How PG&E's EV charging pilot will test utility ownership models
The proposed $130 million plan aims to allow utility investment and a working free market
The controversy over utility ownership of electric vehicle charging infrastructure could to come to a head in California.
Two of the state’s three dominant investor-owned utilities (IOUs) are already acting on plans to build networks of EV chargers approved by the California Public Utilities Commission. In one, the utility will own all the chargers; in the other, all will be owned by independent charger providers.
The third pilot — PG&E’s closely-watched hybrid proposal — will involve both utility- and third party-owned EV chargers. Set to be decided this month, it could be especially important in helping regulators decide how to structure the large-scale charger buildout in the nation’s largest electric vehicle market.
Advocates for utility ownership say their ability to rate base investments can help ensure charging infrastructure reaches all customers — not just higher-income ones who today own most EVs. But third party providers say that could squeeze them out of the market, and consumer advocates voice concerns about the cost-effectiveness of utility EV investments.
A recently-released proposed decision in the California’s Alternative Fuel Vehicle proceeding (A 15-02-009) focuses squarely on the question of whether utility ownership of charging infrastructure will unfairly impede private providers.
“Where we seek to support the development of a now nascent market, our inquiry into the anticompetitive effects of utility ownership must take into account both actual and potential effects,” Administrative Law Judge (ALJ) Darwin E. Farrar wrote.
“Our concern with anticompetitive effects must focus on the impacts PG&E’s entry and ownership will have on the nascent market as well as the market we hope to develop,” Farrar added.
Farrar’s proposed decision leaves the PG&E pilot far smaller than the utility’s original $654 million proposal to build and own 25,000 Level 2 charging stations and 100 direct current fast chargers (DCFCs). But it is now comparable in scale to those approved for Southern California Edison (SCE) and San Diego Gas and Electric (SDG&E).
SCE is working on the buildout of Charge Ready, a $22 million, 1,500-site pilot where hosts will own the charging stations. SDG&E just completed the competitive bidding for Power Your Drive, a $45 million, 3,500-site pilot of utility-owned chargers.
Farrar approved a $130 million ratepayer-funded expenditure for PG&E ownership of “make-ready” infrastructure for up to 7,500 EV charging stations — essentially extending the distribution system up to the site of the station. Up to 2,625 of the stations can be owned by PG&E and they will be sited at multi-unit dwellings, disadvantaged communities, and workplaces.
Both the utility and some private providers say the proposed decision offers a workable format to test utility ownership of EV chargers, but some consumer advocates and third-party charging companies say even the scaled-back program could inhibit a private market and prove costly to ratepayers.
PG&E’s original plan, filed in 2014, would have directed 10% of the $654 million investment in charging stations to multi-unit dwellings and disadvantaged communities.
The commission effectively rejected the proposal in September of that year and ordered a “more measured approach” with a “more phased deployment.” In response, the utility presented three revised proposals to regulators.
An $87 million “compliance” proposal reduced the number of Level 2 charging stations from 25,000 to 2,460 and the number of direct current fast chargers from 100 to 50, with 10% of the deployment targeting disadvantaged communities.
PG&E also submitted a $222 million “enhanced” proposal that included 7,430 Level 2 chargers and 100 direct current facilities.
Finally, a $160 million “Settlement Agreement (SA)” plan called for 7,500 Level 2 chargers and 100 direct current. It also included options for Time of Use (TOU) Rate-to-Driver and Rate-to-Host rates. Varying levels and types of participation would be available to multi-unit dwellings, disadvantaged communities and other entities.
The SA also required the utility to assess the potential for aggregated EV resources in its Distribution Resource Plan in its Integrated Capacity Analysis.
In his survey of the submitted plans, Judge Farrar concluded that “no proposal is supported by all parties,” but found “particular strengths” and “certain weaknesses” in each.
“Rather than approve any one of the proposals as presented,” he decided, “we will adopt an EV program, drawing from elements of all proposals, that is more consistent with the proceeding record and the public interest.”
Because the “majority” of stakeholders agreed much of the utility’s plan should be rate based, Farrar concurred. Rebates should, however, be treated as expenses and excluded from rate base, he wrote.
PG&E calculated the cost of the enhanced proposal to be $0.22/month/customer, Corporate Relations Spokesperson Ari Vanrenen told Utility Dive. Since Farrar reduced the overall cost of the program from $160 million to $130 million in the proposed decision, the cost per customer would be less if it is approved, she said.
The proposed decision
Farrar’s proposed decision orders PG&E to implement “a three-year Electric Vehicle Program.”
It excludes the 100 direct current chargers, but provides for a $130 million ratepayer-funded expenditure to support “up to 7,500 Electric Vehicle Level 2 charging ports” with the make-ready infrastructure. It also allows the utility to own “up to 35% of total Electric Vehicle Supply Equipment (EVSE) ports.”
For its “Charge Smart and Save Program,” PG&E would have to make clear to all customers their option to own the EV chargers. It would also provide a 50% rebate on the cost to multi-unit dwelling and a 100% rebate to site hosts in disadvantaged communities. PG&E would be barred from owning stations at workplaces not in those communities.
The proposed decision would establish a Program Advisory Council with which the utility must work to set prices, rebates, and participation payments through a competitive Request for Proposal (RFP) process. Operations and Maintenance (O&M) vendors would also be selected through RFPs and listed publicly.
O&M costs for utility-owned EV chargers will be paid by the utility. Site hosts are responsible for O&M on the other chargers.
The site hosts, not the charger providers, would be billed by the utility. The hosts would have the option of the TOU Rate-to-Host and the TOU Rate-to-Driver options. In the first, the price signal is to the site host. In the second, it is sent to the driver.
The Program Advisory Council would have the “final say” over the reasonableness of the site host’s load plan and “may request that PG&E modify its data collection parameters,” Farrar wrote. In deciding reasonableness, it is to use criteria based on the criteria in SDG&E’s site selection RFP.
The ALJ on utility ownership
Farrar abridged the stakeholder SA in two significant and connected ways. First, he rejected $30 million in funding — $25 million for DCFCs and $5 million for a build out targeting low-income utility customers.
Second, he wrote the SA did not meet state anti-competitive standards failed to pass the crucial “balancing test” reaffirmed in the approved SDG&E and SCE plans. The balancing test requires ratepayer benefits of utility ownership of EV chargers “to be balanced against the competitive limitation(s) that may result from that ownership.”
To meet the balancing test, a commission “review of the public interest must include an analysis of the impact of such ownership on competition,” Farrar added.
Like the previously-approved utility plans, the SA considers factors such as market saturation rates, site host choice of EV charger and service providers, and time varying price options that can reduce anti-competitive impacts. But those factors do not, the ALJ wrote, eliminate the need for further anti-competitive mitigation measures.
The other approved utility plans also include consideration of other factors, like economic drivers, market composition, and number of customers, Farrar added.
Even stakeholders who did not actively oppose the SA acknowledge some shortcomings, Farrar wrote.
Farrar noted a comment from ChargePoint, the largest third-party charger provider, that argued "PG&E’s entry into the market will push out competitors that cannot compete or adapt to PG&E’s takeover of a large sector of the workplace, commercial, public and [multi-unit] market sectors."
ChargePoint also argued that “competition would likely cease within PG&E’s target geographical and target product markets” because “barriers to entry will form,” Farrar added.
The SA asserts that utility ownership of 3% of the infrastructure needed in 2025 for California’s 1.5 million ZEVs “will not adversely impact the developing EV charging market.” The proposed decision rejects this argument because it “references anti-competitive impacts in the market as it might exist almost ten years from now,” Farrar wrote.
“We can neither now determine the exact number of EV charging stations that will exist ten years from now, nor ignore how a system in place three years from now will impact the development of the market we would like to have in place ten years from now,” he wrote.
Neither the SDG&E nor the SCE approvals “conclude that there are no anti-competitive impacts associated with utility ownership,” Farrar observes. Instead, the SDG&E ruling found that utility ownership “would be in the ratepayers’ interests and outweigh the disadvantages that could result from a lack of competition.”
Similarly, he concludes, “development of the EVSE and EV charging services market is in ratepayers’ interest” but the SA contains “potential anti-competitive impacts” that warranted changes in the decision.
PG&E’s welcomed Farrar’s decision, saying it “has always been happy to partner with the charger providers because that is what they do,” according to spokesperson Vanrenen. “At our core, we are an infrastructure company.”
ChargePoint is “happy” with ALJ decision and recognizes utilities “are uniquely positioned to find sites for their customers,” said Anne Smart, director of government relations.
The decision includes elements common to both the SDG&E and SCE programs and it allows PG&E the flexibility to be innovative in creating a program appropriate to its territory, she added. There is also “flexibility to fit different charging station providers’ business models.”
“Protection of the site host’s ability to choose their own equipment” was critical in earning the company’s support, Smart said. “It ensures we will continue to have a competitive marketplace and a sustainable marketplace for charging stations that will be in place beyond these pilots.”
But not all private charging companies were so pleased. Greenlots, one of the leading charge station providers, said the ALJ got it wrong.
The proposed decision “a significant departure” from the SA and was mainly due to the commission’s concern with protecting market competition, Director of Government Affairs Tom Ashley told Utility Dive. “The ALJ was concerned about the utility competing with electric charger service providers in the market but did not consider the very competitive nature of traditional utility procurement.”
In particular, Ashley said, improvements could be made on the RFP process for EV charging infrastructure.
"My understanding is that SDG&E’s RFP for charger providers was the most complex procurement process the EV charging industry has seen,” Greenlots’ Ashley said. “The metering requirements and some of the elements around quality control challenged the industry to meet those standards.”
Farrar acknowledged shortcomings in PG&E’s RFP process and in the proposed decision, and directed the utility to “develop this detailed process in consultation with its Program Advisory Council.”
Every utility RFP may not be as rigorous SDG&E’s, Ashley acknowledged. But “the decisions made by SDG&E are made on the basis of feature and functionality and ultimately the ability of that equipment to provide services that meet the need of the utility in executing this ratepayer-funded program.”
Even so, Greenlots preferred the SA proposal to the proposed decision, Ashley said. The program would have been stronger if it offered the direct current chargers and included the $5 million for a more targeted disadvantaged community buildout, he said.
The SA also offered a “relatively simple turnkey operation,” while the proposed decision is “significantly more complex,” he said. “The complexity could delay deployment and result in a chilling effect on utility investment.”
From the consumer advocate perspective, concerns remain that “consumer benefits don't justify the consumer costs,” said Elise Torres, staff attorney at The Utility Reform Network. In rejecting the $25 million direct charger expenditure, the proposed decision “specifically references TURN’s concerns about stranded costs.”
How regulators view the stakeholder arguments on competition and cost will likely shape their final decision on the PG&E pilot, expected in mid-December.