Cost of Service & Rates | Electric Vehicles
Electric Vehicle Charging Subscription Rates? An App for That?
Main Points — Electric Vehicle Subscription Rate
- Many electric co-op and utility customers already pay subscriptions for entertainment, apps, and travel — so a subscription rate for charging electric vehicles is a natural concept.
- EV charging subscription rates are based on the average charging of the entire customer group. All customers pay the same flat monthly rate and can charge as much as they want.
- The subscription rate assumes customers will charge their vehicles during off-peak hours. Smart meters allow the electric provider to monitor charging times and adjust the rate as the actual experience of the EV customer class develops.
A Subscription Rate to Charge My Car?
Electric vehicle (EV) sales made up approximately 6.5% of car sales as of December 31, 2023, with projections of a market share of nearly 30% by 2030. Is your electric co-op or utility's philosophy to promote greater electrification of your system? Or, do you simply want to make sure you're in the game with rates and options available for new EV customers? From either approach, there are a variety of rate methods to consider.
One method gaining traction as an EV rate is the electric vehicle subscription rate . A subscription rate will feel natural to EV customers — many already pay subscriptions for Netflix, Apple TV+, Hulu, and other services. The appeal of a subscription from the user side is the ability to use as much of the service as they want for a fixed monthly fee. The flip side is that the subscription fee is paid whether or not the service gets fully used.
From an electric rate perspective, a subscription rate must recover the total cost of serving customers who use it — some customers will be over, some under. Finding the middle ground is the key.
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Pacific Gas & Electric offers a business plan that works on a subscription model — the consumer chooses a subscription tier based on their maximum EV charging kW consumption, with overage fees at twice the rate per kW. While innovative, the PG&E rate is not a true subscription model, as it still includes a fixed demand charge plus an energy charge at a per-kWh rate based on the time of day charging takes place.
The Familiar Subscription Model Rate — Try This for Electric Vehicles
A true subscription rate for EV 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 a single flat monthly subscription charge.
The average EV achieves approximately 3 miles per kWh . The following assumptions are used to calculate the monthly EV subscription rate, based on the average usage of the entire group of EV customers for this electric provider:
Illustration 1 — Monthly EV Subscription Rate Calculation
| Rate Component | Calculation | Monthly Amount |
|---|---|---|
| Step 1 — Determine Monthly kWh Usage | ||
| Average monthly miles driven | Per customer survey | 500 miles |
| EV efficiency | Industry average | 3 miles/kWh |
| Monthly kWh required for charging | 500 miles ÷ 3 miles/kWh | 166.67 kWh |
| Step 2 — Calculate the Demand Charge Component | ||
| Average system demand (Level 2 charger) | Estimated per customer class | 7 kW |
| Monthly demand charge rate | Utility rate schedule | $5.00/kW |
| Monthly demand charge | 7 kW × $5.00/kW | $35.00 |
| Step 3 — Calculate the Energy Charge Component | ||
| Monthly kWh for charging | From Step 1 | 166.67 kWh |
| Off-peak energy rate | Evening/nighttime charging assumed | $0.10/kWh |
| Monthly energy charge | 166.67 kWh × $0.10 | $16.67 |
| Step 4 — Combined Monthly Subscription Rate | ||
| Demand charge component | $35.00 | |
| Energy charge component | $16.67 | |
| Monthly EV Subscription Rate (flat fee) | Rounded to nearest dollar | $50.00/month |
The $50.00/month rate should be reviewed annually to confirm that assumptions for kW demand, average kWh, and time-of-day charging remain valid as the EV customer class matures.
Why Offer a Subscription Charging Rate to EV Customers?
One could argue that since co-ops and utilities increasingly use smart meters, why not simply invoice for actual usage? From a rate development perspective, billing actual customer usage is fair and equitable. But historically, electric rates have been used to encourage changes in customer behavior and service territory outcomes — economic development, energy-efficient appliance adoption, peak load reduction — and an EV subscription rate falls into that same category.
Customer Ease of Billing
A flat monthly fee simplifies budgeting for EV customers — no bill surprises based on how much they drove that month.
Greater Electrification
More EV customers mean higher unit sales for the electric provider. The margin on EV charging can be higher than on-peak power, contributing more toward covering fixed costs.
Better Load Management
Off-peak charging uses low-cost nighttime power supply, improving load factor and reducing pressure on peak generation resources.
Multi-Location Charging
If the provider builds out community charging stations, the EV customer could use their subscription at multiple locations via a login mechanism.
Greater electrification benefits the electric provider at a strategic level. Gross margins have decreased as kWh and kW unit sales declined due to greater energy efficiency of buildings, light bulbs, HVAC systems, and appliances. Decreased margins mean less cash flow available to cover fixed costs — infrastructure and debt service. EV load growth helps reverse that trend.
As electric systems install more smart meters, rates like the EV subscription rate can be rolled out and refined based on actual data. It provides the opportunity to design rates that recover the cost of service for the EV customer class — while giving customers a degree of freedom in how and when they charge their vehicles.
Key Takeaway: Electric vehicle charging subscription rates are based on the average charging of the entire customer group. All customers pay the same flat monthly rate and can charge as much as they want. The rate is a win for both the customer — predictable monthly cost — and the electric provider — off-peak load growth that improves margins and load factor.
About the Author
Russ Hissom, CPA is a principal of UtilityEducation.com , providing on-demand professional education classes in FERC, RUS, FASB, and GASB accounting, finance, ratemaking, artificial intelligence, and management for electric, gas, wastewater, and water utilities and electric cooperatives.
Contact Russ at [email protected]
The material in this article is for informational purposes only and should not be taken as legal or accounting advice provided by Utility Accounting & Rates Specialists, LLC. You should seek formal advice on this topic from your accounting or legal advisor.