U.S. Department of Energy - Energy Efficiency and Renewable Energy
Tribal Energy Program
It may be necessary to develop new organizations or institutions to effectively implement your tribal energy plans and projects. In some cases, it may be possible to expand the responsibilities of an existing tribal entity to include energy implementation, but sometimes a whole new entity, such as a tribal utility, is needed. Sometimes, joint ventures with outside partners may make the most sense, although true tribal economic development cannot be achieved by simply contracting out the opportunity.
The foundation of organizational development is human capacity. Effective strategic energy planning requires addressing a host of issues including legal, environmental, finance, energy end-use, technology, and market elements. The section on human resource development describes these elements. Ideally a tribe would have all this expertise in-house, but very seldom does, relying instead on consultants and other outside experts. While this is often necessary to begin with, tribes should be working to build this internal capacity. Going through the strategic planning process will help build this capacity, but the more a tribe can build this internal capacity, the more sovereign it becomes, and the faster it can make effective decisions to promote economic development opportunities, in energy and elsewhere.
There are many organizational options. The "organization," in this context, refers to the legal business structure that is set up to implement energy projects. Energy projects are usually long-term (10-, 20-, or even 50-year) commitments and require a stable professional business-like structure to sustain the project performance (operations and maintenance, revenue collection, and debt payment) after construction. Energy efficiency projects can be accomplished without a formal organization, but they are more effective, more comprehensive, and can reach more tribal homes and commercial buildings if they are well organized. The most common organizational options are described below.
Tribal Utility Authority
For tribes desiring to operate their own utility for energy services (electric power and natural gas), creating a tribal utility, or expanding the charter of an existing operation (for example, a tribal water or sewer utility) may be an important path to follow. A handful of tribal utilities have been formed in Indian country. Descriptions of these utilities can be found at Tribal Utility Formation under Case Studies. The steps and authorities required for forming a tribal utility can be found under Tribal Legal Issues.
Tribal utilities may also be important when considering ownership of new power plants and facilities to sell power into the regional power grid. In this instance, the management and operating responsibilities of power production require a solid legal entity with capable personnel, operating in a stable environment, and independent from tribal politics.
While creating a tribal utility can be an important step — strongly contributing to tribal sovereignty — it can also bring with it responsibilities that not all tribes are willing to accept. The most difficult responsibility may be dealing with lack of payment, and the possible necessity of disconnecting "grandma" or a tribal elder. But creating a utility is creating a business that must meet its fiscal obligations, as well as its responsibility to serve. When a tribal power line fails, there is no one to call but the tribal utility, so that responsibility comes along with the benefits of independence and sovereignty.
Tribal utilities may also be required to obtain preference power from the Federal Power Marketing Administrations (the Bonneville Power Administration has this requirement, but the Western Area Power Administration does not).
The Navajo Tribal Utility Authority (NTUA) is the oldest such entity in Indian country. NTUA is an enterprise of the Navajo Nation, established by the Navajo Nation Council to provide utility services to the Navajo People. NTUA purchases electrical power from off the Navajo reservation and transmits that power to homes throughout the 25,000-square-mile Navajo Nation, which covers northeastern Arizona, northwestern New Mexico, and southeastern Utah. Since 1959, NTUA has supplied electricity, water, natural gas, wastewater treatment, and (more recently) photovoltaic solar power services to residents of the Navajo Nation. Today, NTUA provides electrical service to approximately 30,000 households.
Cooperatives are organizations built and managed by their members, who receive its benefits and services. In terms of electric utilities, the best example is the Rural Electric Cooperatives (also called rural coops or RECs) that were built by farmers throughout various parts of the rural West to bring electricity to their farms. Rural coops are seldom in the power generation business, but instead buy power from others for distribution to the farmer-members through poles, wires, and substations that are owned and operated by the coop. The National Rural Electric Cooperative Association (NRECA) is the industry's trade group, with nearly 1000 member cooperatives.
This organizational model might be useful for large land-based tribes with dispersed populations, but perhaps more importantly, it could be tailored for a region where a number of tribes exist, but each tribe individually is too small to consider utility formation by itself. In this instance, the tribes could get together to create a coop organization to service their collective needs. The southern California tribes, the Pueblos of New Mexico, and the tribes of Oklahoma may be able to take advantage of this cooperative institutional model.
Energy Service Companies
Another approach to entering the energy business and improving tribal energy economics is the creation of an energy service company, or ESCO. ESCOs are typically focused on energy efficiency improvements, but the structural concept is also applicable to managing distributed power or remote off-grid energy services.
ESCOs build their business around applying energy efficiency improvements to residential, commercial, or industrial customers, and collecting revenue based on the monthly cost savings from these improvements. Typically, this is a shared-savings arrangement, where the building owner splits the savings with the ESCO. After the ESCO has been repaid (including profit), the full ownership of the assets reverts to the building owner, who continues to reap benefits into the indefinite future. It is the responsibility of the ESCO to bring the capitalization and technical implementation expertise to the agreement, so the essence of ESCO creation includes raising the initial capital, targeting the savings opportunities, and implementing efficiency improvement programs.
Today, there are a large number of ESCOs operating throughout the United States. One approach that may be worth considering is to develop a joint venture between a tribe and an existing ESCO, with training for tribal members that eventually leads to the transfer of the ESCO's management to the tribe.
An excellent web site for those interested in learning more about ESCOs, including what ESCOs currently exist, is the site of the National Association of Energy Service Companies.
Joint ventures, in this context, means creation of a utility, or other energy-based business, as a joint-ownership business relationship between a tribal entity (the tribe in its corporate capacity, a tribal utility, or other tribal business) and a non-tribal partner. In the joint venture, fiscal, management, operation, bill collections, power and/or fuel purchasing, and everything else having to do with utility operation can be divvied up between the partners however they choose. A joint venture could also be structured to build tribal capacity over time, with an eye toward creating jobs at all levels of management and implementation. In addition, the joint venture could be structured to increase tribal responsibility over time, with the option for tribal buy-out of the business in the future.
There are a number of small business opportunities that could be pursued or encouraged by a tribe to meet some of its members energy needs. These range from heating, ventilating, and air conditioning (HVAC) contractors, to home weatherization teams, to retailing building and efficiency products. Absent a formal tribal organization focused on providing energy services, many opportunities for small business formation exist to provide services that are otherwise obtained from off-reservation businesses.