California Public Utility Commission (CPUC) staff have estimated that “more than 80% of California’s investor-owned utility (IOU) customers will get their electricity from alternative sources by 2025, and at least 30% will have done so by the end of this year.” Among alternative electricity supply options, Community Choice Aggregators (CCAs) are proving exceptionally popular, with growth outpacing expectations. Local governments and municipalities in California are increasingly using CCAs to achieve more control over electricity supplies, driven by the desires of many citizens for cleaner, cheaper sources of electricity and CCAs’ focus on renewable energy supply options.

Key Details

• The enabling policy, California’s Assembly Bill 117 of 2002, authorized local governments to act as CCAs “to aggregate the electrical load of interested electricity consumers within its boundaries”
• As an alternative to the “bundled” electric service provided by incumbent IOUs, CCAs purchase electricity in wholesale markets to provide to customers at competitive rates
• Recent growth in CCAs has been driven by California residents’ particularly keen interest in controlling the source of electricity they consume, to achieve higher penetration of renewables, and also to take advantage of falling costs
• IOUs are prevented by law from obstructing CCAs, and CCAs still rely on the utility’s transmission and distribution infrastructure, metering, and billing services
• CCAs may be capable of procuring renewable power more cheaply than utilities in some cases because they can take advantage of recent declines in cost, whereas utilities have higher prices locked in legacy renewable power purchase agreements
• The recent announcement that a new CCA in Los Angeles will be procuring power for customers of Southern California Edison in unincorporated areas and 82 municipalities, eventually serving as many as a million accounts, reinforces the trend

Implications

The implications of large portions of customers migrating from IOUs to alternative providers, which in practice somewhat resembles retail-choice or municipalization, are only beginning to be fully understood. Cost sharing between IOUs and CCAs and recovery of power supply costs that IOUs contend is stranded are of particular concern. Policies and methodologies are still being refined to ensure that stranded resource costs, including some in rate base, are shared fairly and equitably among departing customers and remaining bundled customers. The CPUC further held a joint en banc session on “The Changing Nature of Consumer and Retail Choice” in the state on May 19 to solicit additional input from utilities, regulators, and other stakeholders. As long as the regulatory, economic, and technological environment continue to favor CCAs, migration may continue, assuming no unforeseen challenges.

More information:

• Utility Dive: Choice in La La Land: LA County community aggregation has California utilities on full alert
• SNL: regulators say 80% of electric customers to switch energy supply sources
• CPUC: Consumer and Retail Choice, the Role of the Utility, and an Evolving Regulatory Framework

This report is part of the Grid Edge Minute series. To view all featured Minutes, please click here.

Additional Contributing Authors: Rizwan Aslam, Quentin Watkins