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Exit strategy

AKWESASNE, N.Y. – The St. Regis Mohawk Tribe passed a referendum June 6 saying the tribe should exit the national electricity grid and form an independent utility company. The community supported the referendum by a vote of 445 to 102.

Economic and engineering feasibility studies commissioned by SRMT have indicated many advantages for tribal members, including avoiding continued distribution rate increases expected from National Grid, and tribal leaders feel the move will enhance sovereignty.

“We are being proactive in meeting the future energy needs of the community,” said Tribal Chief James W. Ransom. “This will give us the opportunity to deliver electricity within our territory, create jobs in the process and continue on the path of economic self-sufficiency.”

Plug into the numbers Full-time jobs created: 6 to 8 Currently paying power company: 13 cents a kilowatt hour Operating own electrical utility company

will reduce kilowatt hour price by about: 1.5 cents Constructing independent utility company: $13.7 million

According to tribal officials, the project is expected to create six to eight full-time jobs and will keep revenues within the community. Although the benefits are promising, the costs associated with exiting the grid are of concern to the tribe.

SRMT, upon leaving the grid, will incur costs of about $4.3 million. It will cost an additional $13.7 million to construct the independent utility company. The tribe will soon contract with National Grid to maintain the electrical distribution system for up to two years to allow the tribe time to physically separate.

Though the exit cost is high, feasibility studies are prompting tribal leaders to exit the grid immediately to begin saving on electrical costs.

“There is a chance for immediate savings for community members by operating our own electrical utility,” said Tribal Chief Barbara Lazore. “In addition, high electrical costs hurt businesses in any community and we have a chance to address that problem.”

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The tribe is modeling its efforts on the town of Massena which formed the Massena Electric Department several years ago. MED kept the same rates as then Niagara Mohawk Power Corporation, but over the years has not had to raise rates as much. As a result, MED customers pay much lower rates than National Grid customers while also benefitting from better system reliability.

According to Dan Duthie, an attorney and consultant for SRMT, the ultimate cost of electricity based on kilowatt hourly rates are determined by certain components such as the actual cost of the distribution system, the rates required to support that system and the electricity running through the wires.

“Niagara Mohawk has rates that are 13 cents a kilowatt hour (kwh). We are hoping to reduce the distribution rate by about 1.5 cents per kwh and then take title to the utilities after Niagara Mohawk gets the approval from the New York Public Service Commission.”

Duthie said “removing the middle man” and delivering electricity to the tribal community will benefit everyone. “You buy the facility, build it and reconfigure it, it’s like you have your own mortgage but you have much more kwh’s to spread the costs over. Therefore, you can achieve reductions in the rates. Along with the fact that this would be a not-for-profit, there would not be a component as there is in Niagara Mohawk rates for federal and state income taxes.”

He said the total costs associated with exiting the grid may be less when taking into consideration the possibility of BIA involvement. Duthie explained financing being researched by the tribe.

“There is a financing technique known as a new market tax credit, which may lower the amount of money the tribe would have to put up front in terms of cash. We are also considering asking the BIA to guarantee 90 percent of the loan that will hopefully bring interest rates down and the total cost of financing down.”

One of the tribe’s main concerns is the projected growth of tribal enterprise and the ultimate electrical needs. SRMT’s needs for electricity are expected to double from 2008 to 2024.

“Being able to control electrical distribution will help guarantee that everybody will get the electricity they need,” said Tribal Chief Monica Jacobs. “This is an important step in being able to control rates and allow the community to grow and develop.”

In addition to passing the grid referendum, SRMT voters also passed a referendum which asked “Do you want tribal land disputes to be decided by the tribal court?” and elected Mark Garrow to replace Lazore as tribal chief.