title
COMMUNITY CHOICE AGGREGATION INFORMATIONAL PRESENTATION
recommended action
RECOMMENDATION
Staff from the Center for Climate Protection and the Interim General Manager for Valley Clean Energy will present information regarding Community Choice Aggregation, and Council is asked to provide guidance regarding its interest in evaluating the feasibility of participation.
body
Summary
This item is presented for informational purposes, and there is no recommended Council action. Community Choice Aggregation (CCA), also known as municipal aggregation, are programs that allow local governments to procure power on behalf of residents, businesses, and municipal accounts from alternative suppliers while still receiving transmission and distribution service from the existing utility provider. Under state law, CCAs are an option for communities that want more local control over electricity sources, more green power than is offered by the default utility, and competitive electricity prices. By aggregating demand, communities gain leverage to negotiate rates with suppliers and choose power sources. There are potential benefits of CCA and many implementation issues that would need to be addressed. If Council determined that the feasibility of CCA should be explored for Stockton, expertise would need to be obtained in the form of consultants and outside counsel and staff resources would need to be redirected. Council is asked to receive the presentation from the Center for Climate Protection and Valley Clean Energy and to provide the City Manager guidance regarding CCA.
DISCUSSION
Background
Under state law (Chp. 838, Stats. 2002), customers are authorized to aggregate electrical loads with community choice aggregators. Community Choice Aggregation (CCA), also known as municipal aggregation, are programs that allow local governments to procure power on behalf of residents, businesses, and municipal accounts from alternative suppliers while still receiving transmission and distribution service from the existing utility provider. Under state law, CCAs are an option for communities that want more local control over electricity sources, more green power than is offered by the default utility, and competitive electricity prices. By aggregating demand, communities gain leverage to negotiate rates with suppliers and choose power sources.
In general, electricity customers are automatically enrolled in the electricity service selected by the CCA, although customers may opt out if they do not want to participate in the CCA. While CCAs can source electricity from any generation type, several CCAs procured green power products through alternative suppliers. CCAs may offer green power products either by default or as an optional premium package. According to the United States Environmental Protection Agency, CCAs are currently authorized in California, Illinois, Ohio, Massachusetts, New Jersey, New York, and Rhode Island. In 2016, CCAs sold about 8.7 billion kilowatt-hours of green power to about 3.3 million customers. A number of other states are also exploring CCAs.
CCAs offer several advantages and challenges. The presentation by the Center for Climate Protection and Valley Clean Energy will introduce these issues. Historically, three major attractions of participating in a CCA include lower electric rates, the potential for local control to accelerate the transition to greener power sources, and the opportunity to create local jobs in sustainable energy development. However, recent decisions by the California Public Utilities Commission (CPUC) affected the electricity rates offered by CCAs.
The National Renewable Energy Laboratory (Laboratory) completed a state-level geographic analysis of green power that reveals the demand for green power is pervasive. Green power demand is higher in states such as Illinois, California, Texas, and Massachusetts where local green power options are available, but demand exists in every state and in both urban and rural areas. Demand for green power is likely to increase across the country as green power providers offer innovative new products and renewable energy prices continue to decline. California saw the largest jump in estimated green power sales year over year of any state where CCAs are available. The Laboratory estimates that the California CCA market is likely to continue to grow as other municipalities implement new programs.
Given these market dynamics, the CPUC held a hearing on CCAs with the California Energy Commission to understand the potential impacts of CCA expansion. The hearing focused on resource planning and cost allocation, among other topics. The CPUC has authority to allocate costs across ratepayers, both utility ratepayers and those ratepayers leaving utilities for a CCA. In 2018, the CPUC approved utility requests to recover investments originally made to serve the load of departing CCA customers via an exit fee. Previously, CCA rates were marginally lower than those of the utility for some customer classes. However, recent exit fee increases reduce the ability to achieve lower rates and could also increase the number of new customers that decide to opt out of CCAs and remain with their existing utility service according to the National Renewable Energy Laboratory. Considering these changes, CCAs will need to actively market benefits other than cost savings if rates reach or exceed utility rates to retain customers.
Present Situation
Future consideration of participation in a CCA would require working through implementation issues. The City would need assistance navigating enabling state legislation and CCA regulations. Assistance would also be needed to develop and pass the appropriate local ordinances. In California, CCAs are usually administered under a Joint Powers Authority (JPA) on behalf of multiple jurisdictions. Formation of and participation in a JPA would incur upfront cost and could require additional resources. Beyond the policy and fiscal issues, significant effort would be required to educate consumers about the CCA benefits and address questions regarding implementation. Finally, it is unclear how the bankruptcy filing by the Pacific Gas and Electric Company, the City’s current franchise electricity provider, may affect the City’s participation in a CCA and exit fees.
FINANCIAL SUMMARY
There is no cost associated with receiving the presentation and providing guidance to the City Manager regarding CCA.
If the City were to pursue CCA, there would be costs to determine the feasibility of implementing CCA in Stockton. An analysis completed for the City of Arcata estimated pre-startup costs ranging from $750,000 to $1.7 million. This estimate is in line with Alameda County estimates of the upfront costs for a feasibility study and implementation plan, including staff time, at $1.3 million. The Alameda estimate assumed three to four dedicated staff for at least a year. The total cost estimate, including community engagement, coordination with local agencies and JPA formation was $3.2 million for the County. Further time and resources would be required to determine a cost for the City. Ultimately, the effect on rates paid by electricity consumers would not be known until CCA implementation issues and boundaries are set and a feasibility study is completed.