The United States sets aside just seven days at the end of May to prepare for hurricane season, but for utilities that serve coastal communities, it is a year-round job. The potential devastation caused by hurricane hazards — storm surges, high winds, tornadoes and flooding — forces utilities to plan months in advance of hurricane season.

Yearly Storm Preparedness

The supply chains for utilities such as American Electric Power (AEP) and Cleco Power, two utilities serving coastal customers, begin reviewing plans early in the year. Both Cleco's and AEP's plans have tactical as well as strategic elements. Supply chain personnel with Cleco and AEP work closely with the utility operations teams to ensure the plans provide a clear understanding of roles and responsibilities. The annual planning process also requires localized stress-test drills so everyone knows the specific role they will play during storm-restoration efforts. The drills also provide an opportunity to identify training needs and weaknesses in the plans.

An important step in planning for hurricane season is a review of storm stock. At Cleco and AEP, delivery and storage of any replenishments or “beefing up” of storm stock is expected to be complete by the latter part of April. Another key planning step is reviewing personnel and vendor emergency contact lists. The Cleco supply chain also furnishes a list of contractors and vendors typically used during power restoration to the utility operations team for their review and edits. This step saves valuable time in the process of validating insurance and contractor information.

Both AEP and Cleco also execute planning that goes well beyond inventory levels and replenishment. Issues that normally can be thought of as mundane — such as transportation, scrap and trash contracts — can quickly escalate to a crisis level without adequate planning. Depending on the severity of a storm, material replenishment challenges can arise as the demand for material haulers increases. For example, during recovery from Hurricane Katrina, transportation was difficult to obtain because of demands by federal agencies and other restoration efforts. It also can be difficult to obtain trash and scrap bins when private and public properties are being cleared of storm damage.

During its annual planning process, Cleco prepares storm stock at one central location. The storm stock is intended to support a week of work for one or two locations. Cleco also stages storm trailers in its St. Tammany, New Iberia and Pineville, Louisiana, storerooms to cover the first 24 hours of storm restoration. AEP, on the other hand, is able to leverage its 11-state footprint in the hurricane planning process. During the spring of each year, AEP provides some inventory increases in the two major Rio Grande Valley storerooms and at its regional distribution center located in Kingsville, Texas. The increases are intended to sustain the first 48 hours after a storm. Because of the continued standardization of material, AEP plans also provide the capability to influx material from locations as far away as Virginia, should the need arise.

Both AEP and Cleco recognize the importance of having a plan for determining how to respond to a disaster. The bottom-line result of having to execute the plan is that more goods and services — transformers, wire, poles, crossarms, hardware and contractors — will be needed than can ever be supplied from the inventory of any one utility. Securing multiple suppliers that are reliable in a crisis situation is a vital part of responding to disasters.

Planning for the Wild Cards

Although both Cleco and AEP clearly understand they can plan ahead to address many issues to help utility operations safely and effectively restore power after a hurricane, there are still unexpected events that can occur. For example, this year additional uncertainty stems from the BP oil spill in the Gulf of Mexico. Clearly, the economies and ecosystems of many coastal communities have been devastated by oil that has washed ashore.

However, this uncertainty is being introduced into the supply chain planning process as utilities try to understand the potential impact of oil contamination spread by a hurricane or tropical storm striking coastal communities. Would additional personal protective devices be required for line personnel? Would oil-contaminated scrap need to be handled differently? How would material handling equipment be decontaminated? Would additional state and federal regulations be implemented? How many critical logistics providers would be available because of the current massive cleanup efforts of BP? Unfortunately, many questions can be asked, but concrete answers are not currently available. What is certain is the supply chain will be ready to assist in any way to provide materials to help address these challenges.

Another issue Cleco, AEP and other utilities in the state are facing is Louisiana-mandated credentialing to access areas that have been struck by a hurricane. The credentialing process requires critical infrastructure owners and operators to carry valid identification, a standardized vehicle placard and a letter of access issued by the host utility at all times during the restoration process. With the massive influx of personnel needed to assist with restoration of power, the credentialing process is critical so that personnel can move from parish to parish when restoring power to affected areas.

For many years, both Cleco and AEP have responded to other utilities' calls to send their employees and contractors to assist in storm restoration. While these mutual-assistance calls are a critical part of restoration, many utilities are being asked to do more with less and this, too, adds to the challenges facing utilities during storm restoration. Utilities that typically would send both company personnel and contract crews now face tough decisions as to the number of response personnel they can share during storm-restoration efforts.

Hurricane in the Gulf

While both AEP and Cleco have different triggers that activate their respective storm plans, each utility moves swiftly to ensure materials are available for restoration efforts. Cleco takes concrete steps such as moving storm trailers into its three major work locations. The AEP supply chain begins the process of staging material for quick deployment from major stocking locations such as Canton, Ohio; Ft. Wayne, Indiana; Roanoke, Virginia; and Tulsa, Oklahoma. Both utilities begin talking with their major suppliers to get an understating of their ability to respond after hurricane landfall. Major utility suppliers understand and plan for the urgent requests for materials that can be caused by hurricanes. Realistically, suppliers have to respond to every storm that hits the United States, while utilities focus first on their service territory and secondarily on assisting other utilities recovering from hurricane damage.

As the landfall location becomes clearer, the supply chains of AEP and Cleco have store attendants and extra material staged outside of the strike zone to provide a quick response to support the surge of distribution and transmission personnel brought in to recover from the hurricane damage. After landfall, both storm-management teams provide guidance and resources needed for restoration efforts. Material staging yards are supplied with predetermined lists of initial material, and store attendants are placed in staging yards identified in the plans.

One key element in supporting distribution and transmission personnel in storm restoration is communication. Supply chain personnel are assigned within storm teams to obtain as much information as possible regarding damage assessment and identifying areas of concentration for crews. To assist distribution and transmission storm management, the supply chains need to know where material is and how soon it can be deployed. The AEP supply chain also has an internal website populated with real-time shipping data so the locations of critical shipments can be tracked.

Both Cleco and AEP supply chain personnel consider even preliminary damage-assessment information to be key information in helping to identify the type and location of large quantities of material needed to support power restoration. Both utilities strive to implement routine material replenishment processes as soon as possible. This provides a steady flow of material and helps in establishing work cycles that allow store attendants to have rest periods. The AEP supply chain typically maintains a roster of store attendants from other AEP operating companies that can be brought in for seven to 14 days to help provide rest opportunities to ensure safety.

Although safely providing utility operations with the necessary material and services to restore power is first on the priority list, supply chain supports other areas like regulatory and financial services. During storm restoration, regulatory teams provide local and state officials with information regarding the progress of storm recovery. The financial teams also need spending information to assist in budget and cash management. The supply chains of both AEP and Cleco provide material logistics and send reports on a next-day basis using inventory management and transportation systems.

Lessons Learned

Since both Cleco and AEP serve coastal communities, their supply chains have been called to respond to many storms. Although their lessons-learned lists are long, some key ideas have emerged from both supply chains.

A key point is that utilities must pay attention to hurricanes that do not have a first-strike effect on their service territories. Utility industry personnel recognize that material and contractor services will be diverted to the areas that have been struck by a hurricane, which can have an impact on resource availability for months, depending on the severity of the storm. And, back-to-back storms can create even longer diversions. Additionally, if forests are damaged by storms, pole supply can be impacted. Of course, the effects of hurricanes can be seen miles inland, causing additional challenges for utilities. For example, remnants of Hurricane Ike caused one of the largest power outages ever experienced within AEP's service territory when Southwestern Electric Power Co. and AEP Ohio were struck by tropical storm-force winds.

Another lesson learned is to avoid panic purchases of material. Although priority one is ensuring material is available, returns of excess material after hurricane restoration can be costly, so buyers must strike a balance. In some cases, Clecohas purchased extra poles and crossarms to avoid lead-time increases that occur in an active hurricane season. Cleco also has partnered with three of its major suppliers to retain a storm stock at the vendor facilities. The storm stock is retained for a nominal fee, preventing a large increase to utility inventory levels. Cleco has adopted a strategy of waiting to dip into storm stock if a hurricane occurs early in the season. This strategy helps combat material supply problems that can occur later in an active hurricane season.

Both Cleco and AEP agree that one of the biggest lessons learned is the art of being flexible. Supply chain must be actively plugged into the restoration activities of distribution and transmission. The material demands of some commodities in one week can exceed a typical year's consumption. It takes significant coordination with suppliers and the internal supply chain to ensure that all the required material is available to restore power in a safe and efficient manner.

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Kristy Kelley (Kristy.Kelley@CLECO.com) has worked for Cleco Corp. for 20 years and served as supervisor of the field warehouse for the past three years. Her utility experience includes plant and property accounting, accounts payable, general ledger, financial reporting, marketing and logistic coordinator for lodging during storms. She holds a degree in accounting from Louisiana College.

Todd Rind (trind@aep.com) has worked for the last 15 years in supply chain management with an emphasis on materials management. He has twice served as chair of the supply chain section of the Southeastern Electric Exchange. Rind is currently manager of inventory management for AEP, and he is actively involved in supply chain statistical research. Rind is a professional engineer.

American Electric Power www.aep.com

Companies mentioned:

Cleco Power www.cleco.com