The Senate Natural Resources Committee took up S.5 again on Tuesday.

Main Points:

1. Fuel dealers do not like this bill.
2. Global Partners is pushing for the bill to allow swapping less efficient fuels for more efficient ones that qualify for clean heat credits.
3. PUC is pushing hard to eliminate the “tradable” credit market that has been a key part of this concept up until now, and making it so the Dedicated Default Agent is the only authorized organization that can retire credits.

Matt Cota (Lobbyist, Fuel Dealers Association) was first to testify. He lodged several objections:

1. Small businesses are working 18 hours a day to deliver fuel and don’t have the resources register in January, July would be preferred.
2. The Committee needs to better define the obligated party. The current language includes 80% of fuel retail sellers. They should consider defining an obligated party as a wholesaler rather than a retailer.
3. A better definition is needed for which fuels are included. Not clear that it’s just those intended to be used for thermal purposes. For example, fuel sold to a farmer for use in a might tractor be counted under this bill.
4. Lawmakers should cap the amount paid for credits; ex: “No more than X cents per gallon.”
5. He wants the Committee to “fix the DDA”. Ideally, he believes it should be a government agency, or at least a non-profit.
6. He also wants the Taxpayer Advisory Group (TAG) to allow fuel dealers to be more involved in the process.
7. The PUC is not the right organization to regulate this. They are not equipped to catch people running fuel across the border without complying.
8. Make the legislative check-back provision active rather than a passive (meaning the legislature would have to vote to affirm the implementation plan).

Drew Carlson (Global Partners) shared that his organization is one of the Northeast’s largest independent suppliers and operators of liquid energy terminals, as well as gasoline stations and convenience stores. They serve the energy needs of Vermonters through a terminal location in Burlington and via 95 convenience stores. Global Burlington is a key distribution hub and the only bulk liquid energy products terminal located in Vermont.

Global generally supports the principles of Vermont’s State Energy policy and believes these goals are best accomplished through performance-based programs that avoid specific technology choices. Open competition to deliver the cleanest fuels at the lowest cost will help to minimize the burden on Vermonters during this energy transition.

They also believe that there should be a special emphasis on pursuing the State’s objectives in a manner that does not disproportionality place costs on those least able to afford it. The point of obligation should be placed on the entity that brings fuel into Vermont, whether they are a wholesaler or retailer.

Many low-carbon fuel programs, such as California’s Low Carbon Fuel Standard, enable emissions reductions in the petroleum supply chain to qualify for the generation of credits, which is driving significant innovation in the fuels market. They believe Vermont should consider similar policy design.

They also believe that Vermont should engage with those who make up the liquid fuel infrastructure to craft policies and incentives, so the state can efficiently reach its ambitious 2030 greenhouse gas (GHG) emission reduction targets, as they cannot be met through electrification alone.

Kyle Landis-Marinello (General Counsel, Public Utility Commission) and Thomas Knauer (Policy Director, Public Utility Commission) reminded the committee that the Public Utility Commission (PUC) is not taking a stand on support or opposition to the bill. Their comments are directed at making the system workable.

They believe the DDA should be the primary entity responsible for retiring credits. This would do away with a system of tradable clean heat credits. You’d still have credits, but they wouldn’t be tradable. This would effectively remove the credit market all together.

There is also considerable uncertainty surrounding the DDA and how it would work. All the obligated parties might choose to use the DDA or if none of them will, so PUC can’t know how much it will cost to run the DDA. The system being contemplated is very different from how Efficiency Vermont works in this respect. They suggested it might make sense to have more than one DDA. Vermont Gas might want to be its own DDA for its customers, for example.

Again, the PUC is lobbying hard for eliminating the credit “market.” DDA will be the mandated method for obligated entitles to retire their credits.

Chairman Bray suggested that “there have been concerns about the DDA possibly being a for-profit entity,” he asked if the PUC shared those concerns. They didn’t, just so long as they have the authority to regulate and police the entity.

PUC also requested that the list of eligible measures be changed from “shall be counted” to “may be counted” to allow for new future technologies. Senator White seems worried that new technologies might displace some of the stuff on the list now; she questioned why we even need a list if we change this to “may be counted.”

At this point Senator McCormack made a stunning admission. “I don’t see how this works. I don’t understand this yet. We are asking the PUC to put together a ‘Rube Goldberg’ system,” he said. We should “never vote for a bill you can’t explain to your constituents.”

Bray fiercely objected to the “Rube Goldberg” description.

The Committee returned to S.5 on Friday to vote out the bill.

Main Points:

1. State Racial Equity Directors says the bill does not measure up on social equity.
2. Committee voted the bill out 5-0, anyway.

Xusana Davis, Vermont’s Director of Racial Equity, went through the bill point by point. Senator McCormack asked if Davis is prepared to sign off on the bill in terms of equity.

Davis responded, “I don’t think the bill in its current version quite meets the mark on equity. Simple things can be done to bring it closer, but at the end of the day I think that the implementation is really going to be – we’ll see what the commitment really is.”

She recapped her list of problems with the bill that need to be addressed.

• Re-thinking the credit system.
• Re-thinking the timing and the funding.
• Incorporating language (translation) access.
• There are privacy and data concerns.
• Defining what constitutes low income and moderate income.
• Thinking about who is bearing the benefits and burdens from regional, geographic, and demographic perspectives.
• Better understanding how frontloading versus backloading costs impacts households.
• Thinking more about people of color, not just where they currently are but also where they could be if they were able to live in other parts of the state.

Senators Bray and White argued there are opportunities to fix these issues later in the legislative and rulemaking process.

Davis responded, “I appreciate the point about there being more opportunities to perfect, and I just need to express a real concern or perhaps a warning about that. It’s now my third or fourth session in the state and one of the things I often hear from legislators is, oh yeah sorry the equity piece isn’t quite there but we’ll fix it in January. We’ll fix it later. And what that says to me is there is something that motivates us to do this that is more important to us than justice. So, the justice will have to wait….”

The Committee discussed the bill and Bray urged the Committee to “advance the bill as is” regardless of Davis’ testimony, because “we can fix it later.” McCormack suggested the committee begin work on amendments to be made on the floor.

The Committee voted the bill out unanimously in favor, 5-0. It is expected that it will head for a floor vote the week of February 27 - March 3. The bill will first go to the Appropriations Committee.