Cost of community choice aggregation
Last updated 6/7/2019
Community choice aggregation can help residents, businesses, and municipal organizations save money on their electricity costs. However, these savings are not guaranteed, and how much you can save with a CCA plan depends on a number of factors, from your utility company’s supply rates to who and where your local government chooses to procure power from and even the type of CCA you elect to participate in.
Costs of CCAs
CCAs aggregate a community’s buying power and ask for bids from electricity service providers to serve these community members. As a result, when electricity suppliers are presenting bids to a CCA they are incentivized to offer competitive rates. CCAs bring together hundreds and sometimes thousands of electricity accounts to purchase electricity, which equates to a lot of revenue in the eyes of the energy supplier. Potential suppliers will come to the table with a competitive offer to beat out other suppliers so that your local government’s CCA doesn’t look elsewhere for electricity.
CCA rates across the country vary depending on location, the type of CCA, and the type of power. Often, CCAs have lower electricity rates than standard residential retail energy prices, sometimes by as much as 15 to 20 percent. However, any discount offered through a CCA only applies to only a portion of your bill–for electricity supply charges–as the distribution and delivery of your electricity will continue to be handled by your traditional utility company, meaning those portions of your bill will not change.
Comparing electricity costs from a CCA vs. an electric utility
All CCAs are voluntary. This means that you’ll be able to decide whether or not you want to participate in the CCA, and then opt-in or opt-out accordingly.
Electricity rates and your electricity usage may both fluctuate throughout the year, so it can be difficult to calculate exactly how much you can save from participating in a CCA. Here is a method for a quick estimate of potential annual savings:
#1. Determine your average annnual electricity usage
To find out how much electricity you use in a given year, add up your kilowatt-hour (kWh) totals from the past 12 monthly electricity bills you’ve received from your utility. If you can’t locate your past bills to find these numbers, utility companies will provide them upon request.
#2. Calculate how much you pay for electricity supply each year
This is the trickiest part of the calculation. In order to calculate how much you pay annually for the electricity you consume, you need to determine your current electricity supply rate and multiply it by your annual electricity usage determined in Step 1.
Electricity bills typically have three different charges on them: fixed charges, supply charges, and transmission plus distribution charges. Fixed charges will be consistent from bill to bill and are not based upon how much electricity you use each month. As a result, they are “unavoidable,” meaning you will have to pay fixed charges whether you purchase electricity from your utility or from a CCA. Transmission and distribution charges vary based upon your monthly electricity consumption, and are also paid to your standard utility regardless of whether you participate in a CCA or not.
However, the electricity supply rate is the piece of your existing electricity bill that you will change by transitioning to a CCA. To calculate what you currently pay for electricity supply, find the supply rate on your utility electricity bill (listed in cents per kilowatt-hour), and multiply it by your annual electricity usage. The result is an estimate of how much you will pay per year for electricity supply to stay with your electric utility.
#3. Multiply your annual kWh total by the estimated rate included in the CCA plan
When your local government notifies you of the new CCA plan, they’ll include an electricity rate that you can expect to pay for supply. Multiply that rate by your annual electricity usage to get an estimate of how much you’ll pay for electricity supply under the CCA.
#4. Subtract the value calculated in step 3 from the value in step 2 to find the difference between the two values
If this value is a positive number, you will likely save money by participating in the CCA. If the number is negative, the CCA may end up being more expensive than sticking with your traditional electricity plan.
Many CCA plans have an “opt up” option, where you can opt into a higher renewable energy mix than the default option in the CCA. How much extra you’ll pay for this option will vary depending on your CCA and location; that said, even if this greener option is more expensive than the default CCA rate, it may still be cheaper than the retail electricity offering from your utility company.