On March 13, 2024, the BCUC approved BC Hydro’s application for permanent public electric vehicle (EV) charging rates.
From June 1, 2024, BC Hydro will charge a rate of 28.28 cents per kWh for Level 2 charging stations and 34.34 cents per kWh for fast charging stations, before adjustments. According to the BCUC, the new rates are “designed to fully recover the forecast costs of providing the public EV charging service” and “are set on a portfolio basis which supports ease of understanding and provides pricing consistency and flexibility.”
Analysis
On its face, this appear to be a relatively straightforward decision: BC Hydro’s public EV charging rates are being set to recover the forecast cost of providing the service. What’s to see here?
Actually, quite a lot. The story of public EV charging rates in BC demonstrates the range of powers available to the BCUC to protect ratepayers while supporting government policy and serving the wider public interest.
The story starts in December 2017, when FortisBC Inc. (Fortis Electric) filed an application for public EV charging rates. In January 2018, the BCUC approved interim rates to allow Fortis Electric to start offering its service, but adjourned the proceeding without approving permanent rates while the BCUC conducted an inquiry into EV charging.
BCUC EV Charging Inquiry
The BCUC established this inquiry on its own initiative, as permitted by section 82 of the Utilities Commission Act. In fact, section 24 requires the BCUC to “make examinations and conduct inquiries necessary to keep itself informed” about matters in its jurisdiction.
In phase one of the inquiry (report issued November 26, 2018), the BCUC determined that anyone offering public EV charging services is a public utility under the Utilities Commission Act, and is regulated by the BCUC.
However, it went on to conclude that the public EV charging market “does not exhibit monopoly characteristics” (i.e. it is at least potentially competitive) and therefore the BCUC should not regulate prices or terms and conditions, so long as the provider is not otherwise a public utility. The BCUC subsequently exempted such service providers from price regulation under the Utilities Commission Act, with the approval of the Minister of Energy as required under section 88 of the Act.
In phase two of the inquiry (report issued June 24, 2019), the BCUC turned its attention to public utilities such as Fortis Electric and BC Hydro that offer monopoly electricity service, and how their public EV charging services should be regulated. Because of their monopoly status and market power, the BCUC concluded that utilities’ public EV charging services should be regulated so that ratepayer funds are not used to subsidize EV charging prices.
The BCUC also found that it would be in the public interest that the “playing field remains as level as possible” in the public EV charging market. An unfair advantage for monopoly utilities might “crowd out” investment by others, undermining the government’s policy of electrification in the transport sector.
To achieve these regulatory and public interest objectives, the BCUC recommended that public utilities’ EV charging rates should be set using the “cost causation” principle, which “aims to have customers bear the share of costs that are attributable to their class of service and to prevent cross-subsidization among different customer groups.”
BC Hydro’s first attempts to collect its EV costs
In February 2019, BC Hydro applied to recover capital and operating expenditures associated with EV charging stations from all BC Hydro ratepayers. On October 2 2020, the BCUC denied this on the ground that the EV charging assets were not in service and hence not “used and useful.” The BCUC directed BC Hydro to remove from its fiscal 2020 to 2021 rates all expenditures associated with EV charging.
In June 2021, the BCUC approved BC Hydro’s request to set up an EV Costs Regulatory Account (later renamed the EV Fast Charging Regulatory Account) and to defer to the account costs that met the terms of a prescribed undertaking, but denied the request to start recovering those costs, noting that BC Hydro had, by this point, applied to the BCUC for EV charging rates to recover these costs.
BC Hydro’s EV charging rates applications
In March 2021, BC Hydro applied for public EV charging rates. The BCUC approved these rates on an interim and refundable / recoverable basis, but after a proceeding the permanent rates were denied in January 2022 because they would not cover BC Hydro’s costs.
In particular, the BCUC found that BC Hydro’s internal cost of energy supplied to its own EV charging stations was “not consistent with the actual costs incurred by exempt EV charging service providers.” The BCUC was concerned that BC Hydro’s ratepayers would subsidize its EV charging customers, and there would be “an unlevel playing field in what is otherwise a competitive EV charging service market.”
BC Hydro’s next application for public EV charging rates came in July, 2023, and included both time-based and energy-based rates. BC Hydro estimated that the applied-for rates were 15 percent higher than its previous application, and were “generally in line with other service providers’ charges across Canada and the United States.” BC Hydro asked that the rates be approved on a non-refundable and non-recoverable basis.
In August 2023, approval for these rates was again denied. The BCUC objected to the requested interim rates being non-refundable and non-recoverable, stating that BC Hydro could and should refund or recover any differences between the interim and permanent rates to future EV charging customers.
After an expedited review process, in December 2023 the BCUC approved BC Hydro’s request for the updated interim time-based rates effective January 1, 2024, stating that any difference between the interim and the eventually permanent rates would be resolved later.
BC Hydro’s final public EV charging rates
Finally, in March 2024, the BCUC approved BC Hydro’s request for permanent rates for its public EV charging services.
Consistent with the recommendations of the BCUC’s EV inquiry, the regulator has set BC Hydro’s public EV charging rates according to the cost causation principle. This fundamental regulatory principle is intended to ensure that customers pay the full cost to provide their service, but no more. The cost causation principle also seeks to avoid one class of customers subsidizing the rates of a different class.
In this case, the BCUC has determined that BC Hydro’s rates are now “designed to fully recover the forecast costs of providing the public EV charging service”. In setting these permanent rates, the BCUC has attempted to protect the interests of other BC Hydro ratepayers by removing the subsidy that was built into the rates BC Hydro had originally proposed.
The BCUC also found that BC Hydro is now allocating to its public EV charging customers “electricity costs comparable to the costs paid in a competitive EV charging services market.” This helps to “level the playing field”, which as the BCUC’s EV inquiry had found, could have discouraged private sector businesses entering the public EV charging market.
BC Hydro even included in its rate calculation the $5 million uncollected balance that had, by March 31, 2023, built up in its EV Fast Charging Regulatory Account. While BC Hydro acknowledges that this regulatory account does not include the full cost of providing its EV charging services in the past, it states that the $5 million balance will be “recovered from all BC Hydro’s electric vehicle charging customers over the 10-year modelling period.” The BCUC had previously suggested that it would approve an EV rate if BC Hydro included “previous years’ under-recoveries”.
Residual risks
Looking forward, there are still risks that BC Hydro ratepayers will end up subsidizing the utility’s EV charging services. For example:
- BC Hydro’s EV charging rates are based on a 10-year revenue forecast, hard to predict in a rapidly changing market. If its EV charging stations are less successful than forecast, or if costs are higher, ratepayers may have to pick up the losses.
- The EV charging rates make assumptions about the expected life of BC Hydro’s current charging technology. If these assets become “stranded” (i.e. they are taken out of service before the end of their forecast life, perhaps because they are replaced by newer technology), ratepayers may still have to reimburse BC Hydro for their full cost.
- BC Hydro expects to make a loss on its EV charging stations for the next first eight years, only making up the difference in the following two years. If the BCUC were to approve lower prices before the end of the 10-year period, the early losses may never be recovered, and again ratepayers may be liable.
These risks arise primarily as a result of section 18 of the Clean Energy Act, which obliges the BCUC to set public utility rates to allow the recovery of the cost of prescribed undertakings such as EV charging stations (on June 22, 2020, the government directed that EV fast charging stations were prescribed undertakings under the Greenhouse Gas Reduction Regulation).
The Clean Energy Act does not direct how the costs of prescribed undertakings must be recovered. This allows the BCUC the discretion, if it chooses to use it, to approve only rates that attempt to fully recover the cost of such a service.
Ultimately, however, if the BCUC-approved rates fail to fully recover the costs of a prescribed undertaking, the utility’s ratepayers could be on the hook.
Conclusion
This decision, the culmination of an extended regulatory process, shows how an independent BCUC can protect ratepayers while advancing public policy goals.
The BCUC had the foresight to identify early on that regulatory issues would arise as utilities sought to enter the public EV charging market, and was inquisitive enough to explore areas – such as competition – that go beyond the narrow mechanics of rate setting.
It took a degree of courage to repeatedly deny applications from BC Hydro that did not satisfy regulatory principles, for example cost causation, when the utility is owned by the same government that has the power to deny reappointment of or even fire BCUC commissioners.
The BCUC also showed its pragmatic side, agreeing not to insist that BC Hydro recover from future EV charging customers the difference between interim and permanently approved rates. The regulator agreed with BC Hydro that the administrative burden would be “disproportionate to the possible value of such an exercise.”
EV owners across the province may also benefit from this decision. By ensuring BC Hydro’s EV charging rates are, in the utility’s words, “generally in line with other service providers’ charges,” private sector businesses should be more inclined to invest in additional charging stations knowing that they have something closer to a level playing field. And more private sector investment reduces the pressure on BC Hydro to find capital to fund its own electrification programs. This is squarely in line with the BC government’s policy of electrifying the transportation sector.
There are undoubtedly some residual risks that BC Hydro ratepayers will end up subsidizing its EV charging customers. But for now, at least, the BCUC appears to have done the best it can with the powers it has.