Stubborn supply chain issues with key electric grid components have led to more aggressive stockpiling strategies that are paying off in record-high inventory levels that will serve electric cooperatives well into 2025.

That's the word from Matt Brandrup, president and CEO of Rural Electric Supply Cooperative, distribution and transmission material supplier to 272 co-ops and public power districts in the Upper Midwest and Northern Plains.

Brandrup recently discussed how Middleton, Wisconsin-based RESCO plans to meet electric co-ops' needs going forward by applying lessons learned during the pandemic and preparing for greater electrification in the future.

What were the biggest challenges RESCO faced this year?

Brandrup: Over the past few years and now into 2024, RESCO has faced unprecedented demand for product from our member electric cooperatives, especially for transformers and underground electric utility material. The record demand has coincided with supply chain disruptions, which caused lead times to extend significantly on the products we provide our members. To address the continuing supply chain issues in 2024, RESCO has continued to take an aggressive approach in stocking abundant amounts of inventory. This has allowed our members to get the material they need when they need it.

The other ongoing challenge RESCO and our members faced in 2024 is the substantial product cost inflation. From the beginning of 2021 to the beginning of 2024, the cost of all electric utility products, on average, has increased by about 48%. To put that into perspective, an electric cooperative that spent $10 million per year on their material purchases in 2020 would now have to spend $14.8 million to buy the same amount of material in 2024. That type of inflation has really put a significant burden on our members' workplan budgets.

How has RESCO's approach benefited its members?

Brandrup: RESCO has made significant investments in our inventory levels for our member cooperatives. Our inventory levels have more than doubled over the past couple of years and are now at all-time record-high levels, around $60 million.

As our inventory levels grow, so, too, does our need to expand our facility space to store the inventory. In that regard, RESCO has opened two new warehouses in Wisconsin and Iowa, and we have expanded our other existing warehouses in order to accommodate our robust inventory levels.

Perhaps the most critical supply chain issue our electric cooperative members have faced over the past few years was access to transformers. This issue stemmed from a significant supply/demand imbalance with transformers, which impacted many utilities across the nation. Fortunately for RESCO and our members, we have a partnership with ERMCO Transformer in Dyersburg, Tennessee. ERMCO is a cooperative-owned manufacturer and has committed much of their production to serving RESCO's electric cooperative members as well as the nation's rural electric cooperatives as a whole. This has enabled us to take care of all of our members' transformer needs with few, if any, issues. It's just another example of cooperatives working together to help other cooperatives.

What are ERMCO's current lead times on transformers?

Brandrup: ERMCO's lead times to RESCO for single-phase pole-mount and pad-mount units is an industry-leading 10 to 14 weeks. As it relates to three-phase transformer lead times, those lead times are a bit longer, depending upon the size of the unit.

What lead time is RESCO able to provide co-ops on transformers?

Brandrup: RESCO is carrying significant inventory of ERMCO single-phase pole-mount and pad-mount transformers, so we can deliver single-phase transformers to our member cooperatives within a couple of days for the most common transformer sizes. As it relates to three-phase transformers, we do carry some limited larger-sized three-phase inventory–1500 to 2500 kVA–within our warehouses. If we ship three-phase transformers directly from ERMCO to our members, they can expect about a 16- to 24-week lead time, depending upon the size of the unit.

What impact are the recent devastating hurricanes having on demand?

Brandrup: RESCO has seen lead times move out a bit on overhead line material as the Southeastern states continue to recover from the hurricanes. However, we do not expect lead times to extend out significantly, as manufacturers have generally been able to meet the increased demand without impacting their ability to supply the rest of the nation's electric cooperatives.

What are the top challenges RESCO expects in 2025?

Brandrup: As we head into 2025, there continues to be a significant shift to underground utility construction due to storm and system hardening considerations. This ongoing shift to underground construction that started a few years ago will likely continue to increase demand for underground components. And this most likely will continue to extend lead times on underground material, like elbows, junctions and even underground conductor in some cases.

What would you recommend electric co-ops do to ease these challenges or to prepare for them?

Brandrup: The more electric cooperatives can plan in terms of forecasting and ordering material ahead of time, the less likely they will run into problems securing the needed products. This is always easier said than done, but I would suggest they focus more on longer-term planning and working closely with their material providers, which helps ensure that material is ordered in a timely fashion.

What does the increasing electrification of the U.S. economy mean for RESCO and your member co-ops?

Brandrup: As the demand for electricity in our country increasingly grows, electric cooperatives nationwide will continue to upgrade their distribution and transmission systems for many years to come. This will likely require our co-op members to “up-size" their existing systems, which may mean replacing undersized transformers, conductors and other hardware with larger and more robust material to handle the larger loads. This also requires RESCO to make sure we inventory larger-sized transformers and other material to ensure our member cooperatives' needs are met as timely as possible.

Just five to 10 years ago, our members routinely purchased 10-15 kVA transformers as their normal residential specification. Now, our members are shifting to purchasing larger 25-50 kVA transformers for these loads.

What would you say has been the overall impact of the COVID-19 pandemic on the electric utility supply chain?

Brandrup: While there were significant issues over the past few years due to the pandemic and due to the unprecedented demand for distribution and transmission material, I believe the supply chain within the electric cooperative network has become much stronger. Cooperative suppliers like RESCO—along with our member cooperatives—have bulked up their inventory levels significantly, which will allow the electric cooperatives to be in a much stronger position to weather future supply chain disruptions, should they again re-appear.