Utility regulators in Colorado are investigating community choice energy (Proceeding No. 22I-0027E). Community choice energy, or community choice aggregation, is an alternative to the for-profit electric utility model that must be enabled by the state. Nine U.S. states have passed community choice legislation and Maryland launched a community choice pilot in 2021.
Through community choice, a public entity purchases electricity on behalf of an aggregation of communities. Community choice entities can offer lower rates than the incumbent utility, since the public entity does not make a profit and the customers get a bulk discount from grouping together. The incumbent utility handles distribution and billing.
Ideally, a community choice entity can cater to many customer preferences: more affordable rates, more renewable energy in the mix, and a boost to local electricity generation capacity. Marin Clean Energy, the first community choice entity established in California, offers customers 50 to 100 percent renewable energy at a price that is competitive with Pacific Gas & Electric. East Bay Community Energy offers programs to increase rooftop solar, distributed energy storage, and electric vehicle charging infrastructure.
Community choice is a way for communities to get what they want without going through the municipalization process, which is lengthy, expensive, and often fails.
Community choice energy does not always live up to its potential. Exemplary community choice entities have community advisory councils, but this is not the norm. Many community choice agencies fall into the same traps of the incumbent utility model, said Al Weinrub on episode 153 of the Local Energy Rules podcast. Even where there is significant community engagement, residents are not guaranteed to get what they want.
On March 1st, ILSR submitted comments to the Colorado Public Utilities Commission for its Study of Community Choice for Wholesale Electricity Supply (Proceeding No. 22I-0027E). The comments largely draw from ILSR’s 2020 report on community choice energy. ILSR describes how a community choice agency, as a public entity, can better manage energy efficiency programs, support the expansion of distributed energy resources, and align with local interests. ILSR’s comments also list several crucial powers a community choice entity must have and make recommendations on transition fees.
Read ILSR’s comments to the Colorado Public Utilities Commission in full below.
Comments for the Institute for Local Self-Reliance will address a number of the Commission’s questions regarding community choice energy, but will focus on the broader question of whether the enabling authority will allow cities (and aggregations of cities) to maximize its potential value, referencing our 2020 report on community choice energy (attached).
Enable Advanced Community Choice Energy Models
Although the policy model for community choice energy has been used for 30 years, it’s only in the past ten years that communities, largely in California, have demonstrated how to use community choice energy for much more than purchasing competitively priced electricity.
In its most basic form, community choice works like a Costco or Sam’s Club. It gives communities buying power on behalf of their electric customers, allowing them to buy more competitively priced energy than they would otherwise buy. Community choice entities in Ohio and Massachusetts have succeeded in lowering consumer electricity prices for decades using this rubric. However, community choice can be leveraged to provide superior services to a community’s electricity customers in several additional ways.
Demand Side Program Management
Allowing community choice entities to take over operation of utility energy efficiency programs has several benefits. Most prominently, it removes conflicts of interest from program operation, where most investor-owned utilities earn profits on the construction of infrastructure (power plants, transmission, etc) that can be avoided with greater investments in energy efficiency. Community choice agencies have no such conflict, but are in strong alignment with their customers that lowering energy costs are superior. [In response to question 11 from the statute: yes, community choice agencies should be allowed to offer and take over utility demand-side programs].
To enable demand side program operation, a community choice agency needs access to the same energy use data utilities have about utility customers. This includes any metering information collected about the timing, volume, and magnitude of energy use (in short, everything collected by the utility). A community choice agency may choose to use the data to provide services itself or, as in the case of East Bay Community Energy, it may provide aggregate data to third party service providers. An agency also needs utility bill payment information to judge the credit risk in order to facilitate provision of financing to utility customers to implement demand-side programs. [This responds to question 14 from the statute].
Some of the most successful demand side management and energy efficiency programs are run by third parties, e.g. Efficiency Vermont. As such, it’s possible that efficiency programs run by community choice agencies would accelerate Colorado’s progress toward its greenhouse gas emissions goals. [Response to statutory question 17].
Community choice energy has a well-documented positive impact on renewable energy adoption. According to the National Renewable Energy Laboratory, significant shares of electricity provided by community choice agencies across multiple states comes from renewable energy resources in excess of state mandates. The following chart, from ILSR’s report, illustrates.
Community choice agencies reach higher shares of renewable energy in part because they offer customers more choices to purchase renewable energy. In California, for example, more than three-quarters of the state’s community choice programs have a 100% renewable energy option. In Illinois, Massachusetts, and Ohio, nearly a quarter of programs have a 100% default option, automatically enrolling customers in a 100% renewable electricity program. The following chart, from ILSR’s report, illustrates the shares of state community choice programs offering these 100% options or default enrollments.
Community choice agencies don’t just purchase renewable energy, they also procure it from new, local sources. Marin Clean Energy and Sonoma Clean Power have 10 megawatts of local solar contracts. CleanPowerSF prefers to purchase power within nine Bay Area counties. Clean Power Alliance has a request for proposal for more customer-owned solar. [In response to statutory question 15, in other words, community choice is likely to support expansion of distributed energy resources due to its alignment with local goals].
Other Local Benefits
Community choice programs also use their local procurement powers to align with other important local interests. Pioneer Clean Energy in central California has local hiring and prevailing wage criteria in its procurement process. East Bay Community Energy has a local development business plan, using funds from electricity sales and savings to support local economic development.
Community choice also allows for better coordination between electricity procurement goals and city planning around climate and clean energy. For example, cities can work with their local and locally-run community choice agency to deploy charging for electric vehicles and integrate with local transportation plans (as is happening with Sonoma Clean Power), align local energy codes and permitting (as is being done with Silicon Valley Clean Energy), design zoning and land use policies to support clean energy, and even coordinate electricity and energy storage procurement with local emergency and disaster planning and resilience.
Multiple community choice agencies in California also have community advisory councils, where local residents advise the agency on its procurement and programs. These advisory bodies can act as liaisons and provide engagement with the community to enroll customers in energy savings programs, can help with legislative advocacy, and can help solicit community input. Some advisory councils focus on ensuring representation from specific stakeholders, including low-income residents, labor, and others.
One of the crucial lessons from California’s community choice energy model is that local agencies need the ability to band together to capture economies of scale in procurement and operations, as well as retaining their local character. For example, California community choice agencies can span multiple jurisdictions. With scale comes purchasing power for signing contracts or the ability to contract for new renewable electricity (as well as the ability to dictate terms important to the community including wage and labor standards). Related, these agencies need the authority to sign long-term procurement contracts.
In its research on community choice energy, Institute for Local Self-Reliance offers a few principles for reasonable transition fees for community choice energy programs:
- Do account for the cost of legacy renewables, especially those procured under state mandates. These contracts seeded today’s renewable energy opportunity and should be borne by all customers.
- Don’t use transition fees to cover costs associated with poor judgment by utility management (such as building a coal plant in the past 20 years when it was very unlikely to remain competitive).
Thank you for the opportunity to share feedback on Colorado’s consideration of community choice energy. The Institute for Local Self-Reliance believes that the evidence supports this community-driven structure contributing to state clean energy and climate goals while prioritizing local interests.
Respectfully submitted on March 1, 2022.
John Farrell, Director, Energy Democracy Initiative
Institute for Local Self-Reliance | Minneapolis, MN
Featured photo credit: National Renewable Energy Lab via Flickr (CC BY-NC-ND 2.0)