In these challenging economic times every penny saved is a penny earned. Mayors of New Jersey’s Municipalities and Boroughs are in a unique position to help residents and local businesses reduce their energy costs and put these savings in the pocket of their constituents.
This opportunity is offered by a little known legislation, the Government Energy Aggregation Act of 2003 (PL. 2003, C24), that authorizes municipalities and/or counties of New Jersey to establish a Government Energy Aggregation (GEA) program simply by passing an ordinance or a resolution. Contrary to already existing municipal aggregation programs like that offered by the NJ Sustainable Energy Meeting (SEM) which aggregates energy requirements of assets under municipal control. A GEA program allows municipalities, working alone or in a group, to aggregate the energy requirements of residential, commercial and municipal accounts at the same time. This approach gives the opportunity to qualified Third Party Suppliers (TPS) to bid on contracts for substantial quantities of energy (electric and/or natural gas) that are put on the market by municipalities participating in a GEA program.
The GEA concept was first proposed in the Electric Discount and Energy Competition Act (EDECA, P.L.1999, C.23), the legislation that turned New Jersey into an energy procurement deregulated state, as a means to insure competition in the supply of energy to consumers. The initial efforts at building viable GEA programs were frustrated by the requirement in the legislation that the demand of residential accounts could be aggregated only by obtaining the “wet signatures” of the individual home owners. In comments made at the November 12, 2001 meeting of the National Association of State Utility Consumer Advocates, the Director of the New Jersey Division of the Ratepayer Advocate, Blossom A. Peretz stated that “…in July 1999, after the passage of EDECA, the Village of Ridgewood, located in Bergen County, our northernmost and most affluent county, led 14 other surrounding municipalities into an association called Community Choice New Jersey, the largest electric aggregation project in the state. The cooperative effort had the potential to benefit 250,000 residents and businesses by aggregating as much as 2.6 billion kilowatt hours of electricity worth more than $300 million a year. The savings could have potentially been much larger than the 5% to 10% rate reduction mandated by EDECA, which was enacted the previous February. What might have been a model aggregation success story was derailed by the onerous provisions of EDECA. Specifically, the modified opt-out, in which energy suppliers would have had to ring every doorbell to obtain the wet signature of residents wanting to join Community Choice New Jersey, would have been too expensive.”
This obstacle was eliminated by the passage of P.L. 2003, C.24 which states that residential accounts are automatically enrolled in GEA programs with an option to “opt out”. As allowed in the previous legislation, commercial and municipal accounts can join a GEA program by “opting in”. In March 19, 2008, the NJ Board of Public Utilities issued final rules for the implementation of GEA programs in the state (N.J.A.C. 14:4, Subchapter 6).
Cooling America thru Local Leadership (CALL), is a small 501 (c)(3) non-profit organization established with the goal of working with local governments to help them reduce GreenHouse Gas emissions by increasing energy efficiency in their communities and exploring novel approaches to energy procurement. Following up on existing successful implementations of GEA programs (also known as Community Choice Aggregation) in Massachusetts, Ohio and California, states with GEA enabling legislation, CALL has approached several NJ municipalities to inform them of the potential advantages of the NJ GEA programs.
The current NJ legislation and the subsequent BPU rules, contain clauses that make implementation of GEA programs extremely favorable to the end users. Among the most notable features are:
- Low Risk. Municipalities act only as agents for the end users and are held harmless from any liability,
- Low/No Cost. Municipalities can ask the energy suppliers to refund all costs to set up a GEA program,
- Consumer Transparency. The local utilities retain responsibility for delivering, metering and billing customers,
- Consumer protection. Residential accounts enrolled in a GEA program can leave it anytime without liabilities and revert to supply by the local utility,
- Renewable energy opportunities. Municipalities can use some of the savings to purchase electricity with a higher renewable content,
- Control of contract terms and conditions. The supply contract has to follow guidelines dictated by the GEA legislation and the BPU Rules and Regulations.
Properly implemented, GEA programs will turn into a win-win situation for communities and energy suppliers. Several Third Party Suppliers (TPS) in New Jersey are presently engaged in a vigorous campaign to enroll individual residential accounts. This is an enterprise with high marketing costs and fairly long implementation times. GEA programs offer suppliers the following advantages:
- A large number of accounts all at once
- Substantially reduced marketing costs
- Low contract renewal costs
On the other hand, TPS will obtain business only through competitive bids which could result in lower prices than they could get from individual customers. In addition , they will not be in control of the supply contract Terms and Conditions since these will have to follow the guidelines issued by the NJ BPU.
Several TPS interviewed by CALL have expressed a keen interest in working with municipalities if they will pursue GEA programs.
It is a fairly obvious consequence of the GEA approach that the larger the amounts of energy put out for bid, the better the prices and conditions expected. Of the 566 municipalities in New Jersey roughly only 66 may have over 18,000 residential accounts. Smaller municipalities can enjoy the same advantages of scale by joining with other interested municipalities to create a critical customer base. Such a group of municipalities do not need to be contiguous. Counties also could act as an aggregating agency and bring in all interested municipalities under their purview into the GEA. This could be seen as an extension of the Shared Services concept implemented by several NJ counties.
Successfully implemented in other states like Massachusetts (Cape Light Compact), Ohio (NOPEC) and California (Marin Energy Authority), GEA programs have insured that almost one million Americans receive reliable energy at discounted prices thanks to the efforts of their local governments.
Community Clean Energy Aggregation is based on legislation that allows local governments (counties and municipalities) to buy electricity wholesale and sell it to their own businesses and residents. Only 5 states have passed specific legislation that allows community energy aggregation: Ohio, Massachusetts, Rhode Island, New Jersey, and California.