Minding "the store," amid inflation pressures

The importance of planning and looking ahead is essential in Rich Riewer’s job. As Beltrami Electric Cooperative’s manager of engineering, Riewer knows it’s more important than ever to keep an eye on the calendar – especially when it comes to ordering equipment and supplies for BEC’s electric distribution system.

The Challenge at Hand

Riewer, with 26 years of experience in the industry, expresses concern about the unparalleled supply chain issues he's witnessing. “Prices for crucial components like spools of wire, underground cable, transformers, metering equipment, and even basic nuts and bolts have surged over the past few years. This poses a daily challenge in procuring co-op equipment vital for the safe distribution of electricity.”

The roots of these challenges trace back to the COVID-19 pandemic, affecting not only BEC but industries worldwide. Core steel for transformers, heat shrink tubing, copper connectors, and computer chips—all critical to the electric system's reliability—have experienced shortages and price hikes.

Manufacturers, grappling with historic backlogs, are unable to meet demands promptly. The lead time for transformers, for instance, has stretched to over 52 weeks, nearly double what it was just four years ago.

Adaptation and collaboration

To counteract these challenges, BEC has adjusted its approach. Riewer mentions, “We’ve adapted, ordered supplies earlier, and held some equipment longer in inventory to avoid construction delays. Our changes have helped shield us a bit from the continually increasing costs.”

BEC is part of a cooperative network, fostering relationships with equipment supply co-ops. Cooperative relationships are important in normal times – and even more so in extraordinary times because co-ops look out for each other – and co-ops look out for the members and communities they serve.

Matt Brandrup, CEO of RESCO, a co-op equipment supply company, highlights the industry's struggle with a 40% increase in product costs since 2020, putting pressure on members' capital expense budgets. “Inflation on the products we distribute has been at record highs over the past few years. In two short years, the costs of all the products we provide increased by 32% on average. While inflation has slowed in 2023, we expect to end the year with about an 8% product cost increase. That represents a 40% increase in product costs since 2020, which places a huge burden on our members’ capital expense budgets.”

Holding the line

Despite facing inflation rates of 14% in 2021 and an additional 18% in 2022, BEC remains dedicated to managing member resources carefully. The co-op has not implemented a rate increase in more than five years, emphasizing its commitment to providing excellent value to its members.

As BEC navigates these turbulent waters, the cooperative's philosophy stands firm. It's a commitment to the members, ensuring that amidst supply chain challenges, the lights stay on, and the communities we serve receive dependable, affordable, and resilient electric service. This steadfast dedication will guide your cooperative into the New Year and beyond, promising a future of reliability and innovation.