I wouldn't allow aluminum wire to be used in my house--or at least not at any point after the electric meter.
Yes, the electrical code allows aluminum wire in some cases, and if installed correctly it is supposed to be safe.
From what i understand, nicking aluminum wire, failing to use antioxidant paste on the connections, or torquing it incorrectly may all cause it to oxidize and start a fire.
If you're only going to own the house for 10 or 20 years and don't care what happens to the next owner, then it's probably fine. If you're in it for the long haul, then it seems like a foolish economy.
Recent amendments to the California electrical code require copper wire (i.e. ban Al wire) for most residential purposes:
Article 310.2(b) is hereby amended by the addition of a second paragraph to read as follows:
Copper wire shall be used for wiring No. six (6) and smaller in all installations. Consideration for use of aluminum wiring can be made by the Building Official for feeder lines only on an individual basis were adequate safety measures can be ensured.
But if you really, really want to use Al wire there does seem to be an exception:
310.106 Continuous inspection of aluminum wiring.
Aluminum conductors of No. six (6) or smaller used for branch circuits shall require continuous inspection by an independent testing agency approved by the Building Official for proper torqueing of connections at their termination point.
I don't know what "continuous inspection" means, but it sounds expensive.
Also, Farmers Insurance recently cancelled the fire insurance on our 3 unit building in San Francisco (built in 1908--just after the Earthquake). Our insurance agent said that most insurers in California will not insure a building that has aluminum wiring, knob and tube wiring (which we have), fuses, or circuit breaker panels made by Federal Pacific, Zinsco, Challenger, or Sylvania GTE. We had to pay $$$ to get insurance from a one of the two companies willing to insure a building with knob & tube, and we also had to have it inspected by a licensed electrician.
A good web page provided by the state of California for those unfortunate enough to have Al wiring in their homes:
References for the electrical code (admittedly, these are references to the electrical code for two cities in California, not California as a whole, but they are both titled CALIFORNIA ELECTRICAL CODE