Businesses generally need to see cost savings in order to justify switching to an electric vehicle fleet.
“They need the rates to be better than gas or diesel if they’re going to give up their diesel bus or truck,” said Cal Silcox, clean transportation strategy manager at California utility Pacific Gas & Electric.
Right now, there’s no guarantee that commercial and industrial customers in PG&E territory will see any fuel savings, he said. That’s largely because of the demand charges C&I customers are required to pay when their electricity use spikes — such as during a high-powered EV charging event.
That’s why PG&E is hoping to replace demand charges with a new subscription rate plan for customers that are using commercial EV (CEV) charging. The proposal, submitted to the California Public Utilities Commission Monday, allows customers to choose the amount of power they need for their charging stations and pay for it with a flat monthly fee — similar to picking a cellphone data plan.
The proposal would create a new rate class for CEV charging and would offer two types of rates within that: one for customers with charging up to 100 kilowatts and one for customers with charging over 100 kilowatts.
“As EV charging stations become more common in places such as multi-family residences, businesses, transit stations and other commercial spaces, PG&E has recognized that the existing rate structure does not best meet the needs of commercial EV charging,” according to a company press release. “Currently, public or fleet EV chargers on PG&E’s commercial electric rates can see higher costs than the typical business customer, on average. These costs pose challenges to the expansion of EVs and needed charging stations.”
CEV customers currently pay 30-40 cents per kilowatt-hour in PG&E territory, while commercial buildings pay 18-25 cents per kilowatt-hour, Silcox explained. The new plan brings customer costs in line with their cost of service. PG&E’s modeling shows that it could save a transit agency, for instance, 20-34 percent on what it is paying today.
“We think it should get the price down to equal or less than the cost of diesel so it’s competitive and…makes the business case for going electric positive for them,” he said.
While the subscription fee is lower than the demand charges PG&E’s commercial customers currently pay, the plan is not unlimited. So if a customer’s electricity usage exceeds its rate program, it will have to pay for overages. But because the plan is monthly (rather than yearly, as some commercial rates are), customers have more insight into their usage and can adjust quickly to avoid additional payments in the future.
Also, any CEV customer that buys a plan covering their maximum charging capacity installed on site should never go over that limit, unless they add more chargers. Some customers may intentionally pick a subscription plan that covers less load than their charging stations require, running the risk of overages. But they would only elect to do so if they thought they could save more money through managed charging.
In that scenario, imagine a transit agency has a fleet of five electric buses and five 50-kilowatt chargers to fuel them up, said Silcox. The agency could either buy a 250-kilowatt subscription plan and cover all of its needs for the five buses, or purchase a 200-kilowatt plan and cover the remaining 50 kilowatts of charging load with energy storage or load management and potentially pay less overall.
The new proposed rate also includes a basic time-of-use structure that remains the same every day of the week and throughout the year. The time-of-use rate is specifically designed to encourage CEV charging during the middle of the day (with super off-peak rates offered between 9 a.m. and 2 p.m.) so that customers are taking advantage of California’s surplus solar power.
Peak hours would start at 4 p.m. under the subscription plan, which aligns with new time periods approved by the California Public Utilities Commission earlier this year. The peak period for CEV customers would end at 10 p.m. (an hour later than other customers), when prices start to decline again.
A new approach to ratemaking
PG&E has been working with California’s other investor-owned utilities to develop a new framework for designing rates, which is focused less on conventional rate classes and more on meeting a customer’s specific needs, for, say, EV charging. The utilities recently outlined this “modern rate architecture” concept in a white paper.
Margot Everett, senior director of rates and regulatory analytics at PG&E, said the fundamental idea is that rates need to get more granular in order to reflect how electricity customers actually use a utility’s products, which include energy generation, as well as the poles-and-wires delivery system, other services around that, and the utility’s public policy initiatives such as low-income programs. This approach also involves creating a rate that reflects a customer’s fair share of their cost of service, without creating other distortions in rate design.
“That’s the direction the state is going,” Everett said. “Really creating transparency around rates, really making sure our rates are meeting customers’ needs and making sure customers are paying for what they use…and not paying for other people’s costs.”
When asked why other utilities don’t take the same approach, Everett posited it’s mostly because they’re hesitant to do so.
“I think you’re going against a norm that’s been part of rate design for 100 years,” she said. “Creating rate classes based on how big you are or who you are, your demographic…is just the way utilities have been doing this for years.”
“Other utilities can start thinking in terms of creating different customer classes and recognizing that with technology evolution and customer choice, customers are not as homogenous as they used to be,” Everett continued. “This type of rate design worked fine in the 1970s, when everybody had pretty much the same type of load. […] Now you have customers that have a lot of choice, and we need to be thinking about how our customers are different and [considering] that it costs us something different to serve them.”
Moving to this new ratemaking model will require finding ways to gather more data. It could also be met with some pushback. Rooftop solar supporters have long opposed putting solar customers into a separate rate class from other residential customers, because these proposals typically reduce the economic benefits of going solar.
Things could be changing now that the solar market is maturing, though. And things could be different for EVs from the get-go, given that the additional load is generally a positive thing for utilities, whereas rooftop solar took load away.
PG&E says stakeholders have generally reacted favorably to the new subscription rate proposal so far. Everett said the California Public Utilities Commission and the advocacy group at the commission have also seen the plan receive positive responses. Regulators are highly motivated to approve this rate or something like it, she said, given that California’s two other investor-owned utilities already have CEV rates in place.
Because PG&E’s latest proposal isn’t tied to an EV infrastructure build-out and consequently doesn’t come with a big rate request, as previous EV filings have, the utility is hopeful it will move quickly.
Some industry members are too.
“ChargePoint applauds PG&E for the innovative commercial electric vehicle rate proposal that will, if approved, benefit EV drivers by significantly reducing barriers for operating charging stations in California,” said Renee Samson, director of utility solutions for ChargePoint, in a statement. ChargePoint hopes the new rate design will serve as an example for utilities around the country moving to support transportation electrification.”
“Creative new rate designs that help transit fleets like ours save on fuel costs will help enable us to make the transition to a 100 percent clean fleet, further reducing emissions on behalf of the residents that rely upon our fleet for safe, efficient, and reliable transportation throughout San Joaquin County,” said Donna DeMartino, chief executive officer for San Joaquin Regional Transit District. “PG&E’s proposed rate design provides a critical portion of that solution, and its approval will help bring us closer to our zero emissions goal.”
PG&E Proposes Ditching Demand Charges for Commercial EV Charging, by Julia Pyper, Greentech Media, November 7, 2018.