Refuting Common Objections to Community Choice Energy for Boston

In advance of the City Council hearing today at City Hall, BostonCAN has compiled a list of responses to the common objections we hear from the Office of Energy Environment and Open Spaces (EEOS) about why they should delay implementing Community Choice Energy.

Community Choice Energy (CCE) could cost more than basic supply, which would put an unacceptable burden on ratepayers.

The cost of renewable energy is steadily dropping and will continue to drop as economies of scale are achieved. Already many community choice aggregations (CCAs) have been successful in getting better rates. In a study by the Applied Economics Clinic in Nov. 2017, the residential rates procured by local aggregations saved 19% on average below the Eversource rate. By delaying the implementation of CCE, the Office of Environment, Energy, and Open Space (EEOS) is costing ratepayers by not getting residents and businesses a better option.

There will be fluctuations in the market, but if the City finds that all the bids it receives for CCE are higher than Basic Service it can delay entry into the market until a better opportunity arises. Over the course of a contract the price will likely stay below Basic Service since many forces mitigate against significant declines in Basic Service rates. If at the time of contract renewal the bids would be significantly above Basic Service, the city can choose not to renew. In addition, individual ratepayers can always opt out.

But it happened in Chicago. In fact, Chicago’s aggregation had to be stopped when basic service prices became cheaper than their aggregation’s. What if that happens here?

In Illinois, rates for basic service had been kept high by a temporary state regulation for several years. Then that regulation expired, so basic service became much cheaper and was able to underbid aggregation contracts. In Massachusetts, there are no temporary regulations on basic service rates that are set to expire.

What about Melrose, MA? When their first contract was up, none of the new bids was competitive with basic supply.

Melrose had to pause its aggregation due to a spike in capacity charges in National Grid territory. Boston’s default electricity supplier is Eversource, who has not had the problem with capacity charges that National Grid has. Melrose plans to petition DPU to re-start its aggregation once the capacity charge issue has abated.

The Request for Information (RFI) invited vendors to share historical pricing data for municipal aggregations. Since none of the respondents did so, the cost of CCE to Boston ratepayers cannot be estimated.

Vendors were probably the wrong people to ask for historical pricing information. It is understandable that they might consider this information proprietary. Typically, vendors provide prospective pricing information in response to a Request for Proposals (RFP).

CCE will cost too much to administer. Between start-up activities and on-going maintenance, EEOS simply does not have enough staff.

Most municipalities with CCE programs hire a consultant who handles most administrative details of the program. The best way to ascertain administrative cost is to issue an RFP and see what competing consultants would charge.

Additionally, however, the city needs to weigh the cost of providing a CCE program with the cost of not providing one. The slower we reduce greenhouse gas emissions, the more the city will have to spend on adaptation and on responding to emergencies.

Boston is so big it has to move cautiously when considering CCE and can’t follow the same template that smaller towns followed.

Boston has more than 600,000 residents. It can follow the example of the Southeast Regional Planning and Economic Development District (SRPEDD), which also has a population of more than 600,000, and has had a joint municipal aggregation since early 2015. SRPEDD followed the standard aggregation pattern of using a consultant to create an aggregation plan and administer the program.

EEOS needs time to study the trade-offs of making CCE an opt-in vs. an opt-out program.

This is not the way the law works—the path to set up a municipal aggregation is a clear and well- understood process. Setting up an “opt-in,” and entering the market as an individual competitive supplier muddies the waters and is not what the city council authorized the mayor’s office to do.

According to a city report showing GHG emissions through 2015, Boston is on track with its GHG reductions, based on a per capita decrease.

Boston’s commitment to reduce GHG emissions from 2005 levels was never based on per capita emissions, nor are the commitments in the Paris Accord. Global warming depends on CO2 levels in the atmosphere and not on how many people live on the planet. So tying GHG reductions to population doesn’t make sense. Moreover, in 2017 Mayor Walsh pledged to reduce GHG emissions to zero by 2050, changed from the previous goal of an 80% reduction and zero emissions can’t be adjusted per capita. In order to get to the new 2050 goal, the 2020 goal not only has to be met, but exceeded.

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