Monday, February 14, 2011

Oh, give me a home where the PEVs roam...(?)

There has been a lot of discussion about Plugin Electric Vehicle (PEV) "roaming" in various contexts.  For those not familiar with the term, PEV "roaming" is like cellular phone roaming.
  • With a cell phone, if you take or make a call outside of your cellular carrier's service territory, the carrier who handles the call bills your carrier, who bills you, and the call gets charged back to your home (or business) cellular phone bill.
  • With a PEV, you recharge your PEV outside of your local distribution company's service territory, that distribution company bills your distribution company, and it gets charged back to your home (or business) electricity bill.
Roaming makes sense for cell phones, but I'm not sure it makes sense for PEVs.

Phone companies have had an infrastructure all along that provides for one carrier billing another for service provided to end users (i.e. intercarrier compensation.)  That doesn't mean that it works without problems.  The FCC has been wrestling with intercarrier compensation problems for about a decade, and still hasn't found a universal solution.  For that matter, ask any telco exec about access charges and "traffic pumping" sometime if you want a real earful.  However, at least there is a business case and infrastructure for doing it.

Electric utilities have never had or needed kind of infrastructure.  I'm not sure there's a business case for developing it for PEVs, either.

Let's take one aspect of transportation costs for an example of the problem; taxes on transportation fuels.

Right now, gasoline is taxed at a rate of $0.18 / gallon at the federal level, and between zero and $0.461 / gallon at the state level.  That is just the excise tax on fuel.  Some states charge sales tax on top of that.

In most States, most of that money goes to fund the Department of Transportation (around 60% of the Federal portion goes to the USDOT.)  In some states, it is the vast majority of the money that goes to build and maintain roads.  As electric vehicles increase in market penetration, that tax revenue will dry up.  It won't take long for the various states to start taxing electricity when used as a "motor fuel."  I imagine that it isn't happening now only because (a) there is a desire to encourage initial PEV adoption, and (b) the revenue impact of PEVs hasn't been felt yet.

Right now, these taxes on gasoline are paid along with the fuel, in a "pay at the pump" situation.  It's a fairly efficient and equitable way to collect taxes to support road use, since presumably one drives the roads in the locality where you purchase fuel, at least most of the time.  If PEV recharge stations operate on the same "pay at the pump" concept (you pay whatever the local rate is for a recharge wherever you're recharging, when you're recharging) the transaction is fairly simple, and the taxes continue to get collected in pretty much the same manner.

Now if the Utility is billing for customer "roaming" recharges, they'll have to rework their backoffice systems to handle taxing "motor electricity" and remitting to the correct authority.  That's fairly straightforward, even trivial, in a "pay at the pump" scenario.  The customer swipes a credit card at the recharge station, and the credit card charge includes the taxes in effect at that recharge station.  If the corner 7/11 can do it with gasoline, I gotta figure a utility can do it with watts.

Are Utilities additionally going to rework their back office systems to handle;

  • different tax rates, depending on the state (or even locality) in which a PEV is charged,
  • billing for, tracking and remitting the taxes to the appropriate State,
  • tracking and remitting to the Feds their portion,
  • dealing with the inevitable errors and exceptions,

just so they can do PEV roaming?

I'd love to be listening in as a customer service rep tries to help a customer understand their electric bill after Grandma and Grandpa make a cross country trip to see the kids.  That's another aspect, Customers are accustomed to paying for transportation fuel where they "fuel up".

What happens if localities jump on the bandwagon?  City transportation departments are cash-strapped, and while people are screaming over fuel prices already, having something new to tax gives a great opportunity to "bury" the tax.

All of that gets avoided in a "pay at the pump" scenario.

"Ah," I hear you saying, "but what happens when I recharge at a friend's house?"  Uh, you settle up with your friend, on whatever basis you and your friend choose.  That's no different than a million other "6-pack" transactions that happen every day.  Last week I repaired a friend's PC and charged him a cup of coffee.  Does AEP want to get involved, just because electricity was involved?

Fuel taxes are only the beginning.  Privacy and data security issues (with all that those entail) get rather simpler in a "pay at the pump" scenario as well.

Could these problems be resolved?  Probably.

With an existing, simple, and customer friendly business model, and no compelling reason to open that can of worms, should we?

(Postscript: I reworded one sentence because, frankly, what I wrote wasn't what I meant.)
(Postscript 2: Since posting this missive, I have heard that California is requiring utilities to do the very "excise tax on motor electricity" that I describe here.  I haven't been able to confirm that, yet.)

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