Governor Scott says S.5 looks too much like climate bill he vetoed last year

Vermont Business Magazine At his weekly press conference today, Governor Phil Scott and Natural Resources Secretary Julie Moore discussed S5, The Affordable Heat Act, which is currently before the Senate.

They addressed the potential significant financial hardship the proposal could inflict to low- and moderate-income Vermonters, and the need to thoroughly plan how to make a transition to carbon-free heating alternatives – a goal the governor said he shares.

“Vermont is taking significant action to combat climate change. In fiscal year 22 alone, I asked for, and then worked with the Legislature, to secure more than $200 million for climate action,” said Governor Scott. “So there’s no confusion, I want to be clear, my Administration agrees with many of the same objectives as legislators, like reducing emissions from the thermal sector. But I firmly believe we need to help people make changes, not punish them.”

The governor agreed with the ultimate goals of reducing carbon emissions and with it cost savings, which modeling suggests will be achieved over time. But he emphasized that initial costs will be significant, especially to those who can least afford it. S5 does not directly address those startup costs which are likely much greater than the millions already set aside for heating upgrades, like weatherization and heat pumps.

For instance, the cost issue just isn't for the equipment and materials themselves. Electrical contractor Steve Richard of Richard Electric in Wilder described the cost of simply adding an electric line. For instance, mobile homes, or even regular single-family homes, may need thousands of dollars in upgrades to their electric boxes to install heat pumps and electric vehicle chargers. Then, Richard said, there is the issue of workforce. He said his firm does a lot of heat pump installation, but there simply isn't enough workforce to increase his business, and other potential jobs are already waiting for his services.

On top of the cost is the grid reliability and sources of new electricity as the state becomes more electrified. Scott said his colleagues in southern New England are concerned about having enough natural gas for the power plants down there. The good news for Vermont, he said, is that there is new solar generation and storage in-state being installed, more wind and hydro generation from Quebec could be available, offshore wind could come online and the TDI under-Lake Champlain power line from Canada is still a real possibility. Scott also wouldn't rule out for Vermont smaller, cleaner nuclear generators, which are being considered in other parts of the country.

A transcript of remarks from Governor Scott and Secretary Moore can be found below, and you can watch the press conference by clicking the image above.

Governor Scott:

Thank you for coming. We’re here today to talk about Senate Bill 5, the “Affordable Heat Act,” previously known as the “Clean Heat Standard.”

But before I start talking about the bill, I’d like to remind everyone of the actions we’re taking to combat climate change. In Fiscal Year 22 alone, I asked for and then worked with the Legislature to secure more than $200 million for climate action.

So there’s no confusion, I want to be clear, my Administration agrees with many of the same objectives as legislators like reducing emissions from the thermal sector. But how we achieve our shared goals is where there is disagreement. I firmly believe we need to help people make changes, not punish them.

Last January, my Administration was at the table with legislators, listening, engaging, and asking questions about the “Clean Heat Standard,” then H.715. But after months of discussion, it became clear that the bill was not going to get any more specific or provide the details Vermonters expected or deserve.

At that point, I clearly, repeatedly, and respectfully asked the Legislature to include language that after the Public Utilities Commission (PUC) finished designing this new strategy to reduce emissions that the General Assembly would put the PUC design in bill form, and then transparently debate the policy and costs with all the details before any burden would be imposed on Vermonters.

From my standpoint, that’s what Vermonters expect, deserve, and have a right to receive. Now, that was last year, but unfortunately, it appears we’re in the exact same situation today – at least in the Senate version.

As Governor and as elected legislators, we have an obligation to ensure Vermonters have all the details and understand the financial costs and impacts of what any policy would have on their lives and the State’s economy.

Last year, the Legislature’s own Joint Fiscal Office wrote the following in regard to the “Clean Heat Standard”:

“It is too soon to estimate the impact on Vermont’s economy, households, and businesses. The way in which the Clean Heat Standard is implemented including the way in which clean heat credits are priced and how incentives or subsidies are offered to households and businesses must be established before meaningful analysis is possible. At the same time, those incentives or subsidies could be costly for the State, suggesting larger fiscal impacts in future years.”

Again, while I support the work to reduce emissions, we’ve got to be realistic about what’s achievable, consider the very real workforce challenges we face, and make sure we don’t harm already struggling Vermonters in the transition.

As most of you are aware, I’m an advocate for the transition to electrification. I believe there will be long-term savings as a result. But we cannot ignore the fact that there are significant upfront costs which could be regressive and harmful to low-income Vermonters. A policy like this will require a lot of thought to ensure those who can least afford it are not punished because they have no real choice.

At last week’s press conference, I gave an example of the Vermonters I’m most worried about. People in mobile homes, often have above ground tanks and have to buy kerosene at $6 per gallon to prevent gelling in the winter. And if they want to electrify, they’ll need to make thousands of dollars in upgrades, and this is money they simply don’t have.

Whether it’s a retiree on a fixed-income or a single mom barely making ends meet, none can afford to pay a premium on a gallon of heating fuel, whether it’s 70 cents or even more. And they certainly can’t afford the upfront costs to upgrade their service panels, weatherize their homes, and install cold climate heat pumps.

We’re joined today by Steve Richards of Richards Electric who will talk through the logistical challenges needed to make this transition.

Again, we can’t rush into this without a well thought out plan.

But first, I’d like to turn it over to Secretary Moore to talk about our proposal and additional concerns from the Agency’s perspective on S.5, but before I do, I want to express my sincere appreciation for her dedication, poise, and professionalism.

Julie has been the target of some unfair attacks throughout this process for the simple crime of bringing up potential impacts of this policy, asking questions, and seeking answers which have been in short supply.

Now Julie doesn’t typically tout her credentials, but she’s a civil engineer and also has a master’s in environmental science and policy from Johns Hopkins University. In total, she’s served over a decade as a public servant in the Agency of Natural Resources, and in her previous stint helped lead the state’s efforts in cleaning up our waterways which she’s still championing today.

She’s a true expert and unlike some who are leading the charge on the so-called “Clean Heat Standard” she has nothing personal to gain from it passing, or not passing. She just wants to help get this right.

That’s all we’re asking for. We need the Legislature to fully understand the impacts of this bill, and then be honest with Vermonters about those very real costs and complications. That’s it, that’s our request.

So I’ll now turn it over to Secretary Moore to recap the testimony and advice she’s been providing to the five members of the Senate Natural Resources Committee over the last six weeks.

Secretary Moore:

Over the past several weeks, there has been considerable criticism of the cost estimate I provided for the Clean Heat Standard legislation.

I stand by my cost estimate and, perhaps more importantly, the principles it represents – that government has an obligation to be honest about benefits and costs, and that Vermonters deserve transparency from government.

Transitions cost money, real money. To date, my concerns and my cost estimate have been largely dismissed by the Legislature and advocates as “scare tactics.” This is unfortunate. My goal in developing a ballpark estimate was to highlight what was missing from the discussion – careful consideration of the upfront cost of making big changes in how we heat our homes.

The fact is that while there have been numerous studies on the need to address carbon emissions generated from building heat, there has not been a detailed evaluation of the Clean Heat Standard, how it would apply to Vermont and what the near-term cost impact will be on Vermonters. We raised this concern a year ago and the groups advocating for the program declined to study this important issue.

If such work had been already completed around the Clean Heat Standard we would have the answer to the question that matters most to Vermonters: how is this going to affect my heating bill?

The simple fact is, we don’t yet know.

There is no economic study, no fiscal analysis of the Clean Heat Program, and S.5 currently contains no cost containment provisions. To be clear, I think we can know these things, but it will take a bit more time.

Despite the rhetoric, it is important to remember, as the Governor said, there is no disagreement between the Legislature and the Administration. We need to transition from heating our homes and businesses with increasingly high-priced and volatile fossil fuels.

Transitioning how we heat our homes won’t be easy. It is complex. It requires significant investments and, done poorly, will disproportionately affect those least able to afford it, because as the cost of fuel rises – as clean heat costs incurred by fuel dealers are passed along to consumers – fuel assistance benefits will not go as far.

My team at ANR has contracted with Hinesburg-based Energy Futures Group to gather more data points and complete needed technical analysis to better understand price impacts and support a thoughtful program design. This work includes:

  • Assessing the opportunities to take advantage of the tens of millions of dollars in federal programs to support things like weatherization and installing heat pumps.
  • Undertaking technical analysis of policy options for clean heat that evaluate:

o The full cost of implementation, regardless of how much of the cost is born by fuel suppliers, individual homeowners or government.

o Price impacts, by fuel type and rate impacts on natural gas and electricity.

o Savings because of changes in heating fuel and electricity consumption.

o And knowing that costs and savings may not be distributed evenly across Vermont households – looking at differences between urban and rural, by income level, and impacts on the commercial/industrial building heat.

o The need for supporting policies – such as residential electrical service upgrades and improvements to grid infrastructure – that are critical to implementation.

This work is on track to be completed in June; absent this sort of work, legislators are voting for an idea, not a plan. And there are real risks in acting hastily.

I want to close by saying, I care deeply about supporting meaningful and timely climate action, environmental protection is my life’s work. And as a public servant, I feel an incredible obligation to Vermonters to be forthright and make clear that how we heat our homes is not going to be simple or free.

I absolutely believe that we can achieve the “desired future state” the Legislature envisions if we work together. It will, however, take a bit more time to do the necessary homework for something this impactful, this complex demands.

Absent this, I am concerned the Senate design will end in disaster.

3.1.2023. Montpelier