Utility demand charges—steep fees that commercial customers pay when their power consumption exceeds a certain level—are the bane of public charging operators, and most Charged readers are probably familiar with how they work. Average Joe and Jane, however, are blissfully ignorant of their existence, and might be shocked to learn that they represent a roadblock to more public charging deployment.
In a recent op-ed piece in the Tampa Bay Times, Florida Senator Jeff Brandes set out to educate the public about these nefarious charges. (Ironically, Republican Jeff Brandes, who represents Charged’s home town of St. Petersburg, is not known as a friend of EVs—in 2020, and again in 2021, he sponsored bills that would have imposed a special yearly tax on plug-in vehicle owners.)
Senator Brandes points out that, under the Bipartisan Infrastructure Law, Florida is expected to receive some $198 million in federal funding for charging infrastructure, and that the state needs to “allocate these funds in a way that prioritizes a competitive charging marketplace and supports private sector investments.” (One of Brandes’s colleagues has introduced a bill that would supposedly promote competition in the charging market.)
Demand charges are especially onerous for small businesses that want to install DC fast chargers. A small store or restaurant’s average energy use may be relatively low, but even moderate usage of a typical DC fast charging station can cause a spike in energy consumption that incurs a demand charge. “In many cases, these additional fees make it hard for charging station hosts to break even on charging costs, let alone begin recouping the costs associated with the initial installation,” writes Brandes.
Last June, the Florida Department of Transportation released an EV Infrastructure Master Plan, which listed utility demand charges as a primary barrier to public charging station deployment.
The document reads, in part:
EV charging station companies are concerned that through the rate structure, demand charges by utilities are an impediment to DC fast charging infrastructure. Fast charging stations are commercial customers billed under rate schedules that include an energy charge (based on the amount of energy consumed, or kWh) and a demand charge (dollar per kW). The demand charge is based on the highest usage, or demand, over a specified time interval (15 or 30 minutes). This peak usage determines the demand charge for the billing month.
Demand charges…challenge the economics of public fast charging stations that experience a high peak demand, but low levels of kWh energy sales, or utilization. Peak demand at an infrequently used site could be determined by the single customer of that site with the highest demand, rather than an aggregate from multiple users charging at the sites busiest time. At low levels of utilization, the bill incurred by the charging stations result in demand charges being spread over a low volume of energy sales. Stations with higher kWh sales spread the demand charge over more energy sales and are more likely to recover costs. In addition to evaluating whether demand charges are appropriate for EV charging, utilities may consider how rate structure can help manage the additional demand created by vehicle charging. Time-of-use rates, based upon the cost of producing energy during different segments of the day, can be a mechanism for encouraging EV charging during off-peak hours.
Brandes argues that charging stations should be exempt from demand charges, and any public charging operator would probably agree.
Last November, The Regulatory Commission of Alaska, which manages public utilities in the state, approved a set of rate structure changes that eliminate demand charges for EV chargers. (The revision also allows businesses hosting charging stations to charge for electricity by the kWh, a reform that Florida regulators made in 2012.)
“Electric vehicles are the future, and Florida needs to be ready to meet the needs of this growing industry with the infrastructure required to support it,” writes Brandes. “While Florida has taken promising steps toward an electrified future, lawmakers and utility regulators must work together to take the necessary steps to promote fair competition in the charging station marketplace.”
Source: Tampa Bay Times