Wednesday

The Committee began marking up S.5 on Wednesday. Chairwoman Sheldon asked if cooking was included in the definition of thermal sector and therefore covered under the bill. Legislative Counsel confirmed that it was included and transitioning from gas to thermal induction stoves in restaurants qualifies for credits.

Representative Smith asked what the best way for someone from his income bracket to save money and lower greenhouse gas (GHG) emissions would be. He wondered if this might be to switch from an old boiler to a new more efficient boiler, but he would get no credit for that under the bill.

Representative Stebbins replied that the concept is to motivate people to take an action that they otherwise wouldn’t take. Getting a new boiler is what you would do anyway, so that’s not “what this bill is about.”

Representative Patt suggested he could get a pellet boiler. Smith argued that seemed discriminatory if he couldn’t afford $15k to upgrade to electric.

Representative Torre commented that “most of us don’t know when our boilers or furnaces are going to die, but we can do weatherization at any time.” The focus should be on that, she argued.

Representative Morris added that even if you switch to a heat pump, you’re still going to need to replace the boiler because you need a back-up heating source.

The PUC has the authority in the bill to pause or adjust the requirements of the Clean Heat Standard for up to 36 months for “good cause.” Smith questioned if this was here in case the “program failed.” Legislative Counsel replied that it was is a safeguard in case market conditions temporarily do not allow for enough clean heat credits to be generated. For example, if workforce or supply chain shortages create a bottleneck. There was some debate about how that circuit breaker would work in practice.

Moving on to the low-income requirements, the Committee debated language defining a “customer with low income.” The current draft would set this at 60% of the area or statewide median income, whichever is greater. This would qualify a customer for a low-income energy subsidy. 16% of all credits generated must go to this group.

It was noted that federal dollars are already going to customers eligible for low-income energy subsidies in order to “prime the market” for the introduction of this credit system. There was some debate about whether this should be called out explicitly in the bill. Representative Sibilia argued that it was “spelled out that early credits are available,” and that federal monies are being used to fund Clean Heat Measures (CHMs), which are activities that generate credits such as weatherization or installing heat pump. However, she was adamant that federal money does not “stand up” this program.

The latest draft also struck out the requirement for the Public Utility Commission (PUC) to consult with the Equity Advisory Group while developing the rules around the Clean Heat Standard (which has been removed from the bill by request of the Racial Equity Office). It also changes the penalty for failure to purchase credits from 4x to 3x of the original credit amount. It also allows the PUC to waive the penalty altogether if the obligated party made a “good faith effort” to acquire the required credits or they roll the deficit forward to a future year.

NOTE: The committee later put the Equity Advisory Group language back into the bill.

Morris commented that their intent is not to put fuel dealers out of business, and this still may do that. He was still not comfortable with this language. Legislative Counsel noted that the cost of a credit is still unknown, therefore we also don’t yet know what 3x of a credit is.

Smith again voiced that they should wait to vote on the bill until we know what that cost is. Specifically, he pointed to the concern that the cost to execute CHMs for low-income households will likely cost more. In the bill, the Default Delivery Agent’s “schedule of costs” include “sufficient costs to deliver installed measures and shall specify separately the costs to deliver measures to customers with low income and customers with moderate income.” This implies that the cost will be different to install CHMs for low- and moderate-income customers, which is what Smith was getting at.

There was also new clarifying language around ownership of Clean Heat Credits where credits generated “the default delivery agent on behalf of an obligated party are creditable in future years.” This means that credits do not have to be used to meet the obligated party’s current obligations, but rather they “shall be owned by the obligated party,” and are able to be used to meet obligations in future years.

Logan asked if the potential study would look into the future of biofuels in the state. She would like it to. Legislative Counsel clarified that it did not, but the Technical Advisory Group was supposed to review the sustainability of CHM, so that might cover what she was asking.

Also of importance is that the new draft changes “may” to “shall” include the items on the list of credit-generating activities named in the bill. This means that only activities listed may generate credits. “Line extensions that connect residential, commercial, or industrial facilities with thermal loads to the grid,” was also added to the list.

NOTE: This ties the PUC’s hands about what activities they can offer credits for. The Senate had left the “may” language there so that future technologies could be accounted for.

Thursday

The Committee reconvened on Thursday to review Draft 3.1, which included their edits from the day before.

Smith asked if each gallon of fuel sold in the state was going to be monitored and wondered if it would be illegal for someone to go out of state to buy their fuel. Legislative Counsel clarified that it would not be illegal.

A new section was added regarding LIHEAP, as suggested by Sibilia. “The Margin Over Rack pricing program for fuel assistance shall reflect the default delivery agent credit cost established by the Commission.” She explained they don’t want to disincentivize fuel dealers’ participation in LIHEAP. This language is based on suggestions from Matt Cota and the fuel dealers. Legislative Counsel added that this provision creates a set price so that fuel dealers will participate in LIHEAP. Otherwise selling that fuel to LIHEAP customers would create a credit obligation for the fuel dealer that they would actively avoid.

New language also tasks the TAG with “calculating the savings associated with public health benefits due to clean heat measures,” which Stebbins explained was related to swapping out gas stoves for electric. The public health benefits that would be realized are associated with claims that gas stoves cause asthma.

Torre agreed this was important but noted that it seems to be outside the purview of the TAG, as they are supposed to be focused on GHG reduction. After some debate the Committee decided to keep the language in.

Morris brought up the penalties section again, saying “I still would like to advocate for lowering the penalty threshold.” Stebbins that they “aren’t trying to put people out of business.” Smith commented that may not be the goal, but the bill will “regardless of the language.” Sibilia chimed in that she was okay with a “double penalty” (meaning a 2x penalty instead of the current 3x) as it “shows good will” to the fuel dealers.

The Committee reached consensus that would change the penalty to double the cost of the credits.

Moving on, Representative Bongartz flagged that he still has a problem with the mutually exclusive nature of allowing the PUC to implement a “downward adjustment” in the credit requirements “for good cause” while at the same time can having a “material impact” on meeting GHG reduction goals. You can’t reduce the requirement, he argued, and not impact meeting the goals.

Logan pointed out that the Global Warming Solutions Act (GWSA) goals don’t change, therefore they “would have to reduce” to increase reductions elsewhere if they don’t occur in the thermal sector. When asked, Legislative Counsel noted that this section was a “teetering balance” between what the bill is going to cost while still needing to meet the requirements.

Bongartz suggested changing the language to having “the minimum impact possible on the state’s ability to comply” with the GWSA goals. The Committee agreed to that language.

After a break, the Committee returned that afternoon to review Draft 4.1 , which reflected the changes they made that morning. In summary, the new draft changed:

• The penalty amount from 3x to 2x of the credit amount.
• The language regarding an application by an obligated party to retire credits on their own, a Default Delivery Agent may not “unreasonably” withhold such approval. 
• The flexibility for the PUC to adjust requirements based on real world conditions as long as they have the “minimum impact possible” on GWSA goals.
• The LIHEAP pricing language.

Sibilia motioned that the new approved by the Committee; Patt seconded.

Smith noted that the bill has “good intentions,” but he believes it’s “too confusing.” Based on the testimony that the Committee took, the bill is “not ready for prime time” in his opinion.

Representative Clifford also believed that there were “too many unanswered questions.” Livelihoods are at stake, he noted. Also, he doesn’t think that the PUC understands the bill, or “wants anything to do with it.”

The Committee voted 8-3 in favor of the bill; with Smith, Clifford, and Morris voting no.

*A previous version of this report inaccurately indicated that the House had undermined the Senate's check-back provision. The language in question was inserted by the Senate, not the House. However, the language is still concerning and CFV will continue to advocate for it's removal.