New Jersey Board of Public Utilities (BPU) wants to halve the size of incentives available to consumers who buy electric vehicles, after the popular program barreled through its second-year budget of $30 million in two months.

The BPU opened the program, known as Charge Up New Jersey on July 6, and then suspended it on Sept. 15 due to the exhaustion of the funds, saying that it would look for new funding to continue offering subsidies. The agency announced on Thursday it would shift $20 million from another fund to continue the program with a new, lower incentive structure, which will be discussed at a public hearing Sept. 30.

The program had been offering incentives of up to $5,000 for EVs with a manufacturer’s suggested retail price of up to $45,000, and up to $2,000 for EVs prices between $45,000 and $55,000. The new incentives will be $2,500 for EVs priced up to $45,000, and $1,000 for those prices between $45,000 and $55,000.

An agency explanation of the revised program rules said that “due to high interest in EVs, staff recommends reducing incentive levels to better allocate the budgeted funds and to increase the longevity of the program.” By cutting the incentives, the program would “ensure equitable access to funding for vehicles accessible to more New Jersey residents and to stretch available funds further,” the document said.

The program awards a $25 incentive for each mile of range that a vehicle can drive solely powered by electricity. Plug-in hybrid electric vehicles (PHEVs) would also be eligible for the $25 incentive for each mile of range, to a maximum of $1,000 under the proposed rules. There was no limit on incentive size at the start of the second phase, although incentives were expected to be relatively small due to the short range of the current crop of PHEVs.

A review of vehicles by NetZero Insider earlier in the year found that that the range of 16 eligible PHEVs listed on the program website was between 17 and 47 miles, which would result in incentives between $425 and $1,175.

By the time it was suspended, the second phase of the program had subsidized the purchase of 9,000 vehicles, the BPU said in a Sept. 14 statement announcing the suspension. It added that “drivers looking to make the switch to electric have enthusiastically embraced” it.

Jim Appleton, president of the New Jersey Coalition of Automotive Retailers (NJCAR), a trade association that represents about 500 car and truck dealers, said Friday the organization supports the program. But he questioned whether now is the right time to put more money into it, given the chip shortage that has hindered car manufacturing, and the possibility of federal money for EVs “on the horizon.”

He said that going “strictly by the numbers,” Charge Up New Jersey has probably been a success. But he said the agency should take time before restarting the program again.

“We really should be looking past the top-line numbers and ask, after two years, was the Charge Up New Jersey program a $60-million success that incentivized consumers to buy EVs they wouldn’t have purchased otherwise,” he said. “Or was it a $60-million give-away” to people who were going to buy an EV anyway?

“NJCAR thinks this would be a really good time to do a thorough analysis of where the money went, how we can better serve consumers that did not participate, and for the BPU and EV stakeholders to review program criteria and administrative functions to improve performance moving forward,” he said.

Searching For “Incentive-essential” Buyers

The Charge Up New Jersey program is part of New Jersey’s effort to get 330,000 registered light-duty EVs in the state by 2025, in line with its goal of using 100% clean energy by 2050. The plan also calls for at least 85% of all new light-duty vehicles sold or leased in New Jersey to be EVs by December 31, 2040.

The first phase of the program, also funded with $30 million, ran from January to December 2020, offering incentives of up to $5,000 for EVs priced up to $55,000. It subsidized the purchase of 7,000 vehicles, which along with the 9,000 subsidized thus far this year, accounts for about 5% of the 330,000 target total.

At the end of 2020, there were 28,869 EVs registered in New Jersey, along with 12,227 PHEVs, for a total of 41,096 vehicles — or about 12.5% of the 2025 target — according to figures from the New Jersey Department of Environmental Protection.

In the first year of the Charge Up program, 93% of recipients received the maximum incentive of $5,000, and 83% of the vehicles purchased were Teslas, according to BPU figures. In response, the BPU revised the structure in the second phase so that the maximum incentive of $5,000 would be available only to vehicles priced $45,000 or below. (See: NJ EV Incentives Target Cheaper Vehicles, Middle-income Buyers.)

BPU officials outlining the reasoning behind the price cap said it was an effort make the incentives “more accessible to middle-income families” and to prioritize “incentive-essential” buyers, or those who would likely not buy an EV without the incentive. Only one Tesla model, the Model 3 — which sells for $39,990, according to the company website — is priced below the $45,000 cut off.

Asked about the impact of the decision to focus the maximum incentives on lower-priced vehicles, and how many Teslas were sold under the second-year incentive structure, Peter Peretzman, spokesman for the BPU, said that at a later date the agency would “fully review Year Two of the program which will give us a complete picture of which vehicles were purchased.”

‘Filtering off’ the Teslas

Speaking before the BPU announced its plan to cut the incentive size, Stanislav Jaracz, president of Central Jersey Electric Auto Association, who spoke at a hearing on the proposed rules in the spring, urged the agency to shrink the incentives.

Jaracz, in a Sept. 16 email to NetZero Insider, said he found it “very surprising” that the fund was exhausted so quickly. He urged the BPU to do a thorough, transparent evaluation of who bought the cars. The rapid exhaustion of the funds reinforced his belief that the incentives should have been smaller, he said.

Incentives of $4,000 for EVs priced up to $40,000, and $2,000 for vehicles in the $40,000 to $50,000 price range would “filter off all Teslas from the $4,000 rebate tier to $2,000 tier,” enabling twice as many drivers to buy an EV, he said.

“With my proposal, the funding would still not last until the end of June 2022, but it would not be exhausted after less than 3 months,” he said.