New York in 2022 told school districts they’d be barred from purchasing gasoline- or diesel-powered buses after 2027, and instead have to buy electric buses at more than double the upfront cost.

“The purchase of new electric buses will help grow the market,” officials later pledged, “which will in turn help reduce prices.”

Unfortunately for taxpayers, those reductions aren’t materializing—in part because state officials put the prices, and future increases, on cruise control.

The state Office of General Services, which negotiates contracts on which local districts are expected to piggyback, reached a five-year deal in December 2022 with nine bus dealers and tied the price schedule to the federal Producer Price Index for “truck and bus bodies.” That’s notable on its own because the index doesn’t reflect changes in battery or electric motor costs—the components that make electric buses so costly and where advocates had hoped prices would fall.

New York’s arrangement left school bus prices rising automatically. A handful of bus models were added to the price schedule in the first year after getting state Department of Transportation approvals, but nothing has changed since—except for the price hikes, which totaled 3.7 percent over the last 12 months. (The total increase since December 2022: 8.7 percent).

Inflation-related provisions are common in government procurement, especially in multi-year deals. But it’s remarkable that state government hasn’t been able to woo more players into the market or work out lower prices.

Looking specifically at the OGS prices for the ubiquitous “Type C” buses (which make up two-thirds of school buses statewide), five manufacturers with electric models are listed. That’s actually more than the number of listed manufacturers for gasoline or diesel buses (three), and should have set the stage for greater competition and downward pressure on prices.

What’s more, OGS expressly reserved the right to negotiate lower prices or rebid the contracts altogether “in the event of a decrease in market price.”

So far, the agency hasn’t. This means the price gap between gasoline/diesel and electric units is widening: in January 2024, for instance, the lowest price for a 46-seat Type C bus was $134,353, compared to $388,265 for electric (difference: $253,912). This year, the premium is up to $263,360 (and assumes the availability and selection of no-frills models).

That premium alone—that is, the added cost of buying electric buses instead of replacing them—is on track to total more than $9 billion by 2035, when state law requires districts to park the last of the fuel-burning units.

But it’s become increasingly clear that the total cost of compliance will be far bigger.

Big Costs, But Still No Price Tag

Despite being the largest unfunded mandate in a generation, officials in classic Albany form never issued any sort of cost estimate on the electric bus policy before approving it as part of the fiscal 2023 state budget.

Besides the added upfront cost of electric buses (and their chargers), a significant and largely unanticipated expense is coming into view as districts figure out how to charge dozens or hundreds of electric buses.

The state Education Department in October found at least 42 percent of districts “will need some electric service update or upgrade to meet their bus charging needs,” compared to just 3 percent saying they won’t. Another 39 percent haven’t yet made an assessment.

State officials still haven’t estimated the total added grid-related costs, but some districts face costs in the tens of millions of dollars as they contemplate necessary substation upgrades and additional or upgraded distribution lines (or potentially relocating their bus depots). And since distribution-level upgrades must be planned (and approved by the state utility regulator) years in advance, school districts will likely need to keep buying gas and diesel buses long after 2027.

Districts face other major sources of uncertainty:

• Instead of gasoline or diesel, school districts will buy more electricity, the cost of which is poised to rise as the state prematurely shutters natural gas-fired power plants. The Hochul Administration has indicated the per-mile costs of electricity will be lower than fuel, but has otherwise been mum on the subject. They’ve slow-walked their years-overdue state energy planning process that would feature cost forecasts around which schools could plan.
• Most school districts will use bonds to pay for their bus upgrades, and financing costs have surged since the electric bus mandate was adopted because the Federal Reserve has kept interest rates higher than expected to tame inflation.
• Schools are counting on a slurry of state and federal incentives to defray their costs. These include one-time proceeds from the 2022 Environmental Bond Act, as well as various federal incentives sure to come under scrutiny as the feds grapple with ballooning debt costs and the potential expiration of parts of the 2017 Tax Cuts and Jobs Act.

In this last case, Governor Hochul and state lawmakers are likely to blame congressional Republicans and the Trump Administration for forcing them to postpone the electric bus mandate. But it’s difficult for Albany to blame Washington for a policy’s cost and feasibility problems when Albany didn’t first determine the policy’s cost or feasibility.