Office of the Ohio Consumers' Counsel

Electric

Energy Aggregation: An Overview

Over 150 counties, cities townships and villages have voted in favor of authorizing their local governments to pursue electric aggregation. Over 200 ballot issues have been approved authorizing local governments to offer natural gas aggregation.

Energy aggregation is the process of joining consumers together as a group to buy electricity or natural gas. Local governments and affinity groups (such as trade groups and professional organizations) have used this concept to obtain lower energy prices for their residents or members. While most customers served by investor-owned utilities may participate in a local government’s buying pool, those served by municipal electric systems or rural electric cooperatives are not able to aggregate unless these markets voluntarily open up their utility system to retail competition.

By purchasing large blocks of energy, aggregated groups may have the advantage of being able to negotiate discounts on their energy prices. Residents who are a part of the aggregated group remain customers of their natural gas or electric utility company. However, their new energy supplier and rate will appear on their utility bill.

Ohio’s aggregation record is impressive. While the overall electric market has been slow to develop, local government aggregation offers the most promising opportunity for choices and savings for customers. Since 2000, about 800,000 residential consumers statewide – or approximately 20 percent of eligible customers – actually switched electric suppliers. The vast majority (over 90 percent) switched as a part of a local government’s aggregation program. In most cases, savings from governmental aggregation programs range between 1 percent and 11 percent of a customer’s total electric bill, depending on usage. For a typical customer, that means an annual savings of between $10 and $110.

Energy aggregation is a unique opportunity that is rooted in two recent Ohio laws. Electric choice legislation (Senate Bill 3) led to the restructuring of Ohio’s electric utility industry beginning January 1, 2001. Electric restructuring provides customers the opportunity to choose the company that supplies, or generates, their electricity. Currently, electric utility companies’ rates are capped. However, at the end of the electric utility companies’ market development period, a three to five year transition period during which consumers are sheltered from the volatility of an evolving, unregulated marketplace (December 31, 2003 for Dayton Power & Light, December 31, 2005 for all other investor-owned electric companies), all electric utility companies and suppliers can begin charging customers a market-based rate.

In the natural gas market, a law passed in March 2001 requires suppliers to be certified by the Public Utilities Commission of Ohio (Amended Substitute House Bill 9). This law also gives local governments the opportunity to aggregate customers in a manner similar to the electric choice model.

Energy aggregation has allowed local governments to give their constituents additional electric and natural gas choices.

In 1997, Dominion East Ohio and Columbia Gas of Ohio began natural gas choice pilot programs. Cincinnati Gas & Electric also began offering natural gas customer choice throughout its territory. The Vectren Energy Delivery of Ohio gas choice program began enrolling customers November 2002. Gas choice allows customers to select a natural gas supplier or continue to purchase gas from the local distribution company. The program also enables consumers to take advantage of the competitive market and selectively shop for the best price or other incentives.

Similar to electric aggregation, if customers choose a new gas supplier, the local gas utility company will still deliver the gas to their homes, and will continue to read their meters, assist with billing and respond to emergencies. And if a customer remains with the local gas company, that company will continue to supply his or her natural gas.

Energy aggregation has allowed local governments to give their constituents additional electric and natural gas choices. As you consider the possibility of achieving savings for your community, read the information contained in this guide and contact the Ohio Consumers’ Counsel (OCC) with any questions or to arrange a presentation. As the residential utility advocate, the OCC serves as a resource for you in an effort to create public awareness and educate your community about the benefits aggregation may deliver.