California Electric-Cars Push May Raise Power Costs

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Oct. 23 (Bloomberg) -- California’s push to lead U.S. sales of electric cars may result in higher power rates for consumers in the state, as a growing number of rechargeable vehicles forces utilities to pay for grid upgrades.

The autos’ effect on electricity fees is being reviewed by California’s Public Utilities Commission this month as the most populous U.S. state will require Toyota Motor Corp., General Motors Co., Honda Motor Co., Ford Motor Co. and Nissan Motor Co. to sell more plug-in vehicles from late 2011.

Power companies including Southern California Edison, the state’s largest, have to install new transformers and meters to handle greater demand and prevent blackouts when autos are being charged at outlets. Utility rates will rise to cover the costs, said Travis Miller, a Morningstar Inc. analyst in Chicago.

“If you look at the kind of money that will be needed for a full smart grid and support for electric vehicles, then you are talking about a substantial amount,” Miller said in a phone interview. The spending may total “multiple billions” of dollars over a decade or more, he said.

From model years 2012 through 2014, the largest carmakers by volume in California must sell about 60,000 plug-in hybrids and electric cars combined, according to the state Air Resources Board. President Barack Obama is aiming for 1 million plug-in cars on U.S. roads by 2015 to curb tailpipe emissions and cut dependence on foreign oil.

System Overload

Rosemead, California-based Edison International, the owner of Southern California Edison, has identified the city of Santa Monica as a community with many potential battery-car customers that may require transformer upgrades.

A typical Santa Monica circuit, which serves about 10 households, may be overloaded should two or three of those customers charge vehicles simultaneously, even if they do so overnight during off-peak hours, Ted Craver, Edison’s chief executive officer, said in a phone interview on Oct. 20.

While surplus power is available at night at cheaper rates, the grid needs adjustments to handle such charging, Craver said. For example, additional or larger transformers may be needed in neighborhoods with numerous plug-in car owners.

“If all those people do it at off hours, in the middle of the night, a lot of our system is designed so the transformers cool down at night,” Craver said. “That’s part of how they are able to function at full capacity during the day.”

Electricity Rates

Edison, PG&E Corp., owner of Pacific Gas & Electric Co., and Sempra Energy’s San Diego Gas & Electric have said in filings with the state utilities commission they’ll have to make infrastructure investments related to plug-ins, without proving specific figures.

Expenses will start next year for plug-in “readiness efforts, and will require a reasonable process for seeking recovery of these costs,” Edison said in its filing.

Vehicle charging may wear out electric distribution equipment faster at some locations, Mark Duvall, director of electric transportation research at the Electric Power Research Institute, said at an event in San Francisco yesterday.

“It will raise costs and make rates go up a bit,” Duvall said, estimating that California utilities will need to spend a “handful of millions” for initial improvements. “There is a near-term investment needed versus a long-term benefit,” he said.

Offsetting Increases

Utilities providing power to recharge vehicles are set to receive “low-carbon fuel” credits that may be sold to oil companies. Edison, PG&E and San Diego Gas all said they’ll use revenue from the credits to moderate potential rate increases.

A decision by the commission on rate changes linked to plug-ins isn’t likely for “several months,” Edison CEO Craver said.

Edison fell 55 cents to $32.64 at 4:15 p.m. in New York Stock Exchange composite trading.

The Edison Electric Institute, the main industry group for U.S. investor-owned utilities, said Oct. 21 its members are increasing efforts to prepare for electric vehicles, calling it an “urgent imperative.”

Minneapolis-based utility Xcel Energy Inc. helped fund and install “Smart Grid City,” a $100 million project in Boulder, Colorado, designed for electric-vehicle charging. Toyota said this week it will supply 10 plug-in Prius hybrids for testing on the Boulder system in a program by the University of Colorado and the Energy Department.

Home-Use Chargers

In addition to transformers, so-called smart meters and upgrades to public chargers installed in California a decade ago, individual customers will also have costs if they install home-use charging units, Craver said.

Edison estimates that by 2020, as many as 1.6 million cars recharged by the grid may be in use in its 50,000-square-mile coverage area, about the size of Alabama.

Edison is making system-wide upgrades to improve efficiency and doesn’t have a cost estimate for modifications related solely to battery vehicles, Craver said in an Oct. 15 interview at the company’s Electric Vehicle Technology Center in Pomona, California.

“I don’t think you can really isolate and say this is just the pure incremental case related to electric vehicles,” he said.

In preparation for vehicles such as Nissan’s Leaf electric car and GM’s Chevrolet Volt, due in late 2010, Edison is trying to estimate how much demand there will be, where most of the vehicles will be in use, and potential impacts on its system.

“It’s important that the customer experience with plug-in electric vehicles be a good one,” Craver said.

To contact the reporters on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net; Mark Chediak in San Francisco at mchediak@bloomberg.net