A Greg at Ion Electric Consumer

ELECTRIC CONSUMER
AGGREGATION OPTIONS:
An Introductory Guide for Non-Profits, Local
Governments, and Community Leaders
Caroline Sahley
May 2001
IN COLUMBUS: IN CLEVELAND:
7870 Olentangy River Road 2012 West 25th Street
Suite 209 Suite 917
Columbus, Ohio 43235 Cleveland, Ohio 44113
Voice: 614-985-6131 Voice: 216-861-4491
Fax: 614-888-9716 Fax: 216-861-4492
Toll-free: 1-866-GREENOH
geo@GreenEnergyOhio.org
www.GreenEnergyOhio.org
Acknowledgements
Green Energy Ohio would like to recognize the Benjamin S.

Gerson Family Foundation and the Gerson-Margolis Foundation
for making this report possible through their generous support.
GEO would also like to thank David Rinebolt of the Ohio

Partners for Affordable Energy and Jason Gifford of Green
Mountain Energy Company for reviewing earlier drafts of this
publication. Green Energy Ohio is solely responsible for its
contents.
Electric Consumer Aggregation Options:
An Introductory Guide for Non-Profits, Local Governments
and Community Leaders
1 CONSUMER CHOICE AND ELECTRICITY . . . . . . . . . 6
1.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . 6
1.2 Aggregation and the Small Consumer . . . . . . . . 9
1.3 Ohio’s Aggregation Provisions and Definitions . . 12
1.4 Study Objectives . . . . . . . . . . . . . . . . . . . 13
2 AGGREGATION MODELS AND STRATEGIES . . . . . . . . 14
2.1 Types of Aggregation Pools . . . . . . . . . . . . . 14
a) Governmental Aggregation (15)

b) Affinity Aggregation (16)
c) Internet-based Aggregators (17)
d) State/Public Entities as Aggregators (17)
e) Institutional and Governmental Aggregation
(18)
f) Green Power Aggregation (18)
2.2 Key Issues in Forming an Aggregation Pool

. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
a) Forming a Buying Pool (22)
b) Assessing the Load Profile (22)
c) Issuing a Request for Proposals (24)
d) Negotiating the Terms of a Contract (24)
2.3 Aggregation and Residential Customers . . . . . 25
3 GOVERNMENTAL AGGREGATION: COMMUNITY CHOICE

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.1 Benefits of Community Choice . . . . . . . . . . 26
Electric Consumer Aggregation Options
3.2 A Slow Start to Community Choice: The Cape Light

Compact: . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.3 The Northeast Ohio Public Energy Council

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.4 Conclusions: Local Governments as Aggregators

. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4 AFFINITY AGGREGATION . . . . . . . . . . . . . . . . . 37
4.1 Introduction: Aggregation by Non-Profits . 37
4.2 PowerOptions: The Massachusetts Non-Profit

Energy Purchasers Consortium . . . . . . . . . . 38
4.3 Trade Associations . . . . . . . . . . . . . . . . . . 41
4.4 Residential Aggregation . . . . . . . . . . . . . . 43
4.5 Conclusions . . . . . . . . . . . . . . . . . . . . . . 44
5 CONSUMER AGGREGATION: A MODEL FOR LOW-INCOME

POPULATIONS? . . . . . . . . . . . . . . . . . . . . . . 46
5.1 Introduction . . . . . . . . . . . . . . . . . . . . . 46
5.2 Serving Low-income Groups . . . . . . . . . . . . 47
5.3 Consumer Cooperatives: Reaching Out to

Low-Income Households . . . . . . . . . . . . . . . . . 50
a. Boston Oil Consumers Alliance (51)
b. Connecticut Energy Co-op (51)
c. New Hampshire Consumer Utility Cooperative
(52)
5.4 Community Action Agencies . . . . . . . . . . . . 53
5.5 Aggregation by the Public Sector: Ohio’s Energy

Assistance Program . . . . . . . . . . . . . . . . . 57
5.6 Conclusions . . . . . . . . . . . . . . . . . . . . . . 57
6 AGGREGATION AND GREEN POWER . . . . . . . . . . . . 60
6.1 Aggregation: The Key to Developing a Market for

Green Power? . . . . . . . . . . . . . . . . . . . . . 60
6.2 Green Power Aggregation: The Role of Co-ops . 61
6.3 Governmental Aggregation and Green Power

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.4 Affinity Aggregation: The Role of Environmental and

Faith-based Groups in Aggregating Green Power 64
6.5 Concluding Remarks . . . . . . . . . . . . . . . . . 66
7 SUMMARY CONCLUSIONS . . . . . . . . . . . . . . . . . . . 68
8 APPENDICES . . . . . . . . . . . . . . . . . . . . . . . . . . 72
APPENDIX A: Ohio communities that voted on

governmental aggregation, November 2000 . . . . . 72
APPENDIX B: Communities included in the Northeast

Ohio Public Energy Council (NOPEC) . . . . . . . . . . 74
1
CONSUMER CHOICE AND ELECTRICITY
1.1 Introduction
Introducing competition into the retail electricity market will

lead to lower prices and better service. Large, bureaucratic utilities
will become more competitive, not only in their pricing, but in their
customer services. Utilities will spin off retail companies that are
more attuned to the needs of their customer base, developing an
identifiable, “brand” name through an expanded range of services,
lower prices, or environmentally friendly generation. A new
generation of power marketers will emerge to meet consumer
demand, increasing market efficiencies. In the long run, competition
will ultimately drive down prices, benefitting both residential and
business consumers.
These are the assumptions driving the current trend toward

electricity deregulation across the nation - assumptions that are now
being sorely tested. The notion that competition will naturally result in
lower prices and better service is being challenged, and growing
evidence suggests that deregulation is not a panacea to remedy the
electric industry’s ills.
The pioneering case of California, once upheld as a model to

follow, is now touted as an example of how deregulation can go
wrong. In the summer of 2000, electricity rates skyrocketed more
6
1 Consumer Choice and Electricity
than 100% in San Diego, leaving consumers reeling. A severe power

crunch in early 2001 brought rolling blackouts to California consumers1.
California’s electricity market, moreover, ended up not being very
competitive, with only 2% of residential consumers switching suppliers
in the first twenty months of competition2. Most of those who
switched did so out of a desire to purchase green power, not because
they were lured by many competing offers of cheaper power. Even in
Pennsylvania, where the market is more competitive, only 500,000
consumers statewide have changed suppliers3.
The case of California may offer many useful lessons for

policymakers and regulators in other states as they set deregulation
policies. Many of the problems faced in California could have been
prevented, and with more deft policymaking can be avoided in other
states. However, the main question that the case of California raises
still remains unanswered: Is deregulation necessarily good for
consumers? How will residential consumers fare? Will it deliver on its
The 2001 power shortage in California is due in part to growing demand for
electricity coupled with the slow growth of in-state generation. Transmission
constraints make importing power difficult and low hydro levels in the Pacific
Northwest contributed to power shortages. More significantly, long-term, fixed price
wholesale contracts are not permitted, requiring suppliers to buy electricity on the
Power Exchange. This makes them vulnerable to price fluctuations and spot pricing.
2
California Public Utilities Commission data, December 1999, cited in Nancy Rader and
Scott Hempling, Promoting Competitive Electricity Markets Through Community
Purchasing: The Role of Municipal Aggregation, American Public Power Association,
January 2000.
3
As of January 2001, 568,492 consumers are being served by an alternative supplier.

Pennsylvania Electric Shopping Statistics, PA Office of the Consumer Advocate,
January 2001.
7
promise of lower cost power or will it provide limited savings and

weakened consumer protection?
Critics of deregulation contend that residential consumers gain

few if any benefits from competition. While large commercial and
industrial customers are attractive to retail electricity suppliers and
can use their purchasing power to negotiate lower rates, residential
consumers may find that their bargaining power is limited. Fewer
retailers are interested in competing for their business, and consumers
are quickly finding that policymakers have tended to overestimate
potential savings to residential customers. Consumers are being left
with empty promises and nearly imperceptible savings.
The ability of small consumers to benefit from deregulation

was also dealt a hard blow by the large scale award of stranded costs
to utilities. Stranded costs -) multi-billion dollar debts largely incurred
through investments and cost overruns on nuclear power plants -) are
theoretically unrecoverable in a competitive market4. Regulators
across the country are awarding utilities billions in stranded costs, to
be paid by consumers, regardless of their choice of electric supplier.
Stranded costs are estimated at nearly $30 billion in California, and
$12 billion in Massachusetts. 5 In Ohio, the stranded cost award to First
Energy alone is $8.8 billion.
In a regulated, monopoly market, utilities planned to recover stranded costs with a

fixed number of customers over a long period of time. Stranded cost recovery
accelerates the collection of these costs. However, the key question this raises is
whether this cost should be born by ratepayers - or shareholders.
5
Robert Wallace, “Power Play”, The American Prospect, no 42, January-February,

1999.
8
In this uncertain context, consumer advocates have been

promoting a wide range of policies designed to help residential
consumers. Rate freezes, mandated rate cuts, renewable portfolio
standards, low-income programs, and systems benefit charges are
merely a few of the policy tools that legislators have at their disposal
to protect consumers. Increasingly, legislators are looking closely at a
combination of these policies to extend the benefits of deregulation to
small scale consumers. These palliative measures offer some degree of
consumer protection.
One policy that has generated intense interest among consumer

advocates is aggregation. Aggregating the demand of large numbers
of consumers for bulk purchasing is not a new idea. Energy purchasing
cooperatives have bought gas and oil in bulk with proven benefits to
consumers, while business associations have a long history of procuring
goods and services for their members. Extending that model to
electricity is one way that consumers might be able to improve their
savings potential.
1.2 Aggregation and the Small Consumer
Whether electricity deregulation will ultimately be good for

consumers is still open to debate. Our national experiment in
deregulation is just beginning, and retail electricity markets in
deregulated states are still far from mature. It is difficult to predict at
this early stage whether in the near future electricity suppliers will
9
develop a range of services in response to consumer needs, and

whether competition will stimulate new suppliers to enter markets,
providing for meaningful consumer choice in terms of products. At
minimum, consumers are released from the monopoly power of the
incumbent utility. The ability to switch away from an unsatisfactory
supplier is not an insignificant benefit for both large and small
consumers.
On balance, there is cause for concern. Competition creates

some dangers, particularly for residential consumers. The impact of
deregulation will vary among different consumer classes. Large
industrial consumers may be first in line to buy the cheaper power,
leaving residential consumers to fend for themselves in an open
market.
Part of the problem is that the market for residential

consumers is not often very competitive. The lack of a dynamic
market for residential consumers is due to a variety of converging
factors. Residential consumers are not seeing significant savings, and
are not switching suppliers in large numbers. Consumer inertia further
exacerbates this problem, as few consumers are willing to invest the
time in sorting through a variety of offers and compare suppliers,
especially given the relatively small savings possible. The Midwest
Energy Research Center suggests that 10% savings are needed to
induce significant switching.6 Actual savings are often lower.
Dave Rinebolt, Will Residential Customers Benefit from Restructuring, Deregulation

and Retail Competition?, Midwest Energy Research Center, 1999.
10
Conversely, from the supplier’s point of view, the residential

consumer market may not be very attractive. The cost of marketing
for individual consumers is high, making residential consumers an
unattractive market segment. Some suppliers, including Enron in
California, found the residential market to be unprofitable as a result
of the high per-transaction costs. The CEO of Enron, Ken Lay, has
warned suppliers to expect losses on every small customer served. 7
Aggregation, therefore, does not simply depend on volume

purchases to get the generation price of power down. By developing
large purchasing pools, it improves market efficiencies by lowering the
administrative and marketing costs to retail electric suppliers of
reaching the residential market. In fact, some have gone so far as to
argue that suppliers perceive aggregators not as buyers but as
marketing subcontractors. 8
The potential benefits of aggregation as a public policy tool,

therefore, extend beyond bringing savings to residential and small
business consumers. It can in fact stimulate the residential market, by
making it more attractive to retail electric suppliers.
1.3 Ohio’s Aggregation Provisions and Definitions
Jack Lyne, Power Deregulation: A Bumpy Road Begins the Free-Market Ride, Site
Selection, August/September 1998.
8
Barry Ingber, An Oil Co-op’s Experience Marketing Green Electricity, paper

presented at EPRI Green Power Conference, 1999.
11
Ohio’s electric restructuring legislation was passed in 1999.

Three types of aggregation are allowed under this legislation. First,
the Ohio law permits governments, including municipalities, townships
and counties to act as aggregators. Secondly, “voluntary” aggregation
or aggregation by private entities is permitted. Third, the statute
specifies that low-income customers enrolled in benefits programs can
be bid out as an aggregated pool by the Ohio Department of
Development.
Both governmental and non-governmental aggregators are

required to be certified by the Public Utilities Commission of Ohio
(PUCO). The PUCO sets out the following definitions:
• Aggregation: Combining the electric load of multiple retail

customers through an agreement with the customers or
formation of a governmental aggregation pursuant to Section
4928.20 of the Revised Code for the purpose of purchasing
retail electric generation service on an aggregated basis.
• Aggregator: a person who contracts with customers to combine

the customers’ electric load for the purpose of purchasing retail
electric generation service on an aggregated basis. The term
does not include a governmental aggregator.
• Governmental Aggregator: The legislative authority of a

municipal corporation, the board of township trustees of a
township, or a board of county commissioners of a county, that
aggregates the citizens of a municipal corporation, township,
or unincorporated areas of a county in accordance with Section
12
4928.20 of the Revised Code for the purpose of purchasing

retail electric generation service on an aggregated basis. 9
1.4 Study Objectives
This study aims to outline the options and models of

aggregation available in Ohio to aggregate consumer demand for
electricity purchases. It provides a preliminary assessment of some of
the benefits and potential obstacles to different aggregation models.
Where available, representative case studies have been used to
illustrate these strategies.
A particular focus of this study is identifying prospects and

options for aggregating low-income groups, a particularly challenging
target group to aggregate. In addition, this report highlights
strategies for green power purchases.
It is important to note that aggregation of residential

consumers is a new and largely untested tool in the electricity
market. It is still too soon for conclusive answers to the key question
of whether this is an effective strategy for residential consumers. This
study aims to highlight the potential obstacles to, and benefits of,
aggregation as suggested by these early experiences.
Competitive Retail Electric Service Provider Certification Applications and Filing

Instructions, Public Utility Commission of Ohio, 2000.
13
2
AGGREGATION MODELS AND STRATEGIES
2.1 Types of Aggregation Pools
Aggregating consumer loads into larger purchasing pools can be

achieved in a variety of ways, differing in terms of type of entity
managing the aggregation as well as in member composition. The
organization acting as aggregator can span the range of non-profits,
municipalities, for-profit energy brokers, and state entities. The case
studies that follow highlight a wide range of organizations that have
initiated aggregation processes, including business associations,
consumer cooperatives, and non-profit organizations. These
organizations exist for the purpose of benefit of their members, and
may wish to provide electricity purchasing as an additional benefit to
their members.
The membership composition of aggregation pools, similarly,

can differ widely. Members of purchasing pools can be selected on the
basis of geography, customer market segment, or affinity grouping.
Common target groups include commercial and industrial customers,
residential consumers, low-income households, and institutional
customers, such as hospitals and universities. Although the vast
majority of aggregation pools are formed with the objective of
securing the lowest rate of electricity possible, a growing number of
aggregations are forming for the specific purpose of procuring
renewably generated green power.
14
2 Aggregation Models and Strategies
Aggregation models can be loosely grouped into five categories.

There is no one model that is simpler, easier or right for a given
target group or objective. Each has its own unique advantages and
disadvantages. Although more extensive case studies follow in
subsequent chapters, some basic models are outlined below.
a) Governmental Aggregation
Governmental aggregation, also known as community choice,

allows local governments to purchase electricity on behalf of their
residents. Community choice legislation was pioneered in
Massachusetts, where it was championed by a local government
official. Bipartisan support helped Ohio become the second state to
explicitly include a governmental aggregation provision in its
deregulation legislation of 1999.
There are many advantages to aggregation by local

government. Local government officials are directly accountable to
their constituents, and are open to public scrutiny. Their actions are
not driven by the profit motive; rather, their responsibility is to seek
the best service for their community. Organizational capacity is also
an important issue to consider. Municipalities and counties are
experienced at handling large scale service provision and are equipped
with the resources and legal skill to implement a large scale
aggregation.
Governmental aggregation differs from municipal utilities and

rural electric cooperatives that assume responsibility for distribution
15
and transmission. The role played by municipal aggregators is limited

largely to negotiating the purchase of electricity.
In November 2000, more than 100 communities in Ohio voted

to allow their local government to purchase electricity on their
behalf 10.
b) Affinity Aggregation
Affinity aggregation is so called because it draws its members

from a group that has similar characteristics and interests. Rather
than being defined geographically, as in governmental aggregation, its
membership is comprised of a group sharing a commonality, such as a
manufacturer’s organization, farmers, retired persons or
environmentalists in a green power pool. In many cases, affinity
aggregations are formed on the basis of an existing organization,
with a clearly defined and extensive membership base.
The recent effort of the Ohio Farm Bureau to aggregate

residential and commercial farm interests provides a good example of
how existing organizations can become the basis for a successful
aggregation. Non-profit organizations, including cooperatives, trade
associations, or 501(c) 3 organizations can expand their range of
services to include electricity procurement, or an organization can be
created specifically for this purpose.
Most successful experiences of this type include trade

associations which aggregate commercial customers. Business
10
See Appendix A for complete list of communities voting on community aggregation.
16
associations often already aggregate the members’ demand to receive

lower rates for services, such as health and property insurance, credit
card processing, and other services, and as such are well poised to act
as electricity aggregators. However, a growing number of
cooperatives and other entities are targeting residential consumers.
c) Internet-based Aggregators
In Pennsylvania, several internet-based aggregation programs

have emerged which solicit interested consumers over the internet
within a certain service area. When enough consumers have signed up
to form a pool, bids are accepted for that pool. The supplier that
offers the best price supplies the electricity to those consumers in the
pool.
These aggregation pools are unlike those described earlier in

that they are not based on any type of natural affinity or existing
group. The customers are not members of a certain organization, and
do not necessarily share any key characteristics in common (apart
from computer literacy). Commercial aggregators assume the risk of
forming an aggregation pool, and assume the marketing cost of
forming such a pool.
d) State/Public Entities as Aggregators
One of the interesting elements of the Ohio legislation is that it

expressly authorizes the Ohio Department of Development to
aggregate consumers that benefit from low-income energy assistance
programs. Beneficiaries of the Universal Service Fund assistance
programs will be pooled and bid out to electric suppliers. Although low-
17
income customers might be assumed to be an unattractive pool for a

supplier to bid on, the fact that the State pays for part of the cost of
the electricity provides a partial guarantee on payment. This factor,
and the sheer size of the aggregated load, is likely to attract bids.
e) Institutional and Governmental Aggregation
Companies, local governments, and other institutional

organizations with multiple sites may aggregate their own loads, and
bargain for electricity jointly. This model differs conceptually from
those outlined above, as in this case, the aggregator is not acting as
an intermediary in the process. For example, a company or
institutional entity with multiple facilities could aggregate its own load,
and purchase electricity under a single contract, rather than through
multiple contracts. To do so, an energy consultant/agent might be
hired to facilitate the process and negotiate the contract. One
instance of this is the City of Santa Monica which aggregated the
electricity load of its municipal buildings to purchase electricity
generated by renewable sources.
f) Green Power Aggregation
It is important to note that consumers can come together to

bargain not only for cheaper power, but also for cleaner power. While
aggregation is most often promoted as a strategy to gain access to
the least expensive power possible, it may also have an important role
to play in building a market for renewable energy.
Green power aggregation is not a distinct model of

aggregation; in fact, any of the models listed above could be used to
18
purchase green power. However, the use of aggregation as a tool to

advance a social or public good, such as seeking environmental
benefits, is an intriguing possibility and merits special consideration.
Green power is defined as electricity that is both renewably

generated - that is to say, its supply is replenished at the same rate at
which it is consumed - and is also environmentally benign. Green
power is still in short supply in the United States, and is generally more
costly than conventionally generated sources of electricity.
Green power aggregation can accelerate the development of

the green power market in three key ways. First, because aggregation
can reduce the price of green power, it can make renewable products
attractive to a wider range of consumers. Green power programs on
average capture approximately 1% or less of the market11. An
expanding customer base will be key to stimulating investments in
large scale renewable generating facilities. Secondly, the existence of
large purchasing pools actively procuring green power provides a
concrete demonstration of market demand that can entice green
power marketers to enter a state, or encourage existing marketers to
develop a green product. Third, large scale purchasing pools, such as
governmental aggregations, provide a significant, long-term, and
stable source of demand for green power. This is more difficult to
achieve through individual household sign-ups.
11
In California and Pennsylvania, the most successful states for green power,
approximately 2% have switched to green power. Blair Sweezey and Lori Bird, Green
Power Marketing in the United States: A Status Report, Fifth Edition; National
Renewable Energy Laboratory, August 2000, pg. 7-8.
19
2.2 Key Issues in Forming an Aggregation Pool
By pooling the demand of small consumers, aggregation

strengthens the balance of power between producers and consumers.
The clearest manifestation of greater consumer power is the ability to
bargain for better rates for electricity. However, this is only one of
the potential benefits of bargaining jointly. The use of skilled
professionals in procuring power for many households increases the
ability of consumers to negotiate favorable terms of a contract -) of
which rates and prices are but one component.
As our case studies will show, one of the keys to a successful

aggregation pool is the expertise in negotiating favorable overall terms
of a contract, including length, fees, and guaranteed service. As
Guinane points out:
In a retail competition scenario, how can the individual,
small customer bargain for energy services on an equal
footing with an array of utility companies, marketers,
and holding company subsidiaries? What resources and
options do the parties bring to the table? The small
customer is limited in terms of time, information,
expertise, and option. The so-called “bilateral”
contracts that would result from such a bargaining
process are not likely to fulfill the basic requirements of
a true contract: meeting of the minds, mutuality and
consideration12.
12
Kay Guinane, Group Buying Power: Meaningful Choices for Energy Consumers,
Environmental Action Foundation, May 1997, pg. 9.
20
It is essential to understand that aggregation not only enables

individuals to obtain cheaper power, but provides them with access to
a skilled intermediary to represent them in the market.
Forming an aggregated group can be a fairly complex process.

An aggregator performs a variety of roles, many of which require a
high degree of technical and legal expertise. Few organizations or
small companies have staff with a thorough understanding load
profiling, power procurement and pricing issues. For these reasons,
most governmental and nonprofit aggregators hire a consultant or
agent to perform these essential functions.
One of the most significant questions facing an aggregation

pool is what role it will play in the electric purchasing process. Private
aggregators can act directly as intermediaries between consumers and
sellers of power, by purchasing and reselling the power, and assuming
billing and other functions. Or, more commonly, aggregators act
merely as broker, responsible for negotiating a match between
consumers and sellers of power. This is an importance distinction to
make, and the term aggregator is often used to refer to both of these
very different functions. Guinane13 draws a distinction between these
roles of aggregators as acting either as brokers or marketers, while
Rader and Hempling 14 distinguish between aggregators as buying
agents or retail sellers. Regardless of the terminology, the key
distinction is whether the aggregator purchases power and resells it to
its members, or simply negotiates a contract, but does not take title
13
Kay Guinane, op. cit.
14
Nancy Rader and Scott Hempling, op cit.
21
to the power. The latter option is most often used for its simplicity
and low risk.
The basic steps to a successful aggregation are to a) form the

buying pool, b) assess the load profile of the group, c) draft a request
for proposals that allows electric suppliers to bid on the group, and d)
negotiate the terms and conditions of a contract.
a) Forming a Buying Pool
The initial step of identifying potential customers and forming

a buying group is made easier if the aggregator can build on the basis
of natural buying alliances, sometimes known as affinity groups.
Trade association or other groups with a large membership that share
certain characteristics provide a natural target group. It is more
difficult, requiring considerable marketing, to initiate a group without
such a basis.
b) Assessing the Load Profile
Once the aggregation pool is formed, most likely, an agent or

consultant will be hired to assess the load profile of the group, draft
an RFP, and negotiate the final contract. Analyzing the load profile of
the aggregated group is important prior to drafting the RFP. Suppliers
will be more willing to bid on a group if they can anticipate with a high
degree of certainty what the load size and demand pattern is likely to
be. The logic of economies of scale dictates that a pooled load size
may be enough to obtain lower prices, as the supplier gains multiple
customers with no associated marketing costs and low per-transaction
costs. However, equally or more significant to the economies of scale
22
are load profiles. Aggregation pools may get better rates if they offer
a flat load profile -) one that is fairly consistent both seasonally or
intra-day -) or better yet, if they can demonstrate lower loads at peak
times. A supplier will consider not only the demand for power, but a
flatter load profile and higher load factor (ratio of consumption to
peak demand). A skilled consultant can not only assess the load profile
of a given group, but can help form a buying pool with a more
attractive load profile.
The importance of load issues to the competitiveness of an

aggregation pool can hardly be exaggerated. The president of
Westwood Energy Group, a private aggregator, argues that the key
factor is when a buying group uses power, rather than obtaining flat
load profile or large volume purchases. A group with a flat load profile
or a large scale group that uses lots of power during weekdays and
peak times will be less attractive than a group that uses lots of power
in off-peak times, such as in the winter and during evenings. 15
A key question that emerges at this stage is if those joining the

pool are bound contractually to purchase electricity through the group,
prior to the contract having been negotiated. Suppliers are less likely
to bid on an aggregation pool that has an uncertain load, with no
guarantee that all members will subscribe16. This introduces a larger
degree of uncertainty when determining demand and load profiles,
15
Anne Millen Porter, The Power Buy: What You Need to Know Part II, Purchasing
Online: The Magazine of Total Supply Chain Management, June 5 th 1998.
http://www.manufacturing.net/magazine/purchasing
16
Christine Strobel, Bulking Up, Energy Buyers Guide, 1997.

http://www.energysource.com/ebg/ebgx.html.
23
leaving suppliers with little alternative but to estimate worst case

scenarios17. On the other hand, aggregators may find members
hesitant to commit to purchasing power if the contract terms -)
including price -) have not been determined in advance.
c) Issuing a Request for Proposals
Drafting a Request for Proposals, or Request for Quotes, which

invites electric suppliers to bid on the aggregated group, is the next
step. Including in the RFP the terms and conditions that the
aggregator is seeking can reduce the number of proposals, but will
ensure better matches. Often, the terms and conditions of a contract
are the deciding factor in choosing a supplier.
d) Negotiating the Terms of a Contract
Although most of the key expectations and requirements of

the purchasing group will have been spelled out in the Request for
Proposals, aggregators or their agents will need to consider the terms
that govern the contract. Issues such as a fixed or floating price,
length of contract, cancellation options, collection policies, additional
costs if the load is less or more than projected, are just a few of the
key issues that need to be specified.
17
Porter, op. cit.
24
2.3 Conclusion: Aggregation and Residential Customers
Aggregation has been promoted as a policy tool to extend the

benefits of deregulation into the low-income, residential and small
commercial market segments. Aggregation, moreover, may help
stimulate the competitive retail electricity market by lowering the
costs to electric suppliers of reaching small scale consumers.
Forming an aggregation pool, however, is a complex process,

requiring technical and legal expertise in energy procurement issues.
Aggregating a small group becomes economically viable only when the
savings obtained are greater than the cost of contracting skilled
consultants.
Larger aggregation pools can be formed geographically,

through governmental aggregation or geographically defined co-ops, or
can be drawn from the membership of existing organizations. The
following sections will review case studies of different models of
consumer aggregation.
25
3
GOVERNMENTAL AGGREGATION:
COMMUNITY CHOICE
3.1 Benefits of Community Choice
Consumer advocates in Ohio championed the cause of

“community choice” -) the right of local government to act as
aggregator of a community’s electricity demand. Modeled on a
provision of the Massachusetts deregulation legislation, governmental
aggregation received surprisingly strong bipartisan support in the Ohio
legislature and was included in Ohio’s law.
What distinguishes community choice from more tepid efforts

to encourage governmental aggregation in states such as Michigan is
the ability of local governments to assume the right to aggregate all
residents, if approved by referendum or general vote. One of the
challenges of forming any kind of aggregation pool is the time and
cost it takes to enroll participants in the group. Signing participants
one at a time, known as opt-in aggregation, naturally results in only a
small percentage of the prospective target group joining. Low
switching due to customer inertia is a proven obstacle to forming
aggregation pools, as is cost.
Consumer advocates in Ohio, led by Ohio Citizen Action, pushed

for opt-out aggregation, which empowers local governments to
26
3 Governmental Aggregation: Community Choice
automatically include all residents in the purchasing group18. Residents

are allowed to “opt-out” by specifying that they want to be left out.
Opt-out aggregation uses consumer inertia to its advantage, by
requiring consumers to take action if they want to be excluded from
the pool. In this way, consumer switching inertia actually works in
favor of the aggregation pool, making community aggregation a more
potent force for pursuing savings for large numbers of residential
customers.
The potential benefits and advantages of governmental

aggregation have been widely discussed. These include the following:
• local governments have experience in providing services,

including garbage collection, municipal water and sewer
etc. They have legal resources and are familiar with
processes of issuing requests for proposals and contract
negotiations.
• local governments are publicly accountable 19
18
Governmental aggregators acting as intermediaries for residents should not be

confused with aggregating the load of the municipal buildings themselves.
Community choice refers to the former. There was some confusion generated by the
City of Santa Monica’s program to aggregate the municipal load to buy green power.
Only the municipal owned buildings were included in the contract, not Santa
Monica residents.
19
Matthew Patrick, Community Choice, July 31, 1998. unpub.
27
• opt-in enables the municipality to form a ‘reasonably

predictable’ pool of customers, which is attractive to
suppliers 20
• governmental aggregation is more likely to include a mix of

commercial, residential and government users, resulting in
a balanced load profile.
• Local governments have no profit incentive to sign a deal
that doesn’t benefit consumers.
• Governmental aggregation does not exclude low-income
groups or other market segments that are unattractive to
suppliers, but instead blends them with other consumer
segments21.
The process of setting up a governmental aggregation in Ohio

has four basic steps. First, a city, township or county passes an
ordinance or resolution to aggregate. Second, for an opt-out
aggregation model, the voters must approve the measure by
referendum. Third, the local governments must develop a plan and
hold two public meetings on the plan. Fourth, the aggregating
municipality must seek certification from the PUCO.
Despite the potential benefits of governmental aggregation, to

date, only Ohio and Massachusetts have opt-out governmental
aggregation. Matthew Patrick, a councilman in Massachusetts who
pioneered the concept of community choice, argues that “cities and
towns are, by law and tradition, natural aggregators for their
20
Blossom Peretz, Community Choice Means Competition, Not Slamming, American

Local Power Project, 1998.
21
Nancy Rader and Scott Hempling. op. cit.
28
community” 22. Patrick’s pioneering efforts to set up the first

intergovernmental aggregation program, however, have encountered
a variety of legal and market obstacles to completing their electricity
purchases. The Cape Light Compact was established in 1997 after two
years of study. Yet, by December 2000, electricity had not yet been
delivered under a Cape Light Compact negotiated contract.
In Ohio, local government officials moved rapidly to pursue an

inter-governmental consortium to purchase electricity, with over 100
municipalities placing aggregation on the ballot prior to the advent of
competition. These two case studies are considered below.
3.2 A Slow Start to Community Choice: The Cape Light

Compact
The Cape Light Compact is the first governmental aggregation

program in the nation. It demonstrates an ambitious attempt to form
a multi-city aggregation, comprising 21 towns and two counties in
Massachusetts. 23 The Compact represents approximately 180,000
consumers, including residential, commercial, industrial and
22
Patrick op. cit.
23
Participating towns include Barnstable, Bourne, Brewseter, Chatham, Dennis,

Eastham, Galmouth, Harwich, Mashpee, Orelans, Provincetown, Sandwich, Truro,
Wellfleet, Yarmouth, Barnstable County, Aquinnah, Chilmark, Edgartown, Oak Bluff,
Tisbury, West Tisbury, and Dukes County.
29
institutional customers. The Compact was established to create a

purchasing pool for electricity and to promote energy efficiency
through a fund recovery program established by the deregulation
legislation in Massachusetts. In addition, the Compact aims to
promote renewable energy development.
The first request for proposals was issued in 1998. The first
bids were received in the fall of 1998, and were found to be
uncompetitive. The standard offer of $.035, which most residential
consumers were eligible to receive from the default provider, was
difficult for suppliers to beat.24 This illustrates the critical importance
of setting the price to compare, or standard offer, at a price high
enough to enable new entries to the market to be competitive.
Although rates in the Commonwealth Electric territory are relatively
high, the low standard offer price set by regulators acts as a barrier to
competition.
The standard offer in Massachusetts is slated to increase over

the next few years, to 4.2 cents in 2002, 4.7 cents in 2003 and 5.1
cents in 2004.25 This gradual transition to a competitive market has
hampered the development of a robust, competitive supply of
electricity.
A second effort to find a competitive supplier was launched in

January 1999. The second RFP resulted in four bids that were able to
supply electricity at a cost lower than the standard offer. Negotiations
24
Cape Light Compact to Try Again. LEAP Letter September-October 1998.
25
Press Release, Cape Light Compact and Select Energy Announce Landmark Contract.
1999.
30
with potential suppliers began shortly thereafter, and Select Energy

was chosen as the supplier to the Compact members. This process hit
an unanticipated obstacle when the Massachusetts Municipal
Association claimed that they had an existing agreement with Select
Energy that gave them exclusive rights to serve cities and towns in
Massachusetts. As contract negotiations became deadlocked, several
municipalities joined a private aggregator (PowerOptions) to supply
their buildings with power.26 Cape Light Compact members remained
on the standard offer, receiving their electricity from Commonwealth
Electric.
The contract negotiated with Select Energy addressed the

fundamental market obstacle presented by the low standard offer.
The contract spelled out a gradual phasing-in of customers to the Cape
contract, starting with large accounts in December 2000, and including
municipal and medium commercial accounts in 2001. Residential
consumers would be brought into the pool in 2002.
As contract negotiations with Massachusetts Municipal

Association progressed, a more intractable problem emerged to throw
the Cape Light Compact once again off its plans. Increasing prices in
the wholesale power market led Select Energy to invoke a clause in the
contract which allows it to defer service provision until supply prices
normalize. If this provision is triggered, the Compact would also have
the right to search for another supplier. At the time of this writing, it
is unclear if the deal will go ahead. The latest string of difficulties
encountered by the Cape Light Compact illustrates that deregulation
does not automatically create a robust competitive market.
26
For more information on PowerOptions, see section 4.2.
31
3.3 The Northeast Ohio Public Energy Council
The Massachusetts legislation which enshrined the principle of

community choice was pursued by consumer advocates in Ohio. Ohio
Citizen Action brought Matt Patrick, the Executive Director of the
Cape Light Compact, to Ohio to testify before legislative hearings.
Gaining the support of the Ohio Consumers’ Counsel, the measure
received strong bipartisan support in the legislature, and was included
in the final bill.
Many Cleveland area mayors immediately began to set the

wheels in motion. Parma was the first city to get voter approval to
aggregate in March 2000. More than one hundred municipalities
followed, placing the issue on the ballot on November 7, 2000. The
concept of aggregation was overwhelmingly approved, with 132 of 136
communities voting in favor. Some local governments were eager to
sign up early to receive a block of low cost, MSG (Market Support
Generation) power that First Energy was making available to suppliers,
as negotiated under its transition plan. Cities also began the second
step of the process: applying to the PUCO for the certification
necessary to become aggregators.
Discussions also began, led by City of Brookpark Mayor Coyne,

to create a multi-city aggregation, joining many of the communities
that had passed referendums27. The Northeast Ohio Public Energy
27
See Appendix B for a complete list of all NOPEC communities.
32
Council of Governments, or NOPEC, was created as the legal entity

that would act as aggregator.28
In early 2001, NOPEC received nine bids, of which two were

deemed responsive and of sufficient interest to pursue29. In the spring
of 2001, NOPEC signed a ground-breaking agreement with Green
Mountain Energy Company. NOPEC signed a six-year contract on
behalf of 94 communities spread over eight counties in Northeast
Ohio, representing an estimated 400,000 consumers. This agreement
is notable both for its size -) the first large scale community choice
aggregation -) and for the fact that Green Mountain Energy Company
is a leading supplier of cleaner and renewable energy.
The agreement calls not only for 2% renewable energy

immediately, but includes a commitment to install wind and solar
facilities in Ohio. The key components of the agreement include:
! 98% of electricity supply will come from natural gas-fired

facilities or other general sources of equal or lesser
emissions characteristics
28
NOPEC has also successfully lobbied the Ohio legislature to amend a law that governs
gas aggregation. The House-passed version would have limited the aggregations to
only 50,000 customers, thus denying NOPEC the right to represent its entire 400,000
customer base.
29
Many suppliers had difficulty meeting transmission requirements. In addition,

shopping credits in First Energy territory have been set near the wholesale price,
making it difficult for suppliers to be competitive. It is likely that at least some of
these bids were dependent upon the availability of Market Support Generation
power, most of which was bought by the city of Parma’s aggregation.
33
! 2% will be generated by qualified renewable energy

facilities
! service delivery commences September 2001
! commitment to build new wind facilities in Ohio
(approximately 10 megawatts)
! commitment to install solar facilities (approximately
100kW)
! minimum savings estimated at 1% for 2001-2001, and 1.5%
for 2005-2006
! estimated $10 million in savings over the life of the
contract30
It appears that NOPEC’s efforts to aggregate will be free from

the unexpected obstacles that thwarted the Cape Light Compact. Ohio
has emerged as a national leader in governmental aggregation, and
provides an important testing ground both for multi-county purchasing
pools and the use of aggregation to spur the development of green
power. Although the initial percentage of green power might appear
rather limited, 2% renewable generation of a large load representing
400,000 customers is not insignificant. In conjuction with natural gas
generation, the electricity product being sold has very low emissions,
particularly in comparison to the regional average.
Perhaps most importantly, the pioneering case of NOPEC

reveals that cleaner sources of electricity can be competitive in a
deregulated market. The aggregation pool enabled Green Mountain
Energy Company to extend its reach beyond the small green power
30
Personal communication, Jason Gifford, Green Mountain Energy Company, March

2001.
34
market of environmentally aware individuals, to the larger community.

Large scale aggregation, moreover, can give suppliers the long term,
stable demand needed to encourage investment in new renewable
energy facilities. 31
3.4 Conclusions: Local Governments as Aggregators
Community aggregation as a concept has the potential to

provide substantial savings to segments of the community unlikely to
benefit much from electricity deregulation. Community choice,
moreover, is inclusive in its approach, blending residential demand
with commercial and industrial consumers. Local governments also
have the essential advantage of having the organizational capacity to
become aggregators. Their experience with RFPs, negotiating service
contracts, and in-house legal resources make them well-suited to
becoming an aggregator -) a claim that cannot be made for many
other types of groups. The lack of profit motive, moreover, ensures
that contract negotiations are driven by what is best for the
community.
In practice, however, obstacles to governmental aggregation

exist. Only two states have passed opt-out aggregation -) an essential
provision for effective community aggregation. The first two efforts
at governmental aggregation, moreover, reveal that the lack of a
dynamic competitive market results in few bids or savings
31
For more on green power aggregation, see Chapter Six.
35
opportunities. Market constraints, created in part by low standard

offer power, allow few suppliers to competitively bid even on large
aggregation pools. As competitive markets mature, a greater range of
savings opportunities are likely to become available.
36
4
AFFINITY AGGREGATION
4.1 Introduction: Aggregation by Non-Profits
Although community choice aggregation has generated a lot of

interest in Ohio, it is important to recognize that communities are not
the only entities that can aggregate consumers for electricity
purchases. In fact, most examples of aggregation conducted in the
U.S. to date have been initiated by a wide variety of organizations,
trade associations and non-profits. This is due in large part to the fact
that few states have included effective community choice provisions in
their deregulation legislation. Yet, this is not the only explanation.
Non-profits, and for-profit private aggregators, may have other
advantages and unique characteristics that enable them to become
effective aggregators.
Most existing case studies of affinity aggregation have been

pioneered by the institutional and business sector. Trade associations
and other affinity groupings have either become licensed aggregators
themselves, or partnered with for-profit aggregators.
This chapter outlines several models of affinity aggregation,

from the successful Power Options in Massachusetts, that represents
the loads of non-profit institutions, including hospitals and universities,
to Chambers of Commerce that assist business members, and
organizations like the Farm Bureau that assist with residential
electricity purchases.
37
4.2 : PowerOptions: The Massachusetts Non-Profit

Energy Purchasers Consortium
PowerOptions provides an extraordinarily successful model of

non-profit organization that aggregates the demand of institutional,
rather than residential, consumers. PowerOptions is one of the largest
examples of aggregation in the country, with a combined load of over
400 megawatts of power.
The PowerOptions program was launched in 1996 to enable

non-profit organizations in Massachusetts to form an energy
purchasing coalition. By July 2000, more than 400 PowerOptions
members had signed contracts totaling over 400 megawatts of
electricity. The successful aggregation model was named as one of 25
finalists in the 1998 Innovations in American Government Awards
competition sponsored by Harvard University and the Ford Foundation.
PowerOptions is also being licensed for replication in other states, and
is currently being expanded into Maine.
PowerOptions is a 501(c)3 subsidiary of the Massachusetts

Health and Educational Facilities Authority (HEFA), an independent
public authority that issues tax exempt bonds to finance capital
projects for non-profit institutions. PowerOptions was launched in
1996, well in advance of the 1998 deregulation of the state’s electric
utilities. One reason that the PowerOptions program has been so
successful in enlisting a wide base of support within the non-profit
sector is that HEFA was already widely known and had established
itself as a credible organization. Using its extensive networks with
38
4 Affinity Aggregation
large non-profits, such as hospitals, schools and universities,

PowerOptions was able to ensure a core base of electricity users with
high levels of electricity demand, essential to forming an aggregation
collective large enough to be of interest to utilities and power
marketers. HEFA’s existing clients had major purchasing power, and
as a result, HEFA was well positioned to form an attractive
aggregation pool. PowerOptions acts as an aggregator for both
electricity and gas purchases.
The institutions that comprised the PowerOptions purchasing

pool, moreover, had complementary load profiles. Hospitals are fairly
consistent with their daily and yearly load profiles, demonstrating a
slight peak in the dead of winter and in mid-summer, which coincides
with the winter and summer breaks of schools and universities. Taken
as a whole, the load profile of the PowerOptions customers was
relatively steady and balanced.
Finally, the larger non-profit institutions that comprised the

core of PowerOptions are particularly desirable customers for an
electric supplier. Hospitals, museums, and universities are not only
large power consumers, but are financially secure and reliable
customers.
Requests for proposals were issued, and in 1997, a remarkable

27 electricity suppliers bid for PowerOptions customers. The size and
profile of the PowerOptions pool proved indeed to be attractive to
suppliers, and PowerOptions began the task of negotiating a contract
favorable to its member organizations. In the end, PowerOptions
struck a hard bargain with PECO Energy Co. of Pennsylvania. Included
39
in the deal was a fixed price over the life of the contract, short term
(two year) options, uninterruptible power, and discounts for
employees of participating non-profits. More significantly, PECO
reimbursed PowerOptions for a significant proportion of its start up
costs -) which were approaching $1 million.
PowerOptions acts as a broker between its members and PECO.

It does not assume ownership of the electricity. PowerOptions
members sign contracts directly with PECO -) and are entitled to all
the benefits negotiated by PowerOptions. Members are under no
obligation to sign the PECO contract and purchase their electricity
through the collective, if they deem it not to be in their best interest.
Not surprisingly, the majority of PowerOptions members have signed
on. The terms and conditions that have been negotiated, in particular
the short term contract, are attractive to most organizations and
institutions. In addition, the savings are estimated at 6-13% below the
standard offer32.
Why has PowerOptions been so successful in its efforts to

increase the benefits of electric competition to the non-profit sector?
This case study shows clearly that in terms of aggregation, bigger is
indeed better. The sheer size and scale -) nearly 7% of the state’s
electricity consumption -) of the PowerOptions purchasing group
enabled it to increase its negotiating power with electric suppliers.
However, size alone is not enough. Skill, legal expertise and
persistence in negotiating terms of the contract also plays a critical
role. PowerOptions invested a substantial amount up front to hire
attorneys and consultants to help negotiate a solid contract. The new
32
Interview, Angela O’Conner, Power Options Operations Manager, September 2000.
40
organization had extraordinary up-front expenditures to draft an RFP

and RFQ, and negotiate the supply contract. According to
PowerOptions Operations Manager Angela O’Conner, this was crucial to
the success of the program. The negotiated deal had to include terms
and conditions that would be better than those that could be
negotiated by even large institutions, such as members Harvard and
Boston College. Without a good contract, larger institutions -) whose
presence makes the aggregated group attractive to electric suppliers -
) will likely leave the group to put together their own deals.
4.3 Trade Associations
Trade associations have traditionally been involved with many

types of bulk purchasing strategies. Chambers of Commerce and other
business groups have pooled health insurance and other services for
the benefit of their members. The existing membership provides a
natural base for forming a cohesive aggregation pool.
Business associations across the country are jumping into

electricity aggregation. The California Manufacturers Association, for
example, obtained an 8% average discount for its 1,000 members. 33
The California Retail Association signed an agreement with New
Energy Ventures, a commercial load aggregator that will act as broker
33
Jack Lynne, Power Deregulation: A Bumpy Road Begins the Free-Market Ride, Site
Selection Magazine, August-September 1998.
41
on an estimated $2 billion on electricity34. Aggregated business groups

are such an attractive and potentially profitable market segment that
some electric suppliers are actively encouraging business associations
to aggregate. Select Energy, for example, has developed “The Power
of Association” -) an energy related member benefit program. Under
this program, Select Energy offers a customized package of energy
products and services tailored to the members of business
associations35.
Business associations provide the clearest examples of private

aggregation in practice. Many business associations have successfully
aggregated their members, and have proven their ability to obtain
reductions in retail electricity rates for their members. The question
that remains is whether aggregation is as suited as a strategy for
residential consumers.
Business associations have many advantages over residential

aggregations. In addition to the obvious advantage of representing a
significant combined load, trade associations provide an existing
framework that may already be experienced as a buying group. It is
also worth pointing out that energy prices rank high among the
concerns of businesses. Even modest reductions in electricity costs can
result in a substantial difference to the bottom line of commercial and
industrial customers. As a result, business associations may feel
obligated to address electricity purchasing concerns. Other types of
34
Strober op. cit. pg 3.
35
Select Energy Newsletter, Eye on Energy, #4, June 12, 1998.
42
affinity groups comprising individuals and households are less likely to

get involved in energy aggregation.
4.4 Residential Aggregation
Few examples of affinity aggregation exist that target

residential users. One example is the Ohio Farm Bureau that has in
excess of 200,000 members throughout the state of Ohio. As part of
the range of services it offers to its members, the Farm Bureau has a
“Self-Help Energy Program” for natural gas purchasing that has
approximately 7,000 subscribers. Moving into electricity aggregation
was the natural next step. According to the Director of Energy
Services for the Ohio Farm Bureau, “Close to two decades of
experience has shown us that members support using cooperative
efforts to reduce their natural gas energy costs. It just makes sense to
carry that experience over to group purchasing of electricity.”36
The Ohio Farm Bureau has registered with the Public Utilities
Commission of Ohio as a licensed aggregator for farm, residential and
small business members. The first step in early 2001 will be to conduct
a load profile of the potential group. Interested Farm Bureau members
have been asked to release their electricity use records to enable a
load profile to be developed.
36
Quoted in, Electricity Choice Begins Now. Buckeye Farm News, January 2001. Pg. 6.
43
Case studies of successful residential aggregation efforts are

somewhat limited. 37 Most affinity groups of a sufficient scale to
tackle the task of aggregating its members are comprised of a
statewide membership. Non-geographic based aggregation groups that
span the service territories of several distribution companies will face
additional complications, including more complex metering and billing
processes. Non-geographic aggregation, simply put, is less efficient.38
4.5 Conclusions
The potential roles of civic associations or other non-profits in

aggregating consumers are multifaceted. Non-profits are not trying to
squeeze out a profit from the narrow margins created by aggregated
purchasing, and are able to pass on more savings to customers. The
potential for non-profits to obtain grant funding to secure start-up
costs, moreover, is an advantage unique to the sector. The
membership base and outreach abilities of non-profits are an asset to
an aggregator in forming an initial pool of consumers.
Certain classes of customers are more likely to be included in a

private aggregation pool. Commercial and industrial consumers,
through the representative organizations, are more likely to negotiate
jointly for electricity. The civic organizations that represent individuals
are more likely to include a narrow fraction of a customer class.
37
The case of energy purchasing cooperatives is covered in the following chapter.
38
Guinane op. cit.
44
Affinity groups are likely to represent a specific and narrow target

group, such as retired persons, environmentalists or farmers.
Governmental aggregation is able to extend benefits to all members of
a community, including low-income groups, residential consumers and
businesses.
Another type of private aggregation group, the energy

purchasing cooperative, is gaining popularity on the East Coast. These
co-ops often have a particular focus on providing services to low-
income households. The issues facing aggregating low-income
populations are highlighted in the following section.
45
5
CONSUMER AGGREGATION: A MODEL FOR
LOW-INCOME POPULATIONS?
5.1 Introduction
At its core, aggregation is about increasing the market power

of small scale consumers. The California experience, with soaring
electricity prices and rolling blackouts, has awakened fears over the
effect of deregulation on ordinary consumers. Low-income households,
especially in cold weather states, are particularly vulnerable to even
modest rate increases as a disproportionately high percentage of their
income is spent on energy. Strategies to maximize potential energy
savings -) or to mitigate the impacts of potential rate increases -) are
essential to protect low-income communities in a potentially volatile
deregulated environment.
Will aggregation emerge as the solution for improving service

and lowering rates for low-income communities? The answer to this
question is not yet clear. There are few mature case studies to point
to at this time, although pilot programs are being initiated in many
states. However, previous aggregation efforts with natural gas or
heating oil provide a preliminary indication of the opportunities and
difficulties of aggregating low-income consumers. Bulk purchases of
other energy products have demonstrated some successes in providing
lower cost services to economically vulnerable populations.
46
5 Consumer Aggregation: A Model for Low-Income Consumers?
5.2 Serving Low-income Groups
Low-income communities, not surprisingly, are not the most

attractive to retail suppliers. Among the issues that diminish the profit
potential of providing electric service to these groups is a high rate of
uncollectible bills and the higher percentage of customers requiring
energy assistance, resulting in lower per-resident profits. 39
The potential risks facing low-income consumers are multiple.

Small-scale consumers are not only lacking sufficient bargaining power
to obtain improved rates, but may be so unattractive to electric
suppliers as to have few if any companies competing for their
business. Many suppliers target only the more lucrative
commercial/industrial market while abandoning the residential
market, and many analysts fear that service territories dominated by
low-income groups will draw even fewer suppliers. Consumer
advocates warn against the potential for redlining; that is, the
practice of avoiding service provision to certain geographic locations
because of socio-economic characteristics. 40
39
On the positive side, however, low-income communities are densely populated,

facilitating electric service. Peretz op.cit
40
Colton points out that anti-redlining provisions can be included in deregulation

legislation and should be addressed by policymakers, not left to the market. Roger
Colton, Electric Utility Restructuring and the Low-Income Consumer. A report to the
Iowa Community Action Association 1997.
47
Given the possibility of higher cost, lower service provision in

low-income neighborhoods, does aggregation make sense as a strategy
to mitigate these risks? Aggregation can counter the threat of
redlining, by enticing suppliers with large aggregated groups and low
per household transaction costs. Aggregation may actually stimulate
the market by attracting suppliers to service territories where they
are unlikely to target otherwise.
Several compelling counter-arguments can be made. Some

analysts believe that purchasing pools comprised solely of low-income
households undermines the ability of low-income households to benefit
from large, diverse aggregation groups, with attractive load profiles
and customer composition. Marshall and Colton argue,
Separating low-income customers from any larger

aggregated pool, therefore is a disservice to low-income
households. Fragmenting low-income customers into a
stand alone subset of electric customers is exactly
contrary to the ability of low-income customers to
exercise the maximum amount of negotiating power in
a competitive electricity market.41
Perhaps the greatest problem is that this approach fails to address the
key issues facing low-income customers -) poor load profiles and
payment histories. Colton quotes the National Conference of State
Legislatures as stating “even if customers with similarly unattractive
load profiles combine their accounts, they will simply become one large
41
Pam Marshall and Roger Colton, Aggregating Low-income Customers: Can Market-
Based Solutions Fix Market-Based Problems? Energy CENTS Coalition, June 1998. pg.
54.
48
account with an unattractive load profile. 42” Size alone is insufficient

to overcome the problematic issues of load profile and real or
perceived poor payment records.
Combining low-income consumers in aggregation pools with

other customer profiles provides clear advantages. Yet, joining
existing aggregation pools is not an option for most low-income
households. In rare cases, affinity groups might exist that would
combine low-income clients with a wider customer pool. A more likely
scenario is a city-wide governmental aggregation, which provides the
exceptional opportunity to combine low-income demand with small
business, institutional, and industrial customers. As one component of
a wider pool, low-income groups are more likely to receive a more
competitive service.
While blending low-income consumers with other customer

groups may reduce supplier concerns, governmental aggregation,
however, is not immune to the risk of “redlining”. The danger exists
that smaller governmental aggregations of predominantly poor
communities will simply attract fewer bids from suppliers.
Three interesting models of supporting low-income groups are

being piloted and tested around the country. First, consumer
cooperatives are creating aggregations comprised primarily of low-
income households. Secondly, Community Action Agencies are working
together to establish new aggregation models for their low-income
clients. Third, state agencies are acting as aggregators for LIHEAP
42
Colton 2000 op cit.
49
(Low-income Home Energy Assistance Program) eligible households.

These strategies are reviewed below.
5.3 Consumer Cooperatives: Reaching Out to

Low-Income Households
A growing movement in the Northeast has centered on the

creation of cooperatives to act as aggregators for not only electricity
purchases, but a wider range of energy services. Throughout the
Northeast, energy co-ops are being established to provide a consumer-
owned response to the potentially consumer-unfriendly deregulated
electricity market. Their concern with social justice and economic
fairness makes them one of the few types of organizations that have
demonstrated an interest in aggregating residential consumers and
low-income groups. This value-driven focus, moreover, reveals several
case studies featuring the unlikely combination of low-income
customers and green power programs.
Purchasing cooperatives acting as aggregators, it is important

to note, differ in substance from Rural Electric Cooperatives that act
as electricity suppliers. Most Rural Electric Co-ops are similar to
municipal utilities in that they own electric distribution systems and
are engaged in electricity distribution. A purchasing cooperative, in
contrast, generally acts as an intermediary in the electricity purchasing
process and is not involved in distribution of power.
50
The formation of consumer-owned co-ops as aggregators may

be a growing trend. Efforts to establish energy purchasing co-ops can
be seen in New Hampshire, Massachusetts, Connecticut and Vermont.
Drawing on experiences of bulk purchases of oil and gas,
comprehensive energy co-ops are becoming more common. In many
cases, existing energy cooperatives are moving into electricity
aggregation.
a. Boston Oil Consumers Alliance

The Boston Oil Consumers Alliance (BOCA), was established in
1981 as a response to rising home heating oil prices, and other fuels.
BOCA served to aggregate consumer demand for home heating oil,
and has obtained rates nearly 30% below market rates. 43 BOCA later
expanded to provide energy efficiency services.
Drawing on its experiences as an aggregator, BOCA in 1999

expanded into the electricity market, and included a focus on green
power. As with many other energy cooperatives, BOCA sought to
provide integrated energy services, including energy efficiency,
education, electricity and other fuels. As a cooperative, BOCA’s
strategy is guided by strong moral principles, and aims to provide not
only savings, but also a “true green alternative”.
b. Connecticut Energy Co-op

In Connecticut, an energy cooperative was established for the
primary purpose of aggregating residential electric consumers. The
43
Barry Ingber, An Oil Co-op’s Experience in Marketing Green Electricity, EPRI Green
Power Conference, May 1999.
51
Co-op was able to offer electricity at 5.25 cents per kWh, beating the
standard offer in the Connecticut Light and Power service territory.
Members receive the additional benefit of services from the ICE
program: Innovation, Conservation and Efficiency. In addition, the
Connecticut Energy Cooperative offers fuel oil, propane, natural gas
and telecommunication services. Similar to BOCA, the Cooperative
offers two electricity products, Ecowatt, a certified green product,
and Valuewatt, a low-cost product.44
c. New Hampshire Consumer Utility Cooperative

An example of a statewide cooperative, stimulated by grant
funding, was found in New Hampshire. In anticipation of full
electricity deregulation, the Institute for Cooperative Community
Development situated within the New Hampshire College proposed the
creation of a statewide purchasing cooperative. The Institute received
a grant of $100,000 as seed funding, and their program was designed
to draw from the membership of three existing organizations; The
New Hampshire Credit Union Consumers Cooperative, Consumers
Utility Cooperative and the Northern Forest Energy Cooperative.
In addition, the newly created New Hampshire Consumers

Utility Cooperative would partner with a local community action
agency to include low-income families in the purchasing pool. This
strategy of linking community action agencies to aggregators may in
fact be one of the most promising strategies.
44
The New Co-ops, Rural Electrification Magazine. No date.
52
5.4 Community Action Agencies
Community Action Agencies play a leading role nationally in

energy service provision in impoverished communities, and play a key
role in the implementation of federal energy assistance programs
(LIHEAP). Community Action Agencies have an extensive history of
deep engagement with low-income communities, as well as providing
energy assistance programs. Are Community Action Agencies well
suited to take this one step further and become electricity
aggregators?
Some analysts have considered whether community action

agencies have the necessary organizational capacities to become
aggregators and have found them wanting. A report by the Maryland
Energy Administration and the Office of the Peoples’ Counsel argues
that:
...it has become increasingly clear throughout the

country that aggregating for electric purchases is no
simple endeavor. Several layers of expertise are
required... it is becoming increasingly evident that the
low-income program administrators do not have the
in-house resources to provide such expertise. Moreover,
they do not have the resources to procure the necessary
expertise to successfully “aggregate”.
53
The Minnesota state LIHEAP office assessed the capacity of

local community action agencies, and concluded that they had neither
the expertise nor the resources to aggregate45.
The complexities of forming an aggregated pool may make it

difficult for a CAA to aggregate on the basis of its existing resources.
Yet, as the Maryland report implies, with additional resources, it is
possible for CAAs to procure the expertise required, by forming
partnerships with licensed aggregators, or hiring the necessary skilled
staff.46
The federally funded Low-Income Home Energy Assistance

Program (LIHEAP) supports innovative initiatives through the
Residential Energy Assistance Challenge Option Program (REACH). In
1999, REACH funded two pilot aggregation programs in partnership
with community action agencies, which may help answer important
questions about their ability to successfully aggregate.
The Connecticut Association for Community Action (CAFCA) is

an umbrella organization for 12 community action agencies across the
state. As one component of a three year, $1.5 million REACH grant,
CAFCA will develop a home energy aggregation pilot that will arrange
45
Colton 2000, op cite
46
The Maryland Energy Administration and Office of the Peoples’ Counsel offer a third
solution. The report recommends that a systems benefit charge fund legal,
technical, marketing and other staff to assist with low-income and other residential
aggregation efforts. Maryland Energy Administration and Office of Peoples’ Counsel,
Public Benefits and Electric Market Restructuring in the State of Maryland.,
undated.
54
for bulk purchases of electricity, natural gas and heating oil. Residents
signing up for LIHEAP benefits are eligible to join the purchasing pool.
The pilot program is open to 15,000 residents.
The second grant supports the State of North Carolina’s Office

of Economic Opportunity to strengthen its partnership with 31
Community Action Agencies. The $1,000,000 grant will create:
...a permanent mechanism, a non-profit aggregator,

through which the State’s low-income households
can compete effectively in a competitive energy
marketplace. Project partners will establish a Public
Interest Energy Services Company which will
aggregate the buying power of low-income customers
in order to increase their individual energy market
power, allowing individual low-income households
opportunities for self-sufficiency. 47
The link with the non-profit agencies will provide the necessary link to
the community, through their outreach and organizing capacities.
Similarly in Vermont, an energy consumer co-op is being

established through the REACH program. Community Action Agencies
are able to offer membership in the ComsumerCo as a benefit to their
members. A major goal of the ConsumerCo project is to include a
significant proportion of LIHEAP customers. In addition, the
ConsumerCo expects to rapidly expand into other energy services,
noting that “sale of electricity alone is neither a viable economic
REACH grant awards FY 99, see LIHRSP clearinghouse website,

47
www.ncat.org/liheap/.
55
option, nor is it likely to create the opportunity to signficantly provide

lower bills to members.”48
This strategy enables consumers from multiple community

action agencies to aggregate, a more efficient proposition than each
CAA initiating their own bidding process. Another alternative,
proposed by low-income advocates Pam Marshall and Roger Colton, is
to have the state LIHEAP agency to act as statewide aggregator. They
argue:
...the State LIHEAP administrative agency should

aggregate all LIHEAP households rather than individual
LIHEAP providers aggregating only their local LIHEAP
households....The combination of lower costs associated
with enrolling a larger number of LIHEAP households,
with administering universal service funds, and with
negotiating one supply contract for all LIHEAP households
will make a combined LIHEAP pool more attractive than
pools aggregated by individual LIHEAP providers49.
48
Vermont Reach Project: Development of a Consumer Energy Cooperative, Vermont

Energy Investment Corporation, March 1999.
49
Pam Marshall and Roger Colton, op. cite. 1988. pg. 55.
56
5.5 Aggregation by the Public Sector: Ohio’s Energy

Assistance Program
Drawing from successful experiences in aggregating LIHEAP

customers for gas purchases, Ohio’s deregulation legislation mandates
that the Ohio Department of Development aggregate and bid out low-
income electricity users eligible for Percentage of Income Payment
Plan (PIPP) assistance. This state-led program is a bold effort to
aggregate Ohio’s 200,000 low-income PIPP households into one large
purchasing pool.
Through the PIPP program, the state of Ohio guarantees a

portion of low-income consumer’s electricity bill. As such, the
proposed statewide aggregation will attract the interest of electric
suppliers not only due to its size, but because the state guarantees
part of the payments. This mitigates the potential risk of “redlining”
of low-income aggregations.
5.6 Conclusions
The role of aggregation in meeting the energy needs of low-

income groups is as yet unclear. A series of pilot projects is being
implemented nationally that will help determine the effectiveness of
pooling the electric demand of low-income consumers. Although
57
electricity aggregation strategies are still in the incipient stage, there

is a proven history of aggregation of gas, oil, and other fuels.
Low-income households could benefit not only from aggregation

as a strategy to secure lower energy prices, but also require
comprehensive energy management assistance. Efforts to reduce
overall energy costs to economically vulnerable households must not
focus narrowly on price, but should also include assistance to lower
energy usage. Most assistance efforts highlighted in this chapter
combine bulk purchasing with energy efficiency and other services.
The modest price reductions that could be achieved through
aggregation are on their own insufficient to substantially lessen the
vulnerability of impoverished households.
Cooperatives are emerging as a viable model for low-income

aggregation. Their non-profit and value-driven basis leads them to
actively seek out low-income households, unlike commercial
aggregators, and offers a means by which this demand can be
combined with other customer segments. These efforts are often able
to obtain grant funding in the early and costly start-up years. More
significantly, they are forming productive partnerships with community
action agencies and state energy offices.
The State of Ohio is implementing a bold and aggressive

program designed to aggregate the state’s PIPP customers. The Office
of Community Services, with the resources and organizational capacity
to skillfully aggregate, offers a statewide, large scale approach to low-
income aggregation.
58
It is clear that low-income populations are at high risk in a

competitive market if left unassisted. Aggregation seems to provide a
supplemental strategy for reducing the energy burden on poor
households. This will be useful as one of several energy assistance
strategies when used in conjunction with other services, including
efficiency and weatherization. Low-income aggregation should be
seen as simply one more energy assistance tool.
59
6
AGGREGATION AND GREEN POWER
6.1 Aggregation: The Key to Developing a Market for

Green Power?
Aggregation offers promise for stimulating demand for green

power, and kick-starting a more vibrant green power market. This
option comes none too soon. The market for green power has grown
slowly, and with recession looming, faces an uncertain future.
Although most customers in California and Pennsylvania that switched
actually did so to purchase green power, on average, green power
represents 1-2% of the market. The market for green power has failed
to emerge as dynamically as many analysts had predicted and green
power providers had hoped.
Large scale aggregation can play a vital role in developing a

green power market by creating stable and long term demand for
renewables. Contracts with large aggregation pools can provide
suppliers with the stable revenue stream that is necessary to
encourage capital investment in new renewable generation.
Aggregation for green power purchases faces numerous

challenges, however. The lack of widespread public awareness of the
environmental impacts of electricity generation makes green power a
tough sell to the general public. The relative lack of supply further
constrains possibilities of aggregators obtaining several (if any)
60
6 Aggregation for Green Power
competitive bids, particularly in states like Ohio where there is virtually

no generation of green power. Finally, the expectation of significant
savings when members join an aggregation pool makes green power a
politically difficult choice, particularly for governmental aggregations.
6.2 Green Power Aggregation: The Role of Co-ops
Most cases of green power aggregation are found in the

cooperative sector. The Energy Cooperative Association of
Pennsylvania began as an oil purchasing co-op, and expanded into
electricity service provision after Pennsylvania’s electricity market
deregulated. Unlike most of the case studies highlighted in this study,
ECAP is a reseller of electricity, and assumes title of the power.
ECAP is currently reselling 100% Green-e certified electricity in

the PECO service territory. Like many cooperatives, ECAP aims to both
serve low-income customers as well as encourage the development of
renewable energy resources. As of November 2000, ECAP had 600
members subscribed to the renewable program, and 54,000 in the
standard, low-cost power program. Although the cooperative has the
dual mission of promoting renewables and assisting low-income
customers, in practice, “the two do not overlap much.”50
50
Personal communication, Dean Post, Customer Service and Oil Heat Manager, ECAP.
October, 2000.
61
Similarly, the Boston Oil Consumer’s Cooperative, discussed in

the previous section, combined a variety of services to low-income
groups with a green power offering. BOCA offered AllEnergy’s ReGen,
a green “upgrade” product, that is an addition to a customer’s regular
bill, not a replacement. An initial survey by BOCA indicated that 1,000
people were interested in green power. After five months, only 130
members joined. According to BOCA, one of the stumbling blocks to
extending the popularity of the program was that the offering was
landfill gas, a product unfamiliar to most consumers, and not
environmentally-friendly sounding.51
The non-profit basis of cooperatives makes them a likely

candidate for green power purchases. For-profit aggregators are
unlikely to arise spontaneously to sell green power, unless there is a
proven and identifiable demand. Non-profits are mission driven, and
may be eligible to receive grant funding for the educational outreach
work that they do. From the perspective of marketers, this is
essential. Green power marketers have the additional marketing
burden of explaining the advantages of green power, and conducting
consumer education on issues relating to global warming and air
pollution.
Co-ops, however, are generally too small to stimulate the

market on their own. Buying groups in the thousands or even tens of
thousands, while important, are unlikely to have a discernable impact
on a supplier’s market share. The cumulative impact of these efforts,
however, may help green power suppliers to establish a secure
51
Ingber 1999 op. cite.
62
foothold in the retail market. Nationally, aggregation can slowly

establish a more secure market base for renewables.
6.3 Governmental Aggregation and Green Power
Governmental aggregation presents a tantalizing opportunity to

stimulate the renewable energy market. Through their sheer size,
governmental aggregation programs can kickstart a market for
renewable energy. This is clearly the case in Ohio, where the
Northeast Ohio Public Energy Council issued a Request for Proposals
which generated a response from Green Mountain, which until that
point had not planned to enter the Ohio market. This aggregation led
both to the supply of 2% of renewable energy to 94 communities, and
a commitment to building renewable generation facilities in Ohio. It is
a clear example of how governmental aggregation might attract new
suppliers, given the size of its purchasing power.
A variety of strategies exist that local governments could use to

promote renewable energy. While most would certainly shy away from
purchasing 100% green power due to cost considerations, several
options exist. Local governments could institute what is essentially a
local Renewable Portfolio Standard, that specifies that a fixed
percentage of the power supplied come from renewable sources. Even
if a local government chooses a relatively small percentage, say 5%, of
a pool of hundreds of thousands of customers, this translates into a
significant and fixed load demand for renewables. This type of stable
revenue stream would allow generators to risk investment in
63
expanding renewable capacity. Moreover, the increased costs of

blending a percentage of green power with other sources of power
would not be substantial. When spread among tens or hundreds of
thousands of consumers, the increase in retail price would not be
significant.
A second, less aggressive option, is to list environmental

characteristics as one criteria for selecting among bidders. This
approach falls short of a mandate, but still offers clear incentive for
suppliers to include some renewables in the power mix.
6.4 Affinity Aggregation: The Role of Environmental

and Faith-based Groups in Aggregating Green Power
An obvious market base for green power exists within the

environmental community. With an existing awareness of
environmental issues, and often, a willingness to pay more for
environmentally-friendly products, this market segment comprises the
most likely adopters. What role, then, can environmental organizations
play in this process? Is it beyond the organizational capacity to actually
become aggregators themselves?
Larger non-profits, or coalitions of non-profits, could greatly

facilitate the creation of an aggregation pool if they have already
identified households with a probable interest in green power. Such an
aggregated pool is likely be attractive to suppliers with green power in
their portfolio, as it would reduce the expenditure needed on
64
marketing and public education. Through the use of a for-profit

consultant or buyer’s agent that is a licensed aggregator, it is possible
to form an aggregation pool, and purchase green power, without
assuming the full burden of becoming an aggregator. The ability of
environmental groups to access grants to offset initial start-up costs
would be an added benefit. Perhaps the most intractable problem
with this approach is forming a group of a significant enough size to
make this strategy economically viable. The fees of an energy
consultant or private aggregator start at several thousand to tens of
thousands of dollars. In the absence of grant funding, this cost would
necessarily be born by the aggregation members, raising the overall
cost of power.
A more likely scenario can be found by examining the

experience of faith based groups, that have used preferential
relationships with green power providers to encourage renewables.
Episcopal Power and Light provides an innovative case study of how
groups can work with green power suppliers. Under a contract signed
by Episcopal Power and Light and Green Mountain Energy, the church
received a cash donation for each church or parishioner that signs up
for a renewable energy product from Green Mountain. From the
church’s perspective, this program provides “ a way for churches and
parishioners to put their faith into action”52.
From the supplier’s perspective, this enables the company to

tap into a vast market, with minimal marketing expenses. Non-
52
Green Mountain Energy and Episcopal Power and Light Sign Agreement to Promote
“Green” Electricity Statewide, Press Release, August 8, 2000.
65
profits, however, are faced with a dilemma. While promoting green

power for environmental benefits is a charitable activity, non-profits
must be careful about allying themselves too closely with one supplier
or another, particularly in markets where there are competing
suppliers. Critics contend that grant-funded non-profits acting as
marketers for renewable energy suppliers results in a charitable
subsidy to private companies.
6.5 Concluding Remarks
Retail markets for green power are growing slowly in the U.S.
In the absence of renewable portfolio standards or other green power
mandates, customer sign-ups for green power remain too low to drive
large-scale investment in the generation of renewable energy.
Aggregation may have a role to play -) albeit a limited one -) in

building a green power market. Smaller aggregation pools, if properly
structured, could reduce the costs of obtaining green power for
interested consumers, although it should be recognized that groups of
this size are likely to be offered green power from existing supplies, as
they do not represent sufficient demand to drive investment in new
generation. Larger scale, statewide coalitions of environmental and
faith-based groups hold greater promise for stimulating the market,
but might be unwieldy to organize.
Governmental aggregation, in contrast, provides the

opportunity to extend the green power market well beyond the
66
environmental community into both the business community and low-

income populations -) two market segments that are unlikely green
power consumers. The long-term, large scale demand can provide
suppliers with the stable revenues needed to enable them to expand
renewable energy generation.
67
7
SUMMARY CONCLUSIONS
1) Electricity deregulation poses uncertain benefits and considerable

risks to residential consumers. Competitive markets have been slow to
develop in deregulated states. The savings to consumers have been minimal
and in some cases have been seriously impacted by the large scale award of
stranded costs to utilities. Residential consumers face the additional risks of
lowered consumer protections and price and service discrimination.
2) Aggregation may enhance benefits to residential consumers in a

competitive retail market for electricity. The concept of aggregation -)
that is, buying a product in bulk -) is not new in the energy sector.
Aggregation for residential electricity purchases has several potential
advantages. It uses volume purchases to obtain competitive prices and
services for low-usage customers. It also lowers the marketing and
administrative costs to utilities of reaching the residential market.
Aggregation can be used not only to enhance consumer savings, but also to
stimulate the residential market, making it attractive to retail electric
suppliers. Of equal importance is the fact that aggregation provides
consumers with skilled representatives to negotiate favorable contract terms.
3) A wide range of organizations and institutions can become electricity

aggregators, including non-profits, local government, for-profit energy
brokers, and state entities. The customer composition of aggregation
pools can also vary widely, and can be based on geography, affinity (shared
interest or characteristics) or customer market segment. There is no one
model that is simpler, easier or right for a given objective.
68
7 Summary Conclusions
4) Aggregators may act either as marketers or brokers. Although an

aggregator may purchase power and resell it to its members, most
aggregators simply negotiate a contract, and do not take title to the power.
The latter option is preferable for its simplicity and low risk.
4) Aggregating a small group becomes economically viable only when the

savings obtained are greater than the cost of contracting skilled
consultants. Aggregation requires a high degree of technical and legal
assistance in the areas of load profiling, power procurement and contract
negotiation. Because of the complexity involved, most governmental and non-
profit aggregators hire a consultant to perform these functions.
5) Local governments have the organizational capacity to aggregate, and

provide the unique advantage of incorporating all customer classes,
including industrial, commercial, residential and low-income groups. This
all-inclusive approach can result in a smoother load profile, and can enable
low-usage consumers to benefit by being combined with larger, more
attractive users. Opt-out legislation, that requires residents to specify if they
want to remain outside the purchasing group, greatly facilitates governmental
aggregation.
6) The benefits of aggregation are currently constrained by

uncompetitive markets. Market constraints, caused in large part by
artificially low shopping credits or prices-to-compare, create a significant
market barrier for new entrants to the retail market. This allows few
suppliers to competitively bid even on large aggregation pools. A lack of a
dynamic market results in few bids and minimal savings even for
69
governmental aggregations. As competitive markets mature, a greater

range of savings can be expected.
7) Non-profit aggregation is often constrained by limited membership

size, organizational capacity and non-geographic membership base.
While there are many examples of trade associations or other business
groupings that have successfully aggregated, cases of residential aggregation
through a non-profit are limited. Most affinity groups of a sufficient scale to
tackle aggregation are statewide in focus, such as the Farm Bureau and
AARP, and face the additional challenge of spanning several service
territories.
8) Aggregation is a useful supplemental strategy for energy assistance to

low-income households when used in conjunction with other services,
including efficiency and weatherization. Cooperatives are emerging as a
viable model for low-income aggregation, in partnership with community
action agencies. State energy offices can also play a key role in facilitating
low-income aggregation. Low-income populations are at high risk in a
competitive market if left unassisted.
9) Aggregation can help stimulate the market for green power, by

creating a stable and medium-term revenue stream that is necessary to
encourage large-scale capital investment in new renewable generation.
Governmental aggregation in particular can play a powerful role by extending
the market for green power beyond the narrow market segment of
environmentally-conscious shoppers. Even a modest amount of green power
blended with conventionally generated electricity can represent significant
demand if part of a large scale governmental aggregation pool.
70
71
APPENDIX A
Ohio communities that voted on governmental aggregation, November

2000
Source: Ohio Citizen Action website, www.OhioCitizenAction.org
Communities voting “Yes”
ASHTABULA COUNTY Glenwillow DEFIANCE COUNTY

Ashtabula Highland Heights Defiance
Conneaut Hunting valley
Geneva Independence ERIE COUNTY
Geneva on the Lake Lakewood Sandusky
North Kingsville Village Linndale
Orwell Lyndhurst FRANKLIN COUNTY
Roaming Shores Maple Heights Gahanna
Rock Creek Mayfield Village Upper Arlington
Middleburg Heights
CUYAHOGA COUNTY Newburgh Heights GEAUGA COUNTY
North Olmsted Burton
Beachwood
North Randall Chardon
Bedford
Oakwood
Bedford Heights Hunting Valley
Olmsted Falls
Bentleyville Middlefield
Olmsted Township
Berea South Russell
Orange
Bratenahl
Parma (passed similar
Brecksville JEFFERSON COUNTY
ordinance Spring
Broadview Heights Stratton Village
2000)
Brook Park
Parma Heights
Brooklyn LAKE COUNTY
Pepper Pike
Brooklyn Heights Eastlake
Shaker Heights
Chagrin Falls Fairport Harbor
Solon
Cleveland Grand River
South Euclid
Cleveland Heights
Strongsville Kirtland
Cuyahoga Heights
University Heights Kirtland Hills
East Cleveland
Valley View Lakeline
Euclid
Walton Hills Madison
Fairview Park
Warrensville Heights Mentor
Garfield Heights
Mentor-on-the-Lake
72
Perry
Timberlake Lorain countywide

Waite Hill Medina countywide
Wickliffe City of Sheffield Lake
Willoughby
Willoughby Hills MADISON COUNTY
London
LORAIN COUNTY Fairlawn
Avon MAHONING COUNTY Green
Avon Lake Alliance Lakemore
Elyria Macedonia
Kipton Village MARION COUNTY Mogadore
LaGrange Village Marion Munroe Falls
Lorain Northfield Village
North Ridgeville MEDINA COUNTY Norton
Sheffield Village Brunswick Peninsula
South Amherst Medina Reminderville
Silver Lake
LUCAS COUNTY PORTAGE COUNTY Stow
Countywide Aurora Twinsburg
Holland Village Hiram Village
Maumee Hiram Township WARREN COUNTY
Oregon Kent Franklin
Sylvania Streetsboro
Sylvania Township WAYNE COUNTY
Springfield Township STARK COUNTY Norton
Toledo Louisville
Waterville Village Alliance WILLIAMS COUNTY
Washington Township Stryker Village
SUMMIT COUNTY
Barberton WOOD COUNTY
Boston Heights Perrysburg
Clinton Northwood
Communities voting “No”
Ashtabula countywide
73
APPENDIX B
Communities included in the Northeast Ohio Public Energy Council

(NOPEC)
Source: NOPEC mailing piece
Ashtabula Grand River North Royalton

Avon Highland Heights Northfield
Avon Lake Hiram Oakwood
Barberton Hiram Township Olmsted Falls
Beachwood Hunting Valley Olmsted Township
Bedford Independence Orange
Bedford Heights Jefferson Orwell
Bentleyville Kent Parma Heights
Berea Kirtland Peninsula
Bratenahl Kirtland Hills Pepper Pike
Brecksville Lake County Perry
Broadview Heights Lakeline Reminderville
Brook Park Lakemore Roaming Shores
Brooklyn Lakewood Rock Creek
Brooklyn Heights Linndale Shaker Heights
Brunswick Lorain Sheffield Village
Burton Lyndhurst Solon
Chagrin Falls Macedonia South Amherst
Chardon Maple Heights South Euclid
Clinton Village Mayfield Village South Russell
Conneaut Mentor Strongsville
Cuyahoga Heights Mentor-on-the-Lake Twinsburg
East Cleveland Middleburg Heights University Heights
Eastlake Middlefield Valley View
Elyria Mogadore Waite Hill
Fairview Park Moreland Hills Walton Hills
Fairport Harbor Newburgh Heights Warrensville Heights
Garfield Heights North Kingsville Wickliffe
Geneva North Olmsted Willoughby
Geneva on the Lake North Randall Willoughby Hills
Glenwillow North Ridgeville Willowick
74
About Green Energy Ohio:
Green Energy Ohio is a non-profit organization whose mission is to promote environmentally

and economically sustainable energy policies and practices in Ohio. For more information,
please visit www.GreenEnergyOhio.org or call our toll-free number (1-866-473-3664).
About the author:
Caroline Sahley was Executive Director of Green Energy Ohio from 1999-2000. She was
previously research associate at the International NGO Training and Research Centre in Oxford,
England, and holds a Ph.D. from the London School of Economics. She currently works as an
independent consultant in the field of international development. She can be contacted at
sahley@aol.com.

A Greg at Ion Electric Consumer

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ELECTRIC CONSUMER

Green Energy Ohio would like to recognize the Benjamin S.

GEO would also like to thank David Rinebolt of the Ohio

1 CONSUMER CHOICE AND ELECTRICITY . . . . . . . . . 6

1.2 Aggregation and the Small Consumer . . . . . . . . 9

1.3 Ohio’s Aggregation Provisions and Definitions . . 12

1.4 Study Objectives . . . . . . . . . . . . . . . . . . . 13

2 AGGREGATION MODELS AND STRATEGIES . . . . . . . . 14

2.1 Types of Aggregation Pools . . . . . . . . . . . . . 14

a) Governmental Aggregation (15)

2.2 Key Issues in Forming an Aggregation Pool

2.3 Aggregation and Residential Customers . . . . . 25

3 GOVERNMENTAL AGGREGATION: COMMUNITY CHOICE

3.2 A Slow Start to Community Choice: The Cape Light

3.3 The Northeast Ohio Public Energy Council

3.4 Conclusions: Local Governments as Aggregators

4.1 Introduction: Aggregation by Non-Profits . 37

4.2 PowerOptions: The Massachusetts Non-Profit

4.3 Trade Associations . . . . . . . . . . . . . . . . . . 41

4.4 Residential Aggregation . . . . . . . . . . . . . . 43

5 CONSUMER AGGREGATION: A MODEL FOR LOW-INCOME

5.2 Serving Low-income Groups . . . . . . . . . . . . 47

5.3 Consumer Cooperatives: Reaching Out to

5.5 Aggregation by the Public Sector: Ohio’s Energy

6 AGGREGATION AND GREEN POWER . . . . . . . . . . . . 60

6.1 Aggregation: The Key to Developing a Market for

6.2 Green Power Aggregation: The Role of Co-ops . 61

6.3 Governmental Aggregation and Green Power

6.4 Affinity Aggregation: The Role of Environmental and

6.5 Concluding Remarks . . . . . . . . . . . . . . . . . 66

APPENDIX A: Ohio communities that voted on

APPENDIX B: Communities included in the Northeast

Introducing competition into the retail electricity market will

These are the assumptions driving the current trend toward

The pioneering case of California, once upheld as a model to

than 100% in San Diego, leaving consumers reeling. A severe power

The case of California may offer many useful lessons for

As of January 2001, 568,492 consumers are being served by an alternative supplier.

promise of lower cost power or will it provide limited savings and

Critics of deregulation contend that residential consumers gain

The ability of small consumers to benefit from deregulation

In a regulated, monopoly market, utilities planned to recover stranded costs with a

Robert Wallace, “Power Play”, The American Prospect, no 42, January-February,

In this uncertain context, consumer advocates have been

One policy that has generated intense interest among consumer

1.2 Aggregation and the Small Consumer

Whether electricity deregulation will ultimately be good for

develop a range of services in response to consumer needs, and

On balance, there is cause for concern. Competition creates

Part of the problem is that the market for residential

Dave Rinebolt, Will Residential Customers Benefit from Restructuring, Deregulation

Conversely, from the supplier’s point of view, the residential

Aggregation, therefore, does not simply depend on volume

The potential benefits of aggregation as a public policy tool,

1.3 Ohio’s Aggregation Provisions and Definitions

Barry Ingber, An Oil Co-op’s Experience Marketing Green Electricity, paper

Ohio’s electric restructuring legislation was passed in 1999.

Both governmental and non-governmental aggregators are

• Aggregation: Combining the electric load of multiple retail

• Aggregator: a person who contracts with customers to combine

• Governmental Aggregator: The legislative authority of a

4928.20 of the Revised Code for the purpose of purchasing

1.4 Study Objectives