Senators Urge FERC to Level the EV Charging Playing Field

It’s still challenging to identify a viable business case for private investment in EV charging stations.

June 24, 2022

Electric Vehicle Charger

ALEXANDRIA, Va.—Four U.S. senators have sent a letter to the Federal Energy Regulatory Commission (FERC) seeking to lower market barriers for electric vehicles (EVs). Sens. John Hickenlooper (D-Colo.) and Thom Tillis (R-N.C.) and Reps. Ann Kuster (D-N.H.) and Dusty Johnson (R-S.D.) asked the commission to revisit “discriminatory” wholesale market rate designs that threaten to render fast charging stations uneconomic.

The legislators said that although battery prices have fallen 89% and U.S. automakers are investing billions of dollars in EV research and development, it remains challenging to identify a viable business case for private investment in the EV charging stations these vehicles will need.

“FERC-jurisdictional rates currently present a significant barrier in this respect. Specifically, the demand-based fees imposed by several wholesale capacity markets can pass on undue and significant costs to EV charging stations in likely noncompliance with the Federal Power Act’s just and reasonable requirements. In so doing, they threaten the economic sustainability of high-capacity charging stations, including the direct current (DC) fast chargers needed to electrify the transportation sector and meet the needs of consumers,” wrote the senators in the letter.

They asked the commission to address this issue by scheduling a technical conference on wholesale market obstacles to transportation electrification and by addressing discriminatory wholesale rates that are consistent with the statutory schedule on which states are currently acting as part of the Infrastructure Investment and Jobs Act.

The senators specifically asked FERC to reexamine rates that charge consumers based on the amount of energy consumed at a customer’s peak demand, rather than rates based on the overall electricity a station uses, which is lower overall than a typical commercial customer.

The letter cites a study from the Department of Energy that found demand-based charges can account for most of an EV charging station’s operating expenses and can exceed the revenue generated by the station.

“A station that provides EV charges during a peak load hour will be assigned a ‘capacity tag’ that can saddle the station with unsustainable costs for the next year,” states the letter. “Two identical DC fast charging stations in the same network can thus have widely varying costs of operation based on their capacity tags. An EV charging network operator that maintains station availability risks experiencing a major financial penalty for providing the necessary service to EV drivers during a small number of hours.”

The legislators said that capacity charges pre-date transportation electrification and introduce “extreme volatility” and spikes into the costs of operating EV charging stations.

“They do little to provide an actionable market signal because the hours that constitute the system peak are only knowable retrospectively,” they wrote.

In a worst-case example cited by the senators, demand-based fees resulted in an effective cost of electricity that exceeded an equivalent of $33/gallon of gasoline, without a reasonable ability for charging station operators to predict or mitigate these charges.

“The rapid emergence of a new customer class—those who operate EV charging stations servicing the EV-driving public—is threatened by some wholesale market designs that preclude economic sustainability. As our economy electrifies, these designs threaten the pocketbooks of an increasing portion of Americans,” wrote the senators.

In recently submitted testimony to a U.S. House energy hearing, NACS emphasized that private retailers are not asking for special treatment or for the utilities’ hands to be tied. Rather, the association is calling on lawmakers to establish fair rules for all entities.

“There are some key structural changes and assurances needed to make that case for private sector investment, including policies that encourage utilities to do the needed work to provide reliable electricity as well as rate structures that allow private sector participants to sell electricity in a competitive and price-transparent manner,” said NACS in a recent letter to the U.S. House Committee on Energy and Commerce’s hearing “Charging Forward: Securing American Manufacturing and Our EV Future.”

NACS also reminded lawmakers that public utilities will still profit from EV charging in the future, even without subsidies. A more competitive EV charging marketplace will result in more demand for electricity.

“Electricity markets will have to provide reliable, transparently-priced wholesale electricity to all EV charging site hosts,” states the letter. “This should not be controversial. It would make the charging marketplace highly competitive and EV charging investments more attractive to private businesses throughout the country.”

NACS is a founding member of the Charge Ahead Partnership, a coalition of businesses, associations and individuals who share the same goal of creating a competitive EV charging market nationwide. The Charge Ahead Partnership is free to join. By joining, members will be kept informed about this issue and will learn how they can help the cause.