Phoenix, AZ – Andrew J. Kidd, Ph.D., an economist with the Economic Research Center at The Buckeye Institute and the co-author of It Ain’t Easy Being Green: A Cost-Benefit Analysis of Electric Vehicles in Arizona, testified Wednesday (see full text below or download a PDF) before the Arizona Corporation Commission on the proposed policy that would allow Arizona’s public utilities to build charging stations for electric vehicles and pass the costs on to Arizonans through higher utility bills.

In his testimony, Kidd summarized the findings of It Ain't Easy Being Green, which was released in partnership with the Arizona Free Enterprise Club, “in order to provide policymakers with a clearer picture of policy incentives and the true costs and benefits of electric vehicle ownership.”

Kidd highlighted key findings from the report that “illustrate the fact that Arizona does not need more electric vehicle incentives,” including:

• Arizona’s electric car owners currently benefit from a surplus of state and federal subsidies, including tax credits, reduced vehicle license taxes, and rate discounts for charging at off-peak hours. But for every $17 spent in subsidies, Arizonans reap just $1 in social benefits, such as lower healthcare costs and less pollution;
• Private suppliers are keeping pace with demand for charging stations with one public charger for every 12 electric vehicles on Arizona’s roads, compared to one gas station pump for every 249 gas-powered vehicles; and
• Low- and middle-income Arizonans are subsidizing wealthier Arizonans who can afford new and more expensive electric cars, with more than 83 percent of electric car taxpayer subsidies going to households earning more than $100,000, and less than one percent of those subsidies being used by households making less than $50,000.

In closing, Kidd pointed out that “[s]ound electric vehicle policy must account for the true costs and marginal social benefits that electric vehicle ownership actually entails,” and he urged the commission to “avoid costly and unfair subsidy structures that will financially harm non-EV owners and will risk distorting the competitive private sector market that can and will supply EV drivers with all the recharging services they require.”

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Testimony on Electric Vehicle Policy Implementation Plan 
Before the Arizona Corporation Commission

Andrew J. Kidd, Ph.D., Economist
The Economic Research Center 
at The Buckeye Institute
June 12, 2019

Chairman Burns and commissioners of the Arizona Corporation Commission, thank you for the opportunity to testify today regarding the proposed policy that will allow Arizona’s public utilities to build charging stations for electric vehicles.

My name is Andrew J. Kidd. I am an economist with the Economic Research Center at The Buckeye Institute, an independent research and educational institution—a think tank— whose mission is to advance free-market public policy in the states. I am also a co-author of  It Ain’t Easy Being Green: A Cost-Benefit Analysis of Electric Vehicles in Arizona, a report that we released with the Arizona Free Enterprise Club in order to provide policymakers with a clearer picture of policy incentives and the true costs and benefits of electric vehicle ownership. Our findings are similar to what the literature has found and illustrate the fact that Arizona does not need more electric vehicle incentives, especially one that could cost ratepayers across the state more in monthly energy bills.

Arizona’s electric vehicle—or EV—owners currently benefit from a surplus of state and federal subsidies, including tax credits, reduced vehicle license taxes, and rate discounts for charging at off-peak hours. But for every $17 spent in subsidies, Arizonans reap just $1 in social benefits, such as lower healthcare costs and less pollution. This result is not unique. Other researchers also report that the amount in federal and states subsidies given out greatly exceeds the amount of benefits gained from the purchase of an EV. In many metropolitan areas throughout the country, thousands of dollars in subsidies are given out with little to no benefit in increased EV use.  Thus, increasing electric vehicle use through this proposal will likely provide only a marginal benefit at best.

Allowing public utilities to build electric vehicle charging stations is a solution in search of a problem. Arizona suffers no shortage of charging stations and private suppliers are more than keeping pace with demand for charging stations with one public charger for every 12 electric vehicles on Arizona’s roads. To put that ratio in context, Arizona has one gas station pump for every 249 gas-powered vehicles—but no one is suggesting that the state must subsidize gas station construction to overcome a gas pump “shortage.” The private sector continues to respond to market demands as businesses utilize public chargers to attract new customers. 

Unfortunately, the current policy proposal is also highly regressive insofar as it directly benefits EV-owning households, who disproportionately earn more than $100,000 a year, at the expense of low- and middle-income families, who usually do not drive EVs and pay proportionately more of their income on their energy bills. The proposed policy encourages public utilities to recoup construction costs by increasing electricity rates on all ratepayers, even those who may never use an EV charger, and thus will effectively and regressively take money from lower income families to support the buying preferences of the more affluent EV drivers.

In addition to creating a regressive subsidy program for ratepayers, Arizona’s EV policy proposal will advantage public utilities to the disadvantage of other EV charging station providers. Because the utilities can raise electricity rates on all their ratepayers in order to recoup their charging station construction costs, they would enjoy a government-sanctioned market advantage over private firms and local businesses that must risk their own capital and attract EV customers if they want their charging stations to be profitable.

Finally, the current proposal creates a dangerous precedent for utilities. Arizona should be careful before allowing public utilities to build amenities that they have interest in owning or operating profitably, but may choose to do so simply because the state allows them to recoup costs by raising rates across-the-board. Policies that artificially distort competitive markets and that are designed to benefit the few at the expense of the many rarely prove successful in the long run. Charging station companies can specialize in developing new technologies, such as faster chargers, and can adapt as the EV market shifts by more quickly building chargers where there is increased demand.

Arizona should pursue less regressive, less disruptive policy solutions for their public utilities and electric vehicle owners. The state can encourage utilities, for example, to expand their off-peak charging incentives to benefit EV owners without burdening non-EV owners. Furthermore, if Arizona allows public utilities to build public EV chargers, the construction costs for those chargers should be paid only by the charging station users and not the general public. Such a requirement would be consistent with “time-of-use” and membership access fee structures already used at some EV charging stations and even discount gasoline stations.

Sound electric vehicle policy must account for the true costs and marginal social benefits that electric vehicle ownership actually entails. Arizona should avoid costly and unfair subsidy structures that will financially harm non-EV owners and will risk distorting the competitive private sector market that can and will supply EV drivers with all the recharging services they require.

Thank you for your time and consideration. I welcome any questions that the Commission might have.

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