On February 26, the New York Public Service Commission (“NYPSC”) approved Sustainable Westchester Inc.’s petition to implement a demonstration community choice aggregation (CCA) project in Westchester County, the first such project in New York State. For energy service companies (“ESCOs”), CCA programs have the potential to secure a large number of customers at relatively low marketing costs. This in turn could create the scale to accelerate deployment of value-added services such as home energy management.

Sustainable Westchester, Inc. (“SW”) is a not-for-profit organization comprised of several municipalities in Westchester County. The NYPSC did not address all of the requests made in SW’s December 23, 2014 petition, but did order the creation of a demonstration CCA, and waiver of certain provisions of the Uniform Business Practices (“UBP”). The SW pilot program will now allow municipalities in the county of Westchester more control over energy costs by permitting municipalities to negotiate with energy service companies (“ESCOs”) on behalf of its residents. Any resident not enrolled with an ESCO at the start of the program will be automatically included in the CCA, unless the customer “opts-out.”

About Community Choice Aggregation

In a CCA program, a local government (or group of local governments) passes an ordinance establishing plans to aggregate the energy supply needs of its residents, and if approved, negotiates terms for energy service with ESCOs. Typically, every individual in the municipality is automatically enrolled in the CCA. In what is known as an “opt-out,” individual customers would be free to not participate in the CCA offerings by choosing utility service or an ESCO.

CCA programs can serve as an opportunity to introduce large numbers of customers to retail competition without the risks posed by the current retail choice model. Aggregation of large numbers of customers creates negotiating power, allowing municipalities to find better prices for customers, as most CCA programs in other states offer fixed prices. Due to the scale and reduced marketing costs provided by aggregation, retail customers may also be provided with the lower supply costs usually obtained by commercial and large industrial customers. Additionally, customers enrolled in the CCA have all the same protections as other ESCO customers. For the municipality, CCA allows local governments the flexibility to set their own energy goals based on local input, and to develop distributed energy resources.

How the Sustainable Westchester CCA Will Work

Similar to other CCA programs, the SW CCA will enroll customers on an opt-out basis. Customers already enrolled with an ESCO will not be included in the program, and those customers that opt-out or are not currently served by an ESCO receive default utility service. Large commercial and industrial customers will not be enrolled with the CCA. However, residential and small commercial customers will be enrolled at rates municipalities have negotiated in order to save money, are at a fixed rate, or are contracts for a green product.

Now that the NYPSC has issued an Order approving SW’s demonstration project, each municipality that has approved use of CCA, including the County of Westchester, the Cities of Peekskill and Yonkers, the Towns of Bedford, Lewisboro, North Castle, North Salem, Ossining, and Somers, and the Village of Pleasantville, will issue a request for proposals (“RFP”) to ESCOs. After a contract has been awarded, the municipalities will notify residents and small businesses of their option to opt-out within 20 days. At that point, the utility would have to provide customer usage data, account numbers, and service addresses to the selected ESCOs.

Information and Data Exchange

Central to the success of the CCA is information and data exchange between the municipality, ESCO, and the utility. Current UBP procedures require affirmative consent from customers in order for there to be information exchanges between the utilities and ESCOs, for customer enrollment into a supply program, and for switching between service providers. However, in order to enroll a municipality’s worth of customers, individual affirmative consent is impractical and costly. Utilities are in possession of customer usage data that the municipality would need to provide to ESCOs both during contract negotiations and once an ESCO has been chosen. SW asked that the NYPSC require Consolidated Edison Company and New York State Electric & Gas Corporation to provide certain customer information in order to facilitate the enrollment of customers. SW also requested that the NYPSC be granted a waiver of certain UBP requirements restricting this information transmittal.

The NYPSC granted both of SW’s requests, waiving those provisions of the UBP that would prevent such information from being exchanged, and ordering the utilities to release customer data. In order to protect customer data, the utilities will only provide aggregated usage and capacity tag data to the municipality after the NYPSC has received and reviewed a letter attesting to the municipality’s authority to implement a CCA. It will be the municipality’s responsibility to notify its residents and commercial customers of the implementation of the CCA, customer opt-out options, and links to the information about the CCA.

Renewable Energy and Energy Efficiency

One of the advantages to CCA is that municipal governments can collaborate with ESCOs, DER providers, and utilities to engage in energy planning. SW requested the establishment of an energy efficiency tariff, along with the “Open Underwriting Resource Service” energy fund to finance demand response and micro-grid development. The NYPSC declined to make a determination on these items, citing a lack of detail in SW’s petition about the implementation of these programs. NYPSC did state that CCA participants will continue to contribute to state-mandated energy efficiency and clean energy funds through distribution charges. This would not preclude an order implementing such energy initiatives in the future, however.

CCA and REV

The Commission has indicated that CCA can help achieve the Commission’s longstanding goals, as outlined in the Renewing the Energy Vision (“REV”) initiative, of achieving wider deployment of distributed energy resources and of increasing the participation of, and benefits to, residential and small non-residential customers in retail energy markets. However, out of all of the proposals made in the SW petition, the NYPSC only ordered the implementation of the CCA program and necessary wavers of the UBP. The NYPSC declined to commit to the four year program, instead ordering a compliance filing due after 13 months outlining costs and customer participation.

The NYPSC continues to request input on a number of CCA topics pursuant to REV, including whether ESCOs and non-ESCO customers should be given the same opt-out options, if permanent changes need to be made to the Uniform Business Practices, or if the general structure of CCAs should be changed. Any orders made in this proceeding will affect the SW CCA unless contrary to the Order authorizing the demonstration project. The NYPSC has opened Case No. 14-M-0224 to examine these potential challenges, and will be accepting comments until April 1.