"Community" Vs. "Loose" Franchises

Like municipalization and the muni-lite approach, municipal green aggregation has controversial aspects. In deliberations over California's landmark restructuring legislation, San Francisco-based consumer advocates Toward Utility Rate Normalization (TURN) proposed that local governments become the electricity purchaser for all citizens in their jurisdictions, an approach termed a community franchise. Utilities and many industrial customers objected strongly to the concept, claiming that TURN's proposal invited local governments to incorporate hidden taxes for services unrelated to electricity and, in any case, thwarted customer choice. In response, TURN amended its proposal to allow customers to "opt out" of any local government aggregation program; in this version, known as a loose franchise, the local government would be the default - but not exclusive - electricity provider for citizens.

Ultimately, the state assembly rejected the notion of special aggregation privileges for local governments. California localities, like any other aggregators, will have to convince consumers to "opt in" individually. The most important effect of this is to put the marketing costs of the aggregation program on the local government. To illustrate the effect of this seemingly slight procedural shift, consider that some 80 percent of consumers nationwide remained with their default long-distance provider after deregulation of the telecommunication sector; companies wishing to pry them away required immense advertising and direct marketing budgets.

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