Public Power Utilities Take Proactive Approach In Response To Supply Chain Challenges
May 21, 2022
by Paul Ciampoli
APPA News Director
May 21, 2022
Public power utilities are taking a proactive approach when it comes to meeting the ongoing challenges caused by supply chain disruptions through a series of actions that include working to boost inventory levels, placing orders into next year and expanding communication and relationships with developers.
[This is the second of a three-part series detailing public power’s response to supply challenges. Click here to read the first part of the series].
Lenoir City Utilities Board Sends Letter to Developers And Contractors
On March 15, 2022, M. Shannon Littleton, General Manager for Tennessee public power utility Lenoir City Utilities Board (LCUB), sent a letter to developers and contractors related to supply chain issues.
“Due to LCUB’s rapid growth and supply chain issues that the entire nation is facing, our procurement, engineering, and operations teams have become increasingly concerned about inventory of materials like transformers, power poles and meters,” Littleton wrote.
“As suppliers started to miss delivery dates, our teams began to meet regularly to develop a strategy to mitigate the impact of the delays through our design, procurement, and construction processes. We are managing inventory the best we can by creating alternative designs to maximize efficiency and seeking out new products and manufacturers,” Littleton said in the letter.
“Even with our efforts, more must be done to ensure we have adequate reserves to address weather events and provide permanent power to a growing system,” he said.
“We have decided to reserve single-phase equipment for completed construction projects and service restoration, when needed. Single-phase equipment is used primarily for residential and small commercial projects. The impact to builders is they will not be able to use a temporary power supply during construction unless there is existing infrastructure that we can connect to; they will have to rely on a generator,” Littleton wrote, adding that new permanent installations may also experience delays.
“There is no exact timeline on a resolution, but this situation is very fluid and will improve in time as equipment manufacturing delays are rectified,” he said in the letter.
Nebraska’s North Central Public Power District Keeps Eye On Supply Chain
In a recent Q&A with Public Power Current, Doyle Hazen, General Manager and CEO of Nebraska public power utility North Central Public Power District (NCPPD), described how NCPPD has taken a proactive approach when it comes to addressing supply chain issues.
“NCPPD has been monitoring the supply chain and the material markets through our relationships with our vendors,” he said. “We started ordering additional material and special equipment (transformers and reclosures) in late 2021. Proactively, we have been ordering into 2023 to stay ahead of our normal maintenance requirements, our work plan projects and expected growth of our system,” Hazen noted.
“The relationships we have with our vendors and other service providers are key in NCPPD’s ability to provide services and build projects on time. By knowing early where the market was going with our purchases both in price and availability, NCPPD was able to meet its customers’ needs. Although there is no guarantee of continued supply in any number of items, NCPPD monitors supply on a monthly, weekly and daily basis,” he said.
Mason PUD Issued Supply Chain Disruption Alert
Washington State’s Mason PUD 3 in September 2021 issued an alert in which it said that supply chain disruptions, unpredictable lead times, and unexpected price spikes of common materials “has the PUD and its customers increasingly uneasy about being able to meet construction timelines for electrical and fiber optic projects.”
The PUD said it was monitoring the situation very closely with its suppliers. “During this period, Mason PUD 3 is working to boost our inventory levels and search for additional product beyond our normal supply chains and construction practices. Although we don’t want to cause alarm, we do think that customers need to prepare accordingly,” it said.
The PUD said at the time it issued the alert that it was seeing major shortages and issues in the following areas related to the utility industry:
- Raw Material Shortages: (metals – particularly transformers and wire; silicone and petroleum-based products, including polyurethane, paint, and PVC; many plastic resins; fiber optic cables and components)
- Global Semiconductor Chip Shortage: for electronic devices that run our fiber optic network, and for ramping up production to meet demands at the factories.
- Transportation Logistics: cargo container ships are stacked up at sea and trucking companies are lacking drivers. The customs process for specialty items is also delayed.
- Unexpected Shutdowns at factories, in the delivery industry, and other areas of project pipelines due to COVID-19 outbreaks.
- Shortage of telecommunications supplies due to numerous grants for broadband expansion and the great need for improved internet services all across the nation.
- Labor issues
- Increased demand due to rapid recovery in consumer spending.
- Additional shortage of electrical supplies and equipment due to impacts and reconstruction related to Hurricane Ida.
JEA Official Details Mitigation Strategies
At a February 2022 board meeting for Florida-based public power utility JEA, Jenny McCollum, JEA’s Chief Procurement Officer and Director of Procurement and Inventory Planning, said that “JEA started to see major disruptions around the beginning of 2021 and felt the impact across most of our inventory items.”
She said that “the specialized electric items were hit the hardest at first, followed by our water wastewater materials and then our safety items. More recently, though, we have felt impacts across all commodities including execution of our capital projects.”
McCollum said that “all of the areas of the supply chain are being affected,” which starts with the inability of manufacturers to source raw materials, transportation issues due to port closures, shipping container shortages, increased fuel costs and difficulty in hiring staff,” which has prevented most manufacturers from being able to meet normal demand, resulting in a reduction in capacity.”
She said that “the raw materials that are affecting us the most” are steel, copper, resin, aluminum and brass. The materials most impacted include transformers, valves and fittings, wire and cable, manholes and safety supplies.
“This crisis has caused focus, the need for speed and flexibility and collaboration across the company to take a comprehensive approach to mitigation efforts,” McCollum said.
Among other things, JEA is reducing terms to new contracts “and we’re adding flexibility to make price adjustments to align to the changing market.” In addition, JEA has diversified its supply base.
She pointed out that one key advantage for JEA is its use of a category management approach to procurement. This approach allows JEA “to be in a position to be nimble and quick and gives us a holistic view to all contracts and future spend plans.”
McCollum also said that “we’re expanding our communication and relationships with developers on their future plans. We are also partnering with suppliers to reserve capacity.”
At the same time, JEA is keeping an eye on the demand side of the equation when it comes to supply chain issues.
McCollum noted that the expansion of electric vehicles means that JEA is competing with EV manufacturers for the electric grade core steel “that we use in our transformers. So where their consumption in the past has been insignificant, we are seeing a major shift and there aren’t many suppliers in the market that can keep up with the growing demand.”
One new way that JEA is addressing current supply chain issues is by harvesting transformers. That means if there are transformers in JEA’s territory that are not being utilized for load due to businesses moving to another location in Jacksonville or going out of business, the utility pulls that transformer from the field and sends it to investment recovery to refurbish it. JEA then places it back into the system for new developments or repair/maintenance work.
Hannibal Board of Public Works General Manager Details Supply Chain Issues at Board Meeting
Darrin Gordon, General Manager of Missouri public power utility Hannibal Board of Public Works, addressed supply chain issues at a March 21, 2022, Hannibal Board of Public Works board meeting.
At the meeting, Gordon noted that APPA has reported that nationwide, the U.S. supply chain for electric grid equipment is becoming increasingly disrupted and that utilities were reporting increasing scarcity of electric grid components, with transformers and wires becoming scarcer.
“Those are essential,” Gordon said. “Every single one of our customers is touched by those items and with that, as that scarcity increases,” so does the delivery time and costs are escalating “and we haven’t seen the end of that yet.”
He noted that “consistently, we’ve always tried to maintain a stockyard of those parts that we may need.”
In the short run, the utility has been able to acquire items off the market, but “that market is getting more and more scarce and that stockpile that we have may become less and less adequate and the cost of keeping that is going to increase.”
TVPPA Communications Advisory Group Launches Supply Chain Toolkit
Meanwhile, the Tennessee Valley Public Power Association Inc.’s (TVPPA) Communications Advisory Group has developed a supply chain toolkit of resources.
TVPPA is the nonprofit, regional service organization that represents the interests of consumer-owned electric utilities operating within the Tennessee Valley Authority (TVA) service area.
TVPPA created the communications toolkit in response to member discussions about the challenges of sharing information about supply chain disruptions, particularly as they relate to transformers and other materials critical to servicing the needs of consumers and communities.
TVPPA members include both municipal and electric cooperatives, and they serve more than nine million people in Alabama, Georgia, Tennessee, Mississippi, Kentucky, North Carolina and Virginia.
Klickitat PUD Faces Critical Electric System Equipment Shortages
In late March 2022, Washington State’s Klickitat PUD said that it was starting to experience critical electric system equipment shortages due to the global shortage of materials and longer delivery delays from many vendors.
Jim Smith, the PUD’s General Manager, said that with material delivery delays and increased construction volumes, the utility was short on stock for its standard pad mounted transformers. These transformers take high voltage power from the PUD’s distribution lines and convert it to the 120 and 240 volts delivered to residences and businesses when underground power lines are used. Transformers are on order and the PUD expects deliveries throughout the year, it said.
“We have been communicating with new customers and developers for months that we were expecting these shortages,” said Smith in a statement. “Existing customers should also realize that we are facing the same supply chain issues that they are seeing in stores. Delivery times are getting longer and prices are increasing across many materials.”
He noted, for example, that these transformers “normally have about a 16-week delivery time and were $1,500 each a year ago. Delivery is now more than a year out and they are being quoted at $6,000 each.”
Compounding the supply chain problem is a large increase in new construction in Klickitat County, the PUD said. The PUD would normally see about $1.4 million in new electric construction activity each year. In 2021, this increased to $2.8 million and the same is expected for 2022.
“The PUD Commissioners have directed staff to commit the funds required to allow us to keep two years of inventory in stock, rather than the normal six to twelve months,” said Smith. “We have the funds to be able to acquire these additional materials to support the increased growth in the county, but with limited supply and elevated usage, there is only so much we can do,” he said.