When is a legal settlement not a punishment, but an invitation to monopoly? And when is such a settlement -- and a potential monopoly -- also a boon to the market?
These are just two of the top-level questions underlying a lawsuit filed last week between ECOtality, a San Francisco-based electric vehicle charging infrastructure developer, and California's Public Utilities Commission.
ECOtality is suing the PUC over a settlement with the New Jersey-based energy company NRG from last March, which requires NRG to invest $102.5 million in California's fledgling electric vehicle charging infrastructure. So far so good, right -- couldn't the market for EVs use a shot in the arm like this?
Not so fast, ECOtality says: The suit charges the PUC with handing NRG "a monopoly over the nascent market in California" because the investment will result in the creation of 1,200 electric vehicle charging stations throughout the state -- and NRG's ownership of an electric vehicle charging network provider, eVgo, makes the deal monopolistic, ECOtality claims.
"This so-called 'punishment' is like a restaurant failing a health inspection then being given an exclusive franchise to open and operate every restaurant in the city, subsidized by public funds," said ECOtality CEO Jonathan Read in a statement (the company did not respond to GreenBiz.com's request for comment).
The settlement with the PUC stems from the California power crisis of the early 2000s, and includes $20 million in punitive damages from NRG. Dynegy Energy, a company purchased by NRG in 2006, played a role the price-gouging scandal during that time. (Dynegy paid $281 million to California ratepayers as part of an earlier settlement in the energy scandal.)
The Makings of a Monopoly?
The devil may or may not be in the details of the settlement. Among the requirements the PUC placed on NRG is the installation of at least 200 "level 2" EV charging stations (which use 480 volts and offer faster charging than "level 1" chargers, which can take many hours to recharge an exhausted battery).
But the settlement also requires NRG to spend $40 million to install 10,000 "make-ready stubs" in at least 1,000 locations across the state. These stubs are essentially ready-wired EV charger hook-ups awaiting the final charger module, which any company can theoretically install.
However, the settlement gives NRG the right to choose many of these locations, and gives the company exclusivity over these make-ready stubs for the 18 months following their installation. That means it can decide to install a charging station there -- or not -- and select the vendor for the charging hardware for each of these sites during that time. This is where PUC crossed the line, ECOtality claims.
By requiring that NRG make a $102.5 million investment in the California EV charging infrastructure, the lawsuit also contents that the PUC "intervened outside of its authority in the private marketplace by endorsing one of multiple competitors." The suit calls for the settlement's implementation to be halted.
Both the PUC and NRG have separately issued letters opposing the suit. They claim that the suit should be dismissed for a number of reasons, including a failure by ECOtality to make specific claims on how the settlement would cause it immediate and direct financial harm. The PUC also claims that because the Federal Energy Regulatory Commission is still reviewing the agreement, ECOtality is asking the court for relief that is beyond its jurisdiction.
But John Gartner, senior analyst at Pike Research, points to some other contentious elements of the NRG settlement. "Forcing NRG to pay for the installation of the EV infrastructure sounds, in theory, like it would be a good deal for Californians and could potentially excite interest in the [EV charging] equipment market. However, the way the settlement is structured it does have the potential to be anti-competitive," he says.