The Bottom Line on Community Choice Aggregation? Too many positives to ignore
For more than two years WRCOG has been exploring the feasibility of forming a CCA (short for Community Choice Aggregation) for interested jurisdictions in Western Riverside County. CCA formation is authorized by California law and allows cities and counties to purchase and then provide energy to residents and businesses. Under a CCA, local governments – either alone or as a group in a Joint Powers Authority – buy power on behalf of the communities they represent, and utilize the delivery system of the Investor Owned Utility (such as Southern California Edison – SCE) to deliver this energy to residents and businesses. CCA proponents advocate the benefits of local control and the potential to achieve cost savings. Skeptics bemoan the thought of more government bureaucracy and lack of guarantees that cost savings
can occur.
Our conclusions? CCAs appear to work. Consider the following:
A Feasibility Study performed for Western Riverside County concluded that a CCA could yield rate savings to businesses and residents:
In January 2016, the Executive Committee directed staff to study the potential formation of a CCA Program. In February 2017, the Executive Committee accepted a
Feasibility Study
which concluded, using very conservative assumptions, that a CCA in the subregion will yield savings to CCA participants (i.e., residential and business electricity consumers).
The Bottom Line:
The Feasibility Study indicated a CCA could provide a 4.4% savings on electricity rates for the WRCOG subregion.
The Bottom Line II:
At just a 2% savings (1/2 of what the Feasibility Study projects), 150,000 homes and 20,000 businesses (which represents just a portion of the total homes and businesses in Western Riverside County) could save nearly $5.5 million annually on their utility bills. That’s more than $50 million over a ten-year period.
The Bottom Line III:
In the City of Murrieta, for example, a 2% savings on electricity costs for businesses and residents would translate to about $1.5 million annually in savings each year. The City by itself would realize $37,000 in utility savings annually.
The Bottom Line IV:
For a $200/month electric bill, a 2% savings would result in an annual savings for a household of $72.
The Bottom Line V:
Western Riverside County customers (excluding unincorporated areas) pay approximately $960 million to SCE annually for electricity.
CCAs are not new in California and have a track record of success:
CCAs are not a new or novel concept, and there’s ample history to lean on. Nine CCAs are currently operational in California; all of them have met their objectives to either reduce costs to consumers and/or achieve environmental gains. Based largely on their success, 10 new CCAs are expected to commence operations in the State in 2018. And while the majority of existing CCAs are located in Northern California, jurisdictions representing the vast majority of the population in SCE’s service territory are examining CCA formation. In Los Angeles and Ventura Counties, more than 30 jurisdictions have recently joined “Clean Power Alliance,” the multi-jurisdictional CCA that is underway there.
WRCOG’s CCA (called Western Community Energy) would not even be the first CCA in Riverside County.
In the Coachella Valley, the “Desert Community Energy” CCA is already formed, with three jurisdictions on board. The City of San Jacinto has begun to service load for its community through a CCA operated by the City of Lancaster. And the Riverside County unincorporated area has set up its CCA and plans to begin operations in 2018.
The Bottom Line:
CCA’s have a history of success in meeting community objectives.
The Bottom Line II:
Cities are joining CCA’s at a rate never experienced before in California.
The Bottom Line III:
No city in California has dropped out of a CCA.
“There is a great opportunity to use the examples that other CCAs have established to help our elected officials and community members understand that this is real, and that there are some great opportunities and benefits of Community Choice.”
– Katie Barrows, Director of Environmental Resources, Coachella Valley Association of Governments.
CCAs provide choices for residents and businesses when none currently exist:
Residents in most of Western Riverside County have but one choice (SCE) of where they get their energy from. With the introduction of a CCA in the community, residents and businesses will have the ability to choose from new rates and power sources (often with more renewable energy). When a jurisdiction chooses to participate in a CCA, they open the door for their constituents to have options about where their energy comes from.
Participation in the CCA is completely optional, and prior to launch of the CCA – and even once it is established – every resident and business in the community will be provided with information to help them choose which energy source (the CCA or SCE) will be best for them. What’s better, constituents will have the option to switch back and forth between CCA’s based on their annual review of which energy provider is best for them.
The Bottom Line:
Residents and businesses cannot have energy choices – and thus opportunities for rate savings – unless jurisdictional council members elect to participate in a CCA.
The Bottom Line II:
Once a city joins a CCA, their residents and businesses take it from there, and decide which option is best for them.
“Not only are we using cleaner resources than were available to us before – we’re using resources that are locally controlled. And with local control comes local benefits. It’s great to know that the money we spend on our energy can now be used to better our community.”
– Monica Grado, George’s Cleaners, City of Lancaster.
CCAs allow for energy rates to be set locally, with local input
:
Local jurisdictions and constituents despise losing local control over matters that are important to their communities; they are constantly on watch to oppose any and all efforts that threaten their discretion to govern. A CCA actually provides local government with the ability to control, locally, something that they currently have no authority over. Currently, electricity rates are set by the California Public Utilities Commission (CPUC), a state agency, at meetings held in San Francisco. Under a CCA decisions are made locally – by locally elected City councilmembers and Board of Supervisors. Rates and programs are designed and implemented at the local level, at local public meetings, where members of the public who are living within the CCA boundaries can readily participate.
The Bottom Line
:
By joining a CCA, local jurisdictions will finally have a place at the table, and their local elected officials will have influence and voting rights in rate setting for the benefit of their local community and region.
The Bottom Line II
: Note that the term “local” or “locally” was used twelve times in this section.
“Community Choice Aggregation is currently the best policy tool available to cities and counties who want to tailor energy procurement to their community’s preferences.”
–
J.R. DeShazo, professor of public policy at the Luskin School and principal investigator of a report on CCAs.
“In this scenario, you give the consumer a choice. It’s also a way to incentivize customers to go greener. But any time you can give people a choice, it’s a wonderful thing.”
–
Redondo Beach Councilman Christian Horvarth.
“By bringing energy decisions closer to home, Lancaster Choice Energy provides those who live and work in the City of Lancaster with a far greater say in how their community approaches power generation, energy conservation and sustainability.”
–
Rex Parris, Mayor, City of Lancaster.
CCAs are economic drivers:
Local jurisdictions throughout the state aren’t scrambling to join CCAs just for kicks. They are fully aware that saving on utility rates puts millions of dollars back in the hands of their businesses and residents, where it can then be spent elsewhere in the community, for example. For businesses that are just moderate users of electricity, utility savings can affect the bottom line and potentially impact decisions on where to locate. Local governments that operate their own utilities have known that for years; now CCAs are positioning themselves to improve their economic standing and ability to compete for business.
CCAs are rapidly forming throughout California because they offer local control in rate setting, lower rates, and choices for residents and businesses. The County of Riverside recognized this important linkage when it explored CCA formation. A recent County of Riverside staff report on CCAs indicated that “Estimated potential savings could provide an economic incentive for businesses to locate in Riverside County.” WRCOG jurisdictions might lose critical competitive ground in the fight for new economic growth if they don’t respond.
“Our gym is open and fully lit 24 hours a day, so we use a ton of energy. As an LCE customer, not only do we get some relief on our massive energy bill every month – we appreciate LCE’S rate stability and the ability to predict our costs each month. Plus it’s nice knowing that we can always talk to staff at Lancaster City Hall if we have questions about our energy rates.”
–
Erica Albee, Owner, All About Fitness, City of Lancaster.
Are unknowns such as the “Exit Fee” deal-breakers?
The Power Charge Indifference Adjustment, or “Exit Fee,” is being raised by some as an unknown factor that should put the brakes on CCA formation. The “Exit Fee” is not new, and a fee is already in place for 2018. WRCOG’s Feasibility Study / Business Plan used a high conservative rate (over 30% above the current PCIA) in its analysis, and still shows that a CCA would benefit Western Riverside County. In fact, the PCIA fee used in the Feasibility Study is actually higher than what SCE currently states the PCIA should be. And, the operational CCAs throughout California are doing just fine with the Exit Fees assigned to them.
Three final bottom lines:
Final Bottom Line I:
Yes, there are details to be discussed and sorted out. That’s why it is important to bring jurisdictions that are even the slightest bit interested in a CCA together to establish a CCA in order to have a local forum, with local input, to understand and work out the details and collectively determine whether to proceed with implementation.
Final Bottom Line II:
Existing CCAs have a track record of success. They have moved positively toward rate reduction and greenhouse gas emissions improvement goals. They have provided choices for constituents where no choices previously existed. They have brought energy rate setting and program development to the local level, with decisions being made by locally elected officials where community input can occur. Rate savings for businesses and residents are great for the local economy.
Final Bottom Line III:
Just too many upsides to not pursue.
