Community Choice Aggregation Electric Power Agencies in California: Pros and Cons

By Kevin Dayton
February 21, 2017

Local governments in the major metropolitan areas of California are looking at establishing or joining “community choice aggregation” joint powers agencies. These government agencies will generate electricity for ratepayers as a competitor to the state’s three major investor-owned utilities (Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric). A few are fully operational, several more have just recently been established, and at least two dozen are under consideration.

Information available about these community choice power agencies is disproportionately skewed in support of the concept. Here is an attempt to provide a balanced and fair assessment of the pros and cons of community choice aggregation.

An Assessment of Community Choice Power Agencies
Arguments for Community Choice Aggregation
1. Worldview: Community Choice Aggregation is more than just a regional government that generates and purchases electricity. It is the implementation of a progressive vision to make your region (and our world) a better place by establishing public ownership and control of one of the most important resources in modern society. It takes electricity generation away from tired, inefficient, and unresponsive investor-owned corporations burdened with outdated infrastructure that harms the planet and harms the public. The tremendous power and potential of electricity generation is instead put into the hands of the people. Electricity is a public resource, and the public should control the generation of it.
2. Lower Electricity Rates: Free from the profit motive and the constant need to give shareholders a return on investment, Community Choice Aggregation will be able to keep rates reasonable and probably lower than your investor-owned utility. In addition, excessive executive salaries and perks and other abuses often found in corporate environments will be minimized or absent because of agency transparency and public scrutiny. Publicly-owned utilities throughout the state routinely charge rates that are lower than investor-owned utilities.
3. Consumer Choice: Community Choice Aggregation will give consumers a choice in who generates their electricity. By taking no action whatsoever, customers can become part of a Community Choice Aggregation agency. Or, they can “opt-out” and stay with their investor-owned utility. Right now consumers not served by publicly-owned local or regional utilities must obtain electricity generated or purchased by their investor-owned utility. There is no choice.
4. Fighting Climate Change: Because it serves the interests of the public rather than investors/shareholders, Community Choice Aggregation will be able to offer customers a choice of more ambitious portfolios that greatly exceed the percentage of renewable energy that investor-owned utilities are using and plan to use in the future. Community Choice Aggregation agencies can adopt electricity generation strategies that will hasten the transition to 100% renewable energy production and thus reflect the urgency to fight global climate change. Community Choice Aggregation agencies can construct and operate utility-scale solar and wind farms, encourage households to install their own rooftop solar panels, and offer incentives for conservation. They can even try innovative methods of energy generation such as tidal power.
5. Democracy: Community Choice Aggregation creates a much more “democratic” way to generate electricity for consumers. Instead of obtaining their electricity from a distant and disinterested corporate behemoth, consumers will obtain their electricity from their own publicly-owned Community Choice Aggregation agency. They can attend board meetings open to the public to conduct public business, and every customer will have a representative on the board who works for the interest of the people in their community rather than the interests of investors/shareholders. Board members will reflect the diversity, interests, and values of the community more effectively than a corporate board of directors.
6. Social Justice: The hiring and contracting practices of Community Choice Aggregation agencies will be open and transparent to the public. Policies related to agency hiring can ensure that management, non-exempt employees, and even interns represent the diversity of the community. Training and job opportunities can focus on disadvantaged workers. Policies related to contracting can focus on ensuring high-wage jobs for local people working for local companies in which employees have a voice in the workplace through collective bargaining and union representation. Community Choice Aggregation agencies will be focused on community concerns such as public safety rather than the interests of shareholders. Decisions on infrastructure will appropriately consider the negative effects on disadvantaged communities.
7. Leadership: Customers served by Community Choice Aggregation will have an exciting opportunity to be visionary and innovative leaders in California, in the United States, and in the world in fighting climate change, protecting the environment, and advancing social justice. The public will play an active role in changing the world, rather than passively relying on a corporation to supply electricity.
8. Cooperation and Competition Foster Achievement: Community Choice Aggregation agencies and the consumers who own them may be inspired to adopt strategies or programs adopted by other Community Choice Aggregation agencies. In addition, these agencies will be competing against each other to reach new benchmarks and achieve bragging rights for renewable energy percentages, rates, customer satisfaction, and social justice criteria.
9. Better Community Partnerships: Owned and operated by and for the public, Community Choice Aggregation agencies will have insight on how to partner with and assist local organizations that are trying to create a better community through education and service. Decisions about advertising, partnerships, programs, and grants will be made transparently by public officials for the benefit of the public.
10. Another Public Voice on the Future of the Community: The existence of a publicly-owned community choice aggregation agency will give the public new powers to influence land use, transportation, and other decisions that affect the quality of life in their communities. Community Choice Aggregation serves the interests of the public and will play an important and influential role on behalf of the public when proposals arise that may increase electricity consumption in the region.

Arguments Against Community Choice Aggregation
1. Worldview: Community Choice Aggregation agencies are essentially government control of one of the key segments of our modern society: electricity supply. To be blunt, public power generation is an objective of mainstream advocates of democratic socialism, and it will be difficult to privatize electricity generation once it is controlled by government. In the long-term, it is quite possible that investor-owned utilities will no longer be able to make a profit and stay in business if they lose most of their customers to Community Choice Aggregation agencies. If this happens, opponents of investor-owned utilities may seek public appropriation of electricity transmission and distribution, thus completing the evolution to full government control of regional energy supply.
2. Uncertainly About Future Electricity Rates: A board of appointed politicians will make decisions that will ultimately determine electricity rates for Community Choice Aggregation agency customers. A majority on this board may choose agency objectives, policies, and practices that may impose significant fees or significantly rate increases for some customers. Community Choice Aggregation agency board members may be compelled to prioritize climate change and social justice at the expense of maintaining steady rates, especially if investor-owned utilities cease to be a viable alternative choices and competitors. It is probable that local elected officials who desire to be appointed to a Community Choice Aggregation agency board will be the most zealous about fighting climate change and advancing social justice regardless of cost, and their values will affect priorities and policies.
3. Income Redistribution: Certain types of customers (major users, for-profit corporations, properties with high square-footage) may be targeted by the Community Choice Aggregation agency board to pay disproportionately high prices so that other customers (low-income households, properties generating their own electricity with photovoltaic solar panels, senior citizens, veterans, students, etc.) pay very little. Advocates for various demographic groups may end up fighting each other over who pays for electricity generation. Certain influential corporations, non-profits, industries, and institutions may lobby the Community Choice Aggregation agency board successfully for exemptions or breaks. In the end, residential and small business customers may bear a disproportionate burden of the cost.
4. Consumer Choice May Be Fleeting: A Community Choice Aggregation agency will be the only option if the competing investor-owned utility no longer remains viable – a possible outcome. It is likely that a Community Choice Aggregation agency will strenuously resist applications from any subsequent investor-owned utility to become a competitor.
5. Opting Out Gives One Choice a Significant Advantage: While state law requires Community Choice Aggregation agencies to take certain steps to allow electric customers to “opt-out” and stay with their investor-owned utilities, for practical purposes 85%-90% will not opt out and be switched to Community Choice Aggregation. The specific “opt-out” requirement in state law for Community Choice Aggregation is meant to give such agencies the advantage. Informing electric customers about the investor-owned utility as a valid and worthy choice would require a significant marketing and public relations campaign that is unlikely to happen, for the reason listed below.
6. One Choice Has Its Speech Restricted: Senate Bill 790, enacted in 2011, prohibits investor-owned utilities from using ratepayer funds to market themselves against Community Choice Aggregation agencies. Investor owners can use their own money to establish marketing operations that are separate from the utility, but these programs have to fulfill strict conditions and be approved by the Public Utilities Commission (PUC). The first marketing program (for Sempra Energy, owner of San Diego Gas & Electric) was approved in 2016, but the PUC has already revoked approval for the program.
7. A Prime Motivation for Community Choice Aggregation Is Based on the Claimed Ability of Scientists to Predict the Future: Is it wise to base major public policy decisions about essential services on predictions in 2017 about 2100? One big volcanic eruption, meteorite strike, or variation in solar output can dramatically change the earth’s climate and make the warming effect of greenhouse gas emissions moot. Unanticipated technological developments, changes in mass behavior, nuclear war, pandemic, and other catastrophes can also affect greenhouse gas emissions. In addition, some people assert that the genuine threat of climate change is being exploited by ideologues whose main objective is to have socialism supplant capitalism as a economic and social system.
8. Do the People and Politicians Know Better than Investors and Corporate Managers? The belief that government control is inherently better than a regulated capitalist market is often based on questionable presuppositions related to ideology, philosophy, and even theology. As some advocates of Community Choice Aggregation assert, the pressure to show a return on investment can encourage abuse and corruption. But the pressure of the market can also encourage efficiency and fiscal responsibility. And democracy is not purely benevolent and selfless in practice. Politicians routinely feel pressure to cater to special interest groups and favored constituencies at the expense of efficiency and fiscal responsibility. Unions, environmental groups, social justice organizations, theological movements, and advocacy groups for the disadvantaged are all lobbying furiously to establish Community Choice Aggregation agencies and quickly adopt policies. (Unions demanding Project Labor Agreements are one well-documented example.) In addition, private contractors are already entangled in the promotion, planning, and expansion of Community Choice Aggregation and ready to obtain easy contracts from an agency that will likely be difficult to understand and rarely examined by the news media.
9. Election Campaigns for Local Office May Be Infiltrated by Special Interest Groups Seeking to Influence Community Choice Aggregation: Electricity supply is big business with a lot of power and money at stake. Powerful special interest groups will be continually positioning themselves to obtain a majority on the Community Choice Aggregation agency board. These groups will scheme to get majorities elected to local governing boards that in turn will appoint favored elected officials to the Community Choice Aggregation agency board.
10. Community Choice Aggregation Can Be Exploited as a Tool to Control Land Use and Transportation Decisions: Community Choice Aggregation agencies can get involved in environmental review, lobbying, and public relations to stop any proposed development project or large-scale event that increases electricity consumption. Seawater desalination would be one prominent example.