An interview with Matt Langer, COO of Clean Power Alliance
Community Choice Aggregation (CCA) started in Massachusetts over 20 years ago, giving a small number of coastal communities a measure of freedom to choose their power sources by pooling their electricity requirements. Today, CCAs serve millions of customers in seven states.
CCA offerings largely reflect the interests of the communities they serve. The offerings give customers the ability to make their own choices when it comes to local and renewable energy procurement. Some customers prioritize low energy pricing, while others may prioritize meeting local and renewable energy goals. With over a million customers, Clean Power Alliance is the largest CCA, and is working on balancing the needs of the diverse communities it serves.
We sat down with Matt Langer, the Chief Operating Officer of Clean Power Alliance to discuss how it all works. We talk about Clean Power Alliance’s history and some of the interesting issues and opportunities CPA is facing.
Clean Power Alliance (CPA) went from a concept to one of the nation’s largest power providers in any incredibly short time. How did CPA scale to meet the demands of providing power to 1 million customers?
Langer: The journey to making CPA’s board members and member agencies’ aspirations real and to scale has been rapid and required a lot of innovation. Let’s start with a little background: the Joint Powers Authority that is CPA was formed in the middle of 2017 with three member jurisdictions, and additional jurisdictions joined the JPA by the beginning of 2018 totaling 31 members. Then we began serving customers in early 2018, which was a very short amount of time. We executed our expansion in phases. In February 2018, we enrolled Los Angeles County municipal accounts. Then, in June of 2018, we enrolled nonresidential accounts in unincorporated parts of Los Angeles County, South Pasadena and Rolling Hills Estates. Our phase 3 enrollment in February 2019 included approximately 900,000 residential customers across all 31 member jurisdictions. Then in May, we added the remaining nonresidential customers, and we are at about 1 million customers now.
We had an interesting rollout because right after we formed the JPA, we then moved to quickly hire staff from diverse backgrounds, including energy and customer service. The velocity we operated at was necessary to prepare for the second enrollment phase in June when we added about 35,000 new customers. The benefit to this tiered rollout was that our staff got experience working together as a team to deal with customer issues and we were able to learn lessons on a smaller scale to be well prepared for the big residential enrollment in February 2019.
What was the process to procure the energy needed for the rapid influx in customers you experienced in your first few years?
Langer: For our first phase of enrolled customers, we had one single, full-wrap contract that contained all the different energy needs in one place. This worked for a small load, but it wouldn’t work for the one million customers we have now. After our first phase, we worked with our portfolio manager to do customized procurement for resource adequacy renewable energy, and other energy market products.
We spent the first half of 2018 ramping up procurement, and with the small load it was easy to procure enough energy by using primarily short-term contracts. Over the next six months, we worked to build up the portfolio for the next larger phase of customer enrollment. We put in place RPS contracts, resource adequacy contracts, hydro contracts, and energy hedges, and we worked to build up our institutional infrastructure.
In the summer of 2018, our Board approved an energy risk management policy to direct all of our ongoing procurement activities, set our risk tolerance, outline our internal processes for staff, and make sure that we followed best practices to ensure the success of our procurement activities. As a result, in February 2019, when we added new customers, most of our procurement for 2019 was already done. Now CPA is focused on building a portfolio of resources that can serve our customer base in the long-term.
How has the procurement process changed as CPA has expanded?
Langer: Early on, CPA’s focus was on building out our internal infrastructure and our organization and we relied mostly on short-term contracts. Now, we are able to focus on our big organizational goal of securing long-term contracts for new construction of clean energy resources and getting steel in the ground. We have always been focused on getting more renewable energy and distributed energy resources onto the grid, which is what our customers want. We are proud to say that we signed our first long-term contract in 2018 for construction of a new wind project in Tehachapi and brought new renewable energy to the grid within our first year.
Last year we put out our first large-scale request for offers for clean energy resources, which has been a huge success with over 200 project bids. We’ve already executed two long-term contracts from these offers, and we have more coming soon. The strategy has been to fulfil short-term needs first, but the real goal of the organization is to benefit our communities and increase decarbonization, so that’s why you see us proactively and aggressively doing new procurement.
This leads us into the next question. What has been the greatest driver for CPA’s customers to remain with CPA?
Langer: Our organization has a great value proposition of competitive rates, local control and cleaner energy. We offer three different products “Lean Power,” “Clean Power,” and “100% Green Power” giving customers an opportunity to choose the option that best suits their needs. As a part of local government, we are responsive to the needs of our communities and have the opportunity to develop targeted programs. The combination of value in our product plus responsiveness and transparency has allowed us to build strong relationships with customers that will last for the long-term.
One thing that a lot of people might not realize is that CPA has helped foster local reinvestment to ensure that lower-income individuals don’t miss out on the clean power movement. Can you speak to how CPA has ensured that the cities choosing the more expensive 100% renewable power option are able to meet the energy needs of their more vulnerable populations?
One of the things that we thought long and hard about when we rolled out the 100% renewable energy option was how this might impact economically vulnerable populations, like individuals that qualified for income-assistance or medical baseline programs. The question was: how could we protect vulnerable populations and make accessible 100% green energy? The solution was to provide those qualifying customers with our 100% green product at the same price as the Edison base rate they had been paying before.
We want to be thoughtful about rate design because we want to offer choices, but we don’t want to put vulnerable populations in a bad situation. In a way, this was our first local reinvestment program. The exciting thing is that all of the 100% Green Power default communities were willing to pay a bit more to cover the costs of their low-income neighbors and make sure they weren’t left behind in the transition to green energy.
What is the current composition of CPA’s energy portfolio?
Langer: We have a diverse portfolio that will include more than 60% renewable energy in 2019. Currently, our portfolio of renewables consists mostly of short-term contracts with existing facilities, but our long-term strategy is to shift long-term contracts for newly constructed resources.
Renewable power prices keep falling as equipment becomes increasingly more efficient and less expensive. Has this led to a push to try to move toward 100% renewables in the future, perhaps by 2050?
Langer: Our board members want to move in the direction of increasing renewables, but we are also trying to bring down the cost differential between the 100% Green Power option and our other options. California passed SB 100, which requires 100% clean energy on the grid by 2045, which we will probably achieve with a mix of renewables and hydro power. Our organization is ahead of the curve in marching towards this goal of 100% clean energy and this will probably converge toward a goal of 100% renewables. Our base product is always at least at a compliance level for renewable energy, so as the renewable requirements increase, our product offerings will also adjust and increase. We will continue to work to push the envelope in our product offerings to provide better value and higher decarbonization than with other options.
Can you speak more about the types of long-term procurements that you are seeking now?
Langer: Our long-term procurements are a mix of renewables, renewables with storage, and stand-alone energy storage. We see economic value in being able to use stand-alone storage as energy arbitrage, resource adequacy, and to provide ancillary services to the grid. We are negotiating our first stand-alone storage contract now, and we expect to include this option in our next solicitation launching in October 2019. This next solicitation will be for renewables, renewables plus storage, or stand-alone storage.
Do you have a preference for geographic location when you reach out for energy procurement objects?
Langer: Yes, our highest priority is to receive bids for clean energy projects within our service territory in Los Angeles and Ventura counties. Then we look for projects within Southern California, then all of California, and then out of state.
Do you know how much energy you are looking to procure in your next solicitation?
Langer: We don’t yet have an exact procurement target, but it will likely be similar to our last solicitation, which was around 1-2 million megawatt-hours.
Has CPA been working on any projects to foster local energy specifically?
Langer: Yes, we are working on creating a separate track for smaller local projects (10 MW or less) in Los Angeles and Ventura counties. This would be incorporated as part of a larger solicitation that we plan to launch in October, but with different requirements to encourage local development. Our customers and stakeholders want distributed energy resources and local renewable energy that will result in job creation, economic impact, and clean air impact. It was tough to get those projects in our 2018 solicitation, because there were fewer renewable energy projects already under development Los Angeles and Ventura counties., We are glad to have been able to go out in the market and be clear about our values. Developers see that we are very interested in investing in developing new local renewable projects.
Are there any other considerations that are important when you are evaluating new projects?
Langer: One of the most exciting things about what we do is that it isn’t just about economics. For us, the location, workforce development benefits, and environmental stewardship are important, and we want to make sure that projects bring multiple benefits. These considerations are a real part of the offer and evaluation process, as opposed to just looking at the finances first, with values being an afterthought.
Does CPA offer any net metering services?
Langer: Yes, CPA offers a net metering program for qualifying technologies. We currently have about 30,000 customers using this program now, and our program is similar to other net metering programs in California. The program offers a credit for the generation they produce that can then be applied against charges when the customer uses electricity from the grid. If the customer generates more than they use over the course of a year, we offer payments for the surplus at a rate that is always higher than SCE’s surplus rate.
Two CCAs have now obtained credit ratings from Moody’s. How do you see that impacting the future of CCAs? Did a lack of a credit rating impact procurement for you?
Langer: Ultimately, CPA aspires to get an investment grade credit rating, and we are on track for that. We got a good response from our clean energy RFO, which speaks positively to the fact that the market is willing to deal with CCAs, and with CPA in particular as the biggest CCA. It has not been difficult to find people to meet our standards, but we do think having an investment grade credit rating will increase our options.
Has the PG&E bankruptcy affected the California CCA market, if at all?
Langer: It has not impacted CPA specifically, but we’ve heard from some developers that debt and equity investors may be concerned about the California energy market in general as a result of the PG&E bankruptcy proceedings. We will have more choices for our procurement when there is less uncertainty around the California energy market, because the developers sending us the energy will have an easier time finding financing.
Have you found that the uncertainty following the difficulties faced by the more traditional utility has helped CCAs by comparison?
Langer: All in all, any effect we’ve noticed is marginal, but it does shift the narrative. Naysayers have said that CCAs are upstarts and unreliable. Yet now investor-owned utilities have been downgraded, PG&E is in bankruptcy, and two CCAs now have investment grade credit ratings (some higher than other utilities), so it has changed the conversation. It just proves what CCAs have been saying, which is that, though we are new in the market and might not have the history needed yet to get the investment grade credit rating, we are moving in a positive direction.
One of the worries naysayers had in the beginning was the concern over how CCAs would be able to run what had always been a utility function. Did you encounter this as an issue when CPA was getting started?
Langer: Yes, when we first got started, there was a caricature that the mayor of a city would be personally negotiating all the clean energy deals, and that he wouldn’t know what he was doing. But in any city, the mayor or city council person isn’t running the sanitation or public works departments personally. They hire experts, and then they set budgets and make big picture decisions. Just as these elected officials don’t personally need to be experts in sanitation or other type of work, they have handled this the same way. We have hired experienced staff and lots of specialists, just like our member agencies do for their other municipal tasks. When I look at the industry, there are a lot of really smart people across all the CCAs that have made this model work.
The initial pushback was interesting because as a general matter, CCAs did not invent retail competition. For years, there have been other players in this space. There has been a direct access model since the late 90’s, but just a few customers got choice. CCAs democratize this process, help more people get access to energy choice and switch from a for-profit model to a nonprofit model. CCAs fit into an ecosystem along with other energy providers, and we think we are a great option because we offer choices that you don’t get with some of the other more traditional providers.
Are you looking to expand further in the coming days?
Langer: Right now, we cover customers in the Los Angeles and Ventura Counties, with the City of Westlake Village joining in 2020. In 2022, we will perhaps look to grow further within Los Angeles and Ventura Counties, but we are primarily focused on reaching a steady state with what we have.
The San Diego City Council and other San Diego County municipalities have begun negotiating on establishing a CCA. How does this impact CPA and the CCA movement as a whole?
Langer: It’s really exciting that at least two new CCAs are being formed in San Diego. It impacts CPA in the sense that expansion in general helps us prove that the CCA model has legs. CPA staff have made ourselves available as the closest analogous CCA to support them with technical assistance while they are getting started.
Finally, is CPA working on any new programs to continue to reinvest in your member communities or expand your services in the future?
Langer: One of the things we are working on is developing a distributed energy resources pilot program. We have also been considering solar plus storage, EV charging, demand response, community solar, and other programs that we hope to start implementing in 2020. Large-scale renewable energy and storage procurement will continue, then we will add our local track and distributed energy resource programs, so we have a lot of exciting things on the horizon.
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