The House Environment & Energy Committee picked up S.5 again on Wednesday with testimony from Matt Cota (Lobbyist, Vermont Fuel Dealers), who shared that the “first misconception” being repeated is that this bill only affects large companies. Big companies are not the ones the bill obligates to buy credits, according to Cota. It is not size, but rather who owns title to the fuel when it crosses state lines that determines who is required to buy the credit; that could be a large company or a tiny company, a wholesaler or a dealer. Small dealers who are geographically located near borders are going to be disproportionately tagged as obligated parties.
This idea for a “standard” applied to thermal sector heating fuels has never been tried before, he claimed. It is not comparable to gasoline/motor fuels. He pointed to a “major fundamental difference” between carbon pricing motor fuels and heating fuels – when you sell motor fuels, people come to you, but when you sell heating fuels, you go to the people.
He also believes the bill does not do a good enough job of segregating fuel use for thermal purposes from other uses, such as powering farm equipment, electricity generation (i.e. propane or diesel generators), and cooking. He recommended restricting the obligations of the bill to just thermal usage.
Some types of homes, like mobile homes, may require above ground fuel tanks which necessitate the use of Kerosene to alleviate cold weather performance issues. In many cases these are the same homes that can’t have an electric heat pump because they create a vulnerability to freezing pipes. He recommended either exempting kerosene from the Clean Heat Standard (CHS) or allowing some sort of swap to a cleaner fossil fuel for these types of homes.
Cota also spoke to fuel assistance issues, saying that if the S.5 would undermine the state’s ability to provide fuel assistance to low income Vermonters. By raising the cost of fuel, the state would have to buy fewer gallons of fuel for those who need help. In order to prevent that, the legislature would have to separate the cost of the fuel from the cost of the “credit.”
He acknowledged that there is an open debate about the price increase to fuels in question. Estimates ranging from 70 cents to 4 dollars have been offered. He suggested that they could end that debate by setting a cap on the cost per gallon of fuel.
He also pointed to issues with the Default Delivery Agent (DDA) model, which currently requires quarterly payments and is cumbersome for businesses that sell most of their product in a 90-day period over the winter. Additionally, he called the 4x penalty unfair and believes it would likely be more than the cost of the fuel. “It would kill a business,” he claimed.
There were also questions that Cota raised around the DDA and what happens if they fail to do their job. Currently there is no penalty in the bill for this. He also believes that the Public Utility Commission is the wrong regulator for this because they do not understand the industry they are being asked to regulate.
Further, he noted that a third of the fuel trucks that deliver in Vermont “do not have green plates!” Because there is no money in the budget to enforce the borders, he argued this would create an unfair competitive environment for local companies while being advantagous for out-of-state businesses.
Representative Patt asked how they might push responsibility “upstream.” Cota said that the ideal solution would be “at the well,” but we can’t do that in Vermont, which is the problem. The next best solution would be to make wholesalers the obligated parties, but this can’t happen either because not all wholesalers operate inside the state. He didn’t know if there was a way to fix this outside of a regional approach.
Chairwoman Sheldon asked if there were members of the Fuel Dealers Association that supported the bill. Cota responded that the large companies and utilities and Efficiency VT (who is a member) supported this legislation. It is the small companies that do not support the bill.
Sheldon then asked if it was possible to separate thermal heating use from other uses (farm equipment, cooking, power generation, etc.) Cota thought that it was in some cases. For example, exempting dyed diesel (which has specific uses). However, it’s more complicated for gasses (like propane) which can be used for cooking or electric generation as well as thermal heating out of the same tank.
Tony James (James Plumbing & Heating) was the next witness. He was adamant that there is not enough workforce to meet the heat pump demand required by S.5, saying “there is no way” fuel dealers could meet their credit obligation by installing heat pumps. The way the bill is written, it would put his company out of business in 3-5 years, he claimed.
“I recommend to my heat pump customers that they shut off heat pumps at 33 degrees,” he said. While some customers may get better results than that, he “won’t set people’s expectations higher than that.”
He also pointed out the border disparity issue, saying that he would have to “pass on whatever the cost impact of buying credit to my customers.” However, the “folks delivering fuel from across the border in New Hampshire are not paying those extra costs so can charge less for fuel” he stated. It is possible that many customers will switch to New Hampshire firms and some Vermont firms may relocate across the border.
Representative Smith asked, if customers go into New Hampshire with 50-gallon drums, buy their heating fuels, and come back to Vermont. James had heard some people say that’s what they’re going to do. That would be legal, and he commentated that “customers are up in arms about this. This is insane!”
“People can’t afford this bill,” James pleaded. “Please vote down S.5. Nobody has asked the people who do this work for our ideas about how to make a system work.” He believes, if this bill passes, a lot of Vermonters will be switching to heat with cord wood. This could be dangerous as house fires are already on the rise due to high heating fuel prices and increasing the amount of wood heat could contribute further to this, according to
Fred Percy (Fred’s Energy) shared that he has 15,000 customers and is the second largest dealer in Vermont. “If we start putting heat pumps in low-income Vermonters homes, that’s a great thing,” he said. But he believes customers won’t service or replace them because they can’t afford it. “That’s just a sad reality,” he noted. Instead, he prefers cutting fuel and costs by putting in new and more efficient fossil fuel systems. He believes S.5 should allow for this.
He provided several examples to the Committee where heat pump installations failed for a variety of reasons; largely due to cost of installation, operating costs, reliability issues, and architecture that doesn’t support them.
“The labor problem is real,” he added. “There are a lot of people installing heat pumps that have no clue as to how to service them. It’s not hard to install one, but to fix one can be very complicated.”
Smith asked if heat pumps also provided air conditioning. Percy confirmed that they did, but “now people are using more energy by air conditioning in the summer.” He noted that the power companies were the ones who benefited from that.
One of the issues with electrifying home heating is that often the house needs an electrical panel upgrade to handle the increased load, and in some cases the wire from the box to the house needs to be upgraded as well, and even the transistor on the pole that feeds the box needs to be upgraded at times.
Stenger was the next to speak. His company is located in New Hampshire, but he has some facilities in Vermont. While he’s not a Vermont voter, he is a Vermont taxpayer. His tax footprint is nearly equal between the two states. Between his businesses, he works in four different states. “Vermont is the most complicated and expensive to do business in,” he claimed. When he purchased a business in Vermont in 2009 and had to sell it because of the cost and complication. He’s “not proud of that,” but “it’s the reality” he claimed, commenting that the legislature should work on this.
He shared that they have a mutual goal to be good stewards of the environment. Simple Energy has 90 employees and provides full-service HVAC and energy products, not just oil/propane.
“The energy sector has been transitioning without you,” he claimed. There is an appetite in the market for getting away from the volatility of fossil fuel prices. He shared that they are “adapting and diversifying” their company in response to customer demands. Propane and installing heat pumps are the two biggest growth areas in the business.
He opposes this bill because “we have to confront our reality.” He claims he “embarked on a one-year study of this issue” to understand the perspective of people who support this bill. He noted that the sense he’s gotten from interactions with legislators and regulators is there is “not a lot of interest in compromising.”
He also voiced frustration that “it is not responsible to say we are going to get away from all fossil fuels” and “constituents are largely unaware of what is happening.”
Representative Patt commented that he hears a lot about heat pumps, wondered if advanced wood heat was an option. Stenger said that he loved wood heat, but there is a technical density argument against wood heat. It’s not inexpensive, but it is very laborious (having to feed 20-pound buckets of wood chips regularly into the boiler). “It’s not for everybody,” he said.