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Until a few years ago, the nation's electric utilities had little direct interest in the automotive industry. While fleet vehicles have always been part of the utilities' infrastructure maintenance and customer service activities, and utilities with auto industry customers have always been impacted by the sector's overall health, few people recognized the full direct impact that electric vehicles could have on the utilities' business prospects until it became clear that EV technologies were viable and that consumers were willing to begin moving away from vehicles with combustion engines. It is now becoming apparent that EVs could foster significant new demand growth for the electric utility sector after more than a decade of sluggish to negative growth in most parts of the country.

In addition to allowing consumers to realize significant transportation fuel savings and certain states to meet their ambitious emissions-reduction goals, EVs clearly offer the utilities a unique business opportunity. Electric sales for most utilities have been flat for several years due to sluggish economic growth and widespread adoption of conservation initiatives, and EV investments and, more broadly, increased use of electricity to charge EVs could be a boon to many utilities in the years ahead.

While many utilities have indicated interest and plans to pursue opportunities in the EV market, quantifying investments is a challenge due largely to companies not providing a clear delineation of commitments to capital costs, versus expense allocations.

Based on a preliminary analysis of the EV sector, Regulatory Research Associates, an offering of S&P Global Market Intelligence, has discerned certain key trends, as summarized below.

1. In states that have a strong focus on renewable energy development and alternative energy technologies, the backbone charging infrastructure for EVs is more developed than it is in those states that have been reluctant to adopt policies supportive of the industry. For example, California, which has been supportive of the nascent EV sector, leads the nation both in terms of the number of EVs in use and the number of charging stations and has been a leader in calling for more stringent emissions reductions.
2. A significant issue that utility commissions are grappling with is whether third-party entities that own EV charging stations should be treated like regulated utilities due to the fact that they are essentially resellers of electricity. Utilities in some jurisdictions are interested in investing in charging stations and seeking rate base treatment of their investments, while utilities in other jurisdictions are primarily focused on ensuring that adequate distribution infrastructure is in place to support third-party charging stations and the beneficial impact that EVs are expected to have on electric sales.
3. There is a need to design time-of-use rates to incentivize off-peak EV charging, thereby minimizing adverse effects on the larger distribution grid. In fact, if structured correctly, funneling load to off-peak periods could smooth out demand, creating less dramatic peaks and valleys, thereby allowing the grid to operate more efficiently.
4. Certain regional approaches are being taken to standardize EV policies and infrastructure development. For example, in 2013, the governors of eight states — namely California, Connecticut, Maryland, Massachusetts, New York, Oregon, Rhode Island and Vermont — established the zero-emission vehicle Program Implementation Task Force, which is a coordinated approach to support policies to foster the development of EV markets and the required charging infrastructure, and "remove barriers to the retail sale of electricity and hydrogen as transportation fuels and promote competitive plugin electric vehicle charging rates."
5. In October 2017, the governors of Colorado, Idaho, Montana, Nevada, New Mexico, Utah and Wyoming signed a memorandum of understanding that calls for collaboration to create an "Intermountain West Electric Vehicle Corridor." The agreement calls for promoting EV market development and establishing standards for EV fast-charging corridors across these states.

Although the zero-emission vehicle Program Implementation Task Force and the agreement to create the Intermountain West Electric Vehicle Corridor are perhaps the most disciplined attempts to date to standardize EV related policies for maximum efficacy, many other jurisdictions are addressing the matter on a case-by-case basis.

For further information concerning key regulatory initiatives, prominent legislation and noteworthy proceedings addressing generic EV related matters, refer to RRA's Special Report dated May 2.

For a full listing of past and pending rate cases, rate case statistics and upcoming events, visit the S&P Global Market Intelligence Energy Research Home Page.

For a complete, searchable listing of RRA's in-depth research and analysis please go to the S&P Global Market Intelligence Energy Research Library.