Powering the supply chain
Co-ops work to improve dependability of needed supplies
When you think of infrastructure needed for electric cooperatives to provide safe, affordable and reliable power, it’s easy to picture lines, wires and poles dotting the countryside hills. However, there are many materials needed to ensure your lights come on every time you flip the switch—like the humble PVC pipe.
“PVC pipe has always historically been affordable, but because of a shortage of the resin used to make it, lead times and costs are now up,” Ryan Blackburn, Oklahoma Electric Cooperative logistics manager, says.
It’s a tale that now sounds all too familiar. Two factories that make the resin were hit hard with hurricanes. Demand increased and the factories fell behind. Blackburn says at one point the co-op was paying a little more than $1 per foot on a 3-inch pipe pre-COVID. Now that same pipe is costing more than $6 per foot.
“When you’re using 37,000 feet of PVC pipe a month, those increases really start to stack up,” Blackburn says. “It’s important for members to be aware of all these cost pressures when they see their electric bill each month.”
From the pandemic to natural disasters to political upheavals, the supply chain has been strained past its limits. Co-ops are implementing innovative solutions to mitigate these challenges and improve the overall dependability of supplies needed.
Creating a Supply Chain Task Force
Electric co-ops are among those taking steps to manage both immediate and long-term supply chain constraints, says Stephanie Crawford, regulatory affairs director with the National Rural Electric Cooperative Association.
“This didn’t happen overnight,” Crawford says. “Many of these dynamics started before the pandemic.”
Those dynamics include the fact that there’s only one U.S.-based manufacturer of the kind of steel used to make transformers, which are vital pieces of equipment that help regulate power levels so electricity is safe to use. That constraint, coupled with a lack of workforce, means that transformer manufacturers have not been able to keep pace with a significant increase in demand coming out of the pandemic. Lead times for ordering transformers jumped from one or two months to two years.
Those kinds of delays threatened to slow progress on essential work, like restoring power after a storm or connecting service for new co-op members.
And it wasn’t just transformers in short supply. Crawford says electric co-ops also faced delays “for meters, conductors, utility poles, bucket trucks—essentially all the things needed to keep the system running efficiently, including restoration needs and serving new loads.”
To reduce those backlogs, last summer the utility industry, including electric co-ops, created a task force to work with the federal government on resolving supply chain slowdowns.
Incentives for U.S. Manufacturing
The task force recommended several actions the federal government could take to help provide utilities what they need. Among its suggestions was to provide incentives to encourage domestic manufacturing of steel for transformers.
The task force also identified national trends and policies that could conflict with the utility supply chain:
• Worker shortages: The same lack of people to fill jobs in many parts of the economy, from restaurants to hospitals, also affects the making of materials needed by utilities.
• Competition for workers: Any community wants its economic development efforts to attract major new employers. But a large new business could end up attracting workers away from companies that supply essential utility equipment. The industry task force recommended that the government support incentives for utility-related work.
• Renewable energy and infrastructure initiatives: Electric vehicles, solar energy and even efforts to expand broadband service can use some of the same materials needed by utilities. The task force recommended the government avoid disadvantaging utility work by favoring other projects.
According to Crawford, all these supply chain issues are causing utilities to rethink traditional business practices. She says the logistics and procurement functions of electric utilities are getting increased attention.
In Oklahoma, co-ops have long been accustomed to preparing in advance and stocking up ahead of storm season. However, Blackburn says it’s always “storm mode” in today’s economic climate. Co-ops are keeping an open mind and are trying new products when availability slows, and his team is staying ahead of the game to anticipate needs years down the road.
“I tell my team all the time, ‘If this problem came up today, how can we fix it to where we’re not having the same problem six months from now?’”