California approves expedited pathway for near-term utility EV investments, despite cost concerns

Dive Brief:

  • The California Public Utilities Commission (CPUC) on Thursday narrowly passed a decision allowing utilities an expedited pathway to propose near-term transportation electrification investment plans, despite some concerns about the impacts on state ratepayers.
  • The decision will allow utilities a quicker process to propose investments until the commission finalizes a broader transportation electrification framework that has been in progress over the last couple of years, CPUC Commissioner Clifford Rechtschaffen, the author of the decision, said at a Thursday meeting. But Commissioner Martha Guzman Aceves, while acknowledging the need for these investments, questioned whether ratepayers should be the ones to fund all of them.
  • Last year, California Gov. Gavin Newsom, D, issued an executive order setting the state on the pathway to having all its new passenger car and truck sales be zero-emission vehicles by 2035, with medium and heavy-duty vehicles following in 2045, where feasible.

    Dive Insight:

    California is also moving toward a goal adopted by former Gov. Jerry Brown, D, which would have the state deploy five million zero-emission vehicles (ZEV) by 2030, along with 250,000 light-duty or passenger vehicle chargers by 2025. At the beginning of 2021, the state had installed more than 70,000 chargers, with another 123,000 in the pipeline, according to data from the California Energy Commission — leaving another 57,000 that will need to be installed to meet that goal.

    The CPUC has already authorized utilities to spend around $1.5 billion on transportation electrification investments — including for the medium-duty and heavy-duty sectors — but meeting that 2025 goal will require additional infrastructure, regulators reasoned in the decision. And while the commission is in the process of putting together a broader framework for utilities to file transportation electrification plans, “it is prudent to provide guidance on possible interim investments” for utilities, the decision noted.

    The decision, Rechtschaffen said at the the Thursday meeting, will allow utilities to access a streamlined approval process for projects within the following near-term priorities: promoting resilience; serving customers without access to home charging; investments in medium and heavy-duty vehicles; new building constructions; and upgrading chargers and panels for low-income customers.

    Utilities can get approval for up to $20 million per project in each category, with an $80 million cap per utility. In addition, the decision offers them an expedited application process for extending existing transportation electrification programs.

    Rechtschaffen also pointed to ratepayer protections that have been baked into the decision. For instance, utilities can only access this streamlined approval process if they limit the infrastructure they will own to only 50% of what’s in the proposed program, as part of the commission’s broader effort to gradually move away from utility ownership of EV infrastructure as the market matures, he said.

    “[T]his reduces the portion of the investment that goes into the utility’s rate base,” thereby reducing the cost impact to customers, Rechtschaffen said.

    But other commissioners still had concerns over the impact of the decision on ratepayers. Guzman Aceves pushed for “a progressive way” to fund these investments, adding that at the highest level, “whenever we’re using utility bills to pay for this, it’s inherently regressive.”

    Gov. Newsom earlier this month signed a large portion of the state’s 2021-2022 budget, which included a $3.9 billion carve-out to help meet the state’s zero-emission vehicle goals. This funding, along with federal and other state sources of funding, could help pay for EV infrastructure that will ultimately not be owned by utilities, she noted, “although I do believe there’s a very big role for utility-owned and rate-based infrastructure.”

    “Recognizing that we need to do all of this, do ratepayers need to fund it all?” Guzman Aceves said.

    Commissioner Darcie Houck said she shared many of these concerns.

    If utilities are going to own EV infrastructure, she said, “it’s best served in areas that are going to be difficult to reach otherwise with rebate and other programs, like disadvantaged communities or geographically difficult places to get in rural areas.”

    Guzman Aceves and Houck both voted against the decision, with Rechtschaffen and the other two CPUC commissioners approving it.

    In responding to these concerns, Rechtschaffen said that California will need investment from different areas to meet its goals. While funding in the budget will help share the burden, state energy agencies’ planning assumptions assume that utility investments will continue to play a role, even if it isn’t as significant of a role as now, he said.

    At the same time, he agreed that regulators do need to minimize the impact on ratepayers and one way of doing that is to reduce utility ownership of the infrastructure. The commission has wrestled with this question for a number of years, and has so far allowed some utility ownership of transportation electrification infrastructure, Rechtschaffen said, because the utilities have argued that a one-stop solution would best encourage customers to install chargers.

    However, “we’re seeing more and more that utility ownership is not necessarily the unique factor it’s made out to be in helping customers overcome barriers to installing charging equipment,” he said, adding that regulators are hoping to work through this issue in their upcoming transportation electrification framework.

    The commission’s decision creates inappropriate procedural mechanisms designed to rubber stamp utility proposals, said Mark Toney, executive director of ratepayer group The Utility Reform Network, in an email.

    “If there’s anything we’ve learned over the years, greater regulatory oversight is needed to ensure utility shareholders do not get to benefit from utility greenwashing initiatives,” Toney added.

    Expanding access to EVs and charging stations is essential to reducing emissions, improving air quality and meeting California state goals, Pacific Gas & Electric (PG&E) spokesperson Ari Vanrenen said in an email.

    “PG&E is committed to continuing our efforts to increase EV adoption and looks forward to working with the CPUC and other stakeholders on this important work,” she added.

    Southern California Edison (SCE) supports the decision and agrees that larger policy issues, such as the role of the utility, will be more appropriately addressed in the commission’s future decisions on the transportation electrification framework, utility spokesperson Paul Griffo said.

    “Today’s decision does not authorize any additional funding for the utilities, but rather provides utilities a framework for guidance on the process for requesting additional programs that are needed to help fill gaps, in support of the state reaching its EV and charging infrastructure goals,” Griffo added.