As a leading advisor in the public power sector and as an advisor to First Nations across the country, we often are asked about issues that pertain to tribal utility formation. In this article, we look to break down the concept of public power and how some of those concepts translate to tribes looking to form utilities under their own jurisdiction or expand the services offered through existing tribal utilities.
A public utility by definition is an organization that maintains infrastructure for a public good and provides service by using that infrastructure. Examples of the types of services provided by these organizations include: electricity, natural gas, water and wastewater, and telecommunications. Public utilities are subject to forms of public control and regulation ranging from local community-based groups to statewide government Public Service Commissions. Public utilities are almost always structured as not-for-profit organizations. But there are other types of utility structures as well, including cooperative structures which are owned by their members, and investor owned utilities which are for-profit, privately held or publicly traded companies.
Public power as a model
Public power authorities have been prevalent in the United States for decades. Organized around villages and municipalities, these entities formed for the purpose of getting local control of public infrastructure. The methods and strategies used by these local governments to gain control of their public infrastructure can help Tribes do the same thing. Likewise, the not-for-profit organizational structures formed by these village and municipal governments can provide a benchmark for developing tribal organizations for the same purposes. Of course every tribal nation has its own unique history and particular issues that require customization of its organizational framework. Nevertheless, public power serves as a prime example of how to get local control of the assets and infrastructure that often is outside a tribe’s control.
Tribal electric utilities
Creating a tribal electric utility can be an important element of tribal sovereignty. Tribal utilities can help reverse the historic trend of marginal participation in energy and infrastructure decisions of First Nations by creating an organization that can participate as a peer among the energy providers that currently own and control energy assets on tribal trust land. Creation of a utility can serve as a powerful mechanism for a Tribe to engage with surrounding utilities, federal and state agencies, and most importantly, its own community. There are other reasons to consider a tribal utility, including benefits such as:
- Increased revenue and reduced poverty among tribal members
- Infrastructure self-sufficiency and rate control
- Reduced energy costs associated with electric distribution
- Diversification of tribal assets
- Ability to provide directed electric rate relief to elders and other disadvantaged tribal members
- Creation of jobs to serve community individuals and infrastructure
- Development of intellectual capacity of tribal members
- Development of renewable energy resources for long term price certainty and sustainability
Will a tribal utility work in my community?
In order to determine whether it is feasible to pursue the creation of a tribal electric utility, a tribe should go through a thorough feasibility analysis. Although each tribal government is obviously different, our typical process of evaluation generally focuses on three main areas:
- Technical and financial due diligence: Can a tribal utility be a viable self-sustaining enterprise based on a number of variables relating to current costs of service versus costs of service as a tribal utility
- Exploration of options for the legal and regulatory framework of a potential utility
- Evaluation of organizational capacity – does capacity currently exist, and if not, where are the gaps?
Following this exercise, various implementation strategies can be developed, including strategies for funding any infrastructure related to tribal utility implementation.
The increasing cost-effectiveness of renewable generation at distributed scale along with competitive leverage that can often times be exerted by tribal governments makes now a great time to evaluate, or re-evaluate the formation of a tribal utility authority by your organization. Often times federal grant funding can be made available for such efforts to allow tribes to look at these opportunities for little or no out of pocket costs.
For more information on this topic, or to learn how Baker Tilly energy and utility specialists can help, contact our team.