3FOOD

Third Industrial Revolution Consulting Group
automatically enrolled after a successful public referendum at the local level, as was done in
Illinois and Ohio; or, enrolled when their local elected representatives (city council or county
board) voted to form or join a CCA program, as happened in California. The opt-in approach is
voluntary but participation rates are traditionally very low which reduces the value of group
purchasing and makes it harder for local programs to achieve economic viability. Opt-out
aggregation achieves the necessary market scale for effective group purchasing, but allows a
customer to switch back to utility service or another energy provider at any time. Either way,
customers always have the choice to stay or go.”
LEAN Energy US further explains: “Because CCA is a revenue-based system—not government
subsidized—such programs are self-supporting from an existing revenue stream.” In other
words, the energy costs that consumers pay to a retail energy supplier or an investor-owned
utility “are bundled and redirected to support the group purchase of energy through a local CCA
program.” This can apply whether the service provided is natural gas or electricity, but it could
also be fuel oil or other energy carriers. As shown in Figure 8 above, there is a clear separation
between energy production and the actual distribution of the different energy resources. As
envisioned here, the partnership with an existing energy supplier as the primary distributor is
one that is negotiated and established within the existing market structure. In California, for
example, the local utility has entered into a partnership with the CCA authority. In this instance,
the retail energy provider benefits from the group purchasing power through lower costs. As
LEAN Energy US notes, the utilities or other energy supplies are “made whole” through cost
recovery surcharges (or exit fees), also covering reasonable profits, as they lose energy sales. At
the same time, the energy supplier retains its ownership and management of “the distribution
infrastructure, and all final energy deliveries, repairs, billing, and customer service functions.”
How might such an authority be administered? In the State of California, there are currently
three management options. The most common approach is through an inter-jurisdictional joint
powers agency (JPA) that serves as a public, non-profit agency on behalf of the municipalities
that choose to participate in the CCA program. This is the model under which Marin Clean
Energy and Sonoma Clean Power operate, for example. A second option is a single city or
county that might structure a CCA through an Enterprise Fund; this is the model under which
Lancaster Energy Choice in California operates. In this option, the CCA is managed “in house” as
a separate program/fund within existing municipal or government operations. Still a third
option involves a commercial or third party management where the CCA’s operations are
delegated by contract to a private firm. This model is new in California so its risks and benefits
are yet to be fully vetted or realized.
What specific approach makes the most sense for Luxembourg? That remains open as it will
also depend on how the LSDFP/SEF might complement the operations and purposes of the CCA.
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