Cleantech Market Intelligence
Community Choice Aggregation at the Forefront in California
The city of San Diego is making waves in the energy world with its new and unprecedented commitment to renewable energy. Unanimously approved in December of last year, the city’s Climate Action Plan sets a legally binding mandate to transition to 100% renewable energy by 2035. One of the possible ways to achieve this is through community choice aggregation (CCA), a model that is quickly gaining popularity throughout California. While largely lauded by the environmental community, utility advocates have expressed concerns regarding this industry restructuring, setting the stage for what could be an industry-altering debate in the coming years.
Traditionally, utilities have been able to define their own resource mix with regards to electricity. The concept of CCA shakes up this model and allows communities to form their own local non-profits for electricity purchases and/or generation. Under this system, utilities will still own and manage the electrical infrastructure while local communities will now be allowed to determine their own electricity mix. This model is quickly gaining popularity among California communities, with CleanPowerSF, Sonoma Clean Power, and Marin Clean Energy all representing California CCA systems formed since 2008.
It is easy to see why utilities may not be too keen on CCA given that it could lead to reductions in revenue, monopoly status, and elements of control. Utilities have typically opposed these efforts through lobbying, ballot measures, marketing campaigns, and legislation. However, the California State Legislature responded in 2011 with the passage of a law prohibiting utilities from using ratepayer funds for such activities.
San Diego Gas & Electric (SDG&E) has not come out as actively attacking or suppressing the idea of a CCA system. In an immediate response to the city council vote, SDG&E reaffirmed its support for the Mayor’s Climate Action Plan. Naturally, this has raised a few eyebrows among environmental advocates, with the local nonprofit Climate Action Campaign moving quickly to highlight SDG&E’s newly formed marketing division as a potential source of opposition. This investor-funded venture sidesteps the aforementioned 2011 law by setting shareholders as the source of funding rather than ratepayers. While SDG&E is quick to mention that this is purely to facilitate a robust discussion, the Climate Action Campaign still has strong doubts about this proclamation.
Given the recent trend toward renewable energy adoption, one would expect more CCA proposals to continue in the future, particularly in areas like California. Reaching a balance between community and utility interests will be vital to a cooperative future. One key to a harmonious relationship will be to derive a fair and accurate exit fee for utilities. These surcharges are attached to customers who opt into these CCA systems. This additional revenue will help utilities hedge against long-term power purchase agreements, and forces customers to pay their representative costs for energy that were acquired to serve them prior to their departure. CCA promotes an array of benefits, including customer autonomy, community involvement, and alternative energy adoption. States should look to foster healthy relationships among utilities and local communities looking toward CCA.