Last week, the California Public Utilities Commission voted unanimously to open a new proceeding aimed at addressing the many questions about how billions of utility dollars should be spent on building out an electric vehicle charging infrastructure to meet the state’s lofty transportation electrification goals.
And fortunately for the EV industry, it doesn’t contain a poison pill that could freeze the needed funding to solve all these challenges.
Last week’s Order Instituting Rulemaking to Continue the Development of Rates and Infrastructure for Vehicle Electrification and Closing Rulemaking 13-11-007 (PDF), to use its full title, caused quite a stir when EV charging companies noticed a single sentence that implied a threat to one of the state’s chief sources of EV infrastructure funding.
The CPUC has approved roughly $1 billion in programs to incentivize residential, workplace and public charging from Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric. Those utilities still have another $1 billion in requests for more transportation electrification investments across eight open dockets, and that spending would not be affected by the order’s creation of a new proceeding to take over the CPUC’s previous policy guiding that work.
However, the draft order notes, “while efforts to advance those proceedings will continue, we expect any new applications filed after December 1, 2018 to be considered under the parameters of an initial Transportation Electrification Framework as determined by future rulings in this proceeding.” To the industry and environmental groups involved in state EV charging policy, this sentence implied that any new utility EV charging plans would have to wait until the new proceeding creates new rules for them — a process that could take years.
This move, in short, “would effectively put a freeze on all new utility transportation electrification applications for at least two years,” wrote groups such as Advanced Energy Economy, BYD, eMotorWerks, Greenlots, Proterra and Siemens in a strongly worded letter (PDF) to the CPUC last week.
“Adding another 18-24 months for applications to come forward and the Commission to review the new applications means this action will likely freeze the market for up to four years. Such a strategic decision pre-judges several key issues, has far-reaching market impacts, and should not be made without input from the public or the incoming administration," wrote the groups.
“The way it’s written, to the entire transportation electrification space, it signals that the California Public Utilities Commission is not comfortable receiving new utility applications until this process wraps up,” Matt Stanberry, AEE’s vice president of market development, said in an interview last week.
Thankfully for the groups concerned, the California Public Utilities Commission was quick to point out that this was not the intention of the order. “The CPUC will continue to consider new transportation electrification applications as directed by the legislature or as submitted to us. This was always the intention,” CPUC spokesperson Terrie Prosper wrote in an email. “In fact, the proceeding is being proposed to strengthen and expand the utilities’ and CPUC's work in transportation electrification — not limit it.”
The revised draft of the order, which was passed unanimously by the commission on Thursday, contains new language to replace the offending sentence, and it explains how ongoing utility applications would be managed under the new Transportation Electrification Framework, or TEF, it would create.
“As of the date of issuance of today’s rulemaking, the Commission has pending before it $1 billion in utility requests for additional [transportation electrification] investments across eight open dockets. These proceedings will continue to be considered under current guidance. The Commission will continue to consider new applications as directed by the legislature or as submitted via application. Any new applications filed after December 1, 2018 may be considered under the parameters of an initial TEF, if not solely under existing statutory and regulatory guidance. However, this will be determined with stakeholder input as needed, if new applications are filed before an initial TEF is completed.”
To understand this language, it’s important to note that the order approved last week will replace a proceeding that’s been underway since 2013, a year after Gov. Jerry Brown announced his goal of 1.5 million EVs by 2025 for the state. In late 2014, the CPUC decided to allow utilities to invest in some portions of the infrastructure required to charge up all those new EVs, and the 2015 passage of Senate Bill 350 directed the CPUC to work with the California Energy Commission and the California Air Resources Board “to direct the [investor-owned utilities] to file applications for programs to support widespread" transportation electrification.
The utilities responded with a combination of EV charging plans totaling more than $750 million, which after much debate were approved by the CPUC in May. Meanwhile, in January, Brown upped the goal to 5 million zero-emission vehicles (ZEVs) by 2030, plus 250,000 public charging stations operating by 2025.
All of this activity has supported EV market growth, the order notes. But “the ongoing submission of one-off program applications has prevented the Commission and the utilities from focusing on critical issues that were raised in 2013, such as identifying the most appropriate rate structures to manage the additional load from ZEV charging and the potential to create value from managed ZEV charging,” it noted.
“Specifically, with more than two years of utility investment experience and lessons learned, we seek to establish a common and comprehensive framework for [utility] investments in transportation electrification in California, aligned with the goals of SB 350,” the order states. “This Transportation Electrification Framework will help guide the next chapter of policies and programs supporting California’s ZEV infrastructure, which has developed significantly in the five years” since the docket was first opened.
California lawmakers also passed two laws this year that need to be integrated into its EV charging policy framework, the order notes. The first, SB 1000, directs the CPUC to consider rate-design issues such as EV-specific tariffs, submetering, and other grid integration technologies. The second, AB 2127, requires the CPUC to “support the California Energy Commission’s development of a statewide assessment of the ZEV charging infrastructure needed to support the state’s vehicle adoption and greenhouse gas emission reduction goals” — a nod to the fact that the CPUC’s role as utility regulator is just one part of a broader state effort on EV charging.
To manage this interdependence, CPUC’s new order calls for “better alignment of internal and external state agency resource planning processes while also addressing key questions about the role of utility transportation electrification investments in meeting the state’s ZEV adoption targets and greenhouse gas emission reduction goals.”
The order’s list of issues to address scopes out the complexities the CPUC must tackle to manage the utility-EV charging infrastructure nexus. These include technical issues, such as how to manage the “strategic integration of transportation electrification load” that’s expected to grow nearly tenfold from 2017 to 2030. EV charging programs are addressing that load with time-of-use rates, demand response offerings, fleet optimization, and new rate structures to replace challenging demand charges with subscription plans.
But it also raises more fundamental questions about how much California ratepayers should be expected to pay for utility EV charging programs. “More unified and focused [investor-owned utility, or IOU] investment strategy can bolster market confidence and encourage third-party investment in transportation electrification, while also better managing market and ratepayer expectations regarding the scale of future IOU investment,” it notes. It also addresses the issue of balancing utility investment with enabling third-party private sector investment, stating that “the cost of electrifying California’s transportation sector will be significant and cannot be borne by IOU ratepayers alone.”
AEE’s Stanberry said that all of these issues indicate “this is going to be a pretty energetic discussion. Embedded in the order are questions about the role of the utilities, rate design, a lot of issues people care about. All of those conversations have taken far longer than anticipated."
In the meantime, “in the transportation electrification space, there are a lot of different agencies and parts of government working on this, not to mention the private sector,” he said. That includes the California Energy Commission’s role in broader transportation infrastructure policies, big grant programs and standards development, and California Air Resources Board’s role in overseeing tax credits, emissions standards and other key issues.
“We’re sympathetic to the idea that it would be helpful for the state to develop more of a roadmap for reaching its goals,” said Stanberry. “It’s not necessarily the case that the CPUC is the right place for that conversation to happen. But that being said, we’re definitely sympathetic to the notion.”