A leading supply cooperative serving electric co-ops and public power districts in nine Midwestern states is urging its members to plan for cost increases and parts shortages lingering into 2023.
“Our industry continues to face the challenges of inflation, supply chain disruptions, inventory shortages, and extended lead times,” said Matt Brandrup, president and CEO of Middleton, Wisconsin-based Rural Electric Supply Cooperative. RESCO is the primary supplier of parts and components used by distribution and transmission co-ops serving members in Wisconsin, Iowa, North Dakota, South Dakota, Michigan, Missouri, Nebraska, Minnesota and Montana.
Brandrup is telling members that, while U.S. inflation ran at an annual rate of 7% in 2021, the costs of nearly every item that RESCO orders from manufacturers and suppliers rose about 10% in the same period.
“This increase was entirely out of our hands and not specific to RESCO or our specific manufacturers,” said Brandrup, adding that the same contributing factors remain in play for 2022. “It’s important for utilities to prepare for—and be cognizant of—continued interruptions in product acquisition and delivery.”
Co-ops intent on taking on construction and development projects comparable to those pursued in 2021 can expect costs at least 10% higher for 2022, said Brandrup, emphasizing concern for co-ops now putting together seasonal work schedules. “That sort of inflation can really take a large bite out of any utility’s work plan dollars.”
Among the essential components most affected are transformers, both single-phase and three-phase, essential to extending electric service to new subdivisions and commercial-industrial developments, said Brandrup. He added that domestic manufacturers are facing record demand and don’t have excess manufacturing capacity.
“They’re allocating a set amount of production—and no more—to their distributors and customers,” said Brandrup, who anticipates shortfalls and back orders to be among the ongoing concerns facing infrastructure developers.
RESCO and several other members of the Electric Utility Distribution Association who supply co-ops and public power providers have adjusted inventories to help meet demand for conductors, fiberglass enclosures and hardware. Brandrup is a past president of the EUDA group, which includes nine of the nation’s largest supply and logistics co-ops.
Brandrup is urging his co-op members to complete their capital equipment orders for 2022 now, even for late-year needs, to help minimize fulfillment delays. He’s also encouraging them to work with developers and major commercial-industrial customers to adjust work schedules to reflect anticipated supply chain challenges.
“Consider carrying more inventory for the next year or two to better insulate your utility in the case of unexpected storms or continued supply chain disruptions,” said Brandrup. “Make sure senior leadership and elected directors are kept informed about cost increases so that purchasing budgets can be adjusted as needed.”