Electric vehicle charging: California utilities can own infrastructure, says CPUC

The shift toward electric vehicles is rolling forward in California among consumers -- and regulators are weighing in. Just before Christmas, the California PUC overturned previous policy and issued a new decision allowing the state's utilities to participate in providing electric vehicle charging infrastructure

The CPUC envisions California utilities (including Pacific Gas and Electric, Southern California Edison and San Diego Gas & Electric) taking on a critical role in the transportation sector. This decision represents a new direction for the utility business model. It allows utilities to become, under certain conditions, the procurers, deliverers and suppliers of transportation fuel -- in this case, electricity.

The Dec. 22, 2014 decision set aside the previous California requirement that utilities must demonstrate a "market failure" or "underserved market" as part of any request for authority to own EV charging infrastructure. This change allows for consideration of utility requests on a case-by-case basis.

This decision reaffirms the CPUC's "balance test" -- that is, the benefits of utility ownership of EV charging infrastructure must be balanced with the competitive limitation that could result from such ownership.

The CPUC noted that some market segments are particularly challenging for third parties to penetrate. Utilities may be better positioned to develop those market segments, or to support third-party providers in doing so. In the big picture, even limited utility involvement in accelerating the EV infrastructure market could improve the business case for third parties.

There is reason for concern over utility entrance into competitive market sectors. Therefore, the CPUC is setting some limits on how they're lifting the broad prohibition on utility ownership of EV charging infrastructure. In reviewing utility applications, the CPUC will consider these factors:

The nature of the proposed utility program, and its elements.

The level of competition in the market which the utility program would enter.

Potentially unfair utility advantages, if any.

If the CPUC deems that a given utility might be unfairly competitive, the Commission will determine whether rules, conditions or regulatory protections are needed to effectively mitigate anticompetitive impacts or unfair advantages.

The criteria and case-specific approach set forth in the December decision will not limit the CPUC's future ability to adopt a broader approach, or to set more specific criteria.

How will this play out in practice? We shall soon see. Both Edison and SDG&E have pending applications which will be evaluated using this new approach. Stay tuned.