CPUC set to raise electric rates for EVs

The California Public Utilities Commission (CPUC) is set to give permission to PG&E to raise rates for electric vehicles on August 23.  In a letter dated July 24, Bob Benjamin, Supervisor for the CPUC Energy Division argues in support of PG&E's latest proposal (see PG&E rate proposal for EVs for a detailed discussion of the proposal).

Mr. Benjamin also discourages further debate on the subject saying, " Comments shall focus on factual, legal or technical errors in the proposed Draft Resolution.  Comments that merely reargue positions taken in the advice letter or protests will be accorded no weight and are not to be submitted."

The resolution is as follows:

Resolution E-4508. Pacific Gas and Electric Company (PG&E) Advice Letter 3910-E and Advice Letter 3910-E-A.

 PROPOSED OUTCOME:  This Resolution approves PG&E’s request to create a new electric vehicle rate schedule EV that eliminates the tiers but retains time variant pricing and to grandfather existing customers on E-9 electric vehicle rates until a decision in Phase 2 of PG&E’s 2014 General Rate Case or until December 31, 2014, whichever is later.    

ESTIMATED COST:  The proposed changes are revenue neutral on a class average basis.   

By Advice Letter 3910-E, filed on September 26, 2011, and Advice Letter 3910-E-A, filed on May 9, 2012.

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Given that only "factual, legal, or technical" arguments are allowed, the one issue that jumps out is the statement:  "The proposed changes are revenue neutral on a class average basis."  This appeared to me to be factually incorrect, so I called Adam Langton of the CPUC staff to see what is meant by "class average basis".  From that conversation, I came away with the impression that the change does not have to be revenue neutral for the specific E9 tariff, but rather for the whole class of residential customers.  I think the argument is that the new rate would not be higher than if people used the standard E1 rate, and in that sense the change is "revenue neutral."

I would be happy if anyone reading this can give a better explanation of "revenue neutral on a class average basis."

In any case, I'm not able to challenge this resolution on a factual, legal, or technical basis, so I am assuming it is a done deal.   I do feel that the current proposal is much better than the original one that PG&E proposed on September 26, 2011.  And I'm hopeful that PG&E will start advertising the new rate so more people understand that charging an EV at night is a bargain.

Also on the positive side, Mr. Benjamin's letter states, " We will not direct PG&E to discount the off-peak rates at this point in time.  (emphasis added) We appreciate the logic behind arguments for setting off-peak rates based on marginal costs and intend to consider the feasibility of super-off-peak rates set at marginal cost of service to incent off-peak electric vehicle charging, and whether non-bypassable changes can be discounted in this context, when we re-examine electric vehicle rates in the near future."

Mr. Benjamin's letter also adds, "we expect that the TOU [Time-of-Use] periods will be examined for all three utilities in a more complete electric vehicle rate review to take place in the near future".

From this I encourage EV supporters to weigh in on rate discussions in the near future.  In view of those upcoming discussions I feel there are two key points that the CPUC should address:

1.  Is the PG&E price proposal accurate in terms of its costs?

2.  Should the CPUC support a lower price that will promote more widespread adoption of EVs? 

 1.  The key price for EVs is the off-peak, since people normally charge their cars at home overnight.  The price of electricity is the sum of non-bypassable costs, distribution costs, and generation costs.  PG&E's letter from Brian Cherry dated June 5 defends the rate change; it discusses non-bypassable costs and distribution costs and goes on to say that the proposed "off-peak rate is comparable to other rate options and is fully cost based."

 But the letter does not explain what the generation costs actually are.  Mr. Cherry points out that the price is "comparable to other rate options."  However, no evidence is provided that the comparable other rate options are priced appropriately.   From discussions with CPUC staff I understand that non-bypassable costs and distribution costs come to about 7 cents/kwh.  Since the off-peak proposed price is 10 cents per kwh, this means that PG&E is adding 3 cents for generation in the off-peak. 

 My question, which I think the Commission should require an answer to, is whether there is really a generation cost in the off-peak?  Just saying that the price is comparable to other existing rates does not answer the question.   The issue is this:  PG&E has to turn off some of its generators at night when there is less demand.  PG&E should show that the cost of turning off the generators is less than the cost to keep them running at a low level.  If it is cheaper to keep them running, then the off-peak generation cost should be zero, since anyone using electricity at night is actually saving PG&E money. In this case the charge to customers should be no more than 7 cents/kwh to cover fixed costs.

  2.  My understanding is that the CPUC asked PG&E to modify the rates to encourage EV use, not to discourage such use.  PG&E has presented a proposal which they feel covers their costs.  I suggest that the CPUC should be looking at a price structure that promotes conversion of all automobiles to electric.  When there are millions of EVs, then the off-peak energy demand will doubtless be much higher than today, and modification of rates would be appropriate. Until those millions of EVs are charging overnight, however, the existing E9 rates are an appropriate way to encourage EVs.

PG&E states that their proposed rates offer a "gasoline equivalent charge of roughly $1.00 per gallon which PG&E believes is a significant incentive for EVs compared to the current cost of gasoline."  Although this is indeed an incentive for EVs, it is not as great as the current incentive which is closer to $0.50 per gallon. For the next few years, while battery technology improves and prices drop for EVs, maximizing savings on gas purchases is necessary to make the economics of EVs practical.  Any step that reduces that incentive is a step in the wrong direction.