Advisory electric rate hugely short-changing van drivers on charging costs

The Government’s current advisory electricity rate (AER) of 4p per mile is leaving many electric vehicle drivers out of pocket on charging costs and needs to be increased to encourage EV uptake.

Research by TMC shows the 4p per mile rate does not cover the cost of charging most electric cars – and if public charging is factored in, it does not cover the cost of charging any electric car currently available, except the Renault Twizy quadricycle.

And the cost gap is even wider for electric light commercial vehicles. Only the current Renault Kangoo Z.E., due to be replaced later this year, costs under 4p per mile to charge if home charging alone is considered.

In fact, TMC’s fuel data analysis finds the actual cost per mile for domestic charging is as much as 65% higher than the AER for cars and up to 165% higher for vans based on the WLTP figure.

It’s an issue that TMC managing director Paul Hollick, also chair of the Association of Fleet Professionals (AFP), spoke to Fleet World about earlier this month when he said reimbursement on charging costs was causing some headaches for fleet managers. Introduced from 1 September 2018 for business mileage completed in fully electric company cars and vans, the AER rate ensures no taxable profit and no Class 1 National Insurance when employers pay this rate.

Employers can choose to use a different rate, but they will only avoid a taxable Benefit-in-Kind if they can actually demonstrate a higher electricity cost per mile for business travel, and most fleets are using AER as it’s simpler and easier.

However, TMC has said that if employers want to encourage EV take-up in company fleets, they need to consider the actual cost per mile of using those cars and vans.

Paul Miers, TMC’s chief data officer, commented: “Simply paying the current AER of 4p per mile will leave company drivers out of pocket, particularly if they rely on the public charging network to be able to complete their journeys. There are also seasonal factors to consider too. In winter, the 15% real-world adjustment is likely to be an under estimation, putting even more upward pressure on the actual cost per mile.”

The TMC table shows the cost of running electric cars and vans using three different scenarios compiled by TMC’s team of data analysts and based on electricity priced at 16p/kWh for home charging and 30p/kWh for public charging.

Column 1 shows the cost per mile based on WLTP data, using home charging for all vehicle charging.

Column 2 shows the cost per mile based on the same data but with power consumption per mile raised by 15 per cent to reflect real world battery usage.

Column 3 uses the same data as column 2 but assumes a mix of 75% home charging and 25% public charging.