The purpose of this report is to introduce the topic of Community Choice Aggregation (CCA) and to begin discussion and study of the County’s potential interest in implementing CCA. This report provides general background concerning CCA, summarizes some of the potential benefits, costs and risks associated with CCA, and describes potential next steps to consider if the Committee and the Board of Supervisors decide to further pursue CCA within the County.
Background
Community Choice Aggregation (CCA) is the practice of aggregating consumer electricity demand within a jurisdiction or region for purposes of procuring energy. The existing energy utility remains responsible for transmission and distribution. The most common reason for jurisdictions pursuing CCA is to promote electricity generation from renewable energy sources.
CCA agencies exist in several states, including Illinois, Massachusetts, Ohio and California. CCA in California was authorized by AB 117 in 2002, which allows cities and counties to become electricity providers, or form a Joint Powers Authority (JPA) for this purpose.
CCA agencies are subject to regulation by the California Public Utilities Commission (CPUC), and require certification by the CPUC.
In 2010, Marin Clean Energy became the first CCA agency certified in California. Sonoma Clean Power was the second, in 2014. Both Marin Clean Energy (MCE) and Sonoma Clean Power are JPAs comprised of the host county and various cities. During 2013 and 2014, the cities of Richmond, San Pablo and El Cerrito took actions to join MCE and residents of those cities are now served by MCE. The cities of Walnut Creek and Lafayette have submitted letters of intent to join MCE in recent months, and MCE intends to consider granting membership to these cities this fall. Others members of MCE outside Marin County include the City of Benicia and unincorporated Napa County.
A number cities and counties in California are currently in the process of implementing or studying the formation of CCA agencies, including the counties of Alameda, Santa Clara, San Mateo, Santa Barbara, San Diego, Los Angeles and the City and County of San Francisco. San Francisco has obtained certification of its CCA Implementation Plan from the CPUC.
Formation of a CCA agency in Contra Costa County could involve the creation of a JPA between the County and cities within the County that are interested in participating. Under such a scenario, the CCA agency would be a separate entity from the County, with an independent governing Board.
It is also possible for a CCA agency to span multiple counties. MCE already includes jurisdictions in Marin, Napa, Solano and Contra Costa counties, and Contra Costa County could investigate the possibility of including the unincorporated area of the County in MCE’s service area (as stated above, Richmond, El Cerrito and San Pablo have joined MCE, and Walnut Creek and Lafayette have petitioned to do so). Another alternative is that Contra Costa County could investigate the possibility of partnering with Alameda County to form a CCA agency serving the two-county East Bay region.
There are tradeoffs associated with a multi-county organizational structure. A larger service area and customer base can achieve economies of scale in operating a CCA agency and purchasing power. However, increasing the number of jurisdictions participating in such an agency adds complexity to decision-making and governance.
Benefits of CCA
There are numerous potential benefits associated with local government participation in CCA. The following is a partial list of such benefits:
- Increased Energy Production from Renewable Sources: The main benefit typically associated with CCA in California is increasing the supply of electricity derived from renewable sources, such as wind and solar. The investor-owned utilities (IOUs), such as Pacific Gas and Electric (PG&E), are required to supply a portion of their electricity from renewable sources. CCA can increase the amount of energy generated from renewable sources by offering customers electricity that is derived from 100% renewable sources, or is derived from a supply portfolio that contains a greater proportion of renewable energy than required of the IOUs.
- Local Control: Nearly all residents and businesses in Contra Costa County receive electricity from PG&E, which is a large privately-owned company with a service area covering over half of California. CCA would give residents of the County the option of receiving electricity from a local public agency governed by officials who would be responsive to the interests of the local community.
- Increased Competition and Consumer Choice: PG&E is a regulated monopoly. CCA would introduce competition into the electricity market in Contra Costa County, creating additional consumer choices and creating market pressure for improved service by all electricity providers.
- Local Economic Benefits: A CCA agency may choose to procure power from local renewable energy sources, such a local wind and solar energy generation facilities. The CAA agency could do so by constructing and owning such facilities, or by purchasing renewable energy from privately owned local facilities. Procurement of renewable energy from local sources would create construction jobs and ongoing revenue streams to the local economy.
Costs and Risks of CCA
There are costs and risks associated with CCA. The main risk is that the CCA agency will not compete effectively with the incumbent IOU (PG&E) and will therefore not be financially sustainable. This scenario could occur if the CCA agency does not offer electricity to consumers at a price that is competitive with the price offered by the IOU. The price of electricity that could be offered through CCA in Contra Costa County would depend on a number of variables, including the mix of energy sources included in the CCA agency’s electricity supply portfolio and the size of the CCA agency’s estimated customer base. These considerations would need to be evaluated in greater detail by consultants with expertise in energy markets prior to a decision to form a CCA agency within the County.
The formation of a CCA agency in Contra Costa County would also involve significant start-up costs. Prior to the formation of a CCA agency, start-up costs would be incurred by the County and potentially shared by partnering cities. Additional start-up costs would be required after CCA agency formation and prior to any revenues being generated from power sold to customers. Should Contra Costa County seek to implement a new CCA agency, preliminary estimates suggest total CCA start-up costs would be approximately $3 million. These costs are described in greater detail below:
Pre-Agency Formation Start-Up Costs
CCA start-up costs prior to the formation of a new CCA agency would include the following categories of expenses:
- Community outreach and public meetings to determine the level of public interest and preferences associated with CCA;
- Collection of billing and electricity load data from PG&E;
- Hiring consultants to study the feasibility of forming a CCA agency within the County;
- Legal expenses associated with negotiating contracts and a joint powers agreement between the County and cities that are interested in jointly forming a CCA JPA;
- County and city staff time associated with managing these activities.
Based on preliminary research and the experience of other jurisdictions, staff estimates the cost of start-up activities prior the CCA agency formation to be approximately $1 million. Much of these costs could eventually be reimbursed to the County and partnering cities from the CCA agency, once it is formed and operating. The extent of cost recovery and the period of time required for cost recovery remains to be determined and would be based on the projected ability of the CCA agency to generate revenues that exceed operating expenses over time.
Post-Agency Formation Start-Up Costs
Following the formation of Joint Powers Authority or designation of other CCA agency, additional start-up costs would be necessary before the CCA agency could begin to provide electricity and receive associated revenues from customers. Start-up costs following CCA agency formation would include the following:
- Hiring CCA staff;
- Preparation of an Implementation Plan and other required filings to the CPUC;
- Payment of fixed costs to PG&E as may be mandated by the CPUC;
- Negotiation and execution of a contract with PG&E for necessary services not provided by the CCA agency, such as customer billing, transmission and distribution;
- Negotiation and execution of energy purchase contracts with energy suppliers;
- Potential capital expenses associated with constructing renewable energy generation facilities.
Initial indications are that these post-CCA formation costs would be in the range of $2 million. The source of funding for these expenses is yet to be determined, and could include revenues from the sponsoring entities, such as the County and partnering cities, or from borrowing. Repayment of such expenses to the funding sources would be contingent on the successful and sustained operations of the CCA agency.
Topics of Additional Study and Potential Next Steps
Implementation of a new CCA agency in Contra Costa County would include public outreach and consultation with cities to determine the level of interest in CCA within the County. Assessment of public interest and identification of partnering cities would be essential to proceeding with CCA implementation. Next steps, should the Committee and the Board of Supervisors decide to proceed, could include the development of an outreach plan and associated staffing and budget.
Assuming public outreach identifies a sufficient level of interest within the County and among cities, a technical feasibility study would need to be conducted by qualified consultants to analyze the projected customer base for a CCA agency, and the projected electricity rates for CCA customers.
Following a feasibility study, interested jurisdictions would need to evaluate the findings of the study and decide whether or not to proceed in forming a CCA agency, or potentially a JPA if two or more jurisdictions are interested in participating.
Another area of possible investigation would be to further explore the potential for the County to join Marin Clean Energy, or for the County to partner with Alameda County in forming a new CCA agency. Such partnerships could reduce the cost to the County of participating in CCA, but would be require negotiation of agreements with partnering agencies concerning cost sharing and governance. |