Community choice aggregation (CCA) has become quite the hot topic in California. CCAs happen when local governments, either municipalities or counties, form an entity to procure electricity for their communities. In the Golden State they have allowed communities procure renewable energy even more rapidly than the statewide 60% by 2030 mandate.
Last week, atop the city’s Alvarado Water Treatment Plant, San Diego Mayor Kevin L. Faulconer (R) announced that the city of 1.4 million would be forming its own CCA. The decision comes as critical action toward’s the city’s Climate Action Plan, which sets an even more ambitious renewable mandate than California’s already-aggressive state one, at 100% by 2035. So, not only is San Diego the largest city in the U.S. to have set an 100% renewable energy mandate, but it is the largest single city in the world to form a CCA.
“I want San Diego to lead this region into a cleaner future,” Faulconer said in a release announcing the CCA. “This gives consumers a real choice, lowers energy costs for all San Diegans, and keeps our city on the cutting edge of environmental protection. We are a city where our environment is central to our quality of life and Community Choice will ensure we leave behind a better and cleaner San Diego than the one we inherited.”
This decision comes just weeks after the California Public Utilities Commission (CPUC) voted to increase the “exit fees” that customers have to pay when opting out of utility procurement and into a CCA. Furthermore, CPUC chair Michael Picker has previously expressed concerns over the implementation of CCAs and their affect on utilities.
The raise on exit fees is especially important, as CCAs are already responsible for complying with local capacity requirements and ensuring that remaining utility customers do not see cost increases. However, these concerns do not seem to be an issue in San Diego, as the mayor’s office expects the city to see “a cost reduction of 5 percent or more compared to the utility’s energy generation rates residents and businesses are currently paying,” according to the mayor’s office.
Now, with the announcement in the past, comes the process of procuring power for the city of San Diego. Under the proposed CCA’s business plan, a Joint Powers Authority (JPA) would be formed in 2019, along with the appointment of a board of directors. From there on, the board would hire an executive leadership team, a chief executive and a chief financial officer. These executive positions would guide the JPA through the CCA implementation process, in hopes of delivering power to customers by the plan’s target date of 2021.
“San Diegans deserve to have a choice in where their energy comes from,” said City Councilmember Lorie Zapf. “This is an opportunity to reach our climate goals while at the same time lowering costs for everyone, especially families struggling to make ends meet. With this decision, Mayor Faulconer is ensuring that San Diego continues to set an example for other cities to follow when it comes to protecting our environment.”
Correction: This article’s headline was corrected on October 30. A previous version stated that this is the world’s largest CCA. Instead it is the world’s largest CCA to be formed by a single city, as there are larger CCA formed by multiple local governments working together. The headline has been changed to reflect this.
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CCAs ring a warning bell with me.
New Joint Power Authorities are formed to quickly assemble (rent) the expertise needed to play in a volatile energy market that is undergoing disruption . Member agencies provide JPA governors with zero knowledge of the market and of the consultant functions they will procure. The “enterprise” is sourcing of a green commodity that can be made green through traded offsets. The JPAs are endowed with an amalgam of legal powers, including rate-backed bonding authority. The customers are enrolled by default (to ensure “fairness”), and are promised immediate rate savings. The customer buy-out costs (to pay for utility sunk costs for contracted energy) are still fluid. The commodity (energy) can be obtained at low cost most of the time, but mechanisms to deliver all customer-demanded energy at all times are not yet in place. That leaves the regulated Investor-Owned Utility (IOU) on the hook for reliability services and costs. These must be compensated through demand charges levied by the IOU or the CCA. But wait: the JPAs can sell bonds, and build battery banks! Now we have JPA-funded, consultant-managed construction projects. But what 20-year bond interest rate is supported by a customer base that can opt-out back to the IOU once the entire cost of opting-in is reflected on their CCA bills? Meanwhile, CCA “staff” are all high-hourly-rate consultants with no skin in the game, and performance incentives that perhaps only they understand fully.
Jeez, what could possibly go wrong?
You raise some interesting concerns, however so far reported opt-out rates have been very low. And while IOUs are on the hook for reliability services (their role in maintaining lines and wires never went away), CCAs are responsible for meeting local capacity requirements.
Well said sir.
Minor correction per the linked press release: The City of San Diego will be the world’s largest city to join a CCA, not the world’s largest CCA; LA & Ventura Counties’ CCA, Clean Power Alliance, however, takes the title for world’s largest CCA with an anticipated 2.4 million customers across more than two dozen cities and much of the unincorporated areas of the two counties.
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