By Robert Mullin

LA QUINTA, Calif. — California has about 230,000 electric vehicles on the road, representing almost half of the EVs in the U.S.

Mississippi has about 260.

California Public Utilities Commissioner Carla Peterman sees zero difference between the two numbers.

“Now, granted, [there are] three zeros of difference,” she said, eliciting laughter during a panel discussion on EV rate design at the National Association of Regulatory Utility Commissioners’ annual conference last week. “But I really see zero difference.”

Despite the current disparity between the two states, Peterman explained, every state commission in the country will eventually face the same challenges related to greater adoption of EVs.

Although California leads the nation in EVs, their penetration still represents less than 1% of the state’s passenger fleet. But that is expected to change. Bloomberg New Energy Finance forecasts that the total unsubsidized cost of owning an EV will likely fall below that of a gas-powered car by the mid-2020s.

“You need to be thinking about how these vehicles interconnect” with the grid, Peterman said.

Key Questions

Peterman said there are several key questions commissions must ask themselves: How do EVs impact my system? What type of load do they add? Are the vehicles charging at times that make sense?

California’s thinking about EVs has evolved over time, from focusing on how to reduce the negative impact of EVs on the grid to exploring ways in which the vehicles can actually support the state’s objectives, Peterman said.

The state’s investor-owned utilities (IOUs) were once prohibited from becoming too deeply involved in EV charging based on concerns about anti-competitiveness, Peterman explained. But with this summer’s passage of Senate Bill 32,  which requires the state to reduce its emissions to 40% below 1990 levels by 2030, vehicle electrification is now a “principal goal” for utilities.

To facilitate this new role for the IOUs, the CPUC has been accepting applications to create pilot programs for developing an EV charging infrastructure. The proposals have resulted in a variety of models.

One proposal would have San Diego Gas & Electric owning the charging infrastructure and rolling it into the company’s rate base as a capital expenditure. Another would have Southern California Edison investing in the “make-ready” — the infrastructure from the meter to the charger, which would be treated as an operating expense and also rolled into rates.

In approving an EV infrastructure model, state commissions need to consider the benefits for all ratepayers, not just EV drivers, Peterman said. California set out the benefits in statute, including some not easy to quantify, such as a more reliable grid, improved air quality, greenhouse gas reductions and the creation of better-paying jobs.

She added that commissions should also guard against anti-competitive behavior, allowing EV flexibility to choose charging equipment.

EV-Specific Tariffs

Peterman also suggested adopting specific tariffs for EV drivers.

“You want to encourage charging at times when power is plentiful,” she said, adding that California sees EVs as a way to absorb excess electricity produced by solar installations during the day.

“That electricity is so low cost, especially compared with oil, why not have an opportunity for your vehicles to run on that?” Peterman said.

With a contested proceeding on EV infrastructure currently before his agency, Michigan Public Service Commissioner Norm Saari had to remain tightlipped on his views about how to allocate those costs. But he also laid out a not-too-distant future in which all commissioners would confront the EV issue.

EVs “are now driving in the fast lane,” he said, citing the performance figures for the latest Tesla Motors models.

He added that in some states, EVs are also eligible to travel in the high-occupancy vehicle lane.

“EVs are not just the noble [experiment] they were a decade ago,” Saari said.

Saari pointed to the multitude of federal programs promoting the adoption of EVs, which includes the Corporate Average Fuel Economy (CAFE) mileage standards for auto manufacturers, tax incentives and the Obama administration’s recently announced effort to create 48 EV charging corridors throughout the country. (See White House Announces Nationwide EV Charging Network.)

“Regulators, the private sector and utilities have some critical decisions to make on where the EV world is going to be taking us,” Saari said.

California, Oregon Cited

He lauded the work that regulators in states such as California and Oregon have already done to anticipate the adoption of EVs and said EV forums among state regulators are a critical way to share best practices.

“I would encourage other state regulators, if you haven’t put together the subject matter experts to plan out the programs, now’s the time to really look at doing that,” Saari said.

Bob Jenks, executive director of the Citizens’ Utility Board of Oregon, expressed surprise that policymakers are looking at his state’s cost recovery provisions for EV infrastructure as a model for the rest of the country.

Those provisions require the state commission to condition a utility’s recovery on whether an EV-related project is within the utility’s service territory; is prudent as determined by the commission; is reasonably expected to be used; is expected to stimulate innovation, competition and customer choice; and is expected to support the utility’s system.

“As somebody who was in the room when we negotiated that piece of legislation, I can tell you that the last thing we thought we were doing was setting some sort of national standard for ratemaking associated with EVs,” Jenks said. “All we were trying to do, quite frankly, was get a deal — with the legislative clock ticking during a short legislative session — that we had to have [done] that afternoon.”

Jenks said the EV section of the deal was almost eliminated at the last minute.

The cost recovery provisions, Jenks explained, are not specific to EV infrastructure but apply to any investment made by the state’s utilities.

That last consideration — supporting the utility’s system — could be key for Oregon utilities seeking to gain approval for EV infrastructure projects. Jenks cited a Pacific Northwest National Laboratory study that concluded widespread adoption of EVs could help the region integrate all of its wind.

Time-of-Use Rates

For that reason, Jenks cautioned against imposing time-of-use rates for EV drivers.

“I don’t know that time-of-use rates are the best way to deal with wind variability,” he said.

Jenks also said states should avoid using rate design to lead their EV policies.

“I think where we need to go is direct load control by the utility,” Jenks said. “There has to be a program to compensate customers for it, but I don’t know what that is.”

“We will design these [programs] down the road and these will evolve,” he said.