Public Power Utilities Respond To Supply Challenges, Detail Mitigation Strategies
May 19, 2022
by Paul Ciampoli
APPA News Director
May 19, 2022
Public power utilities across the country continue to grapple with supply chain issues across a range of materials but they are proactively responding to this challenge through a wide range of mitigation strategies.
Those challenges and mitigation strategies were detailed recently at the American Public Power Association’s (APPA) Supply Chain & Management Summit, which was held on May 5-6, 2022.
[This is the first of a two-part series detailing public power’s response to supply challenges].
At the summit on May 5, Edward Thomas, Jr., Manager, Materials Demand, at Florida’s Orlando Utilities Commission (OUC), noted that utilities “have a strong track record when it comes to recovery preparations for weather events and natural disasters.”
However, the health crisis caused by COVID-19 “created some unique challenges” that he said were foreign to the industry such as widespread quarantines, workforce and supply chain disruptions “that further complicated our traditional contingency plans,” he said.
With respect to raw material shortages, Thomas said that low inventories have caused cascading issues with material production with manufacturers. There is also a backlog of orders. “Suppliers have reported to us that it is the sheer amount of demand for materials compounded by the shortages in skilled labor.”
As for the primary materials impacted by the supply chain crunch, Thomas mentioned transformers and switchgear, wire and cable, water meter and meter boxes and lids. Chemicals are also be affected. He noted in his presentation that during the height of the pandemic, OUC experienced shortages of oxygen used in its water plants to ozonate the water for disinfection and removal of hydrogen sulfide.
While the current state of the supply chain has presented a host of challenges, it also offers opportunities, Thomas said.
The way things have been done before “and business as usual is not an option for us any longer,” he said.
Thomas said in his presentation that there is increasing pressure on utilities, suppliers and manufacturers to transform and evaluate and review the planning of capital projects as well as regular scheduled maintenance.
He also highlighted communicating with strategic supply chain stakeholders on volume for the next quarter when available, which includes materials, utility planning, suppliers, manufacturers and customers.
In outlining supply chain mitigation strategies and potential solutions, Thomas highlighted OUC’s strategic partnerships with suppliers and manufacturers. The utility holds monthly scheduled meetings with operations, suppliers and manufacturers to discuss orders and any delays. OUC has also collaborated with suppliers “to hold material at their location based on annual monthly usage, while our project orders were being shipped direct.”
OUC is also working to educate and notify developers and builders within its service area. A letter was drafted with assistance of OUC marketing and communications updating customers about delays and adjusting materials allocated for their specific phased projects, Thomas said.
Another summit panelist, Hud Allworth, Manager, Materials Management and Warehouse, at Washington State’s Snohomish PUD, noted that supply chain issues created more noticeable impacts to a wider range of materials by mid-2021.
Many materials providers and manufacturers were still closed or had reduced production. Others had difficulty ramping production back up, saw supply shortages, experienced transportation pressures and faced labor shortages.
Suppliers began notifying the PUD that lead times were increasing, Allworth said. “In September 2021, we went to our Board of Commissioners and asked for an emergency declaration” to address the supply chain pressures.
In his presentation, he listed the following critical materials impacted by the supply chain crunch:
- Distribution and substation transformers
- Wire and cable
- Load break elbows
- Protection and control equipment (reclosures/regulators/cap banks)
- Petrochemical base products (PVC/conduit/fiberglass)
- Water Shop (meter boxes/meter box lids)
With respect to mitigation strategies, Allworth noted the following in his presentation:
- Proactive and aggressive procurement of materials
- Staying financially healthy and maintaining cash reserves in anticipation of impacts
- Judicious use of stock on hand; and
- Improvising/repurposing materials
“We expect continued supply chain disruption” and anticipate this will remain a top priority for the PUD into 2023, he said.
Jeffrey Stewart, Director for Louisiana public power utility Lafayette Utilities System (LUS), spoke at the summit on May 6.
He noted that since 2017, Louisiana has been hit by tropical storms and hurricanes and detailed existing mutual aid activities involving LUS. Currently, mutual aid only covers labor and equipment necessary for power restoration, Stewart said.
APPA helps to coordinate mutual aid events and offers resources to its members related to mutual aid.
Mutual aid efforts have “strengthened the relationship of APPA members over time,” Stewart said. “The last thing we all want to do is experience a hurricane, but it happens. It’s part of what we do. It’s part of how we operate and getting the assistance from up to 2,000 other members is a huge, huge benefit to being a part of APPA.”
With respect to supply chain issues, Stewart said that LUS is seeing increased prices and a shortage of material across a range of areas. He noted a shortage of supplies in things like transformers and fleet vehicles.
LUS is “trying to find creative ways to get our material.” The utility is looking at the option of leasing standard vehicles and trucks. “We’ve discussed the idea of setting aside material” for storms. But there are not “a whole lot of solutions because the supply isn’t there to implement some things.”
Mutual Aid for Materials
Stewart touted the idea of creating mutual aid for materials, “just like we do for the labor and equipment, especially during hurricane season.”
This would involve one centralized location for finding available materials and utilize three tiers of materials.
As things stand today, if a utility needs a specific type of transformer at a certain voltage level, “it may be 25, 35, a hundred phone calls before I can find anything and that’s regardless of material supply shortages or anything like that,” he said. “I don’t know everybody’s operating voltage.”
Other Public Power Utilities Also Addressing Supply Chain Challenges
Other public power utilities have also been grappling with supply chain issues.
In September 2021, Texas public power utility CPS Energy issued a news release noting that the coronavirus pandemic, labor shortages, and other events have caused major production interruptions for many manufacturers at an international scale.
“Current demand for products and supplies are dramatically exceeding the available supply, which is putting a strain on supplies that CPS Energy and other utilities use daily,” the utility said at the time.
CPS Energy said that an increasing list of raw materials were causing challenges for manufacturing including:
- Ethylene Resin (Manufacturing of polymers such as polyvinyl chloride or PVC)
- Vinyl Acetate Monomer (Adhesives, water-based paints, nonwoven textile fibers and more)
- Semiconductor Chips (Electronics)
- Solar Glass and Wafers (Solar Panels)
- Butadiene (Synthetic rubbers such as tires, plastic gloves, rubber hoses)
- Styrene (Latex, Synthetic rubbers and polystyrene resins)
“CPS Energy is working diligently to minimize the impact of material supply shortages,” it said, noting that CPS Energy was taking a highly creative approach to the materials shortage challenges.
“These supply constraints are not unique to our community,” said Maria Garcia, CPS Energy’s Vice President of Supply Chain, in the news release. “Our peer utilities across the country are taking similar actions to ours such as diversifying their specifications and suppliers to allow for greater flexibility in procuring these critical items, without sacrificing product safety, resiliency and reliability.”
In a May 10 email update, CPS Energy spokesperson Dana Sotoodeh said it is important to note that when discussing supply chain challenges that San Antonio is one of the fastest growing metros in the nation.
She detailed the following general updates:
- Shortages in raw materials and labor, COVID-impacted manufacturing shutdowns, congested ports, transportation challenges, and escalating fuel costs continue to impact both new construction and the maintenance of CPS Energy’s existing electric and gas infrastructure.
- New construction has not slowed down to the point where supply orders can catch up and level out;
- Manufacturing lead times continue to expand, and some manufacturers are placing limits on how many units may be ordered;
- Any significant natural disaster, such as a hurricane, may greatly exacerbate these challenges.
CPS Energy has responded by diversifying its supplier base, expediting shipments where possible, negotiating contracts to keep current pricing in place and refurbishing equipment to increase its lifespan.
The utility is also:
- Engineering solutions to mitigate customer impact
- Reserving inventory dedicated for storm restoration of existing customers; and
- Staying in contact with our peers to share best practices and lessons-learned
New Braunfels Utilities
Another Texas public power utility, New Braunfels Utilities (NBU), posted a supply chain alert on its website in which it noted that developers of new construction are impacted due to material shortages for distribution wire, cable, and transformers to complete planned developments. “Lead time for these materials is now calculated in months rather than days. Buyers at NBU are working diligently to source these materials and find alternate sourcing when available,” the utility said in the alert.
NBU said that it had been notified by multiple vendors that its contracted deliveries of wire, transformers, and other equipment were significantly delayed due to dock delays, labor shortages, and other issues. In some instances, they are citing delays of up to 100 weeks, the utility noted.
“These delays of needed material and equipment will affect the start date for new construction projects,” NBU said.
It pointed out that it “is working diligently to locate alternative sources for the equipment needed to proceed with new construction projects. Our purchasing team is dedicated to finding additional vendors and materials to keep project delays to a minimum.”
To help mitigate the impact of supply chain issues, “any and all developer requirements must be completed prior to material and equipment being reserved. This means all easements, fees, and civil work are required to be completed before NBU will release a project to Purchasing to confirm the needed materials are available.”