Commentary

States Address EV Charging Infrastructure

In addition to affordability, range anxiety—the ability to access efficient and reliable vehicle charging—remains one of the largest barriers to electric vehicle (EV) adoption. At the federal level, investment is underway to create a national network of EV chargers. Locally, investor-owned utilities (IOUs) are generally using ratepayer dollars to support their entry into the EV charging market.

COMMENTARY

This proposed expansion of a utility’s line of business, particularly one that is also served by the private market, is forcing state regulators to address and balance the interest in increasing EV adoption with the ability to promote fair competition in the marketplace—all while maintaining affordable rates for utility customers. While some states are just beginning to confront this question, others are further along in addressing these complex issues.

Andrew Moratzka

For example, after initially prohibiting utility investment in EV service equipment (EVSE) in 2011 (except for that used for utility-owned fleets) on the basis that any benefits of utility ownership were speculative and did not outweigh the competitive harm to the market, California reversed course in 2014. This reversal was broadly supported by ratepayer advocates, charging companies, environmental advocates, and the utilities. The 2014 decision created a policy whereby utility ownership of EVSE, including both front-of-meter (FOM) and behind-the-meter (BTM) costs, would be addressed on a case-by-case basis, considering benefits against the competitive harm, and identifying any market gaps or failures.

In 2020, however, California lawmakers directed a shift to a statewide policy, whereby utilities recover from all ratepayers the FOM costs incurred for installation of electrical distribution infrastructure necessary to support separately metered charging stations. In effect, this policy socializes the costs of all transportation electrification (TE) service line extensions and electrical distribution infrastructure for EV charging across all ratepayers. Utilities track such costs through separate memorandum accounts that are eligible for review and recovery through the utility’s general rate case (GRC). Beginning with the next GRC cycle in 2027, California regulators may revisit this policy to determine whether any customer contributions are merited for FOM TE costs incurred by the utility.

Utility ownership of BTM costs in California has generally been limited and authorized only in targeted communities, such as disadvantaged or low-income neighborhoods, or in multi-unit-dwellings (MUDs). Most recently, however, the California Public Utilities Commission adopted a “Transportation Electrification Framework” via a November 2022 decision that will prohibit utility ownership of BTM EV infrastructure beginning in 2025.

Lilly McKenna

Fully regulated states, such as Minnesota, also are grappling with the issue of utility ownership of EVSE. Previously, the Minnesota Public Utilities Commission (MPUC) approved a variety of utility pilot programs, including both FOM and BTM utility ownership. For example, the MPUC approved both home charging, and public and fleet charging, pilot programs proposed by Northern States Power Company d/b/a Xcel Energy, and it also approved a petition by Minnesota Power for approval to own and operate 16 direct-current fast chargers in its service territory. Notwithstanding the initial approvals, the MPUC affirmed that assessing utility ownership in this space as compared to private industry investment was premature at the pilot stage. However, current proceedings appear primed to make that issue ripe for the MPUC’s consideration.

On Aug. 2, 2022, Xcel submitted an EV Portfolio Petition to significantly expand its public charging pilot into a permanent offering (including building, owning, and operating about 730 new high-speed public charging stations), initiate an electric school bus pilot program, drastically modify its commercial and residential EV pilot programs into permanent offerings, and obtain cost recovery for various advisory services, including education, outreach, and consultation. In total, Xcel is proposing to use nearly $400 million of ratepayer dollars between 2022 and 2026 to fund the proposals in the petition.

Riley Conlin

After hearing from various parties in response to the petition, the MPUC referred this matter to the Minnesota Office of Administrative Hearings for contested case treatment. In addition to cost recovery and rate design issues, the following issues are also to be addressed and considered:

■ Whether it is in the public interest to allow Xcel to exercise its monopoly market power to enter and expand into the EV charging market as proposed.

■ How Xcel’s proposed investments in the EV Portfolio Petition fit within private sector plans for EV infrastructure spending, including whether Xcel’s proposals are duplicative of forthcoming federal infrastructure funding.

■ An evaluation of any proposed alternatives to Xcel’s ownership of EV charging stations, addressing the findings in the commission’s Feb. 1, 2019, order “Making Findings and Requiring Filings.”

Numerous industry and agency representatives are involved in this proceeding, and a decision is due on July 23, 2023. Given the complexities involved and the size of Xcel’s proposed investments, the outcome of this matter will impact both the IOU and EV landscape.

There’s excitement for expanding access to EVSE in various jurisdictions. The examples above for California and Minnesota, which operate under two different regulatory regimes, are intended to highlight the issues being addressed. The resolution of issues relating to EVSE will be a fascinating area of law to monitor going forward.

Andrew Moratzka is a partner, Lilly McKenna is of counsel, and Riley Conlin is an associate with Stoel Rives LLP.

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