Jan 18, 2025 Legislative Update

We are of to the races! The first week of the legislative session was as active as you would expect as a flood of new legislators sought to get up to speed on big issues like education spending, health care costs, and carbon-pricing.

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Big reports landed on legislators desks relating to both education (from the Commission on the Future of Education) and the Clean Heat Standard (from the Public Utility Commission). The former was of little use to policymakers and lacked strong recommendations and clear policy proposals. This is unsurprising given the makeup of said Commission. The late start the Commission had aside, it was comprised mostly of education system insiders who benefit from the current structure and have a vested interest in protecting their piece of an ever grown pie (the Vermont Education Fund). Their strategy for years has been to make the issue look as complicated as possible to dissuade legislators from making any meaningful changes. While it is certainly complex, there are core concepts and outcomes that we can promote with the right incentive structure. To this end, we sent a letter to the Commission highlighting some of these things earlier this week that was based on our own research and experiences with Vermont education policy.

The latter report found that the Clean Heat Standard (CHS) would cost $1,000,000,000 over the next decade to administer. The Chair of the Public Utility Commission (PUC) offered a major caveat to these numbers however, the fact that it does not account for consumer costs for switching energy systems or taking on other "clean heat measures" like weatherization. The majority of these costs, they believe, will be born by consumers and not covered by subsidies. In order to fully understand the total cost of the program, you need have both pieces of the equation. What we do know today though is that the total savings from the program, including the "social cost of carbon" will be somewhere in the $1.5B over that same timeframe. So $1.5B in benefit (taken at face value) for $1B in administrative cost. Your investment advisor may have some thoughts... The PUC Chair certainly did; he stated that "we don't think the Clean Heat Standard is a good fit for Vermont." Instead, he suggested that legislators leverage exiting tools, like the energy efficiency charge, to achieve greater subsidies for low and moderate-income households to make the switch.

The benefit of such programs is that they are already in operation (so little new overhead) and they already have mechanisms in place to protect those you can't afford to pay them. Granted, increasing those costs by up to 58 cents per gallon (like the latest CHS numbers suggest) still may not be the best idea, but at least we can start moving the needle. One other important learning is that much of the PUC's estimates are based (at least in early years) on conversion to biofuels instead of swapping entire heating systems out for heat pumps. This makes the cost of conversion much lower and doesn't require additional weatherization to make heat pumps viable. Often times heat pumps are not plug and play in older homes (Vermont has one of the oldest housing stocks in the country) and require extensive weatherization and even structural upgrades before they can be installed. The biofuel approach, however, means that you can largely keep your existing heating systems in place to make the switch to renewable. Of course the electric companies and energy developers who backed the CHS don't like this approach because it means that households wouldn't be converting to their products and services as quickly in this energy transition. Don't even get us started on wood heat, which they also want to ban...

Looking to the weeks ahead, the Governor is set to announce his plans for a much-needed overhaul of our state's education system. Legislators actually seem to be eagerly anticipating his proposal (which is a departure from previous years) and administration officials hinted at certain aspects of it this week. There are also plans afoot to roll back certain pieces of the new statewide ethics law that just went into effect this month. This is a concerning move that we will watch closely. Health care reform plans will also almost certainly be on the table this year as the head of our largest insurer called health care spending "out of control" this week.

 

On behalf of Vermonters,

 
Pat McDonald
CFV President
 

 

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Quote of the Week:

“After working on this for the last 18 months, we don't think the Clean Heat Standard is a good fit for Vermont.”

 

Edward McNamara
Chair, Public Utility Commission
     

 

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