Electricity Markets

APPA’s Ditto, CPS Energy’s Garza Detail Response To Supply Chain Challenges

Joy Ditto, President and CEO of the American Public Power Association (APPA), and Rudy Garza, Interim President and CEO at Texas public power utility CPS Energy, on June 29 detailed how APPA and CPS Energy are tackling the ongoing supply chain challenges facing the electric utility sector.

Ditto and Garza participated in a virtual press briefing held by the U.S. Energy Association (USEA) related to supply chain issues and the electric utility industry that included a panel of energy reporters and other electric sector officials.

Garza said that the supply chain challenges are impacting “the way our community is growing in terms of new construction. It’s impacting our ability to recover from outages and our ability to be resilient,” as well as creating labor challenges for San Antonio-based CPS Energy, both in terms of recruitment as well as the utility’s contracting community.

“We’re seeing delays in our bread-and-butter equipment,” he noted. This includes standard transformers used to serve residential subdivisions and gas risers to connect meters to houses on the gas system.

Garza noted that “one of the ways that we have been able to manage through – and I think CPS Energy’s probably managing it as well if not better than most utilities in our sector – it’s all been about diversifying our supplier base.” He said that the utility has “more suppliers than we’ve ever had.”

At the same time, suppliers “are starting to not take on new customers because they just don’t have the stock, so even that is becoming a challenge in trying to diversify our supplier base.”

Garza noted that he wrote a letter to the Texas Public Utility Commission suggesting that the state consider creating a strategic stock of transformers “and bread-and-butter items that will allow us to maintain reliability in the event a hurricane hits or we have some major weather event again.”  

Meanwhile, Garza addressed a reporter’s question about the extent to which supply chain issues are affecting new construction projects.

“When we saw this happening and it started to squeeze our stock for new construction, I personally met with all the developers in our San Antonio metropolitan area and just said, look, we’re going to have to work together to ensure that we don’t pit developer against developer. You’re going to have to change the way that you phase in your development and I’m going to have to change the way we engineer the utility infrastructure so that everybody gets a percentage of what they need,” Garza said.   

“It’s worked really well because of the collaboration that we created on the front end,” he said, noting that CPS Energy sends “stock out” updates on a weekly basis “so they know exactly what we’re short on and they can plan their financial backing of their projects accordingly.”    

When asked by a reporter to discuss the supply chain outlook, Ditto noted that APPA has been working with the federal government “to partner with us on getting the manufacturers in a room to really suss out what this could look like and how we could get to a point where we reduce these lead times and, secondarily, really address the pricing issue.”

A tiger team has been formed under the auspices of the Electricity Subsector Coordinating Council, led by the various electricity trades and select CEOs from the industry, including several from public power.

The objective is to enable the Department of Energy (DOE) “to talk to us and to hopefully bring the manufacturers in to address the issue for the medium term.” In the short term, the industry has been speaking across sectors about equipment sharing.

APPA recently rolled out an additional feature to its eReliability Tracker that is available to all public power utilities and allows for voluntary equipment sharing by matching systems with the same distribution voltages.

“In terms of the longer-term view, we’re going to need to really get a handle from the manufacturers about how this can be alleviated,” Ditto said.

She noted that APPA recently asked the DOE for a temporary waiver from the 2016 transformer efficiency standard to help spur faster manufacturing processes.

APPA was joined by the National Rural Electric Cooperative Association in sending a letter in late May to Energy Secretary Jennifer Granholm in which the groups urged her “to temporarily waive the energy conservation standard for distribution transformers to make it possible for manufacturers to increase output as much as possible until this immediate crisis has abated.”

By relieving manufacturers of the current requirement, “raw steel materials used to make distribution transformers can be spread further and result in higher production that our members need. This is a concrete step you can take today to increase transformer availability and address a potential electric reliability issue,” the letter said.

“We would certainly appreciate no new efficiency standard coming down the pike, at least in the short to medium term,” Ditto said during the USEA event. “We just really want the government to put all things on the table and to have the conversations and help us have the conversations that we need to have to address this issue in the longer term.”

In a speech in June at APPA’s National Conference in Nashville, Tenn., Ditto urged member utilities to share their supply chain challenges with APPA so that the trade group can relay details on these challenges to federal partners and discuss how critical burdens on the sector can be alleviated.

In May, APPA convened a supply chain summit that included participation from public power utility officials who discussed their supply chain challenges and mitigation strategies.

APPA also recently finalized a new supply chain issue brief. APPA members can download the issue brief here.