SDG&E Shows its Hand on Electric Vehicles, Prioritizing Profits Over its Customers and the Environment

In January 2017, San Diego Gas and Electric (SDG&E) submitted an Application to the California Public Utilities Commission to collect over $700 million for a program to install and own level 2 residential charging stations. In what would have been an unprecedented encroachment onto residential property, the utility proposed to own wires, panels, and charging stations in customer’s garages. Importantly, this ownership treatment would provide profits to utility shareholders for decades to come, based on accounting rules for utility-owned assets. SDG&E claimed this was needed to get customers to buy electric vehicles (EVs), shift load to off-peak hours, and prevent safety hazards posed by non-utility charging stations.

SDG&E’s proposal represented the most ill-conceived and unnecessarily wasteful utility charging station proposal TURN had seen to-date. One by one the utilities’ justifications withered under scrutiny — for example, TURN demonstrated the program’s costs were excessive, there were no legitimate safety concerns with customer ownership of residential charging stations, and most of the subsidy would be snapped up by wealthy single-family homeowners who would have bought an EV regardless of the program.

Rather than propose the Application be rejected outright, however, TURN and the California Public Advocates Office recommended common-sense reforms to create a program that would serve ratepayer interests both financially and environmentally. Namely, we recommended that SDG&E simply offer a rebate to customers buying a home charging station, which would substantially reduce the price, income-eligibility requirements to promote program efficiency and equity, and greater emphasis on small apartment buildings where low and middle-income consumers have traditionally lacked access to charging. While TURN recommended SDG&E simply be ordered to implement the rebate program, we also discussed an option for the utility to earn some shareholder earnings, in a fashion similar to how rebates for energy efficiency are treated in California.

The CPUC mostly agreed with these arguments in its Decision, and modified the proposal along the lines of TURN’s and the Public Advocates Office’s recommendations. But the Commission left an opening for SDG&E to wiggle out of its own program — it told the utility it could either accept these revisions and submit a proposal for shareholder compensation, which would likely be accepted if a ratepayer advocate agreed to it and the level of subsidy was kept to a reasonable level, or reject the program entirely.

In an extremely unconventional move for a regulated utility, SDG&E chose neither of the two options, opting to “conditionally” accept the program, only if the Commission eventually agreed to whatever shareholder incentive the utility came up with. In the following months as it developed an “incentive mechanism,” SDG&E was continually unwilling to follow the basic instructions given in the Decision, including finding agreement on incentives with a ratepayer advocate and keeping shareholder earnings to a reasonable level. The Commission was forced to reject SDG&E’s entire approach. Finally, last week, SDG&E chose to recall its proposal entirely, nearly two years later.

If SDG&E had followed the Commission’s clear instructions, the utility would be providing rebates for charging stations through an administratively simple and cost-effective process today. More low and middle-income customers in small apartment complexes would now be eligible for subsidies to install charging stations, which is critical for these customers to purchase or lease an EV. Instead, SDG&E decided it “would be unreasonable to expect it to accept the Commission-modified program prior to knowing how it would be compensated” (read: expected profits would unlikely be to the utility’s satisfaction), despite the fact that it would be SDG&E’s ratepayers who would cover all operational and implementation costs of the program.

SDG&E has wasted an opportunity and stakeholder time. As a society, we allow monopoly utilities to collect profits for its shareholders in exchange for regulatory oversight to make sure activities are aligned with the consumer interest. These events make it abundantly clear that strong, principled, and fact-based regulatory oversight is critical to ensure spending on EV infrastructure is in the interest of consumers and the environment, not utility shareholders.