Electric vehicle charging subscription rates? An app for that?
Main Points - Electric Vehicle Subscription Rate
1. Many electric co-op and utility customers are used to paying subscriptions for activities such as entertainment, apps, and travel, so a subscription rate for charging the growing number of electric vehicles (EV) would not be an unusual concept.
2. Electric vehicle charging subscription rates are based on the average charging of the entire group and all customers pay the same flat rate. Customers can charge as much as they want under the subscription rate for a flat amount per month.
3. The electric vehicle charging subscription rate assumes customers will charge their vehicles during off-peak hours. Use of smart meters by the electric provider can monitor charging times and adjust the rate to reflect the actual experience of the EV customer class.
EV Level 3 charger
A subscription rate to charge my car?
Electric vehicle (EV) sales make up approximately 6.5% of car sales as of December 31, 2023, with projections of a market share of nearly 30% by 2030. Is your electric co-op or utility's philosophy to promote more electrification of your system? Or, do you want to make sure you're in the game and have rates and options available for your new EV customers? From either approach, there are a variety of rate methods you can use.
One method that is gaining traction as an EV rate is an electric vehicle subscription rate. A subscription rate will seem natural to EV customers. Many of us pay subscriptions for Netflix, Apple +, Hulu, and other apps. The beauty of a subscription from the user side is that one can use as much of the service as they want. The flip side is that the subscription may not get used, but the subscription fee is still paid. From an electric rate perspective, a subscription rate must recover the total cost of serving customers that use that rate; and some will be over, some under. Finding the middle ground is the key.
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A business model for an EV subscription rate
Pacific Gas & Electric offers a business plan that works on the subscription model. The consumer chooses their subscription level based on their maximum EV charging kW consumption. The subscription tier is based on the customer's estimated kW usage for the month's charging units.
Overage fees apply at twice the rate per kW. While the PG&E rate is an innovative electric rate, the PG&E rate is not an actual subscription model, as there is a fixed demand charge plus an energy charge at the per kWh rate for the time of the day the charging takes place.
The familiar subscription model rate - try this for electric vehicles
A rate that is a true subscription rate for electric vehicle charging is based on the average expected monthly use of the EV by all EV customers. The demand and energy rate components are combined into the monthly subscription charge.
The mileage of an average EV is 3 miles per kWh. Here are assumptions used as an example of calculating a monthly EV subscription rate, based on the average usage of the entire group of EV customers for this electric provider:
1. A customer survey shows that the average EV is driven 500 miles per month or 6,000 miles annually.
2. The EV would use 18,000 kWh annually based on the mileage of 3 miles per kWh.
3. EV customers use Level 2 chargers, and the average system demand (kW) is estimated at 7 kW. The monthly demand charge is $5.00/kW.
4. The off-peak energy rate is $0.10/kWh. It is assumed that EV customers will plug in and charge their vehicles during the evening and night-time hours, which are the off-peak hours.
The monthly subscription rate is calculated as:
Illustration 1 - Electric vehicle subscription rate calculation
The $50.00 monthly rate should be reviewed every year to make sure the assumption used for kW demand, average kWh, and the time of the day of vehicle charging are still valid.
Why offer a subscription charging rate to electric vehicle customers?
Why offer this rate? One could argue that since co-ops and utilities use more smart meters, why offer such a rate? Why not just invoice for actual usage? It is true from a rate development perspective that billing actual customer usage is fair and equitable. But, historically, electric rates have been used to encourage customer and service territory changes in such areas as economic development, increase customer use of energy-efficient appliances, and to reduce peak load usage; an EV subscription rate also falls into that grouping. Some of the benefits to an electric provider and customers for offering an EV subscription rate can include:
1. The rate encourages ease of billing and budgeting for the EV customer.
2. More EV customers move towards greater electrification for the electric provider, which results in higher unit sales for the electric provider. Higher unit sales are beneficial to the electric provider as the margin on EV charging can be higher than providing on-peak power and contributing more towards covering the provider's fixed costs.
3. Off-peak charging of EVs contributes to better load management for the electric provider by using low-cost sources of supply in the nighttime hours.
4. If the electric provider builds out charging stations in the community, the EV customer could use their subscription to charge their EV at multiple locations through a login mechanism.
Overall, greater electrification can benefit the electric provider, as gross margins have decreased as kWh and kW unit sales have declined due to greater energy efficiency of buildings, light bulbs, heating and air conditioning units, and appliances. Decreased margins means less cash flow available to pay for fixed costs (infrastructure and debt service).
As electric systems install more smart electric meters, rates like an EV subscription rate can be rolled out to customers. It's a win for both customers and the provider. It provides the opportunity to design rates that recover the cost of service for the EV customer class while giving a degree of freedom to the customer in how they charge their vehicles.
Electric Vehicle Charging Subscription Rate
Electric vehicle charging subscription rates are based on the average charging of the entire group and all customers pay the same flat rate. Customers can charge as much as they want under the subscription rate for a flat amount per month.
About Russ Hissom - Article Author
Russ Hissom, CPA is a principal of Utility Accounting & Rates Specialists a firm that provides power and utilities rate, expert witness, and consulting services, and online/on-demand courses on accounting, rates, FERC/RUS construction accounting, financial analysis, and business process improvement services. Russ was a partner in a national accounting and consulting firm for 20 years. He works with electric investor-owned and public power utilities, electric cooperatives, broadband providers, and gas, water, and wastewater utilities. His goal is to share industry best practices to help your business perform effectively and efficiently and meet the challenges of the changing power and utilities industry.
Find out more about Utility Accounting & Rates Specialists here, or you can reach Russ at russ.hissom@utilityeducation.com.
The material in this article is for informational purposes only and should not be taken as legal or accounting advice provided by Utility Accounting & Rates Specialists. You should seek formal advice on this topic from your accounting or legal advisor.