Denton Record-Chronicle
By Christian McPhate cmcphate@dentonrc.com
Dec 9, 2022

A “nationwide shortage” of good electrical transformers has reached Denton — impacting municipal electric companies’ ability to meet the increased demand for them because of explosive growth.

This supply chain issue has left Denton Municipal Electric with nearly $16 million in outstanding purchase orders for electric distribution transformers and a long delivery wait time of 70 to 104 weeks, which DME general manager Antonio Puente said is double the normal delivery time.

In response to this shortage, Denton Mayor Gerard Hudspeth sent a desperate plea on Nov. 23 to Sen. John Cornyn, R-Texas, urging him to provide $1 billion for the Defense Production Act implementation so the Department of Energy can address the supply chain issues for the transformers.

“This 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,” Hudspeth wrote.

In a prepared statement, Hudspeth told the Denton Record-Chronicle that staff was doing a great job trying to work through the “supply chain challenges while planning for future needs.”

“This is an issue that is affecting all electric utilities across the country, including Denton Municipal Electric,” Hudspeth said. “The City Council and staff will continue to work with suppliers to ensure necessary inventory levels of all electrical materials, including distribution transformers, are maintained to continue providing reliable energy to Denton.”

But Puente pointed out that it has been difficult, causing DME to use refurbished transformers, which wouldn’t normally be used due to their reliability issues, and has led to delays for developers.

Hudspeth claimed in his Nov. 23 letter that DME’s current inventory is at levels reserved for normal daily operations and emergency response, “but not at levels to support the incredible growth we are experiencing in the city and across the State of Texas.”

The mayor claimed there are 45 construction-ready projects and another 128 projects in the design phase in Denton.

The American Public Power Association surveyed its members several times earlier this year and found that the production of transformers is not meeting demand. This has caused delivery lead times to increase 429% since 2020. Some utility companies reported lead times of more than three years, while others reported that manufacturers had stopped accepting their bids.

“One in five infrastructure projects by public power utilities were being deferred or canceled because they are unable to procure the additional distribution transformers required for these projects,” Hudspeth said. “These shortages are posing urgent threats to reliability and resiliency, especially in communities recovering from a disaster.”

Hudspeth claimed that the APPA survey found that many utilities are nearly out of their emergency stock, with 30% surveyed claiming they would be out within a month, 24% out of stock within three months and 46% out of stock by the end of the year.

Part of the problem, Puente said, is that a lot of the major raw material used in transformer production come from China, where mining operations have been impacted by labor and COVID-19 issues.

Another problem is the economic environment. Manufacturers of the raw material, Puente said, are getting a better return from electric vehicle manufacturers, increasing prices from 250% to 270% for electric companies. Puente said DME’s supplier just notified it of another 16% price increase.

“Trying to get to that dollar spot and being competitive, that is a challenge,” Puente said.

Puente said it isn’t a new problem, though. DME has been hearing about it since COVID-19 erupted. After the February 2021 winter storm knocked out power for millions of Texas due to inadequate maintenance by ERCOT, Puente said DME began looking at inventory levels to figure out how many transformers they had to meet the maintenance needs of existing transformers and the new development flooding Denton. They started increasing the amount of inventory they maintain primarily to meet the needs of existing customers.

When they realized the supply chain issues, Puente said, they began notifying developers, which Hudspeth pointed out in his Nov. 23 letter.

“Due to the low inventory of transformers and current supply chain issues, we have notified customers and developers that DME may not be able to provide immediate service to these projects,” Hudspeth wrote.