Community choice aggregators and community solar

Author: Deanne M. Barrow Publication | April 10, 2018

New community choice aggregators may face delays in starting up in California. 

Meanwhile, New York is moving to an innovative program that will help direct some community choice aggregator customers into community solar projects.

California

The California Public Utilities Commission is tightening the regulatory belt around community choice aggregators as it attempts to keep pace with the rapid growth of such entities. 

Community choice aggregators, or CCAs, are county-level entities operating currently in eight counties that buy electricity at wholesale prices and supply it to county residents. Another 12 counties are expected to have CCAs operating by the end of this year. The California Public Utilities Commission estimates that as much as 85% of the electricity load in California will have shifted from investor-owned utilities to CCAs and other electricity suppliers by the mid-2020s.

California CCAs face new filing deadlines that could delay the start dates of some new CCAs by up to one year under Resolution E-4907, which the commission issued in February. 

The CPUC acknowledged that the new requirements could have the effect of pushing back desired start dates, but said that the delay was only for a finite period of time and necessary to ensure CCAs comply with the California resource adequacy requirements before they begin serving customers.

Resolution E-4907 requires CCAs to file an implementation plan and statement of intent with the CPUC describing, among other things, the program, its operations, rates and funding, no later than January 1 the year before the CCA wants to begin service. For example, if a CCA wants to begin service in 2020, then it must submit an implementation plan and statement of intent by the end of this year. Previously a CCA could file this information and begin service at any time it chose. 

The new deadlines sync up a CCA’s launch date with existing deadlines for submission of annual year-ahead resource-adequacy load forecasts. 

All load-serving entities in California, which include CCAs, investor-owned utilities and direct-access providers, are subject to resource-adequacy obligations under section 380 of the Public Utilities Code. They must show state regulators that they have enough capacity commitments to be able to meet all of their customers’ energy requirements plus a minimum reserve requirement. 

The idea is to avoid a situation where a CCA starts service too late in the year to receive a resource-adequacy obligation allocation for the upcoming year. When this happens, the local investor-owned utility continues to procure capacity for the CCA’s customers and recoups the cost through a fee called the power charge indifference adjustment or PCIA. Each utility and other supplier operating in the retail market is allocated a specific capacity requirement by the CPUC to cover peak loads plus planning reserves based on the supplier’s best estimates of future customers and loads for the year ahead. 

The CPUC’s order applies to newly-formed CCAs and existing CCAs that wish to expand their territories to serve new load. An example of the latter is Marin Clean Energy, which is planning to expand its coverage beyond Marin County to include Contra Costa County. 

The order is not retroactive. CCAs whose implementation plans pre-date the order are exempted from the new requirements. Among those exempted is the Clean Power Alliance of Southern California, California’s newest and largest CCA that began serving Los Angeles County and about 24 cities in February. 

New York

Community solar developers can now partner with CCAs in New York to provide services in a single, combined program. 

This model, which is the first of its kind in the nation, has the advantage of leveraging the opt-out feature of CCAs to fill the subscriber base of a community solar project. If a CCA is formed, electricity customers must choose their suppliers. Anyone failing to choose an alternative supplier is automatically assigned in New York (and California) to the local CCA. The fact that community solar developers could pick up subscribers from residents who opt for CCAs could significantly reduce customer acquisition costs for community solar projects, which can be as high as 15% to 20% of the installed cost of the system. 

CCAs have been gaining popularity in New York since they were first authorized by the New York Public Service Comission in 2016. Four CCAs currently exist within the state, two of which were formed just this year. According to a report released by the NYPSC in January, as many as 100 municipalities have expressed an interest in forming CCAs. 

Community solar refers to small utility-scale solar arrays to which local residents can subscribe by buying a share of the electricity output or solar panels. All of the electricity ends up on the utility grid. The utility gives bill credits that the subscribers use to offset their own utility bills. They still take their electricity as before from the local utility.

Community solar was first authorized in New York in 2015, but it has been slow to take off. In an effort to jump start the industry, the NYPSC increased the size limit for projects eligible to receive New York’s version of net metering compensation from two megawatts to five megawatts in February so that developers can take advantage of economies of scale to improve project economics. Community solar relies on net metering to swap electricity for bill credits.

A proposal to integrate CCAs and community solar found its way before the NYPSC as part of a CCA implementation plan filed before the commission last September. The implementation plan was filed by Joule Assets, Inc. on behalf of seven municipalities in upstate New York, who sought the commission’s approval to form what is now New York’s fourth CCA. The NYPSC approved the proposal in mid-March. (A copy of the order can be accessed online through the NYPSC’s electronic docket card for cases 14-M-0224 and 15-E-0082.)

The NYPSC received 14 comment letters. One supporter said that the integration of community solar with CCAs would help finance the development and expansion of new community arrays, thereby advancing New York’s climate and clean energy goals. Another pointed to the potential of the new arrangement, in theory, to eliminate community solar customer acquisition costs and minimize the possibility that the project will not be fully subscribed. New York City commented that by offering CCA customers a mechanism through which they may receive community solar credits, the NYPSC would be encouraging consumers to take a more active role in their energy choices, thereby advancing a core objective of the state’s “Reforming the Energy Vision” or REV strategy.

Leveraging opt-out

Joule’s proposal is designed so that CCA customers can become community solar subscribers as part of their participation in the CCA program. Each municipality making up the CCA gets to choose whether to enroll its residents in the community solar program on an opt-out basis or an opt-up basis. “Opt-out” means automatic enrollment, whereas “opt-up” requires enrollment with affirmative consent. The NYPSC waived the requirement for explicit customer consent and replaced it with a requirement for municipal consent with an opt-out process.

Figure 1 shows what a community solar project integrated with a CCA might look like based on the NYPSC’s order. 

Norton Rose Fulbright: Project Finance NewsWire - April 2018 by Keith Martin 

The CCA can either build, own and operate the community solar project itself or contract with a third-party developer that is registered with the state as a “DER [distributed energy resource] provider.” 

The CCA then aggregates customers and provides the utility with customer information. The utility tracks and distributes the credits from the community solar facility to the customer. The subscription fee for community solar will be a percentage of the community solar credits in any given month. The CCA bears the responsibility for managing and accounting for the community solar credits with the utility. 

The NYPSC order includes a number of conditions dealing with customer protections. The most significant is that Joule must make quarterly filings with the commission demonstrating that it has made good on its promise of guaranteed customer savings. Joule promised that CCA customers who subscribe to community solar arrays will receive bill credits each quarter that exceed the community solar subscription fees the customers must pay. Joule also will not be permitted to initiate collection activity, impose cancellation fees or reallocate bill credits, except on a prospective basis, if a CCA member enrolled on an opt-out basis objects to paying the community solar subscription fee.


Contacts

Deanne M. Barrow

Deanne M. Barrow

Washington, DC