Supply chains impact power transmission systems

Ever since the pandemic in 2020, delivery times of critical power system equipment have been increasing not by months but by years. Because of this, prices have risen dramatically as well. The current supply chain environment has raised concerns regarding equipment acquisition using the required federal procurement rules. WAPA, a federal Power Marketing Administration, has been severely affected by this trend and is working diligently to provide reliable energy throughout the West.  

A team of WAPA subject matter experts collected and consolidated data on significant supply chain issues for bulk electric system equipment by speaking directly with manufacturers. The team focused on critical equipment at substations and transmission lines to fully comprehend the extent of the issue and devise a plan to safeguard the equipment under their purview.  

Potentially wide-ranging impacts   

In December 2023, Headquarters Electrical Engineering Manager Kyle Vaughn and his team created a prioritized list of equipment using lead time escalation as the primary factor. The list was then separated between equipment of immediate concern, where no immediate solution exists, and other equipment of concern, where a solution would mitigate supply chain constraints if implemented quickly.  

Among the highest priority items are circuit breakers and large power transformers. Circuit breakers interrupt fault current, protect equipment and isolate transmission lines within WAPA’s area of responsibility. Lead times have escalated from six months to 4.5 years for voltage classes 245-kilovolt and below and 5.5 years for 345-kV voltage classes and above. In addition, supply and demand have bumped up circuit breaker costs by 140% over the past two years.  

Large power transformers, which are also of immediate concern, step up and step-down voltage levels within WAPA’s footprint. This includes all voltage levels from 15-kV to 500-kV. Depending on the size of the transformer, lead times have risen from one year to up to nearly four years. Transformer cost has also sharply increased to over 200% of the original pricing, surpassing the Consumer Price Index.   

Lingo lesson: The Consumer Price Index (CPI) measures the average change over time in the prices paid by urban consumers for a standardized “market basket” of consumer goods and services.   

Vaughn spearheaded an initiative to combat this challenge. “There has been an industrywide 18-30% baseline increase in inflation for bulk electrical material and equipment that is impacting how much work we’re able to complete,” Vaughn said. “This involves putting preventive and life-cycle maintenance needs behind higher priority items because the funding isn’t there to execute all of the projects, which is not a position we want to be in.”  

Purchasing power   

During the initial data collection process, WAPA became aware that due to supply chain issues, certain equipment manufacturers are not taking on new customers and are only providing quotes if a procurement mechanism is already in place. They are reserving manufacturing capacity for utilities with direct relationships with the manufacturer. Currently, regulations require that WAPA procures through small business contractors who subcontract through different manufacturers, which makes it more challenging to get the best pricing and delivery lead times.  

According to Procurement Policy Manager Todd Tetrault, “Putting in place WAPA-wide strategic procurements such as Blanket Purchase Agreements or Indefinite Delivery, Indefinite Quantity contracts with manufacturers would enable WAPA to build supplier relationships directly with manufacturers, potentially reducing delivery timeframes and prices.”  

Implementing additional procurement methods requires additional human capital support from Procurement and the business units. Establishing these types of procurement vehicles presents a significant upfront workload. However, the upfront investment in staffing resources will have a substantial payoff in terms of streamlined procurement actions and delivery speed going forward.  

Consequential impacts  

Utility operations rely on spare equipment inventory and the ability to acquire equipment to replace damaged equipment. Construction projects managed by utilities depend on a constant, known supply chain to meet in-service dates that have financial and system reliability impacts. The challenges in obtaining replacement equipment affect these programs and increases uncertainty in planning schedules.  

Supply-chain delays can have significant ramifications. The following are potential consequences of increased power equipment delivery times due to the current purchasing environment:   

• Impacts on the reliability of the power grid.   
• Delays in critical power system projects, equipment replacements and emergency repairs could reduce power delivery capability.   
• Increased power costs for WAPA customers.   
• Impact on planned maintenance and the budgeting process for labor hours and funding.   
• Potential impact on restoration after a bulk electric system outage (black start).  

It’s a balancing act  

In spite of WAPA’s mitigation efforts, some projects are being delayed without additional funding to cover the excess costs. Vaughn notes that HQ Engineering has seen a 50% increase in new project requests, but the materials needed to implement these projects aren’t available. Upcoming meetings with other Power Marketing Administrations are in the works to help identify other concerns and possible solutions.  

Identifying supply chain constraints represents a significant first step. However, the problem will likely require escalating the issue to the Department of Energy and possibly even Congress, where they can address solutions at an industrywide level. In spite of the challenges, WAPA continues to provide reliable energy to its customers and sees addressing today’s supply-chain issues as a top priority.