Wiktor Wise
Electric aggregation, also known as community choice aggregation (CCA), is a program that allows communities to come together and negotiate better electricity rates from suppliers. This collective bargaining can lead to more competitive rates and, in some cases, access to more sustainable energy options. The main idea behind electric aggregation is to use the group's buying power to secure better prices and increase the use of renewable energy sources.
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What You'll Learn
Electric aggregation programs
Energy aggregation, also known as municipal aggregation, is when a group of local institutions, small businesses, or companies join together to purchase energy from one or more developers. This allows them to benefit from the economic advantages of high-volume power purchases while buying at a smaller volume. In other words, it gives customers more buying power as a collective, allowing them to secure more competitive energy prices.
In Illinois, for example, municipalities and counties can purchase electricity on behalf of residential and small-business utility customers (those using no more than 15,000 kilowatt-hours of electricity per year). This allows communities to use their collective bargaining power to negotiate lower power prices from suppliers. However, savings are not guaranteed, and it's important to compare the supplier's price with the utility's "price to compare". It's also worth considering whether the community power deal is a "green" plan that supports renewable energy sources.
Aggregation programs can offer fixed-rate plans, which provide a single, guaranteed rate for electricity or natural gas that won't change, regardless of the energy market. This can be particularly beneficial for small businesses, as the minimum transaction size for other options like virtual power purchase agreements (VPPAs) can be quite large.
Whether opting in or opting out, it's important to carefully review the information sent by the municipality, county, or chosen supplier to understand the steps required to enroll or exit the program.
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Community choice aggregation (CCA)
CCAs are particularly prevalent in California, where they serve over 14 million customers across 25 operational programs. California's CCAs are represented by the California Community Choice Association (CalCCA), which advocates for the development and sustainability of locally-run CCA electricity providers. CalCCA promotes CCA as a tool for communities to achieve their climate and economic goals, increase consumer choice and local control, and transition to cleaner, more efficient energy sources.
To participate in a CCA, cities or counties must implement or join one. Once a CCA is established, customers within its jurisdiction are automatically enrolled and receive a consolidated bill that includes charges from both the CCA and the IOU. However, customers always have the option to opt out of the CCA and continue receiving electricity directly from the IOU.
CCAs can be run directly by a city or county government, or by a joint powers authority comprising multiple participating cities or counties. They are responsible for negotiating electricity rates with suppliers and can leverage the collective buying power of their community to secure more competitive prices. CCAs also enable communities to pursue green" power plans, where a portion of the revenue is used to purchase Renewable Energy Certificates (RECs) to support renewable energy sources like wind and solar power.
In Illinois, a similar concept called Municipal Aggregation is authorized by the Illinois Power Agency Act. This allows municipalities and counties to negotiate for the purchase of electricity for their residents and eligible small businesses. Illinois communities can choose between Opt-out and Opt-in aggregation programs, with most communities pursuing the former. In an Opt-out program, all residents are automatically included in the aggregation program unless they actively choose to opt out, while in an Opt-in program, residents must take action to be included.
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Energy aggregators
Benefits of Energy Aggregation
Energy aggregation offers several advantages to the participating entities:
- Cost Savings: The primary benefit of energy aggregation is the potential for cost savings. By aggregating demand, the group can negotiate better rates and discounts from energy developers due to the larger volume of purchase.
- Access to Renewable Energy: Energy aggregators provide access to renewable energy sources, such as wind, solar, and hydropower projects. This allows smaller entities to invest in renewable energy certificates (RECs) or carbon offsets, supporting the integration of clean energy into the power grid.
- Risk Management: Aggregation also provides risk management benefits by diversifying energy sources and reducing exposure to developmental, market-related, or operational risks associated with individual projects.
- Shared Legal and Transaction Costs: When multiple buyers come together, they can share legal and transaction costs, reducing the financial burden on individual entities.
- Larger Deal Sizes: The combined purchasing power of the group enables larger deal sizes, which may not be achievable for smaller entities on their own.
- Best Practice Sharing: Buyers within an aggregation group can share best practices, leading to improved energy procurement strategies and decision-making.
Types of Energy Aggregation
Energy aggregation can take different forms:
- Project Aggregation: This involves creating a portfolio of diverse renewable energy projects, similar to a mutual fund. It allows buyers to access a higher value product with reduced risk compared to investing in individual projects.
- Buyer Aggregation: Buyer aggregation refers to several non-utility buyers combining their efforts to increase their collective buying power. This enables them to access larger projects and more diverse options.
- Community Choice Aggregation (CCA): CCA, also known as municipal aggregation, allows residents, municipalities, hospitals, and universities to bid as a group on renewable energy projects. This type of aggregation gives communities more negotiating power and can lead to cost savings for residents and small businesses.
Opt-in and Opt-out Programs
Energy aggregation programs may be structured as opt-in or opt-out:
- Opt-in: In an opt-in program, residents or businesses must actively choose to participate in the aggregation program. Only those who opt in will have their electric load included in the negotiated rates.
- Opt-out: In an opt-out program, all eligible residents and businesses are automatically included in the aggregation program unless they actively choose to opt out. Most communities pursuing aggregation prefer the opt-out structure.
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Municipal electricity aggregation
The concept of municipal electricity aggregation is particularly relevant in the context of Illinois and Massachusetts, with specific legislative frameworks in place to facilitate this approach. For instance, Section 1-92 of the Illinois Power Agency Act authorizes municipalities and counties to aggregate electric load, excluding customers served by electric cooperatives or municipalities that own and operate their electric distribution systems. Similarly, the state Restructuring Act of 1997 in Massachusetts enables local municipal governments to aggregate electric loads to negotiate favourable terms with power suppliers.
The process of municipal electricity aggregation can vary, but it typically involves the following steps:
- Local officials put out a request for proposals (RFP) and select a winning bid from electricity suppliers.
- The municipality competitively procures electric supply on behalf of participating customers, potentially joining forces with neighbouring municipalities to increase their bargaining power.
- The chosen supplier sends opt-out notices to all residents and eligible small businesses within the municipality.
- Customers who do not opt out are automatically enrolled in the aggregation program but usually retain the option to opt out at any time without penalty.
- The local utility company continues to deliver electricity and handle billing, even if a different supplier is chosen through the aggregation program.
The primary objective of municipal electricity aggregation is to secure more competitive energy prices for community members. Additionally, municipal electricity aggregation can be a vehicle for promoting sustainability and integrating renewable energy sources into the power grid. Some municipalities, like Worcester, Massachusetts, have launched aggregation programs with a specific focus on sustainability and increasing the proportion of renewable energy in their electricity supply.
While municipal electricity aggregation can offer potential savings and price stability for consumers, it is important to note that savings are not guaranteed. Consumers should carefully review the terms of aggregation programs and compare prices to make informed choices.
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Opting out of an electric aggregation program
Electric aggregation programs allow communities to pool their purchasing power to negotiate better electricity rates from suppliers, resulting in potential cost savings and increased use of renewable energy. These programs are driven by the desire for local control over energy sources and rates and often include goals for increasing renewable energy use.
While electric aggregation programs offer many benefits, some residents may prefer to opt out of the program and choose their own electricity supplier. Opting out of an electric aggregation program is generally straightforward, but it's important to understand the process and implications. Here are the steps to opt out:
- Notification: You will typically receive a notification from the municipality, county, or utility provider informing you about the electric aggregation program and providing information on how to opt out. This notification can be sent through mail, email, or public notices.
- Timeframe: After receiving the notification, you will have a specific timeframe, usually around 10 days, to opt out of the program. If you miss this initial opportunity, you can still opt out later, but it is best to do so as soon as possible.
- Opt-Out Methods: The notification will explain how to opt out, which could include returning a form, calling a phone number, or visiting a website. Be sure to follow the instructions carefully to ensure your opt-out request is processed successfully.
- Choosing a New Supplier: Once you opt out of the electric aggregation program, you will need to choose a new electricity supplier. You can either remain with your current supplier or select a different one that meets your needs and preferences.
It is important to note that opting out of an electric aggregation program may have certain implications. For example, you may need to pay an exit fee, especially if you are already under contract with an alternative supplier. Additionally, you may not have the same access to renewable energy sources or simplified billing processes that are often associated with electric aggregation programs.
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Frequently asked questions
Aggregation of electricity is when a group of local institutions, small businesses, or companies partner to purchase energy from one or multiple developers at a smaller volume while benefiting from the economic advantages of high-volume power purchases.
The pros of an aggregation of electricity include simplified billing, increased negotiating power, and the potential to access more sustainable energy options.
The cons of an aggregation of electricity include limited supplier choice, automatic enrollment, and potential rate fluctuations based on market conditions.
An aggregation of electricity works by allowing customers to have more buying power as a collective, allowing them to secure more competitive energy prices.
Opting out of an aggregation of electricity program is generally straightforward. You will typically receive a notification explaining how to opt out, often by returning a form, calling a phone number, or visiting a website.
