As 2022 comes to a close and, as usual, Congress squabbles over spending for the rest of the current fiscal year (ending Sept. 30, 2023), the electric utility industry is lobbying for funds to solve the problem of an acute shortage of distribution transformers. The dearth of transformers to step down current from utility distribution lines to house current has slowed economic development and raised prices for the essential gear. The shortage has also slowed and complicated restoration devastating tornados, hurricanes, and wild fires.
Joy Ditto, president and CEO of the American Public Power Association, among the first to raise the issue of the impact of limited supply of distribution transformers, told The Quad Report in an interview Dec. 16 that one of her members said a recent quote from a manufacturer for a transformer, normally $2,400, was $24,000. Transformer orders that have typically taken two to four months to fill are now taking over a year on average.
While that’s a classic case of Econ. 101 and the intersection of supply and demand to produce price, it’s crippling to new residential and commercial development, the life blood of many communities and the institutions that provide them with electricity. As a result, the industry has turned to Washington and Congress for help.
While often at odds on policy issues, the transformer shortage has brought both investor-owned utilities and public power together to petition the solons for support. On Nov. 18, APPA, the National Rural Electric Cooperative Association, the Edison Electric Institute, the National Association of Home Builders, the Leading Builders of America, and the Associated General Contractors of America sent a letter to the Democratic and Republican House and Senate Appropriations Committee leaders, seeking $1 billion and use of the 1950 Defense Production Act to deal with the transformer shortage.
Notably absent from that lobbying phalanx was organized labor. According to Ditto, the biggest problem that is causing the transformer bottleneck is not the classic physical supply chain of components, but a shortage of skilled labor. “That’s what we have been hearing from the manufacturers,” Ditto said, although the more familiar supply chain blockages are also a component of the shortage.
The November letter noted that a special industry “tiger team” established to understand the shortage found that labor and material issues were driving the issue. Ditto told Quad, “There are some material crunches, but labor has risen to the primary” problem.
Dealing with the shortage is a bipartisan opportunity. Democrats and Republicans alike like electricity a lot. The appropriators, working largely in secret on the omnibus bill, have raised the utility industry’s request for $1 billion to $2.1 billion. That’s a tiny amount in an enormouTs spending bill. While the negotiators aren’t revealing what the bill’s bottom line will be, several unchallenged accounts have pegged it $1.7 trillion. he transformer funds are so small don’t even count as a rounder error.
One element of the omnibus measure will be Defense Department funding. Both the House and Senate have passed a DOD authorization bill worth $858 billion and sent it to President Biden for his signature, which insiders say is likely. But the funds, or some portion of them, have to be appropriated. CQ-Roll Call commented, “The funds have yet to be appropriated, but congressional leaders hope to clear an omnibus spending bill next week.”
While Biden has shown a fondness for using the relatively obscure 1950 DPA, it isn’t clear how it would work to hire labor for the transformer manufacturers. The act, aimed at procuring war material at the beginning of the Korean War, designates the Commerce Department as the agency to implement the law. Commerce has little energy expertise, not is it clear that the DPA can be used for a labor shortage. Other agencies that could have a card in the transformer game include the Energy Department and the Labor Department.
The legislative clock is ticking toward midnight, the end of 2022 and the current Congress. Government Executive reported Dec. 13, “Senate Appropriations Chairman Patrick J. Leahy, D-Vt., said in a statement that negotiators had ‘reached a bipartisan, bicameral framework that should allow us to finish an omnibus appropriations bill that can pass the House and Senate and be signed into law by the president.’
“Leahy said he cut the deal with House Appropriations Chair Rosa DeLauro, D-Conn., and Senate Appropriations ranking member Richard C. Shelby, R-Ala., who released similar statements.”
Should the clock strike midnight without a deal, there will be a new Congress with Republicans in charge of the House. Ditto noted, “We don’t start over again. We have people from both parties” who are concerned about the problem affecting their constituents. “It’s not a partisan issue. If we don’t get some level of funding in the omnibus, we are not giving up the ghost.”
–Kennedy Maize