Powering Strong Communities

Mayor of Denton, Texas, Urges Funding to Address Transformer Supply Chain Challenges

The mayor of Denton, Texas, a public power community, recently sent a letter to Sen. John Cornyn, R-Texas, arguing for funding to allow the Department of Energy (DOE) to address supply chain issues for electric distribution transformers. 

“The supply chain problem affecting electric distribution transformers has reached a crisis level that requires extraordinary action from the federal government to ensure that Denton Municipal Electric (DME) and other utilities can continue to provide reliable electrical service to our customers,” Denton Mayor Gerard Hudspeth wrote in his letter to Cornyn.

Hudspeth noted that earlier this year the Biden Administration invoked the Defense Production Act (DPA) “to address this crisis and both the pending House and Senate FY 2023 Energy & Water Appropriations bill include funding to allow DOE to address it.”

As Congress seeks to finalize funding for FY 2023, the City of Denton urged that Sen. Cornyn “provide $1 billion for Defense Production Act (DPA) implementation to allow the Department of Energy (DOE) to address supply chain issues for electric distribution transformers.”

Hudspeth said that the supply chain issue “is especially acute for a growing community like Denton, where we struggle to both replace aging equipment in existing neighborhoods and provide service in new and growing neighborhoods. DME currently has nearly $16 million in outstanding purchase orders for electric distribution transformers, with a waiting time of 70 to 104 weeks for delivery of new orders,” he said in the Nov. 23 letter.

The mayor also noted that the American Public Power Association (APPA) has surveyed its members this year to better understand the supply chain constraint of distribution transformers.

“Simply put, the survey found production is not meeting the demand, with average lead times to procure distribution transformers for all voltage classes rising 429 percent between 2020 and 2022 and some utilities reporting lead times of more than three years and others reporting that manufacturers had stopped accepting their bids.”

Hudspeth said that Denton’s current inventory of transformers is at levels reserved for normal, daily electric service operational responsibilities and emergency response, “but not at levels to support the incredible growth we are experiencing in the City and across the State of Texas.”

He said that DME has forty-five construction-ready projects and another 128 projects currently in the design phase. “Due to the low inventory of transformers and current supply chain issues, we have notified customers and developers DME may not be able to provide immediate service to these projects.” 

 For Denton, delivery of ordered transformers is unreliable as most vendors are not able to provide a clear delivery date, the mayor said.

 Normal delivery is for 20-25 transformers, Hudspeth said. “Denton now gets a fraction of that amount with each delivery.  Even when transformers are delivered, the quality of the delivered transformers is lower.  For example, an inspection on a recent delivery of 10 transformers identified five transformers were missing bushings and two of those were leaking making them unusable. Therefore, only five of the delivered 10 transformers were usable by Denton. Additionally, Denton has experienced price increases for transformers at 250% or higher.”  

The mayor attached a recent letter that APPA and other groups sent to the House and Senate Appropriations Committee requesting $1 billion in FY 2023 funding to allow DOE to address this issue under DPA. 

Antonio Puente, general manager of DME, was asked by Public Power Current to detail how DME has responded to the distribution transformer shortages as outlined by Mayor Hudspeth in his letter to Sen. Cornyn.

“Our response to these shortages really began after the February 2021 winter storm known as Winter Storm Uri,” he said.

After that event, DME began reassessing its on-hand inventory levels of all electrical equipment and supplies, including distribution transformers.

“The goal of this effort was to ensure adequate inventory to meet the needs of existing customers from a maintenance and emergency perspective. However, the supply chain issues and the rapid growth in our service territory, then posed additional challenges for us,” he said.

As such, DME has placed a number of bulk orders with vendors, increased the number of vendors under contract, taken emergency steps to acquire refurbished transformers “and to refurbish our own transformers, and engaged in legislative efforts at the federal level to allocate resources to help address these supply chain shortages.”

When asked to describe the root causes of the transformer shortages, Puente said that based on discussions with vendors, “the root cause appears to be the availability of materials (electrical or core steel, primarily) needed to build distribution transformers.”

Challenges in deliveries from overseas and competition from other industries “for these materials appear to be driving this supply chain shortage. As such, DME continues to prioritize our existing customers and will continue to work with new developments on a first-come, first-serve basis as equipment and supplies become available,” he said.