2022-068 DME Notice to Developers Due to Supply Chain ImpactsOctober 21, 2022 Report No. 2022-068
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INFORMAL STAFF REPORT
TO MAYOR AND CITY COUNCIL
SUBJECT: DME Notice to Developers due to Supply Chain Impacts to Electric System
Development.
BACKGROUND:
Supply chain issues faced by DME for the equipment needed to connect new customers and to
implement upgrades to the DME distribution system are starting to impact DME’s ability to meet
the demands of the development community. The equipment and devices include, but not limited
to, many of the raw materials and components for transformers, PVC piping, underground cable
(copper and aluminum), overhead conductor (aluminum), High Voltage connectors, and pedestal
style termination cabinets.
Despite the supply chain issues faced by all electric utilities, development in Denton continues at
an ever-increasing pace as shown in Figure 1.
Figure 1 – DME Customer Growth
DME currently has 61,793 customers. Since 2017 (5 years), DME has seen a 36.692% increase
in customers. Besides the need to provide the necessary materials and equipment to meet this
growth, DME must assure it has sufficient material stocks to respond to daily service issues as
well as its ability to respond to a more widespread event on the system. As a direct result of
serving more customers, the number of pieces of electrical equipment and materials necessary to
0
10000
20000
30000
40000
50000
60000
70000
2017 2018 2019 2020 2021 2022
Customer Growth
Residential Government Commercial Industrial
October 21, 2022 Report No. 2022-068
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maintain the system due to routine outages has increased and getting that equipment during this
supply chain interruption has further exacerbated the lack of inventory available to meet
developer needs.
DME Engineering tracks all developments that we have the penitential to serve and all that we
are obligated to serve. Table 1 provides a quantity breakdown of project classification and status
of the database used. Figure 2 depicts the number of historical residential and multifamily units
that have been interconnected to the DME system and forecasts the 2022/2023 units based upon
the projects that have entered the development services queue.
Table 1 - Project Class and Status
Residential Multifamily Commercial Improvement Total
In Design 17 24 29 57 127
Active 10 9 7 6 32
Totals 27 33 36 63 159
Figure 2 – Historical and Known Developments
414
1,080
502
739
1,272
2,409
108
1,862
743
1,495
1,225
5,151
-
1,000
2,000
3,000
4,000
5,000
6,000
-
500
1,000
1,500
2,000
2,500
3,000
FY17-18 FY18-19 FY19-20 FY20-21 FY21-22 FY22-23 MultifamilyResidentialResidential & Multifamily
Residential Multifamily
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During the COVID years DME’s experience with each revenue rate classes were mixed.
Residential development did not slow but increased dramatically this past fiscal year with a
higher projected growth of over 2,400 new residential lots added to the system for FY 22-23.
Construction of multifamily units dipped slightly between FY20-21 and FY21-22, but
projections show expected growth in FY22-23 of over 5,000 new multifamily units.
Additionally, commercial customer growth has been high as depicted on Figure 3.
Figure 3 – Commercial Rate Base Growth (square feet)
Commercial development within the City of Denton did not slow during COVID, and in fact,
DME expects an exponential growth in new commercial square footage. The chart shows DME
can expect an additional 6,254,518 square feet of commercial space in FY 22-23. Most
commercial development is served through use of three-phase transformers.
Critical Path Equipment and Materials
DME Engineering identified four (4) material items, which are critical to the delivery of electric
service, for further discussion. The comprehensive list of materials is over 75 items, but DME
Engineering is highlighting these for illustrative purposes. Table 2 is a listing of these items
broken down into the minimum requirements (the level DME needs to have on hand to handle
daily and emergency situations), the number that has been committed to projects that are
“active” (released or can be released to field operations for construction), the number of each
item on-hand and currently in stock, the calculated shortfall, purchase order dates of the
material along with the quantity ordered, and finally the current lead time.
-
572,877
141,493 285,767
2,073,536
6,254,518
-
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
FY17-18 FY18-19 FY19-20 FY20-21 FY21-22 FY22-23
Commercial
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Table 2 – Warehoused Items Status
For illustrative purposes Figure 4 depicts the projected timeline #2 Elbows, the item that we
anticipate shortages of in the very near future. Similar graphs are provided for each item in
Table 2 in the Appendix.
Figure 4 - #2 Elbows Supply vs Demand
Minimum Committed Total On Hand Shortfall On Order Leadtime
50 kVA (OH)35 8 43 8 35 40: 9/28/2021
50: 4/27/2022 60 Weeks
50 kVA (UG)25 190 215 3 212
60: 6/7/2021
45: 9/28/2021
180: 4/24/2022
30: 7/25/2022
50: 8/24/2022
60 weeks
Pedestals 70 545 615 121 494
353: 5/12/2022
200: 7/20/2022
252: 8/12/2022
21-9/14/2022
6 months
St Light Pole 24 171 195 0 195
125: 9/29/2021
125: 12/21/2021
150: 5/20/2022
52 weeks
#2 Elbows 24 772 796 133 663
136: 3/23/2022
290: 5/04/2022
495: 5/24/2022
Allocation
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Termination of underground cable to a pad-mounted transformer is
accomplished with an elbow. An elbow is composed of metal parts and
fittings that slide into the receiving port of a transformer. The elbow is
insulated with a rubber covering that protects its energized parts from ready
access. A minimum of two elbows are needed for every transformer installed.
Our current supplier, Techline, has notified us the vendor has them on an
“allotment” for orders. It is the understanding this means Techline receives a
limited amount of these items monthly – no matter how many Techline may have on order.
Techline divvies these out to their multiple customers of which DME is one. DME may only get
two (2) a month. The low supplied value for these critical items is extremely problematic and
certainly can delay multiple active and projects in design if more are not received.
The lead time for #2 elbows is on allocation. Currently, the CoD warehouse has one-hundred
thirty-three (133) in stock compared to the seven-hundred ninety-six (796) needed as minimum
and committed stock providing a six-hundred 663-unit deficit. There are 961 on order with an
allocated lead time. Based on current inventory level, expected deliveries and known and active
projects, DME expects that we will no be able to support development activities after January 1,
2023, and, depending on delivery schedules for this item thereafter, our ability to support
development will be limited by available inventory.
Mitigation Measures
While DME has been working conscientiously to mitigate the impacts of these supply chain
issues, we are now at a point that we believe our ability to support development activities will
soon be impacted. Nevertheless, DME’s project planning and logistics personnel are working
closely with the City of Denton (CoD) Warehouse team members to identify any activities or
methods that can be used to minimize the impacts of these externalities. These measures
include:.
• DME’s project planning and logistics personnel work closely with the City of Denton (CoD)
Warehouse to identify items. To better establish upcoming needs, DME Project Planning
and Logistics staff meet on a weekly basis with CoD Warehouse leadership to review the
status of materials needed for all upcoming projects. To assure the items managed by the
CoD Warehouse are ordered in a timely fashion, DME Project Planning takes the lead and
notifies CoD Warehouse when to order materials.
• DME Project Planning provides CoD Warehouse a list of materials needed with a nine (9)
month outlook.
• With the increase in lead times, DME is making bulk orders to attempt to stay in front of our
material requirements for maintenance and new development projects.
• Space at the CoD Warehouse has been a concern to house large quantities of pedestals.
However, DME is more than willing to make available space at the Spencer warehouse and
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at the substations to house the pedestal quantities as well as any other items that space is
needed for.
• If the proper transformer size is not available, DME will utilize larger kVA transformers to
meet service needs. This action does have an impact since the larger kVA transformer
usually is at a higher cost, reduces the inventory level of a piece of equipment that could be
used elsewhere, has a greater amount of electrical losses, and is an underutilization for its
capacity. But this provides service to the customer.
• Upon project release, DME Project Planning continually reviews actual and anticipated stock
levels of materials and informs CoD Warehouse quantity of materials that will be needed for
projects.
• DME’s Standards and Project Planning staff research and approve alternative suppliers for
materials when contracted suppliers cannot supply demand.
• DME’s current transformer contract was approved for an amendment of 25% which has
already been expended. DME is preparing a new contract for Council approval in the
amount of $75M.
• DME has fully expended the approved spend of an existing CoD Warehouse’s LCRA
contract approved by Council in May 2022. DME gained approval for a new CoD
Warehouse LCRA contract in the amount of $16M.
• DME’s Project Planning proactively reach out to the vendors to try to get deliveries
expedited.
• DME is looking into ways to expedite processes to allow for a reduced purchasing process
timeline.
• DME is preparing a Delegation of Authority ordinance to expedite purchasing processes.
• DME is looking into the possibility to purchase used or rebuilt transformers.
Conclusion
DME surveyed other cities to understand what approach they are taking regarding material
shortages and lead times. The findings are as follows:
Garland Power & Light, Garland
• Experiencing shortages on transformers and load break elbows
• Have notified City Council and halted all new construction within the past month
CPS, San Antonio
• Developers install civil work to the point where transformer pads are installed, CPS will
place the project on hold at that time
• Project prioritization is made on when the developer is ready and how long they have
been waiting on transformers
• Has notified developers, through their website portal system, of material shortages and
increased lead times
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• Sent an Email blast to all current developers about shortage issues
Bryan Texas Utilities, Bryan
• After civil work installed, developers are told up front it may be 6-8 weeks before
equipment can be installed
• Projects material needs and ordering 6-8 months in advance
• Utilizing feed through cabinets where transformers are not needed immediately
• Investigated use of rebuilt transformers
Austin Energy
• Has not formally stopped construction, but is experiencing delays for many of their
construction materials
• Looking for alternative suppliers
DME does, and has done, many of the same tactics used by the other utilities. Supply and lead
times are an issue affecting the entire electric utility industry. DME’s ability to meet
development demand is likely to begin to be impacted by January 1, 2023. The supply chain
issues have created the current material shortage issues being experienced. In reviewing the
circumstances, DME has concluded that these externalities could not be controlled by CoD
Warehouse or DME staff. DME believes it is a responsible action to be proactive with the
development community in Denton and provide them a proactive notice of potential service
delays. The proposed language for this notice is follows:
"Notice to Developers: As a result of nation-wide supply chain issues, Denton Municipal
Electric (DME) is experiencing extended lead times, up to two years in some cases, on various
electrical equipment. As such, DME is prioritizing it’s on-hand inventory for new development
on a first come, first serve basis. DME is committed to working diligently with developers to
understand development timelines and will do everything that is commercially reasonable to
provide electrical equipment to support those schedules. DME will endeavor to keep you
informed of expected delivery dates and our ability to construct and energize your project."
STAFF CONTACT: Jerry Fielder, P.E., Engineering Division Manager
REQUESTOR: Staff Initiated, DME
STAFF TIME TO COMPLETE REPORT: Total staff and contractor time on this project
exceeds 100 hours.
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APPENDIX
Each focused item discussion includes a chart which shows that material item’s quantity needs
for active and projects in design for this and the future fiscal year (orange) along with the
corresponding decline in quantities based on project needs assuming all of the quantities
currently on purchase orders are actually in stock and available – which is not the case. The
reality is even though sufficient quantities are on order, the current lead-time or quantity
restrictions by the supplier or vendor will become problematic in assurance adequate supplies for
a timely development service delivery.
50 KVA Transformers
One of the most important items for DME are transformers, both pad-mounted (used in
subdivision developments) and pole-mounted. Most 50 kVA overhead transformers are used by
DME contractors who are working on priority pole replacement projects. DME uses single-phase,
transformers in overhead and underground configurations to provide electric service to customers.
The transformers ordered and used by DME are purchased with varied electrical demands and
secondary voltages as outlined in DME’s Tariffs and Electric Service Standards.
This image is taken of the racks used by DME to store its
single-phase, pad-mounted transformers. This rack is
normally full but, as can be seen, the number of
transformers is noticeably down.
This image is taken of the area where 50 kVA, single-phase,
pole-mounted transformers are stored. There are only
seven (7) currently in stock. The space to the left of the
transformers is normally full – now it has grass growing in it.
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Chart 1 - 50 KVA Pad-Mounted Transformers
Lead times between ordering and receiving 1-phase, pad-mounted transformers has increased
from approximately 16 weeks to, what will be in the new contract, 60 weeks for the Howard
transformers which are normally purchased by DME. DME has looked at using other vendors
and understand transformer delivery times for ABB is 142 weeks and for Eaton Cooper is at 4
years. This is based on information DME received from Techline – our current contracted
supplier.
Lead time for 50 kVA, 1-phase, pad-mounted transformers is 60 weeks. Currently, DME
Logistics has three (3) in stock compared to the two-hundred fifteen (215) needed as minimum
and committed stock providing a two-hundred twelve (212) deficit. There are three-hundred
sixty-five (365) on order with a projected sixty (60) week lead time.
Commercial developments typically use 3-phase transformers. Due to the quantity currently in
stock, DME is not experiencing too much of an issue with service to commercial customers.
However, the lead times for 3-phase has increased from 16 weeks to 40 weeks. The one 3-phase
transformer we are preliminary predicting may be an issue is the future is 750 kVA, 277/480
volts.
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Pedestals
Chart 2 - Pedestals
Pedestals provide a connection point for
secondary and service conductors to distribute
electricity to a larger number of customers.
These items provide for efficient utilization of
pad-mounted transformer service capacity
(kVA) by allowing multiple users on one
transformer.
Lead time for pedestals is six (6) months.
Currently, the City of Denton Warehouse has
one-hundred twenty-one (121) pedestals in
stock compared to the six-hundred fifteen (615) needed as minimum and committed stock
providing a four-hundred ninety-four (494) deficit. There are eight-hundred twenty-six (826) on
order with a projected six (6) month lead time.
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Residential Street Light Poles
Chart 3 - Residential Streetlight Poles
The standard pole installation for a residential subdivision is the aggregate post top
fixture. Developers can choose between this fixture or DME’s wood poles with
cobra head. Due to aesthetics, the residential streetlight option by far favors the post
top.
Lead times for aggregate poles has increased from 16 weeks to 52 weeks.
Currently, DME has zero (0) 20-foot aggregate poles in stock compared to the one-
hundred ninety-five (195) needed as minimum and committed stock providing a
195-unit deficit. There are four hundred (400) on order with the projected 52-week
lead time. The City of Denton requires developers to have streetlights installed and
energized before providing approval to build houses. If the City is concerned with
this, they may consider a temporary lifting of this requirement for developments.
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Even though this document has focused on four (4) items, lead times for other critical materials
used by DME have also seen lead time expansion. Table 3 provides lead times for several of the
items used in this document and other items. With the increased supply chain issues, lead times
between order and delivery of materials has changed (increased) several times for materials.
Table 3 – Lead Time Changes
Material Original Lead Time New Lead Time
1-phase pad-mounted transformers 16 weeks 60 weeks
3-phase pad-mounted transformers 16 weeks 40 weeks
20’ residential streetlight poles 16 weeks 52 weeks
Electrical components (switchgears, automated equip) 14-16 weeks 20 plus weeks
Poles (wood) 4-12 weeks 26-52 weeks
Pull boxes (heavy & light duty) 12 weeks 12-14 weeks
The United States is experiencing unprecedented levels of inflation. This certainly influences the
costs seen by DME. Supply chain issues are going to have a financial impact on DME’s capital
budget which blends into its cost of service. A recent price request, through the LCRA
warehouse contract, provided stark indication material costs are rising rapidly. Table 4 is the
quote for the LCRA pricing showing the increase for many of the 1-phase, pad-mounted
transformers used by DME.
Table 4 - Price Increase for Pad-Mounted Transformers
Item Percent Increase
50 kVA, 240/120 V 251%
75 kVA, 240/120 V 278%
100 kVA, 240/120 V 267%
167 kVA, 240/120 V 272%
Items identified as electrical components has also seen a price increase in the range of 16%
between 2021 and July of 2022.
Increase in cost for materials will continue to increase the stress on an already stressed capital
budget.