HB568 - A Deep Dive on Electric Car Fees

HB568 Overview: “An Act Relating to Electric Vehicles”
(Similar language is also contained in the House Revenue bill, HB8 which has passed its third reading in the House and will be on its way to the Senate)

  • HB568 (DuPlessis) establishes fees/taxes for electric power for charging and sets definition of EVs and Hybrid vehicles, and sets payment of a road usage tax.

  • The bill requires an excise tax with an initial base rate of $0.03 per kilowatt hour on electric vehicle power distributed in this state by an electric vehicle power dealer for charging EVs, to be adjusted in accordance with the National Highway Construction Cost Index.

  • The excise tax collected will be deposited into the road fund.

  • EVs are defined as having an electric motor only or that has an electric motor/ICE combo that can be plugged in.

  • A hybrid vehicle is defined as a vehicle with an electric motor/ICE combo that cannot be plugged in.

  • Establishes a usage fee for EVs ($140/year), and for hybrids of ($70/year), to be adjusted in accordance with the National Highway Construction Cost Index.


KCC Comments on this legislation

KCC believes all users of our transportation corridors should pay their fair share. However we believe the latest attempt at legislation for adding electric vehicle fees still needs work. HB568 is this year’s attempt to come up with a way to collect revenue from electric vehicles in a way that we hoped would be equitable to gas-powered internal combustion engine (ICE) vehicles. This is not the first time the legislature has tackled this complex question. Different proposals for electric vehicle fees have been introduced as early as 2017, and during the 2019 Interim Session a “mileage-based transportation funding task force” explored models relating to electric cars and road funding.

According to Consumer Reports (2020): “Gas taxes, which fund about 30 percent of transportation spending in the U.S., don’t apply to electric-vehicle owners for an obvious reason: EVs don’t use gas. As the number of EVs in use rises, many legislatures are considering extra fees to make sure all vehicle owners help pay for road maintenance. But in the 19 states… existing and proposed EV fees are rising to a level much higher than the annual gas tax would be for the average new car.”

“Over time, decades of inflation and the greatly improved gas mileage being achieved by conventional gasoline-powered vehicles have reduced the amount of money that states can raise through gas taxes. Rather than increasing gas taxes or raising funds for infrastructure through other effective means, some lawmakers are instituting flat annual fees on EVs.”

The first challenge is in properly targeting the types of vehicles to be taxed. This is where we believe HB568 fundamentally needs some changes. We agree with how Edmund’s defines vehicle classifications:

  • Hybrid Cars: A 100% gasoline-fueled car, but doesn't rely solely on its gasoline engine for propulsion. The electric motors function as generator, and the energy that's regenerated during braking is stored in a small battery for immediate use the next time you accelerate from rest.

  • Plug-in Hybrid (PHEV): A gasoline-powered hybrid with a much larger battery and a means to recharge it using an external power source. A plug-in hybrid behaves much like an electric vehicle, with its gasoline engine essentially dormant, when its battery has charge. Some PHEVs are incorrectly marketed as hybrids. If you can plug it in and also fill it up, it's a plug-in hybrid.

  • Electric Vehicle (EV): An electric vehicle (EV) has a battery that is large enough and an electric motor that is powerful enough to deliver adequate range and performance without the need to include an engine or gas tank at all.

HB580, however, takes an approach where full Hybrid Cars are, in our opinion, double taxed, since the input for their propulsion is gasoline and therefore are already paying the gas tax. In our opinion this penalizes efficient hybrid-drivetrain cars over equally efficient ICE-drivetrain cars. While we assume lawmakers attempted to address inequities by proposing a smaller fee for Hybrids, we argue that this bill sets up a premise that focuses on the drivetrain technology rather than MPG/MPG equivalent, miles driven, or vehicle weight classification as a premise for determining fair fees. We believe 100% gasoline-fueled hybrids should not be included in the additional fees defined in HB580.

“The battery reclamation and mitigation fee shall be: (a) One hundred forty dollars ($140) for electric vehicles; and (b) Seventy dollars ($70) for hybrid vehicles. “

Justice and Equity Issues: While the fees in this year’s bill are somewhat less than previous legislative attempts, we still are concerned with a system that penalizes efficiency and consumer options to save money. While EVs, Plug-in EVs, are still a growing market (with only 3,700 on the roads in Kentucky) hybrid vehicles are now a fairly common technology and all of these vehicles now have a robust secondary/used car market. So these are no longer vehicles for just for the well-to-do. And lower-income communities are often disproportionately impacted by poor air quality, with transportation being a major contributor (see Health section below).

According to the Natural Resources Defense Council, the average state EV fee of $128 per year is more than twice that of someone driving an efficient gasoline car pays in annual state gas taxes. Such fees can significantly erode or completely erase the fuel cost savings that motivate consumers to buy EVs and they hit low- and moderate-income households the hardest.

Environmental and Health Issues: Kentucky should be encouraging, not discouraging, the adoption of cleaner cars to address the real issues of air pollution in Kentucky. Northern Kentucky and Greater Louisville are both presently in “non-attainment” for areas of air quality concern. We want to point to the American Lung Association’s recent report on “The Road to Clean Air” that identifies many major health benefits of converting our transportation sector to zero emission vehicles.

Disincentivizing EV Infrastructure: We have concerns that the $0.03 per kilowatt hour excise tax by an electric vehicle power dealer for charging EVs is premature. We are at a stage in time where building out our nationwide EV charging network is a priority. The Biden Administration has set a goal of 500,000 charging stations by 2030, and is spending $5 billion in infrastructure funding to address this.

Update (3/4/22): Language in HB568 is similar to language in HB8, which just passed its third reading in the House and will shortly be on its way to the Senate. To Comment , we now suggest you contact the Senate Appropriations & Revenue Committee and direct your comments on Hybrid and Electric cars to the provisions in House Bill 8. You may use the legislative message line (1-800-372-7181) or email the members at the link above.


Guest Op-Ed: Stuart Ungar, co-founder, Evolve KY Electric Vehicle Group

As the co-founder of Evolve KY, Kentucky’s nonprofit electric vehicle group, I write today to shine a light on some legislation that is currently (pardon the pun) proposed.

HB568 essentially aims to add a road use fee for electric vehicles that would be paid with registration annually and also a substantial tax on electric vehicle charging stations (which would also be passed along to electric vehicle drivers).

First, the aim of this bill is obviously to increase revenue. While that is an understandable goal, with less than 3,700 all electric vehicles on Kentucky roads, the amount of revenue that would generate would be minuscule.

As a nonprofit organization, our mission is to speed up the adoption of EVs as a cleaner form of personal transportation (compared to gas and diesel vehicles). Having more roadblocks to adoption at this extremely early stage is not a good thing.

And, how does that look to companies that are investing HEAVILY in electric vehicles right now in Kentucky, such as Ford with its new battery plant in Hardin County, Hitachi in Berea and Rivian in Louisville, and Toyota in Georgetown. Encouraging EV adoption would only be a good thing, and indeed will lead to healthier modes of transportation, thereby cleaning the air and reducing overall medical costs.

And, health is a big reason many switch to EVs. In fact, Evolve KY has two members who have had double lung transplants. Going to the gas station physically makes them ill. As a group, we actually donated an EV and home charging station to help one of those members. And, the additional cost of registration may seem slight, but add that to their mountain of medical bills and it is obvious that isn’t right.

There is a common misperception that all EVs are expensive Teslas. I, for one, have two modest EVs in my household: a 2011 Nissan LEAF and a 2012 Chevy Volt. Many of our members are making the switch to electric and have limited means. Should they be penalized for wanting to drive cleaner? Additionally, we want to encourage EV adoption in underserved areas (we have chargers in Louisville’s Portland neighborhood and our most recent installation of chargers is at the Harlan Center in Harlan, Kentucky). We don’t want to see underserved communities be left behind as the switch to EVs happens. 

For the past several years, there has been a push to introduce and pass an EV registration fee. To date, nobody has reached out to anyone at Evolve KY to get their input. Wouldn’t it be smart to include EV drivers in the crafting a bill like this? This bill has pure, battery electric vehicles (BEVs) paying the same as plug in hybrid vehicles (PHEVs) even though PHEVs also use gas and those owners are paying the fees at the gas pump. It also has hybrid vehicles without a plug paying an annual registration fee and those only use gas and don’t plug in at all. Currently there are more than 3.5 million automobiles registered in Kentucky. So, how much revenue is to be gained from taxing under 3,700 people who are trying to make the state a healthier place to live? EV drivers are not opposed to paying our "fair share" of road maintenance costs. But with so few EVs on the road now, perhaps this could be postponed in an effort to encourage the adoption of electric vehicles in our state. This early in the game, taxes that stifle the growth of industries that the state is actively courting can easily be seen as counter-productive.

Also, the proposed EV charger fee language seems very ambiguous. One of Evolve KY’s most popular programs is our Adopt a Charger program where we provide fee-free community charging. To date, we’ve installed over 90 Level 2 chargers at over 40 locations throughout Kentucky and Southern Indiana. Places like Jefferson Memorial Park, Bernheim Forest, Heine Bros. Coffee, YMCA at Norton Commons, the Farmers Market in Bardstown, KY and Norton Healthcare. It is seen as an amenity (similar to WIFI). People can enjoy nature or spend time (and money) in a town, while adding a few miles to their cars. Would the proposed tax mean that all of our chargers would need to be ripped out and replaces with pay-per-use chargers and electric meters? Or, is this proposed tax (which is quite substantial by the way) just for existing networked commercial pay-to-use EV chargers?

Finally, Kentucky is a coal state and most EVs use at least a percentage of coal for fuel. It is a domestic fuel and even purely powered by coal, studies have shown that cradle to grave EVs are 50 percent cleaner than gas or diesel vehicles. And, EVs are the only vehicles that can get “cleaner” over time — as the grid gets cleaner, the cars get cleaner.

I always say we have an eclectic electric group. We have members who get into EVs for a number of reasons and we have members on all the different sides of the political spectrum. We all get along (a rarity these days), and we all share the common goal of promoting EVs for the common good. We hold on to hope that our elected leaders won’t punish EV owners, but work with them to come up with a fair and just way to reach common goals when the time is right.

Stuart Ungar, Co-founder, Evolve KY - Kentucky’s Electric Vehicle Group

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