Photo Credit: Jeff Kubina Flickr creative commons
How can communities take control of their power mix? Who should own and control power generation assets in the 21st century? In the U.S., the landscape is dominated by investor-owned utilities -- private entities that serve customers in order to generate a profit for shareholders. This model has worked pretty well for decades now -- but it’s far from a perfect model.
In the U.S. today there are also many publicly owned utilities (these are government agencies) and co-operatives, which are private but are not operated to achieve a profit for shareholders, as investor-owned utilities are. Co-ops are designed to provide power to areas where the investor-owned utilities dare not tread because it’s not clear that the effort would be profitable.
There is a new kid in town, however, known as community choice aggregation. CCA is a middle ground between full private utility control and full public control of power. Rather than controlling the entire power grid, as is the case in Los Angeles or Sacramento (areas controlled by the two biggest public utilities in California), CCA allows a city or a county to choose what type of power its citizens get and from where. The private utility continues to control the power lines and bill customers, so utility profit potential is preserved -- but the control over power choices shifts to the CCA entity known as a “community choice aggregator.”
This middle-ground solution can provide significant local control over the power mix while avoiding extremely lengthy legal battles that usually follow local efforts to create a public utility as in LA or Sacramento (which took over 20 years of lawsuits before a resolution was reached).
Local governments are receiving more and more pressure from constituents to go green. With solar power prices plummeting steadily, the pressure to increase communities’ share of green power is surely going to increase in the coming years. CCA presents a powerful tool for communities to be proactive in going green and providing more options to customers. By law, community choice aggregators (CCAs) must meet procure at least as much renewable energy as investor-owned utilities, but in practice, so far, all CCAs have used this approach to pursue even higher levels of renewables.
California’s CCA law was passed back in 2001 (AB 117) and it took almost a decade before the first CCA began operations. Marin County is the first CCA to get up and running in California, under the name “Marin Clean Energy.” MCE began operations in 2010, so there is now a track record to look back upon. MCE offers customers three options for power choices: either the default 50 percent renewable energy mix, a 100 percent renewable “deep green” mix for a small premium (about $5 a month), or a 100 percent local solar option that began in 2014. The deep green mix is based on wind power renewable energy certificates.
Sonoma County was the second CCA off the start line, and it has been operating since 2013 as “Sonoma Clean Power.” Similar to MCE, SCP offers two options for green power: the CleanStart option for 33 percent renewable energy at a cost savings compared to PG&E and the EverGreen option for 100 percent renewables at a small premium. SCP also offers a convenient button for opting out of the CCA entirely right on its website's homepage.
Both MCE and SCP offer a local feed-in tariff option for wholesale projects up to 1 megawatt. SCP’s option is called ProFIT. MCE’s option is called (surprise) its "Feed-In Tariff" program. Neither of these programs have seen many projects installed yet, so time will tell if they will be effective in generating local power.
The City of Lancaster, north of Los Angeles, voted to explore CCA in 2014 and is slated to begin operations in 2015 as “Lancaster Choice Energy.” If it’s successful, it will be the first CCA in Southern California Edison territory (the previous CCAs are in PG&E territory). It expects to offer rates 3 percent below Edison rates, and its default power option will include 35 percent renewable energy. As with Sonoma and Marin, customers can also opt for a 100 percent renewable energy mix for a premium.
The Santa Barbara region is also exploring CCA at this time. There was some interest a few years ago but this faded until a new push by the Community Environmental Council, a local environmental group, which coincided with other advocates in the region renewing their efforts. The City and County of Santa Barbara, plus some other jurisdictions, are exploring the feasibility of CCA, as well.
Other communities around the state are also looking at CCA, including San Francisco, a group of cities and the county of San Luis Obispo in the Central Coast region, another group in the Monterey area, and a group of cities in the South Bay area of Los Angeles.
Marin County’s partnership options
The truly exciting development with CCA at this point is Marin County’s expansion to jurisdictions far from Marin County. There is nothing in the law preventing cities and counties from all over the state joining forces in a single CCA. This is the case because CCA is a financial tool and doesn’t require contiguity or even that the partner jurisdictions are in the same utility territory.
MCE expanded in 2013 to include the city of Richmond, in Contra Costa County. Service to the unincorporated areas of Napa County began last month, and the cities of Benicia, El Cerrito and San Pablo, will join in May of this year.
MCE is thinking even bigger, however, and is open to partners that aren’t in counties adjacent to Marin County (as all of their partners have been so far) as “Special Consideration” members. MCE has offered to complete feasibility studies for potential new partners for a cost of about $25,000 each. This is a relatively small amount, considering the potential savings and other benefits that may come from CCA.
The importance of “opt out”
A key feature of the CCA law is its “opt-out” language. This means that if a city or a county chooses to become a CCA, the residents of that city or county are enrolled automatically in the CCA unless they choose to opt out. They’re given many opportunities to do so, and the law requires notification in various ways of the ability to opt out, so there is nothing coercive about this process. Community choice really is about choice.
The road has been rocky at times for CCA. The law has weathered at least two major challenges so far: a ballot initiative (Prop 16) pushed by PG&E in 2010, with $46 million of PG&E shareholders’ money behind it, and, in 2014, a legislative challenge in Sacramento, AB 2145. AB 2145 would have effectively gutted the CCA law by requiring CCAs to follow an “opt in” rule rather than the “opt out” rule described above. Based on inertia alone, it’s generally difficult to induce customers to switch utilities, so requiring opt in rather than opt out would have effectively killed CCA. Luckily, this bill died in late 2014 when it wasn’t called up for a final vote in the state senate.
CCAs can be formed by a vote of the city or county council, or by a vote of the people. My preference is to have the people vote, because as a matter of principle, I’m a strong small “d” democrat: I believe that more democracy is almost always better than less democracy. I can recognize, however, that there might be circumstances where a city or county council vote may be better strategically.
Community choice is about choice, local empowerment, and more ambitious renewable energy goals. As we’ve seen so far with the track record of CCA around the state, these goals can be met while also allowing some customer savings, and that’s pretty remarkable. It’s too early to call CCA an unequivocal success in California, but the next few years will give us enough experience to know whether or not CCA lives up to its promise.
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Tam Hunt is a lawyer and owner of Community Renewable Solutions LLC, a renewable energy consulting and law firm that focuses on policy advocacy and solar and energy storage project development.