Aggregation Process

What are the benefits of aggregation?

Aggregation allows consumers to combine their energy use to form a buying pool or group. These buying pools benefit residential consumers because suppliers may be more likely to negotiate with an aggregated group for service at a lower price than with an individual. When energy is purchased in large quantities, the cost of the supply is reduced.

Aggregation also makes residential consumers more attractive to suppliers because it lowers the suppliers’ costs of marketing to and signing up customers. As a result, suppliers may be able to provide better rates to aggregated groups.

Can all consumers be part of the energy aggregation buying pool?

Some residents may not be able to participate in the energy aggregation pool unless specific conditions are met. For example, Percentage of Income Payment Plan (PIPP) customers are not eligible to participate in governmental aggregation. Natural gas PIPP customers have already been aggregated and are currently being served by a natural gas supplier. The Ohio Department of Development may aggregate electric PIPP customers in the future.

In natural gas aggregation, a person who has an existing contract with a supplier is not eligible to participate in the buying pool until the end of the consumer’s contract. At the time of this publication, in electric aggregation, individuals with existing contracts are eligible to participate in the buying pool. However, an early termination fee may apply if a customer joins the aggregation pool before the end of his or her contract. Additionally, consumers owing arrearages to the natural gas or electric company may participate in the aggregation program if they enter a payment agreement. How does energy aggregation work? Any local government such as a county, city and township may aggregate its residents and eligible businesses provided that there is a choice program through the local utility. Currently, electric choice programs exist in FirstEnergy, American Electric Power, Cincinnati Gas & Electric, Dayton Power & Light, and Allegheny Power service territories. Dominion East Ohio, Columbia Gas of Ohio, Cincinnati Gas & Electric and Vectren Energy Delivery of Ohio service territories all have natural gas choice programs. However, if a natural gas utility company has 15,000 or more Ohio customers and does not have a choice program, a governmental aggregator may petition the Public Utilities Commission of Ohio (PUCO) to require the gas utility company to open its distribution system for the purpose of aggregation. Following the filing of a petition, the PUCO would hold a hearing to determine if opening the distribution system would be in the “public interest.” The burden of proof in that proceeding would be on the governmental aggregator.

The aggregator acts as an agent to obtain bids and to negotiate the supplier contract’s terms and conditions. Ultimately, the agreement for the purchase of the energy is between the individual customer and the supplier.

Is there more than one way for governmental aggregators to aggregate?

opt-in aggregation: each customer is required to agree to participate in the program before being included in the aggregation pool. opt-out aggregation: each customer is automatically included in the program and in the aggregated pool unless the customer affirmatively decides not to participate.

There are two ways for local governments to aggregate their communities for the purchase of energy — “opt-in” and “opt-out.” Opt-in aggregation requires the individual to enroll in the program before being included in the aggregation pool. Opt-out aggregation automatically includes each household in the aggregated pool unless the resident affirmatively “opts out,” or decides not to participate.

Under both the opt-out and opt-in models, a municipality must adopt an ordinance or a board of township trustees or county commissioners must adopt a resolution specifying which model is going to be used. Each local government must decide which model — opt-in or opt-out — is right for its community. Depending on the model selected, the implementation procedure varies.

The benefit of the opt-in model is that it takes less initial planning because the resolution or ordinance does not have to be voted on as a ballot issue. However, opt-in aggregation increases uncertainty as to the energy load, which may decrease the amount of savings a supplier is willing to offer a group.

A benefit of the opt-out model is that it is easier to implement because voters have already approved the ballot question. Because residents are automatically included in the program, higher participation levels may be achieved. In addition, in opt-out aggregation the aggregator has a defined energy load to use in negotiating with suppliers. Having a relatively predictable pool size may increase a supplier’s willingness to negotiate on price.