It takes a lot to keep power flowing to 42 million electric cooperative consumer-members. Beyond the manpower, there is the hardware: millions and millions of parts that must be inventoried, maintained, and replaced when they go bad.
So how do co-ops ensure they have readily available equipment in sufficient quantities that can be shipped quickly, particularly after natural disasters, whenever and wherever they are needed?
“You can’t rely on just-in-time inventory from factories when it comes to parts. You have to have them when you need them,” says Johnny Andrews, chief operating officer of manufacturing and distribution services for Texas Electric Cooperatives (statewide; TEC), headquartered in Austin.
TEC is one of nine members of the Electric Utilities Distribution Association (EUDA), a trade group formed in 1995 to represent logistics and manufacturing suppliers for distribution cooperatives. All members are either independent cooperatives, subsidiaries of statewide associations, or corporations created with co-op support to meet the needs of members and municipal utilities.
Video | How a Tree Becomes a Utility Pole
In total, EUDA members stock about $175 million worth of electric utility distribution and transmission inventory at all times. Combined annual sales top $1.25 billion and meet the bulk of construction, maintenance, and emergency response and recovery needs for NRECA’s 838 member distribution co-ops.
“Any EUDA group member can access the other EUDA distributors’ inventory when major outage events like hurricanes and ice storms occur,” says EUDA Chairman Matt Brandrup.
Brandrup is also CEO of Rural Electric Supply Cooperative (RESCO) in Madison, Wis. RESCO operates a network of satellite warehouses supplying more than 200 member co-ops in nine states.
“RESCO’s six warehouses were created to be an extension of our member co-ops’ warehouses,” Brandrup says. “We work hand in hand with our members to help them set up their own proper inventory levels.”
That approach, adopted by all EUDA members, goes beyond basic inventory management practices and treats utility hardware as perishables.
“Poles and electrical equipment have shelf lives and need to be put into service within an appropriate timeframe and not sitting in warehouses or co-op yards just in case they are needed,” Andrews says. Sophisticated demand-planning software helps EUDA members keep on top of supply.
“We have the ability to forecast down to the item’s location-level in our supply chain model,” Andrews says. “Ninety-nine percent of the time, we have what a customer wants in the quantity they want when they want it.”
TEC has material in more than 20 warehouses and 30 pole yards across Texas. Those facilities house equipment considered “safety stock,” designated for use in the hours immediately following widespread outages.
After region-wide incidents like major hurricanes or ice storms, other EUDA members can quickly dispatch parts, and manufacturers that routinely serve the co-op market can rapidly ship inventory. The approach is applied across EUDA systems based upon seasonal weather threats.
When winds in excess of 50 mph swept through the service territories of several Minnesota electric cooperatives in July 2016, damage was extensive.
Rockford-based Wright-Hennepin Cooperative Electric Association quickly turned to RESCO, which has four fully stocked storm-response trailers at the ready.
“Those trailers are always loaded with storm-related material like splices, hardware, and conductor and can be shipped immediately to one of our members should a storm-response need arise,” Brandrup says.
EUDA members deal with multiple suppliers to ensure quality and savings through bulk purchasing, he adds.
“RESCO is in a unique position to use the buying power of all of our 218 members to get the best and most competitive pricing we can,” Brandup says.
Tim Sullivan, CEO of Wright- Hennepin, adds, “It’s critically important to have a long-term relationship with reliable suppliers. They put a premium on fast response, and there are cost certainties you can count on from vendors you know and trust.”
And by having a supply group they can trust with many supply chain management functions, including the bidding process, purchasing, warehouse and inventory management, and shipping and receiving, co-ops using the system are able to control personnel and other costs.
The arrangement helps with Federal Emergency Management Agency (FEMA) paperwork, as well.
“The federal government wants to know that you procured resources competitively,” Sullivan says. “When you already know your supplier is competitively priced, you’re ahead of the game.”
In October 2015, the territory of Greenville, Texas-based Farmers Electric Cooperative was strafed by straight-line winds that led to a presidential disaster declaration. For the co-op staff, it was an all-hands-on-deck event, and TEC personnel were on site to keep critical inventory flowing to line crews.
“Our EUDA vendor deals with dozens of different suppliers, but we only have one point of contact,” says Farmers Electric General Manager and CEO Mark Stubbs. “Our invoice may be 10 pages long with dozens of different items, but it’s complete and a lot easier to deal with when compiling FEMA expense reports.”
Keeping It Straight
As handheld scanners and Wi-Fi-enabled inventory-management systems have replaced paper ledgers and parts manifests, pole yards and warehouses have been standardized with universal product codes, which allow for “big picture” inventory management across entire EUDA member inventories.
In some instances, logistics management protocols used by the United States military or major retailers have been adapted for co-op use.
John Maples, director of operations at the TEC distribution center in Georgetown, northeast of Austin, points to huge racks of parts along a warehouse gangway.
“It’s like going to Walmart,” he says. “Whenever they scan, it sends a signal back to replenish. Everything that comes in here is barcoded from the time it walks through the door until it leaves.”
TEC tracks items as they’re shipped out aboard container trucks and flatbed supply trailers, and warehouse personnel and yard crew members immediately begin pulling replenishment supplies.
“We have 20 trucks assigned to TEC—13 in the pole plant out in Jasper, Texas; we have seven here; and then one that floats around,” Maples says, adding that each truck is trackable by GPS. “We can tell the customer when the next stop is coming, what they can expect, and where their items are at any time.”
EUDA also helps distribution co-ops stay current with new line equipment rules.
Following adoption of U.S. Department of Energy efficiency standards for distribution transformers in 2013, co-ops relied heavily on EUDA members to meet demand. While units already in co-op inventories were exempt, any new orders were subject to the new regulations.
“Many of RESCO’s stock units already met the new efficiency standards,” Brandrup says. “We worked closely with ERMCO, our cooperatively owned transformer manufacturer partner, to update our stock transformer specification three months prior to the required implementation date to ensure we had a high level of inventory at the transition date.”
ERMCO is the Electric Research and Manufacturing Cooperative, a wholly owned subsidiary of Arkansas Electric Cooperatives Inc. Headquartered in Dyersburg, Tenn., it has turned out pad- and pole-mounted transformers for electric cooperatives since 1971.
Gallery | ERMCO Pad- and Pole-Mount Transformers
Adapting to a Changing Grid
Like the supply and logistics operation of Arkansas Electric Cooperatives, several EUDA members were founded by electric co-ops or their statewide associations in the 1930s and ’40s to help address supply shortages and pricing issues posed by equipment manufacturers and distributors focused on larger investor-owned utilities.
They include the manufacturing and distribution arm of TEC; United Utility Supply, an operating unit of the Kentucky Association of Electric Cooperatives (statewide); Tarheel Electric Membership Association, operated by North Carolina’s Electric Cooperatives and owned by member co-ops in North Carolina, Virginia, and Maryland; and Cooperative Electric Energy Utility Supply, owned by South Carolina’s two G&Ts, 20 distribution co-ops, and the state-owned utility, Santee Cooper.
RESCO was founded by the Wisconsin statewide; GRESCO was developed to meet the needs of co-ops and other utilities in the southeastern United States; Gen-Pac primarily serves co-ops and publicly owned utilities in the Pacific Northwest; and Western United Electric Utility Supply is a member-owned supplier serving the Mountain West.
Over the decades, the distributors began to share information and strengthen ties to help meet the needs of members in their territories. Early joint efforts included promoting manufacturing standards that met or exceeded Rural Utilities Service requirements.
Representatives of the nine members now meet formally twice each year but also interact regularly as co-op equipment and supply needs change. Many of those discussions focus on upgrading system infrastructure to handle larger residential subdivision and commercial loads, particularly as exurban development extends into more co-op territories.
“This includes substation upgrades, circuit upgrades, and, in some cases, securing new sources of additional wholesale power,” says RESCO’s Brandrup. “Many times, these larger projects require additional design/engineering resources and qualified workers to complete the projects in a very specific time period.”
In some cases, co-ops that once had most of their assets above ground now maintain large projects with miles of buried lines connected to ground-mounted transformers.
“Getting major manufacturers to recognize the importance of our members’ collective business aggregated through TEC is the most important success,” Andrews says. “Co-op managers know they’ve also got support systems in place that can get any parts or devices to wherever they’re needed to repair or expand systems and keep electricity flowing to members.”
EUDA members are working on expanding and modernizing their distribution systems to create new markets for specialized services or products. Several coordinate repair, reclamation, and recycling services for obsolete transformers and meters and worn or damaged conductor. They also collect and dispose of transformer fluids.
“This whole site is EPA certified for storage of PCBs,” says TEC’s Andrews during a tour of a contract transformer facility operating within his Georgetown distribution center. “It allows our members to just put stuff on a truck and bring it here, so they don’t have to do any hazmat or decaling or shipping or pretesting. It gives co-ops the level of expertise that they could not possess locally and saves them significant money.”
Salvageable distribution and transmission cans from pole-mounted transformers are collected and emptied, cores are rewound, fittings and hardware are replaced, and fresh mineral oil is added. Then the units are transported back to their co-op owners and put back into service.
“There’s still a lot of equipment out there from the 1950s and ’60s,” Andrews says. “It’s just unbelievable what comes through here.”
Chris Perry, president and CEO of United Utility Supply Cooperative, a parts and equipment supplier for cooperatives in 17 eastern and Midwestern states, sees innovation as key to meeting load growth and member interest in things like distributed generation.
“We’ve found it crucial to adapt to changing dynamics and business models to meet the evolving needs of our members,” says Perry, who is also president and CEO of the Kentucky Association of Electric Cooperatives. “It’s not enough to rely on loyalty and a great reputation.”