Community Choice Aggregation: from California to Colorado?
By Amelia Marsh
Energy production is one of the most significant sources of greenhouse gases in America, making it a vital policy area in the transition away from a carbon-based economy. Most American residences and businesses buy their electricity from investor-owned utilities, which are generally government-sanctioned monopolies. Even as the cost of wind and solar energy plummets, many investor-owned utilities (IOUs) have been slow to make firm commitments to shift to renewables, often due to existing investments in oil and gas. As such, policymakers are seeking a variety of innovative approaches to speed up the energy transition.
One emerging regulatory approach that seeks to straddle the need for energy stability and the benefit of the market is Community Choice Energy (also known as Community Choice Aggregation). Community Choice Energy allows communities to take charge of their energy production without becoming the grid operator. Community Choice Aggregators (CCA’s) can be non-profits or groups of administrators from local municipalities who join together to aggregate their energy loads and purchase bulk energy from third-party power generators. This energy is then passed along to utility customers on an opt-out basis. Because most customers do not opt-out of the program, this model allows CCAs to aggregate enough demand to negotiate contracts with large energy producers. When communities have the freedom to purchase energy from produces beyond IOUs, they can aggressively expand their use of renewable energy sources and invest profits back into communities rather than shareholder dividends.
The most robust Community Choice Energy Program in the United States is in California, which passed enabling legislation in 2002. After a slow start, the program has grown exponentially in the 2010s, and California CCAs served 18% of California’s energy customers in 2019. Researchers from UCLA’s Luskin Center found that CCA’s generated 84% more renewable energy than California’s Renewables Portfolio Standard required between the years 2011 and 2018. This report also found that CCA’s indirectly impacted the renewable output of incumbent investor-owned utility companies (IOUs) in two distinct ways. First, they found that CCAs reduced the IOU’s customer base, reducing their load and causing them to use more of their legislatively mandated renewable resources on existing customers. Second, it found that CCAs may have motivated IOUs to invest more heavily in renewable resources to “defensively deter” the formation of CCAs in their service territory.
The varied and perhaps unexpected impacts of CCAs on IOUs underscore the emergent nature of this policy option. This makes sense. Moving from consistent, historic policy structures into innovative, untried policy structures will inherently generate unpredictable results. In 2019 National Energy Laboratory (NREL) produced a study cataloging CCA’s in America, finding that they can struggle to increase customer awareness, procure local renewable energy, and maintain cost savings. The study also noted, however, that most CCAs offer rates that are lower than IOUs. Customer savings and renewable outcomes make this idea worth investigating further. In fact, ten states have passed legislation allowing municipalities to aggregate their energy load: California, Illinois, Maryland (pilot), Massachusetts, New Hampshire, New Jersey, New York, Ohio, Rhode Island, and Virginia.
Colorado is one of the most recent states to explore the addition of CCAs to the energy sector. During the 2021 regular session, passed House Bill 12-1269. This bill directs the Colorado Public Utilities Commission to begin investigatory proceedings “with the goal of better understanding [Community Choice Energy] in the Colorado context and identifying best practices that would allow CCE to function well in Colorado if adopted.” The bill requests a final report to the legislative committees with jurisdiction over energy matters by December 21, 2022. Colorado lawmakers and Xcel Energy are on a broad range of initiatives to accelerate the renewable energy transition, including local IOU Xcel Energy’s Clean Energy Plan, which seeks to reduce their carbon emissions in Colorado to 85% of 2005 levels by 2030. Coloradans are ready for a new approach to energy generation -- perhaps CCE will be part of that new future.