The COVID-19 pandemic and a spate of natural disasters have triggered a parts shortage and driven up operating costs for electric cooperatives and other utilities, and the problem could continue well into next year.
“I’ve started ordering a little heavier in materials, including transformers, poles and anything else that I knew has a long lead time,” said Jose Baltierrez, a warehouseman with Sulphur Springs Valley Electric Cooperative.
Baltierrez began noticing thinning supplies in the Willcox, Arizona-based distribution co-op’s three warehouses and staging yards last October—about seven months into the pandemic. Deliveries for seasonal work projects and repairs were arriving less consistently, and back-ordered items were increasing.
“We have contacted [commercial and industrial] customers and members to let them know of the long lead times,” said Baltierrez, noting that delays can be particularly onerous for commercial and residential developers.
The pandemic forced many manufacturers to reconfigure plants to accommodate social distancing, which slowed production, packaging and shipping and delayed deliveries.
Commodity prices have also increased, with the cost of steel, copper and petroleum-based products, including plastics and composites, up at least 6% to 8% since the pandemic began.
According to logistics and distribution members of the Electric Utility Distributors Association, transformer and conductor lead times have doubled or tripled.
“We have extended our procurement to other manufacturers that we may not have traditionally bought certain products from,” said Jason Caudle, chief operating officer of Tarheel Electric Membership Association. “That’s allowed us to maintain a level of inventory to keep our members’ orders fulfilled.”
Some product manufacturers have logged as many as three price increases for manufactured items during their 2021 production cycle, and EUDA members have reported price increases on certain items exceeding 300%.
“We have been educating our members on these trends and encouraging them to plan ahead,” said Caudle, whose Raleigh, North Carolina-based operation supplies 35 distribution co-ops in three states. “This has allowed us to help keep material costs down along with hedging lead times.”
Pressures on the logistics system started showing up in the Southeast and West nearly a year ago, as co-ops and contractors began rebuilding from hurricane and wildfire damage.
Unusually low interest rates have also spurred utility infrastructure investment, including expansion of electric vehicle charging networks and transmission to support renewable generation. The deployment of advance metering infrastructure components and the phaseout of analog control and metering equipment is also up.
“This is helping fuel the demand for all distribution and transmission products,” said Matt Brandrup, president and CEO of Rural Electric Supply Cooperative, headquartered in Madison, Wisconsin. “If lead times triple from 12 weeks to 36 weeks, distributors should triple the amount they have in inventory on that product to keep up with normal demand.”
RESCO, which supplies co-ops and other publicly owned utilities in eight Midwestern states, has boosted inventory levels by 40% since the pandemic began.
“We’re placing orders for material with ship dates well into 2022,” said Brandrup. “We expect extended lead times to remain in place well into next year, and perhaps beyond.”
EUDA members’ combined inventory of $300 million in hardware and system components is providing the surge capacity needed to respond to spot shortages.
“We are constantly in touch with each other to assist when one runs low on certain items to help bridge the gap until additional inventory arrives,” said Jennifer Eberhart, a Tarheel EMA account representative and current EUDA chairperson. “We pull our collective resources together when a disaster hits a certain area to ensure material needs are met to help get the power back.”
Louisville, Kentucky-based United Utility Supply responded to multiple natural disasters during the pandemic, sending truckloads of transformers to Iowa after a derecho and to Texas following February’s deep freeze. Massive supply efforts were also mounted after ice storms hit Ohio and Kentucky, and big shipments moved to co-op yards after hurricanes Sally, Laura and Delta.
“We pulled resources from all of our five warehouses,” said Gary Burnett, executive vice president of UUS. “We were shipping material and supplies from Pennsylvania and Ohio to Alabama as we were waiting on vendor replenishments.”
That cooperation among supply and logistics cooperatives continues to help prevent pernicious shortages of essential parts and equipment.
“Working with our vendors forecasting two or three quarters ahead, we have been able to have the material our members need when they need it,” said Phil Clark, UUS vice president of operations.
That’s keeping a steady stream of hardware and components headed to co-ops across the country.
“When they need us, we show up,” Clark said, sharing the response from a UUS truck driver he called on a Friday night when co-ops needed help after a storm.
“No problem,” the driver said, making his way to his truck.
“Our team has done an excellent job making the connection about how our behind-the-scenes efforts relate to our member co-ops’ performance,” said Clark. “They take pride in it and ownership of it.”