4. Tariff-Related Background

Quantifying the social benefits and system costs associated with electric vehicles could assist in the development of modified electric vehicle tariffs that reflect related costs and benefits. In Decision 08-07-045, the Commission endorsed this approach in its rate design guidance by determining that tariff rates generally should be based on marginal cost and incorporate the cost reductions created by users of the tariff. The Commission will explore in this proceeding how billing components can be appropriately assigned to electric vehicles in order to reflect these costs and benefits. Electric vehicles could substantially increase the total load served by utilities, providing an opportunity to spread the cost of fixed, non-generation expenses over a larger load. Electric vehicle load, if directed off-peak, may flatten the electric system load shape, which could reduce the need for costly peaking generation, and avoid generation shut-down and start-up costs. The Commission seeks to better understand these issues. In addition, this rulemaking will also consider the applicability of program expenses included in electricity rates, such as the expenses associated with the Public Purpose Program, which is governed, in part, by Pub. Util. Code § 399.8.

In this proceeding, the Commission also will explore the impact of the electric vehicle rate structure on charging behavior. Large increases in charging during the daytime could increase utility procurement costs and reduce the carbon emission reductions associated with electric vehicle use. Rate design could potentially discourage daytime charging by establishing high daytime rates that reflect the marginal cost of increasing load.

Likewise, an electric vehicle tariff can encourage charging during non-peak hours by establishing rates that reflect the lower procurement costs during these periods. Residential customers that recharge an electric vehicle through their household meter would likely face steep electricity rates to fuel their vehicle, as the current increasing block tariffs result in high electricity rates for adding load. Modifications to block tariffs, such as increasing the baseline quantity assigned to electric vehicle-owning households or the use of a separate meter may be considered to align fueling costs with the social and environmental benefits of electric vehicles. The Commission may also consider additional rate incentives for households owning both distributed generation and electric vehicles, as these households provide unique load benefits that are not captured in existing tariff schedules.

These same tariff design issues will also be addressed for electric vehicle service providers. The Commission may address how tariffs should reflect the presence of third-party charging entities, among other issues. As an example, some such entities may currently be served under existing commercial, residential and street lighting rates. These rate schedules were not necessarily designed to serve this type of load, especially if usage results in large load increases assigned to these tariffs. The Commission intends to take a fresh look at the needs of third party charging entities, recognizing their unique and innovative role in encouraging electric vehicles.