Driving down homeowner costs: Community Choice Aggregation could significantly lower electricity bills

The Enterprise — Michael Koff

Shocking savings: Community Choice Aggregation is a program that allows municipalities to use the collective buying power of their residents to considerably drive down electricity costs. 

New York State, if you can believe it, has some of the lowest utility costs in the country, which may be of small consolation, considering it’s also one of the most expensive and highest taxed states to live in.
Still, a small win is still a win.

Two decades ago, when the state’s electricity monopolies were being broken up in the name of consumer choice, in those years before deregulation, New Yorkers and Hawaiians had the most expensive electric rates in the country. 

In the years following deregulation, New York consistently had the second highest electricity rates in the nation, having finally been bested by a state in the middle of the Pacific Ocean. 

Only in recent years have rates dropped to where New York now hovers around the seventh spot of most expensive electric rates nationwide, which, based on the average of the first six months of 2019, is about 17.6 cents per kilowatt hour. 

And now, if enough local municipalities in the area were to enroll in a new program, electric customers in those communities could wind up paying about one-third of what the rest of New Yorkers pay for their energy. 

Community Choice Aggregation allows local governments to procure power on behalf of their residents, using residents’ collective buying power to drive down costs while allowing the municipalities to choose the source of the electricity generation. 

But municipalities also have to supply enough customers to make the Community Choice Aggregation program worthwhile to electricity suppliers, which means cobbling together 40,000 customers to purchase the power. 

And no single municipality in the area, save for the city of Albany, has the customer base to single-handedly enter into a Community Choice Aggregation program. So, that means local cities, towns, and villages would have to work together to amass enough customers; but no intermunicipal agreements are needed to do so. 

Locally, Saratoga Springs was the first municipality in the area to formally enroll into a Community Choice Aggregation program — the city already makes up 24 percent of the needed 40,000 households needed to form a CCA.

New Scotland — but not Voorheesville — and Guilderland — but not Altamont — have chosen to enter into separate non-binding agreements with the Municipal Electric and Gas Alliance, a not-for-profit development corporation, to begin exploring a Community Choice Aggregation program for their residents. 

Getting to 40,000 customers shouldn’t be too difficult.

Municipalities need not be contiguous to take advantage of the programs so long as they are in the same electric region, Zone F, which includes all of Fulton, Montgomery, Schenectady, Rensselaer, Washington, Saratoga, and Warren counties; most of Albany, Columbia, Schoharie, and Hamilton counties; and portions of Essex and Otsego counties.  

Already, a CCA presentation has made to Voorheesville Board of Trustees, while the towns of Niskayuna and Bethlehem have also expressed interest in the program. 

If New Scotland, Voorheesville, Guilderland, Niskayuna, and Bethlehem were to join Saratoga Springs and enroll in a Community Choice Aggregation program, that would total over 50,000 customers. 

How and Why? 

New York State enabled programs like CCA because of its deregulation of the electricity industry in the late 1990s, said Katy Vescio of EnergyNext, which meant that customers no longer had to buy electricity from the utility company; they could enter the marketplace and look for the best rate on their own. Vescio and EnergyNext are consultants to the Municipal Electric and Gas Alliance; she had made a CCA presentation to the Voorheesville Board of Trustees at its August meeting.

To break the industry monopoly, the state’s utilities were “radically reorganized,” according to one description. The utility companies were made to sell their power plants and were split into separate companies: one company owned and maintained the physical infrastructure while the second company sold the electricity.

The CCA program would help find the best deal from the second company, the electricity seller. The Municipal Electric and Gas Alliance would act as the administrator of the Community Choice Aggregation program, connecting the municipality with the electricity supplier. 

Locally, National Grid owns and operates the physical infrastructure, Vescio said. If customers purchases their electricity through National Grid, they are billed a merchant-function charge: what it costs National Grid to go into the marketplace to buy the energy and to sell and supply electrons to the customer, she said. 

So, a CCA would take the supply portion off of National Grid’s plate — the company would still do all of the things a utility does but the electricity flowing through its lines comes from another supplier, Vescio said. If the power were to fail because of a storm or because a car takes out a utility pole, she said, it would still be National Grid showing up to make repairs. 

And, customers’ electricity bills would still come from National Grid, Vescio said; what would change is that where it says, “Supply,” the charge would be from the CCA supplier.

A lot of municipalities want to help their residents “go green,” Vescio said, through the purchase of electricity that comes from renewable energy sources. A Community Choice Aggregation program could help by attaining a more competitive price option for customers “who really want to support renewable energy,” she said. 

In a CCA being administered by the Municipal Electric and Gas Alliance, MEGA, in New York’s Southern Tier, communities in the program will have two years of fully-fixed rates for both traditional and renewable electricity. 

For example, for a customer in the town of Augusta looking to purchase electricity from 100-percent renewable sources, it will cost him or her about 5.7 cents per kilowatt hour; traditional (electrical grid) power will cost about 5.1 cents per kilowatt hour. The local electric supplier, the New York State Electric and Gas Corporation, charges about 5.3 cents per kilowatt hour. 

In 2017, according to the United States Energy Information Administration, the average annual electricity consumption for a residential-utility customer in the United States was about 10,400 kilowatt hours. 

The Community Choice Aggregation program is an opt-out program, Vescio  said, meaning that, if Voorheesville chose to enroll in the CCA, residents would be automatically enrolled as well and would receive their electricity from the new supplier. 

But long before that, Vescio said, MEGA undertakes an extensive state-mandated public-education program. “We make it as easy as possible to have people who don’t want to participate, not have to participate,” she said. 

If Voorheesville decided to move forward with a CCA, its first step is only agreeing to use MEGA as its administrator should it enroll in a CCA. This agreement is in place because MEGA goes out and spends its own money on behalf of the village, educating the public. 

Vescio used the analogy of buying a home to explain the first step. 

Someone signs an agreement with a Realtor, she said; that person is under no obligation to buy a home — but, if that person does decide to buy a home, he would use the Realtor with whom he had an agreement. 

During the second step, the first public-education period, Vescio said, MEGA would run public forums on behalf of the village, and engage the public through mailers, social media, print media, and television. 

Third, Voorheesville would have to adopt a local law establishing the Community Choice Aggregation program, giving it the ability to bargain on behalf of its residents. The village can still walk away from the deal without consequence at this step. 

In the fourth step, MEGA goes out to bid to find the best electricity rates. The organization requires bidders to provide rates for different contract terms, for example, what the rate would be for 12, 24, or 36 months. The terms and rates are calculated for both the generation of traditional grid mix electricity or renewable energy. The village can still leave the deal scot-free at this point. 

MEGA gives suppliers a threshold under which their bids have to come in; otherwise they are told not to bother with a bid, Vescio said. 

For the CCA program that it administers in the Southern Tier, she said, MEGA was able to negotiate for customers a rate that had been less than the 12-month average the utility had been charging. 

During the fifth step, MEGA would come back to the village with its lowest bid and, for the second time, undertake a public-education program — a 60-day process — to apprise customers of the price the organization had procured. 

After the public-education period, a letter would be sent to customers on village letterhead — but written and mailed by MEGA — giving customers the three options to opt out: by phone, online, or by sending back the mailer they received.

After a 30-day opt-out period, the CCA program would begin.  

“Generally speaking, a municipality could make it through all of the steps in around a year or a bit more,” Louise Gava, a Community Choice Aggregation project leader with the Municipal Electric and Gas Alliance, told The Enterprise in an email earlier this summer. 

Voorheesville Mayor Robert Conway said at the Aug. 27 meeting that the village would make a decision whether or not to join the CCA based on the public-education sessions and public outreach.

The CCA program also gives customers a great deal of flexibility when it comes to opting in and out of the program, requiring little more than a phone call. However, if a customer did want to opt out, she would be responsible for calling the electricity supplier — who would have a dedicated 24-hour customer-service line — to opt out. The supplier would automatically default the customer back to receiving power from National Grid. 

If customers already have a block or a hold or are in a contract with an ESCO, Vescio said, the CCA program wouldn’t do anything to change that relationship; the CCA would apply only to residents without an ESCO.

Vescio said that MEGA negotiates a low rate that provides stability and can provide cost savings, but as for the actual cost savings over the course of the CCA program, MEGA won’t know until the contract is up and it calculates the savings.

The state’s first Community Choice Aggregation program, in Westchester County, between April 2016 and June 2018, saved the approximately 100,000 enrolled customers about $12 million. 

By contrast, she said, for customers who stick with the utility, there may be some months where the utility customer is paying less than the CCA customer and some months where they are paying more, but, over time, costs tend to increase no matter what.  

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