Utilities in the Midwest, great plains states, and southeast continue signaling their intention to build out electric vehicle (“EV”) charging station networks across their respective service territories. In some areas these efforts have already begun to take shape, such as the Consumers Energy PowerMIDrive program established in a settlement agreement approved by the Michigan Public Service Commission.
As an example, Consumers Energy’s program offers public charging station rebates, a direct current fast charging (“DCFC”) rebate to create an initial network of fast-charging infrastructure throughout the Company’s electric service territory, and educational outreach on the benefits of installing charging stations to attract more consumer traffic to business locations while maintaining the ability to set pricing and accessibility to reflect individual on-site needs. These efforts are bolstered by the Michigan Energy Office’s Charge Up Michigan rebate program and siting strategy as well as the Michigan Public Service Commission’s determinations that for regulatory purposes “the sale of electricity by charging station owners should not be treated as a resale of electricity . . . or as a sale by regulated utilities.”
While increasing EV use and charging station incentives provide opportunities for commercial and business entities to offer additional services and attract additional customers, the full life cycle (i.e. pre-installation through removal and disposal) of an EV charging station project involves numerous practical and legal issues that must be considered.
The most elemental of these is the project design dependent on project size. For example, the availability of parking space and the ancillary commercial use or uses (e.g. retail, restaurant, auto dealership, etc.) will influence the number and type of charging stations to be installed. Available utility, governmental, or other incentives (such as those in Consumers Energy’s Michigan service territory) are also important considerations, as the amount and program requirements thereof may influence initial decisions regarding charging station selection and installation.
The ownership and operation of the property and project must also be considered to determine what benefits (e.g. available environmental “credits,” fees charged for use, etc.) and responsibilities (e.g. easement and land use restriction resolution, construction costs, operation, and maintenance (“O&M”), etc.) will accrue and fall to which entity. Ownership and operation could reside with a property owner, tenant, utility, charging station vendor, other third parties, or involve some combination of these entities. Working through ownership and operation issues will likely also influence which entity is ultimately responsible for obtaining any special permitting or zoning authorizations. It also allows an analysis of whether commercial entities providing charging services are allowed to provide this form of electrical service without becoming regulated by a public utilities commission. In some states, a non-utility entity selling charging services could be deemed as “re-distributing” retail electricity, which is the primary right and obligation of the local electric utility, requiring special licensing. Various regulatory circumstances may require alternative approaches or business models for offering customers the use of a charging station, such as doing so without technically selling the electrical service. Further property issues that must be addressed also include arranging, negotiating, and authorizing new utility infrastructure and easements as well as design work and actual construction. Again, this issue may be complicated if the party seeking installation is not the property owner, as charging station installation may implicate property values and could pose an impediment to alternative future land use plans.
Actual charging station selection and contractual procurement must also be arranged and could be influenced by incentive programs or utility requirements. Given the ongoing developments in commercial EV charging station installations, entities should negotiate these transactions and underlying business models with flexibility and appropriate due diligence. It’s also important to consider the technological elements of this service, meaning that in addition to the contractual elements relating to delivery, installation, operations, and the guarantees of the physical charging station, the software, IT support, ownership and use of charging station customer data, payment processing, privacy issues, and data security elements will also be important. These contractual provisions must be well understood by all parties as they relate back to standard contractual questions such as each party’s various obligations, which entity is required to pay which and when, the length of the term, potential breaches and remedies, indemnification and insurance responsibilities, assignability, and what is to be done when there is a change in controlling law. This last point is particularly important in this area, given the fluid nature of energy technology and associated laws and regulations.
Beyond initial procurement matters, construction issues must also be considered. While the relevant utility will typically install the electrical infrastructure, the party installing the charging station must be determined such that utility, installer, and property owner or tenant operations can be coordinated. Necessary utility infrastructure upgrades, land use rights and restrictions, regulatory approvals, and associated costs should also be confirmed. Clarity regarding the responsible permit applicant and regulatory contact should also be addressed and the impact of construction on surrounding properties and business operations should be considered in advance to potentially work out mitigating measures, if necessary.
After construction, project operation also presents issues that must be resolved. Chief among these is whether customers are charged a fee to use the charging station and, if so, how the fees are set, collected, held, processed, and disbursed by and between parties. Branding or advertising considerations should also be addressed along with the party in control thereof, as well as the party responsible for charging station maintenance and upkeep (e.g. site owner responsibility, utility or installer service plan, etc.) Further, the liable party for operation malfunctions and their attendant responsibilities should also be clear.
The eventual end of a contract’s initial term should also be proactively addressed. Potential options for continuing the contract for varying terms, advance notice requirements, required or optional system upgrades, or purchase and vendor changes, among other issues, should be considered during initial contract negotiation. End of useful life issues are also important, as the party responsible for removing and disposing of the charging station and relevant infrastructure must be identified. Potential environmental remediation and indemnification responsibilities must also be dealt with in the event charging station-related construction or removal results in a release of a hazardous or regulated substance.
As EV adoption and associated public charging infrastructure continue to proliferate commercial and business entities should consider the opportunities and benefits of hosting charging stations. Doing so, however, requires deliberate, thoughtful, and proactive due diligence which contemplates the long-term practical and legal issues presented by charging station selection, procurement, construction, installation, operation, and ultimate cessation. For further information or assistance regarding issues relating to EV charging stations contact Stephen A. Campbell.