Published on February 22nd, 2012 | by John Farrell3
Community Choice Aggregation Lets Cities Buy (Cleaner) Electricity in Bulk
In 30 states, citizens have just one choice for their electricity service. It’s like the old communist truism: “you can have any color car you want, as long as it’s red.” What if citizens could collectively shop around for electricity in bulk to get lower prices and cleaner, local power?
In six states, they can, with community choice aggregation.
Community choice aggregation is an alternative to (or complement to) electricity deregulation, allowing residential and commercial customers to choose a different electricity provider. The linchpin, and difference from traditional deregulation, is that community choice aggregation allows municipalities to aggregate their customers and bid on their behalf, obtaining lower prices by buying in bulk. It also allows for local determination of electricity supply without requiring a city to buy the distribution grid of the utility (although Boulder, CO, and some Massachusetts towns are considering that step). Under community choice aggregation, the municipality is the electricity purchaser, but the utility retains control of the grid. (It should be noted that while community choice is a step shy of full retail deregulation, every state with a CCA law has experienced full retail deregulation).
Community choice aggregation can provide a community a lot of power: to choose local electricity generation over remote, to choose local ownership over absentee, and to choose clean energy over dirty. And without having to finance and buy the local grid, it can come at a much lower financial and political cost.
So far, six states have authorized municipalities to be community aggregators, but the option has only been exercised in five of the six states (see map below):
In its history, community choice aggregation has largely been used to obtain long-term contracts for electricity at lower prices than the incumbent utility provides. But it can do much more.
For example, the town of Oak Park, IL, recently signed new contracts for electricity, paying 2 cents per kilowatt-hour less than incumbent utility Commonwealth Edison (ComEd) provided, and with sufficient renewable energy credits to be 100% renewable (compared to ComEd’s 6% renewable power). Other aggregators, including NOPEC in Ohio and REAP in Rhode Island, have likewise saved their ratepayers millions in electricity costs, while Marin Energy Authority in California offers customers a chance to get 100% clean electricity.
Since community choice aggregators can choose their electricity providers, they could choose to get their clean energy locally, too. Using a feed-in tariff, for example, a municipal aggregator could acquire local solar power using a standard contract with small residential and commercial property owners, much like the Gainesville municipal utility has done in becoming a solar leader (per capita). Since the projects would be local, the economic benefits would multiply: a study by the National Renewable Energy Laboratory found that locally-owned renewable energy projects have twice the jobs and 1.5 to 3.4 times the economic impact of absentee-owned projects. Unlike a traditional utility, the economic bottom line could be factored in to the electricity purchase for a municipal aggregator.
There’s more to consider, like the unique value of distributed renewable energy to the electricity system, as well as the way that feed-in tariffs can use long-term contracts to drive down the cost of clean energy.
Community choice aggregation isn’t without detractors. In California, where deregulation was suspended (see: Enron), incumbent monopoly utility PG&E spent $40 million on a ballot initiative to effectively gut the state’s community choice law. This experience hints at the likely reception for community choice aggregation laws in other states with regulated utility markets.
Even with the potential opposition, there are still eight states with deregulated markets lacking community choice aggregation laws and another six that have experimented with deregulation in the recent past. With lower prices and cleaner power, as well as a chance to juice local economies with local clean power generation, more states should consider enacting community choice aggregation.