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What is a Right of First Refusal? And why is it important for EV charging policy?

As states across the country have begun to grapple with different approaches to right-sizing the role of electric utilities in the EV charging market, one strategy that has emerged as popular is developing a “right of first refusal” (“ROFR”) process.

Under a ROFR system, when a utility wants to use ratepayer funds to own and operate a public EV charger the utility must demonstrate a need for EV charging services at that location (often in rural or disadvantaged areas). If the state regulatory body overseeing the ROFR process agrees that an area is in need then a public notice is issued opening a waiting period. During this time, nearby private businesses can raise their hand and indicate their desire to provide EV charging services within a designated proximity to the location, preventing the utility charger from being built in that area. If no private entity raises their hand, then the utility can move forward with that proposed charger. Any private entity that does indicate an intention to build a charger, thus blocking the utility-owned charger, often has a period of time in which they must begin construction, otherwise the location typically reverts back to the utility.

One example of right of first refusal can be found in Georgia where Senate Bill 146 limited Georgia Power’s ability to compete in the EV charging market to their existing Community Charger Program, which includes a ROFR process. Until 2026, Georgia Power will file a Community Charging Plan each year. This plan can include up to 11 chargers to be installed through the Community Charging Program that cannot be within one mile of a federally defined Alternative Fuel Corridor and only in rural and income-qualified counties. When the plan is filed, a 60-day window opens in which private entities within 15 miles of the proposed charging location can exercise the ROFR to claim a location. If an entity chooses to exercise the ROFR, they would have 18 months to break ground or the location reverts back to Georgia Power.

There is also a ROFR system in place in the Non-ERCOT areas of Texas which was implemented by Senate Bill 1002 in 2023 and a ROFR process is included in Nebraska Legislative Bill 1218 in the 2024 session.

This policy is imperfect due to the inherent market risk of a regulated utility participating in a competitive market. Also, once a utility has built an EV charger through ROFR, that area will remain unattractive for future private investment for as long as the utility owns and operates the charger. However, ROFR often represents a vast improvement for a state’s EV charging policy. ROFR has also proven to be a compromise that helps alleviate concerns from environmental groups and EV advocates who worry that rural or low-income areas may not see private investment in charging soon enough.

As more states continue to evaluate EV charging policy and the threats that utility ownership can pose to private investment in this growing market, ROFR will likely appear as a compromise policy solution. If a ROFR system is implemented in a state where you operate, understanding the details, rules and timeframes of your state’s process will be essential to ensuring that utilities do not compete with your private investment in the EV charging market.