Clean Heat Standard Legislation Advances, Cost Risks for Manufacturers and Other Customers Not Addressed

The House Environment and Energy Committee Thursday passed out S.5, which would create a Clean Heat Standard program, developed by the Public Utility Commission by 2025, under which fossil fuel sellers (those who initially own the fuel imported into Vermont for sale) would have to purchase tradable credits in order to sell non-highway transportation fuels.  They could also earn credits through supporting certain types of efficiency or fuel switching projects.  What these credits will cost is not truly known and will not be until the program is developed – as currently drafted, there is no cap on price impacts.  A very rough estimate from ANR earlier this year was that the initial price could be 70 cents a gallon roughly equivalent across fuel types, but higher estimates have been suggested.

During the bill’s development in the Senate, the language and the policy discussion focused on heating and heating fuel.  However, as written the bill would also include industrial and commercial processing fuels and the Legislature has not fully investigated or discussed the economic impact of including these fuels or the merits of including them in the first place given that opportunities to mitigate costs through efficiency or fuel switching are not available for these applications to the extent that they are for space heating.

Key Concern for Industrial and Commercial Customers

Although the House Environment and Energy Committee did adopt some amendments – or versions of amendments – offered by AIV with the support of other business organizations to try and call attention to the need to address the risk that industrial and commercial customers will not have equitable access to cost saving projects, they did not address a very significant problem with the bill for these customers.  Specifically, the bill does not allow credits for projects that switch from one fossil fuel to another.  This takes off the table support for projects, such as switching from oil to natural gas/propane, that could be the most likely options available for industrial and commercial operations, especially for processing applications.

What’s Next for Manufacturers and Others with Fossil Fuel Cost Exposure?

S.5 has now been referred to the House Appropriations Committee, which could approve the bill next week.  Should the full House approve changes recommended by the Environment and Energy Committee the bill will go back to the Senate, which will either make further changes or agree to the House version.

AIV will continue to advocate for changes to address the serious concerns of industrial and commercial customers as this legislative process continues.

However, if the bill does ultimately get enacted this year, there will be a long process before the Public Utility Commission to develop the program, and any final proposal submitted will have to be approved by an act of the Legislature in 2025.  This will also provide opportunities to try and address concerns with the bill, even if it will be more difficult if key criteria are not first fixed in S.5 before final passage this year.

Companies interested in this issue, either for additional updates, opportunities to engage with legislators, or interest in the possible proceeding with the PUC should the bill be enacted, are strongly encouraged to contact us at info@aivt.org.