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kWh Billing and New EV Charging Tax Policies: What You Need to Know

Posted 10/06/2023

The electric car market is experiencing massive growth, exceeding 10 million in sales in 2022. As a result, regulations and guidelines related to electric vehicles are changing frequently, and consumers and charging station hosts must be aware of new developments. As both EV adoption increases and internal combustion engine vehicles have become more fuel efficient, states are seeking to offset lost revenue from the gas tax. With states enacting new kWh taxes on EVs and EV charging, we want to make sure you have the right information. Here's what you need to know about kWh energy rates and EV charging taxes.

Understanding kWh Energy Rates

To begin, let's clarify what a kilowatt-hour (kWh) energy rate is and why it matters for electric vehicles. Just as conventional internal combustion engine (ICE) cars measure fuel by the gallon, EV owners measure their energy consumption in kWh. This metric quantifies the energy transferred to an EV's battery during charging, similar to filling up an ICE vehicle. Although much cheaper than putting gasoline into a ICE car, charging an EV is not necessarily free. While around 80% of EV drivers charge their vehicles at home, and many others charge at work, this isn't always possible for renters or apartment-dwellers. To ensure convenient and accessible charging, public charging infrastructure is essential. By the end of 2022, there were 2.7 million global public charging stations, with a 55% increase in 2021 alone. However, as the demand for EV infrastructure increases,  public charging is changing.

Transitioning from Time-Based to kWh Pricing

At the beginning of the EV industry, charging fees were based on time, where EV owners paid for the duration of their charging sessions. This was primarily due to the classification of utility companies under state laws. In order to regulate public utilities, states must pass laws that define a public utility. These broad definitions are written to include all utilities but may inavertently include businesses that install EV charging stations for public use. Generally speaking, most states consider a business to be a public utility if it resells a public good like electricity or natural gas, and businesses that are not utilities cannot resell that public good. As an example, here’s how the Commonwealth of Virginia defines a public utility:

"Public utility" means any company that owns or operates facilities within the Commonwealth of Virginia for the generation, transmission, or distribution of electric energy for sale, for the production, storage, transmission, or distribution, otherwise than in enclosed portable containers, of natural gas, or, if produced, stored, transmitted, or distributed by a natural gas utility as defined in § 56-265.4:6, supplemental or substitute forms of gas sources as defined in § 56-248.1, or geothermal resources for sale for heat, light or power, or for the furnishing of telephone service, sewerage facilities or water.

With the rise of EVs, there's a shift toward kWh-based pricing, which aligns more closely with the conventional model of gasoline refueling. kWh-based pricing is based on the actual energy consumption, measured in kilowatt-hours, during a charging session.

kWh Pricing State Policies

Transitioning to kWh pricing for EV charging stations offers several benefits, such as more precise pricing based on actual energy use and real-time data for EV owners to monitor their charging sessions, allowing them to make cost-saving adjustments. However, this transition also involves policy changes.

Redefining a public utility

At the beginning of the EV industry, EV advocates were concerned with promoting legislation that would allow businesses to charge EV drivers for electricity used. Without the ability to pass their own kWh usage to EV drivers, duration-based rates are the only option for charging station hosts who want to recoup energy costs. These per-minute rates cannot account for a vehicle’s charging efficiency. Not only is charging restricted by the capacity of the vehicle’s onboard charger, but smart technology within the vehicle slows charging as the battery nears full capacity. Especially for DC fast chargers that deliver more power to the vehicle in less time, kWh pricing is the equitable solution for billing drivers for actual energy used. But because states defined a public utility as anyone who resold electricity, a business could not charge EV drivers a kWh fee (i.e. resell electricity) without being regulated by the state as a public utility. Legislation was needed to exclude EV charging station hosts from the definition of a public utility. As of October 1, 2023, every US state except Michigan, Nebraska, Tennessee, and Wisconsin has passed the legislation needed to redefine a utility and allow kWh pricing. To return to Virginia’s example, here is an example of an amendment to the state code:

An entity that is not a public utility, public service corporation, or public service company that provides retail electric vehicle (EV) charging services is not defined as a public utility and may sell electricity if the electricity is used solely for transportation purchases and the entity procured the electricity from an authorized public utility. The Virginia State Corporation Commission may not set the rates, charges, or fees for retail EV charging services provided by non-utilities.

Taxing charging revenue

The federal government and many states currently tax sales of gasoline and diesel to fund “related government services like road construction, maintenance, repair, and public transportation.” However, EV drivers do not pay these taxes, and the growth of EVs is expected to lead to a decrease in tax revenue. For this reason, states have considered solutions such as EV registration fees, per-mile road usage fees, and kWh charging taxes. New laws in seven states require charging station operators and/or owners to pay taxes based on kWh usage tracked by the charger. Here's an overview:

  • The kWh tax in Georgia is set to take effect in 2025, but the specific reporting requirements for charging station operators have yet to be determined. The Georgia Agriculture Commissioner is expected to propose rules before 2025 to outline the details of this tax policy.

  • In Iowa, the kWh tax has already been in effect since July 1, 2023. Owners of EV charging stations must register for a business license and are responsible for reporting and remitting a tax of $0.026 per kWh dispensed into an EV battery or energy storage device.

  • Kentucky will implement the kWh tax starting in January 2024. Station operators will need to report the total kilowatt-hours distributed, tax collected, and provide monthly payments to the state.

  • Similar to Iowa, Montana introduced a $0.03 kWh tax in May 2023 for charging stations rated for 25kW or higher. Owners of “legacy public charging stations” installed before July, 1, 2023 must register with the Department of Transportation and then install a dedicated electric meter before the first $0.03 kWh tax begins on July 1, 2025. Owners of public charging stations installed after July 1, 2023 must register with the Department of Transportation within 30 days of installation, install a dedicated electric meter, and collect taxes based on the monthly utility invoice.

  • Oklahoma will also introduce the $0.03 kWh tax in January 2024, with an exemption for chargers with less than 50kW capacity (Level 2 chargers range from 7.2-19.2kW, and DCFC begin at 30kW). Charging station owners or operators are required to remit the tax monthly using prescribed forms provided by the Oklahoma Tax Commission.

  • In Pennsylvania, there is an existing alternative fuel tax in effect. This tax is remitted by dealer-users, with reports and payments due monthly for fuel sold or used in the preceding month. The Department of Revenue may grant dealer-users permission to report annually, subject to specified criteria.

  • Utah is set to implement a new kWh tax in January 2024. Charging station operators in Utah must remit the tax electronically, adhering to the same schedule as sales and use tax filings. The tax amount is due and payable on a corresponding schedule.

It is important to note that EV drivers charging at home will not typically be liable for this business tax.

Consumer Preparedness

Ideally, any kWh taxes on EV charging paid by the consumer will be included in the kWh pricing listed on the charger or network app, similar to the gas tax. Consumers located in states with a kWh tax should be prepared for an increase in charging fees and carefully review billing statements from charging stations. If in doubt, seek clarification from the charging station operator to avoid unexpected costs. Strategic management of charging sessions can help control costs, such as scheduling sessions during off-peak hours or in states with lower kWh tax rates. Additionally, smartphone apps providing real-time information on charging station availability and pricing are also helpful for informed decisions. The Blink Charging app is designed to make it easier and more convenient for EV owners to charge their cars on the go. This app gives EV drivers better search options so they can easily find nearby  charging stations by using zip codes, cities, businesses, categories, or addresses. It also manages the entire charging experience, allowing EV owners to track travel, time and costs (including the rate displayed in kWh).

Considerations for Charging Station Hosts

For charging station hosts, understanding state regulations is essential, as well as awareness of the taxation start dates, reporting requirements, and applicable tax rates. Compliance with the law requires investments in technology to meet regulatory mandates. While many businesses installed non-networked EV charging stations earlier in the industry, it is now essential to connect all commercial chargers to a charging network. Even if a station host does not charge for energy, a charging network like Blink allows them to download usage reports and get 24/7 customer support. The new Blink Network features:

  • Real-time view of EV station locations, hours, pricing, and availability

  • Remote EV charging station monitoring for better customer support

  • Flexible and dynamic pricing configurations

  • 24/7 Customer Support Center with action-tracking system

  • Blink Network Operations Center (NOC) proactively monitors and manages the Blink Network

  • Smart grid implementation and support for commercial users and utilities

Transparency in pricing is also important for building trust with customers, and it is required in the state of California.  Clear billing statements help consumers understand their charges, reducing confusion and avoiding potential disputes. Maintaining detailed records of kWh consumption, tax collection, and payments are all important as new state legislation goes into effect.

Blink is Here to Help

It's important for both consumers and charging station hosts to stay informed about EV policy changes. By following these guidelines, consumers can understand new energy tax policies, ensuring fair prices and compliance. Make sure to visit Blink's policy page regularly for the latest updates on electric vehicle industry regulations. Need to network or expand your Blink charging stations? Click here to contact our team.

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