Is Community Choice Aggregation the Right Choice for Your Community?September 20, 2016
Community choice aggregation is surging in California. The Center for Climate Protection estimates that local governments representing over 17 million California customers are part of a community choice aggregator (CCA), scheduled to launch a CCA, or are actively considering one. Given this growing trend, communities that are not currently involved in a CCA effort may find themselves being invited to join a CCA or otherwise considering if it is the right choice for them.
In broad terms, a CCA allows a local government to establish an alternative energy provider for customers within its jurisdiction, with the electricity delivered through the existing power supply grid. This structure maintains reliable electric service while giving the local CCA the ability to shape its energy policy to reflect community goals, which often include taking greater advantage of renewable energy and distributed resources. To help guide local governments curious about CCAs, this article outlines the basics of the CCA formation process and describes some important factors to consider.
What does a CCA do?
A CCA is distinct from a municipal utility. Unlike a municipal utility, a CCA is not responsible for maintaining transmission and distribution infrastructure, or even for providing billing and customer support. These important functions remain with the local utility, which is legally obligated to provide those services to CCA customers without discrimination. The CCA, meanwhile, takes responsibility for procuring power supply and setting generation rates for its customers. Through entering into contracts and adopting incentives, a CCA can further important community goals like reducing carbon emissions and encouraging local generation investments.
How widespread are CCAs?
Currently, seven states (California, Illinois, Massachusetts, New Jersey, New York, Ohio, and Rhode Island) permit CCAs. AB 117 established California’s legal framework for CCAs in 2002 and the first California CCA (Marin Clean Energy) launched in 2010. Since then the pace has quickened considerably; four CCAs are currently operating and they will be joined by a fifth later this year. Local governments from over twenty more counties, including Los Angeles and San Diego, are at various stages of studying or implementing CCAs.
How can local governments establish CCAs?
Under California law, any city or county may elect to form a CCA. In addition, multiple cities and/or counties may cooperate to form a single CCA by means of a joint powers authority (JPA). The typical CCA formation process requires the city or county to:
- Fund and conduct a feasibility study
- Establish a JPA (if necessary)
- Adopt the CCA by ordinance
- Create an Implementation Plan
- Submit a Statement of Intent (SOI) to the California Public Utilities Commission (CPUC)
- After SOI approval, submit a formal application to the CPUC
Once formed, CCAs have ongoing compliance and other obligations. An important element of California’s CCA framework is that all customers in a CCA’s jurisdiction are automatically enrolled in the CCA program unless they choose to opt out. Opt-out rates have historically been low; for example, to date, only one percent of the customers from California’s most recently-launched CCA (CleanPowerSF) have chosen to stay with PG&E.
What are some important considerations in choosing to form a CCA?
Energy Policy Goals: Many current and future CCA participants have determined that a CCA is the most effective way to meet their energy policy goals, often related to reducing greenhouse gas emissions. CCAs can select their energy suppliers directly; but beyond that, they can also implement innovative policies that serve a variety of related goals, such as incentivizing local generation or increasing energy efficiency. A CCA provides an opportunity to have a power portfolio tailored to the city or county’s policy goals.
Cost-Competitiveness: The long-term viability of a CCA will ultimately depend largely on how its rates compare to the rates of the local utility. CCA and utility customers share the costs of the distribution and other grid services that the utility provides. CCA customers also pay an additional utility charge for their share of power the utility previously procured on their behalf. So far, CCAs have generally been able to balance out this charge by securing energy at lower generation rates. California CCAs have offered competitive—and in some cases lower—overall rates, even while utilizing a higher percentage of renewable energy. However, local governments should pay close attention to this area when studying a potential CCA.
Joint Powers Authority: Many local governments will want to consider joining forces with other jurisdictions by forming a JPA. JPAs can be a cost-efficient way to share the initial costs of studying and implementing a CCA; moreover, increasing the size of the CCA can give it greater buying power and leverage when negotiating power purchases. As with any joint venture, however, JPA members may sacrifice some decision-making autonomy. Potential JPA members will want to carefully examine the compatibility of their respective CCA goals and craft a joint powers agreement that provides an effective and equitable governance structure for making the many complex decisions inherent in operating a CCA.
Assessing these—and other—important considerations is no easy task. In addition to understanding the clean energy goals of their residents, a prudent local government should consult technical and legal experts to help determine if the increasingly popular CCA model is right for its jurisdiction.