Demand Charges Hamper C-Store Investment in EV Charging

Recent state legislation looks to promote private investment in EV charging.

February 06, 2023

ALEXANDRIA, Va.—Convenience retailers know that their locations make the perfect location for EV drivers to juice up, but there is a reason why few gas stations offer the amenity, reports The Epoch Times.

“Our industry’s locations are purposely visible. People already have established patterns using [gas stations], and we typically show the prices of fuels we offer on large signs that motorists can see as they are driving,” Trevor Walter, vice president of petroleum supply management for Sheetz, told the U.S. House Committee on Agriculture last year on behalf of NACS.

However, gas stations are impeded from gaining much, if any, profit from EV charging, due to government regulations on how power is sold, including exorbitant demand charges.

“Given the large electricity demands associated with fast chargers, these demand charges overwhelm the cost of electricity and make it impossible for retailers to sell electricity and make a profit,” Walter told the committee.

The sale of electricity must be changed for the retail market to get in the game, he indicated.

As detailed in NACS Magazine, convenience retailers are hit with demand charges from electric companies because they are considered commercial users of electricity when a customer uses their EV charger to juice a battery. A demand charge is not just based on how much electricity convenience retailers use but the highest consumption they have over a short period of time.

NACS believes that EV charging should be an open, competitive market. Convenience and fuel retailers should have the option to sell any legal source of transportation energy in a competitive market with a level playing field.

Also, many electrical utilities have received approval to raise consumers’ electricity bills in order to pay for not only their own installation of chargers but also the operation of those chargers.

“That’s subsidized competition, which appears to make the cost of electricity much lower than it really is. It undercuts the rest of the private market and makes it very difficult to make money on it,” said Doug Kantor, NACS general counsel, on a recent NACS podcast episode. He pointed out that electric utilities also don’t have to bill themselves for a demand charge.

According to Ryan McKinnon of Charge Ahead Partnership, a coalition of businesses, associations and individuals that aims to develop a nationwide EV charging network, the state level is where the barriers of entry to EV charging will lift. (NACS is a founding member of the Charge Ahead Partnership.)

“Under current policies, these locations at gas stations and convenience stores can’t get into the market,” McKinnon told The Epoch Times. “No rational business owner would get into the EV charging market if they know they’re going to have to compete against a government-sanctioned monopoly.”

Minnesota-based utility company Xcel Energy asked the state’s public utilities commission if it could increase customers’ rates in order to raise $197 million to build 700 high-speed EV chargers in the state. There is also proposed legislation in the state that would permit electric companies to use rate increases to cover charging stations in the future.

Xcel Energy provides utilities to eight other states and is looking to add similar projects in these states.

“It makes no sense to reinvent the wheel and create all these new locations, and leave the retailers that want to get into the game, that want to invest their own money, that are willing to take the risk—to leave them on the side, and instead saddle just your average ratepayer with higher electric bills so the power company can build entirely new networks of recharging stations from scratch,” McKinnon told The Epoch Times. “Rather than utilizing all these plots of land and pieces of real estate that have already been fully equipped to serve travelers, with snacks, amenities, restrooms, lighting and signs.”

In contrast, California’s utility commission has taken steps to limit the role of power companies in the EV charging system, and last month, legislation was introduced in Oklahoma that would encourage private investment in the EV charging market.

The Oklahoma bill would keep public utilities from using customer funds to pay for their own EV chargers, as well as mandate that utilities establish a standard rate for electricity used in EV charging instead of a high demand model. The bill would also make sure that businesses who are selling electricity for EV charging would not be treated as utilities by the state.

“The most logical place for EV drivers to charge up while on a long road trip is at the existing retailers and commercial locations that already dot the interstate,” Sen. Chuck Hall, who introduced the bill, said in a statement. “This bill would make that possible and establish Oklahoma as a leader in developing common-sense and forward-thinking EV charging policy.”

Some convenience retailers, including Kum & Go and Casey’s, have worked directly with utility companies to ensure the companies can handle the high rates. Some offer special rates for electric vehicle charging.

“They knock them down to where we’re not losing everything that we have, or everything we’re making, just to have an EV charger on site,” Jacob Maass, commercial fuels manager at Kum & Go, told CNN, in a recent article.

(Fuels Market News Magazine recently interviewed Brad Petersen, Kum & Go’s director of retail fuels, about the convenience retailer’s EV charging strategy.)

Despite hurdles, many convenience stores are still investing in EV charging infrastructure, including 7-Eleven, Sheetz and Circle K, among many others.

“We’ve been very early adopters of EV charging,” said Sheetz’s Walter in a Bloomberg article. “We installed our first EV chargers in Pennsylvania in 2012.”

Sheetz has worked closely with Tesla to install Tesla-branded chargers at its locations, and when Tesla users charge up at a Sheetz location, they pay Tesla for the charge, not Sheetz. The company is betting that during the half hour or so it takes to charge an EV, customers will come into the store and buy a drink or order food.

Because these EV owners will have time on their hands to spend at c-stores while their vehicles recharge, some retail experts say that c-stores may be required to change their formats.

The NACS EV Charging Calculator allows retailers to assess the cost and profitability of offering EV chargers at their sites. The calculator focuses on what retailer utility costs associated with EV recharging are and what the corresponding revenue must be to recover those costs after allowing for potential ancillary in-store visits and purchase profitability.

For convenience retailers looking to bring EV charging to their locations, NACS launched the EV Infrastructure Matchmaking Tool, which connects retailers with EV charging companies for all aspects and stages of offering electric vehicle supply equipment.