Community choice aggregators (CCAs) have become a formidable player in California’s electricity markets, taking over the role of supplying electricity to millions of customers from the state's investor-owned utilities, announcing big-time clean energy contracts and pushing regulators to add flexibility to state rules that stymie the growth of CCAs.
A Monday announcement again underlines that expanding influence: eight CCAs have teamed up on a joint powers authority, an entity joining public agencies in service of a common goal. In this case, the goal is buying larger amounts of clean energy; many of California’s CCAs have renewables targets more aggressive than those of the state at large.
Taken together, the new group, California Community Power, serves 2.6 million electric customer accounts, about half the number served by Northern California utility Pacific Gas & Electric. That size “turns them into one of the biggest buyers of power in the country overnight,” said Colin Smith, a senior solar analyst with energy consultancy Wood Mackenzie.
The structure is designed to allow disparate aggregators to work together on larger energy procurements than they’d be able to handle separately.
“When you think about the clean energy transition and the kinds of investments that are needed in the future, it allows us to have a seat at the table as a very large entity,” said Silicon Valley Clean Energy CEO Girish Balachandran.
Silicon Valley Clean Energy joins East Bay Community Energy, Redwood Coast Energy Authority, Marin Clean Energy, Peninsula Clean Energy, San Jose Clean Energy, Sonoma Clean Power and Central Coast Community Energy — CCAs covering swaths of Northern and Central California — as members of the new agency. San Francisco’s CCA, CleanPowerSF, is currently pursuing membership, according to the group.
The group is designed to outfit a growing band of CCAs in California with weightier buying power when it comes to renewables and storage. CCAs may be small on their own, and the younger ones can have trouble gaining financial backers for their power projects. But a combined group of such organizations — several with investment-grade credit ratings — could mean bigger deals and more confidence from developers.
In October, a group of eight CCAs, including seven of those involved in California Community Power, leaped ahead of the state's investor-owned utilities in announcing a request for offers for long-duration storage, which state regulators have said is required to meet California’s clean energy goals. The joint powers authority is now steering that process on behalf of seven of its members and is currently evaluating projects.
“By partnering together, we’re able to leverage economies of scale, have enhanced negotiating power [and] increase opportunities to innovate and share risk,” said Jan Pepper, CEO of Peninsula Clean Energy.
Joint powers authorities have been used in the past to combine buying power of smaller electricity providers in the state. The Balancing Authority of Northern California includes municipal utilities such as the Sacramento Municipal Utility District and the Modesto Irrigation District, and the Southern California Public Power Authority has members including Riverside Public Utilities and the Los Angeles Department of Water and Power.
Credit ratings and economies of scale
While the new structure is designed to give CCA participants greater leverage in purchasing decisions, each organization will also maintain autonomy. In particular, groups will continue pursuing separate renewables targets and are also likely to continue pursuing their own credit ratings, Pepper said.
Peninsula Clean Energy, Central Coast Community Energy, Marin Clean Energy and Silicon Valley Clean Energy have already secured credit ratings. The joint powers authority could pursue such a rating in the future, although Balachandran and Pepper said the group has no current plans to do so.
Credit ratings historically have acted as a barrier for CCAs, as financiers and developers can be wary of deals with unestablished counterparties. An increasing number of aggregators gaining those ratings, however, has helped blunt those concerns.
“There has been a longstanding problem with both developers and financiers…not being entirely sure if they want to do business with CCAs. These are very young organizations,” said WoodMac’s Smith. “Getting a credit rating helps a lot with that.”
Seth Hilton, a partner in Stoel Rives’ Energy Development practice, said the larger aggregation into a joint powers authority “seems to address some of the concerns that have been raised about CCAs in the past.”
“This looks like a much broader attempt that could address some of those concerns and really streamline some of the procurement,” said Hilton.
The California Public Utilities Commission has already recognized CCAs as the expected source of the majority of the state’s carbon-free procurements in the next decade, since they're taking over responsibility for a larger portion of the state's electricity customers.
California Community Power is not the first effort by CCAs to work together to secure those deals. Peninsula Clean Energy, East Bay Community Energy and Silicon Valley Clean Energy worked with municipal utility Silicon Valley Power on a battery storage solicitation in 2019, for example.
The formation of California Community Power is likely to add to the credibility of those entities, according to Smith. The ramifications for California’s existing investor-owned utilities remain somewhat unclear. PG&E said it will continue to work with CCAs “in the same way” as it did prior to the announcement.
“It’s important to remember that if a customer becomes a CCA customer, they are still a PG&E customer,” spokesperson Ari Vanrenen said in an email. “We continue to deliver the electricity to CCA customers through our transmission and distribution system, and provide meter reading, billing, customer service and maintenance services.”
But the growth of aggregators has reconfigured the traditional role of investor-owned utilities as the sole providers of power for customers in their territories. If CCAs continue to proliferate, it's possible that California's investor-owned utilities could see themselves becoming “de facto poles and wires companies,” charged largely with delivering electricity rather than generating it, Smith said.
Don’t wait to switch to solar, do it today http://reduceandsaveenergy.com/switch