April 1982
REGULATORY IMPACT ANALYSIS OF THE
PROPOSED RULE FOR PCB-CONTAINING
ELECTRICAL EQUIPMENT
by
Charles J. Queenan III
Michael M. Schnitzer
Contract #68-01-5943
and
Work Assignment #2 Contract #68.-Qlr6287
Amy Moll
Sammy K. Ng
Economics and Technology Division
Office of Toxic Substances
Washington, DC 20460
OFFICE OF PESTICIDES AND TOXIC SUBSTANCES
U.S. ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, DC 20460
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April 1982
REGULATORY IMPACT ANALYSIS OF THE
PROPOSED RULE FOR PCB-CONTAINING
ELECTRICAL EQUIPMENT
by
Charles >J. Queenan III
Michael M. Schnitzer
Contract #68-01-5943
and
Work Assignment #2^ Contract- #68.-01-6287
Amy Moll
Sammy K. Ng
Economics and Technology Division
Office of Toxic Substances
Washington, DC 20460
OFFICE OF PESTICIDES AND TOXIC SUBSTANCES
U.S. ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, DC 20460
-------
This report was prepared under contract
to an agency of the United States
Government- Neither the United States
Government nor any of its employees,
contractors, subcontractors, or their
employees makes any warranty, expressed
or implied, or assumes any legal
liability or responsibility for any third
party's use or the results of such use of
any information, apparatus, product, or
process disclosed in this report, or
represents that its use by such third
party would not infringe on privately
owned rights.
Publication of the data in this document
does not signify that the contents
necessarily reflect the joint or separate
views and policies of each sponsoring
agency. Mention of trade names or
commercial products does not constitute
endorsement or recommendation for use.
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TABLE OF CONTENTS
LIST OF TABLES - iv
•
EXECUTIVE SUMMARY ix
PCB Capacitors .... . xiv
Askarel Transformers xvii
Mineral Oil Transformers — - xvii
Electromagnets, Voltage Regulators, Cables
and Switches/Sectionalizers xx
Circuit Breakers and Reclosers- xxiii
Summary . xxiii
Chapter 1
INTRODUCTION . 1
Chapter 2
CONSIDERING ALTERNATIVE APPROACHES 5
PCB Capacitors 7
Askarel Transformers 9
Mineral Oil Transformers 11
Electromagnets, Voltage Regulators, Cables,
and Switches/Sectionalizers 12
Circuit Breakers and Reclosers 13
Chapter 3
ASSESSING BENEFITS 14
PCB Capacitors 17
Askarel Transformers 18
PCB-Contaminated Transformers 22
Circuit Breakers, Reclosers, and
Other Equipment 26
ii
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TABLE OF CONTENTS (Continued)
Chapter 4
ASSESSING COSTS . 28
PCB Capacitors - 29
Askarel Transformers ~ 29
PCB-Contaninated Transformers — 33
Circuit Breakers, Reclosers, and Other
Utility Electrical Equipment . ^. 33
Chapter 5
EVALUATING BENEFITS AND COSTS 37
PCB Capacitors 38
Askarel Transformers 38
PCB-Contaminated Transformers 43
Other Utility Equipment 43
Chapter 6
REGULATORY FLEXIBILITY ACT 46
REFERENCES .. .. 50
Appendix A
PROCEDURE FOR ANALYSIS OF ALTERNATIVE
NEW RULES REGULATING THE USE OF
PCBS IN ELECTRICAL EQUIPMENT 52
Appendix B
ACCELERATED PHASE-OUT OF PCB-CONTAINING ELECTRICAL
EQUIPMENT POSING DANGER TO FOOD AND FEED 77
Appendix C
DISPOSAL CAPACITY REQUIRED TO ACCOMMODATE
ACCELERATED PHASE-OUT OF PCB-CONTAINING
ELECTRICAL EQUIPMENT . 85
Appendix D
COST-EFFECTIVENESS OF INCREASED
INSPECTION FREQUENCY 89
AptJendix E
COMPARISON OF PHB AND EEI "COST" ESTIMATES 95
Appendix F
COST OF CLEAN-UP FOR PCB SPILLS 100
iii
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LIST OF TABLES
Page
Table S-l. Utility-Owned PCB Electrical
Equipment....— . ~xi
Table. S-2. Summary of Alternatives Analyzed:
Utility-Owned PCB Electrical
Equipment.... xiix
Table S-3. Benefits, Costs and
Cost-Effectiveness of Alternative
PCB Capacitor Regulation xv
Table S-4. Relative Benefits, Costs and
Cost-Effectiveness of Alternative
PCB Capacitor Regulation. xvi
Table S-5. Benefits, Costs and
Cost-Effectiveness of Alternative
Askarel Transformer Regulation xviii
Table S-6~ Relative Benefits, Costs and
Cost-Effectiveness of Alternative
Askarel Transformer Regulation xix
Table S-7. Benefits, Costs and
Cost-Effectiveness of Alternative
Mineral Oil Transformer Regulation... xxi
iv
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LIST OF TABLES (CONTINUED)
Paqe
Table S-8.
Table 1.
Table 2.
Table 3.
Table 4.
Table 5.
Table 6.
Table 7.
Table- 8 .
Table 9.
Table 10 .
Table 11.
Relative Benefits, Costs and
Cost-Effectiveness of Alternative
Mineral Oil Transformer Regulation...
Utility-Owned PCB Electrical
Equipment -
Summary of Alternatives Analyzed:
Utility-Owned. PCB Electrical
Equipment -
Utility-Owned. PCB Capacitors:
Benefits Assessment of Regulatory
Alternatives
XXIX
Utility-Owned PCB Capacitors:
Benefits Sensitivity Analyses.~.
Utility-Owned Askarel Transformers:
Benefits Assessment of Regulatory
Alternatives
Utility-Owned Askarel Transformers:
Benefits Sensitivity Analyses
Utility-Owned PCB-Contaminated
Transformers: Benefits Assessment
of Regulatory Alternatives
Utility-Owned PCB-Contaminated
Transformers: Benefits Sensitivity
Analyses
Utility-Owned PCB Capacitors:
Costs Assessment of Regulatory
Alternatives
Utility-Owned PCB Capacitors:
Costs Sensitivity Analysis...
Utility-Owned Askarel Transformers:
Costs Assessment of Regulatory
Alternative^
19
21
23
24
25
27
30
31
32
v
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LIST OF TABLES (CONTINUED)
Page
Table 12. Utility-Owned Askarel Transformers:
Costs Sensitivity Analysis 34
Table 13. Utility-Owned PCB-Contaminated
Transformers: Costs Assessment
of Regulatory Alternatives 35
Table 14. Utility-Owned PCB-Contaminated
Transformers: Costs Sensitivity
Analysis 36
Table 15. Utility-Owned PCB Capacitors:
Cost-Effectiveness of Regulatory
Alternatives - 39-
Table 16. Utility-Owned PCB Capacitors:
Relative Cost-Effectiveness of
Regulatory Alternatives - 40
Table 17. Utility-Owned" Askarel Transformers:
Cost-Effectiveness of Regulatory
Alternatives....... 41
Table 18. Utility-Owned Askarel Transformers:
Relative Cost-Effectiveness of
Regulatory Alternatives. 42
Table 19. Utility-Owned PCB-Contaminated
Transformers: Cost-Effectiveness
of Regulatory Alternatives 44
Table 20. Utility-Owned PCB-Contaminated
Transformers: Relative
Cost-Effectiveness of
Regulatory Alternatives 45
Table 21. Impact of Accelerated PCB Capacitor
Phase-Out on Small Non-Utility Firms. 48
Table A-l. Variable Inputs to Computer Model
for Utility-Owned PCB Capacitors 67
vi
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LIST OF TABLES (CONTINUED)
Page
Table A-2.
Variable Inputs to Computer Model
for Utility-Owned Askarel
Transformers
68
Table A-3. Variable Inputs to Computer Model
for Utility-Ovmed Mineral Oil
Transformers
69
Table B—1.
Table 3-2.
Table B-3.
Cos-t-Effectiveness of Use
Authorizations for PCB Capacitors
Posing Danger to Food and Feed*
Cost-Effectiveness: An Alternative
Estimate for PCB Capacitors
Posing Danger to Food and Feed
Cost-Effectiveness'of Use
Authorizations for Askarel
Transformers Posing Danger
to Food and Feed....
79
80
81
Table B-4-.
Table B-5
Table B-6.
Table G-l.
Table D-l.
Cost-Effectiveness: An Alternative
Estimate for Askarel Transformers
Posing Danger to Food and Feed
Cost-Effectiveness of Use
Authorizations Subject to Inspection
for PCB Capacitors Posing Danger to
Food and Feed...... ~
Cos-t-Effectiveness of Use
Authorizations Subject to Inspection
for Askarel Transformers Posing
Danger to Food and Feed
Peak PCB Disposal Capacity Required
for Accelerated Phase-Out of PCB
Capacitors and Askarel Transformers.
PCB Capacitors: Required Reduction
in Spill Volume per Year for
Inspections to be Cast-Effective....
82
83
34
87
91
vi J.
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LIST OF TABLES (CONTINUED)
Page
Table D-2. Askarel Transformers: Required
Reduction in Spill Volume per Year
for Inspections to be Cost-Effective. 92
Table E-l. EEI/PHB Cost Comparison.- 96
Table E-2. EEI/PHB Cost Comparison 99
Table F—1. Calculation of PVSPILLS for
Utility-Owned Equipment- 104
viii
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EXECUTIVE SUMMARY
On 12 February 1981, the U.S. Court of Appeals for
the District of Columbia Circuit issued an order requiring
EPA to conduct a rulemaking concerning the use of PCBs in
electrical equipment. The court also ordered EPA to
complete this new rulemaking by 12 August 1982. In
response to the court's order, EPA proposes to amend the
existing PCB rule to allow the continued use of PCBs in
eight different types of electrical equipment. EPA
proposes to authorize, pursuant to section 6(e) (2) (B) of
the Toxic Substances Control Act (TSCA) , the use of PCBs
in:
©¦ Capacitors — through 1992 subject to quarterly
inspection and maintenance requirements;
o= Transformers — indefinitely, except that use in
PCB transformers is subject to quarterly
inspection and maintenance requirements;
o> Electromagnets;
©. Voltage regulators;
o Cables;
© Switches/sectionalizers?
® Circuit breakers; and
o Reclosers.
ix
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While EPA does not believe that the proposed rule is
a major rule as defined in section l.b of Executive Order
12291, this Regulatory Impact Analysis (RIA) has
nonetheless been prepared addressing, to the extent
possible, the requirements set out in E.O. 12291.
However, due to the time constraints imposed by the
court-ordered schedule, both the scope and depth of the
RIA have been limited.
The major data source upon which this RIA is based is
the Edison Electric Institute (EEI, 1982) report. Time
constraints have precluded a critical review of the EEI
study to assess the validity of the data it provides. In
addition, the EEI 'study addresses utility-owned PCB
electrical equipment only. Hence, a quantitative analysis
is feasible only for utility-owned equipment. However,
the results of this analysis are believed to be generally
applicable to non-utility electrical equipment as well.
For the purposes of this regulatory impact analysis,
the eight types of PCB-containing electrical equipment
proposed to be authorized 'were reclassified into five
categories:
a- PCB capacitors;
• Askarel transformers;
• Mineral oil transformers;
• Electromagnets, mineral oil voltage regulators,
oil-filled cables, and mineral oil
switches/sectionalizers; and
• Mineral oil circuit breakers and mineral oil
reclosers.
As Table S-l shows, the effect of this reclassifica-
tion is toi isolate the three largest sources of PCBs —
PCB capacitors, askarel transformers and mineral oil
transformers — from the remaining types of electrical
equipment* \ These six remaining equipment types were split
into two groups, roughly according to their average level
of PCB contamination.
Within each classification, the base case is the case
where EPA does not undertake a further rulemaking and, as
x
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Table S-l. Utility-Owned PCB Electrical Equipment
Equipment Type
Number
of Utility-
Owned Units
Total Fluid
Volume
(Gallons)
Total
Pounds PCBs
Average PCB
Concentration
PCB Capacitors
2,800,619
7,547,669
87,552,960
100%
Askarel Transformers
39,640
8,525,404
74,597,283
70%
Mineral Oil
Transformers
20,227,428
958,365,880
262,230
36 ppm
Electromagnets
77
7,700
3a
50 ppma
Voltage Regulators
145,159
17,840,968
6,707
49 ppm
Cable
Switches/
Sectionalizers
6,545 miles
385,768
30,413,005
1,415,769
2,31lb
329
10 ppim^
31 ppm
Circuit Breakers
180,939
137,335,668
12,685
12 ppm
Reclosers
170,158
3,403,670
410
16 ppm
23,949,788+
6,545 miles
1,164,855,733
162,434,918
SOURCE: EEI/USWAG (1982, pp. 9, 10, 109, A-14, A-15). Average concentrations calculated by
Putnam, Hayes & Bartlett, Inc. from EE! data, except where cited.
aAssuming from EEI (1982, p. 109) that "there are no data to suqgest that contamination levels
are higher in electromagnets than in other types of equipment."
^Assuming from EEI (1982, p. 9) that "twenty-two tests were available and all indicated PCB
concentrations of less than 10 ppm."
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a consequence, the use of all PCB electrical equipment is
banned on. 12 August 1982. Alternatives to the base case
include 10-, 20- and 30-year equipment phase-outs,
retrofilling- (where technically feasible), secondary
containment (where technically feasible), and inspection
and maintenance programs to reduce spill volume and/or
exposure. The alternatives analyzed for each of the five
equipment classifications are summarized in Table S-2.
Due to time constraints, the last two equipment categories
received a limited, qualitative assessment.
Given that the base case results in the banning of
all. PCB electrical equipment, the benefits and costs of
regulatory alternatives take on different definitions from
those which normally prevail. The benefits of alternative
regulations are the value of avoided or deferred costs,
either direct, or indirect, that are otherwise associated
with the base case. The costs of alternative regulations
are the injury to health and environment that result from
the- incremental release of PCBs into the environment, as
compared to the amount released in the base case. As a
practical matter, the data 'required, to estimate human
exposure were not available,* so the incremental weight of
PCBs spilled, as compared to the base case, was used as a_
surrogate for injury to health and environment.
By definition these costs and benefits are
comparative — they represent the incremental effects from
the base case. Thus for each regulatory alternative, the
costs (in the classical sense of the word) and expected
pounds of PCBs spilled were calculated over the 1982 to
2012 time period (inclusive) . Benefits were then
calculated as the decrease in costs, and costs were
calculated as the increase in pounds spilled. In
addition, the cost-effectiveness of each alternative was
assessed by calculating the ratio of benefits to costs.
This ratio measures the dollars saved per additional pound
of PCBs spilled. The higher the ratio value, the greater
*" While some data were provided by EEI (1982, Volumes II
and IV), information describing the physical distribution
of PCB-containing electric equipment is sparse. This
information is necessary to estimate the magnitude of
direct exposure and of food and feed contamination that
would result from PCB spills.
xii
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Table S-2. Summary of Alternatives Analyzed:
Utility-Owned PCB Electrical Equipment8
Immediate Immediate Inspection and Maintenance
Phase-Out 10-Year 20-Year 30-Year Retro- Immediate 10-Year 20-Yeqr 30-Year
Equipment Category (Base Case) phase-Out Phase-Out Phase-Out fill Containment Phqse-Ouf: Phase-Out Phase-Out
PCB Capacitors
Askarel Transformers
Mineral Oil
Transformers
Electromagnets,
Voltage Regulators,
Cable, Switches/
Sectlonallzers
Circuit Breakers,
Reclosers
X
X
X
X
X
X
X
X
* *
XXX
X x
Qualitative Assessment
Qualitative Assessment
X
X
X
X
X
X
X
SOURCE: Putnam, Hayes & Bartlett, Inc.
£
Similar non-utility-owned equipment categories could only be assessed qualitatively.
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the benefits of the alternative per pound spilled,
relative to the base case. The results for each equipment
category are summarized below.
PCB CAPACITORS
The base case for PCB capacitors is dominated by
indirect costs. As the entire national electric
distribution system is dependent on PCB capacitors, a ban
on their use would result in. a serious disruption of
electrical service for an extended period. The cost of
such interruptions has been conservatively estimated by
PHB to exceed $175 billion, even if the disruption in
service lasted for only one month- A disruption of only
one month would require that over 2 million capacitors
could be replaced in that time — an extremely optimistic
assumption.
Given the tremendous magnitude of the indirect costs
associated with the base case, any regulatory alternative
which avoids very large PCB -releases will result in net
benefits to society. Hence, an evaluation of alternatives
centers on cost-effectiveness, and on whether a given
alternative "will not present an. unreasonable risk of
injury to "health or the environment." As shown in Table
S-3, all of the alternatives examined produce positive
benefits ranging from $444 million to $709 million (in
addition to the benefit of avoiding the $175 billion
indirect cost). Not surprisingly, benefits increase as
the authorization period lengthens. However, the cost of
these alternatives ranges from 2.0 million to 4.6 million
additional pounds of PCBs released. Again, the longer the
authorization period, the larger the incremental PCB
release. The ratio of benefits to costs ranges from $153
to $217 saved per incremental pound of PCBs released.
As a comparison, benefits and costs could be defined
relative to an indefinite authorization (essentially the
conditions which prevail today as a result of the Court's
stay of mandate). Table S-4 presents relative benefits
and costs using the alternative base case of a 30-year
phase-out (tantamount to indefinite authorization).
xiv
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Table S—3. Benefits, Costs and Cost-Effectiveness¦of
Alternative PCB Capacitor Regulation
Benefits3" Costs Effectiveness13
Alternative ($ Millions) (Pounds) ($/pound)
1.
Ten-Year Phase-Out
450
2r702 ,000
166.5
2 .
Twenty-Year Phase-Out
692
4,504,000
153.5
3.
Thirty-Year Phase-Out
709
4,649 ,000
152.5
4.
Thirty-Year Phase-Out
444
2,046 ,000
216.8
with Immediate Con-
tainment of Substation/
Generating Station
Equipment
SOURCE: Putnam, Hayes & Bartlett, Inc. calculations based on
methodology and data sources described in Appendix. A.
aExcluding avoided indirect costs.
^Dollars saved per incremental pound of PCB release.
xv
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Table S-4. Relative Benefits, Costs and Cost-Effectiveness of
Alternative PCB Capacitor Regulation
Benefits3" Costs Ef fectiveness*3
Alternative ($ Million) (Pounds) ($/pound)
1.
Immediate Phase-Out
709
4,649,000
152.5
2.
Ten-Year Phase-Out
259
1 ,947,000
133 .0
3.
Twenty-Year Phase-Out
17
145,000
117.2
4.
Thirty-Year Phase-Out
265
2 ,603 ,000
101.8
with Immediate
Containment of
Substation/
Generating- Station
Equipment
Base Case: Phase-out of all PCB capacitors by 2012 (essentially an
indefinite authorization).
SOURCE: Putnam, Hayes & Bartlett, Inc. calculations based on
methodology and data sources described in Appendix A.
aExcluding avoided indirect costs.
^Decrease in benefits per incremental decrease in PCB release.
xvi
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ASKAKEL TRANSFORMERS
The base case for askarel transformers, immediate
phase-out, is dominated by indirect costs — and for the
same reason that the base case for capacitors is dominated
by indirect costs. While fewer in number, askarel
transformers play a crucial role in the production and
distribution of electricity, particularly in urban areas.
Again, given the magnitude of the costs of electric
service interruptions, almost any alternative which does
not. result in. large- PCB. releases will produce net
benefits- The key considerations are cost-effectiveness
and whether the alternative "will not present an
unreasonable risk of injury to health or the environment."
As shown in Table S-5, all but one of the
alternatives (immediate retrofill) produce benefits
ranging from $12 million to $526 million (excluding the
benefits of avoiding the $175 billion indirect cost).
Again, the longer the authorization period, the greater
the- benefits_ However, all of these alternatives (except
structural containment and retrofill) result in increased
release of PCBs.. The additional pounds released range from
135 thousand to- 213 thousand pounds. The ratio of direct
benefits to costs ranges from $2,470 to $2,660 saved per
incremental pound of PCBs released for various
authorization periods.
As for capacitors, Table S-6 presents relative
benefits and costs measured against the alternative base
case of a 30-year phase-out (essentially indefinite
authorization).. Using this increase, cost-effectiveness
ranges from $1,789 to $3,049 per pound of PCB spill
avoided.
MINERAL OIL TRANSFORMERS
The 20 million mineral oil transformers currently in
service are critical to the production, and distribution of
electricity. As- a result,, the base, case for mineral oil
transformers is also dominated by the over $175 billion
indirect cost that would result from a ban on this
equipment. The analysis has once again focused on
cost-effectiveness and on whether am alternative "will not
present an unreasonable risk of injury to health or the
environment."
xvii
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Table S-5. Relative Benefits, Costs and Cost-Effectiveness of
Alternative Askarel Transformer Regulation
Alternative
Benefits
($ Million)
Costs
(Pounds)
Cost- ,
Effectiveness
($/pound)
1„ Ten-Year Phase-Out 358
2. Twenty-Year Phase-Out 519
3. Thirty-Year Phase-Out 526
4. Thirty-Year Phase-Out 12
with Immediate
Containment
5.. Thirty-Year Phase—Out (123)
with. Immediate Retrofill
134,547
208,976
212,888
0
2,661
2 ,484
2,471
CO
-oo
SOURCE: Putnam, Hayes & Bartlett, Inc. calculations based on
methodology and data sources described in Appendix A.
Excluding- avoided indirect costs.
^Dollars saved per incremental pound of PCB release.
xviii
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Table S-6. Relative Benefits, Costs and Cost-Effectiveness of
Alternative Askarel Transformer Regulation
Alternative
Benefits
($ Million)
Costs
(Pounds)
Cost- ,
Effectiveness
($/pound)
1. Immediate Phase-Out 526
2_ Ten-Year Phase-Out 168
3 _ Twenty-Year Phase-Out 7
4. Thirty-Year Phase-Out 514-
with Immediate
Containment
5. Thirty-Year Phase-Out 649-
with. Immediate
Retrofiil
212,888
78,341
3,912
212,888
212,888
2,471
2,144
1,789
2,414
3,049
Base Case: Phase-out of all askarel transformers by 2012
(essentially an. indefinite authorization) .
SOURCEr Putnam, Hayes £ Bartlett, Inc. calculations based on
methodology and data sources described in Appendix A.
Excluding avoided indirect costs -
^Decrease in benefits per incremental decrease in PCB release-
xix
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As shown in Table S-7, all of the alternatives
produce benefits ranging- from $313 million to $8.2 billion
(in addition to the benefit of avoiding the $175 billion
indirect cost).' The benefit associated with a 30-year
authorization, $8.2 billion, is much larger than the
corresponding benefit for capacitors and askarel
transformers, reflecting the value of avoiding the cost of
testing 20 million pieces of equipment. Again, these
benefits increase as the authorization period increases.
The additional pounds of PCBs released range from 390 to
600 pounds. This much smaller increase reflects the lower
concentration of PCBs in mineral oil transformers.
Finally, the ratio of benefits to costs ranges from $6.0
million to $13.7 million saved per additional pound of
PCBs released. The much higher benefit-to-cost ratios for
mineral oil transformers result from the magnitude of
avoided testing costs and from the relatively small
quantities of PCBs that would be spilled, due to the low
level of contamination of mineral oil transformers.
If benefits and costs are measured against the
alternative base case of a 30-'year phase-out (as in Table
S-8) , cost-effectiveness ranges from $13.2 million to
$27.9 million per pound of PCB spill avoided.
ELECTROMAGNETS, VOLTAGE REGULATORS, CABLES
AND SWITCHES/SECTIONALIZERS
While a detailed analysis of these types of equipment
was not possible due to time constraints, the benefits and
costs have been qualitatively assessed. With the
exception of electromagnets, all of these equipment items
are crucial to the production and distribution of
electricity. Accordingly, the indirect costs associated
with a bam on their use would again probably dwarf the
direct costs. Given that the average level of PCB
contamination is similar to that of mineral oil trans-
formers, if the spill rates and equipment lives are
anywhere near comparable, the indefinite authorization of
such equipment would result in additional PCB releases on
the order of 20 pounds. It is also anticipated that the
ratio of dollars saved to additional pounds released is on
the same order of magnitude as those for mineral oil
transformers — that is, extremely large.
xx
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Table S—7. Benefits, Costs and Cost-Effectiveness of
Alternative Mineral Oil Transformer Regulation
Alternative
Benefits
($ Million)
Costs
(Pounds)
Cost- j
Effectiveness
($/pound)
1.
Ten-Year Phase-Out
2,336
387
2.
Thirty-Year Phase-Out
8,162
596
3.
Immediate Phase-Out
313
0
with Retrofill Option
6,036 ,000
13 ,695 ,000
CO
SOURCE: Putnam, Hayes 4 Bartlett, Tnc. calculations based on
methodology and data sources described in Appendix A.
* Excluding avoided indirect costs.
** Dollars saved per incremental pound of PCB release.
xxi
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Table S-8. Relative Benefits, Costs and Cost-Effectiveness of
Alternative Mineral Oil Transformer Regulation
Cost-
Alternative
Benefits3,
(5 Million)
Costs
(Pounds)
Effectiveness
[$/pound)
1.
Immediate Phase-Out
3 ,162
596
13,695,000
2.
Ten-Year Phase-Out
5 ',826
209
27,876,000
3.
Immediate Phase-Out
7,349
596
13,169,000
with Retrofill Option
Base Caser Phase-out of all PCB—contaminated mineral oil
transformers by 2012 .(essentially an indefinite
authorization).
SOURCE: Putnam, Hayes & Bartlett, Inc. calculations based on
methodology and data sources described in Appendix A.
aExcluding avoided indirect costs.
^Decrease in benefits per incremental decrease in PCB release.
xxii
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CIRCUIT BREAKERS AND RECLOSERS
While time did not permit a detailed assessment, of
this equipment, category either, a similar qualitative
assessment has been under-taken. Again both circuit
breakers and reclosers are critical elements of utility
transmission and distribution systems. As such, the
indirect costs associated with a ban on their use are
substantial, and dwarf the direct costs. While the level
of PCB contamination of this equipment is estimated by EEI
to be approximately one third the level in mineral oil
transformers, assuming equivalent contamination as well as
similar service lives and spill rates, an indefinite
authorization of this equipment would result in additional
PCB releases of approximately 30 pounds. Once again, the
ratio of dollars saved per additional pound released is
probably on the same order of magnitude, or greater, as
the ratio for mineral oil transformers.
SUMMARY
Given the tremendous indirect costs associated with
the interruption of electric service that would result
from an--immediate ban, all of the alternatives analyzed
produce net benefits to society, simply by avoiding these
indirect costs. However, the ratios of dollars saved to
incremental pounds released indicate a substantial range
of cost-effectiveness across equipment types (five orders
of magnitude) — a range which exceeds the uncertainty in
the cost-effectiveness calculations. Mineral oil
transformers appear to be a good candidate for extended or
indefinite use authorization. The benefits of such
authorization exceed $13.7 million per pound of PCBs
released, and the total amount of PCBs spilled as a result
of indefinite authorization is only about 600 pounds.
Similarly,- extended authorization of mineral oil equipment
— electromagnets, voltage regulators, oil-filled cable,
switches/sectionalizers, circuit breakers and reclosers —
also seems reasonable, given that the benefits of
authorization per pound of PCBs spilled are estimated to
be comparable to those for mineral oil transformers, i.e.,
over $13 .7 million per pound of PCBs spilled-
The merits of extended or indefinite authorization of
PCB capacitors or askarel transformers are less clear-cut.
The benefits per pound of PCBs released for capacitors and
xxiii
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askarel transformers are approximately $150 and $2,500 per
pound, respectively, and are five orders and four orders
of magnitude less than for mineral oil transformers. The
benefits of alternatives are much lower for these two
types of equipment because no testing is necessary 'to
identify the equipment, and the amount of PCBs spilled is
far greater due to the much higher concentration of PCBs
in capacitors and askarel transformers.
Of these two equipment types, capacitors appear to be
the best candidate for accelerated phase-out. The
benefits per pound released are an order-of-magnitude
lower than for askarel transformers~ As important, the
total PCB release from capacitor spills is estimated to be
20 times greater* than for askarel transformers.
All of these calculations are necessarily dependent
on a number of assumptions, including equipment life, size
and current vintage, discount rate, spill frequencies and
volumes, contamination levels, and unit costs for
replacement, retrofill and the like. While the data used
are believed to be the best available, sensitivity
analyses for many of these uncertainties have been
performed, and are summarized in the body of the report.
xxiv
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INTRODUCTION
CHAPTER 1
Section 6(e) of the Toxic Substances Control Act
(TSGA) prohibits all manufacture, processing, distribution
in commerce, and use of PCBs after 1 July 1979. However,
the statute does provide for the continued use of PCBs in
a "totally enclosed manner.11 'A totally enclosed manner is
defined to be "any manner which will ensure that any
exposure of human beings or the environment to a poly-
chlorinated biphenyl will be insignificant- as determined
by the Administrator by rule." In addition, TSCA also
allows EPA to authorize by rule the continued use of PCBs
in a manner other than in a "totally enclosed manner" if
EPA finds such use "will not present an unreasonable risk
of injury to health or the environment."
In the 31 May 1979 regulations promulgated to
implement section 6(e) of TSCA, EPA designated all intact,
non-leaking electrical capacitors, electromagnets, and
transformers as "totally enclosed," thus permitting their
continued use without regulation. However, the
Environmental Defense Fund petitioned the U.S. Court of
Appeals to review three aspects of the rule, including the
designation of non-leaking electrical equipment as a
totally enclosed use. In a 30 October 1980 decision, the
court found that there was no substantial evidence in the
record to support the Agency's classification of
transformers, capacitors, and electromagnets as totally
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enclosed. The court remanded this and another portion* of
the regulation to EPA for further action.
The effect of the court's decision was to make the
continued use of transformers, capacitors, and
electromagnets containing PCBs at any concentration a
violation of section 6(e) of TSCA. To avoid the
disruption of electrical service that would otherwise have
resulted, EPA, EDF, and several intervenors requested an
18-month stay of the order, during which time additional
data were to be collected, a new rulemaking undertaken,
and certain interim risk reduction measures implemented.
On 12 February 1981 the court granted a stay of its
earlier order until 12 August 1982, subject to the above
conditions. The current proposed rulemaking is in
response to the 12 February 19 81 stay, and is subject to
the court-ordered schedule.
The- court's order requires EPA to promulgate a final
rule within six months of receipt of the additional data
to be provided by the Edison Electric Institute (EEI,
1982) through the Utility Solid Waste Activities Group
(USWAG). Since the final EEI/USWAG study was received on
19 February 1982, the final rule for the use of PCBs in
electrical equipment must be delivered to the Federal
Register by 19 August 1982.
EPA proposes to authorize eight uses of PCB
electrical equipment pursuant to section 6(e)(2)(B) of
TSCA. Specifically EPA proposes to authorize the use of
PCBs in:
Capacitors through 1992 subject to quarterly
inspection and maintenance requirements;
» Transformers indefinitely, except that use in
PCB transformers is subject to quarterly
inspection and maintenance requirements;
» Electromagnets;
* The second remand dealt with EPA's determination that
with one exception PCBs in concentrations lower than 50
ppm were not subject to regulation.
-2-
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Voltage regulators;
o> Cables;
» Switches/sectionalizers;
• Circuit breakers; and
Reclosers.
While EPA does not believe that the proposed rule is
a major rule as defined in section l.b.. of Executive Order
12291, this Regulatory Impact Analysis (RIA) has
nonetheless been prepared addressing, to the extent
possible, the requirements set out in E.O. 12291.
However r due to the time constraints imposed by the
court-ordered schedule, both the scope and depth of the
RIA have been limited. While many of these limitations
can probably be addressed in time for the final rule, it
is important that they be well understood. Accordingly,
each of these limitations is discussed below.
First, the EEI (1982) study, which provides much of
the data upon which, this analysis is based, has only been
available for a few weeks. Given- the shortage of time,
the scope of the RIA is limited to cost/benefit and
cost-effectiveness considerations. Economic impact
(distributional) issues and alternatives which are not now
permitted by law are not addressed, or are addressed only
qualitatively. The one exception is an analysis of the
impacts of the regulation on small business (required by
the Regulatory Flexibility Act), which is presented in
Chapter 6.
Second, the cost/benefit and cost-effectiveness
analyses are themselves limited by available data and
time. The health impacts of PCB spills or releases cannot
be quantified at this time, as no data are available to
estimate human exposure. While a methodology for
estimating human exposure could be developed given
additional time, for the purposes of this analysis, the
expected weight of PCBs spilled is used as a surrogate for
health impacts.
Third, all estimates of number of units in service,
equipment, volume, spill rates, and costs of replacement,
retrofill, containment, and the like are based on the data
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provided by EEI (1982) , and have not been independently
verified, with few exceptions. While these data are
believed to be the best available, errors or bias may
exist, which can only be detected with further review.
Such review, together with comments received in response
to the proposed rule, should clarify the accuracy of the
EEI (1982) data.
Finally, data concerning the non-utility use of PCB
electrical equipment are incomplete. While some
information as to the amount of PCB equipment, the PCB
concentration, and the spill rates is available, these
data are neither complete nor consistently collected.
Thus the amount of non-utility PCB equipment in service,
and the distribution of this equipment within the
commercial and industrial sectors, are very uncertain..
Hence, non-utility cost assessments can be based only on
qualitative comparisons with utility data, and are less
reliable.*"
Despite these schedule- and data-related constraints,
a methodology for evaluating alternative regulations has
been developed and consistently applied. The results can
be used to assess cost-effectiveness as well as the risk
of injury to health or the environment for each
alternative..
* However, data submitted by the Chemical Manufacturers
Association and others (Pittaway, Heiden, and O'Connor,
1981) in response to the Advance Notice of Proposed
Rulemaking indicate that the unit volumes, PCB
concentration levels, and spill characteristics are
roughly comparable to those for utility-owned equipment.
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CONSIDERING ALTERNATIVE APPROACHES
CHAPTER 2
The base case, against, which all alternatives should
be compared, is the case where EPA does not undertake a
further rulemaking» As has been previously discussed,
this base case would result in a complete ban of the use
of PCB • electrical equipment on 12 August 1982.. Because
PCB concentration, equipment costs and spill rates vary by
equipment type, alternatives to the base case must be
formulated and analyzed for each type of equipment. Thus,
the remainder of this section is dedicated to a discussion
of the alternatives considered for each equipment type.
For purposes of this analysis, the eight equipment types
proposed to be authorized were- reclassified into five
equipment categories:
•- PCB capacitors;
o- Askarel transformers;
* Mineral oil transformers;
• Electromagnets, voltage regulators, cables, and
switches/ sectionalizers;
» Circuit breakers and reclosers.
As Table 1 shows, the effect of this reclassification
is to isolate the three largest sources of PCBs — PCB
capacitors, askarel transformers and mineral oil
transformers — from the remaining types of electrical
equipment. The six remaining equipment types were split
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Table 1. Utility-Owned PCB Electrical Equipment
Equipment Type
Number
of Utility-
Owned Units
Total Fluid
Volume
(Gallons)
Total
Pounds PCBs
Average PCB
Concentration
PCB Capacitors
2,800,619
7,547,669
87,552,960
100%
Askarel Transformers
39,640
8,525,404
74,597,283
70%
Mineral Oil
Transformers
20,227,428
958,365,880
262,230
36 ppm
Electromagnets
77
7,700
3a
5 0 ppma
Voltage Regulators
145,159
17,840,968
6,707
49 ppm
Cable
Switches/
Sectionalizers
6,545 miles
385,768
30,413,005
1,415,769
2,311b
329
}0 ppm^
31 ppm
Circuit Breakers
180,939
137,335,668
12,685
12 ppm
Reclosers
170,158
3,403,670
410
16 ppm
23,949,788+
6,545 miles
1, 164,855,733
162,434,918
SOURCE: EEI/USWAG study (1982, pp. 9, 10, 109, A-14, A-15). Average concentration calculated
by Putnam, Hayes & Bartlett, Inc. from EEI data, except where cited.
£
Assuming from EEI (1982, p. 109) that "there are no data to sugqest that contamination levels
are higher in electromagnets than in other types of equipment."
^Assuming from EEI (1982, p. 9) that "twenty-two tests were available and all indicated PCB
concentrations of less than 10 ppm."
-------
into two groups, roughly according to their average level
of PCB contamination.
Alternatives to the base case include 10-, 20- and
30-year equipment phase-outs, retrofilling (where
technically feasible), structural containment (where
technically feasible), and inspection and maintenance
programs to reduce spill volume and/or exposure. The
alternatives analyzed for each of the five equipment
classifications are summarized in Table 2.
PCB CAPACITORS
Large power capacitors are used for precise control
of the voltage level. As a result, they are widely used
by both utilities and large commercial and industrial
power users. Virtually all capacitors manufactured prior
to 1978 were filled with PCBs. Utility ownership of PCB
capacitors is estimated by EEI (1982, pp. 9, 10) at 2.8
million units, containing over 87 million pounds of PCBs.
The annual spill rate for capacitors is estimated by EEI
(1982, pp- 80, 81) to be 0.008 spills per capacitor per
year, with an average PCB release of 17 pounds per spill.
EPA estimates that utility PCB capacitors account for 85
percent of the total in service. This implies that a
total of 103 million pounds of PCBs are contained in PCB
capacitors.
The regulatory alternatives considered for PCB
capacitors include the following.
•> Immediate phase-out (Base Case) — replacement
of all PCB capacitors in 1982. While this
alternative is probably not feasible, let alone
desirable, estimates of costs and benefits are
provided as if this alternative could be
implemented.
o- Ten-year phase-out — replacement of all PCB
capacitors by 1992, starting accelerated
replacement in 1988.
• Twenty-year phase-out ~ replacement of all PCB
capacitors by 2002, starting accelerated
replacement in 1998.
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Table 2. Summary of Alternatives Analyzed; Utility-Owned PCB Electrical Equipment
Immediate Immediate Inspection and Maintenance
Phase-Out 10-Year 20-Year 30-Year Retro- Immediate 10-Year 20-Year 30-Year
Equipment Category (Base Case) Phase-Out Phase-Out Phase-Out fill Containment Phase-Out Phase-Out Phase-Out
PCB Capacitors
Askarel Transformers
Mineral Oil
Transformers
Electrnmagnets,
Voltage Regulators,
Cable, Switches/
Sectlonalizers
Circuit Breakers,
Reclosers
X
X
X
X
X
X
X
X
X X
XXX
X X
Qualitative Assessment
Qualitative Assessment
X
X
X
X
X
X
X
SOURCE: Putnam, Hayes & Bartlett, Inc.
Similar non-utility-owned equipment categories could only be assessed qualitatively.
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» Thirty-year phase-out — replacement of all PCB
capacitors by 2012.
• Immediate secondary containment of potential
spills — construction of a dike and, where
necessary, a concrete pad for all substation and
generating station PCB capacitors in 1982.
o Inspection and maintenance — four inspections*
per year of each PCB capacitor to facilitate the
detection and clean-up of PCB spills. This
alternative is evaluated in conjunction with
10-year, 20-year and 30-year equipment
phase-outs.
ASKAREL TRANSFORMERS
Transformers are used to raise or lower electric
voltage- As a resultr they are in widespread use, owned
either by electric, utilities or by commercial or
industrial concerns which use significant amounts of
electricity- Most transformers currently in use are
mineral oil transformers, so named because mineral oil is
the dielectric fluid- However, a number of. transformers
are askarel transformers, the dielectric fluid of which is
about 70 percent PCBs by volume. Askarel transformers are
considerably more expensive than mineral oil transformers
of equivalent size, but the superior fire protection
properties of the PCB dielectric fluid permit their use in
areas where mineral oil transformers would require
substantial (and expensive) additional fire protection
measures.
Recent EEI estimates (1982, pp. 60 , 64) obtained by
sampling many of the larger electric utilities indicate
that approximately 40,000 utility-owned askarel
transformers are' currently in service, containing over 74
* While EEI data (1982, p- 82) indicate that utilities
inspect their equipment with varying frequency, for
purposes of this analysis the current level of inspection
activity was assumed to be zero. This is a conservative
assumption as it results in a slight overestimation of
costs.
-9-
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million pounds of PCBs.* The annual spill rate of askarel
transformers is estimated by EE I (19 82 , p. 70) to be less
than 0.008 spills per transformer per year, with an
average PCB release of 66 pounds per spill. Versar (1978,
p» 19) estimates that utility-owned askarel transformers
comprise only 30 percent of the total number of askarel
transformers currently in service. This would imply that
a total of 132,000 askarel transformers are now in
service, containing over 300 million pounds of PCSs.**
The regulatory alternatives considered for askarel
transformers include the following.
<» Immediate phase-out (Base Case) — replacement
of all askarel transformers in 1982. While this
alternative is probably not. feasible, let alone
desirable, estimates of costs and benefits are
provided as if this alternative could be
implemented.
or Ten-year phase-out .— replacement of all askarel
transformers by 1992 r starting accelerated
replacement- in 1988 .
Twenty-year phase-out ;— replacement of all
askarel transformers by 2002, starting
accelerated replacement, in 1998 .
& Thirty-year phase-out — replacement of all
askarel transformers by 2012.
o- Immediate secondary containment of potential
spills — construction of a dike and, where
necessary, a concrete pad for all askarel
transformers in 1982.
* Unless otherwise stated, all cost, volume and spill
assumptions are from Volume III of the EEX (1982) study.
**" Industry data indicate that non-utility askarel
transformers are, on average, larger than utility-owned
units. If non-utility units were the same size as utility
units, the total amount of PCBs contained in askarel
transformers would be 250 million pounds.
-10-
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•• Immediate retrofill of askarel transformers —
draining of fluid, three rinses, and three
retrofills of all askarel transformers to reduce
PCB concentrations.
»• Inspection and maintenance — four inspections
per year of each askarel transformer to
facilitate the detection and clean-up of PCB
spills. This alternative is evaluated in
conjunction with 10-year, 20-year and 30-year
equipment phase-outs.
MINERAL OIL TRANSFORMERS
As discussed above, most, transformers now in use are
mineral oil transformers; EEI (1982, p. 61) estimates that
current electric utility ownership exceeds 20 million
units. Prior to public awareness of the health and
environmental effects of PCBs, mineral oil and askarel
transformers were often serviced with the same equipment,
and in some cases askarel dielectric fluid was mixed with
mineral oil. As a result, EEI (1982, p. 67) estimates
that almost 60 percent of the mineral oil transformers in
service contain PCBs at some detectable level (in excess
of 1 ppm) . However, only 11.8 percent of the mineral oil
transformers contain PCBs in excess of 50 ppm, and only
1.1 percent contain PCBs in concentrations exceeding 500
ppm- The total amount of PCBs estimated by EEI (1982, p.
69) to be contained in mineral oil transformers is 262,000
pounds.
The :annual spill rate of mineral oil transformers is
estimated by EEX (1982, pp. 72, 74) to be 0.008 spills per
transformer per year, with an average PCB release of 0.005
pounds per spill. The number of non-utility-owned mineral
oil transformers is unknown.
The .regulatory alternatives considered for mineral
oil transformers include the following.
• Immediate phase-out (Base Case) — identifica-
tion and replacement in 1982 of all mineral oil
transformers containing PCBs in excess of 50
ppm. While this alternative may not be fea-
sible, estimates of costs and benefits are
/
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provided as if this alternative could be
implemented.
& Ten-year phase-out — individual identification
and replacement of all mineral oil transformers
containing PCBs in excess of 50 ppm, starting
accelerated replacement in 1988 and finishing in
1992»
Inspection and maintenance — one inspection per
year of all mineral oil transformers to
facilitate the detection and clean-up of PCB
spills. This alternative is evaluated in
conjunction with a 30-year phase-out of
PCB-contaminated transformers (>50 ppm PCB).
Common container collection and testing of
contaminated mineral oil is permitted. Due to
the large costs associated with individually
testing every mineral oil transformer, this
alternative is less expensive than testing all
units initially, but only inspecting those units
with PCB concentrations greater than 50 ppm.
ELECTROMAGNETS, VOLTAGE REGULATORS,
CABLES, AMD SWITCHES/SECTIONALIZERS
These four types of electrical equipment, all of
which utilize mineral oil, have been identified as being
contaminated with PCBs. Electromagnets, while owned by
utilities, have no direct role in the production or
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distribution of electricity. Their principal use is in
equipment repair or in other applications where heavy
metal objects must be lifted. The other three types of
equipment are all used in utility transmission and
distribution systems.
These four types of equipment have been grouped
together for two reasons. First, they are much less
extensively used than mineral oil transfonners, and are
estimated by EEX to contain many fewer pounds of PCBs.
Indeed, collectively these four types of equipment are
estimated by EEI (1982, pp. 10, 107, 109) to contain
approximately 9,000 pounds of PCBs, 3.5 percent of the
amount estimated to be contained in mineral oil
transformers. While fewer in number, the average
contamination of these four types of equipment is
estimated by EEI to be similar to that of mineral oil
transformers — 30 to 50 ppm. Second, fewer data are
available as to the number of equipment items and the
associated PCB concentration, spill rates, and
phase-out/retrofill costs.
Given the shortage of available time, regulatory
alternatives have been assessed in a qualitative manner-
CIRCUIT BREAKERS AND RECLOSERS
Circuit breakers and reclosers are two other types of
mineral oil equipment used in utility distribution
systems. They too are few in number relative to mineral
oil transformers, and are- estimated by ESI (1982, p. 10)
to contain approximately 13,000 pounds of PCBs. They are
distinguished from the previous equipment group by a lower
average level of PCB contamination.. EEI (1982, pp. 93,
100) estimates that the average contamination of circuit
breakers and reclosers is in the range of 10 to 15 ppm,
approximately one third the level of mineral oil
transformers.
Given the shortage of available time and the low
levels of PCB contamination, the consideration of
regulatory alternatives was both qualitative and limited.
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ASSESSING BENEFITS
CHAPTER 3
As described above, the benefit of a proposed rule is
measured relative to the base case in which EPA
promulgates no new rule and the Appeals Court mandate
issues directly_ Thus benefits derive from deferral or
avoidance of the direct and indirect costs of an immediate
phase-out of all electrical equipment, net of the cost of
any conditionsJ(e.g., inspection and maintenance) that EPA
may attach to use authorizations- Only: incremental
changes associated with an alternative rule are properly
regarded as the benefits of the rule. For example,
disposal of PCB fluids and PCB articles is already
governed by existing' regulation. A- use authorization of
askarel transformers would not change the manner in which
askarel fluid or transformer carcasses must be disposed,
but would permit deferral of the disposal cost. The
incremental benefit is measured ;by a reduction in the
present value of that cost.
The following analysis focuses on the incremental
real resource costs to society, i.e., those identifiable
costs which result from a reallocation of resources in
society for the purpose of avoiding PCB exposure (e.g.,
accelerated investment in new transformers or capacitors,
labor for inspection, equipment removal and installation,
etc.). The emphasis of the EElj (1982) study was the
identification and quantification of real resource costs,
although not necessarily on an incremental basis.
The total economic impact of new regulation, however,
also should include deferral or avoidance of any
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transitional or indirect costs that would otherwise be
borne by society. In this case, an immediate ban of all
PCB-containing electrical equipment would cause disruption
of electric power- with associated costs that are
indisputably huge, albeit difficult to quantify. As an
illustration, failure to provide even one month of the
annual power demand could conservatively cost over $175
billion.* The period of authorization required to avoid
indirect costs is unclear; nevertheless, it is assumed
that ten years would in fact be sufficient time to avoid
all power disruption. Thus, the incremental benefit of
authorizing continued use of PCB-containing electrical
equipment for ten years might be at least $175 billion
more than the benefit of avoiding or deferring the real
resource costs of an immediate ban.
In order to quantify the benefits associated with
deferred real resource costs, a quantitative methodology
was developed and then applied to utility equipment.
Eight types of utility-owned electrical equipment
containing PCBs were identified in the EEI (1982) study.
Based on the estimated PCB content of the equipment, the
number' of equipment pieces, and the tendency of the
equipment to leak, five groups of equipment were chosen
for analysis: PCB capacitors, askarel transformers,
mineral oil transformers, circuit breakers and reclosers,
and other equipment (switches, sectionalizers, voltage
regulators, oil-filled cable, and electromagnets). Time
and data limitations precluded quantitative analysis of
the last two equipment groups. Nevertheless, should
better data be developed, a quantitative analysis of these
other equipment groups could be performed.
Similarly, the EEI (1982) study did not consider
non-utility equipment. Other information submitted to EPA
* Total electric power sales in 1981 were 2.12 trillion
kwh.. Estimates of the value of lost electric power range
from $0.90/Jcwh to-$3.28/kwh in 1978 dollars (EPRI, 1978,
p. 4-19) . If a value of only $1.00/kwh is assumed (1982
dollars), and if power were disrupted for only one average
month during emergency replacement of the entire stock of
PCB-containing electrical equipment, an indirect cost of
about $175 billion would result ($1.00/kwh x 1/12 x 2.12
trillion kwh)»
-15-
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was insufficient to assess benefits quantitatively.
However, the available data do suggest that be:-®fits
should be roughly comparable (order of magnitude) to those
for utility-owned equipment on a unit basis, insofar as
contamination levels and. unit costs are not markedly
different.
Five major aspects of the methodology (as it applies
to quantification of benefits) are described below.
» The assessment of alternative use authorization
periods requires that the natural rate of
equipment retirement be estimated, since
incremental effects apply only to those pieces
of equipment for which retirement is accelerated
by mandate. No age-related data are available
to describe current equipment stocks.. The
age profile was calculated by using previous
estimates of equipment life (normally
distributed) and natural failure rates, and
estimating the increase in the equipment stock
(assumed to grow proportionately to electric kwh
sales through 19-77) . The beginning equipment
stock in 1944 was adjusted so that the 1981
stock matched estimates from the EEI (1982)
study.
& Equipment is replaced on a normal basis at the
end of its useful life. Mandating equipment
replacement advances the replacement schedule
that would otherwise have prevailed. The
benefit of avoiding such advancement is not the
full replacement cost of the equipment, but
rather the economic value of the equipment at
the time of its phase-out. This incremental
benefit was estimated as the present value
'difference of two perpetuities of replacement
that begin in different years.
9- . An inherent feature of present value analysis is
the requirement that the appropriate discount
rate for future expenditures be known.
Estimating the "social" discount rate required
for this analysis is am • extraordinarily
difficult task, but one which is unavoidable
since it could have a significant impact on
results. Many of the benefits are attributable
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to timing differences , the value of which is
measured by the discount rate. While the real
rate of 3 percent used in the EEI (1982 , p.
A-37) study was adopted for this analysis, the
sensitivity to alternative assumptions was'also
measured.
» The analysis considers aggregate costs to
society, regardless of who bears them. Thus,
for example, tax. effects are ignored, since
taxes primarily affect the distribution of costs
between industry and the government, but not. to
society as a whole. Likewise, the opportunity
for utilities to pass costs on to ratepayers via
rate increases was not evaluated~
a Finally, the methodology overstates the direct
benefits of authorization, since it does not
include clean-up costs for PCB spills that will
occur as a result of use authorization. In
certain cases, the costs of clean-up could be
quite large (for example, when a rupture occurs
in a. densely populated commercial area) ;
however, the cost to clean up an average spill
is very difficult to quantify. In addition to
the direct costs of spill clean-up, such as
removing and disposing of contaminated soil or
dredging a nearby waterway, clean-up may also
entail significant indirect costs (for example,
disposal of contaminated merchandise at nearby
businesses, or lost sales during a temporary
business closing). The data to quantify these,
costs are currently not available? however, a,
discussion of data requirements and a
methodology for quantifying clean-up costs are
provided in Appendix F.
PCB CAPACITORS
Seven regulatory alternatives were evaluated for
utility-owned PCB capacitors (retrofilling capacitors is
not technically feasible) . Most of the cost and current
inventory data required for these analyses were derived
from the EEI (1982) study. The year 1977 was assumed to
be the last year new PCB capacitors were produced and
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installed. A 25±2-year equipment life and 3 percent real
discount rate were assumed for the evaluations.
Table 3 shows the present value of the incremental
benefits of each regulatory alternative. Note that a
30-year authorization period is tantamount to indefinite
authorization, since nearly all PC3 capacitors would
already be removed from service by 2012. The benefits
range from $444 million for 30-year authorization with
immediate containment of all substation/ generating
station located capacitors (56 percent of the total), to
$709 million for a 30-year authorization with no
additional restrictions.
The magnitude of the benefits of each alternative is
significantly affected by the choice of discount rate, and
by the assumed equipment life. Nonetheless, both
parameters are highly uncertain. Estimating a social
discount rate is complicated by the absence of a
comparable rate that, can be observed in the market.
Normal replacement of PCB capacitors installed in the
1940s and 1950s has only begun to occur, so that average
equipment life has yet to be determined. In order to
address this uncertainty the sensitivity to alternative
assumptions was explored; the results are shown in Table
4. At higher discount, rates, the value of cost deferral
is greater. A swing of only ±2 percentage points in the
real discount rate altered benefits by as much as 17
percent. Similarly, the alternative age assumptions
change expected benefits by 9 to 22 percent. Thus, even
if unit costs of replacement, disposal, etc., are highly
accurate, the calculated benefits for each alternative are
probably only accurate to within 40 percentage points.
ASKAREL TRANSFORMERS
The benefits of eight regulatory alternatives were
estimated for utility- owned askarel transformers. In
addition to cost and inventory data derived from the
EEI (1982) study, it was assumed that no new askarel
transformers were produced after 1977 and that askarel
transformers were not rebuilt (with PCB fluid used to
refill) after 1975. The real discount rate was assumed to
be 3 percent (EEI, 1982, p. A-37). A newly installed unit
was assumed to last 24±1.5 years, and then to last an
additional 16±1.0 years if rebuilt (ranges are standard
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Table 3. Utility-Owned PCB Capacitors:
Benefits Assessment of Regulatory Alternatives
Present Value
of Incremental
Begin End Units Benefits
Alternative Conditions Phase-Out Phase-Out Retired Early ($ Millions)
1.
Ten-Year Phase-Out
None
1988
J992
2,037,117
450
2.
Twenty-Year Phase-Out
None
1998
2002
426,233
692
3.
Thirty-Year Phase-Out
None
2012
2012
70
709
4.
Ten-Year Phase-Out
With Inspection
Quarterly
Inspection
1988
1992
2,037,117
391
5.
Twenty-Year Phase-Out
With Inspection
Quarterly
Inspection
1998
2002
426,233
601
6.
Thirty-Year Phase-Out
With Inspection
Quarterly
Inspection
2012
2012
70
615
7.
Thirty-Year Phase-Out
With Immediate
Containment
Immediate
Containment for
Substation/
Gen. Station
Equipment
2012
2012
70
444
Base Case: Phase-out of all PCB capacitors in 1982 (2,732,484 units retired early)
3 percent real discoun£ rate**
25-year equipment life
SOURCE: Putnam, Hayes & Bartlett, Inc. calculations using methodology and data sources
described in Appendix A.
Notes on following page.
-------
Table 3. Utility-Owned PCD Capacitors:
Benefits Assessment of Regulatory Alternatives
(Continued)
Notes:
aExcluding avoided indirect costs.
bEEI/USWAG estimate (1982, p. A-37) (3 percent real = 12 percent nominal - 9 percent
inflation).
cVersar (1976) estimate cited in PHB (1979, Vol. IIf pt 14) »
i
K>
O
I
-------
Table 4. Utility-Owned PCB Capacitors:
Benefits Sensitivity Analyses
A. Discount
Rate Sensitivity
Benefits ($ million)
Discount Rate
Alternative
1% Real 3% Reala
5% Real
Ten-Year Phase-Out 372 450
Thirty-Year Phase-Out 621 709
523
784
B. Equipment
Life Sensitivity
25-Year Life*5
30-Year Life^
40-Year Life
Alternative
Benefits Units
($ millions) Phased-Out
Benefits Units
($ millions) Phased-Out
Benefits Units
($ millions) Phased-Out
Ten-Year
Phase-Out
Thirty-Year
Phase-Out
450 2,037,117
709 70
413 2,219,567
773 32,976
370 2,476,324
851 679,582
SOURCE: Putnam, Hayes S> Bartlett, Inc. calculations based on methodology and data sources
described in Appendix A.
dEEI/USWAG estimate (1982, p. A-36, A-37).
^Versar (1976) estimate, cited in PHB (1979, Vol. II, p. 14).
-------
deviations; data from Versar, 1978)- Other assumptions
are detailed in Appendix A.
Table 5 shows the present value of the incremental
benefits of each regulatory alternative. Note again that
30-year authorization is tantamount to indefinite
authorization if equipment life estimates are correct.
The benefits range from $12 million for a 30-year
phase-out with immediate containment to $526 million for a
30-year phase-out (no conditions). Mandated immediate
containment has only small benefits compared to other
alternatives; immediate retrofilling does not result in
any positive benefits (i.e., on average, equipment
replacement would be preferred; however, on an individual
basis, it might be preferable to contain or retrofill
newer units if their age were known).
The sensitivity of benefits to alternative discount
rate assumptions and to alternative equipment lives was
explored. Table 6 shows the results of these evaluations.
A change in the real discount rate of ±2 percentage points
(i.e., 1 percent real or- 5 percent real) alters benefits
by 11 percent to 16 percent (computed benefits rise with
higher discount rates). Doubling the expected equipment-
life alters benefits by 12 percent to 22 percent.
PCB-CONTAMINATED TRANSFORMERS
The analysis of alternative regulatory options for
PCB-contaminated transformers is substantially more
complicated than that, for PCB capacitors or for askarel
transformers, primarily because those units which are
contaminated above 50 ppm PCB have not been identified. A
wide variety of testing/disposal/replacement options are
possible under a given regulation; it is difficult to
predict how utilities would react.
Four alternatives were evaluated; the benefits of
each are shown in Table 7. Most assumptions were
identical to those for askarel transformers, except for
the PCB contamination level. For immediate or 10-year
phase-outs, it was assumed that utilities would field test
every unit in service in order to avoid phase-out of units
with PCB concentrations less than 50 ppm. For a 30-year
phase-out (essentially indefinite authorization), it was
assumed that common collection testing of fluid would be
-22-
-------
Table 5. Utility-Owned Askarel Transformers;
Benefits Assessment of Regulatory Alternatives
Present Value
of Incremental
Begin End Units Benefits
Alternative Conditions Phase^Out phase-Out Retired Early {$ Millions)
1.
Ten-Year Phase-Out
None
1988
1992
24,486
358
2.
Twenty-Year Phase-Out
None
J998
2002
3,9U
519
3.
Thirty-Year Phase-Out
No^e
2012
2012
1
526
4.
Ten-Year Phase-Out
With Inspection
Quarterly
Inspection
1988
1992
24,486
349
5.
Twenty-Year Phase-Out
With Inspection
Quarterly
Inspection
1998
2002
3,911
505
6.
Thirty-Year Phase-Out
With Inspection
Quarterly
Inspection
2012
2012
1
512
7.
Thirty-Year Phase-Out
With Immediate
Containment
Immediate
Containment
2012
2012
1
12
8.
Thirty-Year Phase-Out
With Immediate
Immediate
Retrofill
2012
2012
1
f 123:
Retrofill
Base Case: Phase-out of all askarel transformers in 1982 (38,400 units retired early)
3 percent real discount rate b
40-year equipment life with rebuild
SOURCE: Putnam, Hayes & Bartlett, Inc. calculations based on methodology and data sources
described in Appendix A.
aExcluding avoided indirect costs.
bEEI/USWAG estimate (1902, pp. A-36, A-37).
-------
Table 6. Utility-Owned Askarel Transformers:
Benefits Sensitivity Analyses
Discount Rate Sensitivity
Alternative
Benefits 1$ million)
Discount Rate
1% Real
3% Real'
Ten-Yeajr Phase-Out 302
Thirty-Year Phase-Out 467
358
526
5% Real
416
506
B.
Equipment Life Sensitivity
Alternative
40-Year Life
Benefits
a ,b"
60-Year Life
Benefits
Units BenefitsUnits
(§ millions) Phased-Out ($ millions) Phased-Out
80-Year Life
Benefits
Units
($ millions) Phased-Out
Ten-Year
Phase-Out
Thirty-Year
Phase-Out
358
526
24,486
1
310
595
31,756
149
291
673
35,254
9, 383
SOURCE; Putnam, Hayes & Bartlett, Inc. calculations based on methodology and data sources
described in Appendix A.
aEEl/USWAG estimate (1982, pp. A-36, A-37).
Total equipment life includes the extension of useful life which results if the trans-
former is rebuilt.
-------
Table 7. Utility-Owned PCB-Contaminated Transformers;
Benefits Assessment of Regulatory Alternatives
Present Value
of Incremental
Begin End Units Benefits
Alternative Conditions Phase-Out Phase-Out Retired E^rly ($ Millions)
1. Ten-Year Phase-Out
Test
All Units
1988
2. Thirty-Year Phase-Out Common
Collection
and Testing
3. Thirty-Year Phase-Out Annual
With Annual Inspection Inspection;
of all Mineral Common Collection
Oil Transformers and Testing
4. Immediate Phase-Out Single Wash
With Retrofill Option Retrofill,
Test All Units
2012
2012
1992
2012
2012
1982
1982
1,462,239
34
34
2,311,496
(retired or
retrofilled)
2,336
8,162
6,413
313
Base Case: Phase-out of all PCB-contaminated transformers in 1982 (2,311,496 units retired
early)
- Transformers contaminated over 50 ppm PCB must be
identified by testing all migeral oil transformers
3 percent rea^l discounjt rate
40-year equipment life
SOURCE: Putnam, Hayes s, Bartlett, Inc. calculations based on methodology and data sources
described in Appendix A.
Excluding avoided indirect costs.
b..
EEI/USWAG estimate (1982, pp. A-36f A-37).
-------
employed (units must, be drained anyway for disposal) , so
that., on average, the fluid of 25 units could" be batch
tested, with a corresponding increase in average fluid
disposal requirements of about 2H times. Benefits range
from $2.3 to 38.2 billion. Alternative four indicates
that retrofilling would be attractive as an alternative to
immediate replacement (only newer units would be
retrofilled)-
As before, the sensitivity of the benefit calculation
was assessed with respect to discount rate and equipment
age as shown in Table 8. The relative effect of both was
diminished (results vary by 1 to 4- percent) because of the
greater importance of one-time testing costs (particularly
for immediate phase-out).
CIRCUIT BREAKERS, RECLOSERS, AND
OTHER EQUIPMENT
Lack of time and data precluded a quantitative
assessment of benefits for use authorization of other
utility equipment. categories. However, for -this
PCB-contaminated equipment, the benefits are probably on
the same order of magnitude as for PCB-contaminated
transformers, for an equivalent replacement value of
contaminated units. Significant testing costs would also
be incurred in order to identify contaminated units. For
circuit breakers and reclosers, in particular, this cost
is likely to be very large, over $16,000 per contaminated
unit found, since the proportion of contaminated units is
believed to be very small (EEI, 1982, pp. 93, 100).
Hence, the benefit of deferring and reducing this testing
cost (due to common collection economies) would be large.
-26-
-------
Table 8. Utility-Owned PCB-Contaminated Transformers:
Benefits Sensitivity Analyses
A. Discount Rate Sensitivity
Benefits ($ million)
Discount Rate
Alternative
1% Real
3% Real^
5% Real
Thirty-Ye^r Phase-Out
7,895
8,162
8, 366
B. Equipment Life Sensitivity
40-Year Life3
•60-Year
Life
80-Year
Life
Benefits Units
Alternative ($ millions) Phased-Out
Benefits
($ millions)
Units
Phased-Out
Benefits
($ millions)
Units
Phased-Out
Thirty-Year 8,162 34
Phase-Out
8,146
8,945
8,468
564,687
SOURCE: Putnam, Hayes & Bartlett, Inc. calculations based on methodology and data sources
described in Appendix A,
aEEI/USWAG estimate (1982, pp. A-36, A-37),
-------
ASSESSING COSTS
CHAPTER 4
Using the same base case involving an immediate ban
of all PCB-containing electrical equipment, the cost of an
alternative regulation is the injury to health or the
environment that results from any release of PCBs that
would not otherwise have occurred- Such injuries include
the human health effects of direct or environmental
exposure to PCBs, the effect on.animal and plant life, and
non-health effects (e.g., contamination of waterways)..
The cost of incurring these injuries is extremely
difficult to quantify.
In order to meet the deadline for a proposed rule,
the expected pounds of PCBs released into the environment
is used as a surrogate for injury to health or the
environment. Depending on the inventory of equipment in
service, average size and PCB concentration, and assumed
spill rates and volumes, the cumulative release of PCBs to
the environment is quantified for each regulatory
alternative.
Insufficient data are available to quantify the PCB
release resulting from alternative regulation of
non-utility PCB-containing electrical equipment. It is
unclear whether more severe industrial conditions result
in more frequent spills, since greater spill prevention
measures may also be employed (for example, significant
numbers of industrial equipment are already contained).
However, utility equipment might be used to estimate
order-of-magnitude releases , from industrial equipment
(proportional to equipment inventory).
-28-
-------
PCB CAPACITORS
Table 9 shows the incremental PCB release resulting
from each of the regulatory options considered in Chapter
3. However, no spill reduction was assumed for
alternatives which include inspection. Depending on the
mode of equipment failure, it was not clear how much
inspection would affect the tendency of equipment to
spill- Early detection of incipient failure followed by
preventive maintenance would not be feasible for all modes
of failure (e.g., an accident). Certainly, inspections
would be useful in reducing the average time before a
spill is detected, and hence, would reduce exposure.
However, their value cannot- be quantified using a
pounds-based (rather than exposure-based) methodology (see
Appendix D for a more complete discussion).
Incremental PCB release- ranges from 2.0 million to
4.6 million pounds. The above evaluations assumed that
0.8 percent of the equipment in service has a spill each
year, and that 55 percent of the fluid in the equipment is
released during the spill. These assumptions (derived
from EEI, 1982, pp. 80, 81) are highly uncertain.
Sensitivity analyses were performed, varying these
parameters by an order of magnitude (see Table 10) . The
estimated PCB release correspondingly fluctuates by an
order of magnitude. The estimates assume that spills are
the only source of PCB release (i.e., proper fluid
disposal upon retirement is assumed) . Table 10 also
presents the sensitivity of PCB release to the assumed
equipment life. Since spill rate is independent of age,
longer life assumptions result in PCB releases that are
nearly 80 percent higher, since equipment remains in
service longer_
ASKAREL TRANSFORMERS
Table 11 shows the incremental PCB release for the
eight regulatory alternatives considered for utility-owned
askarel transformers (excluding three inspection options).
The evaluations assumed that 0.8 percent of the
transformers spill each year, and that 3.43 percent of the
fluid volume is released during the spill (assumptions
from EEI, 1982, pp. 70-72). Immediate containment of all
askarel transformers, or retrofilling with non-PCB fluid,
is assumed to avoid all PCB release. Releases range from
-29-
-------
Table 9. Utility-Owned PCB Capacitors:
Costs Assessment of Regulatory Alternatives
Alternative
Conditions
Begin
Phase-Out
End
Phase-Out
Incremental
PCB Release
(Pounds PCB)
1. Ten-Year Phase-Out
2. Twenty-Year Phase-Out
3. Thirty-Year Phase-Out
4. Ten-Year Phase-Out
With Inspection
5. Twenty-Year Phase-Out
With Inspection
6. Thirty-Year Phase-Out
With Inspection
7. Thirty-Year Phase-Out
With Immediate
Containment
None 1988
None 1998
None 2012
Quarterly 1988
Inspection
Quarterly 1998
Inspection
Quarterly 2012
Inspection
Immediate 2012
Containment of
Substation/
Generating
Station Capacitors
1992
2002
2012
1992
2002
2012
2012
2,702,000
4,504,000
4,649,000
2, 702,000£
4 , 504 , 000£
4,649,000'
2,046,000
Base Case: Phase-out of all PCB capacitors in 1982
0.8% of equipment in service spills each yegr,;>
55% of unit volume is released during spill
SOURCE: Putnam, Hayes & Bartlett, Inc. calculations based on methodology and data
sources described in Appendix A.
aWhile inspections should reduce exposure to PCB spills, their effect on spill
frequency and volume is unknown and assumed to be zero.
^Estimate based on EEI moderate leak rate (1982, p. 80), and average capacitor unit
and spill volumes (1982, pp. 80, 01).
-------
Table 10. Utility-Owned PCS Capacitors:
Costs Sensitivity Analysis
A. Spill Rate and Spill Size Sensitivitv
Incremental PCB Release (Pounds)
Alternative
Spill Rate:
0-08%/year
Volume
SDilled: 5%
Spill Rate:
0.8%/year
Volume
Spilled: 55%c
Spill Rate:
8%/year
Volume
Spilled: 100%
Ten-Year
Phase-Out
Thirty-Year
Phase-Out
24,563
42,257
2,702,000
4,649,000
49,126,000
84,534,000
B.. Equipment Life Sensitivity
Incremental PCB Release (Pounds)
Alternative 25-Year Life 30-Year Life'
40-Year Life
Ten-Year
Phase-Out 2,702,000
Thirty-Year
Phase-Out
4-,649,000
2,782,000
5,993,000
2,924,000
8,277,000
SOURCE: Putnam, Hayes & Bartlett, Inc. calculations based
on methodology and data sources described in Appendix A.
aEEI/USWAG estimate (1982, pp. 80, 8'1, A-36) .
^Versar (1976) estimate, cited in PHB (1979, II, p. 14).
-31-
-------
Table 11. Utility-Owned Askarel Transformers:
Costs Assessment of Regulatory Alternatives
Alternative
Conditions
Begin
Phase-Out
End
Phase-Out
Incremental
PCB Release
(Pounds PCB)
I.
Ten-Year Phase-Out
None
1988
1992
134,547
2.
Twenty-Year Phase-Out
None
1998
2002
208,976
3.
Thirty-Year Phase-Out
None
2012
2012
212,888
4.
Ten-Year Phase-Out
With Inspection
Quarterly
Inspection
1988
1992
134,547a
5.
Twenty-Year Phase-Out
With Inspection
Quarterly
Inspection
1998
2002
208,976a
6.
Thirty-Year Phase-Out
With Inspection
Quarterly
Inspection
2012
2012
212,888a
7.
Thirty-Year Phase-Out
With Immediate
Immediate
Containment
2012
2012
0
Containment
8. Thirty-Year Phase-Out Immediate 2012 2012 0
With Immediate Retrofill
Retrofill
Base Case: Phase-out of all askarel transformers in 1982
0.8% of equipment in service spills each yearj^
3.43% of unit volume is released during spill
SOURCE: Putnam, Hayes & Bartlett, Inc, calculations based on methodology and data
sources described in Appendix A.
aWhile inspections should reduce exposure to PCB spills, their effect on spill
frequency and volume is unknown and assumed to be zero,
bEstimates based on EEI moderate leak r^te for mineral oil transformers (1982 p.
72), and average capacitor unit and spill volumes (1982, pp. 60, 62, 70). '
-------
135,000 to 213,000 pounds for 10- to 30-year phase-outs.
Order-of-magnitude sensitivities to spill rate and spill
volume assumptions are shown in Table 12. In general,
total PCB release is proportional to spill rate, spill
volume, and the average period before equipment retirement
or phase-out. As before, longer equipment life
assumptions result in substantially higher PCB releases
(shown in Table 12).
PCB-CONTAMINATED TRANSFORMERS
Table 13 shows the incremental PCB release for each
regulatory alternative evaluated for PCB-contaminated
transformers. Total PCB releases, ranging from 390 to 600
pounds, are much lower than for askarel transformers,
reflecting the low average level of contamination (280 ppm
for the nearly 2.4 million mineral oil transformers with
fluid over 50 ppm PCB). The average spill rate and volume
fraction spilled were assumed to be the same as for
askarel transformers. Table 14 shows order-of-magnitude
sensitivities to spill rate and spill volume assumptions..
At low assumed spill rates, the PCB release is
insignificant. Longer equipment life assumptions result
in PCB releases that are 54 to 114 percent higher (also;
shown in Table 14).
CIRCUIT BREAKERS, RECLOSERS, AND
OTHER UTILITY ELECTRICAL EQUIPMENT
Lack of time and data precluded a quantitative
evaluation of the expected PCB release resulting from
alternative use authorization of other utility electrical
equipment. Nevertheless, PCB release would be
proportional to the number of equipment units in service,
the spill rate and spill volume, and the average PCB
concentration levels. Given the level of PCB
contamination of this equipment (approximately equal to
the level of contamination in mineral oil transformers) ,
assuming that spill rates and equipment lives are similar
to those for mineral oil transformers, indefinite
authorization of this equipment would result in the
release of approximately 50 pounds of PCBs.
-33-
-------
Table 12. Utility-Owned Askarel Transformers:
Costs Sensitivity Analysis
A. Spill Rate and Spill Size Sensitivitv
Alternative
Incremental PCB Release (Pounds)
Spill Rate:
0_08%/year
Volume
Spilled: 0.
Spill Rate:
0.8%/veara
Volume
Spill Rate:
8%/year
Volume
4% Soilled: 3.43% Spilled: 10%
Ten-Year
Phase-Out
Thirty-Year
Phase-Out
1,569
2,483
134,547
212,888
3,922,644
6,206,666
B. Equipment Life Sensitivity-
Incremental PCB Release (Pounds)
Alternative 40-Year Life3, 60-Year Life 80-Year Life
Ten-Year
Phase-Out 134,547 148,119 155,583
Thirty-Year
Phase-Out 212,888 318,788 443,676
SOURCEr Putnam, Hayes & Bartlett, Inc. calculations based
on methodology and data sources described in Appendix A.
aBased on EEI/USWAG estimate ( 1982, pp. 60, 62, 70, 72,
A-36).
-34-
-------
Table 13. Utility-Owned PCB-Contaminated Transformers:
Costs Assessment of Regulatory Alternatives
Incremental
Begin End PCB Release
Alternative Conditions Phase-Out Phase-Out (Pounds PCB)
Ten-Year Phase-Out Test 1988 1992 387
All Units
Thirty-Year Phase-Out Common 20}2 2Q12 596
Collection
and Testing
Thirty-Year Phase-Out Annual 2012 2012 596a
With Annual Inspection Inspection*
Common Collection
and Testing
Immediate Phase-Out Single Wash 1982 1982 0
With Retrofill Option Retrofill,
Test All Units
Base Case: Phase-out of all PCB-contaminated transformers in 1982
0.8% of equipment in service spills each yearly
3.43% of unit volume is released during spill
SOURCE: Putnam, Hayes 5 Baptlett, Inc. calculations based on methodology and data
sources described in Appendix A.
aWhile inspections should reduce exposure- to PCB spills, their effect on spill
frequency and volume is unknown and assumed to be zero.
^Based on EEI/USWAG estimates (1982, pp. 61, 63, 70, 72).
-------
Table 14. Utility-Owned PCB-Contaminated Transformers:
Costs Sensitivity Analysis
A. Spill Rate and Spill Size Sensitivity
Incremental PCB Release (Pounds)
Spill Rate: Spill Rate: Spill Rate:
0„08%/year 0.8%/year 8%/vear
Volume Volume Volume
Alternative Spilled: 5% Spilled: 3.43%a Spilled: 10%
Thirty-Year
Phase-Out 7 596 17,373
B.. Equipment Life Sensitivity
Incremental PCB Release (Pounds)
Alternative 40-Year Lifea 60-Year Life 80-Year Life
Thirty-Year
Phase-Out 596 918 1,278
SOURCE:' Putnam, Hayes & Bartlett, Inc. calculations based
on methodology and data sources described in Appendix A.
aBased on EEI/USWAG estimate (1982, pp. 61, 63, 70, 72,
A-36).
-36-
-------
EVALUATING BENEFITS AND COSTS
CHAPTER 5
Since the cost of incurring incremental PCB exposure
risk could not be calculated, a quantitative assessment of
net. benefits is not possible. However, since the benefit
of avoiding the indirect cost of power disruption is very
large (at least $175 billion") , use authorizations which
prevent such disruption have net benefits to society.
Given that each alternative avoids disruption of
electrical service, the ' key issue for each equipment
category is which authorization period and other
conditions of authorization are most appropriate.
Although costs were not quantified, it is possible to
assess the cost-effectiveness of the various regulatory
alternatives by calculating the ratio of the benefits of a
given regulation to the expected incremental PCB release
that would result. This ratio measures the dollars saved
per additional pound of PCBs spilled. Ideally, one would
compare the marginal benefit of avoiding or deferring
direct costs with the marginal cost of increased PCB
exposure risk, and would choose the alternative where,
marginal costs most nearly equaled marginal benefits, thus
maximizing net benefits. As a starting point, the
cost-effectiveness of each regulatory alternative can be
calculated and used as a measure of comparison with the
base case. The greater the benefit per pound of PCB
released, the more attractive is the alternative rule
compared to an immediate ban.
While a quantitative cost-effectiveness analysis of
non-utility equipment could not be undertaken without
-37—
-------
additional data, the information provided in response to
the ANPR indicates that the results would be roughly
comparable to those for utility equipment.
PCB' CAPACITORS
Table 15 shows the dollar benefits per incremental
pound of PCB release for each of the seven alternatives
considered for utility-owned PCB capacitors, excluding the
benefits of' avoided indirect costs. Both benefits and
costs are measured with respect to the base case of an
immediate ban. The cost-effectiveness ranges from $132 to
$217 per pound of" PCB release. These results are not
likely to vary by more than 40 percent under alternative
discount rate or equipment life assumptions, but could
change by an order of magnitude if spill rates are
substantially higher or lower than those assumed.
Alternatively, benefits and costs could be measured
relative to indefinite authorization (essentially the case
prevailing- today but assuming that an immediate ban does
not. take effect). Cost-effectiveness then measures the
decrease in benefits (i.e., the cost) in order to decrease
the expected PCB release by 1 percent- These figures are
presented in Table 16.'
ASKAREL TRANSFORMERS
Table 17 illustrates the cost-effectiveness of the
regulatory options considered for utility-owned askarel
transformers. These measures indicate that the benefits
per pound of PCB release are- roughly an order of magnitude
greater than those for PCB capacitors, ranging from $2,470
to $2,660 per pound of PCB release. As for PCB
capacitors, the greatest uncertainty in these ratios is
contributed by the uncertainty in spill rate.'
Likewise, the cost-effectiveness can be presented
from the perspective of an indefinite use authorization.
Using this scenario as the "base case," Table 18 shows the
calculated cost-effectiveness for each regulatory
alternative.
-38-
-------
Table 15. Utility-Owned PCB Capacitors:
Coat-Effectivenesa of Regulatory Alternatives
($ Benefit Per Pound of Incremental PCB Release)
Cost-
Begin End Effectiveness
Alternative Conditions Phase-Out Phase-Out ($/Pound)
1.
Ten-Year Phase-Out
None
1988
1992
166. 5
2.
Twenty-Year Phase-Out
None
1998
2002
153f 6
3.
Thirty-Year Phase-Out
None
2012
2012
152.5
4.
Ten-Year Phase-Out
With Inspection
Quarterly
Inspection
1988
1992
144.7
5.
Twenty-Year Phase-Out
With Inspection
Quarterly
Inspection
1998
2002
133.4
6.
Thirty-Year Phase-Out
With Inspection
Quarterly
Inspection
2012
2012
132.3
7.
Thirty-Year Phase-Out
With Immediate
Containment
Immediate
Containment of
Substation/
Generating
Station
Equipment
2012
2012
216.8
Base Case: Phase-out. of all PCB capacitors in 1982
a
0.8% of equipment in service spills each year
55% of unit volume is released during spill
SOURCE: Putnam, Hayes £ Bartlett, Inc. calculations based on methodology and data
sources described in Appendix A.
aBased on EEI/USWAG estimate (1982, pp. 80, 81).
-------
Table 16, Utility-Owned PCB Capacitors:
Relative Cost-Effectiveness of Regulatory Alternatives
(Decrease in $ Benefit per. Incremental Decrease in PCB Release)
Alternative
Condition
Begin End
Phase-Out Phase-Out
Cost-
Effectiveness
($/Pound)
1 * Immediate
Phase-Out
2.. Ten-Year
Phase-Out
3. Twenty-Year
Phase-Out
None
None
None
4. Ten-Year Quarterly
Phase-Out with Inspection
Inspection
5. Twenty-Year Quarterly
Phase-Out with Inspection
Inspection
6. Thirty-Year Quarterly
Phase-Out with Inspection
Inspection
7. Thirty-Year Immediate
Phase-Out with Containment of
Immediate
Containment
Substation/
Generating
Station
Equipment
1982
1988
1998
1988
1998
2012
2012
1982
1992
2002
1992
2002
2012
2012
152.5
133.0
117.2
163.31
744. 81
CO1
101.8
Base Case: Phase-out of all PCB capacitors by 2012 (effectively an
indefinite authorization).
SOURCE: Putnam, Hayes & Bartlett, Inc. calculations based on methodology
and data sources described in Appendix A.
Excluding indirect costs.
^While inspections should reduce exposure to PCB spills, their effect on
spill frequency and volume is unknown and assumed to be zero.
-40-
-------
Table 17. Utility-Ov^ned Askarel Transformers;
Cost-Effectivenasa of Regulatory Alternatives
($ Benefit Per Pound of Incremental PCB Release)
Alternative
Conditions
Begin
Phase-Out
End
Phase-Out
Cost-
Effectiveness
($/Pound)
1.
Ten-Year Phase-Out
None
1988
1992
2,661
2.
Twenty-Year Phase-Out
None
1998
2002
2,484
3,
Thirty-Year Phase-Out
None
2012
203 2
2r471
4.
Ten-Year Phase-Out
With Inspection
Quarterly
Inspection
1988
1992
2,594
5.
Twenty-Year Phase-Out
With Inspection
Quarterly
Inspection
1998
2002
2,417
6.
Thirty-Year Phase-Out
With Inspection
Quarterly
Inspection
2012
2012
2,405
7.
Thirty-Year Phase-Out
With Immediate
Containment
Immediate
Containment
20J 2
2012
+ GO
8.
Thirty-Year Phase-Out
With Immediate
lietrof ill
Immediate
Retrofill
2012
2012
-oo
Bane Case; Phase-out of all askarel transformers in 1982
0.8% of equipment in service spills eacl}
3.43% of unit volume is released during
a
year
spilla
SOURCE; Putnam, Hayes & Bartlett, Inc. calculations based on methodology and data
sources described in Appendix A.
aBased on KEI/USWAG estimate (1982, pp, 60, 62, 70, 72).
-------
Table 18, Utility-Owned Askarel Transformers:
Relative Cost-Effectiveness of Regulatory Alternatives
(Decrease in $ Benefit per- Incremental Decrease in PC3 Release)
Alternative
Condition
Cost-
Begin End. Effectiveness
Phase-Out Phase-Out ($/Pound)
1. Immediate
Phase-Out
2. Ten-Year
Phase-Out
3. Twenty-Year
Phase-Out
4. Ten-Year
Phase-Out with
Inspection
5 - Twenty-Year
Phase-Out with
Inspection
6.. Thirty-Year
Phase-Out with
Inspection
7. Thirty-Year
Phase-Out with
Immediate
Containment
8. Thirty-Year
Phase-Out with
Immediate
Retrofill
None
None
None
Quarterly
Inspection
Quarterly
Inspection
Quarterly
Inspection
Immediate
Containment
Immediate
Retrofill
1982
1988
1998
1988
1998
2012
2012
2012
1982
1992
2002
1992
2002
2012
2012
2012
2,471*
2,144
1,789
2,25 9*
5,36s1
CO1
2,414
3 ,049
Base Case: Phase-out of all askarel transformers by 2012 (effectively
an indefinite authorization).
SOURCE: Putnam, Hayes & Bartlett, Inc. calculations based on methodology
and data sources described in Appendix A.
Excluding indirect costs.
^While inspections should reduce exposure to PCB spills, their effect on
spill frequency and volume is unknown and assumed to be zero.
-42-
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PCB-CONTAMINATED TRANSFORMERS
Finally, Table 19 shows the cost-effectiveness of the
regulatory alternatives considered for PCB-contaminated
transformers (PCB concentrations greater than 50 ppm) ,
relative to the base case of immediate phase-out. Even
excluding the benefits of avoiding indirect costs, the
cost-effectiveness of the alternative rules exceed $6
million per pound of PCB release. Even with the
uncertainty of the figures considered, extended
authorization periods appear preferable to immediate
phase-out. Marginal benefits appear to be four orders of
magnitude greater than for askarel transformers. The
largest uncertainty (perhaps an order of magnitude) is
attributable to the uncertainty in spill rate. As before,
a calculation of cost-effectiveness using indefinite
authorization as the case against which benefits and costs
are measured is shown in Table 20.
OTHER UTILITY EQUIPMENT
EEI (1982, p_ 10) has- estimated that circuit
breakers, reclosers, and other utility electrical
equipment have equivalent or lower levels of PCB
contamination than mineral oil transformers. In view of
this fact, testing costs will be extremely high on a "per
contaminated unit identified" basis. This high testing
cost will in turn result in extremely high marginal
benefits per incremental pound of PCBs released, probably
at least as high as for mineral oil transformers. Under
these conditions, indefinite use authorization appears to
be justified unless the cost to society (risk of injury to
health or environment) is extremely high per pound of PCB
release. In retrospectr this result is not surprising,
since the equipment contains such a small proportion of
PCBs, and since the cost of early phase-out is raised
substantially by the need to test the equipment in order
to identify those units contaminated at levels above 50
ppm. Notwithstanding such observations, the analysis of
these equipment categories is qualitative only, and
conclusions should be regarded as tentative.
-43
-------
Table 19t Utility-Owned PCB-Contaminated Transformers:
Cost-Effectiveness of Regulatory Alternatives
($ Benefit Per Pound of Incremental PCB Release)
Alternative
Conditions
Begin
Phase-Out
End
Phase-Out
Cost-
Effectiveness
($/Pound)
1. Ten-Year Phase-Out
Individual
Test All Units
1988
1992
6,036,000
2. Thirty-Year Phase-Out
Common
Collection
and Testing
2012
2012
13,695,000
Thirty-Year Phase-Out Annual
With Annual Inspection Inspection;
Common Collection
and Testing
2012
2012
10,760,000
Immediate Phase-Out Single Wash
With Retrofill Option Retrofill,
Test All Units
1982
1982
OO
Base Case: Phase-out all PCB-contaminated transformers in 1982
0.8% of equipment in service spills each year*
3,43% of unit volume is released dqring spill1*
SOURCE: Putnam, Hayes & Bartlett, Inc. calculations based on methodology and data
sources described in Appendix A.
aBased on EEI/USWAG estimate (1982, pp. 61, 63, 70, 72).
-------
Table 20. Utility-Owned PCB-Contaminated Transformers:
Relative Cost-Effectiveness of Regulatory Alternatives
(Decrease in $ Benefit per Incremental Decrease in PCB- Release)
Alternative
Condition
Cost-
Begin End Effectiveness
Phase-Out Phase-Out ($/Pound)
1.
2.
Immediate
Phase-Out
Ten-Year
Phase-Out
None 1982
None 1988
1982.
1992
13 ,695,000'
27,876,000
3.. Thirty-Year
Phase-Out with
Inspection
4. Immediate
Phase-Out with
Retrofill
Option
Annual In— 2012
spection of
Oil Trans-
formers;
Common
Collection
Testing at
Disposal
Single Wash 1982'
Retrofill;
Tes-t all
Units
2002
1982
2,935 ,000
13,169,000'
Base Case: Phase-out of all PCB-contaminated transformers by 2012
(effectively an indefinite authorization).
SOURCE: Putnam, Hayes & Bartlett, Inc. calculations based on methodology
and data sources described in Appendix A.
Excluding indirect costs.
^While inspections should reduce exposure to PCB spills, their effect on
spill frequency and volume is unknown and assumed to be zero.
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REGULATORY FLEXIBILITY ACT
CHAPTER 6
The Regulatory Flexibility Act (RFA) requires that
the impact of new regulations on small business be
assessed~ In general, use authorizations for PCB-
containing electrical equipment will be beneficial to all
equipment owners,. including small businesses, as the
costs of immediate replacement and any associated business
interruptions are avoided- However, a more detailed
analysis of the impacts^ on small business was undertaken,
subject to the constraints of available data and time.
• An estimate of the effect of use authorizations on
small business was .performed using data on utility real
resource costs collected from a survey of the 100 largest
utilities and presented in the EEI (1982) study. Use of
these data for estimation of the regulatory impact on
small utilities, or on small non-utility businesses is
extremely speculative. Such an analysis has been
performed only to provide an order-of-magnitude estimate
of these impacts.
Assuming that 3,320 utility systems exist in the
United States and that the largest 100 utilities own 72
percent of the utility-owned askarel transformers and 70
percent of the utility-owned PCB capacitors (EEI, 1982,
pp. 1, 3), the average benefit per company for the
-46-
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smallest 3,220 utility systems* would be $46,000 for
indefinite authorization of askarel transformers' and
$66,000 for indefinite authorization of PCB capacitors.
These figures represent the present value of deferring
equipment replacement costs and PCB disposal costs for
each firm, on a before-tax basis. In fact, the costs
could be shared with the government if they served to
reduce taxes (municipal power authorities are not taxed,
however), or with ratepayers if utility commissions
granted an increase in rates to cover early replacement
and disposal costs.
EPA proposes to accelerate phase-out of" PCB
capacitors only. A 10-year phase-out of capacitors will
reduce the benefits to the smallest 3,220 utility systems
by $24,000 per utility.
The incremental reduction in benefits to non-utility
companies of mandating a 10-year PCB capacitor phase-out,
compared to an indefinite authorization, was also
estimated using cost data reported in the EEI/USWAG study.
As mentioned above, the "extrapolation of ¦ cost data
gathered from the 100 largest utilities to the smallest
non-utility companies is extremely speculative. Table 21
illustrates the - cumulative reduction in benefits to all
firms in an industry smaller than the largest 50,* for
eight industry sectorsr assuming that 80 percent of all
PCB capacitors are utility-owned. Since the number of
firms within the smallest segment was not available, the
impact per firm on the bottom 30 of the largest 50 firms
in an industry was estimated. Since the average size of
these 30 firms is much larger than the firms not among the
largest 50, and since larger firms own a disproportionate
* These "smaller" utility systems include many companies
with annual revenues of over $100 million which would own
a disproportionate share of the remaining equipment but
would not generally be- considered "small business." Hence
the stated impacts per utility overestimate the impact on
small business.
**" The dollar value of shipments was used as a measure of
size. Non-utility capacitors were allocated to
industries, and to size segments within each industry,
based on a study for EPA (PHB, 1979).
-47-
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Table 21 ~ Impact of Accelerated PCB Capacitor-
Phase-Out on Small Non-Utility Firms
Estimated Number
of PCB Capacitors
Industry Sector In Industry
Total
Impact on All Per Firm Impact
Firms Not Among On Bottom 30 of
Largest 50 Firms Largest 50 Firms
(Dollars) (Dollars)
Metals
105 ,1.98
Chemicals
101,269
Paper & Lumber
54,127
Mining
24,881
Automobiles
18,333
Food
24 ,008
Textiles
14,405
Stone, Clay & Glass
17,897
All Commercial
Buildings 340,038
767,000 30,950
606,000 49,790
1,130,000 28,260
0b 39,020
15,150 270
767,000 10,760
242,000 8,020
121,000 5,380
$31,450,000C N.A.
SOUPvCE: Putnam, Hayes & Bartlett, Inc..
aAssumes an average reduction in the present value of benefits of
$92.48/capacitor for a 10-year phase-out as compared to indefinite
authorization.
^Less than 50 firms included.
cTotal impact on all owners of commercial buildings.
-48
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share of the electrical equipment, the estimated impact
per firm shown in Table 21 overestimates the impact, on
small business (probably by a substantial amount).
Nevertheless, -in no case would the impact on the average
small business exceed a present value- of $50,000. If the
impact were spread over the 10-year phase-out period, it
would be less than $5 ,000 per year on a levelized basis.
As before, if these costs were tax-deductible, the impact
on individual firms would be reduced even further.
-49-
-------
REFERENCES
EEI. Edison Electric Institute. 1974. Historical
statistics of the electric utility industry through 1970..
New York: EEI.
EEI. Edison Electric Institute. 1978. Edison electric
Institute year book: of the electric utility industry- No..
45, Oct.
EEI. Edison Electric Institute. '1982. Comments and
studies on the use of polychlorinated biphenyls in
response to an order of the United States Court of Appeals
for the District of Columbia Circuit. Washington, DC:
EEI, 12 Feb.
EPRI. Electric Power Research Institute. 1978. Costs
and benefits of over/under capacity in electric power
system planning. EPRI EA-927. Palo Alto, CA: EPRI, Oct.
PHB. Putnam, Hayes & Bartlett, Inc. 1979. TSCA/PCB
enforcement strategy. Washington, DC: EPA, 10 Dec.
PHB. Putnam, Hayes & Bartlett, Inc. 1980. The impact of
additional regulation of polychlorinated biphenyls (PCBs)
in food-related industries. Vol. I. Washington, DC:
EPA, Office of Pesticides and Toxic Substances, 8 Dec.
Pittaway AR, Heiden EJ, O'Connor RS. 1981. A study of
enclosed use of PCB in the chemical industry. Prepared
for Chemical Manufacturers Association, Regulatory
Research Service, Dec.
-50-
-------
Rancourt LR. 1981. Capacitor protective schemes
investigated by northeast utilities. Presented to EPRI
PCB Seminar, Dallas, TX, 1-3 Dec.
Versar, Inc.. 1976. PCBs in the United States:
Industrial use and environmental distribution. NTIS PB
252-012/3WP. Springfield, VA: NTIS, Feb.
Versar, Inc- 1978~ Microeconomic impacts of the proposed
'PCB Ban Regulations~' NTIS PB 281-881/3WP. Springfield,
VA: NTIS, May.
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PROCEDURE FOR ANALYSIS- OF ALTERNATIVE
NEW RULES REGULATING THE USE OF PC3S
IN ELECTRICAL EQUIPMENT
APPENDIX A
GENERAL METHODOLOGY
1» Background
Executive Order 12291 requires that the benefits and
costs of new rules be assessed for every major rule, as
defined in section l.b of the Order - While EPA does not
feel that new rules regulating the use of PCBs in
electrical equipment are major rules, an economic impact
analysis has been prepared complying, to the extent
possible, with the requirements of E.O. 12291. As
explained in Chapter- 1, all electrical equipment
containing PCBs in any concentration would be banned
immediately if EPA were to promulgate no new rules.
Hence, the benefits of the new rules were defined as the
avoidance or deferral of costs to society that would be
incurred immediately in the event of a ban (e.g.., power
disruption, PCB fluid disposal, equipment replacement).
Accordingly, costs were defined as the impact of increased
PCB exposure risk that would result from continued use of
PCB-containing equipment. In order to facilitate the
evaluation of many alternative rules, a major portion of
the procedure for quantifying benefits and costs was
automated. However, due to the short time within which
the economic analysis was to be performed, indirect and
transitional costs (e.g., price effects) were treated only
qualitatively. A computer model was designed to evaluate
the benefits of avoiding or deferring real resource costs
-52-
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(e.g., accelerated equipment replacement, 'PCB disposal),
as well as injury to health and environment, measured by
the expected increase in PCBs released to the environment
from spills that occur during continued equipment use. A
monetary evaluation of cost was precluded by lack of data,
as was a quantitative calculation of the cost to clean up
PCB spills - The computer model offered significant
advantage in speed, precision, -consistency, and
flexibility.
The EEI (1982) study of the use of PCBs in utility-
owned electrical equipment presents a substantial amount
of information regarding the quantity and type of
PCB-containing electrical equipment still in use, as well
as the costs required to replace, contain, inspect, or
retrofill the equipment and to dispose of PCB material.
However, at least partly due to a different focus and
different assumptions, the EEI (1982) study does not
provide an adequate, economic basis from which to compare
alternative rules. The objective of the computer model is
to provide such a basis by supplying the following
information:
» An estimate of the age distribution of the
current inventory of PCB-containing electrical
equipment;
» A forecast of equipment retirement under various
phase-out schedules, accounting for natural
retirement or failure of equipment during the
intervening period;
9- An estimate of the direct costs to society that
result solely from the new rule (i.e.,
"incremental costs") for each year of use
authorization, and the present value of those
costs; and
A forecast of the weight of PCBs spilled each
year, and the amount requiring disposal each
year, accounting' for the decline in the
in-service equipment population that results
from failure/ natural retirement, or mandated
phase-out.
-53-
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2. Model Outout
A section of the computer code was devoted to each of
the calculations described above„ The following output
was available from the model for each scenario (a single
scenario considered one type of equipment with a given
phase-out schedule and given assumptions regarding
equipment characteristics and economic parameters)r
1.
NEW (Y) -
2. REBUILD (Y) -
3. NEWFAIL (Y) -
4„ REBFAIL (Y)
5. NEWRET (~Y)
6. REBRET
-------
11. DISPOSE (Y) -
12. TSTOCXCOST (Y)
13 _ TFLOWCOST (Y) -
14- TRECURCOST (Y)
IS. TOTALCOST (Y)
16 . PVSTOCX, PVFLOW,
PVRECUR -
17. PVCOST -
Reduction in inventory, in
year Y: units that must be
permanently disposed due to
retirement, failure, or
phase-out, net of units re-
built
Incremental nominal dollar
costs in year Y" which depend
on the number of units in
service (e.g., inspection and
maintenance), for years 198 2
to 2012
Incremental nominal dollar
one-time costs in year Y
which depend on the number of
units disposed (e.g., dispos-
al costs, testing cost), for
years 1982 to 2012
The present value in year Y
of a stream of costs begin-
ning in year Y, depending on
the number of units disposed
in year Y (e.g., equipment
replacement, removal, and
installation), for years 1982
to 2012
The sum of TSTOCXCOST(Y),
TFLOWCOST(Y), and TRECUR-
COST(Y), for each year from
1982 to 2012
The present value in 1982 of
the stream of costs from 1982
to 2012 defined by TSTOCX-
COST(Y), TFLOWCOST(Y), and
TRECURCOST(Y), respectively
The present value of all
incremental real resource
costs associated with a given
scenario, equal to the sum of
PVSTOCX, PVFLOW, and PVRECUR
-55
-------
18. PC3RELEASE (Y)
19. CUMRELEASE (Y) -
20. PCBDISPOSE (Y) -
21. CUMDISPOSE (Y) -
The expected weight of PCBs
released from equipment
spills in year Y, for years
1982 to 2012
The cumulative expected
weight of PCBs released from
equipment spills from 1982
through year Y, inclusive
The weight of PCBs contained
in equipment disposal in year
Y, in pounds, from 1982 to
2012
The cumulative weight in
pounds of PCBs disposed frcm
1982 through year Y, inclu-
sive
3. Calculation of Benefits and Costs
For most cases, the calculations of the benefits and
the incremental PCB release of an alternative rule
proceeds directly from the output described above. The
evaluation requires two computer" runs: one for the base
case, and one for the alternative. The calculations
(performed outside of the model) are as follows:
(1) SBENEFITS = BVCOSTbase case - PVCOSTalternative
(2) INCREMENTAL PCB RELEASE (POUNDS) «
CDMB£I£ASE U012)alternative
- CTMEELEASE (2012)base case
As an indication of the severity of mandated phase-out,
the sum of all PHASEOUT (Y) from 1982 to 2012 was also
calculated outside of the model and presented • in the
report.
In four cases, additional one-time costs not
accounted for in the model were calculated outside of the
model:
-56-
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For a 30-year phase-out of PCB capacitors with
immediate (1982) containment of substation/generating
station capacitors:
a. $CONTAINMENT COST =
unit cost to contain * 56% of caoacitors in
1982
b _ $BENEFITS =
$BENEFITS^Q_Year Phase-Out ~ SCONTAINMENT COST
C. INCREMENTAL PCB RELEASE =
44% * INCREMENTAL PCB RELZASE30_Yaar phase_out
For a 30-year phase-out of askarel transformers with
immediate containment of all units in 1982:
a. $ CONTAINMENT COST =
unit cost to contain * number of askarel
transformers in 1982
b„ $ BENEFITS =•
$ BENEFITS.
c- INCREMENTAL PCB RELEASE = 0 (by assumption)
SBEHEFITS30.Year phaseH3ut - SCONTAINMEHT COST
For a 30-year phase-out of askarel transformers with
immediate retrofilling of all units in 198 2:
a. SRETROFILL COST = incremental cost to retrofill
all units and to incinerate
and dispose of intermediate
rinse and refill fluid
b. SBENEFITS =
SBENEFITS30.year phase.out " SEETROPILL COST
— PVFLOW^ase case + PVFI,OW30-year phase-out
c. INCREMENTAL PCB RELEASE = 0 (by assumption)
For immediate phase-out of all PCB-contaminated
mineral oil transformers by replacement or retrofill,
whichever is cheaper:
-57-
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a. Assuming that rebuilding is permitted, and that
the age of each transformer is known, the
decision to retrofill or rebuild depends on the
expected remaining life of the unit (new units
are retrofilled; older units are replaced).
Breakeven lives for new and rebuilt units were
calculated separately using a decision tree
analysis.
b. Then: 5BENEFITS =
PVCOST (replace all) - PVCOST (retrofill or
replace) where PVCOST (replace all) is
the base case
c.. PVCOST (retrofill or replace) =
PVCOST (retrofill) +• PVCOST (replace)
d. PVCOST (retrofill) = unit cost to retrofill and
dispose, 1982 * # units retrofilled +¦ PVRECUR
(for Y >breakeven life)
e» PVCOST (replace) = unit cost to replace * #
units replaced
f. INCREMENTAL PC3 RELEASE =0 (by assumption)
DESCRIPTION OF COMPUTER ALGORITHMS
1. Estimate Composition of Current Equipment Inventory
a^ Assume that installation of new units began in
1944 and that total inventory in service grows
in proportion to residential kwh sales for
utilities until a specified end production year
(input) . Then:-
TOTAL(Y) = TOTAL(Y-l)*SALESRATIO(Y)
b. Vary 1944 new installations ("seed" units) until
1981 in-service inventory matches EEI (1982)
estimate:
TOTAL(1931) = EEI 1982 estimate of 1981
inventory
-58-
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c- Assume normal removal from service results from
failure (a fixed percentage for every year)- or
from retirement (high early failure is ignored).
The percentage retired varies by year for each
vintage of equipment and is normally distributed
around the mean equipment life. The percentages
(normal probabilities) are calculated in the
model based on the mean and standard deviation
of the equipment life (input). Then:
NEW(Y) = TOTAL(Y) - TOTAL(Y-l) - REBUILD(Y) +
NEWBET(Y) REBRET(Y) + NEWFAIL (Y) +
REBFAIL(Y)
d. Assumed proportions (input) of failed and
retired units may be rebuilt each year, until an
end rebuild year (input). If rebuilding is not
technically feasible, the end rebuild year is
set to 1944. Rebuilt units can have separate
failure and retirement characteristics. So:
REBUILD(Y) = fraction of failed rebuilt *
NEWFAIL (Y) -i- fraction of retired rebuilt *
NEWRET(Y)
2. Forecast Retirements Under Phase-Out
a. Assume failure/retirement rates do not vary by
equipment vintage.
b. For years after 1977 (end production year),
assume that rebuilding results in total
decontamination of unit, so that the unit is
effectively retired from the population of
PCB-contaminated equipment:
REBUILD (Y) » 0 for Y >1977
c. For years after 1977, assume that no new units
are added to the contaminated equipment
population:
NEW(Y) =0 for Y > 1977
d. Phase-out is "ramped" between two years
specified by the user (e.g., 1983 , 1987). For
-59-
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each year after phase-out begins, a fraction
equal to the reciprocal of the remaining years
of phase-out is retired, after accounting for
normal retirement and failure (for example, 1/5
of the in-service inventory is retired in 1983,
1/4 in 1984, etc., for a 1983-1987 phase-out).
e. Phase-out units randomly from the in-service
inventory (i.e., the same fraction is removed
from every vintage).
f. Forecast in-service inventory (end of year) and
total units disposed (phase-outs plus failure
and retirement) for every year until all units
phased-out:
TOTAL(Y) = TOTAL(Y-l) - DISPOSE(Y)
DISPOSE(Y) = PHASEOUT(Y) + NEWRET(Y) +
NEWFAIL(Y) + REBRET(Y) + REBFAIL(Y)
3. Estimate Costs
a. All annual costs are input as a unit cost per
piece of equipment in 1982 dollars? total costs
depend either on the number of equipment pieces
retired from service (disposed) or the number of
pieces of equipment in service, end of year.
b. TSTOCKCOST(Y) — costs based on units in
service, assuming average equipment size,
location, and PCB concentration. Stock costs
include: incremental inspection, maintenance,
recordkeeping, and marking.
c.. TFLOWCOST(Y) — one-time costs associated with
removal of equipment from service, including:
disposal of equipment piece, PCB fluid disposal,
and testing for identification of contaminated
units.
d. TRECURCOST (Y) — a stream of recurring costs
beginning when equipment is taken out of
service, occurring once every NEWLIFE years,
where NEWLIFE is input. Recur costs include:
removal of old equipment, installation of new
-60-
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equipment, purchase of new equipment, . and
purchase of rebuilt equipment. Costs are
assumed to recur in perpetuity? the perpetuity
factor (inverse of the real discount rate) is
used to calculate the present value of the cost
stream at the time of equipment removal/
replacement. Rebuilding costs are assumed to be
60 percent of the cost of a new unit (Versar,
1978) , and are imbedded in the unit recur cost
as a present value_
e. Unit stock, flow and recur costs are inflated at
separate rates (input). Total costs are
discounted at the same rate (input) , to
calculate the present value of costs in 198 2:
PVTOTAL. = PVSTOCX +> BVFLOW + PVRECUR
4. Estimate PCB Release and PCB Disposal
a. The expected annual PCB release due to spills is
determined as- the product of the number of units
in service each year, the average unit volume,
the fluid density, the average PCB
concentration, the spill rate (fraction of units
spilling" each, year) , and the fraction of the
unit volume spilled. Only the in-service
inventory varies by yearr
PCBRELEASE(Y) =
TOTAL(Y)*UNITVOL*DENSITY*PCBCONC*SPILLRATE
*VOLFRAC
b. Failure rates and average spill rate are not
linked in the model.
c. The expected annual weight of PCBs disposed each
year is determined as the product of the number
of units disposed each year, the average unit
volume, fluid density, and PCB concentration.
Only the number of units disposed varies by
year:
PCBDISPOSE (Y) =»
DISPOSE(Y)*UNITVOL*DENSITY*PCBCONC
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d. The cumulative PCB release and cumulative . PCB
disposal requirement are calculated as running
totals each year.
MODEL INPUTS
1. Common Parameters
For each equipment category, a majority of the model
inputs remained the same for all scenarios. These
"constant" parameters are listed below.
a. PCB Capacitorst
SALESBATTom = residential kwh sales, Y
SALESRATIO(i) .residential kwh sales, Y-l
where annual kwh sales were obtained from EEI
Statistical Yearbooks of the Electric Utility
Industry, for years 1945 to 1977.*"
END • REBUILD YEAR = 1944 (rebuilding not
feasible)
END PRODUCTION YEAR = 1977
FRACTION FAILED UNITS REBUILT = 0
FRACTION RETIRED UNITS REBUILT » 0
UNITVOL =2.7 gallons/unit (EEI, 1982, pp. 79,
80)
DENSITY - 11.6 pounds/gallon (EEI, 198 2, p.
A-14)
PCBCONC =1.0 (EEIr 1982, p. A-14)
STOCKESC = .09 (escalation rate for stock costs,
EEI, 1982, p. A-37)
* For years 1945-1970: EEI (1974, p. 60); for years
1971-1977: EEI (1978, p. 31).
-62-
-------
FLOWESC = .09 (escalation rate for flow costs,
EEI, 1982, p. A-37)
RECESC = .09 (escalation rate for recur costs,
EEI, 1982, p. A-37)
FAILURE RATE, UNITS NOT REBUILT = .003 per unit
per year
FAILURE RATE, REBUILT UNITS =- .003 per unit per
year
End of Year 1981 inventory = 2,800 ,619 PCB
capacitors (EEI, 1982, p. 9)
b. Askarel Transfonnersr
SALESRATIO(Y) = same as for PCB capacitors, 1945
to 1977
END REBUILD YEAR = 1975
END PRODUCTION YEAR = 1977
FRACTION FAILED UNITS REBUILT = .8
FRACTION RETIRED UNITS REBUILT = 1.0
UNITVOL = 215.07 gallons per unit (EEI, 1982,
pp„ 60, 62)
DENSITY = 12.5 pounds/gallon- (EEI, 1982, p.
A—14)
PCBCONC » .7 (EEIr 1982, p. A-14)
STOCXESC = .09 (EEI, 1982, p. A-37)
FLOWESC = .09 (EEI, 1982, p. A-37)
RECESC = .09 (EEI, 1982, p.. A-37)
FAILURE RATE, UNITS NOT REBUILT = .002 per unit
per year
63-
-------
FAILURE RATE, REBUILT UNITS = .002 per unit per
year
End of Year 1981 inventory = 39,640 askarel
transformers (EEI, 1982, p. 60)
c. Mineral Oil Transformers (data are stated per
contaminated transformer)
SALESRATIO (Y) = same as for PCB capacitors, 194-5
to 1977
END REBUILD YEAR = 1977
END PRODUCTION YEAR = 1977
FRACTION FAILED UNITS REBUILT = .8
FRACTION RETIRED UNITS REBUILT =1.0
UNITVOL = 42-32 gallons per unit (EEI, 1982, p.
67)
DENSITY =7.5 pounds/gallon (EEI, 1982/ pp.
A—14, A—15)
PCBCONC o 280 ppm (EEI, 1982, pp. 67, 69)
STOCXESC = .09 (EEI, 1982, p. A-37)
FLOWESC = .09 (EEL:r 1982, p. A-37)
RECESC = .09 (EEI,,' 1982, p. A-37)
FAILURE RATE, UNITS NOT REBUILT = .00 2 per unit
per year
FAILURE RATE, REBUILT UNITS = .002 per unit per
year
End of Year 1981 inventory = 2,386,077 mineral
oil transformers containing >50 ppm PCB (EEI,
1982, p. 67)
-64-
-------
2.
Case-by-Case List of Variable Inputs
a.
BEGPHASEOT -
ENDPHASEOT -
STOCKCOST -
FLOWCOST -
RECURCOST -
MLT(NEW) -
SDLIFE(NEW) -
Input Definitions
Year in which equipment
phase-out begins
Year in which equipment
phase-out ends
Unit cost per equipment
piece, stated in 1982
dollars, for costs de-
pending on the units in
service (e.g., inspec-
tion and maintenance)
Unit cost per equipment
piece, stated in 1982
dollars, for one-time-
costs depending on the
units disposed (e.g.,
disposal costs, testing
costs)
Unit cost per equipment
piece, stated in 1982
dollars, representing
the cost per occurrence-
of a stream of costs
beginning in a given
year and recurring peri-
odically (e.g., equip-
ment removal, installa-
tion and replacement)
The mean life in years
for equipment that has
never been rebuilt
The standard deviation
of the equipment life in
years, for equipment
that has never been
rebuilt
-65-
-------
MLF(REB) -
SDLIFE(REB) -
NEWLIFE -
DISCOUNT -
SPILLEATE -
VOLFRAC -
The mean life in years
for equipment rebuilt
once
The standard deviation
of the equipment life in
years, for equipment
rebuilt once
The period in years
separating each occur-
rence of RECURCOST,
generally the sum of
MLF(NEW) and MLF(RE-
BUILT)
The nominal rate of
interest used to dis-
count all costs to 1982
The fraction of equip-
ment units that- spill
each year (generally the
moderate leak rate, -as
reported by EEI)
The fraction of the
average unit fluid vol-
ume that is released to
the environment on
average during a spill.
Variable Input List:
Refer to Tables A-l through A-3.
UNIT COST DERIVATION
(All costs and figures from EEI (1982) unless
otherwise shown.)
-66-
-------
Ttil> I c A-1. Vnrjublti Input*) to Computer Hod el for Utility-Owned I'CB Capacitors
HUH I JJFWIIASJSOT ENUPIIASKOT STOUXOST FI.OL'COST ItGCUKCIIST HI.K(HtW) .SJU.U'MNKU) MIF(REB) SIU.IH-(HtB) HblH.lHi DISCOUNT SPII.I.ftAT£ VOLft-'RAC
t
1982
1982
0
?6.0
424.0
25
2
—
—
25
.12
.008
.55
2
2012
2012
—
—
3
4
I486
1983
1992
1992
—
—
5
1998
2002
—
—
6
1981
2002
—
—
7
a
2012
2012
2012
2012
--
—
.10
.14
9
1988
1992
—
—
.10
10
1988
1992
—
—
.14
II
1988
1992
10
4
—
—
12
1988
1992
40
5
—
--
13
2012
2012
30
4
—
—
14
2012
2012
40
5
—
15
1988
1992
—
—
.08
1.0
16
2012
2012
—
—
.1)8
1.0
17
I9A8
1992
—
—
.0008
.05
IS
2012
2012
—
—
.0008
.05
19
1988
1992
1.1
—
—
211
1998
2002
J.J
--
—
21
2012
2012
1. J
—
—
22
1982
1982
--
—
.10
2}
1982
1982
—
—
.14
24
1982
1982
30
4
--
—
25
1982
1982
40
5
—
—
Valutiu cqunl Co vulua shown |i»r RUM II tin It: lift otherwise Dtated.
SOURCE: I'ninaa, Hayes ft Rnrtlett. Inc.
-------
Tal-li >-2. VarUl.l.i lii|>nLu to Cinn|niler H.xlil lor lit 1111 y-Ouned Ankiiri-1 Tranefornn-'i «
Kllll I HKf.lMIASlOT ElUmiASEOT STOCK filST FI.UUCOST KKIIWCOST MI.F(MtU) SUMFK(NEW) Hl.f(KKB) SIll.lHUBK.B) HF.WI.1KE DISCOUNT SI'II.I.KATE VOI.WAC
1
I9B2
19H2
0
4260
1424 7
24
1.5
16
1.0
40
12
.una
2
2012
2012
1
me
I'ISI
4
198)
1992
5
mil
6
1981
2002
1
2DI2
2012
J89 1J
.IU
e
2012
2012
11161
. 14
9
1938
1992
1S91?
.10
0
IDflti
1*92
11)61
.14
i
i!*as
1992
J297A
JO
1
JO
1
60
2
I960
ih a
1992
.oixm
2012
21112
.imni;
y
1988
1992
40
I99B
20IJ2
4(1
i
I'd 12
2012
40
2
t(.(B2
1*182
1K91?
. 10
1
I9H2
1982
11161
.14
4
l'JB2
I9B2
1I/97B
10
1
10
1
60
5
I9B2
I9B2
11106
40
4
40
4
BU
SOLIIU.H: i'utii.ia, 6 lliirtielt, (ik.
Vjilnca »N]uiil in valpa elioun for RUN #1 unlena otherwise ntated.
-------
Table A-3. Variable lii|iutu In Computer Model fur Ut i 111 y-Owned Mineral Oil li'iinnf oro^ru
Containing Greater tlian 50 P1"H ITU
KUH I BKCrilASKOT ENUPIIASMVV STOCKCOST FI.OUCOST RKCUHCOST HI.HHEW) SI>| lHi(HEW) Ml.KURD) SI>|IFE(REb) NEUI.IKK DISCOUNT SCIJ.l.HATK. Vll|.FKAC
.008 .0141
1
1982
1902
0
2992
1998
24
1.5
16
1
40
.12
2
2012
2012
451.19
19)2
3
I9B8
1992
2992
1990
4
1081
1992
2992
1998
5
1982
1982
vatlesl
retrof111/repl
ace
6
21)12
2012
254.19
1932
7
1982
1982
2992
2288
.10
a
1982
2982
2992
181 i
.14
9
2012
2012
451.19
2262
.10
10
2012
2012
451.19
1714
.14
II
1982
1982
2992
1880
30
3
30
3
60
12
2012
2012
451.19
1942
30
3
30
]
60
1)
2012
2012
84.8
451.19
1932
14
1982
1982
2992
1770
40
4
40
4
80
IS
2012
2012
451.19
18)4
40
4
40
4
80
16
2012
2012
451.19
1998
17
2012
2012
451.19
1932
.08 .1
.OUOH .004
Values equal to value shown for RUN II unless otherwise stated.
^ SOIIHCE: futnan, llayes I buctlutt, Inc.
VO
I
-------
a-
Stock Cost
0 for all cases without inspection
2.8 * 10 capacitors *
56% in substations r
30 capacitors/avg bank =
2.8 * 10 capacitors *
44% not in substations r
7 capacitors/avg bank =
228,267 banks §
510/inspection/bank =
$2,282,670/inspection r
2.8 * 10 capacitors =
Annual cost of quarterly
inspection =
52,267 substation
banks
176 ,000 banks
228,267 banks
$2,282 ,670/
inspection
$0.815/capacitor/
inspection
4 x .815 =
$3.26/caDacitor
Recur Cost
Removal/Installation:
4 mhrs 0 $34/mhr =
Replacement Equipment:
$2.88/KVAR * lOO'KVAR
Flow Cost
Disposal Cost
Transport Cost
$136.00
288 .00
$424.00/capacitor
$ 50.00
26.00
$ 76.00/capacitor
-70-
-------
d. Special Cases — Containment
$5,080/substation capacitor
bank * 52,267 banks = $265.5 million
2.
Askarel Transformers
b.
Stock Cost
0 for all cases without
inspection
For each, inspection:
.5/hrs/inspection *
$20/hr. =
Annual Cost for
quarterly inspection:
(4 x $10) =*
Recur Cost
Removal/installation
$495,750,600 -r-
39,640 units =
Replace
$552,420,500 ^
39,640 units =
$10/trans former/
inspection
$40/transformer
$12,506
13 ,936
$26,442
Adjust, cost to reflect rebuild cost according to
the following formula:
.6 * $26,442 * 1/(1+X)y
where:
.6
ratio of rebuild cost to replacement
cost (Versar, 1978)
real discount rate (equals DISCOUNT -
RECESC)
-71-
-------
= number of years until rebuild (equals
MLF(NEW))
for X = 3% , Y -
24 years: RECURCOST =
$34,247/transformer
c.. Flow Cost
Disposal Cost
Drain/rinse/transport
d. Special Cases
$ Containment Cost
$1,050/transformer mounted
on concrete *
19,820 transformers =
$14,372/transformer not
mounted on concrete *
19,820 transformers =
Bi-Weekly inspection
TOTAL
$2,150
2 ,110
$4,260/trans former
$ 20.8 million
284.9 million
$305.7 million
208.0 million
$513.7 million
$ Retrofill Cost
Labor: 36 mhrs * ?34/mhr $1,224
Rinse Stock:
215 gal/transformer *
3 rinses * $3/gal 1,935
Retrofill fluid:
215 gal/transformer *
3 retrofills * $10/gal 6,450
-72-
-------
Resiting/increased fire
protection 1,000
Incremental disposal
4 * 215 gallons/
transformer * 12.5
pounds/gallon *•
$0.4/pound 4,300
Transportation 452
$15,361/transformer
TOTAL = 39,640 transformers
*¦ 15 ,3 61/transformer = $608.9 million*"
3 .. Mineral Oil Transformers
a- Stock Costs
0 except for cases
with inspection
$10/transformer/
inspection
Cost per contaminated
transformer =
$10 * 20227428
2386077 ~
$84.77/contaminated
transformer
b- Recur Costs
Removal/installation
$1,119 * 10° •?
2,386,077 units «¦ $ 469
* Does not include the incremental cost of advancing the
disposal costs associated with the original fluid volume:
PVFLOW, - PVFLOW-. „ _ .
base case 30-Year Phase-Out
-73-
-------
Replacement $2,596 * 10^
t- 2 ,386 ,077 units = 1,088
$1,557/unit
The $1,557 figure is then adjusted to account
for the proportion of rebuild/replace and
replace/rebuild perpetuities and for the
discount rate and equipment lives for the case
being" analyzed.
c. Flow Costs
With common collection (2.5 times volume
disposed as with testing of each equipment
piece)
Disposal
42.32 gal/unit *"
7.6 lbs/gal * $0.40/lb *¦
2.5 =• 321.63
O
Drain
2 mhrs- 8 $34Vmfar* 68.00
Transport
42.32 gal/unit *
7.6 lbs/gal * $3/loaded mi
* 700 mi t 50,000 lbs
* 2.5 = 33.75
Testing
$82/test*(20,227,428 units
f 25 units/test) ?
2,386,077 units - 27.81
Total Unit Cost = $451.19
Without Common Collection:
Testing
$303/test * 20,227,428
units r 2,386,077 units = $2,569
Disposal
4,232 gal/unit *
7.6 lbs/gal * $0.40/lb = 129
-74-
-------
Drain
2 mhrs 0 $34/mhr
68
Transport
42.32 gal/unit *"
7.6 lbs/gal * $3/loaded
mi * 700 mi * 50,000/lbs = 13.50
Total Unit Cost =•
$2,779.50
d. Special Casesi
Retrofill
The decision analysis problem of retrofill
versus replacement as a function of equipment
age was analyzed.
For new units, only those with more than six
years remaining before rebuild were assumed to
be retrofilled.
For rebuilt units, only those with more than
eight years remaining before replacement were
assumed to be retrofilled.
Retrofill Costs:
Labor
12 mhrs @ $34/mhr
408 .00
Rinse, solvent
1.25 * 42.32 gal *• $3/gal 158.70
Mineral oil
1.25 * 42.32 gal *
$1.40/gal
74.06
Disposal
42.32 gal/unit *
(7.6 lb/gal + 1.25 *
12.5 lb/gal) * $0.40 = 393.15
-7 5-
-------
Transportation
42.32 gal/unit *
(7.6 lb/gal +¦ 1.25 *
12.5 lb/gal) * $3/mi
* 700 miles * 50,000 lb = 41.28
Total Unit Cost = $1,075.19/unit
-7 6-
-------
ACCELERATED PHASE-OUT OF
PCB-CONTAINING ELECTRICAL EQUIPMENT
POSING DANGER TO FOOD AND FEED
APPENDIX B
While no special requirements to accelerate phase-out
are currently proposed for PCB-containing electrical equip-
ment posing danger to food and feed, EPA is interested in
receiving comments about potential regulation of this equip-
ment. Accordingly, a separate analysis of accelerated
phase-out of this equipment has been performed using the same
methodology described in Appendix A.
Two assumptions motivated this separate analysis: 1)
the pieces of equipment posing danger to food and feed are
few enough in number so as not to exceed the near-term
capacity for new equipment production or PCB disposal, and 2)
the benefit to society of avoiding PCB spills in the vicinity
of food and feed is greater than for PCB-containing
electrical equipment in general, and hence could justify
accelerated phase-out of this equipment.
Two-, three- and five-year phase-outs of PCB capacitors
and askarel transformers posing danger to food and feed were
evaluated using the methodology employed in the RIA. Since
the EEI (1982) study considered only utility-owned electrical
equipment, estimates derived in an earlier PHB study (1980)
of the 1979 inventory of equipment located near food- and
feed-related industries were used to perform the analysis.
Furthermore, since the average unit characteristics of util-
ity equipment and equipment owned by food and feed industries
may differ, the cost-effectiveness of each phase-out program
was estimated assuming first that the equipment was identical
to utility equipment, and second, that average equipment
-77-
-------
size was- as estimated in the PHB study (1980) . Size
estimates affected both unit replacement and PCB disposal
costs.
Tables B—1 through B-4 summarize the results. As
with utility equipment, the benefit of authorizing
continued use of PCB capacitors per pound of PCB released
to the environment is an order of magnitude smaller than
for askarel transformers. The benefit effectiveness of
phase-out using EEI 1982 (PHB, 1980) equipment size
estimates ranges from $180 per pound to $176 per pound
($145 per pound to $141 per pound) for 2- to 5-year
capacitor phase-outs, and from $2,272 per pound to $2,215
per pound ($2,204 per pound to $1,974 per pound) for 2- to
5-year transformer phase-outs. If a cost per pound of PCB
release of this magnitude is attributed to spills in the
vicinity of food and feed industries, accelerated
phase-out of both askarel transformers and PCB capacitors
in 5 years or less could be justified. Given the large
uncertainty in assumed spill rates, the calculated benefit
effectiveness of a 2-, 3— or 5-year phase-out is not
materially different. Likewise, the conclusions do not
strongly depend on the unit size assumption.
An analysis" of the cost-effectiveness of"' an
associated program of weekly or quarterly inspection and
maintenance was performed, assuming that inspection has no
incremental effect on PCB release. These results are
presented in Tables B-5 and B-6. for PCB capacitors and
askarel transformers, respectively. While inspection is
likely to decrease the exposure resulting from PC3 spills,
the degree to which inspection would decrease either spill
frequency or volume is unclear. This issue is addressed
more fully in Appendix D. Those conclusions are
applicable to PCB equipment located near food- and
feed-related industries. Annual inspection must- result in
a volume reduction of PCB spills from about 3 percent to
10 percent for capacitors and transformers, respectively,
in order to be cost-effective. As shown in Table B-5,
weekly inspection of capacitors would not be
cost-effective when compared to an immediate phase-out.
-78-
-------
Table B—1. Cost-Effectiveness of Use Authorizations
for PCB Capacitors Posing Danger to Pood and Peed
Cost-
Cost Effectiveness
Begin End Benefit (Lbs. PCB ($ Benefit/lb,
Alternative Phase-Out Phase-Out ($ 000) Released) PCB Released)
1. 2-Year
Phase-Out 1983 1984 1,538 9,078 180
2. 3-Year
Phase-Out 1983 1985 2,146 11,998 179
3. 5-Year
Phase-Out 1983 1987 3,108 17,671 176
4. 30-Year
Phase-Out 2012. 2012 11,480 75,372 152
Base Case: Immediate phase-out of all PCB capacitors in 1982.
Parameters: Real Discount Rate: 3% (EEI, 1982, p. A-37)
Avg. Equipment Life: 25 years (Versar, 1978)
Unit Cost Data: EEI (1982)
Estimated Units in Service, 1979: 47,502 (PHB, 1980,
p. 31)
Average Size of Unit: 100 KVAR (BET, 1982, p. 141)
SOURCE: Putnam, Hayes & Bartlett, Inc. using methodology and data
sources described in Appendix A.
-79-
-------
Table B-2. Cost-Effectiveness: An Alternative Estimate
for PCB Capacitors Posing Danger to Food and Feed
Cost-
Cost Effectiveness
Begin End Benefit (Lbs. PCB ($ Benefit/lb,
Alternative Phase-Out Phase-Out ($ 000) Released) PCB Released)
1. 2-Year
Phase-Out 1983 1984 972 6,725 145
2. 3-Year
Phase-Out 1983 1985 1,274 8,887 143
3-. 5-Year
Phase-Out 1983 1987 1,844 13,090 141
4-. 30-Year
Phase-Out 2012 2012 6,813 55,831 122
Base Casei Immediate phase-out of all PCB capacitors in 1982
Parameters: Real Discount Rate: 3% (EEI, 1982, p. A-37)
Avg. Equipment Life: 25 years (Versar, 1978)
Unit Cost Data: EEI (1982)
Estimated Units in Service, 1979: 47,502 (PHB, 1980,
P- 31)
Average Size of Unit: 40 KVAR (PHB, 1980, p. 43)
SOURCE: Putnam, Hayes & Bartlett, Inc. using methodology and data
sources described in Appendix A.
-80-
-------
Table B-3. Cost-Effectiveness of Use Authorisations for
AskareL Transformers Posing Danger to Food and Feed
Alternative
Begin
Phase-Out
End
Phase-Out
Benefit
(? Millions)
Cos-t
(Lbs. PCB
Released)
Efif
(S
PCB
Cost-
ectiveness
Benefit/lb
i Released)
1. 2-Year
Phase-Out
1983
1984
19.4
6,745
2,877
2, 3-Year
Phase-Out
1983
1985
25 .3
8,875
2,353
3. 5-Year
Phase-Out
1983
1387
36*3
12,947
2,805
4. 30-Year
Phase-Out
2012
2012
12.0 .1
48,8 75
2,469
Base Case: Immediate phase-out of all asJsaxel transformers in
1982
Parameters: Real Discount Rater 3% (EEI, 1982, p. A-37)
Avg. Equipment Lifer 40 years (EEI/ 1582, p. A-36)
Unit Cost Data: ESI (1982J
Estimated Units in Service, 1979t 9,573 (PHB, 1980,
p. 31)
Average Size of Unit: 300 KVA (EEI, 1982, p. A-22)
SOURCE: Putnam, Hayes & Bartlett, Inc. using methodology and data
sources described in Appendix A.
-81-
-------
Table B-4. Cost-Effectiveness: An Alternative Estimate
for Askarel Transformers Posing- Danger to Food and Feed
Alternative
Begin
Phase-Out
End
Phase-Out
Benefit
($ Millions)
Cost
(Lbs. PCB
Released)
Cost-
Effectiveness
($ Benefit/lb
PCB Released)
1.
2-Year
Phase-Out
1983
1984
28.2
10 ,977
2 ,569
2.
3-Year
Phase-Out
1983
1985
36.8
14 ,444
2 ,547
3 .
5-Year
Phase-Out
1983
1987
52.8
21,070
2 ,505
4. 30-Year
Phase-Out 2012 2012 175.4 79,539 2,205
Base Case: Immediate phase-out of all askarel transformers in
1982.
Parameters: Real Discount Rate: 3% (EEI, 1982, p. A-37)
Avg. Equipment Life: 40 years (EEI, 1982, p. A-36)
Unit Cost Data: EEr (1982)
Estimated Units in Service, 1979: 9,573 (PHB, 1980,
p. 31)
Average Size of Unit: 1,125 KVA (PHB, 1980, p. 43)
SOURCE: Putnam, Hayes & Bartlett, Inc. using methodology and data
sources described in Appendix A.
-82-
-------
Table B-5. Cost-Effectiveness of Use Authorizations
Subject to Inspection for PCB Capacitors
Posing- Danger to Food and Feed
Quarterly Inspection:
Cost Cost-Effectiveness
Begin End Benefit (Pounds PCB ($ Benefit/Pound
Alternative Phase-Out Phase-Out ($ 000) Released) PCB Released)
. 2-Year 1983 1984 1,422 9,078 157
Phase-Out
. 3-Year 1983 1985 1,864 11,998 155
Phase-Out
. 5-Year 1983 1987 2,699 17,671 153
Phase-out
weekly Inspection:
Cost Cost-Effectivenes;
Begin End Benefit (Pounds PCB ($ Benefit/Pound
Alternative Phase-Out Phase-Out ($ 000) "Released) PCB Released)
. 2-Year 1983 1984 -1,163 9,078 -128
Phase-Out
. 3-Year 1983 1985 -1,524 11,998 -127
Phase-Out
. 5-Year 1983 1987 -2,207 17,671 -125
Phase-Out
«ase Case: Immediate phase-out of all PCB capacitors in 1982
arameters: Real Discount Rate: 3 percent (EEI, 1982, p. A-37)
Average Equipment Life: 25 years (Versar, 1978)
Unit Cost Data: EEI (1982)
Estimated Units in Service, 1979: 47,502 (PHB, 1980, p. 31)
Average Size of Unit: 100 KVAR (EEI, 1982, p. 141)
cOURCE: Putnam, Hayes & Bartlett, Inc., using methodology and data sources
escribed in Appendix A.
-83-
-------
Table B-6. Cost-Effectiveness of Use Authorizations
Subject to Inspection for Askarel Transformers
Posing. Danger to Food and Feed
Quarterly Inspection:
Benefit Cost Cost-Effectiveness
Begin End ($ (Pounds PCB (S Benefit/Pound
Alternative Phase-Out Phase-Out millions) Released) PCB Released)
1. 2-Year 1983
Phase-Out
2. 3-Year 1983
Phase-Out
3. 5-Year 1983
Phase-out
1984
1985
1987
18.9
24 »6
35.4
6,745
8 ,875
12,947
2,801
2,777
2,731
Weekly Inspection!
Benefit Cost Cost-Effectiveness
Begin End ($ (Pounds PCB ($ Benefit/Pound
Alternative Phase-Out Phase-Out millions) Released) PCB Released)
L. 2-Year 1983
Phase-Out
I. 3-Year 1983
Phase-Out
i.. 5-Year 1983
Phase-Out
1984
1985
1987
12.7
16 ,5
23.7
6 ,745
8 ,875
12,947
1,879
1,863
1,833
lase Case: Immediate phase-out of all askarel transformers in 1982
?arameters: Real Discount Rater 3 percent (EEI, 1982, p. A-37)
Average Equipment Life: 40 years (Versar, 1978)
Unit Cost Data: EEI (1982)
Estimated Units in Service, 1979: 9,573 (PHB, 1980, p. 31)
Average Size of Unit: 300 KVA (EEI, 1982, p. A-22)
OURCE: Putnam, Hayes & Bartlett, Inc., using methodology and data sources
Iescribed in Appendix A.
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DISPOSAL CAPACITY REQUIRED TO ACCOMMODATE
ACCELERATED PHASE-OUT OF PCS-CONTAINING
ELECTRICAL EQUIPMENT APPENDIX C
A practical consideration associated with the
accelerated phase-out of PCB-containing electrical
equipment is the adequacy of disposal caoacity. The
following analysis was performed in order to quantify the
disposal capacity required for various phase-out
alternatives. Fluid" disposal for PCB-contaminated- mineral
oil equipment was not included in the analysis. If
disposal of contaminated fluid in high-efficiency boilers
is not a viable option, the required PCB incineration
capacity could be substantially higher, if incineration of
large volumes of mineral oil is limited by constraints
other than the licensed capacity measured by PCB weight.
As part of the evaluation of utility-owned PCB
equipment for preparation of the RIAr PHB estimated the
weight of PCBs that would be disposed each year from PCB
capacitors and askarel transformers as a result of various
regulatory alternatives~ Similarly, the annual PCB
disposal resulting from phase-out of PCB capacitors and
askarel transformers posing danger to food and feed was
estimated. The additional assumptions required to
estimate the weight of PCB waste disposed each year for
any combination of transformer and capacitor phase-outs
include the following:
•- Utility askarel transformers are assumed to
comprise 30 percent of all askarel transformers
(Versar, 1978).
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©. Utility PCB capacitors are assumed to comprise
85 percent of all PCB capacitors (EPA).
» PCB capacitors contain 100 percent PCB fluid
with a density of 11.6 pounds oer gallon (EEX,
1982, p. A—14).
» Askarel transformers contain fluid that is 70
percent PCBs by weight, with a density of 12.5
pounds per- gallon (EEI, 1982, p. A—14) .
& Utility and non-utility equipment are assumed to
have the same average unit volume (2.7 gallons
and 215 gallons for PCB capacitors and askarel
transformers, respectively).
Except for special treatment of equipment
located near food- and feed-related industries,
phase-out of utility and non-utility equipment
is assumed to be identical.
Using these assumptions (taken from EEI, 1982 except
where noted)r a total of about 352.million pounds of PCBs
must be disposed, during normal or accelerated retirement
of PCB capacitors and askarel transformers — an average
of 11.7 million pounds per year through 2012. EPA
currently estimates existing or planned incineration
capacity (at the Rollins and ENSCO facilities) to be- 5,000
pounds per hour, or 35 million pounds per vear.* At best,
assuming the timing of disposal was managed perfectly,
disposal would require 10 years.
Table C-l presents the required peak disposal
capacity under various regulations, for the next five
years (through 198 7), and then for the following 25 years
(through 2012). As shown by the first alternative (30
year phase-out — essentially indefinite authorization),
normal retirement of PCB equipment will require an annual
disposal capacity in the 1990s of only 60 percent of the
currently planned 35 million pounds per year. A 10-year
phase-out (case 2) will require two times the existing or
planned disposal capacity, as estimated by EPA? however, a
20-year phase-out would not require additional capacity.
* Annual capacity assumes an 80 percent capacity factor,
as in EEI study (1982, p. 154).
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Table C-l. Peak PCB Disposal Capacity Required for
Accelerated Phase-Out of PCB Capacitors and Askarel Transformers
Phase-Out Period of Regulatory Alternative
PCB Capacitors ~ Askarel Transformers
Food/Feed Utility/Other Food/Feed ' Utility/Other
Maximum Required Annual
Disposal Capacity
Million Pounds of PCB
1982-1987 1988-2012
1. Indefinite 2012-
Authorization 2012
2012-
2012
2012-
20}2
2012-
2012
13. 6
21.5
10-Year
Phase-Out
1988-
1992
1988-
1992
1988-
1992
1988-
1992
13.6
67.3
3. 20-Year
Phase-Out
1998-
2002
1998-
2002
1998-
2002
1998-
2002
13.6
31.3
4. 2-Year Phase-Out
of Food/Feed 1983-
Equipment 1984
2012-
2012
1983-
1984
2012-
2012
20. 5
20. 4
5. 5-Year Phase-Out
of Food/Feed 1983-
Equipment 1987
2012-
2012
1983-
1987
2012-
2012
15.8
20.4
6. 10-Year PCB
Capacitor
Phase-Out
1988-
1992
1988-
1992
2012-
2012
2012-
2012
13.6
31. 6
10-Year Askarel
Transformer 2012-
Phase-Out 2012
2012-
2012
1988-
1992
1988
1992
13. 6
50. 7
SOURCE: Putnam, Hayes & Bartlett, Inc. calculations based on methodology described above and in
Appendix A.
-------
Special accelerated phase-out of equipment located near
food- and feed-related industries is feasible for 2- to
5-year phase-out periods; it actually reduces the
subsequent disposal capacity needed for remaining
equipment in the 1990s. This pattern suggests that some
mandated phase-out program might result in more efficient
use of disposal facilities. Finally, accelerated
phase-out of askaxel transformers alone would require a 40
percent increase in capacity by 1988. However,- the
currently proposed 10-year capacitor phase-out could be
achieved with the currently planned disposal capacity.
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COST-EFFECTIVENESS OF
INCREASED INSPECTION FREQUENCY
APPENDIX D
Inspections of PCB-containing equipment result in
faster spill detection and clean-up, and hence, lower
exposure» In addition, such inspections may serve to
reduce the amount of PCBs spilled by facilitating early
detection of leaks or of an impending rupture. While for
the purposes of this report, inspections were assumed to
have no effect on the amount of PCBs spilled, the
potential for inspections to be cost-justified on
spill-prevention grounds is discussed in this appendix.
Unfortunately, many of the data necessary to
undertake a proper analysis are not available.
Specifically, descriptions, of the various spill/failure
modes, including identification of any early warnings and
specification of their duration do not exist.
However, absent this information, the reduction in
spill volume necessary for inspections to be cost-
effective can be calculated. These required reductions
can then be qualitatively assessed and cost-effectiveness
judgments made.
Three factors will influence the calculation of
required spill reduction: 1) the cost per inspection; 2)
the inspection frequencyr and 3) the social cost per pound
of PCBs spilled. Other things being equal, the higher the
cost per inspection, the larger the required reduction in
spill volume. Similarly, more frequent inspections result
in larger required spill reduction. Finally, as the
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social cost per pound of PCBs spilled increases, the
required reduction in spill volume decreases.
For this analysis the EEI (1982) estimates of cost
per inspection have been used. Inspection frequencies
ranging from annually to weekly and social costs ranging
from $1 million per pound to $50 per pound have been
evaluated.
The results of the analysis are summarized in Tables
D-l and D-2 for PCB capacitors and askarel transformers,
respectively. As can readily be seen, the required spill
reduction does increase with inspection frequency. For
instance, at a social cost of $1,000 per pound spilled and
annual inspections, a reduction in PCB capacitor spills of
2,500 pounds, or 0-6 percent, of the total pounds expected
to be spilled is required for the inspections to be
cost-effective~ For quarterly inspections, a spill
reduction of 9,560 pounds, or 2.3 percent of the total, is
required. — four times greater than for annual
inspections.
The required reduction in spill volume decreases as
the social cost of PCB spills increases.. Eor annual PCB
capacitor inspection at a social cost of $500 per pound,
the required spill reduction is 4,570 pounds, or 1.1
percent of the total pounds expected to be spilled. At a
social cost of $1,500 per pound, the required spill
reduction is only 1,660 pounds, or 0.4 percent of the
total.
The tables also show that for some combinations of
social cost and inspection frequency, the required spill
reduction is greater than the total annual spill. For
instance, at a social cost of $50 per pound, monthly
capacitor inspections must reduce the spill volume by over
572,000 pounds. Since the total spill volume is only
415,800 pounds, such a reduction is clearly impossible.
Thus, if the social cost of PCB spills is $50 per pound,
monthly capacitor inspection cannot be cost-effective on
spill prevention grounds alone. As shown in the tables,
there are a number of instances where it is easy to
conclude that inspections could, not be cost-effective.
However, there are also a number of cases where it is
easy to conclude that inspections are cost-effective due
to spill prevention alone. At a very high social cost of
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Table D-l. PCB Capacitors; Required Reduction in Spill Volume
per Year for Inspections to be Cost-Effective
Cost to Society Inspection Frequency
Per Pound Annually Quarterly Monthly Weekly
PCBs Spilled Pounds Percent Pounds Percent Pounds Percent Pounds Percent
$1,000,000
2
0.1
10
0.1
30
0,1
120
0.1
1,500
1,660
0.4
6,240
1.5
19,130
4.6
82,330
18.8
1,000
2,500
0.6
9,560
2.3
28,690
6.9
123,900
29.8
500
4 ,570
1.1
19,130
4.6
57,380
13.8
247,820
59.6
, 150
vo
M
I 50
15,800
47,870
3.8
11,5
63,620
190,850
15,3
190,850
45.9
826,610
198.8
45,9
572,140
137.6
2,479,000
596.2
Assumes: 2,8 million units in service (EEI, 1982., p. 9)
415,800 pounds PCBs spilled per year (EEI, 1982, p, 80)
$2.38 million per inspection (EEI, 1982, pp*. A-16 - A-19)
SOURCE; Putnam, Hayes & Bartlett, Inc.
-------
Table D-2t Askarel Transformers» Required Reduction in Spill Volume
per Year for Inspections to be Cost-Effective
Cost to Society
Per Pound
PCBs Spilled
Pounds
Annually
Inspection Frequency
Percent pounds
Quarterly
Percent
Pounds
Monthly
Percent
Pounds
Weekly
Percent
$1 ,000,000
1 ,500
1,000
500
150
50
1
180
290
550
1,840
5,550
0.1
0.9
1.4
2.7
9.0
27.1
1
740
1,100
2 ,200
7,400
0,1
3,6
5,4
10.B
36.2
3
2,200
3,340
22,200
106.5
0.1
10.8
16.3
15
9,620
14,450
100.5
[
96,170
p.l
47.0
70.6
6,650 32,5 | 26,850 141.0~|
| 22,200
170.0 |
66,590
325 .4
288,570 1,410.0 |
Assumes; 39,640 units in service (EEI, 1982, p. 9)
20,460 pounds PCBs spilled per year (EEI, 1982, p. 13)
$390,640 per inspection (EEI, 1982, p, A-lfi)
SOURCE: Putnam, Hayes & Bartlett, Inc.
-------
PCB spills, which may be reasonable for at least food- and
feed-related uses of PCB equipment, of $1 million' per
pound, negligible spill reductions are required.
Other than these easy cases, it is difficult to reach
firm conclusions. The actual spill reductions that would
result from inspection programs are dependent on the
nature of the various spill and failure modes. If major
spills are usually preceded by a small leak which itself
lasts several weeks or months, inspections will be very
effective at reducing the expected unit volume of PCBs
spilled. If major spills occur without warning,
inspections will not be very helpful in reducing the
expected spill volume, although they will help to reduce
exposure, as discussed in the report.
The EEI study does provide a limited amount of
information which bears on this point. For capacitors,
EEI reports that 8.6 percent of spills are caused by
accidental damage- to the capacitor, 28.1 percent by leaks,
and 63.2 percent by capacitor ruptures (1982, p. 81).
Inspections will not be effective- for spills caused by
accidental damage, and could be effective for those caused
by leaks. However, for spills caused by rupture which
account for may of the--spills and. more of the. volume, no
conclusions can be reached. If ruptures occur without
warning, capacitor inspection will at most be effective
only to reduce exposure, not to reduce spill volume. If
there are early indications of rupture, capacitor
inspection could be effective. It is conceivable that
weekly inspections could reduce spills by 30 percent or
even 60 percent under the latter conditions..
For askarel transformers, no specific spill-cause
information was provided by EEX (1982). However, for
mineral oil transformers, 66 percent of the spills were
caused by leaks, 10 percent by rupture, and 22.8 percent
by accidental damage (EEI, 1982, p. 73). Assuming that
spill causes for askarel transformers are comparable, the
rupture mechanism is again crucial, as only 8 percent of
askarel transformer spills account for 68 percent of the
PCBs spilled (EEI, 1982, pp. 70, 71). If there are early
indications that a rupture will occur, inspections may be
useful. If not, it is difficult to justify them on
spill-prevention grounds.
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In general, transformer inspection is less likely- to
be cost-effective than capacitor inspection, even ignoring
the rapture issue. For a given inspection frequency and
social cost, the required reduction is more than twice the
required reduction for capacitors under the same
assumptions. Thus, askarel transformer inspections
probably can only be justified on spill-prevention grounds
if the social cost of spills is at the high end of the
range and if ruptures can be detected before they would
otherwise occur.
For capacitors, the cost-effectiveness for spill
prevention probably hinges on the rupture issue. If there
are early indications of impending" rupture, capacitor
inspection appears reasonable across a fairly broad range
of social costs per pound spilled.
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COMPARISON OF PHB AND EEI
"COST" ESTIMATES
APPENDIX E
Most of the data required for this RIA were provided
in the EEI (1982) study. The number of equipment items in
service, average fluid volume and PCB concentration, spill
rates and fractions, and unit replacement, retrofill
inspection and disposal costs all come directly from EEI-
Howeverthe_ methodology used to calculate the costs
of alternative regulation is different "from the
methodology used by EEI, and hence the costs calculated
are different. These differences are summarized in the
attached tables for those alternatives where direct
comparisons are possible - The costs reported are not as
compared to the EPA base case, but rather as compared to
indefinite use authorization, as this is how EEI reports
them.
As Table E—1 shows, the EEI estimates are in all
cases substantially higher than the PHB estimates, often
more than twice as high.
Unfortunately, as it is not possible to reconstruct
the EEI analysis with the information provided, the
sources of these variances cannot be exactly determined
and quantified. However, based on EEI's description of
its methodology, the likely sources of variance can be
identified and discussed. The three most likely sources
of variance are:
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Table E-l. EEI/PHB Coat Comparison
($ Million)
(1)
PUB
($ pillion)
(2)a
EEI
(§ million)
(3)
Difference
($ million)
(2) - (1)
(4)
% Difference
|(3)*(1)1 * 100
Askarel Transformers
10-Year Ph^se-Out
$ 267
$ 590
$ 323
121
20-Year Phase-Out
141
346
205
145
Quarterly Inspections
with Indefinite
Authorization
14
32
18
129
Capacitors
10-^Year Phase-Out
388
622
234
60
20-Year Phase-Out
214
277
63
30
Quarterly Inspections
with Indefinite
Authorization
93
168
75
81
SOURCE: Putnam, Hayes & Bartlett, Inc.f using methodology and data sources described
in Appendix A.
aEEI (1982, pp. 130, 140, 149).
-------
Definition of incremental costs,
«> Definition of costs, and
* Assumed equipment, vintage..
The incremental cost of accelerated phase-out is the
sirn of any additional costs that would not have otherwise
been incurred plus the increase in the present value of
costs which are incurred sooner as a result of the
phase-out. While EEI's methodology is not fully described
in the report, it seems likely that costs which would be
incurred sooner due to the phase-out were treated as if
they would not otherwise have been incurred. Disposal
costs are one example of this type. As disposal
requirements are not at issue in the current rulemaking,
the costs of disposing of PCB capacitors and askarel
transformer fluid will be incurred even in the absence of
an accelerated phase-out. The cost of the phase-out (the
disposal cost component) is only the increase in the
present value of costs, not the total disposal cost.
Accelerated equipment replacement is another such,
example. The cost of replacing sl piece of equipment that~
would otherwise have been replaced the next year is not
the cost of the replacement equipment. Rather, it is a
pro rata share of the replacement price which reflects the
proportion of useful life remaining for the old equipment
at the time of its phase-out. Again, it is not clear how
EEI made its calculations, but the replacement costs
attributable to the regulation may have been overstated.
An important consideration in- analyses of this type
is the definition of the costs to be measured: social
costs or private costs. It appears that the EEI analysis
is based on private costs to the utilities on an after-tax
basis, although the exact calculations used by EEI are not
fully described. PHB has used social, or before-tax,
costs in its analysis which,, other things being equal, are
larger than after-tax costs.
The equipment vintage, or average remaining life, is
an important assumption because it determines the economic
value foregone due to accelerated phase-out, as well as
the magnitude of the present value increase due to costs
being incurred sooner than would otherwise have been the
case. EEI has assumed a IS-year average remaining life
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for capacitors, and a 20-year average remaining' life for
askarel transformers (1982, p. 130) . PHB, using the
methodology described in Appendix A, has calculated an
average remaining- life of 12 years for capacitors and
askarel transformers (although actual calculations treated
different vintage years separately). Other things being
equal, longer average remaining useful lives would tend to
increase the cost of accelerated replacement.
In addition to the above cost variances which stem
from differences in methodology, there are also
differences between PHB and EEI cost estimates which stem
from the definition of the regulatory .alternative. EEI
assumes that under 10-year equipment phase-outs, equipment
is evenly phased out over the 10-year period. For 20-year
phase-outs, the equipment is assumed to be evenly phased
out over 20 years. In PHB's phase-out cases the equipment
is phased out over the last 5 years of the authorization,
years 6 through 10 and 16 through 20, respectively. As
Table E-2 shows, the costs decline substantially when the
equipment is phased out in the last five years of the
authorization period- Given this cost difference,
equipment owners will have strong economic incentives to
delay.. equipment replacement as long as possible. To the
extent that replacement can be accomplished in the final
years of the authorization period, the EEI cost numbers
overestimate the costs that will be incurred.
In closing, it should be noted again that the PHB
estimates do rely extensively upon EEI data for number and
size of units and replacement, retrofill, containment and
disposal costs. These items are not responsible for the
differences shown in the tables.
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Table E-2. EEI/PHB Cost Comparison
($ Million)
EEIa PHBb
Askarel Transformers-
10-Year Phase-Out over 10 years 5 90 267
10-Year Phase-Out over 5 years — 168
20-Year Phase-Out over 20 years 346 141
20-Year Phase-Out over 5 years — 7
PCB Capacitors
10-Year Phase-Out over- 10 years 622 388
o
10-Year Phase-Out over 5 years — 259
20-Year Phase-Out over 20 years 277 214
20-Year Phase-Out over 5 years — 17
aEEI (1982, pp. 140 , 149) .
^Putnam, Hayes & Bartlett, Inc. calculations based on
methodology and data sources described in Appendix A.
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COST OF CLEAN-OP FOR
PCB SPILLS
APPENDIX F
The cost to clean up PCB spills reduces the expected
benefits of use authorization, since continued use of
PCB-containing electrical equipment could result in PCB
spills that are otherwise avoided by an immediate ban.
Since the necessary data were not available, clean-up
costs were not quantified as a part of the calculations
described in Apendix A. The treatment of PCB spills
(recordkeeping, containment, clean-up, and disposal) is
regulated by previous rulemakings (in 40 CFR 761) as well
as by changes proposed in this rulemaking. These rules
require, among other things, that spills be cleaned up so
that contamination is reduced to less than 50 ppm in all
cases, and further to pre-existing background levels if
the spill poses a threat of contamination to water, food,
feed, or humans.
The cost to comply with these regulations could vary
dramatically, depending on the spill. For example, the
rupture of a PCB capacitor located in a populated
commercial area would require a much more costly clean-up
than a small spill from a leaking substation transformer
located in a rural area. In the absence of further
regulation, the owner of PCB-containing electrical
equipment may choose to replace it if the risk of a verv
costly spill clean-up were high. A replacement decision
would depend on equipment age, as well as on location, on
whether the equipment was already contained, and on the
type of spills that might be expected.
-100-
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The data regarding equipment location, age,
containment, and failure characteristics are currently
very sparse, so that estimating the average cost of spill
clean-up with any useful degree of accuracy is nearly
impossible. Reported experience with spill clean-up is
limited mainly to catastrophic spills (e.g., that which
occurred in Boston's Quincy Market in January 1982).
These spills demonstrate that clean-up costs can be
substantial, but do little to help quantify clean-up costs
on average.
Just as incremental disposal costs refer only to the
present value of deferring these costs via. use
authorization, the incremental clean-up costs of use
authorization are relevant only to the extent that they
are avoided or that their timing is changed by an
immediate ban. For example, the direct labor that would
be required to clean up a spill occurring in five years is
avoided entirely if the equipment is replaced immediately7
hence, the present value of- this labor represents an
incremental clean-up cost that reduces the benefits of
authorization. But if an individual piece of equipment
would be replaced immediately anyway because the expected
spill clean-up costs (or insurance against this cost) are
large, then the current rule has no incremental effect and
the cost, of accelerated replacement should not be
attributed to this rulemaking. Identifying which costs
are incremental requires a number of assumptions regarding
the nature of information available to the decision maker
(e.g., a utility company) and the way decisions are made.
These requirements complicate the task of estimating total
expected clean-up costs for a pool of equipment-
As a starting point, the total incremental cost of
spill clean-up (CLEANUP) can be described by the following
variables for a given type of equipment:
TYPEFREQ (G, P, M, A, C, V) — frequency of spills of
a given type for geographic location, G; population/
business density, P; equipment spill' mode, M?
equipment age, A; equipment secondary containment
(existent or nonexistent), C; and spill volume, V.
TYPECOST (G, P, M, A, C, V, Y) — incremental cost of
clean-up in year Y for each tvpe of spill.
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SPILLS(Y) — total expected number of spills which
occur as a result of use authorization in year Y.
Then, using a discount rate R, the present value in 19 82
of the cost of clean-up could be computed as follows:
Volume III of the EEI 'study (198 2) does provide some
data similar to that described by TYPEFREQ. For example,
the frequency of different failure modes, the geographic
location of spills, and a rough volume distribution for
PCB spills are presented for PCB capacitors. Note that
these reported data do not exactly match the information
described by TYPEFREQ unless the effect of each parameter
is assumed to be independents Data regarding equipment
age,. the percentage of equipment units currently
contained, or location of equipment relative to population
or business centers were not reported.
Virtually no data regarding the cost of spill
clean-up are available, with the exception of an average
cost of $1,000 per spill reported by Northeast Utilities
for overhead capacitor bank ruptures (Rancourt, 1981, p.
7) . These cost data are required before a quantitative
estimate of clean-up costs can be made.
Using the methodology described in Appendix A, a
reasonable estimate of SPILLS(Y) can be derived for PCB
capacitors, askarel transformers, and mineral oil
transformers, for each year of authorization. If TYPECOST
is stated in current dollar terms and assumed not to vary
by year. Equation (1) can be rewritten as follows:
(1)
TYPEFREQ*TYPECOST*SPILLS
G,P,M,A,C,V,Y
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(2) CLEANUP = PVSPILLS * > TYPEFREQ*TYPECOST
G,P,M,A,C,Y
where;
Y = end
authorization year
(3) PVSPILLS = * SPILLS(Y)
(1+R)*"1982
Y = 1982
Table F-l shows the values of PVSPILLS for 10-, 20-
and 30-year authorizations of utility-owned PCB capacitors
and askarel transformers, using the formula shown in
Equation 3 and a' real discount rate (R) of 3 percent. The
incremental number of spills in each year (SPILLS(Y)) were
taken from the output of runs #19, #20, and #21 for PCB
capacitors and #19, #20, and #21 for askarel transformers
(see Tables A—1 and A—2 in Appendix A) . Although the
average cost per spill (characterized by the summation in
Equation 2) is unknown, Table F-l does facilitate a simple
"what-if" analysis of clean-up cost. For example, if the
average incremental cost per capacitor spill were $1,000,
the benefit of a 10-year authorization would be reduced by
about $143 million (143,290 x $1,000) to $307 million.
This would reduce the benefit per pound of PCB release to
$113.60 per pound. In order to achieve a similar
cost-effectiveness for askarel transformers (i.e., about
$114/pound) , the cost per spill would have to be about
$179,000, Conversely, if average cost per spill were
equal, clean-up costs would be over two orders of
magnitude larger for a use authorization of PCB capacitors
as compared to one for askarel transformers.
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Table F-l. Calculation of PVSPILLS for
Utility-Owned Equipment
Askarel
Alternative PCB Capacitors Transformers
10-Year Phase-Out 143,290 1,910
(1988-1992)
20-Year Phase-Out 220,728 2,768
(1998-2002)
30-Year Phase-Out 225,859 2,806
(2012)
Base Case: Phase-out all PCB capacitors and askarel
transformers 1982 (all spills avoided)
Real Discount Rate: 3 percent (EEI, 1982, p. A-37)
Spill Rate: .8 percent/year (for both PCB capacitors and
askarel transformers) (EEI, 1982, pp. 70-72,
80)
SOURCEi Putnam, Hayes & Bartlett, Inc. using methodology
described above and in Appendix A.
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