Is Municipal Aggregation Right for Newton?

With a goal of cutting carbon emissions, Newton is looking into group purchasing of electricity, also known as municipal aggregation—a way for a city to use bulk buying power to select power suppliers and negotiate electric rates and sources on behalf of residents and businesses. Aggregation procedures also allow participants to opt out without penalty. Massachusetts authorized aggregation in 1997—the same time the utility industry in the state was deregulated. Since then several entities have taken advantage of the opportunity including Cape Light Compact; the City of Marlborough; and the towns of Lanesborough, Lunenburg, Ashland, Lancaster, and Greenfield. (For a complete list, visit the State’s aggregation website.)

A Tufts University study found that cost-savings from aggregation are modest and hard to predict, but other benefits, including environmental benefits, consumer education, and consumer protection can make it attractive (see Community Choice Aggregation: Municipal Bulk Buying of Electricity in Massachusetts). The chief environmental benefit involves the ability to increase the use of renewable energy by requiring suppliers to have more than the 10 percent required by Massachusetts. The simplest way to do that is to give participants a greener option; more ambitious is to require an increased amount of renewables—the approach being taken in Greenfield, MA, where the town rolled out a program with 100 percent renewable power—at a lower cost than the standard utility rate.

Aggregation can also be set up to encourage the development of local renewable resources. Other potential environmental benefits include funding for energy efficiency services, and improving access to energy consumption data for energy reduction planning purposes. The Tufts study concludes that a lot of time and expense is involved in setting up an aggregation plan, but most of that cost would be covered by an aggregation broker. Overall, the researchers note that aggregation “can be a valuable and relatively inexpensive tool that each municipality should independently assess in order to meet the needs of its residents.” Newton is currently engaged in that assessment.