The Washington Utilities and Transportation Commission (“UTC”) recently issued a draft policy statement intended to provide guidance to Washington utilities investing in electric vehicle charging services. Drawing on experience with utility electric vehicle (“EV”) programs in California and Oregon, the UTC bases its proposal on the regional “market transformation” approach that has been employed successfully to usher a number of innovative energy conservation technologies into mainstream markets. Because an accepted business model has yet to emerge for electric vehicle charging, the policy statement also proposes a “portfolio” model intended to encourage competing financing and business approaches to achieve a robust market for electric vehicles and infrastructure to support their use. The UTC has requested comments, including comments on several basic questions such as how “electric vehicle charging services” should be defined, by March 31.
The policy statement was issued in response to ESHB 1853, adopted by the legislature in 2015, which provides an incentive rate of return of up to two percent for utility investments in “electric vehicle supply equipment” and also authorizes the UTC to adopt policies to improve access to and encourage competition in the provision of electric vehicle charging services. The draft policy statement provides guidance on several key legal questions related to EV charging, such as how providers of charging services will be regulated, what a utility must show to demonstrate that EV charging infrastructure is "used and useful" and therefore eligible for inclusion in utility rate base, and how the environmental benefits of EVs will be considered by the UTC. The policy statement also lays out the UTC’s interpretation of ESHB 1853’s provision allowing charging equipment to be “gifted” to property owners after it is fully depreciated by the utility.
The policy statement also starts to answer some of the more difficult questions that have bedeviled EV efforts in the Northwest. For example, long-standing regional policy has favored conservation of electricity and encouraging adoption of EVs appears to run counter to this policy. The UTC did not going as far as some advocates suggested by adopting a new framework that would consider overall energy efficiency, not just efficiency of electricity use, a framework that would favor EVs because they are far more efficient than internal combustion engines in terms of units of energy consumed. Nonetheless, the UTC concluded that investments in EV charging infrastructure can be justified because they would encourage Level 2 chargers, which are more efficient than Level 1 chargers using a standard 110-volt outlet. In addition, the UTC concluded that, if EVs are charged during off-peak hours, utility revenues from existing equipment will increase, benefiting all ratepayers, even those who do not own EVs.
On the other hand, the UTC is concerned that EV owners may charge their cars when they arrive home from work, which would add to evening peak loads and require new investments in generation equipment to cover these loads. The policy statement therefore strongly encourages measures that will encourage off-peak charging, such as time-of-use or dynamic pricing. The growth of demand related to EVs may therefore require Washington utilities to re-examine time-of-use rates and other forms of dynamic pricing, which have not fared well in this region in the past. In addition, the policy statement indicates that EV owners should be compensated for services they provide to the grid. Compensating EV owners for providing these kinds of services could result in them becoming direct participants in markets for energy storage and ancillary services, which raises a host of practical and regulatory difficulties.
One unfortunate aspect of the policy statement is that effectively bars utilities from making investments in DC fast charging stations based on ESHB 1853’s requirements that charging infrastructure will be eligible for enhanced rates of return only if it is placed where EVs are likely to be parked for more than two hours at a time. Since fast charging stations are capable of recharging EV batteries in far less than two hours, the UTC concludes that this provision bars utilities from participating directly in the market for fast charging stations even though fast charging is by the most capital- and energy-intensive form of charging, and therefore the market for which utilities may be best fit. Instead, the policy statement provides only that regulated utilities should cooperate with the Washington Department of Transportation in providing DC fast charging on key transportation corridors.
With most major car makers committed to rolling out electric vehicles with greatly improved battery ranges, the UTC policy statement demonstrates that the UTC is now grappling with the regulatory barriers that may discourage the construction of charging infrastructure that will be necessary for EVs to capture a significant share of the vehicle market. If it can be achieved, electrification of Washington’s transportation system will be a substantial benefit to consumers, to the environment, and to the Northwest’s overall economy.