Dive Brief:

Staff of the Vermont Public Service Department is recommending utilities offer a pathway for "immediate relief" from demand charges for new loads like electric vehicle (EV) public charging stations, possibly by designing preferential rates that could enable emerging business models.

The recommendations, released this week, were requested by state lawmakers who want to consider possible rate design changes to improve rural economic development. The Vermont legislature passed Act 194 last year, calling for the report.

Demand charges, which utilities rely on to pay for transmission needed to meet peak demand, are particularly problematic for EV charging stations. The station have low utilization rates with high peak demand, the Rocky Mountain Institute concluded in a 2017 report.

Dive Insight:

The report includes a broad look at demand charges in Vermont, including how they impact rural and business customers, but says that a "particular concern is associated with emerging enterprises like public EV charging stations."

EV charging and other heating or battery loads are increasingly-flexible resources, the report notes, which "can be more readily timed to match available price incentives."

The Public Service Department exists within the executive branch of Vermont's government, and represents the "public interest in energy, telecommunications, water and wastewater utility matters."

"Demand charges were well suited to another era in which the emphasis was arguably well focused on cost causation and the fair allocation of costs rather than encouraging cost management," staff concluded. "Technology now permits us to more precisely measure demand; align price signals and incentives with cost causation; and empower customers to respond through communications, automation and utility controls."

All of Vermont's electric utilities apply demand charges to large customers, and there is also mixture of charges for residential customers. Staff noted that Green Mountain Power serves roughly 264,000 customers and almost 9,000 incur demand charges.

Source: Vermont Public Service Department

But just nixing the demand charge would force costs elsewhere, said staff. One possible solution considered in the report includes using estimated demand charges that would be "incorporated into the energy rate for the first three years of operation, provided the EV charging station owner allows for active and dynamic load control capabilities to the host utility."

Rocky Mountain Institute has advocated for solutions that allow utilities to recover costs through volumetric rates, while still offering the DC Fast Charger station the opportunity to profit. The group's analysis revealed demand charges could be responsible for over 90% of a charging station’s electricity costs — a function of a nascent industry, low utilization rates and high variability.

Vermont staff said that as the EV sector evolves, utilities should look to provide "stopgap relief" from demand charges for charging stations — so long as the solution allows for rates to cover marginal costs and "reasonably protects the system from the burdens of new coincident system peak loads."

Act 194 required the Public Service Department report and recommendations be submitted to several House and Senate committees by Jan. 31; the report was published this week on the Public Utilities Commission web site.