“The Impact of CCAs on Decarbonization in California”
Bruce Cain (Stanford University), Roger Noll (Stanford University), Alison Ong* (Stanford University), and Rayan Sud (Stanford University)
California’s Community Choice Aggregators (CCAs) allow a local government to form a load serving entity to compete for retail customers and electricity supply with the investor-owned electric utility that operates within its territory. In theory, CCAs could reduce the costs and/or enhance the speed of decarbonization of electricity supply. In reality, a flawed market design, the transfer of regulatory burdens from the IOUs to the CCAs, and the wide variability in California community capacities and motivations imperil the achievement of either goal. IOU ownership and economic regulation of distribution and transmission have effectively eliminated meaningful price competition. Transferring the responsibility for long term contracts and system reliability from the IOUs to the CCAs essentially creates a ceiling on the greenness and a floor on the price of CCA power. And devolution of electricity procurement to local communities that differ in the intensity of preferences for green energy, local investment in generation, and lower end-user prices results in wide variation in energy portfolios and financial stability among CCAs. We call this energy sorting, i.e. a self-selected grouping of local energy consumers by income and commitment to decarbonization. This has important implications for deep decarbonization because CCAs in many communities bear much of the responsibility for designing and implementing residential, transportation and commercial electrification programs. Some of these problems, such as finding the right scale for CCAs through the creation of joint power agreements, are being solved. Others, such as problematic regulation of the relationship between IOUs and CCAs will require more serious efforts at reform.