installations.
2. Low Voltage Power ...
Capacitors installed in industrial plants (typically large motors and welders) are
designed for 230 to 575 volt service. Capacitors installed near the loads are the
-.-- most efficient way to supply the magnetizing current to produce the flux
necessary for the operation of inductive devices. Rates for the sale of power are
generally structured to encourage power factor correction at the site, eliminating
the need for the electric utility to transmit both power-producing current and
magnetizing current all the way from the generator to the plant site; -
The same considerations apply to induction heating application," the principal
difference being that capacitors for this rapidly growing application are designed
for operation at 960 to 9,600 Hz.
Electronic Capacitors - -..--.-
. 3. Lighting ;^_L_
Capacitors improve the efficiency of lighting systems. A fluorescent, or mercury
._ _ vapor lamp can be ballasted without the use of a capacitor, but the power factor
-of the lighting system would then be in the range of 50 to 6& percent. Fluorescent
- and high intensity discharge lamps for commercial or industrial lighting use a^
• -- - capacitor in the circuit part of the lamp ballasting to bringl the system "power
3-6
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^factor into the range of 90 to 95 percent. The current market for these
applications is about 44,000,000 units annually of which about 10 percent are-
estimated to be replacement ballasts.
4. Air Conditioning
As in the lighting applications, the capacitor improves system efficiency. Almost
: all air conditioner pump motors are of the split-winding type on which the
capacitor provided phase differential for the so-called start winding, thus
delivering good starting torque. The proper size PCB capacitor permits high
(90 percent) power factor after start-up, while non-PCB capacitors would be less
efficient. The current market for this application is about 12,000,000 units
annually, with about 5 percent of these estimated to be for replacement usage.
Industrial Capacitors - - -"
5. Industrial Electronics
:This capacitor market category is a catch-all covering many varied applications,
two important ones being motor run and power supply applications. Motor run
applications are for pumps, fans, and farm equipment and do not differ
significantly from air conditioning applications. The power" supplymarket uses
capacitors principally to provide high power factor, but through careful design the
capacitor can also provide wave shaping where desired. The market is estimated
at 23,000,000 units per year with no estimate as to the relative size of the
replacement market.
3-7
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CHAPTER 4
FINANCIAL PROFILE OF INDUSTRIES
INTRODUCTION
During the past year, the transformer and capacitor industries have responded to
anticipated PCS controls with as much as 40 percent shifts from PCB to non-PCB units.
As this shift becomes more pronounced, price trends, profit changes, and net sales are
expected to further change industry structure.
Despite the limited availability of data, some estimates are available for the overall
capacitor and transformer industries. An estimate of U.S. PCB transformer production
is roughly 5,000 units per year with a value of $35 to $45 million.: The annual estimated
PCB transformer production for 1971 to 1973 is given below Qlef. 41J.
Capacitor
PCB Shipments
Transformer
PCB Shipments
Year (Ibs of PCBs x 106) (Ibs of PCBs x 10 )
1971
1972
1973
14.1
14.4
20.2
11.1
11.3
15.9
Combined
Capacitor and
Transformer :
PCB Shipments
(Ibs of PCBs x 106)
25.2
25.7
36.1
Total PCB
- Transformer
: : : : "Units
at 3000 Ibs. PCB
Per Transformer
3700
3800
5300
Estimates by General Electric Company and Westinghouse Electric Corporation of
industry ^annual sales of PCB transformers are $45 million: and $35 to. $45 million,
respectively. Preliminary data for 1975 indicated a possible decrease of- 15 to
20 percent, with this decline primarily due to the nationwide recession in 1975. :.-:..-:
4-1
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Annual production of PCB industrial capacitors by all major manufacturers during 1973
and 1974 was 90 to 95 million units according to General Electric data. Industry sales
estimated developed by the two major capacitor manufacturers are as follows:
Source of Estimate
PCB
Power
Capacitors
($ Millions)
PCB
Industrial &
Electronic
Capacitors
($ Millions)^,
Total
.._!$- Millions)
General Electric
Westinghouse
50-52
35
90-95
70
140-147
105
CAPITAL AVAILABILITY
PCB capacitors comprised approximately 20 percent of the total number of capacitors
sold in the U.S. in 1973 1975, whereas PCB transformers were only about 10 percent of
the total number of transformers during the same period.
The ability of a firm to finance new investments resulting from proposed effluent
standards depends upon a host of critical financial and economic factors. In general,
the new capital must be raised by one or more of the following methods: ------
-•- - New equity capital generated by sales of new preferred or common stock "
• Loans from outside sources
• Retained earnings
The financial condition of a firm is of critical importance in its ability to raise capital
for investment. The firm's earning record, credit rating, debit-equity ratio and overall
financial stability are critical factors in its ability to make investments required by the
proposed standards. Internally generated funds depend upon profits which, in turn, will
depend on outlays for PCB effluent controls. In addition, the nation's economic
condition, the demand for the products, technology and other factors are important in
the determination of a plant's ability to finance new investments.
4-2
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In the transformer and capacitor industries, a firm producing PCB units generally
produces non-PCB units as well. Larger companies also manufacture products other
than transformers or capacitors. Therefore, if the market conditions are such that the
non-PCB part of production has rapidly rising sales in response to consumer demand, the
firm may find it uneconomical to invest in the PCB part of the firm and may decide to
dissolve it. There is some indication that some of the transformer and capacitor firms
.have been gradually reducing the PCB part of their operations over the last two to
three years. Interviews with various plant officials indicate even greater reductions in
the future.
As part of the electronics industry trend, profits in the transformer and capacitor
industries are expected to increase in 1976. One indication of a 1976 recovery from the
1:975 de'cline is data compiled by the Electronic Industries Association fkef. 30J . U.S.
factory shipment for all capacitors for the first six months of 1976 was 2.05 billion units
($296.4 million sales) or 180 percent of the 1.16 billion units for the same period in
1975.
Another positive outlook for 1976 is available from company sales and profits for
various industries fkef. 35J. Both General Electric and Westinghouse sales of all
products for the six months of 1976 were 9 percent over that for 1975. General Electric
and Westinghouse profits for the same periods increased by 55 percent and 36 percent,
respectively. The electrical and electronics industry composite of 37 companfes shows
a 12 percent increase in sales and a 50 percent increase in profits for the same six
month period. Similarly, the all-industry of all industries composite for the same
periods shows a 14 percent increase fn sales and a 36 percent increase in profits.
.The primary focus of this project is on the five transformer and six capacitor plants (in
eight companies) which discharge directly into navigable waters even though the
transformer and capacitor industries are comprised of many more plants. Data for
publicly-held companies were obtained from the Securities and Exchange Commission.
These data were used to assess the financial profile of the PCB user industry. In each
case .the financial profile represents total company data; information was-not available
for individual plants, nor was it available for the PCB portion of product-sales."
4-3
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Company income statements and sales estimates indicate a potential ability for some
companies to meet investment requirements for PCS effluent treatment or shifts from
PCB to non-PCB production. Four of the eight companies with direct"discharge plants
experienced an increase in net sales between 1974 and 1975, in spite of the general
industry sales decline. Westinghouse Electric Company showed an increase of over $64
million (1.1 percent of 1974 sales) and Research-Cottrell, Inc. showed an increase of
over $59 million (36 percent).
/Pollution Control-Walther, Inc., of which Helena Corporation is a subsidiary, expe-
rienced a 1974 to 1975 sales increase of over $12 million (63 percent). In contrast, the
remaining four companies had reductions ranging from one-tenth of one percent for
General Electric Company to over 24 percent for Sprague Electric Company. Based on
January to September figures, Sangamo is the fifth of eight companies to show
reductions—the Sangamo Electric Company merged with Schlumberger Electric
Company on October 6, 1975.
Table 4-1 shows that five of the eight companies experienced an after-tax profit of
greater than $900,000 in both 1974 and 1975. Profits in 1974 ranged from 4.1 to
11.2 percent of net sales. However, Research-Cottrell, Inc. showed a loss of 2.3
percent and Pollution Control Walther, Inc. showed a loss of 10.5 percent. - :
For 1975r the profits ranged from 2.4 to 14.2 percent of net sales for six companies^
. One of the remaining two companies—Sprague Electric Company—suffered a loss of 7.3
percent, probably as a result of the significant $53 million decline in sales. Although
Pollution Control-Walther, Inc. showed a pretax loss of 0.1 percent of net sales, it
experienced a remarkable recovery between 1974 and 1975 with $13 million increase in
net sales.
"Research-Cottrell, Inc. showed an improvement in 1975 with a pretax profit of
2.4. percent of net sales as compared with a loss of 2.3 percent in 1974. The other five
companies showed before tax profits of over 4.7 percent of sales. These profits tend to
indicate some ability to finance new investments. -
4-4
-------
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In order to develop the model pro forma income statements which are presented in
Chapter 7, it is necessary to obtain information concerning the ratio of fixed to variable
costs and also the provisions for income tax for the 11 direct discharge plants. This
information can be provided by a close inspection of Table 4-2 financial data available
for the companies representing the 11 direct discharge plants. The variable costs
ranged from ,81.5 to 93.1 percent in 1974 and from 76.5 to 95.4 percent in 1975.
Conversely, the lowest percentages represented by the fixed costs were 6.9 and 4.6 for
1974 and 1975, respectively; while, the highest percentages noted for fixed costs were
. 18.5 and 23.5 for 1974 and 1975, respectively.
In 1974, provisions for income tax varied from 26.8 percent of pretax profits for
. _ Westinghouse Electric Corporation, to 49.9 percent for Sangamo Electric Company
(based on the nine month financial statement). In 1975, Westinghouse Electric
Corporation had the lowest tax provision and Research Cottrell, Inc., had the highest
tax provision, with 55.7 percent.
Information for Tables 4-1 and 4-2 was obtained from financial statements and other
company reports. Excerpts from company financial statements are given in Appendix B.
In conclusion, an estimate of the cost of capital for the industry is necessary for
developing the pro forma income statement in Chapter 7, including the calculations by
which anticipated future net income is discounted to its present value. Ah EPA
document !jlef. 28j states that the cost of capital for several industrial segments for
1977-1979 averaged 15.9 percent.
" Each of the following sections is a short summary of the financial profile for the eight
individual companies for which data were available. The goal of these financial profiles
is to allow some estimation of capital availability and to provide information to develop
; " pro forma income statements.
4-6
-------
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AVX CORPORATION
AVX Corporation, which mainly manufactures ceramic capacitors and electromagnetic
filters, holds a prominent position in the ceramic capacitor industry. As stated in their
Annual Report, their 1975 net sales of almost $27 million represented almost one-fifth
of the ceramic capacitor industry in the U.S.
Before. analyzing the five year summary of operations, it should be "noted that in
, # _ -
June 1973, after the Aerovox Corporation sold the non-ceramic capacitor portion of
'their .business, they merged with the AVX Corporation to concentrate on multi-layer
ceramic capacitors and the electromagnetic filters which utilize these capacitors in
their production.
An examination of net sales for the last five years reveals an increasing trend from
1970 through 1974, with the highest net sales being slightly over $34 million. However,
a drop of 21 percent in net sales occurred in 1975. A partial explanation for this is that
customers ordered fewer items in 1975 as a result of depleting their overstocked
inventories from 1974, caused by their apprehension of the raw material shortages
reported at that time. This over-buying also contributed to the larger net sales value
for 1974.
The cost of goods sold, which represents the major portion of the operating costs,
decreased in 1973 to its lowest point of 75.6 percent of net sales during the five year
period but rose to 79.3 percent of net sales in 1975. The lowest ratio of total operating
costs to sales—87 percent—occurred in 1972. " ~ - - — -
.Net income for continuing operations before tax, minority interests and extraordinary
items, which is the complement of total operating costs, ranged form 5i percent to
13 percent of net sales for the five year period. The highest pretax profit shown was
( for 1973 and the lowest for 1975. Despite the lower profits due to the increased costs"
and decreases net sales for 1975 as comparerd with 1974, it is feasible to expect AVX
Corporation .to continue experiencing a profit in the near future. In support or this
observation are the following facts: The Opcoa Division, which manufactured light-
4-8
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emitting diodes and which was operating at a loss from 1971 through 1974, was
discontinued in December 1974. Also, late in 1974, AVX Corporation acquired capacitor
manufacturing facilities at Myrtle Beach, South Carolina which accounted for the
increased interest expense in 1975 but which should contribute an increase to net sales
for 1976. In addition, a consolidated income statement show retained earnings of over
$.8 million at the end of 1975. Finally, the first quarter of 1976 shows an increase in
net sales of 9 percent as compared with the same quarter in 1975 [kef. 37j .
Respite the decline in sales for 1975, the outlook is good for the ceramic capacitor
'ndustry, particularly for multi-layer ceramic capacitors. These multi-layer or
lonolithic ceramic capacitors are replacing many other types of capacitors because of
h.eir high capacitance, extremely small size and high reliability. They are used by the
lilitary and aerospace systems and will soon be used to a greater degree by commercial
nd private consumers. Since multi-layer ceramic capacitors constitute the principal
roduct of AVX Corporation, and since this company is reported to be still using some
CB in their capacitors, it seems safe to assume that this corporation would most likely
ave the ability to invest in either treatment or replacement costs for equipment that
ould use substitute fluids.
FEDERAL PACIFIC ELECTRIC COMPANY FOR : - -
CORNELL-DUBILIER ELECTRIC COMPANY (subsidiary) 7- -- --:
n analysis of the financial statements of Federal Pacific Electric Company was' made
ince there was no such data available for their subsidiary, Cornell-Dubilier Electric
ompany. Major products produced by Cornell-Dubilier are electronic capacitor and
rahsformer components, switch gear and circuit breakers; Included are paper; plastic
ilm, and aluminum foil capacitors which are of the type usually impregnated with PCB
ielectric fluid.
ince comparable data^were not available for the five year period from 1971 to 1975, a
omparision for the financial situation of this company was made for 1974 and 1975. —
4-9
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Both sales and operating costs increased in 1975 over 1974 by 8.4 percent and 4.7
percent, - respectively. Sales were $275.6 million in 1975 and the corresponding
operating costs were $233.5 million. Pretax profits were experienced for both years,
amounting to $28.5 million and $39.0 million, respectively, and represented 11.2 percent
and 14.2 percent of the respective net sales reported for 1974 and 1975.
. Since this company showed profits for both 1974 and 1975, not only before taxes, but
after-minority interests and taxes, it would seem plausible to make the assumption that
effluent standards causing treatment or costs of changing to other raw materials can
be- included in their operation without much difficulty. Lending support to this
.assumption is the fact that 1975 retained earnings of $11.5 million were reported on the
company financial statement. In addition, sales for the first six months of 1976
increased by 18.3 percent. Since net income after tax and after minority interests for
this period increased by 67 percent, the financial outlook for this company is favorable
and indicates an ability to invest in meeting the effluent standards.
GENERAL ELECTRIC COMPANY
The. leading manufacturer of electrical equipment and an important producer of
electronic, equipment in the U.S. is the General Electric Company whose^ sales for 1975
of .$13*339 million equalled more than twice the sales of the next largest producer of
electrical ^equipment, Westinghouse Electric Corporation.- Financial" statements
.obtained from the Form 10K filed with the Securities Exchange Commission and the
1975 company Annual Report reveal that there are five major product consolidated
operations which are listed as follows:
(1) Aerospace— - : :; - -
(Includes control devices, engines, instruments, radar systems, etc.) :
(2) Consumer—
. _ (Includes air conditioners, various appliances, lamps, radios, television
receivers, etc.)
4-10
-------
(3) Industrial Components and Systems—
(Includes appliance controls, capacitors, electronic components, motors,
" transportation equipment, etc.)
(4) Industrial Power Equipment—
(Includes generators, gas and steam turbines, transformers, etc.)
(5) International Division—
(Includes varied products manufactured by foreign affiliates.)
Analysis of the five year period from 1971 to 1975 indicates that company sales and
operating costs increased over the previous year reaching a peak sales figure of $13,413
million in 1974. A slight decrease of $14 million, or one-tenth of one percent occurred
in 1975. On the other hand, operating costs maintained an increasing trend for this
period, with a lower percentage increase in 1975 of only five-tenths of one percent as
compared with an increase of 16.9 percent for 1974.
Company net profits before taxes and minority interests increased from 1971 to 1973.
A slight downturn in profits was experienced for both 1974 and 1975, amounting to one
percent and 5 percent, respectively. Pretax profit for 1975 equalled $949.6 million.
In view of the fact that capacitors are produced by the Industrial Components and
Systems Division, we reviewed the pertinent division sales and net income before tax
figures. Except for a decrease of 4.6 percent in 1975 from 1974 for sales of Industrial
Components and Systems, the sales from 1971 to 1974 showed an increase, peaking at
$4,529 million in 1974. Sales for Industrial Power Equipment maintained an increase
from 1971 to 1975 reaching its highest sales figure of $2,922 million in 1975. Pretax
profits by division are available for only 1971 to 1974. Industrial Components and
Systems' before tax profits increased to $423 million in 1974, amounting to 9.3 percent
of sales. Industrial Power Equipment's before tax profits increased from 1971 to 1973,
but suffered a decline in 1974 of 26 percent from 1973. The 1974 figure of $168 million
represented about 6 percent of the 1974 sales. Net earnings after tax for Industrial
Components and Systems decreased 11 percent from 1974. Net earnings for Industrial
Power Equipment also decreased about 35.6 percent in 1975 from 1974.
4-11
-------
-------
The outlook for 1976, based on the company sales for the first six months of 1976,
appears to be favorable. Sales for 1976 increased 8.8 percent compared with the same
period in 1976. Indications are that consumer products will experience a significant
- increase-in sales [Ref. 38~]. This company enjoyed a profit for 1974 and 1975, and
retained earnings amounted to about $300 million for these "years, indicating an ability
to invest in treatment or replacement costs for equipment capable of using substitute
. fluids. Furthermore, large expenditures for reasearch and development were made in
1974 and 1975, amounting to $890 million and $938 million, respectively. -
POLLUTION CONTROL-WALTHER, INC.
for HELENA CORPORATION (Subsidiary)
Since financial data were not available for Helena Corporation, a financial review was
made on the basis of income statements and Form 10K files with SEC for Pollution
Control-Walther, Inc. (PC-W). Helena Corporation a subsidiary of PC-W,'manufactures
power supplies and controls for PC-W to be utilized in their electrostatic precipitators
for which transformers are a component. ' " ~ " "'
Pollution Control-Walther, Inc, operates on a fiscal year basis ending March 31. A five
year analysis from 1971-1975 was not possible due to the lack of adequate available
. information. Data for 1973 is not comparable to that of 1974 and 1975, as the company
was closed for half of that year. ~~T~
Sales revenues for fiscal year 1975, amounting to almost $20.5 million, represented a
16.9 percent increase over 1974. An increase of 48 percent, almost $10 million, was
experienced for sales in fiscal year 1976. Operating expenses exceeded earned revenues
, for 1974 and 1976, amounting to $846 thousand and $121 thousand,"respectively. Theser
expenses for 1974 1976 represented increases of 142 percent for 1975 and 49 percent for
1976. A net loss before taxes and minority interests was reported fo:r each year from
1974-1976. These losses represented 10.5 percent, 0.1 percent, and 0.6 percent,
respectively, based on revenues earned. However, an adjustment was made in 1976 to"
correct the cumulative effect of a change in accounting principle/ This'correction7
which appeared to wipe out the 1976 net loss resulted in a net profit "after taxes of
$35,000 as shown on the income statement. -- . ..
4-12
-------
An accumulated deficit was reported at the end of each year averaging about
$1.3 million which would seem to support the fact that it would be unable to invest
capital in meeting proposed effluent standards.
RESEARCH-COTTRELL, INC.
-According to the 1975 Annual Report and the 10K Form filed with the Securities
Exchange Commission, Research-Cottrell, Inc. is the leading manufacturer :of precip-
ritators, in addition to producing tall cooling towers and chimneys, wet scrubbers and
other air pollution control equipment. (Although this company was included in the list
of direct discharge plants supplied by EPA as having a transformer plant, no mention of
. transformers was found in the Annual Report; however, a precipitator unit contains a
transformer. The electrostatic precipitators are used by electric utilities to remove
metallic or mineral particles from industrial by-products). Its Environmental
Engineering Group has the responsibility of controlling or eliminating any harmful solid
or gaseous waste matter produced by industrial processes which could be discharged into
the air or streams.
Inspection of a summary of financial operations table shows an increasing trend for
-sales and.operating costs from 1971 through 1975. Sales in 1975^ amounted to
$22-3.6 million,, an increase of 36 percent over 1974. Cost of-sales and administrative,1
general and selling expenses for 1975 amounted to $216 million, an Increase £of 39.5
percent as compared with 1974. Net income for continuing operations before tax and
jextraordinary items for 1975 reached $5.3 million, whereas in 1974, the company
suffered a loss of $3.8 million. The more favorable financial position in 1975 was most
likely attributable to the significant increase in sales as well as to an increase in new
orders. A restructuring of the Air Pollution Control Group, which was operating at a
loss, also contributed towards a profit instead of a loss.
Analysis of the sales and income figures of the Air Pollution Control Group (APC) which
manufactures precipitators would probably result in a better insight into capital
, availability for the transformer aspect of Research-Cottrell, Inc". Sales of $f44 million"
..reported-for,the APC Group in 1975 and $81 million in 1974 represented B4;2:percent
4-13
-------
and 49.5 percent, respectively, of the total company sales. With the exception of the
4.8 percent decrease in 1973, sales for this group displayed an increasing trend between
1971 and 1975, reaching a peak in 1975.
Income for the APC Group showed an increase for 1972, whereas a significant decline of
57 percent was experienced in 1973. An even greater decrease occurred in 1974,
resulting in a loss of over $8.5 million. The loss is largely attributable to the loss of
$3.8 million suffered by the total company. As mentioned earlier, a restructuring of the
:APG Group helped the 1975 recovery when profits reached $1.8 million.
Sales for the fiscal third quarter ending on July 31, 1976, as compared with the same
period in 1975, showed an increase of 13.7 percent, whereas sales for the nine-month
fiscal period for 1976 increased five percent over 1974 (Ref. 39J. Thus, a. more
favorable outlook is indicated for 1976 as compared with 1975. It would seem plausible
that this company may have the ability to invest in treatment facilities or replacement
costs for equipment that would use a substitute dielectric.
SANGAMO ELECTRIC COMPANY
Despite the fact that the Sangamo Electric Company was acquired on October Q, 1975
by the Schlumberger Electric Company, an oilfield service enterprise, a financial profile
wilt ~be given because this company has continued to manufacture various types of
capacitors" under the new title of Sangamo Weston. This new company represents the
merger ~of Sangamo, Weston and EMR companies as a subsidiary of Schlumberger
Electric "Company and produces, in addition to both small and large (power) capacitors,
other electronic components such as filters, oscillators, etc.
The major products of Sangamo are the energy management products produced for
:publfc utilities and industries, including capacitors made of aluminum, mica and paper
impregnated with oil. The paper-oil capacitors are the most likely to be impregnated
witirPCET oils. These are used in household appliances as well as in telephone,
computer, and electrical power distribution systems.
4-14
-------
.A consolidated financial summary for 1971 through 1974, indicated that sales-and
operating costs were increasing as was net income. A consolidated income statement
revealed that in 1974, net income before taxes, minority interests and extraordinary
items amounted to approximately $14 million, while retained earnings for 1974
.amounted to over $4.9 million or 3.4 percent of the net sales. As itemized on an income
statement comparing 1975 with 1974, for the nine-month period ending September 30,
sales decreased 8 percent in 1975 while net profit before taxes, etc. decreased about
50 percent to $5 million. • . - . .
According to the Sangamo Weston Annual Report, their sales and net income are both
. expected to increase as are prospects for Schlumberger Products Corporation. Overall,
it would appear that the financial position of Sangamo was strenghtened by the merger
so that an ability to invest in replacement costs or treatment facilities may be likely
but this capital availability would depend on perspective PCB equipment sales.
SPRAGUE ELECTRIC COMPANY -
As a manufacturer of various types of capacitors, Sprague Electric Company holds a
prominent position in the capacitor industry. Capacitors comprised 82 percent of their
197.5 sales figure. These passive components, including PCB-containing units, undergo
different processes including impregnation, deposition and plating on-such" materials as
paper, film and plastics, ceramics, aluminum and tantalum. These products are sold to
other manufacturers to be incorporated in such end-products as refrigerators,
.fluorescent, lights, television sets, computers, and air conditioning units destined for
both private and government users.
Analysis of a five-year financial statement reveals an increasing trend for "net sales^
from $118 million in 1971 to $215 million in 1974. A decline of 24.7 percent, amounting
to $53 million, was experienced in 1975. Selling, general and administrative expenses
increased from 1971 through 1975, representing an average of 14.JT percent of net sales
over this period. However, the costs of goods sold dropped 19.8 percent in 1975 as
compared with 1974 after a four year increase. Attempts were made to reduce aft costs
. when .sales started decreasing partly due to customers liquidating-their-invenfories^in
the second half of 1974. :-. ^ :::-„.: . -
4-15
-------
Sprague Electric Company ended 1975 with a reported loss"before taxes, extraordinary
- items, etc., amounting to $11.9 million. Yet from 1972 through 1974 they enjoyed a
profit of $1.0 million, $10.6 million, and $11.6 million, respectively. :
-Despite the decline in sales for 1975, Sprague Electric Company is expected to show a
-profit for 1976. Sales reported for the first six months of 1976 amounted to $95.8
million as compared with $83.7 million for the same period in 1975 {an increase of
H.S.-percentJ^Ref. 40J. In addition, the company is attempting1" "to replace PCB-
contained capacitors with biodegradable impregnants and/or metallized film. As
- planned, this procedure should start sometime in 1976. The expansion of the multi-layer
- ceramic-capacitor facility in Witchitafalls, Texas is expected to contribute toward a
profitable 1976 as there is an increasing demand for this type of capacitor. In view of
the $7 million annual average expenditure for research, development and engineering
purposes, added to the above noted improvements expected for 1976, conclusion can be
^ made to the effect that Sprague Electric Company will be able to invest in replacement
costs for equipment that would use a substitute dielectric or treatment facilities.
WESTINGHOUSE ELECTRIC CORPORATION ~-
- The_ second largest producer of electrical equipment is Westinghouse Electric
Corporation. Their many and varied products may be classified into the following" four:
divisions: :
(1) Power Systems— .-:-;-..
---- - - (In addition to transformers, includes circuit breakers, control devices,
generators, meters, etc.) ------
(2) Industry Products— ~-...•'.- .-•::_•--
_.,-.. (Includes batteries, electronic components, lighting equipment^ motors,- etc.y;
(3) Public Systems— -- ; - ; -
, - -- (Includes defense-related products, such as radar devices and1 electronic'
countermeasures, etc.) " -." -.~ .
(4) Broadcasting and Other Systems— - : ; '—'-'"--
...__.... (includes central air conditioning units, electric stairways,-elevators,-fans,
watches, etc.) _ ; ;- - -
4-16
-------
A five-year-historical financial summary was obtained from the 1975 company Annual
; Report indicating sales and net income for the company as a whole, as well as for each
of the major divisions. Company net sales and operating costs increased each year from
1971 to 1975 with the smallest increase for each item of one percent occurring in 1975.
The largest increases of 13.7 percent for sales and 15.8 percent for operating costs as
--shown in Table 4-1 occurred in 1974 as compared with 1973. Company net income
before taxes indicated a profit each year for the five-year period. However, the lowest
f profit, amounting to $206 million or 3.6 percent of sales, was experienced in 1974.
--Some degree of recovery was evident in 1975 with a pretax profit of:$275 million, or 4.7
percent of sales. r
Since transformers are produced by the Power Systems: division, a more accurate
- picture of their financial position may be obtained by analyzing Power System data In
: addition to company data. Sales for the Power Systems, which represented 37.4 percent
or $2,194 million of total company sales in 1975, also increased each year from 1971
through 1975. These increases amounted to 9 percent, 8 percent, 13 percent and~:
T 9 percent^ respectively, of the previous year's sales. Operating costs were not given.
The outlook for 1976 is more favorable than for 1975 as indicated by the comparison of
.company sales for the first six months of each year. The 1976 sales'figure for this
period amounted to an increase of 8.6 percent as compared with that of 1975. This^
:, more favorable position resulted from the discontinuance "where'possible,: of unprof--
5 itable operations. Although the profitability of the Power Systems division will: be
limited as a result of some unfavorable fixed price contracts, this section as a whole^is
expected to improve [Ref. 32~]. Capital availability should be no problem, for
Westinghouse.
4-17
-------
CHAPTER 5
BASELINE MARKET CONDITIONS: DEMAND, SUPPLY AND_£BICE=_
There is need for a clear reference point in measuring differences with :and without PCB;
effluent controls. Since time for this study did not allow original market research it
. was. necessary to use available historical data and expectations ^to project production
and prices.
Since-it is difficult to determine the extent to which historical data :and projections
already reflect anticipated PCB controls, they are referred to as a reference point.
Therefore, estimated impacts are a combination of two possible changes:
. L._ Changes already incorporated in data and projections—i.e., changes that
would be deleted if PCB effluent controls had never been proposed.' : ^
2. Changes not yet reflected in the historical data and projections.
JSince -most impacts are small percentages of total industry sales arid average prices, the
baseline market trends are satisfactory for this analysis. ~ - 'r~ -r -' ~ :'-
Production levels and average prices are necessary for determining the Relative impact
.of .effluent control costs. Each firm will have its own sales base and projections tor its^
investment analysis, but this study had to be based on industry averages and general
trends to avoid need for proprietary information. ~~':: •' ~- '--'- "'-^'- - ~ r -:: -
Figure 5-1 shows the historical trend in overall electronic components and the 1974-
1975 decrease in transformer and capacitor sales. It is important to note that the 1975
dip in transformer and capacitor sales corresponds to the overall patternlfl electronic
components. There is little chance that PCB controls influenced this fdip since
combined transformers and capacitors are only 10 percent of electronic cbmfp'dhents-aricf
PCB units are only a fraction of total transformers and capacitors^ - " :' ; " ^: :
5-1
-------
404.6
447.1
437.4 J
=882^
400 200
1975 Million dollars
Transistors
Copocltors
Resistors
Transformers
Connectors
0 200 400 ' 600 . 800"
1974 Million dollars
Billions
of dollars 04 q
Z1 j 1 «• *• w
n ^4.1
ELECTRONIC COMPONENTS
ELECTRONIC SYSTEMS flNO EQUIPMENT
20H
10 H
s-^
S
s
23.2
I
20.1
16.5 16.6 17-!
I
I
I
I
16.2
I
•vrXy
!§l? 15.1
I
i
,1975 1974 1973 1972 1971 1970 1969 1968 1967 1966 -c *
% _
Source: Reference 16.
_ FIGURE 5-1: VALUE OF SHIPMENTS OF ELECTRONIC SYSTEMS AND COMPONENTS"
5-2
-------
CAPACITORS
Figures 5-2 and 5-3 show trends in total capacitor sales and a breakdown by type of
.capacitor. Again, there is no indication of a significant effect from PCS regulations;
sales of all types of capacitors decreased between 1974 and 1975.
There is a big upturn in 1976 capacitor sales. Specifically, capacitor sales in the first
- -- ~ : - - - /•• «•\ - - _~ -_ . - - - i - .
half of 1976 were up 26 percent [Ref. 30). The largest increase has been in ceramic
dielectric capacitors—a 192 percent increase in number of units.
In recent testimony, the capacitor industry was, represented _ as follows
(Ref. 4, p. 29 ff):
Total Annual Sales $600 million
DC (primarily electronic) $450 million - . - -
AC $150 million
Large utility capacitors $50 million ~~ ?T
Small capacitors
Lighting $50 million
Motors and other . _ _ . ;.
applications $50 million
The. small AC capacitor sales could increase by more than 75 percent to $175 million by
,1980 if Federal Government (or state) energy standards are enforced (Ref. 4, p. 3(]Q .
TRANSFORMERS
There is less, available information on transformers, but the upper part of Figure 5-2
indicates that transformer sales followed capacitor sales between 1974 and 1975. "
Since transformers using PCBs are marked more by their proximity to public exposure
than types of transformers, there is less useful information on transformer types.
5-3
-------
700 -
=00 J
00 -
00 -
(Million $)
^ 5%.. Annual Growth Rate
(Useful reference)
6T S3— 65 66 67 68 69 70 71 72 73 74 75
Source: Reference 2, pp. 81-82.
FIGURE 5-2: ANNUAL CAPACITOR SALES AND TREND
5-4
-------
ALL OTHER FIXED
13%
VARIABLE 2-5*
VARIABLE 2.7%
1970
VARIABLE 4 4%
MICA
5.0%
1972
VARIABLE 2.7%
1971
' VARIABLE 4.3%
• ALL OTHER
FIXED
13%
1973
VARIABLE 3.0%
MICA
4.8%
1974
1975
Source: .Reference 2, pp. 81-82. ~ ' ~~ '
Note: Paper and film type capacitor is a major use bf'PCBs',
FIGURE 5-3: CAPACITOR SALES BY TYPE
5-5
-------
e.future pricing and production of the subset of transformers and capacitors which
ntain PCBs is a function of a number of variables including:
• General economic trends
• Electrical products and component trends '. -
• Added production costs because of effluent standards : -•_..•
. . • Availability and price of products without PCBs -;:.;:
• Legal and institutional factors _ -.: ~ .- - . • 5
ices during 1975 remained fairly stable. Private communications with presidents and
uragers of various plants and companies indicated that there were only-5 to 10
rcent variations due to the combined effects of the above factors and the price of
el.
*
jlities purchase approximately 85 to 90 percent of PCB transformers (distribution and
wer transformers) for network applications. It is expected that the demand for more
liable, non-flammable transformers by utilities will increase to meet the increasing-
mand for electricity. . Therefore, the added costs of PCB effluent standards very: .
:ely:will not affect the market for PCB transformers until a one-to-one substitute in
rformance and cost-effectiveness is found. Mineral oil transformers .are-;not. --.
tractive alternatives due to large size, potential increases in the cost of insurance,
orter average life, and increased repair and maintenance costs. - _ . - _; r . . - . . -:-:„:
the hoped-for perfect substitutes for PCBs are developed, tested and adopted by the
dustry, the switch from PCB-insulated transformers and capacitors to non-PCB units" --
isild be much faster than presently anticipated. However, a certain, minimum :
oduction of IPCB-insulated transformers and capacitors will be necessary Ito-meet the -.::.-
ecific :demands of defense installations and other uses in the vicinity of high
^m'raability areas, viz. furnaces, glass melting etc., unless a perfect substitute is "
und.
• - '
le. future supply of PCB transformers and capacitors faces some uncertainty due>to . -;:
imarid response to price increases caused by the added cost of. proposed. PCB effluent:---
andards^. The price of a non-PCB capacitor is about 20 to 30 pereenrhigherthan the:---
5-6
-------
price of a comparable, (but not a perfect substitute) PCB capacitor. This increase is
due to large size requirements (approximately double) for a given electrical rating.
Mineral oil or dry type capacitors are accepted, at present, only when the appliance is
sufficiently small to make hazards minimal or price increases acceptable.
The effect,of an increase in price for PCB transformers and capacitors is of interest :
because such price increases might enable manufacturers to maintain profits and cash
f.low, and thus, be able to afford treatment facilities to avoid PCB effluents.
•
The first question that would occur to many economists in this connection is, "Why
haven't suppliers already raised prices if they could?" Mineral 'oil is a much less
expensive dielectric, but is inferior in many aspects of performance including size,
dielectric constant and resistance to fires. Accordingly, PCB containing products are
sold on a performance basis which suggests that prices could be increased if all
producers were faced with the same percentage cost increase for a given product. In
technical language the industry-wide demand for PCBs and products made of them are
fairly inelastic with respect to price because of the superior performance with PCBs.
Company sales could, nevertheless, be very elastic with respect to price. ...'-'-
The new rules proposed by EPA would affect only those transformer and capacitor -
producers that .discharge PCBs into navigable waters directly. The EPA plans to-Tssue :
pretreatment standards for other plants which discharge into publicly owned treatment
works as near to the effective date of the direct discharge regulations as possible. It is
likely that the costs incurred by the indirect discharge plants will be similar to those
estimated in the Versar technical study, causing the reallocation of resources between
the two kvdustry segments to be minimal. The size of this effect would depend-upon the :
letter's, capacity and ability to expand their capacity and their inventories and on
Mdnsanto's. willingness to increase sales to them. In immediate economic terms,"
Monsanto would profit by using excess capacity or inventories. For public relations and
futore business relations, Monsanto might not choose to increase PCB sales to such :
customers, especially on a basis that they expected to be temporary. The alternative of-
selling_at ^Efferent prices to different customers to make PCB total costs" equal per
similar product unit must be cost-justified according to the Hobinson-Patman Act and
justification would be very difficult in these circumstances. A limit on sales to:previous
5-7
-------
amounts would be a likely Monsanto response to the change in competition that extra
disposal costs could generate. Thus, the indirect dischargers will not have an
overwhelming competitive advantage.
A review of the current industry sales, as obtained by telephone interviews, indicates a
consistent decline in the demand for PCB transformers. The 1975 decline in production
for some plants ranged from 10 to 30 percent. Precise data on sales of PCB units are
not available. The future demand for these units is uncertain due to various PCB issues
if - ~ »
which would influence both the producers and the consumers. However, it is likely that
sales or PCB transformers will decline during the next three years, with 1979 sales
being approximately 50 percent of 1976 sales. This decrease is primarily due to (1> the
necessary price increases of PCB products in order to cover the increased costs of
production caused by the effluent standards, and (2) the ban on PCB consumption. For
the purposes of this analysis, it is estimated that production will decrease by 25 percent
in 1977, 20 percent in 1978, and 15 percent in 1979, as firms which currently use PCB
products convert to substitutes. No information is available on the export of PCB
transformer and capacitor units beyond some general statistics. , ------
The substitutes for PCB products are about 20-30 percent more expensive than the PCB"
product of a comparable electrical rating. In response to'the increased "costs of
production following installation of pollution control equipment, prices of PCB"
transformers and capacitors are expected to rise to levels just below the prices of
comparable substitute products. More specifically, price increases of approximately
20 percent are expected in 1977 due to all factors affecting the industry. After this
-large and immediate increase in prices, it is expected that the prices of PCB'capacitors
_and transformers will become stable, as any further increases would eliminate the slight
price advantage of PCB products. However, prices of all capacitors and transformers'
'pan be expected to rise during the next three years in response to general inflation.
Prices, appear to reflect the approximately 10 percent general inflation in 1975, and in
this analysis, plants are assumed to increase prices by 10 percent in each of 1978 and
1979, although inflation may be somewhat less than this. _ - - - -
5-8
-------
EFFECT OF PCB EFFLUENT CONTROLS ON SALES --~ -" "
: PCB controls would effect sales in two ways: (1) price increases could reduce total
quantity demanded, and (2) price increases could increase net imports. There is little
indication that either of these will have, or has already had, significant effects on
transformer and capacitor sales. : :
f Table:5?rshows the 1974-1975 changes in imports and exports. There-is no indication in'
this data that proposed effluent controls have had a significant effect on net imports of^
• PCB units.
5-9
-------
TABLE 5~1<-U.S. IMPORTS AND EXPORTS OF ELECTRONIC PRODUCTS
(Millions of Units and Dollars)
IMPORTS
1975
SELECTED PRODUCTS
„
Transformers, Rectifiers and
• - Rectifying Apparatus
Microphones, Loudspeakers
" " Audio Amplifying Equipment
Tuners for TV Receivers
Television Apparatus, NEC
Capacitors
Other
TOTAL
Units
na
na
12.3
na
1,443.6
na
na
Dollars
73.6
120.2
76.7
308.3
85.6
282.2
946.6
~~wilH.&
na
na
18.1
na
2,701.4
na
na
1974
DnlT
i-MjiiHrs
53.0
148.7 ~
88.0
358.7
144.7
371.0
1,164.1
% Inc
or (De<
Units
na'
na
(32.0)
na
(46.6)
na
na
rease
ireasey
Dollars
38.9
(19.2)
(12.-8)
(14.1)
(40.8)
nn
(18.7)
EXPORTS
'SELECTED PRODUCTS .
Coils, Transformers, Reactors,
Chokes and Parts of
Electronic Components
Television Tuners
Microphones, Loudspeakers
and Amplifiers
Capacitors
Parts, NEC, for Capacitors
Oth'er
TOTAL
1975
Units
na
2.3
na
258.8
na
na
na
Dollars
43.5
6.0
120.1
64.3
15.8
630.8
880.5
1974
: -nn-t
Will lw
"na
4.5
na
321.7
na
na
na
% Increase
or (Decrease) — -
54.4
11.4
111.7
88.3
25.1
663.3
291.9
Units
na
(48.9)
na
(19.5)
na
na
na
Dofl&ps
(20.0)
(47:4)
7.5
(27.2)
(39.5)
tin
(7.8)
Source: Ref. 2, Table 74.
5-10
-------
CHAPTER 6
SUMMARY OF ALTERNATIVE TREATMENT TECHNOLOGIES
The alternative treatment technologies [ Ref. 1 considered in this report consist of
various -combinations of basic technologies applied to several -possible routes of PCB
escape into the environment including wastewater and rainfall runoff. Table 6-1
summarizes descriptions of these alternative technologies and ranks each alternative
treatment technology with respect to relative PCB reduction. It is likely that a plant
would install a treatment system similar to one of these alternative technologies
depending on the final regulations, but the regulation does not require a plant to install
any specific technology.
Each of the alternatives required that incinerator scrubber water be pretreated and
subjected to adsorption by activated carbon. Associated wastes from various parts of
the plant are also treated the same way. No treatment of sanitary wastewaters is
necessary as they are discharged to municipal systems.
Rainfall runoff from certain areas is handled by enclosing them to. eliminate contact of
' PCB-with rainfall runoff. Differences in costs and effectiveness are derived solely from
variations in handling non-contact cooling water, steam jet condensate, detergent
washing water and boiler blowdowns.
Alternatives "A" and Zero Discharge use process changes and recycling of wastewaters.
Alternative "B" makes maximum use of adsorption by activated carbon, while
Alternative "C", which does not treat the non-contact cooling water,, achieves the-
lowest reduction of PCB discharge and costs the least, as shown in Table B-2.. Thus the
fundamental differences among the various alternatives concern the amount of,
recycling, process change, and carbon treatment used. Activated carbon is a very^
effective adsorber, but its effectiveness decays as it is used, and the replacement of
carbon is necessary. Zero Discharge depends upon incineration Jiea ting to a, degree -that
disassociates the PCB molecules. This approach may dictate concentration of. waste
:from more than one source.
6-1
-------
30
01
Li
00
X
u
0>
c
S
» e "
5 i 4:
oo >
b
V .C
a »*
e —
'i §
,23
g , .i
•O U
t/3
W
»**
a
o
S
O
w_
w -
S *
II
ee >
i J
s J
; e-
O 0
z
as
a
E-
C 3
1^
oi e
u o
t -s
i 3
Q.
O
•o a
C u
0.
w u
I J
*
to
oa
i I
c
3 1
-
-• a.
Q b
01 0
< I
a
o
u
6-2
-------
TREATMENT COST ESTIMATES
Costs for alternative treatment technologies were estimated by Versar, Inc., based on
effluent data compiled from Section 308 letter responses and visits to some plants.
These data include total PCB use, total wastewater discharge, total PCB discharge, and
plant equipment. Using this information, Versar estimated required capital investment
and annual operating costs for individual plants using engineering techniques. For those
plants with "insufficient data for engineering techniques, costs were based on a
representative effluent flow and the assumption that little or no treatment equipment
was being used. Treatment costs for this study were derived from Versar cost data.
ANNUALIZED COSTS FOR THE INVESTMENT ANALYSIS
For purposes of the investment analysis in this report, five model plants were specified
to represent the set of transformer and capacitor plants classified as direct dischargers.
The model plants presented in Chapter 7 illustrate the range of available financial and
production characteristics. It was necessary to use model plants for the following
reasons:
1. Appropriate financial and production data were not available for 5 out of the 11
" direct discharge plants.
2. One of the 11 direct discharge plants was operating at a loss, but it was assumed,
however, that the PCB portion of operations was operating at a profit.
Predictions are made concerning this plant's ability and willingness to incur PCB
r" ' treatment costs in Chapter 7.
3. Most companies are unwilling to have data on their company publicized,
particularly for use in evaluation of environmental controls.
Capital investments for each of the alternative treatment technologies were estimated
for the five model plants. The lump-sum investment costs formulated by
- «- — f ~'- ^ - "•% 's. .. - -- • - - TT^_ Z ~ ~
Versarjllef. 1J were converted to annual equivalent costs by amortizing the investment
6-3
-------
over a three year period at 9 percent annual interest rate. A discussion of the reasons
for using 9 percent as the annual interest rate is presented later. A three year
payback period is appropriate in light of Monsanto's publicized cutback of PCB
production and the recent passage of the Toxic Substances Control Act, which prohibits
production of PCBs after January 1979, and their use in production of electrical
equipment after July 1979. The annual operating and maintenance costs of each
alternative treatment technology were added to capital recovery costs to obtain total -
annual costs for each alternative technology as shown in Table 6^2. The alternative "
treatment costs for 1977 do not include operating or maintenance costs, as the
treatment system is assumed to be under construction but not in operation during this
period. It should also be noted that estimated operating and maintenance costs were
adjusted for inflation at an annual rate of 8 percent in 1978 and 7.5 percent in 1979,
based on unpublished GECO estimated for inflation for those years.
Investment decisions for the five model plants are based on "the annual treatment costs
: for each alternative listed in Table 6-2. Predictions are made for each -model plant
based on its net present value of complying with proposed PGB effluent standards as
.compared tcr its net present value if it did not install the treatment equipment;"-This
analysis is presented in Chapters 7 and 8. --...:' i -.: -
6-4
-------
TABLE 6-2. - ANNUAL COSTS OF TREATMENT TECHNOLOGIES
(treatment costs)
1977a 1978b 1979- Jan. 1980
Alternative A 173,000 245,000 257,-OOQ-
Alternative B 775,000 955,000 968,-OOQ"
Alternative C 55,000 ' 58,000 58 ,-QOQ
Zero Discharge 170,000 283,000 292,-QOO-
#2
Alternative A 101,000 139,000 142,-000'
Alternative B 500,000 615,000 623,-000'
Alternative G 37,000 37,000 37,-000
Zero Discharge 121,000 191,000 197^000
#3
Alternative A 256,000 331,000 336,-000
Alternative B 370,000 461,000 467,-GOO"
Alternative C 227,000 285,000 290,000"
Zero Discharge 269,000 391,000 400,-000
Alternative A 256,000 331,000 336.-000"
Alternative B 370,000 461,000 467,-OGO"
Alternative C 227,000 285,000 290,-GOG"
Zero Discharge 269,000 391,000 400=000
#5
Alternative A 256,000 331,000 336,-QOG"
Alternative B 370,000 461,000 467,-000"
Alternative C 227,000 285,000 290,000"
Zero Discharge 269,000 391,000 400,eOOO:
aThe alternative treatment costs for 1977 do not include operating costs as the"
treatment system is assumed to be under construction, but not operating
this period.
Operating and maintenance costs for 1978 and 1979 were estimated 'Using'
unpublished OECD forcasted inflation rates of 8.0 percent and 7.5 percent;
respectively. ":
6-5
-------
CHAPTER 7
INVESTMENT ANALYSIS
The financial condition of a firm is a critical factor in determining its ability to finance
the new investments which would result from the imposition of PCB effluent standards
under Section 307 (a).
Model plants^ were developed for this analysis, and to the extent possible were designed
to represent actual plants. An analysis of the projected cash flows for these model
plants indicates the capability of individual transformer and capacitor plants to install
the equipment necessary to meet PCB effluent regulations.
Model plants reflect real plants when the appropriate financial and production data for
the PCB operations of specific plants were available. Appropriate data were available to
develop models and provide income statements for five plants. Models were not
developed for the six remaining plants due to the lack of suitable data, and in many
cases, the unwillingness of individual plants to participate in supplying necessary
Information. A model was not constructed for the one direct discharge plant ;that has
been operating at a loss. If the PCB portion of operations for this firm is operating at a
profit, predictions can then be made concerning this plant's advantage in accepting
treatment costs.
BACKGROUND AND USES OF CASH FLOW ANALYSIS : . " '
A discounted cash flow analysis can be used to indicate the investment decisions of
individual plants. A cash flow analysis summarizes cash inflows and outflows and is
useful to plant financial planners in their analysis of alternative investments.
A present value is calculated for a future stream of net cash flows by using a specified
cost of- capital. The net present value for PCB production without installing~treatment is
Calculated by using the 1977 Pro Forma Income Statement, and allowing treatment costs
7-1
-------
to be zero. The firm would stop production after 1977 since it would not confirm to the
effluent standards. The net present value for PCB production if treatment equipment
were installed is calculated by using the Pro Forma Income Statement with deduction for
annualized treatment costs. The present value of future incomes with and without the
specified control alternative can then be compared; for each plant, the company will
presumably choose the course of action that would most increase their net present value.
ASSUMPTIONS UNDERLYING MODEL PRO FORMA INCOME STATEMENTS
Analysis of the financial statements of specific firms currently producing PCB-
containing capacitors and transformers was presented in Chapter 4. The following
conclusions from previous chapters have been incorporated into the model Pro Forma
Income Statements in this chapter:
1. Fixed costs are approximately 18 percent of each firm's total costs; the
remaining 82 percent of costs are divided among a variety of variable costs.
2. The costs of capital in the electronics industry was estimated to average 15.9
percent over the next three years (see information provided by the EPA in
~~Ref. 28^.
3. The firms involved in the production of the PCB capacitors and transformers
have annual tax payments amounting to approximately 40 percent of pretax
net income.
In addition to the above assumptions, the model Pro Forma Income Statements are also
based on findings concerning the expected production and price trends for PCB products
during "the next three years. Production of PCB items is expected to decrease by
25 percent -in 1977, 20 percent in 1978, and 15 percent in 1979. Price increases
associated with these declining levels of production and other effects of combined
environmental controls are expected to be 20 percent in 1977 and 10 percent in each of
1978 and 1979.
7-2
-------
Another assumption is important in light of the relatively short time horizon of this
investment analysis. The Toxic Substances Control Act (TOSCA) is expected to prohibit
all consumption of PCBs by 1980. Hence, any investment which a firm might undertake
to comply with the proposed interim effluent standards for PCBs would be useless (or
greatly reduced in value) as soon as the total ban goes into effect (see Appendix A). For
this reason, the time horizon of the investment analysis has been limited to 1979; also,
the investments necessary to comply with the proposed standards have been amortized
over the three year lifetime which these investments would be likely to have. Salvage
value of the production equipment is assumed to be negligible, since no information on
this was available.
. EXPLANATION OF THE METHODOLOGY USED IN THE INCOME STATEMENTS
The best way to explain the methodology employed in the construction of the model Pro
Forma Income Statements is to present a step-by-step description of the process which
was used.
1. The price/pound of PCBs used was determined by dividing the estimated
annual sales of PCB units by the pounds of PCB used annually. -
.2? Production levels were obtained from EPA and were'than projected through
1979, allowing for anticipated decreases in production levels.
3. The price/pound of PCBs was used as a surrogate for the price of the PCB
products themselves and was projected through 1979, allowing for estimated
price increases due to the espected market conditions and inflation.
4. Sales for 1977 through 1979 equal production (in terms of PCB*s used)
multiplied by price/pound.
5. Fixed costs are approximately 18 percent of total costs in 1976. These costs
were inflated in accordance with unpublished OECD estimates for inflation iff
the U.S. during 1977 through 1979. ..-.::_-.':
7-3
-------
6. Variable costs were projected to decrease during 1977 through 1979 at the
same rate as production, to reflect the decreasing amounts of raw materials
and labor used. These costs were then inflated at the same rates as the fixed
costs were inflated.
. 7. Treatment costs are zero in 1976. In 1977, they equal"the annualized costs of
: t the capital expenditures necessary for the firm to comply with the effluent;
"-standards. For 1978 and 1979, treatment costs include both the annualized
" .: capital costs and the expected operating and maintenance costs for each
year. :
8. Sales minus the three classes of costs yields pet pretax income (loss).
9. The tax rate was estimated to be 40 percent; hence net income is
approximately 60 percent of net pretax income.
: 10. Net income was discounted to its present value using the standard technique
of: present value = 4* Yt (1 + r) where T'is net income in yearjt'
and V is the annual discount factor. , - -.-__.
Tables 7-1 through 7-5 present the Pro Forma Income Statements and :the cash flow
analysis which was performed. The following section summarizes-results from analysis of
Pro Forma Income Statements under each of alternatives A through D..-_---: .- • : ._
ALTERNATIVE A
.If. EPA issues standards such that firms wouls be likely to implement Treatment A* the
model plants Investment analysis indicates that plant 2, would continue to produce PCS
. pr-oducts and would, therefore, incur the expenses necessary to .comply with standards. -
For" plants 1, 3, 4, and 5, however, net income would be maximized by continuing
production of PCB products through the end of 1977, but stopping use of PCBsassoon.as
the new standards became effective. ; - - - ; -..- -:?, -;: - r;; - - - - - -.
7-4
-------
Due to the variation in results among model plants, it is difficult to make accurate
predictions about the responses of the six plants for which models were not constructed.
However, four of these plants have publicly stated that they will stop accepting orders
for PCB items as of July 1, 1977. Clearly, these plants will not undertake the investment
necessary to comply with the standards which would become effective in early 1978,
.unless their backlog of orders grows to enormous proportions.
The most likely action for the four firms which have announced cutoff dates for new PCB
units is that they will accumulate only as many orders as they can fill before the
standards go into effect. It is assumed that the other two firms will either continue
production or cease production in the same ratio as the model plants; this means that
probably both firms will cease production of PCB products.
Implementation of standards which would require firms to undertake Treatment
Alternative A would cause all affected PCB transformer producers to cease production
of PCB products; on the other hand one producer of PCB capacitors would probably
comply with the standards.
ALTERNATIVE B
In the event that the EPA issues effluent standards such that the direct discharge plants
would be likely to undertake Treatment B, the model plant investment analysis
indicated that plants 1 through 5 would probably cease use of PCBs early in 1978 rather
than comply with the new standards.
Examining the six plants for which models were not constructed,"four have already
_ "publicly announced their intention to stop accepting orders for PCB items as of
' July 1, 1977_... Clearly, these plants will probably not undertake the investment
necessary to comply with the proposed standards which would become effective in early
: 1978, unless their backlog of order grows to enormous proportions. These plants will
probably stop accepting orders as soon as they accumulate as many orders as they can
fill before the proposed standards go into effect. Concerning the other two plants, the
unanimity of the results from our model plants indicated that these two plants will also
discontinue the use of PCBs, rather than comply with the new standards. T ":" " ' " :
7-5
-------
The promulgation of effluent standards for which firms would be likely to implement
Treatment Alternative B would probably force all affected producers of PCB capacitors
"and transformers to cease use of PCB early in 1978, rather than comply with the new
standards.
ALTERNATIVE C
fir the "event that the EPA issues effluent standards such that the direct discharge plants
-would be likely to undertake Treatment Alternative C, the model plant investment
.analysis indicate that plants 1 and 2 would continue use of PCBs, whereas plants 3, 4
and 5 would cease production early in 1978. _ :
Examining the six plants for which models were not constructed, four have already
publicly announced their intention to stop accepting orders for PCB items as of
July 1, 1977. Clearly, these plants will probably not undertake even the minimal
investment necessary to comply with the proposed standards which would become
effective in early 1978. It is likely that these firms will accumulate as many order as
they can fill before the proposed standards go into effect, and then stop accepting
-orders—the near unanimity of the results from our model plants indicated that the
remaining two plants would probably continue the use of PCBs, and would comply with
the new standards. - -
According: to cash flow analysis, effluent standards which might lead the 11 direct
discharge plants to invest in Treament Alternative C would cause two capacitor and
three transformer producers to cease use of PCBs, rather than comply with the
standards in addition to the plants that have already announced their deadline for taking
orders for PCB units. -
ZERO DISCHARGE
"If7the EPA issues standards such that the direct discharge firms-would be likely to
- implement Treatment Alternative D, (Zero Discharge), the—model-plants investment -
analysis indicate that only plant 2 will continue to produce PCB items_untiL 1980> plants
7-6
-------
1, 3, .4, and 5 will all cease use of PCS. In terms of production, the withdrawal of these
four plants from the production of PCB items will cause a decrease in capacity of
approximately 75 percent.
Examining the six plants for which models were not constructed, four have already
. publicly, announced their intention to stop accepting orders for PCB items as of
July 1.-1977* These plants will obviously not undertake the large investment necessary
.to comply with the standards which would become effective in early 1978. The most
likely scenario is that these firms will accumulate only as many orders as they can fill
-before the proposed standards go into effect, they will stop accepting orders even if it
were before the announced July 1, 1977 deadline. The near unanimity of the results
from our model plants indicates that the remaining two plants would also cease use of
PCBs rather than comply with the new standards.
Implementation of effluent standards which might lead the 11 direct dischargers of
PCBs to invest in Treatment Alternative D would cause 10 of the 11 plants to cease use
of PCBs rather than comply with the new standards. Only one capacitor plant would
maximize its future net income by undertaking the necessary investment.
. Detailed data on the five model plants are given in Tables 7-1 through 7-5. Other data
are available on project worksheets, but are deleted from this report to ensure
confidentiality of data.
7-7
-------
;:|LE.7-l.-PRp FORMA INCOME STATEMENTS AND DISCOUNTED'CASH FLOW ANALYSIS
FOR PCB USING PRODUCTION OF MODEL PLANT NO. 1 (IN DOLLARS)
—
•
;/.
.. - •
Sales
Less Fixed Costs
Less Variable Costs
Less Treatment Costs
Net Income (Loss) Before
Less Taxes
Nee Inconc (Lots)
The Present Vilue
of Plant's Net Income
The Present Value
of Plant's Net Income
Sales
Less Fixed Costs
Less Variable Costs
Less Treatment Costs
Net Income (Loss) Before
Less Taxes
Net Income (Loss)
The Present Value
of Plant's Net Income
The Present Value
of Plant's Net Income
Sales
Less Fixed Costs
Less Variable Costs
Less Treatment Costs
Net Income (Lots) Before
Less Taxes
Net Income (Lots)
The Pretent Value
of Plant's Net Income
The Present Value
of Plant's Net Income
Sales
Less Fixed Costs
Less Variable Costs
Less Treatment Costs
Net Income (Loss) Before
Leas Taxes
Net Income (Loss)
The Present Value
of Plant's Net Income
The Present Value
of Plant's Net Income
Treatment
1976
3,450,000
604,000
2,679,000
-0-
Taxes 173,000
69,200
Alternative A
197_7
3,110,000
655,000
2,178,000
173,000
104,000
41,600
103,800 62,400
With Treatment is: » 54,000 +
Without Installing Treatment is:
Treatment
Taxes
Alternative B
3,110,000
655,000
2,178,000
775,000
(498,000)
-0-
(498,000)
With Treatment is: - -430,000
Without Installing Treatment is:
Treatment
Taxes
Alternative C
3,110,000
655,000
2,178,000
55,000
222,000
88,800
133,200
With Treatment is: - 115,000 +
Without Installing Treatment is:
Zero
Taxes
Discharge
3,110,000
655,000
2,178,000
170,000
107,000
42,800
64,200
With Treatment is: • 55,000 +
Without Installing Treatment is:
1978
2,737,000
707,000
1,736,000
245,000
49,000
19,600
29,400
22,000 + 28,000' »
143,000
2,737,000
707,000
1,736,000
955,000
(661,000)
-0-
(661,000)
- 493,000 - 412,000
143,000
2,737,000
707,000
1,736,000
58,000
236,000
94,400
141,600
106,000 + 105,000
143,000
2,737,000
707,000
1,736,000
283,000
11,000
4,400
6,600
5,000 + 14,000 -
143,000
1979
2,558,000
760,000
1,469,000 .
257,006
72,000 -
28,800
43,200 .
104,000
2,558,000
760,000
1,469,000
968,000
(639,000)
-0-
(639,000)
• -1,335,000
2,558,000
760,000
1,469,000
58,000
271,000
108,400
162;600 -
326,000
2,558,000
760,000
1,469,000
292,000 -
37,000 -
-14,300
22,200 -
74,000
.-:.-- - - -
-
- . -- -
-.-- - --•:--
•>
7-8
-------
TABLE,7-2.-PRO FORMA INCOME STATEMENTS AND DISCOUNTED CASH FLOW ANALYSIS"
-FOR PCB USING PRODUCTION OF MODEL PLANT NO. 2 (IN DOLLARS)
—
• -."
m
^
. •.-
'•
Sales
Less Fixed Costs
Less V»ri«ble Costs
Less Treatment Costs
Treatment
1976
4,546,000
795,000
3,524,000
-0-
Met Income (Loss) Before Taxes 227,000
Less Taxes 90,800
Net Income (Loss)
The Present Value
of Plant's Net Income
The Present Value
of Plant's Sec Income
*
Alternative A
1977
4,091,000
862,000
2,865,000
101,000
263,000
105,200
136,200 157,800
With Treatment is: • 136 + 110,000
Without Installing Treatment is: •
Treatment
Sales
Less Fixed Costs
Less Variable Coses
Less Treataent Costs
Net Income (Loss) Before Taxes
Less Taxes
Alternative B
4,091,000
862,000
2,865,000
500,000
(136,000)
-0-
Net Income (Loss) (136,000)
The Present Value
of Plant's Net Income With Treatment is: • 117,000 - 172
The Present Value
of Plant's Net Income Without Installing Treatment is: *
Sales
Less Fixed Costs
Less Variable Costs
Less Treatment Costs
Net Income (Loss) Before
Less Taxes
Net Income (Lots)
The Present Value
of Plant's Net Income
The Present Value
of Plant's Net Income
Sales
Less Fixed Costs
Less Variable Costs
Less Treatment Costs
Net Income (Loss) Before
Less Taxes
Set Income (Loss)
The Present Value
of Plant's Net Income
The Present Value
of Plant's Net Income
Treataent
Taxes
Alternative C
4,091,000
862,000
2,865,000
37,000
327,000
130,800
196,200
With Treatment is: • 169,000 * 155,
Without Installing Treatment is: •
Zero
Taxes
Discharge
4,091,000
862,000
2,865,000
121,000
243,000
97,200
145,800
With Treatment is: " 126,000 + 87
Without Installing Treatment is: *
1978
3,600,000
931,000
2,284,000
139,000
246,000
98.400
147,600
* 108,000 «
188,000
3,600,000
931,000
2,284,000
615,000
(230,000)
-0-
(230,000)
,000 - 108,000
188,000
3,600,000
931,000
2,284,000
. 37,000
348,000
139,200
208,800
000 + 149,000
188,000
3,600,000
931,000
2,284,000
191,000
194,000
77,600
116,400
000 + 87,000
188,000
1979
3,365,000
1,001,000
1,942,000
142,000
280,000
112,000
168,000
354,000
3,365,000
1,001,000
1,942,000
623,000
(201,000V
-0-
(201,000)
» -354,000
3,365,000
1,001,000-
1,942,000 - -
"37,000 "
385,000 ~
154,000
231,000
• 473^,000
3,365,000
1,001,000-
1,942,000 -
197,000
225,000 "
90,000
135,000 "
300,000
--.:--
->
7-9
-------
.BLE Z-3.-PRO-FORMA INCOME STATEMENTS AND DISCOUNTED € ASH FLOW ANALYSIS
FOR PCS USING PRODUCTION OF MODEL PLANT NO. 3 (IN DOLLARS)
—
•
7- —
"
-
.
. •
,___
Sales
Less Fixed Costs
Less Variable Costs
Less Treatment Costs
Net Income (Loss) Before
Less Taxes
Net Incone (Loss)
The Present Value
of Plant's Met Income
The Present Value
of Plant's Net Income
Sales
Less Fixed Costs
Less Variable Costs
Less Treatment Costs
Net Income (Loss) Before
Less Taxes
Net Income (Loss)
The Present Value
of Plant's Net Income
The Present Value
of Plant's Net Income
Sales
Less Fixed Costs
Less Variable Costs
Less Treatment Costs
Net Income (Loss) Before
Less Taxes
Net Income (Loss)
The Present Value
of Plant's Nat Income
The Present Value
of Plant's Net Income
— — -- "
Sales
Less Fixed Costs
Less Variable Costs
Less Treatment Costs
Net Income (Loss) Before
Less Taxes
Net Incone (Loss)
The Present Value
of Plant's Net Income
The Present Value
of Plant's Net Income
Treatment
1976
3,916,000
685,000
3,036,000
Taxes 195,000
78j 000
117,480
With Treatment is:
Without Installing T
Taxes
With Treatment is:
Without Installing T
Taxes
With Treatment is:
Without Installing 1
Zero
Taxes
With Treatment is:
Without Installing 1
Alternative A
1977
3,524,000
743,000
2,468,000
57,000
34,200
30,000 + 450 +
reatment is: •
3,524,000
743,000
2,468,000
370,000
(57,000)
-0-
(57,000)
- -49,000 - 96
reatment is: *
3,524,000
743,000
2,468,000
227,000
36 , 000
34 , 400
51,600
45,000 * 21,
reatment is: "
Discharge
3,524,000
743,000
2,468,000
269,000
44,000
17,600
26,400
23,000 - 40,
reatment is: "
1978
3,102,000
802,000
1,968,000
1,000
600
14,000
162,000
3,102,000
802,000
1,968,000
461,000
(129,000)
-0-
(129,000)
,000 - 61,000
162,000
3,102,000
802,000
1,968,000
285,000
47,000
18,800
28,200
000 + 32,000
162,000
3,102,000
802,000
1,968,000
391,000
(59,000)
-0-
(59,000)
000 - 18,000
162,000
, , .,, .
1979
2,898,000
862,000
1,664,000
36,000
21,600
44,450
:, 898, 000
862,000
1,664,000
467,000
(95,000)
-0-
(95,000)
« (206,000)
2,398,000
862,000
1,664,000
290,000 '
82,000 "
32,800
49,200
98,000
2,898,000
862,000
1,664,000
400,000 '
(28,000)"
-0-
(28,000) '
(35,000)
._ _ ..
.
- --
•y
7-10
-------
TABLE; 7-4.-PRO FORMA INCOME STATEMENTS AND DISCOUNTEDjCASH FLOW ANALYSIS
FOR PCB USING PRODUCTION OF MODEL PLANT NO. 4 (IN DOLLARS)
—
__*__
*
Sales
Less Fixed Coits
Less Variable Coses
Less Treatment Coats
Treatment
1976
4,546,000
795,000
3,524,000
-0-
Net Income (Loss) Before Taxes 227,000
Less Taxes 90,800
Dec Income(Loss)
The Present Value
of Plant's Net Income
The Present Value
of Plant's Net Income
Alternative A
1977
4,091,000
862,000
2,865,000
256,000
1 OS, 000
43,200
136,200 64,800
With Treatment is: » 56,000 + 24
Without Installing Treatment is:
Treatment
Sales
Less Fixed Costs
Less Variable Costs
Less Treatment Costs
Net Income (Loss) Before Taxes
Less Taxes
Alternative B
4,091,000
862,000
2,865,000
370,000
(6,000)
-0-
Net Income (Loss) (6,000)
The Present Value
of Plant's Net Income With Treatment is: " (-5,000 -
The Present Value
of Plane's Net Income Without Installing Treatment is:
Sales
Less Fixed Costs
Less Variable Costs
Less Treatment Costs
Net Income (Loss) Before
Less Taxes
Net Income (Loss)
The Present Value
of Plant's Net Income
The Present Value
of Plant's Net Income
Sales
Less Fixed Costs
Less Variable Costs
Less Treatment Costs
Net Income (Loss) Before
Less Taxes
Net Income (Loss)
The Present Value
of Plant's Net Income
The Present Value
of Plant's Net Income
Treatment
Taxes
Alternative C
4,091,000
862,000
2,865,000
227,000
137,000
54,800
82,200
With Treatment is: » 71,000 *
Without Installing Treatment is:
Zero
Taxes
Discharge
4,091,000
862,000
2,865,000
269,000
95,000
38,000
57,000
With Treatment is: » 49,000 -
Without Installing Treatment is:
1978
3,600,000
931,000
2,284,000
331,000
54,000
21,600
32,400
,000 + 33,000
188,000
3,600,000
931,000
2,284,000
461,000
(76,000)
-0-
(76,000)
57,000 - 29,000)
188,000
3,600,000
931,000
2,284,000
285,000
100,000
40,000
60,000
45,000 + 51.000
188,000
3,600,000
931,000
2,284,000
391,000
(6,000)
-0-
(6,000)
4,000 » 8,000 «
188,000
1979
3,365,000
1,001,000
1,942,000
336,000
86,000
34,400
5 MOO-
US, 000"
3,365,000
1,001,000
1,942,000
467,000
(45,000)-
-0-
(45,000)
(91,000)
3,365,000
1,001,000
1,942,000 -
290,000
132,000 -
'52,800
79,200 ~
167,000
: 3, 365, 000
1,001,000
1,942,000
400,000
- -22:,000 -
' 8,800
13f200 -
53,000-
—
- -
•- - -
-..-._-.- -
1
7-1 1
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7-5.-PRQ .FORMA INCOME STATEMENTS-AND DISCOUNTED CASH FLOW ANALYSIS
FOR PCB USING PRODUCTION OF MODEL PLANT NO. 5 (IN DOLLARS) : "
-•
"•
-
Sales
Less Fixed Costs
Less Variable Costs
Less Treatment Costs
Net Income (Loss) Before
Less Taxes
Net Income (Loss)
The Present Value
of Plant's Net Income
The Present Value
of Plant's Net Income
Sales
Less Fixed Costs
Less Variable Costs
Less Treatment Costs
Net Income (Loss) Before
Less Taxes
Net Income (Loss)
The Present Value
of Plant's Net Income
The Present Value
of Plant's Net Income
Sales
Less Fixed Costs
Less Variable Costs
Less Treatment Costs
Net Income (Loss) Before
Less Taxes
Net Income (Loss)
The Present Value
of Plant's Net Income
The Present Value
of Plant's Net Income
Sales
Less Fixed Costs
Less Variable Costs
Less Treatment Costs
Net Income (Loss) Before
Less Taxes
Net Income (Loss)
The Present Value
of Plant's Net Income
The Present Value
of Plant's Net Income
Treatment
1976
1,594,000
279,000
1,236,000
-0-
Taxes 79,000
31,600
47,400
With Treatment is:
Alternative A
1977
1,435,000
302,000
1,005,000
256,000
(128,000)
-0-
(128,000)
« - 110,000 -
Without Installing Treatment is: -
Treatment
Taxes
With Treatment is:
Alternative B
1,435,000
302,000
1,005,000
370,000
(242,000
-0-
(242,000)
» -208,000
Without Installing Treatment is: *
Treatment
Taxes
With Treatment is:
Alternative C
1,435,000
302,000
1,005,000
227.000
(99,000)
-0-
(99,000)
* - 85,000 -
Without Installing Treatment is: *
Zero Discharge
1,435,000
Taxes
With Treatment is:
302,000
1,005,000
269,000
(141,000)
-0-
(141,000)
-122,000
Without Installing Treatment is: •
1978
1,262,000
327,000
801,000
331,000
(197,000)
-0-
(197,000)
147,000 - 119
66,000
1,262,000
327,000
801,000
461,000
(327,000)
-0-
(327,000)
1979
1,179,000
351,000
677,000-
336,000 .---
(185.000).
. -0- .
(185.000).
,000 " -376,000
1,179,000
351,000
677,000
467,000
(316,000)
-0-
(316,000)
- 244,000 - 204,000 • -656,000
66,000
1,262,000
327,000
801,000
285,000
(151,000)
-0-
(151,000)
113,000 - 90
66,000
1,262,000
327,000
801,000
391,000
(257,000)
-0-
(257,000)
- 192,000 -
66,000
..1,179,000
351,000
677,000-
290,000 -
d-39-,000).
-0-
(139,000)
,000 - - 2SS.OOO-
1,179,000
351,000
677,000-
400,000 _-.r
(249-.000). .
. -o--
(249,000) .
161,000 "..-475,000
-
-- :- . - - -. - --,-:--
-_ --
- _ -
- . - - --_
-:.~ - --....- :-t.:-t-
-:- -..---- ..--'
7-12
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CHAPTER 8
ECONOMIC IMPACT
INTRODUCTION
This chapter is a summary of the probable economic impacts for each alternative
treatment technology. It includes estimated market responses to each manufacturer's
action and, in turn, the company reaction to market response.
Several types of impact can be considered, as illustrated in the following diagram:
Area of Consideration
All Controls Only the
Except PCS Addition
Effluent Controls of PCB
Effluent Controls
Company Action (1) _j[2)
1. Company action that causes Impact 1 Impact 2
treatment costs to be
incurred
2. Company action that avoids Impact 3 Impact 4
need for treatment
This report iff concerned with Impact 2 and 4—i.e. the incremental impacts due to PCB
e"ffluent controls..
Transformer plants are limited to Impact 4 because all companies with direct discharge
plants; are: predicted to phase out PCB use prior to the January, 1978 enforcement of
toxic pollutant effluent standards. The results are given in the next section. -
8-1
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Effects on the capacitor industry are more complicated because they include some
possibility in Impact 2 as well as Impact 4. Also, the range of conditions under which
capacitors operate is considerably greater as shown in a subsequent section of this
Chapter. Westinghouse Electric Company, in particular, has exerted much greater
efforts to delay controls on capacitor manufacturers than it has to delay controls on
transformer manufacturers.
The next part of this chapter will present the estimated economic impacts based on
whether treatment technology A, B, C or Zero Discharge might be used by the affected
plants. Some of the impacts common to all the treatment technologies are discussed in
a separate section. The last part of this chapter analyzes the impact of the regulations
on the individual direct discharge plants. Note that the effects on production are
primarily a matter of timing, since this type of use of PCBs will be prohibited by 1980
due to the Toxic Substances Control Act.
ECONOMIC IMPACT OF EFFLUENT CONTROL ALTERNATIVES
Alternative A
If the EPA issues standards such that the direct discharge plants would be likely to
implement Treatment A, it's likely that all five transformer producers affected by the
regulations would cease the use of PCBs in 1978 rather than invest in the equipment
necessary to meet the new standards. All but one of the capacitor producers would also
switch to the production of non-PC B items. In terms of prodution, Alternative A would
cause a 100 percent decrease in the number of PCB transformers produced by the direct
dischargers, and about an 80 percent reduction in their production of PCB capacitors.
This would be roughly equivalent to a decrease in total transformer production of about
3 to 7 percent of current production, and a decrease in total capacitor production of
about 5 to 10 percent of current production. However, these decreases in total
capacitor and transformer production would be at least partially offset by increases in
prodtiction~of non-PCB transformers and capacitors, as the affected firms phase out
their PCB production and increase production of non-PCB products. Note that this
incremental reduction in production due to Section 307 (a) the regulations will decline
to zero by 1980, when the Toxic Substances Control Act bans production.
8-2
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These responses to the EPA's standards would have only a slight impact on employment
as the production of non-PCB products require as much labor as the production of PCB
items. The temporary layoffs during the conversion of the production facilities could be
frilly offset by the temporary increases in employment necessary to adapt existing
equipment to the use of non-PCB transformer and capacitors.
The anticipated impact on the balance of payments is insignificant, despite the fact
that the Japanese, who have already banned the use of PCBs have a head start in the
development of non-PCB products. The expected insignificant effect on the balance of
payments is based on the expectation that domestic producers of products threatened by
imports would absorb higher costs in the form of lower profits. Also important is-the
fact that considerable political pressure is being exerted to place tariffs on imported
goods which threaten domestic producers who have been affected by the effluent
standards.
The impact of Alternative A upon domestic energy consumption would also be small,; as
this regulation does not affect the large "stock" of PCB transformers and capacitors
currently in use—it pertains only to the "flow" of replacement and new-use PCB
capacitors and transformers. Hence, the total increment iri domestic energy
consumption due to these effluent standards is equal to the-difference in efficiency
between new PCB capacitors and transformers and their substitutes. -This difference in
efficiency is quite small, with the best available industry estimates placing it around 5
.to 10 percent. Sources indicate that this slight difference in efficiency, which is
limited to just the replacement and new-use capacitors and transformers would cause a
negligible increase in energy consumption. : ~ -. ~ - ~
Alternative B
^11
If the EPA standards are such that the direct discharge plants would be likely to
.implement Alternative B, our analysis indicates that all transformer- and capacitor
plants affected would probably cease the use of PCBs rather than invest in the
equipment necessary to meet the new standards. This rwould mean'- a: 100 percent ~
decrease ittrthe production of PCB transformers and: capacitors by the""direct
dischargers. " —:~-.~.
8-3
-------
This would be roughly equivalent to a decrease in total transformer production of about
3 to 7 percent of current production, and a decrease in total capacitor production of
about 5 to 10 percent of current production. However, these decreases in total
capacitor and transformer production would be at least partially offset by increases in
production of non-PCB transformers and capacitors, as the affected firms phase out
their PCB production and increase production of non-PCB products. Note that this
•incremental reduction in production due to Section 307 (a) the regulations will decline
to zero by 1980, when the Toxic Substances Control Act bans production.
These responses to the EPA's standards would have only a slight impact on employment
as the production of non-PCB products require as much labor as the production of PCB
-items. The temporary layoffs during the conversion of the production facilities could be
fully offset by the temporary increases in employment necessary to adapt existing
equipment to the use of non-PCB transformer and capacitors.
The anticipated impact on the balance of payments is insignificant, despite the fact
that the Japanese, who have already banned the use of PCBs have a head start in the
development of non-PCB products. The expected insignificant effect on the balance of
payments is based on the expectation that domestic producers of products threatened by
imports would absorb higher costs in the form of lower profits. Also important is the
fact that considerable political pressure is being exerted to place tariffs on imported
goods which threaten domestic producers who have been affected by the effluent
standards.
The impact of Alternative B upon domestic energy consumption would also be small, as
this regulation does not affect the large "stock" of PCB transformers and capacitors
currently in use—it pertains only to the "flow" of replacement and new-use PCB
capacitors and transformers. Hence, the total increment in domestic energy
-consumption due to these effluent standards is equal to the difference in efficiency
between new PCB capacitors and transformers and their substitutes^JThis difference in
efficiency is quite small, with the best available industry estimates placing it around 5
to 10 percent. Sources indicate that this slight difference in efficiency, which is
limited to just the replacement and new-use capacitors and transformers would cause a
negligible increase in energy consumption. - - - : - - - - - -
8-4
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Alternative C
If the EPA issues standards such that the direct discharge plants would be likely to
implement Alternative C, our analysis indicates that all of the transformer producers
affected by the regulations would cease the use of PCBs rather than invest in the
equipment necessary to meet the new standards. However, two of the producers of PCB
capacitors would continue to use PCBs, and would meet the new standards. This would
mean a 100 percent reduction in the production of PCB transformers by the direct
dischargers, and about a 60 to 70 percent decrease in their production of PCB
capacitors.
This would be roughly equivalent to a decrease in total transformer production of about
3 to 7 percent of current production, and a decrease in total capacitor production of
about 5 to 10 percent of current production. However, these decreases in total
capacitor and transformer production would be at least partially offset by increases in
production of non-PCB transformers and capacitors, as the affected firms "phase out
their PCB production and increase production of non-PCB products. Note that this
incremental reduction in production due to Section 307 (a) the regulations will decline
to zero by 1980, when the Toxic Substances Control Act bans production.
These responses to the EPA's standards would have only a slight impact on employment
as the production of non-PCB products require as much labor as the production of PCB
items. The temporary layoffs during the conversion of the production facilities could be
fully offset by the temporary increases in employment necessary to adapt existing
equipment to the use of non-PCB transformer and capacitors.
The anticipated impact on the balance of payments is insignificant, despite the fact
that .the Japanese, who have already banned the use of PCBs have a head start in the
development of non-PCB products. The expected insignificant effect on the balance~of
payments is based on the expectation that domestic producers of products threatened by
imports would absorb higher costs in the form of lower profits. Also important is-the
fact that considerable political pressure is being exerted to place tariffs on imported
goods - which threaten domestic producers who have been affected by the effluent
standards.
8-5
-------
The impact of Alternative C upon domestic energy consumption would also be small, as
this regulation does not affect the large "stock" of PCB transformers and capacitors
currently in use—it pertains only to the "flow" of replacement and new-use PCB
capacitors and transformers. Hence, the total increment in domestic energy
consumption due to these effluent standards is equal to the difference in efficiency
between new PCB capacitors and transformers and their substitutes.^ This difference in
efficiency is quite small, with the best available industry estimates placing it around 5
:to 10 percent. Sources indicate that this slight difference in efficiency, which is.
limited to just the replacement and new-use capacitors and transformers would cause a
negligible increase in energy consumption. -: r ~
Zero Discharge
If the EPA issues standards such that the direct discharge plants would be likely to
implement the Zero Discharge Alternative our analysis indicates that all transformer
producers affected by the regulation would cease the use of PCBs rather than invest in
the equipment necessary to meet the new standards. However, one of the capacitor
plants would be likely to install the necessary treatment. This would mean a decrease
of 100 percent in the production of PCB transformers by the direct dischargers whereas
their capacitor production would fall by about 85 percent.
This would be roughly equivalent to a decrease in total transformer production of about
3 to 7 percent of current production, and a decrease in total capacitor production of
about 5 to 10 percent of current production. Howeverr these decreases in total
capacitor and transformer production would be at least partially offset by increases in
production of non-PCB transformers and capacitors, as the affected firms-phase out
their PCB production and increase production of non-PCB products.' Note that this
incremental reduction in production due to Section 307 (a) the regulations will decline
to zero by 1980, when the Toxic Substances Control Act bans production. ~ '
These responses to the EPA's standards would have only a slight impact on employment
:as the production of non-PCB products require as much labor as the production of~PCB~
Sterns;.: The. temporary layoffs during the conversion of the production facilities could be
_fuHy.;offset ,by_ the temporary increases in employment necessary-to:adapt existing
equipment to the use of non-PCB transformer and capacitors^ /:---- : - -- . : v : - - '
8-6
-------
The anticipated impact on the balance of payments is insignificant, despite the fact
that the Japanese, who have already banned the use of PCBs have a head start in the
development of non-PCB products. The expected insignificant effect on the balance of
payments is based on the expectation that domestic producers of products threatened by
imports would absorb higher costs in the form of lower profits. Also important is the
fact that considerable political pressure is being exerted to place tariffs on imported
goods which threaten domestic producers who have been affected by the effluent
standards.
The impact of the Zero Discharge Alternative upon domestic energy consumption would
also be small, as this regulation does not affect the large "stock" of PCB transformers
and capacitors currently in use—it pertains only to the "flow" of replacement and new-
use PCB capacitors and transformers. Hence, the total increment in domestic energy
consumption due to these effluent standards is equal to the difference in efficiency
between new PCB capacitors and transformers and their substitutes._.TWs difference in
efficiency is quite" small, with the best available industry estimates placing it around 5
to 10 percent. Sources indicate that this slight difference in efficiency, which is
limited to just the replacement and new-use capacitors and transformers would cause a:
negligible increase in energy consumption.
: DELAYED IMPACTS IN REPAIR AND INSURANCE RATES -- -- - -
Whichever Treatment Technologies the direct dischargers eventually select, there-are
some effects of the PCB effluent standards which will remain unchanged. Two of these
effect are the possible changes in product liability insurance rates and the impact upon
the product repair element of the industry. •
There are two ways that PCB effluent standards in, say, f978 could have effects that
are delayed until after the 1978-1979 study period. First, capacitor and transformer
manufacturers' obligations and committments to repair PCB units could have impact
for many years after terminating production of new PCB units* Second, any saftey
degradation with PCB substitutes might not be reflected in higher-insurance rates until
several- year later when law suits are reflected in higher outlays for-claims under
product liability insurance. - ;__..:. ,
8-7
-------
Since Section 307 (a) controls do not pertain to repair facilities there is no direct
impact. However, a manufacturer might find that costs to fulfill repair committments
are slightly higher after it ceases use of PCBs in new units. Since no company was able
to provide definitive estimates in this areas, it was concluded that this impact is
possible but the expected value is minor.
Property fire insurance rates are not expected to change. Vaults or other adaptations
.to new codes may be required, but fire insurance per se should not change significantly.
Product liability insurance typically changes with the group claim record—i.e., after,
rather than before, changes in product liability. Insurance rates are typically reviewed
once per year, after another year's experience has been accumulated. In the case of an
abrupt or drastic change it is possible that judgement of insurance company executives
could supercede the experience record on the previous product; however, even the
change from judgements will be corrected by the eventual experience record.
Insurance executives have great difficulty discussing changes in the rates before the
codes and before a consensus on changes on safety. As of October, 1976 several PCB
substitutes are still in testing stages.
_-The; best estimate is an insignificant change in insurance rates as PCB substitutes are-
phased in over the study period—1977 through 1979. - -
ESTIMATED ECONOMIC IMPACT FOR INDIVIDUAL PLANTS
Direct Discharge Transformer Manufacturers - -
There _ are; four transformer manufacturers who are (or were until recently) direct
dischargers of PCBs into navigable waters: : ^ . -
8-8
-------
Company Plant Location
General Electric Company Pittsfield, Massachusetts
Rome, Georgia
Helena Corporation Helena, Alabama
Research-Cottrell, Inc. Finderne, New Jersey
Westinghouse Electric Corporation Sharon, Pennsylvania
The General Electric and Westinghouse decisions may have less to do "with effluent
standards than with (1) Monsanto's announcement that it, the sole producer of PCBs in
the U.S., would stop selling PCBs October 31, 1977 {lief. 40 , and (2) the Toxic
Substances Control Act just signed by President Ford which forbids production of PCBs
in the U.S. after January 1, 1979 or their sale after June 30, 1979. Imports would also
be forbidden by June 30, 1979.
The economically useful life of effluent treatment facilities appears to be so short that
investment in treatment is unlikely. The EPA plants to extend the effluent controls
from direct dischargers to indirect dischargers, but any delay would limit the ability of
direct dischargers to recover treatment costs via price increases because" of
competition from other manufacturers. Thus anyone considering investing in treatment
facilities faces a formidable combination of adverse economic factors.
The electric utility companies which purchase most General Electric and Westinghouse
transformers should be able to absorb any price increases due to announced shifts to
non-PCB units. Although electric utilities have delay in regulatory agency approval of
cost increases, they'usually succeed in passing all costs increases to customers. They do
not face the competitive pressure witnessed in the transformer industry." ~" ::"- " - " "~-~
AU of-the large customers for PCB-containing transformers from General Electric and
Westinghouse are power companies and electric train facilities for mass transit systems.
It is widely believed that the power companies will need to buy new transformers as the
- old PCB-filled transformers breakdown since it is impossible ta completely df-aurand
8-9
-------
eliminate PCBs from the old cases, tanks and tubing and other insides. Thus extra
investment funds will be required. If mineral oils or presently known alternatives are
used, fire-proof vaults will probably be required around the transformers, at least in
many urban locations, to reduce possible fire losses. These, too, require additional
capital. It is also believed that electric trains will have difficulties in making the
transition to other types of transformers but many are used in Japan.
Only about 5 percent of all transformers have been built with PCBs and it is unlikely
that employment or output at the General Electric and Westinghouse plants or at their
:customers' establishments will be reduced. Employment at power plants and their
distribution system nodes to build vaults and make other changes, will increase but
these effects will be widely dispersed and of a temporary, transitional nature.
Hence a strong case can be made that economic impacts of the effluent controls
themselves on General Electric and Westinghouse is a minor increase in demand for new
replacement transformers (non-PCB). One might expect a temporary favorable effect
on their non-direct discharger competitors but Monsanto's withdrawal from production
and the EPA's planned regulations for non-direct dischargers make this advantage very
limited and temporary' Ref. 40 |.
The other two relevant producers of transformers (i.e., those containing PCBs and
- discharging directly) are small compared to General Electric and Westinghouse and they
also have a different set of ultimate consumers. They produce transformers only for
use in their own products.
Both Research-Cottrell and Helena produce rectifier transformer combinations to be
-incorporated in electrostatic precipitators of participates, either in public utility-or
-- private industry power plants' smokestacks. Their sales of-transformers are"completely
; integrated as part of the precipitator business and are not sold-as special transformers.
The total cost of a precipitator is much larger than that of the transformer component.
.Since precipitators are required to control air pollution, the price of component
transformers will probably not reduce the demand for precipitators." - : --- :' -': -: -
- ^ A concensus from telephone interviews in preparation of this-' report.
8-10
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Research-Gottrell and Helena's parent company Pollution Control-Walther, Inc. PC-W
specialize in air pollution control and have images that could be damaged by publicity
about misuse of PCBs. Research-Cottrell is a substantial company with total sales of
$223 million in 1975. New orders for electrostatic precipitators were $125 million. PC-
W is much smaller and not yet profitable on an annual basis, but made a profit in the
last two quarters of fiscal 1976 ending March 31. According to Moody's "Manual of OTC
Industrials," PC-W has been talking about a merger with a larger company," Combustion
Engineering, a competitor in nuclear power systems with General Electric and
Westinghouse. Should this go through it would be likely that PC-W could invest in~
ventures with reasonable profit potentials.
Helena is located in the small village of Helena, Alabama, just outside of Birmingham.
Research-Cottrell is located in Northern New Jersey, well outside of the depressed
Newark area. Both are in an industry that is widely regarded as rapidly expanding.
Despite PC-W's string of annual losses which have trended downward since Helena's
start in April, 1973, it seems reasonable to think that financial prospects in general
could allow profitable investment.
The high temperatures inside of smoke stack will probably require that non-PCB
transformer-rectifiers be placed outside and connected with direct current links to the
precipitators themselves. This could open an opportunity for other manufacturers of
transformers to supply those parts.
Direct Discharge Capacitor Manufacturers _______
There are five capacitor producers with a total of six plants that presently use or have
recently used, PCBs and also discharge wastewater into a navigable river: -~: -j •
Company Name
AVX Corporation
Cornell-Dubilier Electric Co.
General Electric Company
General Electric Company
Sangamo Electric Company
Sprague Electric Company
Plant Location
New Bedford, Mass.
New Bedford, Mass.
Hudson Falls, N.Y.
Ft. Edwards, N.Y.^ -
Pickens, S.C. ^-V--
North Adams, :Mass.
8-11
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Chapter 4 presents financial profiles of these five companies.
It is even more difficult to assess the economic impacts on the diverse companies in the
capacitor industry than in the transformer industry. There are difficulties in assessing
the impacts on each of the six capacitor plants which are currently discharging PCBs
into navigable waters. This is largely due to three factors: (1) the wide variety of sizes
and shapes of PCB capacitors—from under 1 inch to over 2 feet, (2) the broad range of
conditions under which capacitors operate, and (3) the different market situations in
which the consumers of PCB transformers and capacitors operate.
To summarize the discussion of PCB capacitors presented in Chapters 3 and 5 of this
report, there are basically two classes of PCB capacitors. (1) Large PCB capacitors,
known as power or industrial capacitors, are primarily used by the electric utilities in
the generation and transmission of power. The demand for these power and industrial
capacitors has been growing at approximately the same rate as sales of electricity. (2)
The second class of PCB capacitors is the smaller electronic capacitors. These are used
in a variety of household appliances (including radios, televisions and air conditioners),
industrial electonin components, and in fluorescent and mercury vapor• lighting. The
demand for these PCB capacitors has also been steadily growing, as shown in Chapter 5.
Substitutes for PCB capacitors are currently available; however, there are one-fo.r-one
substitutes for small capacitors. The price of a non-PCB capacitor is about 20 to 30
percent Jiigher than the price of a comparable PCB product.- This is largely due to the
fact that non-PCB capacitors are nearly double the size of the comparable PCB
capacitor of a given electrical rating. This size differential becomes significant when
one considers that many electronic capacitors are used in small appliances and in the
ballast boxes of fluorescent and mercury vapor lamps. T?or the consumers of PGB
electronic capacitors to switch to the larger non-PCB substitutes would involve
redesigning many of their products—hence, consumers of electronic capacitors will tend
to continue to use PCB capacitors for as long as possible.
:A shift to non-PCB products may not be as difficult for the consumers~of the larger
power capacitors. The utility companies should be able to1 absorb the additional" costs
involved,in-switching from PCB to non-PCB products, including the costs of redesigriing
8-12
-------
where necessary. Although electric utilities frequently run into delays in the approval
of price increases in response to higher costs, they usually succeed in being eventually
able to pass cost increases through to their consumers. Being a regulated monopoly, the
utilities are not faced with the same competitive pressures which confront the users of
the smaller electronic capacitors. In technical terms, the demand for PCB power
capacitors is more elastic than the demand for PCB electronic capacitors.
The General Electric Company has publicly announced that it intends to stop using PCBs
sometime in 1977 rather than wait for EPA standards. As noted in this chapter's analysis
of the transformer industry, General Electric's decision may have been influenced more
by Monsanto's announced end of PCB sales, than by the possibility of new effluent
standards.
The major customers for General Electric's PCB capacitors are large utility companies.
General Electric also produces small capacitors for its own appliance division. As
indicated above, the utilities will probably be able to pass the costs of switching to non-
PCB capacitors through to its customers. However, the General Electric appliance
divisions compete in a more competitive market than the utilities—hence, the increase
in costs due to switching to non-PCB capacitors might be absorbed in the form of lower
profits.
.No significant employment effects are anticipated at either of General Electric's
capacitor plants, as General Electric intends to convert its operations to the production-
of non-PCB capacitors rather than close down. There may be short term layoffs while
the conversions occur, but these layoffs would not have lasting significant effects.
Employment at power plants and along their distribution systems will increase, due to
the need to .modify existing equipment in order to accommodate the larger non-PGB
capacitors. However, these effects will be widely dispersed and of "a temporary,
transitional nature.
None of the other producers of PCB-filled capacitors have publicly announced their
intentions either to meet the expected new EPA standards or to cease the use of PCBs.
The behavior of these plants will largely depend upon which alternative treatment is
likely tp be used to meet the new regulations, and hence any analysis of the economic
8-13
-------
impacts upon these plants must also be related to these treatment alternatives. All
estimates of the impacts of the effluent control alternatives upon the production levels
of PCB transformers and capacitors at individual plants would be based upon
confidential data so these estimated are not presented.
8-14
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CHAPTER 9
LIMITS OF THE ANALYSIS
The data used in this report were Collected from some published sources, the Versar
Task II Report, corporate annual reports, industry sources, and proprietary information
obtained by the EPA. -
Five model plants were developed by synthesizing available data on eleven real plants.
In general, it would be reasonable to associate a real plant with at least one of the
model plants. However, plant-to-plant variations due to location factors and difference
in management practices may be encountered. Uncertainties in technology,
applicability of substitutes, costs, product mix and other regulations, could have
introduced errors. However, data presented in this study generally reflect typical
conditions in the transformer and capacitor industries and provide a reasonable basis for
evaluating the transformer and capacitor industries and provide a reasonable basis for
evaluating the economic impacts of Section 307 (a) controls.
Several critical assumptions and estimates were made in this study and pointed out at
various places. The following is a summary of the more important limitations: - ":
1. One important limitation is that investment capability had to be'based on
company-wide data rather than on the profits or prospects of PCB
operations alone. However, neither the cost of capital nor capital
availability appear to be the deciding factor in a plants decision. -- -- -:: r.
:^ -; 2-: The useful life of the effluent control equipment was considered to be three
years. If substitute dielectric fluids can be treated with the same equipment
as General Electric has agreed to do in its settlement with New; York State,
-.-;- the useful life for such equipment is greatly increased. A-longer life
;-: ,;-. expectancy would cause more plants to install the equipment and use PGBs
^: ::- -.;. -until the ban in 1980, in accordance with the Toxic Substances Control Act.-
9-1
-------
3. Efforts to conserve electricity can slow the growth in demand for electric
equipment generally, but still increase the demand for 'small capacitors in
motors and household equipment generally. States are considering laws in
addition to the federal Energy Policy and Conservation Act of December
1975. This analysis has been based upon current laws concerning energy
policy and conservation, as forecasting the outcome of the legislative
process is highly uncertain. However, if the laws under consideration are
enacted, they would probably increase the demand for small capacitors in
motors and household appliances.
4. The speed of adjustment of the product liability insurance industry and
various safety agencies is unknown and indeterminable until the capacitor
industry settles on a standard substitute for PCBs. Our analysis considered
these costs to be negligible for 1978 and 1979. See the discussion in
Chapter 8.
*
5. More mineral oil than is currently available would be required to replace all
PCBs. It is not known where and at what price sufficient mineral oil will
become available.
6. - - Plants were assumed to be fairly similar in characteristics for which specific
information was unavailable, (e.g., product lines, the ratio of fixed to
variable costs, and the cost of capital). If there are substantial differences
among plants with respect to those characteristics, these differences could
change the results of the investment analysis in Chapter 7. '-"-'- '.- ~-.-. ,\
The capacitor and transformer industries are currently undergoing a period
change due to government regulation of PCBs. These dynamic forces
ke it difficult to accurately forecast production and prices of PCB items.
tively small changes in these forecasts can cause singificant changes in
results of the analysis. For example, if production fell ^more than
Expected or prices could not be increased as much as projected more' plants
9-2
-------
4
-------
might stop using PCBs than the investment analysis showed. Conversely, if
production fell more slowly and prices could be increased more than
projected, more plants might install the treatment equipment.
8. It has been assumed that the sections of the Toxic Substances Control Act
that provide for exceptions to the ban on PCBs will not be used for
transformer or capacitor manufacturers. If these manufacturers were
exempted from the ban the likelihood of their installing treatment
equipment would increase .
9-3
-------
APPENDIX A
SPECIFIC TECHNICAL ISSUES
This appendix presents (1) specific issues that were investigated and found to be
unimportant for impact estimates, and (2) specific issues that seemed too technical for
most readers of the overall report. ------
CAPACITOR USE AND ENERGY CONSERVATION IN HOUSEHOLD APPLIANCES
On December 22, 1975 the Federal Energy Policy and Conservation Act* 42USC6201,
was enacted and became effective. The Federal Energy Administration was instructed
to propose standards for increased energy use efficiency for 1980 within 180 days from
passage. There is to be at least a 20% overall increase in efficiency in the 1972 energy
use rates of household appliances; that is, the energy consumed by all covered
appliances produced in 1980 must be 20% less than the energy consumed by all such
appliances produced in 1972.
According to -the proposed standards issued in the May 14, 1976- issue of the 1976
Federal Register, the increases in efficiency shown in Table A-l are to take place by
1980.
The 92-94% reduction in energy consumption by black and white TV sets makes it
obvious that the standards pertain to total energy consumption rather than rates of
energy use. For example, the number of black and White sets produced in 1980 is
expected to be small compared to that in 1972. .-.-•-.
Categories of appliance beyond the Table A-l list are included, but they do not contain
capacitors; however, they do affect the computation of the rtat least 20%" overall
improvement shown in the first line of Table A-l.
-effect on the demand for capacitors derives from the fact that adding^ additional
capacitors in parallel can have dramatic effects on energy consumption oT fractional
Jiorse_-power motors. For example, start-up energy use can be" reduced 60-80%. MrV
A-l
-------
TABLEAU-ENERGY CONSERVATION FOR APPLIANCES WITH CAPACITORS.
Appliances Which
Contain Capacitors
All covered appliances
Refrigerators and refrigerator-freezers
Freezers
Room air-conditioners
Clothes washers
Electric clothes dryers
Dishwashers
TV monochrome
TV color
% Decrease in Energy Use
for All Units Produced
At least 20%
43-50
33-40
28-40 -
11-50
16-14
22-40
92-94
50-80
Clifford Tuttle of the Electronic Industries Association, testified that the demand for
small capacitors in the U.S. would increase from its present $100 million to between 150
-and 175 million dollars by 1980 as a result of compliance with the Energy Policy and
Conservation Act [Ref. 4J . Some states are considering laws or reguations that would
restrict energy use beyond the proposed federal requirements. : -- - -
It is natural to inquire why these changes in energy requirements have not already
occured inasmuch as they do not require new technology. The answer seems to be that
:foc the-user of household appliances the operating costs have seemed less important
-than the appliance purchase price and the appliance reliability. In turn, manufacturers
have focused their attention on reliability and lower initial costs.
It appears that Mr. Tuttle, despite the circumstances of his testimony, has focused on
;the demand for total capacitors rather than capacitors affected by regulations on :the
: use of PCBs. The cost of liquid dielectrics in appliances using capacitors is a fraction
of total cost.
L.
A-2
-------
In summary, there appears to be no significant effects from proposed PCB effluent
controls on energy usage.
VIEWPOINT OF CONTROL EQUIPMENT MANUFACTURERS
This industry supplies filtration and carbon adsorption equipment. Some equipment
manufacturers assemble components from other manufacturers, but at least one
\ manufacturer produces all components. It is necessary for the supplier to work closely
i
with the purchaser so that the equipment can be custom designed to fit the exact needs.
i"
j
; The whole industry has had great difficulty in obtaining any contracts to treat PCB
, effluents; no transformer company is known to have ordered such equipment or is
i
! planning to order such equipment. General Electric has announced plans to treat
effluents from their Hudson Falls and Fort Edwards, N.Y. capacitor plants, but no other
| capacitor plant has announced such plans. This action by General Electric, resulted, in
part, from legal proceedings initiated by N.Y. State's Environmental Conservation
t
j Department; the action cannot be attributed solely to proposed federal controls under
Section 307 (a).
i ~
i
General Electric will discontinue accepting orders for products containing PCBs by July
; 1, 1977 but will continue to use the PCB treatment facility on whatever substitute fluid
!
; they use instead. Their $3.5 million pollution control system is scheduled for operation
by April, 1977. If other plants expect their substitute fluids to need treatment, the
likelihood of installing the system would tend to increase greatly. One of the major
- - . problems in marketing treatment equipment is the short usage period. This period may
be less than the time required for payback of investment outlays. :
A-3
-------
APPENDIX B
EXCER-PTS FROM FINANCIAL STATEMENTS I. „ _
The tables in this appendix summarize financial and sales data that were available and
used for this report.
B-l
-------
EXCERPTS 5TLOM FINANCIAL STATEMENTS
TABLE B-l
AVX CORPORATION
(in thousand* of dollars e.xctpt pvr shart amounts)
Continuing1 operations :
-, Net sales
, Costs, expenses and other income :
Cost of sales
Seilin;, general and administrative expenses
Interest expense . •
• • Other income
i
Income from continuing operations before
income taxes and -ninnrirv •nr?r+«t
1075
325.950
21.300
-1,008
:i4
ii52)
23.480
L 500
1974
834,096
26,727
4,539
59
(97)
31,333
2,753
1973
527,355
21,053
3,750
25
Clsl)
24.347
3.209
1972
322,170
16,311-
- 2,46* -
57
(54) -
19,238
2.382
1971
S16.692
13.159
•- 1.352 -
140
(29)
15.132
1,560
TABLE B-2
FEDERAL PACIFIC ELECTRIC COMPANY
for CORNELL-DUBILIER ELECTRIC COMPANY
(subsidiary)
3TATSM5HTS OP 2TCCMS A2Q RETAriiD EAE^fC-S
for the years ended ^ecetaber 21, 1=75 ar.d 197^
Hsvenusa:
Set salas $273,504,21^ 52=^,355,578
Hoyaitiss and other lacone 1.230.5?^ 1,717.22"
275.3-t.563 256,072.80°;
Casts and axnenses:
Ccsr of products sold 202,730,011 192,593,031
Selling and adoiaiatrative 30,315,023 30,j62,9O4
Ln-erast 3,-55,572 ^,2^1,010
Other expenses 3lS.«2 ^u.sg^
Income before ainority
interest and income taxes 29,01=,5C5 28,^63,597
B-2
-------
SCC2RPTS HICM FINANCIAL STATEMENTS
TABLE B-3
GENERAL ELECTRIC COMPANY
Ten-year financial summary
(Dollar amounts in millions; per-share amounts in dollars)
-Slimmary^aLoperalions _ _
Sales ol products and services
Materials, engineering and production costs
Selling, general and administrative expenses
Operating costs
.Operating msirgjn
Other income
Interest and other financial charges
_?_srninqs before income taxes and minority interest
Provision for "income faxes
Minority interest
Net earnings
„
1975
SI 3.399.1
10.1953
2.282.3
12.478.1
9?'.0
197.5
(1689)
9496
(C53.0)
(10.8)
Sean a
1974
$13.413.1
10.1370
2.230.5
12.418.1
995.0
1353
(180.1)
1.000.7
(3fl2. i)
Q0.2)
Sfiflfl 1
1973
$11,575.3
8.515.2
2.105.3
10.620.5
954.8
183.7
. <128.9):
1.011.6
(4187)
(7.8)
Seae «
1972
$10.239.5
7.509.6
1.915.2
9,424.3
814.7
1C9.2
. (1.06.7)
897.2
(364.1)
(3.1)
1971 -
$9.425.3
6,962.1
1,726.2
8,688.3
737.0
152.0
(96.9)
792.1
(317.1)
(3.2)
SALES 3Y CATEGORY
Year ancied Dacaaaer 31
SALZS
Consolidated Operations
Aarospace
Consuaer ,
Inaustrial Components and
Sys cams
Industrial Pover Equipment.
Iaternaciotia.1
51,623
2,383
2,865
2,131
1,584
5 1,514
2,782
3,158
2,249
1,330
$ 1,611
_ 3,097
3,723
2,477
2,318
1971 1972 1973
(in millions)
? 1,916
3,214
4,529
2,737
3,213
INCOME
Consoliiacad Operations
(income before cax«s)
Industrial Coirooneats and
Industrial Powar Equipment.
S 62 S
131
233
223
139
47 5
251
271
225
170
73 5
260
319
223
245
—
125
144 - • —
423
168 - -------
290 - :--.--
Operating Results By Major Categories
samings as a
:»retnt of sans
__ -7——
'nausirtai uamoonents ana systems
T. Consumer .
'ndustnai Power Equipment
- . .. Aerospace"
i . international -
. General Electric Credit Corporation
. 7j Corporate eliminations ...
— — ~ Total Company ..
1975
$ 4.320
. . . 1380
.. . . 2.322
.... 1,972
3,7*5
(2.44Q)
313.399
1974
S 4,529
3,214
2,787
1.916
3.218
(2.2S1)
313.413
__1325_
-322S- -
- ' 108
' -73 -
"158 .
: 52 -
19XL.
3254"
36.
tor •
75
174
43"
(125)
5608
1 975
5.2"=
3.3
" :~ 2.2
3.9
4.2
4.3
.137J
5.5%
2.7
3.3
3.3
5.4
4.5
B-3
-------
SXC2SPTS ?ROM FINANCIAL STATEMENTS
TABLE B-4
POLLUTION CONTROL-WALTHER, INC.
for HELENA CORP., (Subsidiary)
CONSOLIDATED STATEMENT OF INCOME (LOSS),
Revenues earned
Cost_ ot_ revenues earned
Operating expanses:
General and administrative
Selling
Interest income
Interest expense
State taxes on income
Minority interest In Iocs
Cumulative effect on years prior to
March 31, 1976 of a chang
for earned revenue on cer
(Nota 2)
-.. . . Net income (loss)
e
m operations
3 ion for
income
terest
ity interest
ative effect of a
nting principle
e in accounting
Ye
1976
$30.286,516
29,193.585
1,092.331
858,374
355,475
1,213,349
(121,018)
82,465
(149,024)
(187.577)
48,768
(236,345)
(236,345)
271.611
35,266
ar Btded March
1975
$20,429,470
19,510,975*
918.495
632.509
253,439*
885,948
32,547
97,810
(156,164)
(25,307)
(25.307) .
(25,307)
:
(25,307)
31,
1974
$7,591,359
7.308,827*
(217,468)
426,608
202,357*
628,965
(846.433)
96,925
(49,447)
-: (798; 953} .- .
r- (798; 953)--
43 ,986
(734,969!- -"
. " . ---:•- .-
(754.969)
B-4
-------
SXCSRPTS TSOM FINANCIAL STATEMENTS
TABLE B-5
RESEARCH-COTTRELL, INC.
(Thousands of Dollars except par share amounts)
; SUMMARY OF OPERATIONS
MEW ORDERS
*•". SACXECCT"
Sales
Cost or sales
Administrative, general and selling axoenses
Operating income (loss)
J- Other income (deductions)
interest sxoense
Miscellaneous, net
income i toss) from continuing ooeranons
cerora ncome taxes
1975
$245496
351493
223448
183489
33,459
(2.002)
(283)
5433
1974 _
5237.466 ._
330.243 — _
164.497
137.356
23,349
'2.308)
(1,732)
233
,'3.307)
_ 1973
_S231.711
—257.27A . ..
140.174
107.945
22.345
9.334
'541)
135
9.023
1972
5147,420
165,737
132,777
99.354
22.336
11,037
(316)
(33)
10.638
1971
SI 56.578
151,094
102.524
77,219
17.041
3.364
^•470)
'2)
7,392
SALES AND INCOME 3Y LINES OF BUSINESS on thousands)
Sataa
1975
1974
1973
1972
1971
Air Pollution Control (also includes
Rex-Kleen. international
Ooerations and Oxy-Cataiyst) J143J42 531.419 S 65.337 S 59,121 555.084
Cfiimneys
Coonng Towers
environmental Sngmeenng
Total
Income (Lou)
Air Pollution Control
Chimneys
Cooling Towers
Environmental Engineenng
Unallocated General Corporate
cxoenses and Other income
and Deductions
Income Taxes (C-eoit)
Net income i Loss)
34^50
19,99*
25.SS8
S323.S46
S 1,799
4,851
1420
3,411
S 11,291
5,348
2470
S 2,383
29.632
30.202
23.244
5164.497
S (3.550)
3.284
2,770
3.164
S 663
4,475
(559)
S (3.248)
24.334
27.201
22.752
5140.174
S 2.779
2.796
2.110
3,390
S 11.075
2.047
4.509
5 4.519
23.157
19.021
21,478
5132.777
S 5.399
2.902
1,030
2.925
S 13.256
2.563
5.353
S 5.335
13.050
1 1 .950
17.540
5102.524
S 5,102
2.394
247
2.258
S 10.001
2.109
3.943
S 3.949
B-5
-------
EXCERPTS FROM FINANCIAL STATEMENTS
TABLE 3-3
SANGAMO ELECTRIC COMPANY
Profit and Loss Information
Cos:.; ir.ci e.-cpenadS, including interest expense
o: 0.395, 000 ($1, 115, 000 in 1974)
Encsfrtu before income taxes, minority interests
erscit
ir'or the Nin* Month's
..Ended Sxata.T.!jffr SiJ.
1575 137-1
(CTna. milted)
$93, 194,000 106, 343, 00.'
93,025. 300 - 96-. 453. Z'.:.
5, 169, 000 10, 395, '„"?•:_
Consonoarea statement
of Operations
Sales (a) (b)
Cost of sales
Selling and administrative
expenses
- Interest expense (h)
Income before income taxes,
•minority interests and
1970
13,897
lj.317
4. 581
Vear £nded Decemoer 3!
1971
1972
(In thousands of dollars)
3108,925 107,134 113,420 127, 170 145,902
33,630 83,561 35,312 96,330 108,429
19,557 13,086 13,991 21,491
__L245 594 743 1.686
104,344 104.363 103.992 116,064 131.606
2,321
9, 423 T 11.106 .. _14. 2_96_
TABLE B-7
SPRAGUE ELECTRIC COMPANY
Net laies
Cost cf jO
* Se»i"5. ;s
- ^esaarcn.
' ' " " " ••> 9r:iir>n
r - - - - - -Miscsilans
" Tcuunes ar sciiars)
RMiUta
3os said
•rsra! and administrative sxoenses
aeveicoment and sngineenng *.xo«nsas
'ncorfle (loss)
>ous income fsxpensa)—
-------
SXC2HPTS FROM FINANCIAL STATEMENTS
TABLE B-8
WESTINGHOUSE CORPORATION
•
.........
'.amounts TT thousands of dollars)
'ncome:
Ecuity »n income 'ossi from non-consolidated
5u^S)diar"*s and affiliated ccmoanies
C;ner ncome
Cost and axoenses:
it,forost
1 rc~me 'axes
1 Minority .merest n net .ncome of
1 -onsondatsd suosidianes
' '^c^me *rrm c^ntinuind ocerations
(amounts ;n thousands ofdoi'ars)
Power Systems
- 'ndusfry Products "."«-.
i Public Systems . ... .- ~
Broadcasting
" * Other -.-.- .:
1 Total^..;....". ....^.
1
1 • - " „,, ,„
(amounts in thousands of-doilars)
Power Systems
'. Industry ?foducts
-P-jbiic Svstsms . -
-Other ..;.:: ::
-' "• Jpcsme 5£fai"e 'axes 'ram- continuing ocerations . .
"- Hncame taxes _-.-. : -.
1973
35.862.747
(4.513)
70.374
5.923.508
.... 4 347 151
901 233
128,323
76.425
93.335
2.452
5, "49,384
' 73 524
1975
32 194 737
... 2 206 371
1 283 189
144 782
33.668
S5.362.747
•975
S 55 352
163 5~7
*5 *^1 2
39 =60
9.010
. . 774 31 1
33.335
-/«*-
35.798513
(32.23S)
71 =90
5.333 113
4 563 "45
727 i26
123.313
111.251
53.370
3.25?
5.539.181
'33 937
J9T4
32. 011-,' 36
2.196.519
1.399.794
135 754 '
55.310
55.798.513
5 13.534
157 "-14
•16.406)
33.G67
3.223
206 !63
63.370
197J
35.101.123
3341
53.567
5.r 63. 031
3.360.412
398 775
'07564
59317
145.333
2.516
4 384 5 1 7
'33514
.
31.776.447
1,767.969
1.375.360
120.537
30.210
S5.-01.123
'373-
S 113.006
-U3.049
15.321
33.460
. . 26.527
-331,363
145.333
"»ar S.idaa
34.498.564
24.510
55.332
4578.706
3 446,463
525.325
;6."30
54 577
153.324
2.436
4 373.356
•99.750
fnr snaaa
1972
31,542.697
1.482.030
1.205.579
116,446
51,712
34.498,564
rear =id»a
•
S 145.572
115,029
23.934
32,"01
. - 38.274. .
355.510
153.324
Oecemo«r 31
„
34.126.500
36.163
52.386
4215.149
3.U6 734
338.331
34,384
66462
1 37,399
3.470
4 033.330
•31.213
197'
31,504.097
1,392.115
1.093.413
109.475
27,500
34.125.500
C»csmotr 31
S 130,560
30.335
23.345
31.708
5.2.74Q
313.688
137,399
B-7
-------
REFERENCES
. 1. Versar, Inc., PCB Water Elimination/Reduction Technology and Associated,_CQsts,
-Marrcrfaeturers of Electrical Capacitors and Transformers,, j^ddendurn. to Final.
Report, Task II, Contract No. 68-01-3259, 2 July 1976.
2; - Electronic Industry Association, Electronic Market Data Book, 1976 Edition, pp.
81 ff.
-3. Electrical World, 27th Annual Electrical Industry Forecast, pp. 43-58. :
4. U.S. Environmental Protection Agency, Industry Views on the Use of
Folyctflorinated Biphenyls in Transformers and Capacitors^ jungJL976)_ContraGt_
No. EPA 560/4-76-003.
5. Versar Inc., PCBs in the United States Industrial Use and Environmental,
Distribution, Task I Final Report, Contract No. 68-01-3259, 25 February 1976.
6. Electrical Week, 29 March 1976, pp. 8-9. -
7. Electrical Week, 26 July 1976, pp. 7-8. ^_
8. Versar Inc., Assessment of Wastewater Management, Treatment Technology.^ and
jv^rt^vj"*-. 4v+rav-ji /"* *i»«*i.r^^^r«^^^^i.rTr4^^3T*^^*^^^FTR/^Tcr!T™7ai'n. U.S.:Department of Commerce, Selected Electronic and AssociatedTrbducts,'
~ IncludlngTelephone and Telegraph Apparatus, 1973, Series: MA-36N(73>il. '-''- '--''-
R-l
-------
REFERENCES (Continued)
16. U.S. Department of Commerce, Selected Electronic and Associated Products,
IhGludTng Telephone and Telegraph Apparatus. 1975, Series: MA-36N(75>-1.
1-7. General Electric Company, Schenectady, N.Y., The Role of Polychlorinated
Biphenyhls in Electrical Equipment, 4 February 1972. ;
18. Interdepartmental Task Force on PCBs, Polychlorinated Biphenyls and the
~~ Environnrent Washington, B.C., May 1972, National Technical Information Center.
19. Electronic Industry Association, Statement of Electronic Industry Association to
EPA Concerning Proposed Toxic Pollutant Effluent Standards for Polychlorinated
Biphenyls (PCB).
20. General Electric Company, "The Impact of a "Ban" on the Use of PCB in
Capacitors," Enclosure in letter to Dr. Martha Sager, Chairman of Effluent
Standards and Water Quality Information Advisory Committee, 21 November 1973.
21. Electrical Week, 30 August 1976, pp. 5-6. ^ ___________________
22. Clark, Dietz and Associates, Engineers, Inc. Wastewater Management Summary of
--
23. Hutzinger, O.S. Safe, and V. Zilks, The Chemistry of PCBs, CRC Press, 18901
Cranwood Parkway, Cleveland, Ohio 44128.
24. National Academy of Sciences, Principles for Evaluating Chemicals in the
Environment, 1973. - _______
25. PL92-500: Water Pollution Control Act Amendment of 1972. Section 307 (a).
26. Toxic Substances Control Act, Section 6 (e). Signed October 12, 1976 by President
Ford.
27. Chemical Week, "G.E. Settles on PCBs," 15 September 1976. p. 14. _
28. Environmental Protection Agency, Office of Planning and "Evaluation, Economic
Analysis Division, Estimation of the Cost of Capital for Major United States
"Industries with Application to Pollution Control Investments,. jj
4-55.
29. Electronic News, "Capacitor Shipments Off 30% to 2.& Billion Units," Martin Gold,
May 24, 1976, p. 35.
30. Electronic News, "U.S. Capacitor Shipments Rise 76%," 20 September 1976; p. 40,
JU> Executive Office of the President, Office of Mangament and Budget, ^Discount
~ Rates to be Used in Evaluating Time-Discounted Costs and Benefits,'^ Circular No.
A-94, March 27, 1972. --- --^ -
R-2
-------
f-
{(
I
REFERENCES (Continued)
32. Standard <5c Poor's New York Stock Exchange Report for Westinghouse Electric
Corporation, July 27, 1976, p. 2470.
33. Business Week, October 18, 1976, p. 48.
34. 'Massachusetts Institute of Technology, Center for Policy Alternatives, The Impact
.'oT Governmental Restrictions on the Production and Use of Chemicals, F
35. Business Week, "Survey of Corporate Performance: Second Quarter 1976— Profits:
The Improvement Continues," August 16, 1976, pp. 71-90.
36. Electronics, "U.S. Markets: Forecast 1976," Economics Department, McGraw-
Hill, Vol. 49, No. 1, January 8, 1976, p. 92. (Part of World -Electronics Markets
MOUNTING A PUSH TOWARD A SLOW MODEST RECOVERY), pp. 83-95.
37. Standard & Poor's American Stock Exchange Report for AVX Corporation, JunejB
1976, p. 7023.
s
38 . Standard & Poor's New York Stock Exchange Report for _General_Electric
Company, July 26, 1976, p. 966.
39. Standard & Poor's American Stock Exchange Report for Research-Cottrell, Inc.,
September 2, 1976, p. 9005.
40.: .Standard & Poor's New York Stock Exchange Report for Sprague Electric
Company, August 31, 1976, p. 2094. :
.41. Progress Report Task Order V - Detailed Technical Market and Economic Impact
"Study of the Environmental Role of PCBs in the Electrical jind Inyestm en r
Casting Industries, May 4, 1974, p. 10. '~-~.l~~ ._.~~ ".'.-" ......
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