A slow-moving global supply chain impacts electric utilities

April 11, 2022 - Global supply chain challenges and material shortages may cause delays in the installation new LCEC electric service and district lighting. Disruptions in manufacturing and delivery, as a result of COVID-19, raw material, labor shortages, and nationwide weather events such as ice storms and tornadoes are making it difficult for suppliers to meet demand for key components essential to keeping the lights on. “Longer than usual lead times and production constraints have impacted inventory levels making it difficult to manage infrastructure planning,” said LCEC Chief Financial Officer Sarah Bullock.

Utilities nationwide are facing supply chain challenges that could possibly linger into 2023, or longer.

Lead times for materials has risen from three months to more than a year in many cases. While LCEC customers have enjoyed consistent turnaround times for new and residential infrastructure and emergency response, service levels will be tested if critical equipment is not available. In addition, rising costs for raw materials, parts, and components will become a concern that could easily lead to rate increases or power cost adjustments in the future. “If supply chain challenges impact rates, it is going to sting when it hits customers’ wallets. LCEC has not raised base rates in more than 13 years,” Bullock said.

In order to help mitigate inventory shortfalls, LCEC plans to:

  • Communicate potential delays to developers, builders, governmental agencies, and customers
  • Prioritize work
  • Suspend new district lighting requests that require unavailable materials
  • Monitor inventory levels frequently and order with longer lead times in mind
  • Utilize reconditioned equipment when possible
  • Reuse equipment at idle service locations
  • Delay proactive replacement of infrastructure

The expectation is that, along with business-as-usual operations, new project and maintenance delays will become longer and more frequent while supply chain challenges remain high. If the cost of construction bids, large ticket items such as power transformers and bucket trucks, and fuel remain higher than pre-pandemic levels it will cause a ripple effect.