How Public Utility Commissions Can Prepare for Electric Vehicles, in Seven Steps

Our electric transportation future is on the way – that much is not in doubt. Electric vehicles may currently account for just a small share of vehicle sales, but a high – and accelerating – growth rate is putting EVs on the agendas of public utility commissions (PUCs) around the country. To address the coming electrification of the vehicle fleet – from passenger cars to delivery vehicles, buses, and trucks – state regulators should take steps to maximize the benefits and minimize the challenges associated with this transportation transformation – seven steps, to be specific.

A confluence of powerful trends is driving consumer interest in, and enhancing the value of, EVs. These trends include: 

• advances in technology – especially lithium-ion batteries – leading to falling upfront costs, declining total cost of ownership, increased range, and better driving experience;
• megatrends in transportation that are leading to connected, automated, and shared vehicle platforms; and
• societal trends, including continuing urbanization, changing views on car ownership, and growing environmental concerns.

These trends all point to the potential for rapid electrification of the vehicle fleet.

Regulators across the country are starting to grapple with what that means for utilities and the electric power system. There are tremendous benefits to be gained from vehicle electrification for drivers, fleet owners, and the electric power grid. AEE’s issue brief, EVs 101: A Regulatory Plan for America’s Electric Transportation Future points regulators in the right direction to capture those benefits.

In EVs 101, we suggest that PUCs take seven specific steps:

• Establish an electric vehicle regulatory framework. PUCs should use a collaborative process to gather information, then put out its viewpoint on the key regulatory issues for EVs, reducing uncertainty in the marketplace.
• Consider roles for various stakeholders in electric vehicle charging infrastructure ownership and financing. Regulators need to clearly define appropriate roles for utilities and third-party companies to play in owning and financing EV charging infrastructure. Both utilities and third parties have critical roles to play and should be able to develop, own, and operate charging facilities under appropriate rules and market conditions.
• Adjust utility planning and operations to fully integrate electric vehicles. Potential impacts and benefits of EVs for utility operations should be considered in load forecasts, modernization investments for smart charging, streamlined interconnection processes, and adopting interoperability standards for public charging stations.
• Implement rate designs for an electric vehicle future. Regulators should consider EV-only tariffs and well-designed time-varying rates to encourage off-peak charging. In the early stages of market development, regulators should also provide relief from excessive demand charges under EV-only rates to support the use of chargers.
• Ensure that vulnerable populations are not left behind. As the EV market unfolds, particular attention should be given to low-income and other vulnerable populations. Regulators should take steps to improve the ability of these communities to access the PEV market and apply longstanding principles of consumer protection to ratemaking decisions with cost implications.
• Educate consumers. Given the important role that consumer awareness plays in EV adoption and utilization of charging infrastructure, regulators should allow utilities to use their unique relationship with customers and experience in customer engagement from energy efficiency programs to improve access to EV information.
• Prioritize consideration of medium- and heavy-duty fleets. Vehicle fleets have the potential to provide electrification at scale in the near term, with substantial benefits to the grid and society. Some operators are already starting to make large commitments to electrifying their fleets. Commissions should explicitly look at fleets in the context of these regulatory issues.

America’s transportation future is electric. Although sales of EVs are still relatively small when compared to gasoline-powered vehicles, the market is growing rapidly, driven by a convergence of powerful trends. Jointly, these trends point to the coming electrification of the vehicle fleet, which has implications for both human mobility and the electricity grid that will fuel it.

To address this transformational market development, regulators should be proactive in developing a plan, to enhance the benefits that EV adoption can provide the grid and its customers and address any challenges that might arise. Each state is different, so there is no silver bullet for optimizing transportation electrification, but the seven-step framework in EVs 101 provides states with a foundation for maximizing the benefits of EVs and making our energy and transportation systems more secure, clean, and affordable. Whether this future can ultimately be realized will depend on regulators, utilities, automobile manufacturers, third-party charging infrastructure providers, and customers working together to create a clear vision and fostering a healthy, competitive, and dynamic environment for America’s electric transportation future.