As many talk about the need to grow and develop more electric infrastructure, uncertainty in the global and domestic economy is making it difficult for utilities to plan and support this growth. Years after the COVID-19 pandemic put strains on the supply chain for a host of equipment and materials, utilities are still grappling with how to bring down long lead times on critical equipment and keep project costs from fluctuating.
Areas experiencing growth are under specific pressure to both catch back up with supplies and expand to meet new demand. Utility plans, project costs, and timelines will continue to be affected by ongoing supply chain constraints and uncertainty in international trade issues. To help, utilities are looking at ways to expand their pool of trusted vendors, increase warehouse capacity, and partner with other utilities where possible on purchases.
Stocking Up
“There continues to be a high amount of demand for the materials that we use, and there continues to be an imbalance between supply and demand, which is resulting in high rates of inflation and also long lead times,” said Jaren Broadbent, director of purchasing services for Salt River Project in Arizona.
“The forecast in SRP’s strategic plan is unprecedented growth,” said Steve Lopez, senior director of supply chain and flight services for SRP, who said the public power utility is preparing to essentially double its capacity in the next 10 years. That kind of development is going to translate down the line to an increased in demand for everything a utility needs, “So we in supply chain need to be positioned to support that growth,” he added.
SRP anticipates that most of the load growth in its area will come from industrial customers. The Phoenix metropolitan area has been among the fastest growing areas in the U.S. over the past few decades, but Lopez said SRP is seeing some indicators that the population growth rate is slowing.
Broadbent said he monitors various measures such as the Global Supply Chain Pressure Index to get an indicator of how utility purchasing might be affected in the coming months.
That index showed how across all industries, supply chain pressures were greatest in 2021 and 2022, when effects from the COVID-19 pandemic had the most disruptions to all kinds of sectors. While the general markets started getting back to normal by 2023, Broadbent said the same hasn’t held true for utility supply chains.
“While there has been noticeable improvement, we are continuing to encounter disruptions in the industries that support our operations,” said Broadbent. “We're competing against a lot of other utilities and entities for the same materials, which is driving up the demand.”
Recent uncertainty around tariffs has added another layer of difficulty in planning to know what materials might be more challenging, or more expensive, to come by.
“The market is constantly changing, creating uncertainty. Today, it might be tough to get ahold of panels, tomorrow it might be something different. It’s not just one thing, that’s the biggest challenge,” said Broadbent.
“It's a very dynamic environment. It's changing, and so our strategy has to deal with that uncertainty and with the changing landscape in the global supply chain,” said Lopez.
That strategy looks at continuous improvement in four areas, Broadbent said, that position relies on four pillars: people, processes, technology, and data. “it's basically around building multiple safety nets, because as one safety net breaks, it's important to have a backup safety net to help ensure continuity of supply.”
SRP’s Investment Recovery Department and Transformer Shop aim to refurbish or repurpose used parts and have helped significantly, said Broadbent.
The groups include skilled technicians and engineers that have extended the life of many critical materials, which has helped alleviate some of the disruptions SRP has experienced. “As a transformer gets removed from the field, it'll get returned to the transformer shop, they'll test it, they'll determine whether or not there's any potential life left in that asset, and if there is, they're able to refurbish it, rebuild it, and return it to stock. And that's been a huge safety net for us,” explained Broadbent.
Another important component is to leverage analytics and internal reporting mechanisms to communicate material status to internal stakeholders to optimize inventory. “It helps us to be more proactive and forecast where we're sitting, where we have healthy stock, and where we might be seeing issues,” said Lopez.
This communication extends to its suppliers. Lopez said that SRP’s systems are integrated with some key external suppliers so that the utility can have visibility into the stock of critical materials, and suppliers have insight into SRP’s stock on certain items.
“With that additional visibility and information, we're able to collaborate closer and ensure that we have the materials that we need within SRP’s warehouse, and also it helps the distributor ensure that they have the materials that they need to support us,” added Broadbent.
While these strategies have helped SRP see some supply chain issues lessen, Lopez said the situation for materials continues to be dynamic. He hopes to see quoted lead times become more stable again, among other factors.
Forging New Partners
Janet Lonneker, assistant general manager for electric services at Anaheim Public Utilities in California, touched on the supply chain concerns the public power utility is facing on an episode of the Public Power Now podcast in October 2024.
The utility has been experiencing a lot of growth and is focused on making a variety of capital improvements, especially ahead of the 2028 Olympics, as Anaheim will be hosting some events in its venues. Some of the major efforts Lonneker said the utility is taking on include upgrading capacity and undergrounding more of its system, which is already more than 60% underground.
Lonneker said that supply chain issues have been a major challenge for the utility, particularly in the last three years. While Anaheim is one of the larger public power utilities, serving 126,000 electric meters, it is a much smaller utility than its neighboring investor-owned utilities. Lonneker said that makes it feel like Anaheim is “a little bit lower on the supply chain priority list,” meaning that the larger IOUs, which tend to place larger orders, get a little more preference on items such as transformers, switches, and cable.
Lonneker noted that lead times for distribution transformers for residential areas have continued to stay long — with the utility typically waiting one to two years to see orders fulfilled, while it used to see about 23 weeks for these orders to come in.
“We're really struggling to balance the delivery of our equipment with the growth in demand here in Anaheim,” she said.
“Some of the ways we've been mitigating that is we've been looking at increasing the number of manufacturers that we bid out our equipment to. For instance, we would typically have a few domestic partners that we would bid out. Those vendors are no longer able to meet our needs and our delivery dates because they are being pulled in many directions and they themselves aren't receiving enough of the components from their vendors and their manufacturers. We have had to increase our manufacturers to some overseas manufacturers. The overseas manufacturers are able to ship faster than our domestic partners.”
SRP has also been looking at expanding its supplier base, with an emphasis on increasing the number of local businesses it works with. In the spring, SRP held a luncheon for area businesses in an effort to boost supplier diversity.
“It was an opportunity for other potential businesses that are local to us that can help us build resilience and help us expand our supply pool,” said Lopez.
Continued Coordination
Anaheim is also looking at partnering with other utilities to create better economies of scale for its orders. “There are plenty of smaller, publicly owned utilities in the surrounding areas who have even less economies of scale than Anaheim does. So how can we bundle together to create a larger order, more demand for a manufacturer to be able to put us higher on the priority list?”
A challenge in these efforts is that a lot of utilities have very different systems with different equipment requirements.
“Sharing of materials, bundling together, makes it a little difficult because we all have different systems,” explained Lonneker, noting how neighboring public power utility Los Angeles Department of Water and Power’s distribution network is based on a different voltage as just one measure that means the systems use a “whole different set of materials.”
However, Lonneker noted that Anaheim’s system does share similar configuration to a neighboring IOU, Southern California Edison. “We try to consolidate and make it so that it's standardized, that we don't have any customized equipment that we're ordering that we would be one offs from other utilities such as Edison. If Edison's ordering a certain type of transformer, it's in our best interest to also have the same standard so that we can then, through economies of scale, have an order go through a manufacturer of similar nature.”
SRP has similarly participated in regional and national groups to discuss potential industry-wide solutions and coordination, but Lopez stressed that standardization is “easier said than done.”
SRP instead has focused on coordinating with other utilities in the Southwest on establishing benchmarks and swapping best practices for overcoming supply challenges.
Lonneker stressed the need for continued action and upward communication on supply chain issues for electric utilities, and noted appreciation for APPA’s efforts to relay this message in Washington, D.C. “There needs to be a partnership there for us to be on board with electrification. We need some assistance in helping us get the equipment and the supply chain fixed in any way possible,” she said.
