Are Some Californians Paying Too Much to Charge their Plug-in Vehicles?

September 24, 2012 | 1:41 pm
Don Anair
Deputy Director & Research Director, Clean Transportation

A recent survey of electric vehicle (EV) owners shows that a significant number of Californians may be leaving hundreds of dollars a year in fuel-cost savings on the table. The survey by the California Center for Sustainable Energy suggests that more than a third of EV owners in some utility territories may not be on the utility rate plan that would save them the most money.

A side-by-side look at our State of Charge analysis results, which evaluated fuel-cost savings of different utility rate plans, with the CCSE survey results provides some insights to rate plan choice by California EV owners. While most of the state’s EV owners are getting the lowest rates they can, more consumer awareness and further evaluation of the barriers to consumer choice of time-of-use (TOU) rates for EV charging is needed.

What utility rate plans are California EV owners choosing?

Image courtesy of California Center for Sustainable Energy.

The CCSE survey of 1,419  EV owners (96% LEAF owners) breaks down responses by the utility service area and has data for five major utilities. The bars in the chart show the percentage of survey respondents who remain on their standard utility rate plan instead of switching to an electric vehicle TOU rate.

For some utilities, more than a third of non-solar owning EV owners are staying on the standard rate plan. Our findings from State of Charge showing greater fuel-cost savings by switching rate plans suggests that these customers  may not be on the utility rate plan that could save them the most money. (See note at the end on solar PV ownership and rate selection.)

Refresher on California utility time-of-use rates

In my previous blog post on California electricity rates, I explained the different TOU options available and potential savings. But here’s a quick refresher. Time-of-use rates offer lower electricity rates overnight when vehicles are typically being charged and higher rates during peak electricity demand hours – typically in the afternoon and into the early evening. The figure below shows LA’s TOU rate as an example.

There are two types of TOU rates available. A whole-house TOU rate (TOU-WH) applies to all of the electricity use in your home including your car, while a EV-only TOU rate (TOU-EV) rate applies only to your vehicle charging while your household electricity consumption can remain on the standard plan. The TOU-EV rate typically requires the installation of additional metering equipment, which can add an upfront cost.

Comparison of CCSE survey data with rate plan savings 

The figure to the right shows the CCSE survey data by utility along with an estimate of the savings from switching to either a TOU-EV or TOU-WH rate for each utility. The two lines show annual savings these utility customers may be able to achieve by switching to a TOU plan. Looking at the data alongside one another helps show which utility customers have the most to gain.

Annual savings estimates are from State of Charge.

For example, LADWP and SMUD show the highest percentage of EV owners staying on the standard rate plan. The potential savings from a switch to a TOU plan for those utility customers is about $200/year on either a TOU-WH or a TOU-EV.

For the average SCE and PG&E customer, the annual savings of switching to either one of the TOU options could results in more than $400 per year – and as much as $1,000. Nearly a third of EV owners are not taking advantage of these rates and potential savings.

SDG&E provides a good comparison to PG&E and SCE.  SDG&E data shows similar levels of savings from switching to TOU rates, about $400, but the percent of people staying on the standard rate plan is half as much (14%) as PGE[1] and SCE (29% and 32%).

Image courtesy of California Center for Sustainable Energy.

Do SDG&E customers know something PG&E and SCE customers don’t?

Well, that does in fact appear to be the case. The survey also asked respondents if they knew TOU rates were available to charge their EV.  A total of 85 percent of SDG&E customers indicated they were aware of the TOU rates, while the number was about 70 percent for the other utilities (figure to the right).

CCSE suggests this may be a result of SDG&E carrying out extensive outreach in support of a TOU rate study for EV charging. The fact that SDG&E customers actually chose these rates could also be influenced by the fact that SDG&E also provided a free meter to customers that allowed access to TOU-EV rates. So a combination of lower upfront cost and greater awareness appears to have been part of the success in getting SDG&E EV customers on the best rate plans.

What can be done to increase TOU rate adoption?

While there’s not enough information in the survey results to discern all the factors regarding rate choice among early EV owners in California, this data does suggest a few things to me.

1)      Educating EV owners about their utility rate plan options is the first step. No one will choose a rate plan they don’t know about. Utilities, dealers, and automakers all have a responsibility for educating their customers — the benefit of doing so is that their customers actually realize the cost savings they expect from owning an EV. The results are encouraging so far — since more than two-thirds  of the survey respondents indicated they were aware of the TOU rate option — but there’s room for improvement. As the EV market expands, it will be even more important.

2)      Reducing other barriers to TOU rate selection may be needed. Education is only part of the solution. SDG&E offered free meters so customers could access TOU-EV rates and the percentage of those selecting these rates is very high. More information is needed to determine how much upfront cost is a barrier. Selecting a TOU-WH rate is an alternative to a TOU-EV plan and minimizes upfront costs, so are customers avoiding TOU-WH rates for other reasons? Uncertain impacts on their household energy bills could be a reason, but more data is needed.

3)      The amount of savings on TOU plans versus standard rate plans may be impacting customer choice. LADWP and SMUD have the lowest savings from making a switch to TOU rates and also have the most customers sticking with the standard rate plan. The relatively lower amount of potential savings from making the switch may be a factor influencing their customer choices.

4)      Some customers may not save as much by switching to TOU rate as I’ve estimated. Huh? My savings analysis is based on the average electricity customer. Individual household electricity consumption varies and can change the economics. For example, someone who uses very little electricity in their home will end up using lower-tier priced electricity to charge their EV. For example, the average PG&E customer on a standard rate plan will be charging their EV at Tier 3 (29.5 cents/kWh) or Tier 4 (33.5 cents/kWh) rates.

If you are able to keep your EV charging in the Tier 2 rate (~14.6 cents/kWh) , your EV charging is half the price and the savings from switching to a TOU rate will be much less. Also, if customers are heavy electricity users during peak hours (major air conditioning loads, for example), a switch to TOU-WH rate could be more costly since use of peak priced electricity could outweigh the benefit of low-cost off-peak vehicle charging. It’s not clear how many customers should be on the standard rate plans given their household use without getting some more data.

Why are utility rates important for the success of EVs?

Savings on fuel costs is important for the economics of EV ownership, potentially totaling well over $12,000 over the life of the vehicle. Making sure EV buyers achieve the cost savings they expect is important and getting on the right rate plan is a critically important part of that.

Image courtesy of California Center for Sustainable Energy.

Making TOU rate plans attractive to EV owners is also important from the perspective of reducing the demands of EVs on the electricity grid. TOU rates provide a signal to EV owners to charge when there is spare generating capacity.

The survey data shows that customers on TOU rate plans (blue line) shift their charging behavior to match the lower rates available. Customers not on TOU rates (red line) plug in and start charging as soon as they get home — during periods of high electricity demand. Those on TOU plans begin their vehicle charging later in the evening. As the market share of EVs grows, encouraging charging behavior that is good for the electricity grid will become more important.

What’s next?

This early survey data shows that the majority of EV owners are making informed utility rate plan choices, but that there is more work to do in providing clearer choices for customers.  Some additional information needs to be gathered to see how this can be improved.

Is a greater monetary incentive between standard rate plans and TOU rates needed to motivate a switch? How much are upfront costs a decision in choosing or not choosing a TOU-EV rate? Are customers hesitant to switch to a TOU-WH plan because it will change how much they pay for their household electricity? Does there need to be a greater effort in making EV buyers aware of their rate options and a clearer enumeration of the benefits?

Answering these question would ensure EV buyers are being given the right information and the right choices for vehicle charging and encourage charging behavior that’s good for the grid.

Note on Solar PV Owners

Customers who produce some of their own electricity with solar panels (a whopping 39 percent according to the survey) are excluded from the survey data shown in the first figure because the lower net electricity consumption of these households means that the standard rate plan could very well be the best choice. That’s because many of California’s utility rates are tiered — meaning the more electricity you use, the higher the rate you pay for the electricity. Adding solar to your house helps keep you in the lower tiered rates.


[1] Note: PG&E recently announced a new rate plan. The survey period is consistent with the rate plan evaluation performed for State of Charge.