Trystan Casey
Energy aggregation is a strategy that allows a group of companies, local institutions, small businesses, or communities to partner and purchase energy from one or more developers at a smaller volume while still benefiting from the economic advantages of high-volume power purchases. In other words, it allows customers to have more buying power as a collective, enabling them to secure more competitive energy prices. This concept is particularly relevant for small businesses or communities looking to purchase renewable energy on a smaller scale, as it provides access to bulk purchases of renewables from wind, solar, and hydropower projects.
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What You'll Learn
Opt-in and Opt-out Aggregation
Electric aggregation refers to when a group of local institutions, small businesses, or companies join together to purchase energy from one or more developers at a higher volume, allowing them to benefit from the economic advantages of high-volume power purchases. In other words, electric aggregation allows communities to use the collective bargaining power of their residents to negotiate lower power prices from suppliers.
There are two types of electric aggregation programs: opt-in and opt-out. Opt-out aggregation is the more popular method, where a referendum must be passed by voters to automatically include residents and small businesses in the aggregation program unless they opt out. In the opt-out method, residents have multiple opportunities to opt out of the program. Firstly, when the community sends out an initial letter notifying residents of a change in their electricity supplier, and secondly, when the utility company sends a letter confirming the same. After receiving the utility notification, residents generally have 10 days to opt out.
On the other hand, the opt-in program requires the governing body to pass an ordinance, and participants must opt in to be a part of the aggregation program. If a community selects an opt-in aggregation program, residents and eligible small businesses must take affirmative action to participate in the program and receive the negotiated price for their electric supply. Information will be sent to residents from the municipality or county, or the chosen supplier, explaining the steps to enroll with the supplier under the aggregation program.
It is important to note that regardless of the type of electric aggregation program, residents can choose from several different suppliers, remain on the utility's fixed-price bundled service, or participate in the utility's Real Time Pricing Program.
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Community Choice Aggregation (CCA)
CCAs are not responsible for the transmission, distribution, or billing of electricity. Instead, the existing IOU in the region, such as PG&E, continues to deliver power and maintain the grid, as well as provide metering, billing, collection, and customer service to CCA customers. CCAs allow communities to aggregate their electricity demand to negotiate for lower power prices and choose cleaner energy sources.
CCAs are required to notify customers of their services, and customers will be automatically enrolled in CCA service unless they opt out. Customers will receive a consolidated bill that includes charges from both the IOU and the CCA.
CCAs can be run directly by a city or county government, or by a joint powers authority comprising two or more cities or counties. CCAs are not a new concept, with some having provided service to customers since 2010. As of 2024, there are 25 operational CCAs in California, serving over 14 million customers.
CCAs have been instrumental in helping communities meet their climate action goals, providing residents and businesses with more energy options, and driving economic development.
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Municipal Aggregation
The process of municipal aggregation usually begins with a vote to initiate the program. The municipality then prepares an aggregation plan, often in consultation with energy experts and with input from residents. This plan is submitted to the relevant public utilities department for review and approval. Once approved, the municipality can put out a request for proposals (RFP) from suppliers and select a winning bid.
There are two main types of municipal aggregation programs: opt-out and opt-in. In an opt-out program, all eligible residents and businesses are automatically included in the aggregation program and must take action to opt out if they do not wish to participate. In an opt-in program, eligible residents and businesses must actively choose to opt in to the program to have their electric load included and benefit from the negotiated price.
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Energy Aggregation Strategy
Energy aggregation is a strategy that allows a group of local institutions, small businesses or companies to partner and purchase energy from one or more developers at smaller volumes. They can do this while still benefiting from the economic advantages of high-volume power purchases. Energy aggregation is also known as community choice aggregation (CCA) or municipal aggregation.
There are two types of aggregation programs: opt-out and opt-in. In an opt-out program, the voters of a municipality or county pass a referendum to automatically combine the electric load for residential and eligible small businesses for purchasing purposes. In an opt-in program, only those residents and eligible small businesses that take action to opt-in to the program are able to have their electric load included in the aggregation program and take advantage of the negotiated price.
The main benefit of energy aggregation is that it allows buyers to pool their energy demand and access larger projects, a more diverse range of options, and more competitive prices. Aggregation can also reduce financial and contractual risks by providing predictable pricing over 10-20 years and reducing exposure to increases in energy prices. Additionally, it can help to send a powerful signal to utilities, policymakers, and developers that local governments are committed to rapidly decarbonizing the electricity system.
When developing an energy aggregation strategy, it is important to consider the following:
- Funding sources and grant applications
- Shortlisting programs of interest
- Creating a project pitch to get buy-in from stakeholders
- Understanding available incentives, such as tax credits for renewable energy
- Comparing the supplier's price with the utility's price to ensure cost savings
- Finding out if the supplier offers a "green" plan that includes renewable energy sources (such as fixed-rate plans)
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Fixed Rate Plans
Electric aggregation is a strategy that allows a group of local institutions, small businesses, or companies to come together to purchase energy from one or more developers. This strategy enables them to benefit from the economic advantages of high-volume power purchases while buying smaller volumes.
Fixed-Rate Plans
Fixed-rate plans are a type of electricity plan where the rate per kilowatt-hour (kWh) of electricity remains the same for the entire duration of the agreement. This means that regardless of what happens in the energy market, the price will not change. Fixed-rate plans are typically offered for set terms, with the most common durations being 6, 12, 24, and 36 months. However, there are also plans with less common durations, such as 8, 15, or 22 months, which often provide great value.
One of the main advantages of fixed-rate plans is the stability and predictability they offer. Customers know exactly how much they will be paying for their electricity throughout the contract, even if the market prices fluctuate. This can be especially beneficial in times of rising electricity costs, as customers are shielded from sudden increases.
However, there is a trade-off to consider. If the market prices for electricity drop, customers with fixed-rate plans may find themselves paying more than necessary. Additionally, breaking a fixed-rate contract can be costly, with termination fees varying depending on the state. For example, in states like Connecticut and Pennsylvania, there are limits on early termination fees, while in Texas, these fees can reach up to $150-$300.
Fixed-rate plans are generally recommended for those seeking long-term stability and peace of mind. They are ideal for those who want to avoid the risks associated with variable-rate plans, which can fluctuate significantly from month to month based on wholesale electricity costs.
When considering a fixed-rate plan, it is essential to carefully review the terms and conditions, understand the contract duration, and be aware of any potential early termination fees. By doing so, customers can make informed decisions and choose the plan that best suits their needs and preferences.
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Frequently asked questions
Electric aggregation is when a group of companies, local institutions, small businesses or municipalities come together to purchase energy from one or multiple developers at a higher volume, allowing them to secure more competitive prices.
There are two types of electric aggregation programs: opt-in and opt-out. In opt-in programs, only those who actively choose to participate in the program will be included in the aggregation and will receive the negotiated price for their electric supply. In opt-out programs, all residents and eligible small businesses will be automatically included in the aggregation unless they choose to opt-out.
Electric aggregation allows communities to use their collective bargaining power to negotiate for lower power prices from suppliers. It also gives customers access to renewable energy sources and helps them save money by creating a combined customer group with more buying power.
