Since the late nineteenth century, a debate has simmered over whether the private or the public sector can better manage the electricity business. Today's regulatory and institutional restructuring of the electric system opens new opportunities for public involvement in the electricity sector. Most promising, by combining its citizens into one large buying group, a municipal government can purchase reasonably priced power generated from clean renewable resources, thus capturing a share of restructuring's economic efficiencies while delivering the environmentally sustainable energy that Americans want. In this paper, we call this policy mechanism green municipal aggregation. Among the reasons local governments might explore alternatives to incumbent electricity providers are the following.
This paper will assess the benefits and potential obstacles to green aggregation by local governments, while noting the potential of municipal aggregation in general to protect and benefit small power consumers. Among the potential advantages of aggregation, green aggregation has received the least attention from local governments. However, it may represent the greatest opportunity for energy innovations to help the economy and the environment.
How costly is green aggregation?
Renewable resources often cost more than conventional alternatives. Municipal green aggregators will have to develop programs that deliver both economic benefits and a cleaner environment. To do so, they might link investments in cost-effective energy efficiency measures, which can total energy usage (and therefore energy bills), to investments in renewable energy systems. Municipalities might also divide the savings from electric commodity purchases between direct customer rebates and the purchase of renewable resources. Above all, policy-makers must show citizens that the local economy will benefit when their electricity purchases support local companies generating power from local renewable resources, rather than distant power marketers.
Is the expertise available?
The electricity sector is complex and unstable. Local authorities may lack the financial and technical expertise to master the complicated details of renewable energy purchasing. Local authorities must demonstrate that their experience in providing diverse services for their constituents - trash pick-up, water, recycling and the like - makes them "natural aggregators," competent to navigate the challenging new electricity market. Are public green aggregation programs more appropriate than private efforts? Skeptics of municipal green aggregation argue that private firms can more efficiently meet demand for green power - if it exists - than governmental programs. Policy-makers seeking to promote renewable energy will need to convey that environmental protection is a public good, perhaps unlikely to be delivered by a competitive marketplace. They must further convince their constituents that green aggregation by local governments will enjoy lower transaction costs than private efforts, while delivering higher standards of consumer protection. At the very least, local governments must aggregate their own municipal loads to patronize sellers of clean energy.
Does the local government enjoy credibility and citizen support for expanding its role?
Many Americans react warily to the suggestion that government should acquire a new function. To initiate green aggregation activities, local authorities will need to demonstrate clearly the public benefits of a clean power system, and assure their constituents that they are capable of carrying out the task efficiently.
Can green aggregation permit customer choice?
Many Americans prize individual choice as a civic right. While some consumers may be delighted to let local governments assume the complicated task of selecting a power provider and negotiating a contract, others may object sharply to what they perceive as a denial of the right to choose. Policy-makers will have to design their aggregation programs either to allow citizens to "opt out" or to convince citizens that the sustainability of the electricity system requires and justifies forced community aggregation. Each of these issues concern political will and credibility. Policy-makers will have to demonstrate that green aggregation will benefit citizens and that the local authorities can deliver an efficient program. Fortunately, several models exist for green municipal aggregation. For inspiration, interested policy-makers can look to Barnstable County, Massachusetts; the City of Portland, Oregon; the Sacramento (California) Municipal Utility District; the Public Service Company of Colorado; and the Izaak Walton League. One thing is certain however - each community will have to adapt the models to its own needs and values.