State regulators nix Xcel plan for ratepayer-funded electric vehicle rebates

Minnesota utility regulators Thursday rejected an Xcel Energy plan to use ratepayer money for tens of millions of dollars in electric-vehicle rebates.

The Minnesota Attorney General's Office argued state law doesn't allow the state Public Utilities Commission (PUC) to approve ratepayer-funded EV rebates — and that such a program would add to customers' "energy burden," particularly pointing to low-income consumers.

PUC Commissioner Matt Schuerger said the assessment was "spot on. ... It is questionable whether it is good policy to use ratepayers' funds for rebates."

Other commissioners agreed, voting 5-0 against the rebate program.

The PUC on Thursday unanimously approved a much smaller Xcel plan to roll out 21 fast EV chargers in rural Minnesota. The commission has already approved similar fast-charger plans by other electric utilities.

Xcel proposed a $150 million EV rebate plan in 2020 in response to the PUC's call to state utilities for investment plans that could help Minnesota's economy recover from the coronavirus pandemic.

Under Xcel's plan, $50 million was aimed at rebates of up to $2,500 per automobile or light truck, provided customers participated in one of Xcel's home EV charging programs. The remaining $100 million would cover rebates for electric transit buses and school buses.

In a rate-increase proposal filed last fall, Xcel asked for $6 million to $22 million annually over three years for the electric-vehicle rebates. In total, Xcel asked for a three-year rate increase of 21%, or $677 million.

The Minnesota Department of Commerce is "mindful" that a significant amount of Xcel's planned rate increase stemmed from the $150 million rebate program, Christopher Davis, a department energy analyst, told the PUC Thursday.

"Electric utilities have a strong self interest in promoting electric transportation," he said.

The Commerce Department gave its OK to a scaled-down version of the rebate program that would have cost $40.3 million. Xcel and several clean-energy organizations were also amenable to a smaller program costing about $42 million.

Those scaled-down proposals would have primarily funded public, school or nonprofit vehicles, leaving only $5 million for light-vehicle rebates for "income-qualified" Xcel customers.

But Peter Scholtz, an assistant attorney general, told the PUC Thursday that "ratepayer-funded rebates are not a good way to encourage EV adoption. If Xcel wants to offer rebates, it is free to do so through its unregulated business."

Xcel's fast-charger program will cost ratepayers about $5 million. The company — by far Minnesota's largest electric utility with 1.3 million customers — will roll out 21 chargers outside of the Twin Cities over the next three years.

While most EV charging is done at home where it's inherently cheaper, public chargers — the gas stations of the EV world — are seen as critical for EV adoption.

Indeed, surveys by J.D. Power, a leading auto-market researcher, for years have shown that the chief hurdle to EV sales is the fear drivers have of running out of juice with nowhere to recharge, a sentiment known as "range anxiety."

Xcel will install, own and operate its 21 fast chargers. "It is designed to alleviate issues of range anxiety," Matt Harris, Xcel's lead assistant general counsel, told the PUC.

"Right now, the public-charging landscape — particularly for DC fast charging — is pretty sparse," Harris said. And many of the DC fast chargers in Minnesota are in the Twin Cities or are part of Tesla's charging network.

Over the past two years, the PUC has approved fast-charger plans for Minnesota Power and Otter Tail Power, investor-owned utilities that serve more rural areas in northern, central and western Minnesota.

Duluth-based Minnesota Power will install and own 16 such chargers. The company expects to finalize charger sites this fall and begin construction in spring 2023. Fergus Falls-based Otter Tail Power plans to install 11 fast chargers.