New Scotland takes step toward Community Choice Aggregation

Enterprise file photo — Michael Koff

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

NEW SCOTLAND — By passing it’s fifth and final law of the year, the town board gave itself the authority to make a local decision about where and from whom New Scotland’s electric customers get their power.

“They don’t ever have to use it,” Louise Gava told attendees during the bill’s public hearing on Dec. 11; now there is just a local law on the books that gives the town the power to make that energy-purchase decision — should it get to that point. Gava is a Community Choice Aggregation project leader with the Municipal Electric and Gas Alliance.

MEGA is a not-for-profit alliance that acts as the conduit between municipalities and their residential customers and the energy-service companies.

New York State’s deregulation of the electricity industry in the late 1990s 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. 

To break the industry monopoly, utilities were, in the words of one description, “radically reorganized”; rather, they were made to split into separate companies: one company owned and maintained the physical infrastructure while the second company sold the electricity.

All of this deregulation underscores the comity appeal of a Community Choice Aggregation program, where, if enough local municipalities in the area were to enroll in the aggregation, electric customers in those communities would likely pay less for energy while also choosing the source of the electricity generation.

“The key is: We want to pay what we did or less, and increase the use of renewable energy,” said Supervisor Douglas LaGrange of enrolling New Scotland in a CCA. “That’s the basic [idea].”

But municipalities also have to supply enough customers to the program to make the aggregation attractive to suppliers, which means offering to energy-service companies 40,000 ready-to-purchase electricity consumers.

And so far, that isn’t an issue.

There are already nearly 49,000 households from the 13 municipalities that make up MEGA’s Capital Region Aggregation.

What Gava wanted to make clear to the public-hearing attendees was that the discount received through a CCA was not as simple to quantify as the discount residential customers would get it they signed up for community solar based off of a recent mailer that went to New Scotland electricity customers. 

With the community solar developer that was advertising the 5- to 10-percent discount to New Scotland electricity customers, Gava said, the discount is based on New York State subsidizing the development of renewable resources and those savings are then passed onto the consumer — in effect, moving money from one pocket to another. With community solar, for example, the 10-percent discount is not off of the kilowatt-hour price; the way that it works is a customer gets $1 credit on the bill that represents a kilowatt hour and then the customer pays 90 percent of that credit value to the solar developer. 

When a residential customer enrolls in a CCA program, he or she remains a National Grid customer. An electric bill has two main charges — delivery, which is the physical infrastructure: the power lines, transmission towers, substations, as well as the maintenance. National Grid providers delivery and is likely to continue to do so.

The other main charge is for is supply, which is the actual electricity, the physical electrons, that use National Grid’s physical infrastructure to get from the point of generation to the homes of customers. National Grid is most customers’ default supplier. But enrolling in the CCA program allows MEGA to find another electricity supplier that could become the new default supplier.

And where CCA customers would see a difference in their bills is in the price paid per kilowatt-hour; not only would it probably be less but it would also have month-to-month consistency — customers wouldn’t experience seasonal-price spikes.

The supply portion of an electric bill, Gava said, has four charges: 

— One is for is the actual electricity; 

— A second is called the Electricity Supply Reconciliation Mechanism (ESRM), which can either be a debit or a credit. 

National Grid doesn’t normally know exactly how much electricity the customer used in the previous month nor does National Grid know exactly how much it was going to cost them to purchase power on the open market. 

So, to use round numbers for a simple example, if it cost National Grid $100 more to deliver electricity to a customer in December than the utility had planned, then in February the customer would be seeing an ESRM for $100;

— A third charge is called the merchant-function charge, which is National Grid passing along to the customer the charge it receives when procuring electricity.

As a regulated monopoly, National Grid can’t make money off the electric supply, but it can charge the customer for purchasing electricity on his or her behalf; and

— The fourth charge is a tax or tariff surcharge.

In a CCA, these four charges would likely come from an energy-service company other than National Grid.

In a MEGA-administered CCA in the Southern Tier, communities enrolled in the program have two years of fully-fixed rates for both traditional and renewable electricity. For example, for a customer 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. 

A New Scotland CCA would be an opt-out program, meaning that residents would be automatically enrolled in the CCA and would receive their electricity from the new supplier. But before that would happen, MEGA would have to undertake an extensive state-mandated public-education program. 

Not to mention, New Scotland is only on step three of seven to institute a CCA. Adopting the local law just gave the town the ability to bargain on behalf of its residential customers. The town 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. 

Gava said these bids wouldn’t be known until spring. 

Although MEGA does have a historical database for electricity prices, it also is able to forecast with some certainty what the market will look like in the near future — based on things like natural gas reserves and the amount of renewable-energy development taking place, she said.

In its request for proposals, MEGA requires bidders to provide rates for different contract terms, for example, what the kilowatt-hour rate would be for 12, 24, or 36 months. The terms and rates are calculated for both grid-mix and renewable energy generation. At this step, the town can still withdraw.

During the fifth step, from which the town can still walk away scot-free, MEGA would come back to New Scotland with its best bid — which may not be the lowest, depending on the type of energy customers are looking to purchase. Then a second, 60-day long, public-education program would take place, letting residential customers of the price MEGA 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.

More New Scotland News

The Altamont Enterprise is focused on hyper-local, high-quality journalism. We produce free election guides, curate readers' opinion pieces, and engage with important local issues. Subscriptions open full access to our work and make it possible.