Clean Heat Standard (S.5) - Senate Appropriations

The Senate Appropriations Committee dove back into S.5 on Tuesday. Chairwoman Kitchel notified the Committee that it was her intention to add a study and a check-back provision to the bill.

Kitchel highlighted the importance of a “potential study.” It informs everything else, including the economic and technical feasibility of the plan. Based on Julie Moore’s testimony (Secretary, Agency of Natural Resources), this study needs to be the first step in this process, and must be added to the bill.

Senator Sears wondered, if we’re studying something, why we are putting the mechanisms in place to start requiring fuel credits. He stated that “I thought you would study it, determine whether its practical or not.”

Kitchel explained that, before the plan moves forward with approve final rules, the legislature will have a check-back. Also, she said that they, per the Racial Equity Office, they need to hear more from Vermonters who are going to be impacted by these policies. Nothing will move forward without future action by the Legislature, according to Kitchel. It’s raised a lot of questions, a lot of concern.

Kitchel invited Senator Bray into the meeting to identify some small changes recommended by the Natural Resources Committee. Bray said the two committees were already in sync on the translation services. Also, he asked for some additional language regarding securing income data collected by all parties throughout the process, and for an increase the penalty rate for non-compliance to 3x to 4x of what the cost of credits would have been. 

He acknowledged that even among those who are concerned, we know that this system is going to change over time. He agreed there needs to be a “full stop” after the Public Utility Commission (PUC) comes up with rules.

NOTE: This is a major shift from his previous comments.

Kitchel commented that she recognized the need to be in a position to maximize federal revenues from the Inflation Reduction Act, Infrastructure Investment and Jobs Act, etc. She also voiced concern that it would be difficult for the Legislative Council on Administrative Rules (LCAR), which reviews all rulemaking, to evaluate rules based on legislative intent because that intent is not clearly articulated. This is a problem.

The “Check-Back provision” prevents the PUC from filing rulemaking related to the Clean Heat Standard without “specific authorization enacted by the General Assembly.” Also, language was added requiring the PUC to submit final proposed rules to implement the Clean Heat Standard to the Legislator by January 15, 2025. This is the same language from last year’s H.715 which passed both chambers but was successfully vetoed by the governor.

Sears asked if the credit system is part of the bill that becomes law upon passage or part of the rules subject to the check-back provision. In other words, if they pass S.5 will this part become law regardless of the rulemaking process. He indicated that he can support the amendment, but not the underlying bill if the credit systems survives. Kitchel couldn’t confirm if Sears’ concern is valid or not. It is her intent that unless there is further authorized there would be no credit system, but she isn’t sure this is how it’s written.

Note: The bill allows for “early credits” to be banked, so how this happens if there is no credit system is tough to square.

Legislative Counsel recapped changes:

  1. Adds language to intent. “The Clean Heat Standard shall to the extent possible maximize the use of federal funds.
  2. Translation services will be made available.
  3. Income data collected will be kept confidential.
  4. Expand the penalty section from 3x to 4x of the credit value.
  5. “The commission shall invite organizations and communities recommended by the Equity Advisory Group” as opposed to “shall consider.”
  6. Increases the funds for DPS, the PUC for translation, and add $250K for the “potential study.”

Per the PUC’s request, $800,000 remains their appropriation. The Public Service Department will also see their allocation will rise from $400,000 to $900,000 to accommodate their request for three more positions, two analysts and an attorney. Additionally, the Racial Equity Office’s request of $25,000 for translation services is being added to the appropriation. Total appropriations for the initial phase of designing the carbon-pricing mechanism comes to $1.725M

Senator Baruth made a motion to accept the amendments, which passed unanimously.

Senator Kitchel made a motion to move the bill as amended, which passed 4-3 with Sears, Starr, and Westman voting no.

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