DC Clean Energy Act: What You Need To Know
We've received a lot of inquiries in recent days about the marketing e-mail below (or similar) concerning the DC Clean Energy act.
We've spoken with a number of suppliers over the last few months about this legislation and potential impact, and here's what we've learned:
In short: If you're currently in a third party supply contract (including CPA aggregations), this legislation won't affect your current contract.
For future contracts, the price effects of this legislation are estimated to be 3-4%, but should be considered in the context of several other factors: daily market fluctuations, the risks of locking in contracts significantly ahead of start dates, and the uncertainty that remains about the current and future effects of this bill.
If you have a contract expiring within the next 6-9 months, there are reasons to think about renewing earlier. If your contract is further out into 2020 and beyond, we don't think there is a compelling reason to rush. CPA has an energy purchase planned for early April (and then again in the Fall) and we'll work together as a Cooperative to make an informed decision on how to best move forward.
In late 2018 DC passed the DC Clean Energy Act increase to their renewable portfolio standard, requiring that DC source 100% of its electricity from renewable sources by 2032. That's double the previous requirement, and DC is set to be the first in the country to transition to exclusively renewable electricity. This really is an important moment for the state.
Everyone who is currently in a third party supply contract will not see an impact from this legislation on their current contract (including those who participated in a CPA aggregation). That means your current contract is grandfathered and you won't see a cost increase because of this legislation on your current contract.
For future contracts, there is some uncertainty about the effective date that these standards apply as well as to the extent that they will impact costs. Currently it looks like the legislation will go into effect April 4th and all contracts up until then will not see an impact from these increased standards. However, this is not yet certain as the act has not been finalized. We suppliers monitoring this and will receive clarity once the language is finished.
The best estimate today for the price effect of this legislation is about $0.0025 per kWh, or about 3.5%. While definitely a real cost increase, it's important to put this in context:
Daily and weekly market price movements can sometimes swing more than this cost increase. What feels like locking in a cost savings before April 4th, can be easily wiped out by a market dip closer to your contract end date.
Locking in significantly ahead of your contract end date can introduce risks of pass-through charges, as other regulatory changes that have not yet been announced materialize. We've seen it happen with other contracts, and something CPA is focusing on more and more.
There's still a lot of uncertainty about the cost effects of this change. In addition to market changes to natural gas (a big driver in supply costs), renewable energy technology is changing fast. We are running pricing on some CPA members with contract starts before and after this legislation is set to take into effect, to see what the short-term effect might look like.
CPA is planning a cooperative energy purchase (aggregation) in early April. If it's looking like the price effects are noticeable and the grandfathered language is accurate, we will work to set the contract signing day prior to this effective date (estimated April 4th).
For those who are currently not on a third party supply contract, or who have contracts expiring in the next 9 months or so, let us know if you'd like to participate. For those who have contracts well into 2020 and beyond, we don't necessarily think you need to rush into a new contract ahead of this deadline. So much is going to change (and become known) from now until your current contract expiration. But of course happy to work with you if you do want to purchase during what is a relatively low pricing environment.
Don't hesitate to reach out with any questions or concerns: email@example.com