What is municipal aggregation?
Municipal aggregation, also referred to as community choice aggregation (CCA), is a process via which towns and cities purchase electricity supply in bulk on behalf of residential and business customers within their municipality. Customers utilizing the Basic Service electricity supply option provided by the local utility at the time of aggregation are typically enrolled in the aggregation program automatically, but all customers have the opportunity to opt out of the program, either continuing with the Basic Service electricity supply option or choosing a competitive electricity supplier. Electricity transmission and distribution services and billing continue to be handled by the local electric utility company. Municipal aggregation is an option available to all Massachusetts towns and cities that are not served by a municipal power plant providing electricity (M.G.L. c. 164 § 134).
What is the purpose of municipal aggregation?
There are three main reasons municipalities choose to pursue aggregation:
- Bulk purchasing can reduce the cost of electricity for individual customers
- Aggregations often provide contracts for longer than the 6-month period guaranteed by the local utility, providing price stability
- Aggregations can provide "green" electricity options with higher renewable energy or local renewable energy content
How can municipal aggregations promote renewable energy development and energy efficiency?
Some municipal aggregations choose to provide "green" electricity supply options with higher renewable energy content than the minimum required by Massachusetts Renewable Portfolio Standards (RPS). In many cases, aggregation supply rates are sufficiently low that greener options can be provided while still saving customers money relative to the utility Basic Service rate. In municipalities where the default option is a greener electricity supply, many customers stay with the default option, rather than opting down to a standard option, or opting out of the aggregation program. This means that more customers may participate in a green electricity supply program than would do so if they had to actively opt to "green-up" from a standard Basic Service offering.
In addition, public aggregations like the Cape Light Compact can apply to the Department of Public Utilities for permission to use the energy efficiency system benefit charge paid by all electricity customers to fund local energy efficiency projects. (Municipalities with market aggregations brokered by a commercial energy consulting service continue to participate in the Mass Save program).
How well do municipal aggregations work in practice?
In May 2018, we conducted a survey to determine if existing municipal aggregations in Massachusetts were providing customers with price savings, price stability, or additional renewable energy content. We found that aggregations do not provide lower costs in every municipality and every rate period. However, on average, municipal aggregations do provide price savings to residential and small commercial customers. Municipal aggregations also provide price stability, with price fluctuations only 10-20% those of utilities in many cases, and rate contract periods up to 3 years in duration. Because price savings are moderate (averaging less than $0.008/kWh, or less than $60/year for the typical residential household), municipal aggregation may not be worthwhile for municipalities interested in pursuing aggregation for purely economic reasons.
Aggregation may provide a clearer value to municipalities looking beyond standard electricity programs which meet Massachusetts RPS for renewable energy content to include “greener” energy options. We found that the modest savings available through aggregation programs were often sufficient to support additional renewable energy content for residential ratepayers while still providing rates lower than Basic Service offerings. As of May 2018, municipal aggregation programs offering 1%, 5%, 20% and 25% additional Class I RECs above the Massachusetts RPS requirements were all providing rates below the Basic Service Rates. Of the programs which offered 50% or 100% Class I REC “green-up” options, approximately half were offering a lower rate than Basic Service.
Our full report on municipal aggregation performance is available here:
How do I form a municipal aggregation in my city or town?
Over 100 municipalities across the commonwealth already participate in a municipal aggregation. The easiest way to see if your community has already formed an aggregation is to visit the Massachusetts Department of Energy Resources (MA DOER) Municipal Aggregation website.
The process of creating a municipal aggregation is outlined in the MA DOER Guide to Municipal Aggregation. In order to form an aggregation, municipalities must vote to initiate the aggregation process, prepare an aggregation plan, allow the opportunity for citizen review, and submit the plan to the Department of Public Utilities for review and approval. Most towns and cities choose to use a “market aggregation” process – they work with a commercial energy consultant who aids in the application process and contract negotiation for electricity from competitive suppliers. The commercial energy broker charges a consultant fee, typically about 1 mill ($0.001) per kWh, for its services. This fee is incorporated into the published electricity supply price available to the customer. As an alternative to market aggregation, municipalities can also form what is known as a “public aggregation," through creation of a non-profit entity which oversees the aggregation. As of 2018, the Cape Light Compact is the only public aggregation active in the state.