S.5 Sibilia Floor Report on S.5

Responsibility to know before we speak

S.5 Floor Report
Madame Speaker,

I’ll be reporting today on S.5 which is An act relating to affordably meeting the mandated greenhouse gas reductions for the thermal sector through efficiency, weatherization measures, electrification, and decarbonization.

Members can find S.5 as it passed the HEE Committee on our webpage for April 13th.

Let’s talk about how we got here:

In 2020, this Vermont Legislature passed the Global Warming Solutions Act. This law did two important things:

  1. First, it committed Vermont to meeting the emissions reductions that had been agreed to as part of the 2015 Paris Accords. Vermont’s 2020 Global Warming Solution Act requires our state to reduce greenhouse gas pollution to 26% below 2005 levels by 2025. Emissions would need to be 40% below 1990 levels by 2030 and 80% below by 2050. Vermonters overwhelmingly want us to act on climate, and in 2019 76% of Vermonters said they were either very worried or somewhat worried about global warming. On behalf of my children and grandchildren I thank our Governor for his courageous urging of the Trump Administration in 2017 to maintain the U.S. commitment to the Paris Accords and for supporting the Biden Administration’s 2021 decision to rejoin the Paris Accords. Climate change affects all life on our planet.

  2. Second, the GWSA required the creation of a Climate Action Plan to be developed using a public process – to meet those statutory goals. In Vermont, the two sectors with the biggest GHG emissions are Transportation and RCI Thermal. A Clean Heat Standard, designed to reduce RCI thermal emissions, was proposed as a part of the initial 2021 Climate Action Plan.

So how are we proposing to do this?

For the last 18 months members of the governor’s administration, representatives from many different heating fuel sectors, environmental advocates, climate scientists, legal organizations, government specialists, alongside eight different legislative committees, the Vermont Climate Council, two iterations of the legislative climate caucus and hundreds of Vermonters have been working to bring forward, debate, fine tune and improve language that would create a Vermont Clean Heat Standard.

The bill in front of us is the product of all of that work, and will establish the Clean Heat Standard to reduce Vermont’s greenhouse gas emissions from the thermal (heating) sector. The Public Utility Commission will develop the Clean Heat Standard with assistance from two advisory groups: the Technical Advisory Group and the Equity Advisory Group. The Department of Public Service will be a partner in providing assistance and in completing a potential study which will tell us: about the potential market for clean heat measures and the characteristics of the workforce available to install the measures.

The bill in front of us has the PUC develop the marketplace and the rules for implementing a Clean Heat Standard through a public process and with these technical and equity experts. The 2025 legislature will vote to approve the rules to implement the Clean Heat Standard or they may change the rules, do nothing with the rules, or repeal the statutory provisions of S.5. And if the 2025 legislature approves, the governor will also have to approve.

If we vote in 2025 to implement the Clean Heat Standard, each year obligated parties must retire clean heat credits – a tradeable, non tangible commodity that represents the amount of greenhouse gas emissions reductions caused by a clean heat measure. Clean heat credits may be retired by delivering fuel and technologies that reduce greenhouse gas emissions (clean heat measures) or by contracting out or purchasing clean heat credits. The Commission would establish the number of clean heat credits obligated parties must retire each year to set a pace for Vermont’s thermal sector to achieve the greenhouse gas emission reductions required by 10 V.S.A. § 578(a)(2) and (3), as amended by the Vermont Global Warming Solutions Act of 2020.

We have heard folks say that stopping all of Vermont’s emissions will do nothing to change the weather patterns we are seeing with climate change. I mostly agree.

If Vermont can’t stop climate change, then why bring forward sweeping climate change bills like GWSA and CHS?

There are at least three important reasons that I bet most of us would agree with:

  • One: Fixed income Vermonters, rural Vermonters and low and moderate income Vermonters are being exposed to greater and greater financial and health risks as a result of the unregulated and volatile global pricing of thermal heating fuels. Vermonters this year paid $2.00 more a gallon for heating oil then they did in 2021. Vermonters with means are already reducing their use of fossil fuels to save money.
  • Two: Larger local, state and national governments are exerting tremendous legal pressure to reduce greenhouse gas emissions as part of the 2015 Paris Accords.
  • Three: This activity is changing markets and those changing markets are and will impact Vermonters. If we don’t help Vermonters try to stay in front of the energy transition, it is our most vulnerable who will suffer and be left behind with more and more costs and less and less choices.

    There have been some wild claims about what we are voting on here today. Some of those wild claims are fueled by monied interests, some from not reading the bill, but most are probably fueled simply by fear of the unknown.

    So I’d like to start by summarizing what we are voting on here today.

    Today we are voting to:
  • Create the Clean Heat Standard in statute
  • Have the PUC develop the marketplace and the rules for implementing a Clean Heat Standard through a public process utilizing technical and equity experts
  • Provide the 2025 legislature and governor with rules to implement the Clean Heat Standard and then change, pass, or repeal the statutory provisions of S.5

That’s it, that is all we are voting on today.

To be clear, a yes vote today will not increase the cost of Vermonters’ fuel, and a no vote will not protect the cost of Vermonters fuel.

Your vote today will neither require Vermonters to rip out their fuel systems nor install heat pumps.

Your vote today will not incentivize the clear cutting of forests or the importation of Palm Oil.

We are not voting on those things today. We will be voting on those things in 2025 – with a lot more certainty and detail if we pass this bill today.

Sadly, your vote today will also not stop the propaganda and misinformation being mass communicated to Vermonters, so I hope, however you vote today, you will make time to talk with your constituents about our changing climate and the changing global fuel markets and that you will help them stay connected to the conversation and work being done over the next two years so that there fears may be eased with knowledge.

Now I will walk through through the sections of the bill:

  • Sec. 1 Short title- Affordable Heat Act
  • Sec. 2 Findings
  • Sec. 3- adds new 30 V.S.A. chapter 94 the Clean Heat Standard
    • § 8121 Intent– states the Intent of Legislature which should be used in the rulemaking process Intent of CHS is to achieve Vermont’s thermal sector greenhouse gas emissions reductions necessary to meet the requirements of 10 V.S.A. § 578(a), minimize costs and protect public health to customers, and recognize that affordable heating is essential for Vermonter. Federal funds should be used for clean heat measures to the greatest extent possible.
    • §8122 • Establishment of Clean Heat Standard; obligated parties required to retire clean heat credits; annual amount set by PUC • PUC by rule or order adopt system of clean heat credits • Credits shall be from: direct delivery of clean heat measures unless Commission approves another method, contract for work to generate credits, purchase of credits, default delivery agent; obligated party must tell PUC how they plan to acquire credits • PUC shall adopt rules or orders to implement CHS
    • § 8123 Definitions of: • Carbon intensity value • Clean heat credit • Clean heat measure • Commission • Customer with low income • Customer with moderate income • Default delivery agent • Energy burden • Entity • Fuel pathway • Heating fuel • Obligated party • Thermal sector does not include non road or other transportation fuels
    • § 8124 CHS Compliance (a) Required amounts- set by PUC; may be adjusted for 36 months good cause, market conditions from potential study; set for 10yrs updated every 3 yrs (b) Annual registration starting in Jan. 31, 2024 of all those who sell heating fuel in VT is required, including obligated parties; PUC shall share data collected with ANR and DPS to use in GHG Inventory; Tax Dept shall share with the PUC data on fuel tax collected (c) Early action credits-actions taken in 2023 and after can generate credits 2 (d) Equity- the PUC shall design and implement CHS to minimize negative impacts on low- and moderate-income Vermonters; At least 16% of credits must come from low income and an additional 16% from moderate-income Vermonters; 50% of credits from low and moderate customers must come from installed measures; required percentages can be adjusted for good cause (e) Credit banking- credits can be used in future years (f) Enforcement- PUC can use enforcement authority from Title 30, including penalties and injunctions PUC can enforce against parties that fail to meet obligation, including amounts of credits from low- and moderate-income Vermonters; penalties are two times the price of a credit and may be waived by the PUC; AG’s Office may enforce violations of CHS under Consumer Protection Act (g) Records- PUC shall require records from obligated parties and set a records retention schedule (h) Reports. PUC report to committees of jurisdiction after adoption of CHS and every year after. LIHEAP Margin Over Rack pricing program reflects DDA credit cost
    • § 8125 Default delivery agent PUC will hire single entity to do variety of work that generates credits, including to low and moderate-income Vermonters; entity will be appointed June 1st 2024 for up to 12yrs with option to renew; PUC & DPS will have oversight over the company and its operation and budget; obligated parties shall use the default delivery agent unless they have a plan approved by the PUC to meet the obligation in another way; PUC sets price to be paid to default delivery agent; funds collected from enforcement go to default delivery agent to generate more credits from low and moderate income customers. Commission will open proceeding to to establish the DDA cost and the amount of credits to be generated. The proceeding shall include a potential study to evaluate market conditions including an assessment of workforce characteristics. The DDA shall create specific programs for multiunit dwellings, condominiums, rental properties, commercial and industrial buildings and manufactured homes.
    • § 8126 Rulemaking The PUC shall adopt rules on the CHS, but may also issue orders; orders may revise rules if there is notice and comment period provided; orders can be appealed to the Supreme Court. LanguAGE aSSISTANCE IS ADDED AS PART OF THE PROCESS
    • § 8127 Tradeable Clean Heat Credits (a) PUC shall establish system of tradeable credits for delivery of GHG emissions reduction measures called clean heat measures; use units of carbon dioxide equivalents (CO2e); DPS shall perform verification of emissions reductions (b) PUC shall establish who owns credits when they are generated (c) credit values shall be based on lifecycle emissions; (d) lists rci actions eligible to count as clean heat measures (e) pipeline gas needs to have renewable attributes attached to count as clean heat measures (f) carbon intensity of fuels; for fuels to be eligible for credit, they must have a carbon intensity below 80; the allowed carbon intensity of fuels declines over time (g) PUC shall establish a schedule of amounts credit actions are eligible for using the GREET model from the Argonne National Lab or other equivalent (h) PUC shall biennially review consequences of installing clean heat measures (i) credits will be time stamped based on when action was delivered (j) credits must come from actions within Vermont (k) credits can be generated by anyone, even by actions required for other programs in the state (l) PUC shall create a system to register credits; PUC may hire a 3rd party consultant to maintain the database for credits (m) nothing in this chapter shall limit the authority of ANR to publish the GHG Emissions Inventory
    • § 8128 Clean Heat Standard Technical Advisory Group (a) PUC shall establish the Technical Advisory Group (TAG) to advise them on technical issues with the CHS; (b) members of the TAG shall be appointed by the PUC and shall include members of the Department of Public Service, the Agency of Natural Resources, and other with relevant expertise; may receive per diems if not paid by employer (c) PUC shall hire a 3rd party consultant to develop clean heat measure characterizations and relevant assumptions, including CO2e lifecycle emissions analyses AND PUBLIC HEALTH BENEFITS DUE TO ch MEASURES.; the TAG shall provide feedback to consultant (d) Annually the PUC shall approve or amend the consultant’s work
    • § 8129 Clean Heat Standard Equity Advisory Group (a) PUC shall appoint Equity Advisory Group to ensure low- and moderate-income Vermonters are not negatively impacted by CHS; advise on different aspects of CHS (b) The Group shall have 10 members and at a minimum shall include at least one representative from each of the following groups: DPS, the Office of Economic Opportunity, community action agencies, Efficiency Vermont, individuals with socioeconomically, racially, and geographically diverse backgrounds, renters and rental property owners, and a member of the Vermont Fuel Dealers Association. May receive per diems if not paid by employer. sUNSETS AFTER RULES ARE ADOPTED
    • § 8130 Severability Allows sections of the act to be severed if found unconstitutional while leaving the rest of the act intact.
    • § 8131 Rulemaking Authority Prohibits the PUC from adopting orders and filing final CHS rules with the Secretary of State without specific authorization by the General Assembly. (This is part of the checkback requirement. This section would need to be repealed for the CHS rules to take effect.)
  • Sec. 4 10 V.S.A. § 582 Directs ANR to include a SUPPLEMENTAL ANALYSIS in the Greenhouse Gas Emissions Inventory and Forecast that measures upstream and lifecycle greenhouse gas emissions of heating fuels.
  • Sec. 5 32 V.S.A. § 3102 Directs the Department of Tax to provide the PUC and DPS with information related to the fuel tax temporarily, in accordance with federal laws.
  • Sec. 6 CHS Implementation (a) PUC shall start proceeding on CHS by August 31, 2023. (b) PUC may hire a facilitator skilled in equity justice and diversity to assist in public outreach for assessing equity in delivery of CH measures, identify actions to ensure LMI better service and mitigate fuel price impACTS CALCULATED IN 8128, RECOMMEND ADDITIONAL PROGRAMS FOR lmi, PROVIDE COMMISSION INFO ON RETER CHALLENGES (c) PUC shall hold 6 public hearings or workshops and accept public comments; PUC shall invite anyone that the Equity Advisory Group recommends (d) PUC shall use funding to advertise public hearings (e) PUC shall issue draft rules and provide a 30-day public comment period on it before filing final rules with SOS and LCAR. (f) PUC shall issue final rules on CHS by January 1, 2025; the rules shall go to the General Assembly for review and they cannot take effect until the General Assembly enacts specific authorization to do so; Parts of the statutory rulemaking requirements are waived in order to accomplish this. After the first set of rules are adopted, the PUC shall use regular rulemaking to update them. (g) PUC shall hire the consultant for the clean heat credit system by January 15, 2023 (h) By fEB. 15, 2024 PUC shall report to Legislature suggested revenues streams to fund CHS program (i) Reports. PUC shall submit reports and testify to committees of jurisdiction on Jan 15, 2024 and 2025 on progress and estimates of potential price impacts (j) Other State agencies shall assist PUC with economic impact analysis
  • Sec. 7 Appropriations (a) PUC- new positions: 1 Staff attorney, 1 analyst, and 1 limited-service analyst (b) $825,000 to PUC for new positions and costs associated with developing CHS (c) DPS- new positions: 1 Staff attorney; 2 analysts (d) $900,000 to DPS for new positions, potential study, and costs associated with developing CHS
  • Sec. 8 Effective Date- on passage

TIMELINE

  1. January 1, 2023 Actions taken are eligible to be registered as clean heat credits once system is created (early action credits) § 8124 (c)
  2. Sometime between May-July 2023 S.5 enacted; takes effect on passage funding and positions available to PUC and DPS Sec. 6
  3. July 1, 2023 PUC opens a proceeding to establish default delivery agent credit costs; DPS conducts potential study § 8125(e)
  4. July 1, 2023 Dept of Taxes provides fuel data to PUC § 8124(b)
  5. August 31, 2023 PUC commences proceeding to write CHS rules Sec. 6 (a)
    1. PUC may hire 3rd party consultant/facilitator for public engagement Sec. 6 (b)
    2. PUC holds 6 public hearings and workshops on CHS rules Sec. 6 (c)
  6. January 15, 2024 PUC hires 3rd party consultant to establish clean heat credit registry Sec. 6 (g)
  7. January 31, 2024 Entities that sell heating fuel in VT must register with the PUC § 8124(b)(1)
  8. February 15, 2024 PUC reports to Leg on status update on development of CHS rules including economic analysis; PUC reports to Leg on suggested funding source for CHS program administration Sec. 6 (i) Sec. 6 (h)
    1. PUC hires consultant to develop emissions schedule for clean heat credits; appoints TAG § 8128; 8129
  9. June 1, 2024? PUC appoints/contracts with DDA § 8125(b)
    1. PUC issues draft rules for public comment Sec. 6 (e)
  10. January 1, 2025 PUC establishes rate of decrease of the acceptable carbon intensity value of clean heat measures for 2025-2030 § 8127(f)(2)
  11. January 15, 2025 PUC submits proposed final rules to Leg; rules cannot take effect until the Leg enacts via bill authorization for the PUC to adopt the rules PUC reports to Leg on status update on development of CHS rules including economic analysis
  12. * could be May-July 2025 Legislature enacts law authorizing PUC to file final rules
  13. When rules approved by the Leg PUC submits proposed final rules to Secretary of State and LCAR Sec. 6 (f)
    1. LCAR reviews final CHS rules During which they will review whether the rules are: beyond the PUC’s authority, within the legislative intent, arbitrary, stylistically sound. It will also review the required environmental analysis and economic analysis. Sec. 6 (f)
    2. August 31, 2025 PUC reports to Leg on any rules adopted § 8124 (h)
  14. When rules approved by the Leg dictate CHS goes into effect
  15. August 31 every year after Annual report to committees of jurisdiction on CHS program § 8124 (h)
  16. January 1, 2030 PUC establishes rate of decrease of the acceptable carbon intensity value of clean heat measures for 2031-2050 § 8127(f)(2)

WITNESSES:

HEE heard from more than 40 witnesses in our committee. These witnesses included representatives from the Vermont Fuel Dealers, The Agency of Natural Resources, the Department of Public Service, the Public Utility Commission, The Vermont Department of Taxes, The Attorney General, members of the Climate Council, advocates for Vermont businesses, environmentalists, housing developers, LMI advocates and others.

VOTE:

The vote out of our committee was 8-3 and we ask for the bodies support

Questions:

  1. How many fuel dealers are there?
  2. List of GHG Inventory fuels included in this bill:
  3. What happens if the legislature doesn’t act?
  4. Why would any fuel seller stay in Vermont?