A large penetration of electric vehicles is not in Michigan’s near-future, so advocates say EV drivers shouldn’t be hit with steep fee increases based on the state’s road funding formula.
That is the prospect under a road funding law enacted in 2015, but clean energy groups hope the issue is revisited before electric vehicle drivers potentially see some of the highest registration fees in the country.
While they hope for and expect a growing number of electric vehicles to be on the road in the coming years — which raises policy questions with infrastructure funded via gasoline taxes — their penetration isn’t high enough to significantly fund Michigan’s crumbling roads.
According to an analysis by the Ann Arbor-based Ecology Center, the fees that would kick in for electric vehicles and hybrid drivers would total about $3 million. However, Michigan is catching up with coastal and some Midwestern states as it grapples with a long-term revenue plan for electric vehicles.
“What we’ve tended to see is that proposed fees aren’t really driven by data,” said Margrethe Kearney, a Michigan-based staff attorney with the Environmental Law and Policy Center. “It’s this shot in the dark. As a result, we think it’s likely a lot more than actually reflects the usage of electric vehicles.”
Under the 2015 road funding legislation, Michigan set registration fees at $100 for full electric vehicles and $30 for plug-in hybrids with $5 escalators for each cent of additional gas tax above 19 cents. With the current 26-cent gasoline tax, that puts the rates at $135 and $47.50, respectively.
Under Gov. Gretchen Whitmer’s proposed $2.5 billion road funding plan, the fees would be held in place, as reported by Bridge Magazine last month. Still, advocates hope they’ll be revisited or removed from any new road funding deal.
By leaving the formula in place, Whitmer’s proposed 45-cent gas tax increase would put the fees for electric vehicles at $360 annually, or among the highest in the country.
Advocates say such high fees remove the incentive for drivers to switch to low-emitting vehicles, particularly as EVs and hybrids move beyond early adopters and purchasing decisions are made increasingly on the cost compared to a conventional gasoline vehicle.
Whitmer spokesperson Chelsea Lewis said electric vehicle owners, like all other car owners, “will experience budget relief in terms of spending less each year to fix their cars since the roads will be better.”
Lewis added that while it’s “not the governor’s intent to penalize electric vehicle owners, the surcharge increase is a result of the 2015 roads package that predates her time in office.” Whitmer’s plan also calls for a committee review in five years that includes recommending potential alternatives to a fuel tax “given the increasing number of electric and alternative fuel vehicles.”
“The governor has an overall good plan for addressing the infrastructure needs,” Kearney said. “But there’s this piece of it that’s really new — electric vehicles — and we need to make sure we’re not disincentivizing electric vehicle use.”
According to the National Conference of State Legislatures, 20 states have registration fees for electric vehicles to account for their lack of gasoline tax revenue. Meanwhile, electric vehicle sales still only represent 1 percent of all U.S. light-duty car sales.
Michigan’s $135 registration fees for electric vehicles in 2015 “were pretty high across the country then,” said Charles Griffith, director of the Ann Arbor-based Ecology Center’s climate and energy program.
Meanwhile, major automakers and state energy officials have pushed for Michigan to be a leader in electric vehicle deployment. Automakers like Ford and General Motors, for example, plan to invest billions of dollars in electric vehicle technology in the coming years.
“We applaud that future direction because it makes sense for a lot of reasons,” Griffith said. “But do we at the same time want to be enacting fees that would be out of sync with that? We’d argue it’s unnecessarily onerous and penalizes electric vehicle owners.”
Supporters of the 2015 funding formula have reportedly said that a few hundred dollars won’t discourage someone from purchasing a new electric vehicle.
The Environmental Law and Policy Center’s Kearney said that’s likely true at this point for relatively early adopters who are not necessarily making their purchases based on cost comparisons with conventional vehicles.
“For folks who look at electric vehicles and would drive one if it was comparable to purchasing a gas-powered car, they could be swayed by a couple hundred dollars,” Kearney said.
Griffith contends that the formula is unfair and doesn’t accurately reflect road usage by electric vehicle drivers. He added that conventional vehicles with higher fuel efficiency likely have a greater effect than electric vehicles on declining revenue from gas taxes.
“The desire to slap a fee on electric vehicles is really a misplaced attempt to make up for increased fuel economy of vehicles in general,” Griffith said, adding that it might take another decade before electric vehicles create a significant dent in road funding revenue.
Michigan has fewer than 15,000 registered electric vehicles and plug-in hybrids on the road, which — if the increases hold under Whitmer’s plan — would provide about $3 million annually in fees. Whitmer has proposed a $2.5 billion roads budget.
That the issue is surfacing as a result of better fuel efficiency and more electric vehicles is positive, Kearney added.
“That’s a good thing. We’re glad that’s happening,” Kearney said. “It’s not a bad thing that we have to reevaluate how we’re going to fund our roads and infrastructure as we start to rely less on gas.”
Clean energy advocates suggest studying average annual miles traveled by EV owners, and taking into account varying fuel efficiencies and vehicle weights. A pilot program in Oregon is testing the use of devices that account for vehicle miles traveled, which bills monthly and refunds money paid in gas taxes. Iowa, which has seen vehicle miles traveled increase while gas tax revenue has remained steady, also is studying potential alternatives.
Griffith said other programs could devise fees based on electricity usage.
Advocates agree that better fuel efficiency and fewer gasoline-dependent vehicles presents a policy question worth solving.
“It is an issue we have to come up with a policy solution for,” Kearney said. “We have time to do that.”
They also remain hopeful the Whitmer administration will take a long-term view, and that the governor will be open to considering alternatives.
Additionally, “they’re not in a position to start negotiating with themselves,” Griffith said. “Now it’s in the Republicans’ court to come up with something they’re willing to support.”