Community Choice Aggregation
The following is a memo drafted by SCCBC Intern Katerina Schreck. It provides an overview of the new policy tool “Community Choice Aggregation”, which allows local jurisdictions the ability to create a public power authority to compete alongside private power distributors, like PG&E.
In 2002, the California State Assembly Bill 117 (AB 117) was passed into law. AB 117 set out the framework for the formation and operation of Community Choice Aggregation (CCA). State Assembly Bill 32, the Global Warming Solutions Act, was signed into law in 2006 and directed public agencies in California to support the statewide target of reducing greenhouse gas emissions to 1990 levels by 2020. In addition, California adopted ambitious energy and environmental policies to reduce statewide greenhouse gas emissions to 20% of 1990 levels by 2050 and, provides 33% of electricity demands in 2020 from renewable resources utilizing clean energy technologies and environmental benefits. In 2011, SB 790 was created to protect CCAs. SB 790 provides important limitations on how investor-owned utilities may or may not market against the formation of CCAs and customer enrollment. In 2012, SB 843 was created to expand private energy alternatives.
One method that has the potential to reduce the greenhouse gas emissions associated with energy consumption is to establish a CCA system that allows California cities and counties the ability to aggregate the electric loads of residents, businesses and public facilities to purchase (and/or generate it) electrical energy in a more competitive market. CCA is a program available within the service areas of investor-owned utilities, such as PG&E, which allows cities and counties to purchase and/or generate electricity for their residents and businesses.
Under CCA, PG&E continues to deliver the electricity through its transmission and distribution system and provide meter reading, billing, maintenance, and outage response services. PG&E will continue to bill you for electricity delivery (non-generation charges). Your CCA provider will bill you for electric generation, which is included in your monthly PG&E bill.
One of the most prominent benefits of CCAs is that it offers communities with local control over energy decisions; choosing who provides their communities energy and what will be used to provide it. CCA offers energy independence, price stability and more efficient Energy Efficiency programs.
Lower energy rates- CCA allows for communities to negotiate the purchasing and development of power and energy-related programs on behalf of their communities.
Energy price stability- CCAs are able to finance conventional and renewable energy projects, which allows them to avoid the wholesale energy market for a portion of their power needs and further buffers them from market fluctuations. Finally, CCAs will lock in multi-year energy prices under contracts with energy service providers (ESPs), thus shielding themselves from short-term energy fluctuations. Business customers in particular tend to value predictability in their energy costs for use in financial planning. Rate stability can be a feature used to attract new businesses into a community or retain those that may be considering leaving due to high and unstable energy costs.
Local benefits- CCAs our local economy with jobs, keeping millions of dollars circulating in the County. For example in Sonoma County what existed was a very expensive private entity that took approximately $180 million in energy revenues out of Sonoma County every year, operating in a marketplace with no competition. By forming SCP, Sonoma County was able to redirect the net income from energy sales back into Sonoma County, while allowing any customers who did not want to participate to opt out and stay with PG&E.
Renewable and alternative energy- CCAs serve the mission of State Assembly Bill 32 in reducing greenhouse gas emissions and as a result increase reliance on renewable energy sources.
Establishing a CCA is not without risk, some of the problematic risks generally include:
Rate risk- the risk that the CCA’s rates are higher than those offered by the current utility
Opt-out risk- the risk that customers opt-out are too high and the program is thus economically infeasible. This is why many of the current utility companies charge a $100 fee for termination of services
Operational risk- the risks associated with commodity, credit, vendor default, poor management and oversight.
Legislative/regulatory risk- the risk associated with unfavorable state legislation or regulation that could threaten or harm the program.
CCAs would also incur known costs, such as costs for political opportunity costs, and administrative costs. A host of unknown costs and obstacles, including cost-shifting, market fluctuations, short term difficulties in attracting private investment, continuing procurement proceedings, complex local and state political negotiations.
Current Operational CCA programs in California:
Marin Clean Energy was California’s first Community Choice Aggregation program (2010), followed by Sonoma Clean Power (2014), and Lancaster Choice Energy (2015). CleanPowerSF is San Francisco’s CCA program and will be launching their program in May 2016. San Mateo County will be launching their CCA, Peninsula Clean Energy in August 2016.
Marin Clean Energy (MCE)
MCE is a not-for-profit public agency that offers 50-100% renewable energy for its customers. MCE’s service area includes Marin County, unincorporated Napa County and the cities of Benicia, El Cerrito, Richmond, and San Pablo. Gas services are not provided by MCE, and continue with your regular provider. MCE services 170, 500 customers.
In the first three years more than 1,300 jobs were created to support MCE. MCE has 20 employees and works with 54 vendor’s (34 local vendors).
A 17- member Board of Directors, representing each other the member communities that it services, governs MCE. MCE Board ensures transparency; all their monthly meetings are open to the public. The Directors are not paid by MCE. The MCE Board of Directors is comprised of elected city and county officials representing each of the communities that MCE serves. The MCE Board of Directors sets electric generation rates for our customers. Rate setting typically occurs on an annual basis, and new rates are usually approved in April.
The revenues received from their customers based on the electricity they consume finance MCE. MCE is self-funded and does not use any tax dollars. MCE is a not-for-profit public agency, which ensures that any financial benefits directly serve the community.
Sonoma Clean Power (SCP)
SCP is a Community Choice Aggregation (CCA) program, and has been the official electricity provider for Sonoma County since 2014. SCP serves all areas of Sonoma County with the exception of the city of Healdsburg, and is a not-for-profit public agency governed by a Board of elected officials and representatives from the participating cities/areas in the program.
The SCP rate has a premium of 3.5 cents per kilowatt-hour or about 20% over the cost of SCP’s CleanStart service. For a typical single-family home the premium would be around $18 per month. When you sign up with SCP you are locked into a one-year contract. There is a $100 early termination fee should customers decide to terminate service before the end of the 12-month period. In order for SCP to meet their market needs they established a multi-tier commercial rate system that encompases five competative rate categories; Industrial & General Service, Agriculture, Street and Outdoor lighting, Discounted, and 100% Renewable Option.
A Board of Directors governs SCP with members appointed by the County and the cities choosing to join. The Board is advised and reviewed by Ratepayer Advisory Committee and Business Operations Committee. The Board of Directors for Sonoma Clean Power. SCP is also run by a CEO and a small staff of 15 people. According to SCP this is not just another expensive government agency, because they are self-funded. None of the expenses are paid by taxes and the revenues cannot be diverted to pay for non-SCP use.
CleanPowerSF (CPSF) will provide San Francisco with new clean energy alternatives. It will begin its operations in May 2016, CleanPowerSF will give residential and commercial electricity consumers in San Francisco a choice of having more of their electricity supplied from clean, renewable sources—such as solar, wind, bioenergy, geothermal, and hydroelectric—at competitive rates. By law, CleanPowerSF is an opt-out program. If residents do not want to participate in CleanPowerSF, you must opt-out to stay with Pacific Gas and Electric Company (PG&E) – currently providing 27% renewable energy. The rest of PG&E’s energy comes from nuclear, natural gas, hydroelectric power and other unspecified energy sources. While PG&E rates fluctuate throughout the year, CPSF sets electricity rates once a year. CPSF rates initially will not exceed a two-cent premium over PG&E’s basic energy rates per kilowatt hour delivered – about $6 more per month for the average residential customer and $33 more per month for the average small commercial customer.
CleanPowerSF is administered by the San Francisco Public Utilities Commission (SFPUC)—San Francisco’s Cleanest Electric Utility. For nearly 100 years, the SFPUC has generated 100% greenhouse gas-free electricity from the Hetch Hetchy Power System for vital City services and customers like MUNI, SFO, schools, SF General Hospital and others. CleanPowerSF will be administered by the same clean energy experts.
Other Communities looking into Aggregation
There are several other CCA’s that are under development in Alameda County (East Bay Community Energy), Contra Costa County, and Silicon Valley (Silicon Valley Clean Energy).
Many others are currently investigating the possibility of forming a CCA in Butte County, City of San Jose, Humboldt County, Lake COunty, Los Angeles County, Mendocino County, Placer County, Riverside County, San Bernardino County, San Diego County, Santa Barbara County, San Luis Obispo County and Santa Clara County.
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