Last year, lawmakers told the Public Utility Commission, which regulates utilities in Vermont, to design a "clean heat standard." The policy is supposed to reduce climate warming greenhouse gas emissions from the building sector.
This week, the utility regulators published their draft rule along with a companion report, where they argue Vermont should take a different approach. Here are some of the key takeaways.
Why did lawmakers tell Vermont’s utility regulators to design a clean heat standard, and how did we get to where we are today?
Back in 2023, lawmakers passed the Affordable Heat Act. The goal was to find a way for Vermont to reduce the amount of climate warming emissions created by heating buildings, mostly our homes.
A few years ago, a group of utilities, energy companies and environmental groups proposed a market-based solution called a clean heat standard.
The idea was to create a new marketplace where companies that import fossil heating fuels into Vermont would have to earn, buy or pay for credits. Credits would come from doing things that help Vermonters heat their homes in less emitting ways. Examples of things that might earn credits include replacing a propane hot water heater with an electric one or installing a heat pump.
Lawmakers took that policy and built upon it during two legislative sessions. They added a provision that a share of those credits would have to come from helping low-and moderate-income households.
The Affordable Heat Act tasked the PUC with designing a draft program, due back to lawmakers during the 2025 session for them to review and potentially tweak. The law also tasks the PUC with estimating the cost of a clean heat standard, and with analyzing how a policy like this would affect fuel prices in Vermont, as well as the economy, equity and emissions.
Though aspects of the policy have already begun, the Legislature has to pass a second law to put a clean heat standard into effect.
This week, the PUC released their first draft rule — the first formal outline of a clean heat standard — but also a sort of progress update.
What do we know from the draft rule, and what did the PUC say in their report?
The PUC said that in its view, a clean heat standard is not the right policy for Vermont to pursue.
The commission says Vermont is too small to manage a marketplace like this alone.
They think that regulating and running the marketplace will be costly, and they say they’ll be submitting a simpler alternative to lawmakers alongside the final clean heat standard.
The PUC offered a fee on fossil heating fuels as an example of something it views as a viable substitute. Revenue raised by the fee could then be spent directly on weatherization and electrification, among other things.
As for the clean heat standard, the draft rule doesn't offer too many new details beyond what is already called out in the Affordable Heat Act.
Many of the features of this policy that have the potential to drive big changes in Vermont's energy sector are still to come, including details about how the credit-based marketplace would operate, how it will be regulated, as well as which activities will earn the most credits and how it might ensure that low- and moderate-income households get a share of the work done.
What do we know at this point about how much both of these proposals — a fee on fossil fuels and a clean heat standard — might cost? How will this affect my fuel bill?
At this point, we know very little about how much either of these proposals would cost — at least to the level of detail required to understand how much they might change the number on a fuel bill.
And when it comes to comparing these programs — no one has crunched those numbers yet.
We’ll know more about how a clean heat standard might affect fuel bills in January. The PUC is due to submit a formal cost study to lawmakers by Jan. 15, 2025, after they've designed the parts of the policy that have the most bearing on fuel prices. Many of those don't exist yet.
But the state did commission a study this fall that tried to explore the societal cost and benefits of a clean heat standard using hypothetical scenarios.
The study laid out lawmakers' three goals: they wanted a plan that would deliver the emissions reductions Vermont has committed to by law. They also wanted it to be cost effective, to deliver the best return on investment of our collective dollars. And they also wanted something that would be equitable — that wouldn’t further disenfranchise and would actually help low-and moderate-income households.
The report found the last goal, especially, is going to take money.
The analysis looked at what would happen if you designed a study that prioritized each of these goals, and tried to pull out some of the unintended consequences Vermont might see under those scenarios.
And one of the big conclusions of that study was that achieving all three of these things — cost effectiveness, equity and emissions reductions — at the level lawmakers called for will be hard, if not impossible, for Vermont to do.
The biggest barriers that analysis called out were Vermont's workforce and cost — we need more people to install heat pumps, weatherize houses and help people electrify.
The study also found that it may be challenging for Vermont to meet its emissions reduction mandates for the thermal sector as required by the Global Warming Solutions Act while also ensuring that roughly a third of the credits in this hypothetical marketplace come from work that serves low-and-moderate-income households.
However, that study also found that reducing emissions from buildings to the degree Vermont has committed to by law using a clean heat standard is technically feasible based on the technology available.
Why is the equity goal a challenge?
Part of the problem stems from the overall cost of funding home upgrades for people who need assistance to be able to access them.
Right now in Vermont, like most places, it’s the people with the least who spend the greatest share of their income on their energy bills. They stand to benefit the most if we can help them spend less and use less.
The problem is: doing this well would be expensive. We’re talking about subsidizing all of the cost of a project, even costly health and safety upgrades to homes that have to happen first — at a scale we've never done before in Vermont.
There may need to be electric panel upgrades, and some people who work with low- and moderate-income households on energy upgrades in the state say Vermont should consider a version of fuel subsidies but for electricity beyond what utilities offer now, so that people who receive assistance to purchase fossil fuels don’t lose any of that assistance when they’re encouraged to electrify.
Wendy McGillivray with the Northeast Employment and Training Office, is very concerned about buttoning up any holes that could leave low-income households behind. NETO runs the low-income home weatherization program in the Northeast Kingdom.
"Low-income Vermonters as well as anyone who lives in a mobile home, they're more likely to have insufficient electric boards to support the upgrades they they'd like," she said. "So the more we go towards these technologies without making sure that the infrastructure has been updated for our most vulnerable Vermonters, the more they're going to be left behind."
The rule is just a draft, but right now, it doesn't include any specific provisions that would help people who need to upgrade their electric panels before they can install, for example, a heat pump.
On top of that, lower-income households tend to use less energy and have lower carbon footprints than more affluent households. This means that helping the people who are already being left behind in the energy transition isn’t the most cost-effective way to reduce emissions for Vermont overall — even if it is equitable.
The study this fall confirmed that the most cost-effective way to reduce emissions would be to invest in incentivizing the people who already have the means to do it because they tend to emit more and require less assistance to adopt new technologies or upgrade their homes.
But that approach doesn’t deliver the equity that the law calls for and risks a future where the people who have the least never get access to this new technology.
Additionally, there will need to be some level of subsidy or incentive for people in the middle.
So everyone is trying to figure out: who should pay for this? And how much? And what is the right balance? And is there a way to create a new market for this sort of work for low income households so that it’s less costly and they don't get left behind?
And everyone — including multiple studies, people in Gov. Phil Scott's administration, people on the Climate Council, lawmakers, environmental activists, the Public Utility Commission — everyone agrees that without more money and more programs, Vermont is simply not going to meet its reduction mandate in the thermal sector.
What are people involved saying about the pros and cons of a fee vs. a clean heat standard?
The PUC says a fee on fossil heating fuels — beyond what we have now as a fuel tax to fund our existing low-income weatherization program — would be simpler than a clean heat standard.
Lawmakers actually commissioned a study of this a few years back.
Sen. Chris Bray, a Democrat from Addison County who chairs the Senate Natural Resources and Energy Committee, helped write both pieces of legislation.
And he says the fee was deemed politically dead on arrival at the time, and lacked support from the Scott administration, so lawmakers pursued a different tack.
"The upside [of a fee] is... it's a very simply way to collect money," Bray said. "What we lose if we do it that way is we don't necessarily create this clean heat credit marketplace in which different technologies will compete and innovate and emerge and play against one another to find the most innovative and cost-effective solutions."
Bray says he supports a clean heat standard for now but is open to an alternative policy so long as it is equitable, cost-effective and cuts emissions.
Ben Edgerly-Walsh of the environmental group VPIRG, which lobbied for the law but is not involved in designing the policy, echoed Bray's sentiments, adding, "We're focused on making the clean heat standard work, but we're interested in seeing what the PUC has to say about other potential options."
The Fuel Dealers Association says small fuel dealers would likely prefer a fee over the clean heat standard because it’s simpler. But large companies would likely prefer a market-based solution because they see it as a business opportunity.
Matt Cota represents fuel dealers on both the Technical Advisory Group and Equity Advisory Group that are offering feedback to the PUC along the way. He points out that a fee doesn't automatically solve the problem of energy burden, that those with lower incomes would still feel the impact the most.
"Every time we look into this, it's we're being told this is going to cost a significant amount of money. And yes, there'll be benefits for those that save energy and yes there will be benefits for the environment," he said. "But you can't avoid that upfront cost."
In many ways, this transition is already happening, just not for the people who can’t afford to opt into it.
Fossil heating fuel sales in Vermont declined by 12% over the last 6 years or so, according to tax data.
That means that there’s already less funding for existing programs that depend on fuel tax revenue.
Geoff Wilcox, who runs Vermont's low-income weatherization program at the Department for Children and Families, says if Vermont wants to leverage fuel sales as a revenue source to fund people moving away from fossil heating fuels, that could present some challenges down the road.
"I'm on the Equity Advisory Group [for the clean heat standard] to ensure that the people who this could hurt the most, or at least not help ... aren't left behind because the carbon savings aren't going to be as cost effective," he said. "They're the folks who are going to benefit the most, who need it the most and will be harmed the most if we don't try to prioritize... and somehow the funding needs to be 100% not from the client."
Scott declined to comment this week on whether he would support a fee on fossil heating fuels, saying he has not yet reviewed the PUC's report.
Public Service Commissioner June Tierney said, "A fee is another way of point to: additional revenue is needed," she said. "I don't think anybody disputes the proposition that if we're going to meet the goals that are in law at this time, we have to direct more funding toward the measures that will get us there to decarbonize and meet those goals. But it is also a time where every fee has to be examined in terms of its impact on people's wallets, frankly, and what they can and cannot afford."
What's next from here, and are people going to be able to tell regulators what they want to see in a policy?
The PUC is holding a public workshop on Oct. 15 to get feedback about what sorts of questions they should investigate to come up with their cost estimate for a clean heat standard.
They say they’re going to continue to design a clean heat standard to bring back to lawmakers this session, but they’ll also have an alternate proposal and be looking for public feedback about that this fall.
Ultimately, none of this goes into effect unless lawmakers approve it a second time.
And lastly: A lot of people have been speculating about how much this all might increase heating costs, even touting specifics about what things might look like on a heating bill. Those numbers just don’t exist yet.
Everyone I spoke with who is involved in making this policy — even the people who oppose a clean heat standard — agrees that we simply do not know at this point.
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