Reps. Kathleen James and Seth Bongartz
One of the most controversial bills to pass the House and Senate this year is S.5, the Affordable Heat Act. It’s controversial for a few reasons:
- The bill addresses how Vermonters heat their homes. Fuel bills are a big part of our household budgets, so this matters a lot … to all of us.
- The bill is complicated. It’s not simple to explain. (Does this mean it’s bad policy? No.)
- The goal of the bill and the solution it proposes — the facts — have been muddied by misinformation that seems specifically designed to scare people.
Many Vermonters have been told that S.5 will result in much higher fuel prices, that it’s a “carbon tax,” that it involves mandates or requirements for how they heat their homes or the fuel they use, and that the unprecedented “check-back” mechanism that the legislature added — at the request of Governor Scott — is somehow a sham.
None of this is true. And it’s keeping folks from understanding the clear, stated intent of the bill, and the language that it contains. And it’s frustrating for the many people who are working hard to help Vermont adapt to climate change in a thoughtful, forward-looking way.
We voted “yes” for S.5 and we encourage all Vermonters to look past the hype and get the facts about this important bill.
Below you’ll find some background about S.5.
Over the past year, the price of fuel oil has risen by $2 a gallon. This has hit Vermonters hard. It’s not the first time, and certainly will not be the last time, that families have been hammered by rising, unpredictable, volatile fossil-fuel prices. In a global commodity market, these prices fluctuate based on factors that our local and regional dealers can’t control or predict: They don’t know, and can’t possibly know, what they’ll need to charge in the future, either.
Here are some things we think we all agree on:
- People can’t afford rising, out-of-control fuel prices.
- Right now, there’s not much anyone can do to control or predict these prices. Neither can our local fuel dealers.
- It would help everyone to find a better, more predictable and sustainable way to heat our homes.
The fact is that clean heat is cheaper and more sustainable. It’s the heat of the future. (Here are some resources to learn more about this: U.S. Department of Energy, Vermont Department of Energy, and Efficiency Vermont.)
So how do we adapt to the rapidly approaching clean-heat future in a way that helps, rather than hurts, the Vermonters who can’t afford rising fuel bills, and who are least able to make the switch to cheaper, cleaner heat?
Vermonters who can afford to do so are already lowering their fuel bills — and saving a lot of money — by taking “clean heat” steps like weatherizing their homes, installing heat pumps or advanced wood heating systems (to replace, supplement or back up their existing heat system), or making smaller changes like switching to solar-powered water heaters.
Vermonters who cannot afford to make these changes — the same folks who can least afford rising fuel prices — are the ones getting left behind as our economy shifts — faster and faster, and inevitably — to clean heat.
S.5 is designed, explicitly and clearly, to help Vermonters save money on fuel bills by switching to clean heat. It does this not through taxes or mandates, but by requiring fossil-fuel dealers to earn credits. Dealers earn these credits by helping interested Vermonters to weatherize, to install clean heat systems, to switch to cleaner fuels, at a more affordable price.
For Vermonters, this bill would translate to many more available choices — and many more affordable choices — to switch to clean heat in any way that works for their home and for their family finances … but only if they want to. It creates a Vermont in which it’s easier and cheaper to take these steps. It’s based on incentives, not mandates, for customers.
A big percentage of the incentives would be aimed at low- and moderate-income Vermonters. The rest of the incentives are aimed at any residential home (regardless of income), plus businesses and manufacturing companies. They will benefit from the incentives, too. One way to envision how this might roll out, for Vermonters, is to check out the Efficiency Vermont Marketplace.
You can click here to see a flow chart.
For policy wonks, here’s the actual language in the bill:
The Clean Heat Standard shall be designed and implemented to enhance social equity by prioritizing customers with low income, moderate income, those households with the highest energy burdens, residents of manufactured homes, and renter households with tenant-paid energy bills. The design shall ensure all customers have an equitable opportunity to participate in, and benefit from, clean heat measures regardless of heating fuel used, income level, geographic location, residential building type, or homeownership status.
At the bottom of this page, you’ll see five examples of how families could save money by taking advantage of incentives offered through S.5.
The two most damaging and inaccurate claims being circulated about the Affordable Heat Act are that:
FALSE: It will raise the price of fuel by 70 cents or more
FALSE: If S.5 becomes law in 2023, it’s a done deal.
Both of these claims are inaccurate. Here’s why:
TRUE: We won’t have to guess about impact on fuel prices. We’ll know ahead of time — and we can adjust the program in response.
- Under the Affordable Heat Act, fuel dealers will be required to earn credits. They’ll do this by delivering a wide range of “clean heat measures” to interested customers at a more affordable price. Dealers could earn the credits themselves, by actually doing the work or partnering with other companies. Or fuel dealers could simply pay for their assigned number of credits. This revenue would help to fund incentives through something like the Efficiency Vermont Marketplace.
- For customers, this will equate to opportunities and incentives. For fuel dealers, this translates to an increased cost that they are, in fact, likely to pass along to customers in some way.
- The question is: How much? There’s been a lot of speculation. A similar program in Oregon, based on transportation fuels, resulted in higher prices at the pump of about 7-10 cents per gallon in the short term, for significant long-term savings. But some have claimed — based on admitted “back of the envelope” math — that in Vermont it could mean a price hike of 70 cents a gallon or more. (Click here for discussion of that number by an energy policy expert).
The good news is, we won’t have to guess, or base our proposed program on data from other states.
As passed by the House and Senate this spring, S.5 includes a series of mandatory reports back to the legislature. The detailed reports include:
- A “potential study” that takes a hard look at the actual logistics and implementation of the proposed program, including important things like the evolution of clean-heat technology, workforce capacity, supply chain constraints, and estimated uptake: How many Vermonters would be likely to install heat pumps, for example, at more affordable prices? How many would weatherize? And how should the program be designed or changed in light of this information? The first potential study is due September 2024.
- Economic impact studies — before the program would take effect and then regularly after that — that analyze the cost of the program (including any impact on fuel prices), the estimated savings for customers and more. The first check-back report is due in February 2024 and the second in January 2025.
- The bill also includes a “circuit breaker” mechanism that would allow the program to be slowed down or paused, for as long as 36 months, in response to market conditions (like a workforce shortage or financial impacts on customers).
TRUE: The unprecedented check-back provision guarantees that the entire proposal will come back to the legislature in 2025, and that it can’t go into effect until and unless we vote to move it forward.
At the Governor’s request, the legislature inserted a “check-back” provision — and I co-sponsored an amendment with several other legislators, successfully adopted during our floor debate, to make crystal clear our intent.
Under the check-back, the Public Utility Commission will spend the next two years “writing the rules” that would regulate the program. This is a familiar and common process: The legislature often enacts broad statutes that set clear intentions and establish parameters, which are then turned over to technical experts at state entities — like the PUC or the Agency of Natural Resources — to “write the rules.” This is an extensive process that brings stakeholders together (in this case, including fuel dealers) to hammer out the regulations, take public comments, publish a draft for more public comments, and then finalize.
Usually, these proposed rules come back to a committee called LCAR (the Legislative Committee on Rules). These legislators review and approve the rules to make sure they’re what the legislature intended. If LCAR approves, the rules are filed with the Secretary of State and the program gets underway.
In this case, we’ve adopted an unprecedented extra step, in addition to LCAR review: A full legislative check-back. In January 2025, all of the studies and the full proposed rules will come back to the legislature. S.5 clearly states that the real “guts” of S.5 — the requirements for fuel dealers to earn credits — cannot move forward unless the legislature enacts them. Enact means we’ll introduce a bill, take testimony, and change or revise the rules in any way that makes sense — to respond, for example, to what we learn about impact on fuel prices or capacity of Vermont’s workforce to handle an uptick in weatherization.
The program cannot become reality unless both the House and Senate vote “yes” on this new bill, and the Governor signs it, in 2025. If all of that happens, the program will start its gradual rollout in 2026. Though the check-back has been questioned by opponents of S.5, the nonpartisan attorneys who drafted this bill for the legislature — in our respected, professional Office of Legislative Counsel — confirmed it when we worked on our amendment and confirmed again in a 4.27 memo to the Senate.
The checkback language is clear. Read the memo from Legislative Counsel here.
Plus: Here is a summary of the timeline provided by our nonpartisan Legislative Counsel. Items in bold are specifically seeking public, legislative and administrative input and comment, but anyone can comment on any of the steps.
If the Affordable Heat Act gets underway in 2026 — in a way that works for Vermont and Vermonters — it will:
- Help more people make the switch to clean heat, saving money on fuel bills over time
- Support fuel dealers during a time when their industry is changing rapidly. The fuel dealers of today can and should be the clean heat companies of the future.
- And help Vermont meet the carbon pollution requirements that we’re required to meet by 2025, 2030 and 2050 … by law. (We’re not on track to meet those legally binding targets: learn more about that here.)
As I said in explaining my “yes” vote on the floor:
Climate action is a complex problem. And complex problems sometimes require complex solutions. I believe the Affordable Heat Act holds great promise — that it will help those Vermonters who are least able to afford rising fossil fuel prices — and for whom the investment required to switch clean heat is currently out of reach. I voted YES to give this potential solution the support, study and deliberation it requires.
- FACT: According to one independent analysis, by 2030, the clean heat services that could result from the Affordable Heat Act are estimated to reduce the overall heating costs of Vermonters by $2 billion, or an average of $7,500 per household.
There are a lot of great resources to learn more about S.5, and I hope everyone will take time to understand it. This bill matters to all of us, and it’s important we all understand what the Affordable Heat Act can accomplish.
CLEAN HEAT RESOURCES: LINKS, DOCUMENTS, FLOOR DEBATE AND MORE!
Click here to read Rep. Laura Sibilia’s excellent floor report, explaining and presenting the bill to her colleagues during our April 2023 debate.
Click below to watch our floor debate on April 20. The four-hour debate starts at 16 minutes. Pro tip: Did you know you can adjust the playback speed on YouTube?
Click here to read the bill
Click here to see how legislators voted:
https://legislature.vermont.gov/bill/status/2024/S.5
Click here to see a flow chart: How the AHA will work.
Click here to see an extensive FAQ published by the policy experts at the nonprofit Energy Action Network.
How Will the Clean Heat Standard Work? It’s Based on Incentives, Not Mandates. Check Out These Family Scenarios:
Scenario A: The Anderson family is a lower-income family that lives in an apartment. They pay the utilities for the apartment but the property owner is responsible for the appliances. The propane water heater that heats their water dies. Instead of replacing it with another propane water heater, the property owner takes advantage of a clean heat credit supported incentive that lowers the upfront cost to install a new heat pump water heater to below the cost of installing a new propane water heater. This allows the Anderson family to save nearly $500 a year.
Scenario B: The Bertrand family is a middle-income family. They live in an average size home and heat with a fuel oil furnace. They make too much to qualify for free weatherization through the Weatherization Assistance Program that supports the lowest income Vermonters, but they don’t make enough to go ahead with weatherization without additional incentives. Due to the incentives made available by the Affordable Heat Act, the Bertrand family can finally afford to comprehensively weatherize their home. Any remaining upfront investment of the weatherization that is not covered by expanded incentives is financed by the Weatherization Repayment Assistance Program, paid back over time on their electric bill. The project results in a 25% reduction in fossil fuel use, which lowers their average annual fuel oil bill from $2,000 a winter to $1,500 a winter, saving them an average of $500 a year in fuel costs, or $5,000 over the next decade.
Scenario C: The Cassidy family is a lower income family who owns a small home that is well-insulated because they previously had it weatherized by the Weatherization Assistance Program. However, they still have trouble with the high cost of their propane bills. Because their home is small and well-weatherized, their heating contractor let them know that they could heat their whole home with heat pumps (while leaving their existing heating system in place as a backup). Thanks to the incentives created by the Affordable Heat Act, the Cassidy family installs the heat pumps and proceeds to save about $1,000 a year in heating costs.
Scenario D: The Diaz family is a middle-income family who had a new fuel oil boiler installed 5 years ago. Because they are invested in keeping their relatively new boiler, they decide to simply switch their heating fuel from fuel oil to B99 biodiesel, made from recycled restaurant oil. Because of the Affordable Heat Act and the value of a B99 biodiesel that is 5x lower emitting than fuel oil, the cost of the biodiesel becomes lower than fuel oil. The Diaz family keeps their boiler but pays less per year in fuel than before.
Scenario E: The Edmonds family lives in an old home that is twice the size of the average home in Vermont. They decide to replace their old propane boiler, which was costing them an average of $5,000 a year, or over $50,000 in total fuel costs over the past decade. Instead, thanks to the Affordable Heat Act, the upfront cost to install a new advanced wood heating pellet boiler is brought down to less than the cost of installing another propane boiler. After installing the pellet boiler, the Edmonds family saves an average of $2,000 a year in fuel costs as a result of using wood pellets rather than propane.
Source: Energy Action Network: https://www.eanvt.org/affordable-heat-faq/
I’m happy to talk to constituents about S.5, the Affordable Heat Act. Send an email to me to set up a time: KJames@leg.state.vt.us.