Community choice aggregations (CCAs), once seen primarily as a way for customers to lower their utility bills, are responding to new competitive prices from utilities by stressing their value in the energy transition.
Nine states have CCA-enabling legislation allowing local governments to form a power providing organization for their residents. In some of those states, CCAs are serving significant numbers of former investor-owned utility (IOU) customers. But as utilities turn to low cost natural gas and renewables to keep prices down, CCAs have begun using customer demand for ambitious climate action to stay competitive, data shows.
"Aggregation has become a tool that supplements state mandates to reach even higher levels of renewables than utilities," said former Massachusetts Department of Public Utilities Chair Ann Berwick, now leading the City of Newton’s municipal aggregation. "There is very steep growth in aggregation in Massachusetts and it is connected to customers' growing climate awareness."
The record-setting growth of state and local governments with 100% clean energy or zero emissions targets and the growth of CCAs are linked, according to 2019 reports from the National Renewable Energy Laboratory (NREL) and the University of California, Los Angeles, Luskin Center for Innovation (Luskin).
CCAs are also forcing utilities to set higher climate and renewables goals, added Sierra Club Ready for 100 Senior Campaign Representative Drew O’Bryan. "Each CCA with a 100% renewables commitment adds pressure for the utility to accelerate the timeline of its transition."
CCAs' impacts on utility and local policy objectives are changing the power system, and trends toward larger aggregations and local empowerment through greater local choice of resources may accelerate their effect, advocates told Utility Dive. But limitations of local governance and cost issues could compromise that effect, Edison Electric Institute (EEI) Vice President of External Affairs Brad Viator cautioned.
The demand for clean energy to meet climate goals is unmistakable. In 2019, roughly 7.8 million residential and commercial-industrial retail electricity customers bought about 164 million MWh of renewable energy through green power markets, up from only 37 million MWh in 2010, according to NREL data.
CCAs are playing a key role. Roughly 4.7 million CCA customers bought about 13.1 million MWh of renewable energy through CCAs in 2018, and preliminary NREL data showed participation in CCAs grew an estimated 40% more from 2018 to 2019, NREL reported.
In addition, local governments procured a record 3,683 MW of new renewable capacity in 2020, the latest data from Rocky Mountain Institute and World Resources Institute show.
CCAs are playing a big role, according to Julie Gill, executive director of national CCA network Lean Energy. Over 1,000 U.S. communities are served by CCAs, including 560 in Illinois, 250 in Ohio and 100 in New York, she said.
"Nearly half of Massachusetts' 352 municipalities have electricity aggregation programs," former DPU Chair Berwick added.
In California, 23 CCAs serve more than 11 million customers in over 190 communities, according to the California Customer Choice Association (CalCCA). They are expected to serve 38% of the state's 2010 IOU load by 2022, CalCCA reported.
New Hampshire, New Jersey, Rhode Island and Virginia have legislation under consideration to enable municipalities and communities to aggregate customers independently from the local regulated utilities, and Maryland, Oregon, Washington and Colorado are developing similar legislation," according to Lean Energy.
In the 1990s, when utility regulation was rethought, both community aggregation and retail customer choice emerged to give customers more control over who provided their electricity. But retail choice benefited only some large business customers and did not serve residential customers, said Paul Fenn, founder and president of CCA advocacy group Local Power.
Former DPU Chair Berwick and Illinois Citizens Utility Board (CUB) Executive Director Dave Kolata agreed. Residential customers lost over $1 billion to Illinois Retail Electricity Providers (REPs) between 2015 and 2020, Kolata said.
CCAs can serve residential customers more effectively because municipalities have the same resources and expertise as large customers, Kolata and Berwick said.
There is not, however, unqualified endorsement of CCAs. Some stakeholders have concerns about protecting system reliability, California Public Utilities Commission Deputy Executive Director for Energy and Climate Policy Edward Randolph told a recent webinar.
Such concerns form the most significant source of opposition to CCAs.
CCAs are attracting customers away from their regulated utilities but utility advocates say they may not be able to serve those customers reliably over the long term.
Of 72 U.S. cities that reached their clean energy goals early 2021, 67 were CCA members, Fenn reported in December, validating the CCA advocates' argument that they drive achievement of renewables and emissions reduction goals. The other five municipalities worked through public utilities with similar policy objectives.
But with growing portions of customer load being served by renewables procured by CCAs, there is diminishing demand for the existing power supply procured by IOUs. If the cost of that power, procured with regulatory approval when prices were higher than today and still in IOU rates, is shifted to CCAs, it could put upward pressure on CCA rates.
That upward price pressure would work against the customer bill benefits of today’s low-cost renewables that CCAs are prioritizing, especially with low natural gas pricies keeping utility pricies competitive, utility and CCA representatives acknowledged.
But if the costs for the portion of that legacy generation procured for customers now with CCAs is not moved into CCA rates, IOU customers' bills unfairly rise, the representatives said.
The "fundamental question" is how to keep customers who remain with a utility or who don't have a CCA option available "indifferent from the cost without inhibiting CCA competitiveness," said Luskin Center Project Manager Kelly Trumbull, lead author on Luskin’s research.
Re-regulation allowed stranded cost bill charges to be imposed on CCA customers for the portion of the legacy generation they are now consuming. But efforts to get stakeholders to agree on what that stranded cost charge, called a Power Charge Indifference Adjustment (PCIA), should be for California’s regulated IOUs have failed.
"It comes down to customer price elasticity," said Todd Edminster, director of regulatory affairs and deputy general counsel for California CCA East Bay Community Energy.
Early PCIA calculations that raised CCA prices did not significantly harm CCAs, Edminster said. "But the PCIA could rise high enough to impact customers, and efforts by regulators and lawmakers to get it right have, so far, not made real progress," he added.
A recent California PCIA working group reached a tentative compromise between CalCCA and IOU Southern California Edison, but left issues unresolved. And Pacific Gas and Electric and San Diego Gas and Electric, the state’s other major IOUs, dissented.
The question of a fair compensation to IOUs for the costs they incurred for customers that are now moving to CCAs is one factor that could undermine CCA progress, EEI's Viator said. The other factor that could be a challenge is CCAs' lack of a system-wide perspective on oversight issues to protect system reliability and individual customer interests the way regulated utilities can, he added.
CCAs have not met their promises of low prices, he said. They can still be "a reasonable solution," but not without a central power market that manages the complexities of energy procurement and a central authority that preserves "consumer protections."
"Over time, IOUs will increasingly provide lower-priced renewables-generation and meet customers’ demands," Viator said. And "that will come with the benefit of system-wide regulation to protect reliable and affordable services for all customers."
CCA advocates had answers to the challenges Viator described.
CCAs are maturing into "stable, creditworthy organizations able to take on large, long-term procurements" that can meet system needs, responded Independent Energy Producers Association Executive Director Jan Smutny-Jones, former head of the California grid operator’s board of directors. And CCAs are increasingly led by "people who understand how the power system works."
CCAs have not yet, as Viator said, achieved their renewables and climate goals, the NREL and Luskin papers acknowledged. But they have made more ambitious commitments than IOUs and have been a key tool where utility commitments have not been met, the research showed.
This is creating a competitve advantage for CCAs, analysts contend.
The NREL and Luskin research found "customers are willing to pay more for clean energy," Luskin’s Trumbull said. And over time, IOUs' resource mixes will adjust, relieving stranded cost pressures on CCAs as the overall cost of their power supply falls, she added.
CCAs' strength is in enabling legislation that allows them to set a "default" level of clean or zero-emissions electricity for customers and requires customers to opt out if they dont want that default level, Trumble, O’Bryan, Fenn and Berwick agreed.
By contrast, utilities’ green premium offerings "weren’t as successful as California CCA programs because they were opt-in products, not default options," Trumbull said. "Behavioral economics research shows customers are biased toward the default option. CCAs’ high renewables default offerings have low opt out rates, even at higher prices."
Those low opt out rates are allowing CCAs to innovate in meeting customer demand for clean energy and in using larger aggregations to their advantage, adovcates said.
New CCA strategies
Different communities and municipalities are finding ways to increase renewables and protect reliability.
Thinking globally, acting locally
It is simple, former DPU Chair Berwick said. "To deal with climate change, New England needs clean energy to electrify everything. Aggregation increases demand for renewables and drives down the cost. Customers in Massachusetts are seeing those savings and joining CCAs."
Residents of most of Ohio’s large cities, including Cleveland, Cincinnati and Columbus, have moved to CCAs specifically to be part of 100% green power programs, said Sustainable Ohio Public Energy Council (SOPEC) Executive Director Luke Sulfridge. SOPEC and Northeast Ohio Public Energy Council (NOPEC) are the state’s primary aggregators.
NOPEC, which formed in 2002 in response to Ohio’s rethinking of regulation to allow retail and customer choice, has been more risk averse and price focused, but in 2018 committed to serving the City of Cleveland’s demand for 100% green power, Ohio renewables advocates said.
SOPEC formed in 2014, but changed from "Southeast Ohio" to "Sustainable Ohio" in 2020 to reflect its "commitment to sustainability," Sulfridge added. "Interest accelerated in recent years because people concluded they couldn't wait for the state legislature or the federal government to act and needed to act locally."
In New Hampshire and California, CCA advocates are working to expand the uses of aggregation.
This year, the small community of Lebanon, New Hampshire, instituted Community Power Coalition NH to advance House Bill 315, the state's CCA-enabling legislation. Opposition to the legislation by the state's IOUs had prevented New Hampshire regulators from implementing it after it was enacted.
With the potential to aggregate customer buying power statewide, advocates were able to negotiate a compromise with Eversource and other state IOUs on the elements of their opposition and move forward with implementation of the bill, New Hampshire Consumer Advocate Donald Kreis said.
Eversource’s concern was that IOUs retain full ownership, control and responsibility for their distribution systems, said Eversource spokesperson William Hinkle. The compromise assures that questions about system operations and procurement planning should be resolved by state regulators, he added.
Other states have aggregated communities, though not statewide as New Hampshire is doing. The Community Power Coalition is already growing, and "will soon represent enough load to match the state’s smaller utilities," Kreis said. "This model could work in other states where small CCAs can benefit from the leverage of a coalition."
California’s CCAs recently took a new step expanding the potential of larger aggregation when eight CCAs aggregated as a Joint Powers Authority (JPA) to meet regulatory reliability requirements and CCA clean energy goals beyond any single CCA’s resources, Silicon Valley Clean Energy CEO Girish Balachandran told Utility Dive.
The JPA "can tailor its investments to common interests, which allows for economies of scale but preserves participants' independence," Balachandran said. The initial investment for long duration energy storage could be for as much as $2 billion, and future investments will be for large scale renewables or large-scale energy reliability services that CCAs cannot meet locally.
The first CCAs focused on lower customer bills and the next generation of aggregations have focused on increasing the use of renewables, Local Power’s Fenn said. The "final major step" will be a focus on aggregating customer investment "to subtract load from the grid from the bottom-up," which can be made possible by individual municipalities, aggregated municipalities or JPAs.
As aggregations expand, there will be a need to balance local decision-making autonomy and the need for economies of scale, Luskin’s Trumbull said.
But the aggregation movement "is maturing and taking its place in the power system," Independent Energy Producers’ Smutny-Jones said. The JPA's "commitment to a long duration energy storage procurement to meet their resource adequacy obligation was a good indication that CCAs are rising to meet their challenges," he added.
But California still has concerns about CCAs meeting their reliability obligations, EEI’s Viator responded. For now, existing renewables mandates can drive IOU efforts and states that want more aggressive action can expand those mandates or develop carbon markets, he said.
There is nevertheless "a growing appetite nationally for aggregation, and our mission is assisting targeted states like Washington and Colorado with CCA enabling legislation," Lean Energy’s Gill said.
Aggregation is "a means to an end," and the end is "meeting customer demand," Sierra Club’s O’Bryan said. "Where communities have achieved their renewables and emissions reduction goals, voters pushed them to do it, and where there is enabling legislation, CCAs are growing because they have been a tool to achieve what voters demanded."