Plug In America 6380 Wilshire Blvd Suite 1000 Los Angeles, CA 90048 323-372-1236 June 19, 2020

Nevada Legislative Committee on Energy 401 S. Carson Street Carson City, NV 89701-4747 Submitted via email to Assemblywoman Daniele Monroe-Moreno ([email protected]); Senator Chris Brooks ([email protected]); and Marjorie Paslov-Thomas ([email protected])

Re: SCR 3 Transportation Funding Solutions

Dear Chair Monroe-Moreno and Vice-Chair Brooks:

On behalf of the (EV) drivers in Nevada that we represent, Plug In America would like to thank you for your leadership with the Senate Concurrent Resolution 3 (SCR3) process, particularly given these challenging times. EVs provide significant benefits to all Nevadans, and we urge you to take these benefits into account as you finalize the report on alternative solutions for transportation funding in Nevada, including what fees – if any – should be assessed to EV drivers in Nevada.

Plug In America is the nation’s leading independent consumer voice for accelerating the use of EVs in the United States to consumers, policymakers, auto manufacturers and others. Formed as a non-profit in 2008, Plug In America provides practical, objective information collected from our coalition of plug-in vehicle drivers through public outreach and education, policy work and a range of technical advisory services. Our expertise represents the world’s deepest pool of experience of driving and living with plug­ in vehicles.1

The solutions to solving the immediate transportation funding shortfalls in Nevada – and also nationwide – require major shifts in how the funding has historically been implemented. New solutions require time to bring all stakeholders on board and to inform all drivers of the changes. Therefore, in the interim before any final solution is adopted, we urge you not to adopt a short-term and shortsighted approach of placing punitive fees on EV drivers.

While EV drivers should pay their fair share for using the roads, EV drivers already pay a registration fee of $33 in Nevada.2 In addition, EV drivers pay local electricity taxes, and plug-in hybrid EV drivers already pay gas taxes. The Committee should not impose any additional fee that would be punitive to the point of disincentivizing the purchase of an EV or negating any fuel cost savings to the EV driver.

We have divided our comments into the following three sections: 1. A detailed list of the benefits EVs provide to Nevadans. a. The SCR3 legislation specifically instructs that the interim study must include an examination of the benefits of the use of EVs and the costs of transportation related pollution, including greenhouse gas emissions in Nevada.

1 More information available at: www.pluginamerica.org 2 https://dmvnv.com/regfees.htm

1 Plug In America 6380 Wilshire Blvd Suite 1000 Los Angeles, CA 90048 323-372-1236 2. Plug In America’s recommended solution to transportation funding in Nevada. 3. A detailed whitepaper examining the transportation funding shortfall issue, the role of EVs and additional options.

1. A detailed list of the benefits EVs provide to Nevadans. a. Benefits to the Nevada EV driver: i. EVs are cheaper to fuel and maintain than gasoline-powered vehicles. On average, fueling a car with electricity is roughly the same as gasoline at $1.09 per gallon in Nevada, thanks to an EV’s performance efficiency and the lower cost of electricity.3 Electricity prices are also far more stable than gasoline prices, allowing drivers to avoid the risk of future price spikes. On average, EVs save consumers about $770 a year in fuel costs.4 Combined with the low maintenance costs, EVs save consumers far more money than gas vehicles.5 Plug-in hybrid EVs (PHEVs) require fewer oil changes, while battery EVs (BEVs) require none. BEVs also have 10 times fewer moving parts than gasoline vehicles; there is no engine, transmission, spark plugs, valves, fuel tank, tailpipe, distributor, starter, clutch, muffler, or catalytic converter. ii. EVs are convenient. With no trips to the gas station, the battery can be charged overnight and be ready to go first thing in the morning.6 b. Benefits to all Nevadans: i. EVs are significantly better for local economies and the Nevada economy. EVs are fueled by electricity from the local grid, which is cheaper for all consumers. Money not spent on gas and maintenance can be invested back into the local economy.7 Nevada imports virtually all of its fuels, sending over $4.2 billion out of state in 2017.8 With a transition to transportation electrification, this $4.2 billion could be kept in the state of Nevada, particularly as Nevada aims to have at least 50% of its electricity generated from . ii. EVs produce little to zero tailpipe emissions, improving air quality and reducing health care costs, especially for low-income and disadvantaged communities. The most recent State of the Air report for Nevada shows that the majority of Nevadans live in areas where the air is unhealthy to breathe.9 In addition, the report gave Clark and Washoe Counties an F grade for ozone pollution (smog). The Las Vegas valley was ranked as the 9th most polluted in the country for

3 http://energy.gov/eere/eveverywhere/ev-everywhere-saving-fuel-and-vehicle-costs 4 https://www.ucsusa.org/resources/going-pump-plug 5 https://www.energy.gov/eere/electricvehicles/saving-fuel-and-vehicle-costs 6 https://afdc.energy.gov/fuels/electricity_infrastructure.html 7 Roland-Holst, David. 2012. Plug-in Electric Vehicle Deployment in California: An Economic Assessment https://are.berkeley.edu/~dwrh/CERES_Web/Docs/ETC_PEV_RH_Final120920.pdf and Stroo, Hans. 2015. Bills to Advance Electric Vehicles Make Good Economic and Environmental Sense http://planwashington.org/blog/archive/bills-to-advance-electric-vehicles-make-good- economic-and-environmental-sense/ 8 https://www.eia.gov/state/data.php?sid=NV#ConsumptionExpenditures . 9 http://www.stateoftheair.org/city-rankings/states/nevada/

2 Plug In America 6380 Wilshire Blvd Suite 1000 Los Angeles, CA 90048 323-372-1236 ozone, with vehicle emissions being a primary contributor to ozone formation. Low-income neighborhoods and communities of color have been disproportionately impacted by health issues related to vehicle emissions and ozone, as these communities are often located next to high-traffic corridors and industrial facilities that are major sources of pollution. BEVs have no tailpipe and therefore no tailpipe emissions, while PHEVs produce far fewer tailpipe emissions than a standard gasoline-powered vehicle. With more EVs on the roads, public and private health care costs can be greatly reduced.10 iii. EVs significantly reduce carbon emissions. EVs powered by electricity from the local grid currently produce 54 percent less (lifetime) carbon pollution than gasoline cars, which could grow to 71 percent by 2050 as our power supply gets cleaner.11 EVs also have the lowest total lifecycle carbon footprints for all light­ duty vehicles on the road.12 To meet the carbon emission reduction goals that Nevada has, Nevada must accelerate the transition to a transportation electrification future. iv. EVs help achieve national security. These clean vehicles reduce our dependence on imported oil as they are fueled by electricity, which can be domestically produced from multiple resources, including renewable energy generated in Nevada.13 As mentioned above, Nevada imports virtually all of its petroleum fuels.14 1516 v. The EV market is creating good jobs in Nevada. According to data from the Blue Green Alliance Foundation, Nevada is home to at least eleven businesses involved in manufacturing components for EVs.15,16 These businesses and the jobs they provide offer job security for Nevadans employed with these businesses, as the entire global auto market is moving towards full electrification. vi. With little to zero tailpipe byproduct and no oil leakage on to roadways, EVs reduce the public and private sector costs spent on mitigating the pollution from roadway runoff. The polluted runoff from highways is nonpoint source pollution, and can impact local surface and ground water quality as well as aquatic habitat. BEVs are cleaner than gas-powered vehicles and have no oil leakage or drips of pollution from the tailpipe. c. Benefits to the electric grid, ratepayers and grid operators: i. Investment in EVs and charging infrastructure can result in more off-peak energy sold, and therefore reduced rates for ratepayers. Additional load from

10 https://www.ucsusa.org/clean-vehicles/vehicles-air-pollution-and-human-health 11 https://www.nrdc.org/experts/luke-tonachel/study-electric-vehicles-can-dramatically-reduce-carbon-pollution 12 http://carboncounter.com/ 13 https://www.energy.gov/eere/vehicles/articles/fotw-1081-may-13-2019-plug-vehicles-united-states-displaced-323-million 14 https://www.eia.gov/state/data.php?sid=NV#ConsumptionExpenditures . 15 https://www.bgafoundation.org/programs/visualizing-the-clean-economy-autos/ 16 https://www.bls.gov/green/electric_vehicles/

3 Plug In America 6380 Wilshire Blvd Suite 1000 Los Angeles, CA 90048 323-372-1236 EVs can make more efficient use of existing utility assets, which – especially through off-peak charging – puts downward pressure on electricity rates.17; 18; 1917 18 ii. EVs can be a source of potential load control. Many EV owners are open to load control programs, such as letting the utility or a third party turn EV charging on and off as needed, as long as it does not prevent the charge from finishing by a specified time.20 Going a step farther than load control is pulling energy from idle EVs at peak load times via “vehicle-to-grid.”21 iii. EVs can make the integration of renewables easier. EV loads are generally during low demand times (and can be moved around with TOU rates and other tools), making it easier to justify the addition of renewable power sources that cannot be ramped.22

2. Plug In America’s recommended solution to transportation funding in Nevada. a. Plug In America agrees with other organizations that the best solution to solving the transportation funding issue in Nevada is to index the gas tax to inflation and total fuel consumption and extend it to other fuels on an energy equivalent basis. b. Please see Appendix A for a copy of the letter Plug In America has signed on to as our recommended solution, including the principles that any final solution should include.

3. A detailed whitepaper examining the transportation funding shortfall issue, the role of EVs and additional options. a. Please see Appendix B for the whitepaper.

Again, we thank you for your leadership with the SCR3 process. Please contact our Policy Director, Katherine Stainken, at [email protected] with any questions regarding our comments.

Best regards,

17 Available here: https://pluginamerica.org/wp-content/uploads/2016/11/PEV-Incentive-Review-October-2016.pdf 18 https://microgridknowledge.com/electric-vehicles-utility-rates/ 19 https://www.synapse-energy.com/sites/default/files/EV-Impacts-June-2019-18-122.pdf 20 Tal, Gil. 2016. Plug-In Electric Vehicle Multi-State Market and Charging Survey http://www.epri.com/abstracts/Pages/ProductAbstract.aspx?ProductId=000000003002007495 21 https://electrek.co/2018/05/24/electric-vehicle-battery-capacity-controllable-load-vehicle-to-grid-feature/ 22 (INL) Anonymous, National Laboratory. 2013. How do PEV owners respond to time-of-use rates while charging EV project vehicles http://avt.inl.gov/pdf/EVProj/125348-714937.pev-driver.pdf and (INL) Anonymous, Idaho National Laboratory. 2015 (a). Residential Charging Behavior in Response to Utility Experimental Rates in San Diego http://avt.inel.gov/pdf/EVProj/ResChargingBehaviorInResponseToExperimentalRates.pdf

4 Plug In America 6380 Wilshire Blvd Suite 1000 Los Angeles, CA 90048 323-372-1236 Joel Levin Executive Director Plug In America

5 Appendix A

June 19, 2020

Legislative Committee on Energy 401 S Carson Street Carson City, Nevada 89701

Re: SCR 3 Transportation Funding Recommendations

Dear Chair Monroe-Moreno and Vice Chair Brooks,

Thank you for leading a thoughtful process to develop much-needed solutions to Nevada’s transportation infrastructure challenges, which have been exacerbated by the current public health crisis in its impact on state revenues. To place the state on the road to recovery and ensure stable funding in the future, the same issues that prompted the formation of the SCR3 working group remain. The working group’s dialogue revealed one solution that can address those issues and that aligns with the principles described in this letter—indexing the gas tax to inflation and total fuel consumption and extending it to other fuels on an energy equivalent basis.

The full committee’s recommendation should start by identifying the real problems. Historically, inflation has been the biggest source of transportation funding losses in the state. By indexing to inflation, Clark and Washoe addressed that problem, but those local measures result in discrepancies across county lines, and after Clark County’s “Fuel Indexing for the Future” expires in 2026, inflation will once again be the main source of revenue erosion in the state. Relative to inflation, improved fuel economy and electric vehicle (EV) adoption have not resulted in significant revenue erosion, but they could result in future losses if not addressed.

Nevada should avoid the red herring solution embraced by some states that have singled-out EVs with punitive fees under the pretense of addressing their larger transportation funding issues. As Consumer Reports notes in a report titled Rising Trend of Punitive Fees on Electric Vehicles Won’t Dent State Highway Funding Shortfalls but Will Hurt Consumers, those EV fees “will not make a dent in declining revenues, generating only an average of 0.04 percent of current state

1 highway funding, and only increasing to 0.3 percent by 2025.” Going after the cleanest vehicles on the road ignores 99 percent of the problem and could create obstacles for Nevada’s air quality, public health and climate goals. Instead, the Legislative Committee on Energy should recommend a comprehensive solution that encompasses EVs, while also addressing the real sources of revenue loss.

The committee’s consideration of proposed solutions should be informed by the following principles:

• User pays: Taxation should vary in proportion to wear-and-tear that varies by vehicle weight, use of road capacity that varies by vehicle size, and total miles driven. • Polluter pays: Taxation should reflect the social, economic and public health damages caused by vehicular pollution. • Efficiency: Improvements in efficiency that reduce consumer expenditures on fuel and avoid pollution (and its related costs on public health infrastructure and lives) should be encouraged. • Technological neutrality: Technology-specific taxation unfairly skews the market and should be avoided. • Equity: Reducing combined tax and fuel bills should be prioritized to provide much- needed relief to households, especially in disproportionately affected communities of color, that spend a larger share of disposable income at the fuel pump. • Alignment with other state goals: The collection of revenue needed to maintain the transportation system should encourage emissions reductions in the transportation sector (the single-largest source of emissions in the state) without which the state cannot meet its climate and air quality goals. • Administrative efficiency: Especially at a time when the state’s budget is strained, Nevada cannot afford to waste human resources or revenue on administrative inefficiencies. Only one solution vetted through the SCR3 working group process advances all these principles and would forever stabilize Nevada’s transportation funding. The state should:

• Index state and local motor fuel taxes to both inflation and total fuel consumption, and • Tax vehicles not otherwise subject to motor fuel taxation (such as EVs) as if they drove on conventional motor fuel based upon their individual annual mileage as already reported to the DMV and their individual fuel economy ratings as published on fueleconomy.gov. Nevada does not need to pilot this solution because the gas tax is already in operation and Clark and Washoe counties have already demonstrated that inflation indexing is effective. The modest extension of that existing solution to also account for total fuel consumption is also a proven solution. It has been working for over 30 years in another major portion of the U.S. economy — the power sector. Decades ago, utilities and efficiency advocates realized that if they wanted to pursue energy efficiency that lowers total household bills, they had to break the link between the volume of electricity and natural gas sold and the recovery of revenue needed to maintain the electric and gas systems. They began indexing utility rates to fuel consumption via “revenue

2 decoupling mechanisms,” which adjust utility rates up or down automatically to ensure utilities collect no more or no less than their authorized revenue requirements.

This simple accounting mechanism has been working ever since, allowing for investments in energy efficiency that lower total household bills without compromising the collection of revenue needed to maintain the electric and gas systems. Thirty-three states now have revenue decoupling mechanisms in place. The Public Utilities Commission of Nevada approved revenue decoupling for the state’s primary single-fuel utility, Southwest Gas, in 2009, and the measure has been in place since 2010. Across the nation, it governs more than $110 billion in annual power sector revenue. If it did not work, shareholders and creditors would have fled the sector. Instead, utilities that have adopted this solution are viewed as an even safer financial bet. The math behind that solution does not care whether the units in play are kilowatt-hours of electricity, therms of natural gas, or gallons of gasoline.

Indexing the gas tax to inflation and total fuel consumption would result in small, automatic, annual adjustments that would be relatively unnoticeable compared to the volatility of underlying gasoline prices, and at the same time stabilize Nevada’s transportation funding stream.

Extending that indexed gas tax to electricity is relatively simple, since Nevada’s DMV already requires EV drivers to report their mileage. Simply dividing the annual miles driven by the mile- per-gallon equivalent rating of an EV and multiplying that result by the state’s gas tax results in a vehicle registration fee that is the same as what an EV driver would pay if he or she drove a gasoline vehicle of equivalent efficiency. Just like the existing gas tax, drivers of more efficient EVs would pay less and drivers of less efficient EVs would pay more. And it’s future-proof. Because those registration fees are tied to the state’s indexed gas tax, even if the entire vehicle fleet in the state were to gradually become all electric, the state would still collect the exact same amount in total revenue in real dollars.

This simple tweak to the existing system avoids novel taxes, fees, or administrative processes that have never been proven at a statewide scale, and instead builds upon the inflation indexing that has already been successful in Clark and Washoe counties and the information and vehicle registration fees the DMV already collects. The current system is not fundamentally broken; it only needs some minor tweaks to align with the state’s long-term goals and provide stable funding in perpetuity.

Sincerely,

/s/ Max Baumhefner Max Baumhefner Senior Attorney Natural Resources Defense Council

/s/ Paul Enos Paul Enos Chief Executive Officer Nevada Trucking Association

3 /s/ Katherine Stainken Katherine Stainken Policy Director Plug In America

/s/ Cameron Dyer Cameron Dyer Staff Attorney Western Resource Advocates

/s/ Andy Maggi Andy Maggi Executive Director Nevada Conservation League

/s/ Matt Frommer Matt Frommer Senior Transportation Associate, Southwest Energy Efficiency Project

/s/ Susan Nedell Susan Nedell Mountain West Advocate Environmental Entrepreneurs (E2)

4 Appendix B Transportation Funding and EV Fees

The Federal government and the states fund highway construction and maintenance partly through taxes on gasoline and diesel fuel. Revenues from fuel taxes were approximately $37 billion at the Federal level,1 and $48 billion at the state level,2 in 2018.

Over the years, the revenue has fallen short of what is needed to maintain and construct the roads. Labor and material costs have increased through inflation, but gas taxes at the Federal level and in most states have not seen a corresponding increase. Had the Federal gasoline tax been indexed to inflation, it would have been 31.7 cents per gallon in 2019, rather than 18.4 cents.3 Given the retail gasoline sales of approximately 134 billion gallons in 2019,4 a Federal gas tax indexed to inflation would have brought in an additional $17.8 billion, more than matching the estimated annual Federal funding shortfall of $16.0 billion for 2021.5

In addition, vehicle mileage efficiency has improved significantly over the past decade. This provides a host of air quality and economic development benefits, but reduces the revenue from gas taxes. Average fleet vehicle fuel economy increased from 18.8 mpg in 1990 to 22.3 mpg in 2017 for all light-duty vehicles (SUVs and pick-up trucks included), with new vehicles in 2017 achieving 39.4 mpg for passenger cars and 28.6 mpg for light trucks.6

In addition to the deficit in Federal highway funding, states have their own shortfalls. Taken together, the total shortfall is about $100 billion per year.7 Estimates of the annual shortfall for some individual states include $650 million for ,8 $232 million for ,9 and $240 million for Vermont.10 Due to a backlog of deferred maintenance, some states express shortfall as a total funding need, which could be regained over a period of years – here, we are referring to annual needs. Furthermore, these numbers refer specifically to highway funding – gas taxes are also used to support transit systems.

Clearly, there is a need to increase revenues.

Other sources of funding exist, such as road tolls and vehicle registration fees. Tolling on the Interstate system is limited to those roads that had tolls in place before the passage of the Interstate Highway Act

1 Federal Highway Administration, Highway Statistics 2017. Table FE-9, “Federal Highway Trust Fund Receipts Attributable to Highway Users in Each State,” online at https://www.fhwa.dot.gov/policyinformation/statistics/2018/fe9.cfm. 2 Federal Highway Administration, Highway Statistics 2018. Table MF-201, “State Motor Fuel Tax Receipts,” online at https://www.fhwa.dot.gov/policyinformation/statistics/2018/mf201.cfm. 3 Kadich, J., “Fixing the Shortfall in Highway Infrastructure Funding,” The Regulatory Review, August 2019. Online at https://www.theregreview.org/2019/08/21/kadich-fixing-shortfall-highway-infrastructure-funding/. 4 U.S. Energy Information Administration, U.S. Total Gasoline, All Sales/Deliveries by Prime Supplier, accessed February 2020. Online at https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=C100000001&f=M. Estimate made for December 2019. 5 Congressional Research Service, Highway and Public Transit Funding Issues, June 2019. Online at https://fas.org/sgp/crs/misc/IF10495.pdf. 6 Bureau of Transportation Statistics, Average Fuel Efficiency of U.S. Light Duty Vehicles. Online at https://www.bts.gov/content/average-fuel- efficiency-us-light-duty-vehicles. 7 American Society of Civil Engineers, Failure To Act: Closing The Infrastructure Investment Gap For America’s Economic Future, 2016. Online at https://www.infrastructurereportcard.org/wp-content/uploads/2016/10/ASCE-Failure-to-Act-2016-FINAL.pdf. Report finds a $1.1 trillion shortfall in surface transportation funding over the period 2016-2025, so approximately $100 billion per year. 8 A Better City, An Update On Transportation Finance, February 2019. Online at https://www.abettercity.org/assets/images/ABC%20- %20An%20Update%20on%20Transportation%20Finance%202019.pdf. Report finds the state’s Highway Division faces a funding gap of $6.5 billion over 10 years. 9 Maine Department of Transportation, State Capital Transportation Funding Annual Shortfall, 2019. Online at https://legislature.maine.gov/doc/3433. 10 Vermont Agency of Transportation, Vermont Transportation Funding Options, January 2016. Online at https://legislature.vermont.gov/assets/Legislative-Reports/Sec-10-Funding-Study-Report-final.pdf.

1 in 1956, although recent changes have allowed other roads to implement tolling for expansion or bridge repair. Both the Obama Administration and Trump Administration have proposed allowing an expansion of tolling on Interstate highways. Tolling presents the opportunity for congestion pricing (discussed below).

Should EVs face increased fees to make up for lost gas tax revenue?

Some policymakers have suggested increasing fees on electric vehicles to make up for the transportation funding shortfall. Battery electric vehicles (BEVs) do not pay any gas tax, but plug-in hybrid electric vehicles (PHEVs) do – and both still use the roads. In the long term, as these vehicles gain market share, they will need to contribute to the maintenance of roadways. Most often, the suggested fee is an increased registration fee that is above the fee level that gasoline vehicles pay.

In the near term, levying additional fees on EVs will discourage their adoption in the early-market stage, while providing only a miniscule portion of the highway funds needed, at considerable cost to states. There are other alternatives. For the following reasons, Plug In America believes that increased fees on EVs to support highways should be delayed until the vehicles reach 15% of new vehicle sales.

• EVs are not responsible for the funding shortfall and cannot solve it. The U.S. has approximately 1.4 million EVs on the road. Applying a registration fee of $100 per year to each would generate $140 million per year, covering 0.14% of the $100 billion funding shortfall.

• EVs allow cities and states to meet air quality attainment standards. Cities that do not meet the federal ambient air quality standards can have their transportation funding restricted or withheld until the city submits a State Implementation Plan (SIP) to meet the air quality standards. EVs provide a net reduction in many categories of pollutant emissions even when considering the generation of electricity to charge them. These reduced emissions not only help with air quality attainment, but also reduce public health impacts and therefore provide an economic benefit to society.

• EVs do pay their fair share. EVs pay taxes that may support road construction and maintenance, as well as other taxes that support other goals. Since EVs generally cost more than their conventional counterparts, they pay higher sales taxes (in states with sales tax) and higher municipal excise taxes. An analysis by the Acadia Center showed that, in Massachusetts, these impacts result in EVs contributing more to state and local revenues than comparable gasoline vehicles.11 In fact, the analysis found that EVs currently pay about 20% more to state programs than average conventional sedans over their lifetime through higher sales and excise taxes. In addition, EVs pay taxes and fees on electricity that serve a variety of public purposes, such as low- income home weatherization programs.

• The proposed fees in many states are excessive. The average state gas tax in the U.S. in 2017 was $0.276 per gallon of gasoline, and $0.273 per gallon of diesel fuel.12 The average new light-duty

11 Acadia Center, Electric Vehicles and State Funds, March 2018. Online at https://acadiacenter.org/wp-content/uploads/2018/03/Acadia- Center_EVs-and-MA-State-Funds.pdf. 12 Federal Highway Administration, Highway Statistics 2017. Table MF-205, “State Motor-Fuel Tax Rates,” online at https://www.fhwa.dot.gov/policyinformation/statistics/2017/mf205.cfm.

2 car in the U.S. (most EVs are light-duty cars) had a fuel economy of 39.4 mpg in 2017. At an average of 11,467 miles per year,13 a gasoline-powered car would use about 291 gallons of gasoline per year and pay about $80 in state gas taxes. If the registration fee were intended to compensate for the lack of gas tax revenue garnered from electric vehicles, this would be an appropriate level. Some analyses include the Federal gas tax as well, reasoning that the Federal gas taxes paid are in part returned to the state through highway funds. Under such a calculation, the comparable conventional vehicle would pay about $134 per year. However, having the states attempt to recoup lost Federal gas tax revenue could lead to double-taxation if the Federal government implements its own plan to recoup the lost revenue. We consider the state tax level more appropriate. Currently, 20 states have EV registration fees, ranging from $50 to $200. A fee of $200 is far above that paid by a comparable conventional vehicle even combining state and Federal gas taxes.

• Plug-in hybrid vehicles may use gas or electricity. It is important to distinguish between those PHEVs that are basically functioning like BEVs and those that are basically functioning like internal combustion engine (ICE) vehicles. It is not reasonable to assess a high registration fee on a PHEV on the assumption that it will not pay much in gas tax.

• Developing a new fee or tax carries a cost. There are administrative and legal expenses associated with developing a new regulation such as an increased registration fee for EVs. For this reason, some states with low EV penetration have decided to delay implementing an EV registration fee, as the cost of changing procedures would exceed the revenue gained from the fee.

• EV costs will decline through economies of scale, and that scale is achieved by growing EV sales now; slowing EV adoption through fees is counterproductive. Members of the public, policymakers, environmental groups, and other stakeholders often want to know when EV costs will decline to make the vehicles more widely affordable. The truth is that costs have been declining with economies of scale. This is most dramatically seen with the reductions in Tesla prices from the Roadster to the Model S to the Model 3, but is also seen in the prices of lithium- ion batteries. Most automakers have focused on utilizing this cost reduction to put more batteries in the vehicles and keep prices relatively constant, so that range reaches 200 to 300 miles. Now that such range is commonplace, future cost reductions in lithium-ion batteries should go towards reducing vehicle prices rather than increasing range. Cost reductions happen through selling more EVs. Increasing the price of an EV in the near term slows adoption and slows the pace of cost reductions.

Road Fees on Electricity

Would it be better to collect a per-kWh fee on the electricity used to charge electric vehicles? This could be dedicated to transportation funding and would be analogous to the per-gallon tax on gasoline. However, in Vermont, where such a solution was proposed, the utilities testified that the implementation is not simple. Most charging occurs at home, and it is not always clear how much of a homeowners’

13 Passenger car VMT were 2.22 trillion miles in 2017, with 193,672,370 such vehicles. From Bureau of Transportation Statistics, Tables 1-35 (https://www.bts.gov/content/us-vehicle-miles) and 1-11 (https://www.bts.gov/content/number-us-aircraft-vehicles-vessels-and-other- conveyances).

3 consumption is due to the electric vehicle. The utilities could monitor the usage from dedicated smart EV chargers that have an embedded meter, but there is no fundamental reason why an EV driver must have such a device; many drivers plug their EVs into regular 120V outlets to charge.

There are algorithms to disaggregate the household load into EV charging and all other uses, but the process of employing such an algorithm carries its own costs, estimated by the utilities at about three to four cents per kWh. That value represents software costs and the utility staff time required to establish and verify the system. Furthermore, the utilities noted that they only had the capabilities to identify Level 2 charging, so charging in a 120V outlet would not be identifiable.

Any effort to assess such a fee on electricity used for EV charging requires the driver’s cooperation, either through installing a smart EV charger or honestly reporting the electricity used. Such reporting could happen through a new process, which again would have its own implementation costs, or through the existing annual registration process. But rather than report kWh used at vehicle registration, why not just report vehicle-miles traveled for all vehicles?

A Proposed Solution

Since all vehicles are using the road and contributing to the wear and tear on the roads, Plug In America supports the development of a road usage charge program.

If the economic benefits of EVs in reduced pollution are not already accounted for through EV rebates or other such programs, then a road usage charge program provides an opportunity to do so and properly compensate EVs for the public good they provide. Plug In America does not seek double-counting of these benefits, so if they are already calculated in the value of an EV rebate we recognize it would be inappropriate to reflect it in a reduced road usage charge. But if there is no EV rebate or tax credit, then electric miles driven should face a lower fee than gas miles driven. This would reward those citizens who are also providing clean air benefits by driving EVs.

Vehicle weight is a significant determinant of damage to roads, but the non-linear impact of vehicle weight on road wear means that it is largely heavy-duty vehicles causing this damage; such impacts should be addressed by fees specific to the freight sector.

A Mileage-Based User Fee (MBUF) provides a sustainable revenue source even if the transportation system changes to feature greater use of ride-sharing and car-sharing services. A funding mechanism based on vehicle registration fees would see diminishing revenue in such a case.

MBUF Pilots

A MBUF may also be referred to as a Vehicle-Miles Travelled (VMT) program or a Road User Charge (RUC).14 Numerous early pilots focused on technological demonstration, as in the Minnesota Road Use Test, the California Road Charge pilot, and the I-95 Corridor Coalition MBUF Pilot. These used “shadow billing,” with simulated bills showing what drivers would have paid under a MBUF.

14 U.S. Department of Transportation Federal Highway Administration, Vehicle Miles Travelled (VMT) Fees. Online at: https://www.fhwa.dot.gov/ipd/tolling_and_pricing/defined/vmt.aspx.

4 has gone beyond the other efforts to implement a more substantial pilot program called OReGO. This program uses with volunteer enrollment and a variety of technology options to track distance traveled. Participants using gas vehicles (including plug-in hybrids) receive a credit for fuel taxes paid, as they are instead paying a vehicle-mile fee to support the transportation system. Pilots show that the technology exists and is reliable and that driver comfort with the approach increases with experience. One interesting finding is that these pilots all use GPS systems, such as through smart phones or vehicle- connected devices, rather than simply tallying the annual miles driven. This is in part because the MBUF replaces state fuel taxes and contributes to state transportation funding. If the driver goes out of state, they are not using the roads of their home state, and their home state cannot give them a credit on fuel taxes paid to a neighboring state. Therefore, it is important to only track the mileage that occurs within the state with the MBUF. Using GPS also allows for varying the MBUF rates such that all vehicle-miles are not equal. A state could increase the fees on certain roads to manage congestion or limit driving on roads with higher repair costs. Concerns for Rural and Low-Income Drivers

Proposals for a MBUF often raise concerns about rural and low-income drivers, and the disproportionate impact such a MBUF may have on these driver classes. However, it is important to note that the gas tax is already regressive, imposing a greater income burden on rural and low-income drivers than affluent ones. A RAND Corporation report concludes that a well-designed MBUF will not have a disproportionate impact on the above two demographics. The analysis notes that rural drivers would pay slightly less on average with a flat per mile fee when compared to the gas tax.15 Although rural drivers travel greater distances than urban drivers, they also tend to drive vehicles that are older and less fuel-efficient, meaning they pay more gas tax than urban drivers.16 For low-income drivers, the gas tax is income regressive and will become more regressive as more drivers switch to driving EVs.15 Low-income drivers in urban areas might face higher fees in the form of rush hour surcharges, but MBUF revenue could be used to offset equity concerns. Low-income drivers could pay nothing if certain income qualifications are met.17

Impact on rural drivers:

• A MBUF seems to be a slight improvement for rural drivers because they tend to drive older, less efficient vehicles that use more gas, and therefore the driver pays more in gas taxes.18 Impact on low-income rural drivers:

• Drivers who are both rural and low-income will likely not fare as well under a MBUF, but would likely not be any worse off than they are paying for the gas tax. A MBUF can be designed with exemptions for low-income earners. This also highlights the need to expand public transit to outlying areas so these residents can earn credits that would offset the cost of driving long distances when needed.

15 The RAND Corporation, Mileage-Based User Fees For transportation Funding: A Primer for State and Local Decisionmakers. Online at: https://www.rand.org/content/dam/rand/pubs/tools/TL100/TL104/RAND_TL104.pdf 16 Mileage Based User Fee Alliance, 5 Myths: Misconceptions of Mileage-Based User Fees. Online at: http://www.mbufa.org/myth.html 17 Information Technology and Information Foundation, A Policymaker’s Guide to Road Usage Charges, April 2019. Online at: https://itif.org/publications/2019/04/22/policymakers-guide-road-user-charges 18 The RAND Corporation, Mileage-Based User Fees For transportation Funding: A Primer for State and Local Decisionmakers. Online at: https://www.rand.org/content/dam/rand/pubs/tools/TL100/TL104/RAND_TL104.pdf

5 Impact on urban drivers:

• Urban drivers would be better off under a MBUF than the gas tax because they will drive fewer miles, particularly if there is no congestion pricing in place. Impact on low-income urban drivers:

• Low-income urban drivers would likely fare better under a MBUF with no congestion pricing. However, with congestion pricing in place, these drivers would likely fare worse. However, low- income urban drivers have greater access to transit options than do rural residents. Exemptions for certain income levels or reduced mileage pricing could reduce the burden for these low- income urban drivers. In addition, a program could be implemented that allows for any driver to earn credits to apply to their MBUF by taking public transit, biking or walking. The Role of Congestion Pricing

Congestion pricing can provide a source of funding for transportation systems and serve a role in traffic management. This approach charges drivers a fee to access a certain stretch of roadway or to access a “cordon” such as a downtown/central business district. That price is higher during peak commuting hours and possibly quite low at off-peak hours. Likewise, the price is generally higher for busy arterial roadways and nonexistent for certain residential surface streets. It sends a signal to drivers about the congestion level of a road and promotes alternative modes of transportation or adjustments to the time of the trip.19

Drivers are primarily only cognizant of the time it takes to get from point A to point B, but are not aware of how one additional vehicle on the road contributes to commute times for other drivers, criteria air pollutants, and wear and tear of roadways. Congestion pricing is an economic tool designed to account for all these factors and to increase the efficiency of road use by giving drivers a closer reflection of the impact of a trip on the transportation system as a whole, i.e. the full social cost.20

A statewide MBUF program employing GPS can include congestion pricing by charging more for travel on certain roads at specific time. Congestion pricing can also be implemented on a stand-alone basis, without a statewide MBUF program. The Federal Highway Administration notes three main types of congestion pricing approaches:21

• Variably priced lanes, including High Occupancy Toll lanes, are specific stretches of highway that vary the tolls in real time. The toll applies to those using the lane with a single-occupancy vehicle, while high-occupancy vehicles can use the lane without paying a toll, and non-toll lanes are available on the same highway but may be more congested. • Variable pricing on entire facilities, such as for toll roads and bridges. • Cordon charges to drive within or into a congested area. Such charges are used in some European cities, and will be implemented for parts of New York City in 2021.

19 Transit Center, Congestion Pricing Will Succeed If…, April 2019. Online at: https://transitcenter.org/congestion-pricing-will-succeed-if/ 20 Curbed NY, Congestion Pricing in NYC, Explained, March 2019. Online at: https://ny.curbed.com/2018/3/14/17117204/new-york-congestion- pricing-cuomo-subway-uber 21 U.S. Department of Transportation Federal Highway Administration, Congestion Pricing: Examples Around the U.S., March 2020. Online at: https://ops.fhwa.dot.gov/congestionpricing/resources/examples_us.htm

6 Congestion Pricing Impacts

Impact on rural drivers:

• Depending on where they drive, rural drivers might not pay very much under a congestion pricing plan. If most of the driving takes place in low-traffic areas away from town and city centers, the burden should be low. On the other hand, these drivers could just as easily face fees if they commute from a rural area to an urban one for work. Impact on low-income rural drivers:

• Low-income rural drivers may not be impacted much if the driving occurs on rural roads, but theses drivers could be impacted more if the driver is commuting to work in an urban setting. Ideally, the revenue from congestion pricing would be used to expand “express” public transit to these outlying areas, which would allow rural residents to rely less on personal vehicle use. Impact on urban drivers:

• Urban drivers will likely face a higher burden under a congestion charge than their rural counterparts since more of the roads these drivers use on a regular basis will be subject to a congestion price. At the same time, access to transit is typically much easier for urban dwellers than rural ones; these drivers will have the option to take public transit, walk, or bike for trips that do not absolutely require personal vehicle use. Impact on low-income urban drivers:

• Low-income urban drivers would face the highest burden under a congestion charge. Exemptions for certain income levels or reduced congestion pricing could reduce the burden for these low-income urban drivers. In addition, the funding from congestion pricing could be used to expand public transit programs, expand bike lanes, and create “car free” walking zones.

7