4. Discussion

4.1. Policy Context

Transportation sources are the fastest growing source of greenhouse gas emissions in the United States, accounting for 47% of the net increase in total United States emissions since 1990.11 In California, transportation sector emissions represent approximately 38% of the total carbon footprint of the economy.12 Light-duty vehicle emissions represent the greatest source of transportation sector emissions in certain metropolitan areas in California.13

Electrification of the transportation sector in California will reduce greenhouse gas emissions and petroleum consumption and improve ambient air quality. Additional emissions due to increased generation of electricity will be more than offset by the reduction in emissions from conventional vehicle operation. Centralized and distributed electricity generation plants in California that fuel an electric motor are collectively more efficient and produce fewer "well to wheels" greenhouse gas emissions than petroleum extraction, refinement, and distribution to fuel an internal combustion engine.14 Plug-in electric vehicle characteristics, such as battery storage capacity, electric-drive range, and vehicle usage patterns, influence potential greenhouse gas emission reductions.15

California policies that are driving down greenhouse gas emissions in the electricity sector are increasing the potential emissions benefits that would result from increased reliance on electricity as a transportation fuel. In addition, party comments note plug-in electric vehicles may enhance the benefit of distributed generation incentive programs.16 Provided it meets grid operator requirements, variable charging of electric vehicles can improve (and potentially reduce the cost of) integration of renewable resources, enabling further greenhouse gas emission reductions to the benefit of all ratepayers. In particular, plug-in vehicles may provide "supply-following" demand to support off-peak wind resources.17

The widespread use of plug-in electric vehicles complements California policies to promote fuel-switching to a range of alternative and renewable fuels and vehicle technologies, and complements policies to reduce greenhouse gas emissions via reductions in total vehicle miles traveled.18 The California Air Resources Board's Climate Change Scoping Plan, the state's plan to achieve the greenhouse gas emissions limit set by Assembly Bill 32, includes several measures targeting the transportation sector, including the Pavley fuel economy standards and the Low Carbon Fuel Standard.19 In addition, as part of the Zero Emission Vehicle program, plug-in electric vehicles are assigned credits toward meeting regulation requirements through the sale of vehicle technologies.20 Electric vehicles can play a very important role in the success of both of those programs.

The legislature has recognized the importance of electric vehicle as evidenced, most recently, by the enactment of Senate Bill 626. Senate Bill 626 requires the Commission to evaluate policies to overcome any barriers to the widespread deployment and use of plug-in hybrid and electric vehicles.

The success of electric vehicles in California will, in significant part, depend on the availability of sufficient charging infrastructure. As emphasized by the Commission's Staff White Paper on vehicle electrification, "[i]nfrastructure investments at the customer site, commercial site, public charging site, and distribution system level are all required to prepare the electricity system for the widespread use of [electric vehicles]."21 Commercial and other publicly accessible charging stations will be important given that there are several times more cars than garages in the United States.22

It is within this policy context that the Commission makes this decision.

4.2. Legal Analysis of the Public Utilities Code

Our legal analysis in this decision focuses on the applicability of §§ 216, 218, 740.2, 740.3 and related sections. However, as discussed in Section 4.3 below, the Commission has many other sources of regulatory authority that may be important as we develop policies related to electric vehicles in Phase 2.

Here we determine that the legislature did not intend that the Commission regulate providers of electric vehicle charging services to the public as public utilities.

This determination is based on an analysis and interpretation of the
Pub. Util. Code, particularly §§ 216, 218, 740.2, 740.3.

We reach this conclusion early in this proceeding in order to provide regulatory certainty for utilities, entities participating in the electric vehicle markets, investors, and customers. Removing regulatory uncertainty advances the mandates of § 740.2 to remove barriers to the widespread deployment and use of electric vehicles by informing planning prior to the introduction of significant electric vehicles in the market, mitigating related potential risk factors associated with investment opportunities in electric vehicle markets, and providing more certainty around the issues framed in Phase 2 of this proceeding. We note that a legislative codification of this decision's conclusion would remove additional barriers to widespread deployment and use of electric vehicles by providing the statutory surety to redirect resources away from frivolous litigation towards implementation.23

As DRA and IREC point out, many instances of electric vehicle charging do not constitute "public dedication," and thus, the charging provider would clearly not be an electrical corporation or public utility pursuant to §§ 216 and 218. The most obvious such example is a homeowner that charges his or her own vehicle in his or her own garage and does not offer charging services to others. Clearly, the homeowner's charging equipment is not dedicated to public use and the homeowner would not be found to be a public utility. Other examples could include residential and commercial landlords that provide electric vehicle charging as a service on the premises to tenants, condominium associations that provide electric vehicle charging on the premises as a service to the condominium owners, and employers that provide access to recharging facilities as a service to their employees.

Our analysis here is limited to instances in which electric vehicle charging services are offered to the public.

Pursuant to §§ 216 and 218 the Commission regulates as public utilities corporations and persons owning, controlling, operating, or managing facilities used for the transmission, delivery, or furnishing of electricity to the public. However, the Commission does not have the legal jurisdiction to regulate vehicle service stations. The emergence of electric vehicle charging service providers blurs these jurisdictional lines. Under the California Constitution, only the legislature can confer new powers on the Commission, so we have to look for evidence as to the legislature's intent on this question. As discussed further below, we conclude that under §§ 740.2 and 740.3, the legislature only granted limited authority to the Commission to set rules related to electric vehicle charging. Therefore, we conclude that under existing laws, we do not have jurisdiction to broadly regulate electric vehicle charging service providers as public utilities.

Recently enacted § 740.2 requires the Commission, in consultation with other agencies and industries, to evaluate policies to "... develop infrastructure sufficient to overcome any barriers to the widespread deployment and use of plug-in hybrid and electric vehicles." Section 740.2 directs the Commission to focus on the potential impacts of vehicle charging on electrical infrastructure and grid operations. Specifically, the Commission is directed to address grid reliability and infrastructure upgrades, integration of renewable energy resources, technology advancements, legal impediments, and the possible shifting of greenhouse gas emissions reduction responsibility from the transportation sector to the electrical industry. Section 740.2 does not direct the Commission to regulate electric vehicle charging service providers as public utilities pursuant to §§ 216 and 218. Thus we conclude that the legislature did not intend that the Commission treat electric vehicle charging service providers as public utilities. Rather the legislature intended that we use the authority granted in § 740.2 to address the potential impacts of vehicle charging.

Our review of § 740.3 further supports this conclusion.

Section 740.3 directs the Commission to develop policies to promote the development of infrastructure needed to facilitate the use of electric power to fuel low emission vehicles. Nothing in § 740.3 explicitly or implicitly directs the Commission to regulate electric vehicle charging service providers as public utilities. In fact, § 740.3(c) requires that the Commission "ensure that utilities do not unfairly compete with nonutility enterprises." Clearly, the legislature contemplated that providers of electric vehicle charging equipment would include both utility and non-utility entities. Therefore, we conclude that § 740.3 further demonstrates that the legislature did not intend the Commission to treat all electric vehicle charging providers as public utilities pursuant to §§ 216 and 218.

In summary we believe that §§ 740.2 and 740.3 demonstrate that the legislature did not intend that this Commission regulate providers of electric vehicle charging services as public utilities pursuant to §§ 216 and 218. Instead the legislature described how the Commission should regulate the impacts of electric vehicle charging in §§ 740.2 and 740.3. In Section 4.3 below we enumerate these and other sources of Commission authority to pertinent to electric vehicle charging.

Since providing electric vehicle charging services does not make an entity a public utility, it follows that an electric vehicle charging service provider will generally be an end-use customer of a CPUC-jurisdictional load serving entity. A charging service provider that is connecting to the transmission or distribution system of an investor-owned utility will, at the very least, be a retail transmission and distribution customer of the utility. The charging service provider's
load-serving entity could be the investor-owned utility, and electricity service provider, or a community choice aggregator.

To the extent an investor-owned utility provides electric vehicle charging services, provision of such services will not affect the utility's status as a public utility. In Phase 2 we will thoroughly consider the appropriate role of
investor-owned utilities with regard to electric vehicle charging including a consideration of terms under which a utility can offer such services.

DRA, NRDC and FOE, PG&E, and SMUD, in arguing that electric vehicle service providers are public utilities, asserted that such a finding is necessary to ensure that vehicle charging occurs in a manner that ensures safety and grid reliability. We share these parties' concerns. However, since providing electric vehicle charging services does not make an entity a public utility, we cannot rely on that authority to pursue these important objectives. Instead we must rely on other important sources of regulatory authority as summarized in Section 4.3 below. Some of these sources of authority are common to all end-use customers. Some are specific to vehicle charging.

Our decision today is consistent with laws and policies pertaining to the electric sector including the Renewable Portfolio Standards (RPS), Resource Adequacy (RA), the Emissions Performance Standard (EPS) and Assembly Bill (AB) 32 programs. Many of these policies apply to load-serving entities, thus, the entity from whom an electric vehicle charging service provider purchases retail electricity will be subject to these various mandates. In other words,
load-serving entities remain bound to the existing requirements of RPS, RA, EPS, and AB 32 programs, even for that portion of their electricity sales that is ultimately delivered to charging service providers and vehicle owners for the use as a motor vehicle fuel. It is unnecessary to impose these important policies directly on the charging service providers to ensure that the policies are complied with. The Commission's finding in today's decision in no way allows electricity sales to circumvent these requirements.

If a provider of electric vehicles charging services attempts to procure electricity on the wholesale market, rather than purchasing electricity from a load-serving entity, the charging provider's purchase of electricity will constitute a "direct transaction" under § 331(c) and will be subject to all the obligations and limitations that apply to direct transactions including § 365.1. Section 365.1 suspends the ability of retail end-use customers to acquire service from "other providers" subject to a maximum limit provided in the section. Section 365.1 also requires that the Commission ensure that other providers are subject to the same RPS, RA and AB 32 requirements as the three largest investor owned utilities. In other words, it is illegal for an electric vehicle charging services provider to procure electricity on the wholesale market if the entity selling the power has not complied with the procurement requirements that apply to the utilities. The Commission will exercise its authority in the area of electric vehicle charging to ensure the law is complied with.

The Legislature has recently praised the benefits of an electric vehicle infrastructure as a major component of the state's efforts to promote the use of low emission vehicles. In Section 740.2 the Legislature directed the Commission to assist with the "widespread deployment and use of plug-in hybrid and electric vehicles." This Commission has broad authority to meet this legislative mandate, and has determined that the approach we take today, in combination with the forthcoming decision addressing the issues scoped into Phase 2 of this proceeding, is the best way to do so. Today's decision is consistent with the state's policy of supporting a vibrant market in electric vehicles.

4.3. Other Sources of Regulatory Authority Over Electric Vehicle Charging

While this decision finds that providing electric vehicle charging services does not make an entity a public utility, we have other sources of regulatory authority that we can and will apply to ensure electric vehicle charging is integrated harmoniously into the electric grid. This section amplifies that we retain all authority granted to us under the California Constitution and Public Utilities Code, and discusses specific types of regulatory authority that could be important as we further develop policies in this rulemaking.

Section 740.2 (Stats. 2009, c. 355 (SB 626) § 1) states that "[b]y July 1, 2011, the [C]omission shall adopt rules to address all of the following:

(a) The impacts upon electrical infrastructure, including infrastructure upgrades necessary for widespread use of plug-in hybrid and electric vehicles and the role and development of public charging infrastructure.

(b) The impact of plug-in hybrid and electric vehicles on grid stability and the integration of renewable energy resources.

(c) The technological advances that are needed to ensure the widespread use of plug-in hybrid and electric vehicles and what role the state should take to support the development of this technology.

(d) The existing code and permit requirements that will impact the widespread use of plug-in hybrid and electric vehicles and any recommended changes to existing legal impediments to the widespread use of plug-in hybrid and electric vehicles.

(e) The role the state should take to ensure that technologies employed in plug-in hybrid and electric vehicles work in a harmonious manner and across service territories.

(f) The impact of widespread use of plug-in hybrid and electric vehicles on achieving the state's goals pursuant to the California Global Warming Solutions Act of 2006 and renewables portfolio standard program and what steps should be taken to address possibly shifting emissions reductions responsibilities from the transportation sector to the electrical industry."

We agree with SCE that with the enactment of § 740.2, the legislature granted the Commission specific authority to implement rules necessary to facilitate the widespread deployment of electric vehicles in California. This authority extends to policies that apply to electric vehicle charging. We intend to exercise this authority to the extent necessary based on our deliberations in Phase 2 of this proceeding.

The Commission has extensive jurisdiction to enforce procurement requirements. The Renewable Portfolio Standards (RPS), Resource Adequacy (RA), and the Emissions Performance Standard (EPS) are just several examples of such jurisdiction. To the extent a provider of electric vehicles charging services procures electricity on the wholesale market for sale to its customers, we intend to exercise our procurement-related jurisdiction to ensure compliance will all applicable requirements.

4.3.3. Setting the Conditions of Utility Service

Since an electric vehicle service provider would receive electricity over a utility's transmission and distribution system, the Commission has authority to dictate the terms under which the utility will provide service to the provider. Following are several examples of such conditions that are already in place:

· The Commission has authority to determine notification and application requirements for customers requesting new electric service. Currently, a customer cannot receive electric service without applying for service with the utility. Additionally, an existing customer is required to provide notice to the utility when the customer makes changes to its connected load.24 Thus, a prospective provider of electric vehicle services would need to notify and apply to the utility before initiating service. An existing utility customer that installs electric vehicle service equipment is also required to notify the utility. Failure to follow these rules could result in the electric vehicle service provider's service being disconnected. This is a significant source of Commission authority to address the impacts of electric vehicle charging on electrical infrastructure.

· Commission-approved rules provide that a utility can discontinue service if a customer is creating unsafe working conditions for utility employees.25 Through this authority the Commission can address circumstances in which a provider of electric vehicle charging is operating in an unsafe manner.

· The Commission determines the conditions under which a customer can take service under a particular rate. An electric vehicle charging rate could include rules that the Commissions deems appropriate.26

· The Commission sets rules addressing utility and customer obligations pertaining to distribution and service line extensions.27 These rules provide important Commission authority over all customers, including electric vehicle service providers.

· The Commission has adopted extensive interconnection standards governing how customer-owned equipment connects to the grid.28 The Commission can use its authority to adopt appropriate interconnection standards for electric vehicle charging providers.

4.3.4. Setting the Rates Charged to Customers with Electric Vehicle Charging Equipment

The sale of electricity by an investor-owned utility to an electric vehicle charging service provider is a retail electricity transaction. Therefore, the Commission has jurisdiction over that transaction and can set the rate that the provider pays to the utility. If the provider is a bundled customer of the utility, then the Commission can set all components of the rate. If the provider is a customer of an electricity service provider or community choice aggregator, the Commission can set all components of the rate except for the generation component.

Designing and approving the rates that a utility charges its customers is a fundamental area of Commission authority.29 Rate design has a significant impact on how much electricity consumers use, and when, and the Commission has had a long standing policy of adopting marginal cost-based rates.30

Rate design can include volumetric charges (dollar per kilowatt-hour), demand charges (based on peak usage during a specified time period), and fixed charges. Rates can be designed separately for each cost component
(i.e., generation, distribution, and transmission) to reflect how a customer's usage impacts the specific cost category. For example, the distribution component of the rate could include a demand charge to reflect the fact that the distribution system is designed to meet peak load.

The Commission's rate design authority may be a tool to address how electric vehicles impact the electric grid and can help to integrate renewable energy resources. The rate that an electric vehicle charging provider pays to the utility will be a cost of doing business that the charging provider may pass on to its customers or absorb. The charging provider will have a strong incentive to operate its business in a manner that is compatible with the needs of the electric grid.

4.3.5. Adopting Demand Response and Energy Efficiency Programs

The Commission has the authority to create demand response and energy efficiency programs to provide customers incentives to reduce their energy usage at certain times (demand response) or on an ongoing basis (energy efficiency). Existing programs have resulted in significant peak load reductions and energy savings.

The Commission can create programs that are specifically targeted at electric vehicle charging to address the potential impacts of charging on electrical infrastructure.

Senate Bill 17 (Padilla, Chapter 327, Statutes of 2009) established that "[i]t is the policy of the state to modernize the state's electrical transmission and distribution system to maintain safe, reliable, efficient, and secure electrical service, with infrastructure that can meet future growth in demand" and achieve specified policies, which the bill characterizes as a "Smart Grid."31

Among other things, the law directs the Commission "to adopt standards and protocols to ensure functionality and interoperability developed by public and private entities, including, but not limited to, the National Institute of Standards and Technology [NIST]..."32 NIST is considering several standards related to communication between electric vehicles, vehicle charging equipment, and the electric grid.33

The Scoping Memo in this rulemaking recognized the importance of interoperability standards in the context of electric vehicles.34 The Commission's authority to adopt interoperability standards, granted by Senate Bill 17, will be an important tool to ensure that electric vehicles and electric vehicle charging providers can integrate smoothly into the electric grid.

4.4. Federal Energy Regulatory Commission (FERC)

In comments, PG&E and SCE have expressed a concern that
investor-owned utility sales of electricity to electric vehicle service providers could be deemed a "sale for resale" by FERC and, thus, fall under the exclusive jurisdiction of FERC.

PG&E's and SCE's concern is misplaced.

Under the Federal Power Act, "sale of electric energy at wholesale in interstate commerce" is subject to the jurisdiction of FERC. "[S]ale of electric energy at wholesale" is defined as "a sale of electric energy to any person for resale."35

In Section 4.2 we conclude that selling electric vehicle charging services does not make an entity an electric utility and that a seller of electric vehicle charging services that purchases electricity from an investor-owned utility is an end-user that purchases the electricity at retail. Thus, the sale of electricity by an investor-owned utility to an electric vehicle service provider is a retail sale of electricity, not a wholesale sale or a "sale for resale." This means that the sale falls under the exclusive jurisdiction of the California Public Utilities Commission, not under the jurisdiction of FERC.

To the extent any party perceives uncertainty in this area, that party is free to seek a FERC declaratory order or a FERC order disclaiming jurisdiction.

11 OIR at 3.

12 Commission Staff White Paper, "Light-duty Vehicle Electrification in California: Potential Barriers and Opportunities," Commission Policy and Planning Division,
(May 22, 2009) at 16.

13 Bay Area Air Quality Management District, "Source Inventory of Bay Area Greenhouse Gas Emissions," Emissions Inventory Section, (Updated February 2010) at 13.

14 Id.

15 California Air Resources Board, Climate Change Scoping Plan, (December 2008).

Commission Staff White Paper (May 22, 2009) at 17.

16 Comments filed by Center for Carbon-free Power Integration, University of Delaware, November 30, 2009 at 5.

17 Commission Staff White Paper, "Light-duty Vehicle Electrification in California: Potential Barriers and Opportunities," Commission Policy and Planning Division,
(May 22, 2009) at 9.

18 Id at 9.

19 California Air Resources Board, Climate Change Scoping Plan, (December 2008).

20 California Energy Commission, 2010-2011 Investment Plan for the Alternative and Renewable Fuel and Vehicle Technology Program, (April 2010), at Appendix B.

21 Commission Staff White Paper at 12.

22 Id. at 41-42.

23 SB 547 expressly stated that CNG fueling does not make an entity a public utility after D.91-07-018 reached the same conclusion, this avoided a waste of stakeholder time and resources unnecessarily litigating the issue.

24 PG&E Electric Rule No. 3, SCE Rule 3, and SDG&E Electric Tariff Book - Rule 3.

25 Id.

26 For example, SCE has an existing electric vehicle rate for its commercial customers (Schedule TOU-EV-3). Among other things, the tariff state that "[w]here SCE determines that the operation of the EV charging facilities may interfere with service to that customer or other customers, SCE will install a load management device to control when EV charging will occur."

27 See also PG&E Electric Rule Nos. 15 & 16, SCE Rules 15 & 16, and SDG&E Electric Tariff Book - Rules 15 & 16 addressing utility and customer obligations pertaining to distribution and service line extensions.

28 See, for example, PG&E Electric Rule No. 21; SCE Rule 21, and SDG&E Electric Tariff Book - Rule 21 concerning interconnection of generation facilities with the distribution grid.

29 Pub. Util. Code § 451.

30 See D.82-12-113 (10 CPUC2d 512), D.83-12-065 (13 CPUC2d 619), D.83-12-068 (14 CPUC2d 15), and D.84-12-068 (16 CPUC2d 721).

31 Section 8360.

32 Section 8362(a).

33 See NIST Special Publication 1108, NIST Framework and Roadmap for Smart Grid Interoperability Standards Release 1.0 from the Office of the National Coordinator for Smart Grid Interoperability, Jan 2010 at 70-71. Specifically, SAE J1772, SAE J2836, and SAE J2847 are promising standards that the Commission could adopt pursuant to SB 17.

34 Assigned Commissioner's Scoping Memo at 12.

35 16 U.S.C. § 824(d).

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