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New LPDD Model Demand Charges Law

September 30, 2021

The LPDD team is excited to announce the publication of a new model law dealing with EV fast charging rate design, particularly with a view towards how demand charges are assessed by electric utilities. The model law is available to view here.

Excerpted from the introductory memorandum to the model law:

In many jurisdictions, the current rate structure for electrical service discourages the development of high-performing DC fast chargers for electric vehicles. Electricity bills in those jurisdictions include charges for the total amount of electricity consumed in the monthly billing cycle, but also impose an additional charge – called a “demand charge” – keyed to the maximum amount of electricity used in any given 15 minute (or one hour) period during the billing cycle.

Problems arise with the application of this concept to DC fast charging stations. At this early stage in development of the EV market such stations may sit idle for most of the day, only to draw significant power for short periods while electric vehicles are recharged.  As a result, demand charges imposing significant costs dominate the bills paid by operators of such stations — even though they may not sell significant amounts of overall power over the course of a billing cycle. As a result, high performing DC fast charging generally tends not to be a profitable business.

The model law that accompanies this memorandum would address this issue.  Under the model law, each regulated electric company would be required to submit to the PUC a proposed tariff designed to facilitate DC fast charging for EVs. The submission would be required to evaluate the costs and benefits of alternative rate designs under multiple scenarios of EV adoption. The PUC would be required to provide notice and the opportunity for public comment, and thereafter approve, modify or reject the proposal. In the event of rejection, the electric company would be required to submit a modified proposal addressing the reasons for rejection. Within thirty days of PUC approval the tariff would be made available to consumers. Thereafter, the electric company would be permitted to seek modifications to the approved tariff, but only once in any three year period.

A number of jurisdictions are focusing on the difficulties posed by the application of demand charges to direct current fast chargers. The model law draws heavily from the language of bills addressing this problem that either are pending or have been recently enacted by legislatures around the country.

 

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Creation of the site was generously supported by the Andrew Sabin Family Foundation.
© 2022 Sabin Center for Climate Change Law

This website provides educational information. It does not, nor is it intended to, provide legal advice. No attorney-client relationship is established by use of this site. Consult with an attorney for any needed legal advice. There is no warranty of accuracy, adequacy or comprehensiveness. Those who use information from this website do so at their own risk.

Laws vary considerably from jurisdiction to jurisdiction. The model legal documents on this website are not specific to any jurisdiction. They should be viewed solely as a starting point for legislators, policymakers and interested stakeholders, and would need to be adapted and modified to the particularities of local, county, state, federal and other legal systems in consultation with an attorney licensed to practice and experienced in the drafting and enactment of legislation in that jurisdiction.

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