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Electric vehicle charging subscription rates? Is there an app for that?

Russ Hissom's picture
Owner Utility Accounting Education Specialists

Russ is the owner of Utility Accounting Education Specialists (UAES) a firm that provides online and in-person courses on power and utilities finance, accounting, and business process...

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Executive Summary

1.     Many electric co-op and utility customers are used to paying subscriptions for activities such as entertainment, apps, and travel. A subscription rate for charging the growing number of electric vehicles (EV) would not be an unusual concept.

2.     Electric vehicle charging subscription rates are based on the average charging of the entire group and all customers pay the same flat rate. Customers can charge as much as they want under the subscription rate for a flat amount per month.

3.     The electric vehicle charging subscription rate assumes customers will charge their vehicles during off-peak hours. Use of smart meters by the electric provider can monitor charging times and adjust the rate to reflect the actual experience of the EV customer class.

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A subscription rate to charge my car?

Electric vehicle (EV) sales make up approximately 3.4% of car sales as of mid-2021, with projections of a market share of nearly 30% by 2030. Is your electric co-op or utility's philosophy to promote more electrification of your system? Or, do you want to make sure you're in the game and have rates and options available for your new EV customers? From either approach, there are a variety of rate methods you can use.

 One method that is gaining traction as an EV rate is an electric vehicle subscription rate. A subscription rate will seem natural to EV customers. Many of us pay subscriptions for Netflix, Apple +, Hulu, and other apps. The beauty of a subscription from the user side is that one can use as much of the service as they want. The flip side is that the subscription may not get used, but the subscription fee is still paid. From an electric rate perspective, a subscription rate must recover the total cost of serving customers that use that rate; and some will be over, some under. Finding the middle ground is the key.

A business model for an EV subscription rate

Pacific Gas & Electric offers a business plan that works on the subscription model. The consumer chooses their subscription level based on their maximum EV charging kW consumption. The subscription tier is based on the customer's estimated kW usage for the month's charging units.

Overage fees apply at twice the rate per kW. Here's more detail on the electric vehicle subscription model rate structure.

While the PG&E rate is an innovative electric rate, the PG&E rate is not an actual subscription model, as there is a fixed demand charge plus an energy charge at the per kWh rate for the time of the day the charging takes place.

The familiar subscription model rate - try this for electric vehicles

A rate that is a true subscription rate for electric vehicle charging is based on the average expected monthly use of the EV by all EV customers. The demand and energy rate components are combined into the monthly subscription charge.

The mileage of an average EV is 3 miles per kWh. Here are assumptions used as an example of calculating a monthly EV subscription rate, based on the average usage of the entire group of EV customers for this electric provider:

  1.  A customer survey shows that the average EV is driven 500 miles per month or 6,000 miles annually.
  2. The EV would use 18,000 kWh annually based on the mileage of 3 miles per kWh.
  3. EV customers use Level 2 chargers, and the average system demand (kW) is estimated at 7 kW. The monthly demand charge is $5.00/kW.
  4. The off-peak energy rate is $0.10/kW. It is assumed that EV customers will plug in and charge their vehicles during the evening and night-time hours, which are the off-peak hours.

The monthly subscription rate is calculated as:

Illustration 1 - Electric vehicle subscription rate calculation

Illustration 1 - Electric vehicle subscription rate calculation

The $50.00 monthly rate should be reviewed every year to make sure the assumption used for kW demand, average kWh, and the time of the day of vehicle charging are still valid.

Why offer a subscription charging rate to electric vehicle customers?

Why offer this rate? One could argue that since co-ops and utilities use more smart meters, why offer such a rate? Why not just invoice for actual usage? It is true from a rate development perspective that billing actual customer usage is fair and equitable. But, historically, electric rates have been used to encourage customer and service territory changes in such areas as economic development, increase customer use of energy-efficient appliances, and to reduce peak load usage; an EV subscription rate also falls into that grouping. Some of the benefits to an electric provider and customers for offering an EV subscription rate can include:

  1. The rate encourages ease of billing and budgeting for the EV customer.
  2. More EV customers move towards greater electrification for the electric provider, which results in higher unit sales for the electric provider. Higher unit sales are beneficial to the electric provider as the margin on EV charging can be higher than providing on-peak power and contributing more towards covering the provider's fixed costs.
  3. Off-peak charging of EVs contributes to better load management for the electric provider by using low-cost sources of supply in the nighttime hours.

Overall, greater electrification can benefit the electric provider, as gross margins have decreased as kWh and kW unit sales have declined due to greater energy efficiency of buildings, light bulbs, heating and air conditioning units, and appliances.  Decreased margins means less cash flow available to pay for fixed costs (infrastructure and debt service).

As electric systems install more smart electric meters, rates like an EV subscription rate can be rolled out to customers. It's a win for both customers and the provider. It provides the opportunity to design rates that recover the cost of service for the EV customer class while giving a degree of freedom to the customer in how they charge their vehicles.

 

Russ Hissom is the owner of UAES, a company that offers online electric co-op and utility accounting, finance, rates, business process and strategy courses, custom courses, articles, and eBooks. Russ has over 35 years of electric co-op and utility industry experience, serving as a partner in a national public accounting and consulting firm’s energy practice. Russ has worked with electric investor-owned and public power utilities and electric cooperatives, learning and leading best practices. He is passionate about the power and utilities business, and his goal is to share his knowledge of best practices with you and provide value to your organization. You can find out more about Russ’ experience on his resume.

The puaes.com website has a wealth of articles and online resources on electric utility and co-op accounting, finance, electric rates, business processes, and strategy implementation in the electric business. 

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Matt Chester's picture
Matt Chester on Sep 20, 2021

Interesting to see a utility look to this model-- do you think a utility could do this better than a private charging company might be able to? Or are these apples and oranges (e.g., subscribe to your home charger as well as public chargers)?

Russ Hissom's picture
Russ Hissom on Sep 21, 2021

You raise a good point. What you could see is utilities building out local charging facilities around the community. The subscription rate could apply no matter where the customer charges as long as they are on the utility's system. This is the model that is arising with companies that are building out wider scale charging facilities (i.e. along interstate travel routes).

Benoit Marcoux's picture
Benoit Marcoux on Sep 22, 2021

Thanks for sharing, Russ.

 

This is a topic that I worked on a lot over the last years. Some comments, based on my experience:

  • Assuming that this refers to residential charging and not workplace or public charging, I'm not sure why there's a $5/kW demand charge. This is not a common tariff component for residential component. However, depending on the market, system capacity prices may, at certain times of the year, be much more than $5/kW. 
  • In practice, the system impact of a 7-kW residential charger is much less than 7 kW. This is because most drivers of modern long-range EVS do not charge daily and, then, not necessarily at peak system time. A number of studies have shown this. 
  • A good (early) example of EV charging subscription for residential customers is Green Mountain Power. The subscription rate is $30, if my memory is good. 
  • A big issue with EV subscription and EV TOU rates is metering. A separate smart meter is an expensive solution, while measuring at the charge or using car API faces  regulatory hurdles. 
  • Also, there's a typo: in "The off-peak energy rate is $0.10/kW", kW should be kWh. 
Russ Hissom's picture
Russ Hissom on Sep 30, 2021

Thanks for the comment Benoit (and the typo catch, it should be kWh.)

 

On the residential demand charge, this is becoming more prevalent in utilities and coops as the metering makes the measurement available. I think this is a trend that will/should continue. Thanks for the other insights and examples. It will be interesting to see the approaches that will develop.

Tim Ryan's picture
Tim Ryan on Sep 22, 2021

The better question is would you pay a subscription to cover the high infrastructure cost of the EVSE provider and then use and pay purely on the real-time energy price so you can optimise your savings if you are prepared to charge when prices are low (or even negative).

Russ Hissom's picture
Russ Hissom on Sep 30, 2021

If you could access the real time rate that would be a good approach.

Benoit Marcoux's picture
Benoit Marcoux on Sep 26, 2021

Russ, for a project, I was looking back at utilities that offered EV subscription tariffs. However, I couldn't find one that is not a pilot, and those were either closed to new applicants (like Xcel) or had been terminated (like GMP). Do you know of any actual subscription offerings? 

Russ Hissom's picture
Russ Hissom on Sep 30, 2021

The PG&E rate is the closest I’ve found so far, except for some private companies that are using that rate to apply to a network of charging stations across the country.

Roger Arnold's picture
Roger Arnold on Oct 18, 2021

An obvious feature of charging-as-a-service is that it incentivizes consumption. From a provider's business perspective, that could be good. The convenience of a known monthly price and the prospect of a low cost per kWh when a customer utilizes the service heavily can help to quickly build a customer base. But from an environmental perspective, incentivizing consumption is arguably the last thing we should be doing. 

 

On the other hand, it's equally arguable that in this particular case, "incentivizing consumption" actually means incentivizing the purchase of EVs to replace IC engine vehicles. A low cost per mile of driving is certainly an attractive feature for EVs, and anything that speeds their adoption should help curb carbon emissions. Actual miles driven per year aren't strongly influenced by the per-mile cost of driving, so a lower per-mile cost of electric driving will likely manifest as growth in the size of the EV fleet, at the expense of gasoline and diesel fueled vehicles. However, any plan for charging as a service needs to deal with the time-of-use issue. It needs to encourage charging at times when there is surplus electrical capacity, and discourage it at times of high demand. It's not clear to me how that works in an "as a service" model.

Russ Hissom's picture
Russ Hissom on Oct 19, 2021

Thank you for the comments. Good points all around Roger. A subscription rate is viewed more as an incentive for EV ownership and an extension of society's familiarity with apps. I agree with the point you make on encouraging time of use charging though. I think that the TOU rate is more prevalent, whereas the sub rate would be for charging away from home base. This article discusses some utility rate structures that directly incentivize charging during off peak hours. Thanks again for your comments. 

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