Municipal Electric Aggregation

A Municipal Electric Aggregation, or Community Choice Aggregation (CCA), is an optional electricity buying group organized by a municipality for the benefit of electric utility customers within its jurisdiction.

Starting in the year 2000, retail electricity supply markets were opened to competition via market restructuring throughout the Northeast, Midwest, and West Coast. Most large and medium-sized end-users of energy in these states have realized significant benefits in the form of cost savings, rate stability, and a range of customizable pricing options.  However, residential and small business customers were not able to participate. In anticipation of this market failure, many states included “Community Choice” language in their restructuring laws that grant municipalities the right to form CCAs.  To date, this includes California, Illinois, Massachusetts, New Jersey, Ohio, and Texas.

The CCA Laws in these states allow for the city manager, mayor, or chief executive of a municipality to execute an electricity supply contract for all utility customers within a jurisdiction that have not already selected a supplier.  Most CCAs are “opt-out” programs, meaning all customers without a supplier will automatically be enrolled unless they take some action to not participate.  However, participation rates are consistently above 96% because the aggregation’s sole purpose is to offer lower pricing; in other words, to opt-out of a CCA is to opt to pay more on a monthly electric bill.

The specifics vary from state to state, but the underlying processes and results are essentially the same.

Benefits of forming an aggregation

  • Savings for all electric customers in the city. In theory, this is capital that gets re-circulated into the local economy.
  • Choice for small consumers. Each customer can opt-out of the aggregation at any time, but they will have a choice; right now there is only one pricing option.
  • Revenue for the city for assuming the minor administrative functions currently performed by the utility. For a small city, this can be hundreds of thousands of dollars per year.
  • Local jobs pursuant to the local energy efficiency program with even more local jobs should the city assume additional responsibilities such as becoming the wholesale supplier for the aggregation. (In addition to significantly more revenue)
  • Improved economics for large-scale renewable energy efficiency projects.
  • Because each customer can opt out of the program at any time, and a contract cannot be executed until the price beats what customers are currently paying, there little-to-no risk associated with forming a CCA.

municipal_aggr

The Basic Process to Form a CCA

The process takes roughly 6-9 months:
  • A. Community adopts a resolution or ordinance stating its intent to form a CCA
  • B. Hire a consultant/facilitator. Although not required, nearly every CCA to date has utilized the services of a consultant or facilitator (like GRIDSMART) to manage the process. The benefit to hiring a facilitator is two-fold
    • 1. The facilitator maintains the expertise in the market and regulatory processes associated with forming and managing a CCA
    • 2. There are legal and other expenses associated with forming a CCA. The facilitator assumes responsibility for these expenses, which can exceed $100,000 in return for a small fee (for example 1% of the savings) on the backend once the program begins. This is good – because the consultant only receives the fee while the CCA is operational – and the CCA only remains operational if it is providing savings.
  • C. Create an aggregation plan and draft an RFP
  • D. Submit an RFP to regulators for notes/approval
  • E. Issue an RFP to licensed suppliers and negotiate a contract with the lowest bidder
  • F. Execute the contract when savings can be achieved for all customers in the aggregation
  • G. Notify customers of aggregation through postcards, public notices and information sessions
Once a CCA is established, the facilitator typically operates a customer support line and website with general information, opt-in and -out instructions, and other customer service resources.

Once the CCA is implemented, very little actually changes
  • 1. The local utility will continue to maintain the wires and electric infrastructure.
  • 2. The Incumbent utility will continue to respond to all customer service and emergency inquiries in the exact same way (they have no way of determining who receives supply service from them and who does not; and they do not profit from that portion of the bill anyway).
  • 3. The local electric utility will continue to provide distribution and billing service; the utility collects for the supplier (or the aggregation) so the customer only cuts one check each month.