trending Market Intelligence /marketintelligence/en/news-insights/trending/OfUwtWWl8nb6uiplukkkqg2 content esgSubNav
In This List

Aggregators supply nearly one-quarter of regulated load in California


Insight Weekly: US inflation soars; real estate faces slowdown; megadeals drive tech M&A


Infographic: Q1’22 U.S. Wind Power by the Numbers


Understanding Loss Given Default A Review of Three Approaches


Insight Weekly: Path to net-zero; US manufacturing momentum; China's lithium M&A frenzy

Aggregators supply nearly one-quarter of regulated load in California

SNL Image

San José Clean Energy Director Lori Mitchell (center) signs the agency's first long-term renewables contract
on Aug. 7. She is flanked by state and local politicians, and a partner at EDP Renewables North America.

Source: San José Clean Energy

California's cities and counties are at the center of a sweeping local takeover of power procurement as the world's fifth-largest economy strives to decarbonize its electric system.

Formed in recent years by more than 130 cities, counties and towns, 19 local government-run agencies known as community choice aggregators, or CCAs, now purchase electricity for about 10 million Californians, roughly a quarter of the state's population, according to the California Community Choice Association.

Ten of these aggregators emerged in 2018 alone in a mass defection that predominantly hit Pacific Gas and Electric Co., or PG&E, and Southern California Edison Co. Propelled by communities' desire for a faster energy transition and by a state law that requires automatic customer enrollment when local governments form CCAs, more migration is in progress.

At least 18 additional cities and one county plan to launch new CCAs or join existing ones in 2020, despite the California Public Utilities Commission's increase to the exit fees charged to departing customers in October 2018. Many other cities and counties, including communities across San Diego Gas & Electric Co.'s service territory, are investigating whether they too will flip to California's new public-private power paradigm in 2021 and beyond.

Though their role in purchasing power is shrinking, investor-owned utilities still supply the power contracted by CCAs, build and maintain grid infrastructure, and bill customers. Utilities also continue to purchase resources for customers who live in areas not covered by CCAs or who opt out of them.

SNL Image

From fringe to mainstream

Since the state's first CCA, MCE Clean Energy, commenced generation services as a fringe player in Marin County in 2010, the local agencies have grown into the state's dominant new buyers of renewable energy resources. After securing approvals for more than 650 MW of new long-term contracts in July, CCAs now have procured more than 3,140 MW of renewables and battery storage, most of it in just the past two years, according to S&P Global Market Intelligence and agency data.

That includes nearly 2,000 MW of solar, 900 MW of wind and 160 MW of batteries.

"We are taking over for the procurement the [investor-owned utilities] might have done," said Nick Chaset, CEO of East Bay Community Energy, which serves around 550,000 residential and commercial customers in Alameda County, in PG&E's service territory. "We are moving from a model where the three IOUs procured basically everything to a model where more than 20 load-serving entities are doing procurement."

SNL Image

The East Bay aggregator's large-scale renewable energy contracts include a 20-year power purchase agreement, or PPA, with EDP Renewables North America LLC for 100 MW of solar and 30 MW of battery storage at the Sonrisa Solar Park. San José Clean Energy on Aug. 7 announced that it also signed a 20-year PPA with EDP for another 100 MW of solar and 10 MW of energy storage from the same power plant.

Two other Northern California CCAs, Monterey Bay Community Power and Silicon Valley Clean Energy, have teamed up to purchase the output of two large-scale solar-plus-storage facilities starting in 2021, at competitive prices not to exceed $40/MWh.

The biggest CCA power deal to date was announced in July by the Clean Power Alliance, the state's largest CCA, covering around three million customers in Southern California Edison's service territory. At least for now, the 15-year power purchase agreement with NextEra Energy Resources LLC, for the output from the 231-MW Arlington (Riverside County Solar) project, does not include the facility's 110 MW of planned energy storage.

10,000 MW by 2030

By 2030, CCAs plan to purchase more than 10,000 MW of new renewables and energy storage, dwarfing the 1,000 MW of additions that investor-owned utilities and other electric service providers have planned, the California Public Utilities Commission reported in its latest integrated resource plan, adopted in April. CCAs aim to increasingly coordinate their resource acquisitions, in part through joint procurements.

As CCAs spread, more customers are choosing to sever their ties to traditional utilities. From just over 6% of the state's total regulated demand in 2017, aggregators' share of the load has climbed to 23% in 2019, according to a CPUC estimate in late March. Over the same period, utilities' share of regulated demand in the state fell from 76% to 56.3%. While their fast rise has triggered concerns among some energy regulators and lawmakers about the reliability of California's grid, CCAs believe they can do more.

SNL Image

In a June 20 letter to Gov. Gavin Newsom, the California Community Choice Association called for policymakers to create a process for investor-owned utilities to completely exit electricity generation and retail service. Such a transition is "compelling," especially for PG&E and SDG&E, a subsidiary of Sempra Energy, the group said. PG&E is undergoing Chapter 11 bankruptcy restructuring with its parent company, PG&E Corp., while San Diego Gas & Electric has asked state lawmakers to facilitate its move to a wires-only utility.

"I think it makes a lot of sense, especially if the IOU wants to get out of the generation business," Chaset said. "We are set up to deliver generation at scale across the community."