A Guide to Understanding Electric Aggregation Programs

Electricity rates are a big concern for many homeowners, renters, and business owners across the United States. As energy costs fluctuate, finding strategies that can help manage and potentially reduce your expenses is crucial.

One increasingly popular strategy for securing affordable energy rates is the electric aggregation program. This article delves into electric aggregation, how it works, and how it can benefit you.

What is an Electric Aggregation Program?

Electric aggregation allows communities to pool their purchasing power to negotiate better electricity rates from suppliers. This collective bargaining can lead to more competitive rates and, in some cases, more sustainable energy options. They are available to renters, homeowners, and business owners in certain states.

The concept of community choice aggregation (CCA) originated in Massachusetts in 1997. Communities wanted more control over their energy sources, often with a focus on increasing the use of renewable energy. These programs differ from traditional electricity purchasing, where individuals or businesses choose their suppliers independently.

States Offering Electric Aggregation Programs

Electric aggregation programs are available in several states across the U.S. These programs, often driven by state legislation, are designed to give communities more control over their energy choices.

• Ohio: One of the most established markets for electric aggregation, with widespread participation across the state.
• Illinois: Illinois has seen significant adoption of aggregation programs, providing competitive rates for many communities.
• California: Known for its focus on renewable energy, California's CCA programs are leading the charge in sustainable energy aggregation. Learn more about California’s programs here.
• Massachusetts: Massachusetts offers robust aggregation programs that strongly emphasize integrating green energy sources.
• New Jersey: A growing number of communities in New Jersey are participating in aggregation, focusing on cost savings and sustainability.
• New York: New York's CCA programs are part of the state's larger energy reform initiatives, aiming to increase renewable energy use.

Each state's program has unique features and regulations. You can visit the EPA's overview of community choice aggregation for more detailed information.

How Electric Aggregation Works

Electric aggregation typically involves a few key steps that ensure communities can benefit from competitive electricity rates:

• 1. Community Decision: The local government decides to pursue an electric aggregation program, often through a public vote or local ordinance.
• 2. Request for Proposal (RFP): The community issues an RFP to electricity suppliers, inviting them to submit bids.
• 3. Supplier Selection: The community selects a supplier based on the best combination of price, terms, and other factors.
• 4. Implementation: The chosen supplier provides electricity to the community at the negotiated rate.

Residents are typically allowed to opt-out if they prefer to stay with their current supplier or choose another.

Pros and Cons of Electric Aggregation Programs

Electric aggregation programs offer several benefits, but they also come with some drawbacks.

Pros of Electric Aggregation:

• Cost Savings: Communities can often secure lower rates than individuals could on their own.
• Increased Negotiating Power: Aggregating demand gives communities more leverage in negotiations with suppliers.
• Simplified Billing: Residents receive a single bill, with the aggregation rate automatically applied.
• Simplified Choices: With the community making the choice, residents don't have to navigate the complex energy market.
• Green Energy Options: Many aggregation programs offer the option to choose renewable energy sources, supporting sustainability goals.

Cons of Electric Aggregation:

• Automatic Enrollment: Some consumers may not be aware they are enrolled in an aggregation program.
• Limited Supplier Options: Once enrolled, your options for switching suppliers may be more limited.
• Market Dependency: If market conditions change, the rates secured by the aggregation program may not always be the lowest available.

Community Choice Aggregation Explained

Community choice aggregation (CCA) programs allow local governments to procure power on behalf of their residents, businesses, and municipal accounts from an alternative supplier while still receiving transmission and distribution services from the existing utility provider.

CCA programs are driven by the desire for local control over energy sources and rates and often include goals for increasing renewable energy use. Unlike traditional municipal aggregation, CCAs provide an opt-out model, meaning residents are automatically enrolled unless they choose otherwise.

Participation in Electric Aggregation Programs

Participating in an electric aggregation program is usually straightforward. Most programs automatically enroll residents but provide an opt-out option for those who prefer to choose their own supplier.

• Opt-In/Opt-Out Process: Residents are informed about the program through mail, email, or public notices. If they do not wish to participate, they can opt out within a specific time frame, usually without penalty.
• Ongoing Participation: Once enrolled, residents typically remain in the program unless they choose to leave, often during specified opt-out periods.

Case Studies: Successful Electric Aggregation Programs

Maryland’s Renewable Energy Procurement

In March 2021, 24 local governments in Maryland collaborated to enhance their renewable energy purchasing power through aggregation. They issued a joint request for proposal (RFP) to secure up to 240,000 MWh of renewable energy, sufficient to power over 246,000 homes annually.

Illinois Municipal Aggregation

Illinois has seen significant participation in municipal aggregation programs, which have become vital to the state’s renewable energy landscape. As of 2023, municipal aggregation programs in Illinois accounted for approximately 192 million MWh of renewable energy procured through green power markets. These programs enable communities to collectively negotiate better rates and terms for renewable energy, demonstrating the effectiveness of aggregation in driving clean energy adoption.

Understanding the Impact on Your Electric Bill

Joining an electric aggregation program can significantly reduce your electricity bill. These programs often secure lower rates, but the exact savings can vary based on market conditions and the terms negotiated by the community.

Key factors influencing savings include:

• Market Prices: Fluctuations in wholesale electricity prices can affect the rates offered by aggregation programs.
• Contract Terms: The length and terms of the contract with the supplier can determine the stability and competitiveness of the rates.
• Renewable Energy Choices: Some programs prioritize green energy, which may come at a premium but offer environmental benefits.

Monitoring your electric bill after joining an aggregation program is essential to ensure you're receiving the expected savings.

The Role of Energy Aggregators

Energy aggregators play a crucial role in the success of these programs. They act as intermediaries between the community and electricity suppliers, helping to negotiate rates and manage contracts.

Aggregators consolidate various small-scale energy resources, such as solar panels, wind turbines, and energy storage systems, to create a larger, more manageable energy supply. This collective management enables them to optimize energy production and consumption across multiple sources, enhancing overall efficiency in the energy market.

When choosing an energy aggregator, it's important to consider:

• Experience: Look for aggregators with a proven track record in managing community programs.
• Transparency: The aggregator should provide clear and transparent information about how they manage the program and negotiate rates.
• Customer Service: Good customer support is essential for handling any issues that arise during the program.

Community Choice Aggregation in California

California's community choice aggregation programs are some of the most advanced in the country, with a strong focus on renewable energy. These programs allow communities to choose energy sources that align with their environmental goals while often securing competitive rates.

Some of the major CCAs in California include:

• Clean Power Alliance: Serving communities across Los Angeles and Ventura counties.
• San Diego Community Power: Providing renewable energy options to San Diego and surrounding areas.
• Ava Community Energy: Offering clean energy solutions in Alameda County.

California's CCAs are often seen as a model for other states looking to increase the use of renewable energy through community aggregation.

Challenges Facing Electric Aggregation Programs

While electric aggregation programs offer many benefits, they also face several challenges:

• Regulatory Challenges: Different states have varying regulations that can complicate the implementation and management of these programs.
• Market Dynamics: Fluctuations in energy markets can impact the ability to secure competitive rates.
• Consumer Awareness: Many consumers are unaware of their participation in aggregation programs, leading to confusion or dissatisfaction.

How to Opt-Out of an Electric Aggregation Program

Opting out of an electric aggregation program is generally straightforward, but it's important to understand the process and implications:

• Steps to Opt-Out: You'll typically receive a notification explaining how to opt-out, often by returning a form, calling a phone number, or visiting a website.
• Implications of Opting Out: Opting out means you will remain with your current supplier or choose a new one on your own. It's important to compare rates and terms to ensure you're making the best decision.
• Alternatives: If you choose not to participate in an aggregation program, you can still explore other options, such as selecting a supplier that offers green energy or other benefits.

Future of Electric Aggregation Programs: A Growing Trend

Community electricity aggregation is gaining momentum across the U.S. as more communities seek ways to lower energy costs and increase their use of renewable energy.

The future of electric aggregation looks promising, with several trends shaping the landscape:

• Increased Focus on Renewable Energy: As more communities prioritize sustainability, the demand for aggregation programs offering green energy options will likely grow.
• Policy Changes: Legislative support and policy changes could expand the availability and impact of these programs.
• Technological Innovations: Advancements in energy management and smart grid technology could enhance the efficiency and effectiveness of aggregation programs.

Conclusion

Electric aggregation programs offer a unique opportunity for communities to take control of their electricity supply with better rates and more eco-friendly options available. Whether you're a homeowner, renter, or business owner, understanding these programs can help you make informed decisions about your energy use and save money on your electricity bills.