March 16, 2015

Vermont House Approves Major Renewable Energy Overhaul

The Vermont House on Tuesday passed a bill designed to reduce residents’ carbon footprint, despite complaints from Republicans who fear the new renewable energy targets will come at an unforeseen cost.

The House voted 121-24 to pass H.40, which puts in place a renewable energy standard requiring utilities to sell electricity from renewables and reduce the fossil fuel consumption of their customers. The bill now goes to the Senate.

RESET, as the bill is known, requires utilities to sell a certain percentage of their electricity as renewable. Some of that electricity would have to come from wind and solar farms in Vermont. The percentage increases from 50 percent of sales by 2017 to 75 percent by 2032.

The bill is likely to address a problem under Vermont’s current SPEED program that has made it difficult for utilities to sell renewable energy credits into a regional market. Without the revenue from these sales, utilities’ rates would rise roughly 6 percent statewide. It is also designed to foster the growth of local renewable energy generation and allow the state to meet its long-term greenhouse gas reduction goals.

Utilities would also be required to reduce their customers’ fossil fuel consumption — a controversial provision in the bill known as Tier 3. The law gives state regulators nearly complete discretion to determine how utilities meet this obligation.

The bill is designed to make is easier to pay for projects that reduce fossil fuel consumption. Utilities could help customers cut down on fossil fuel use by lending them money for weatherization and heat pump leases, for example. But the bill allows utilities to increase rates if they decide to meet these obligations by hiring staff or making direct capital investments.

If the bill passes, residents will be using more electricity and less oil, propane and gasoline, but House Republicans worry that shift will increase power rates.

“My constituents would have concerns that we are going to raise their utility rates, potentially, to stop them from buying fuel oil for their homes,” said House Minority Leader Rep. Don Turner, R-Milton.

The Shumlin administration estimates the proposed program will slightly reduce rates in the long term. Also, customers would purchase more electricity to power appliances, but they may save on other energy costs.

Turner is not confident in the Department of Public Service’s analysis of the rate impacts. He did not cite any studies supporting his claim, but said he has heard from residents concerned about the program’s cost.

His amendment to remove the Tier 3 provisions was defeated 42-99. He said the vote was intended to say “slow down.” His amendment, he said, would have addressed concerns from utilities in the region that have stopped buying renewable energy credits from Vermont fearing they are invalid.

“The purpose is, I want Vermonters to see that we support fixing this problem, but we’re not willing to go to the next step, which is another aggressive, very ambitious program that makes a number of assumptions that rates will be less in the future,” Turner said.

According to Darren Springer, deputy commissioner for the Department of Public Service, eliminating the final requirement of the bill — which would encourage consumers to reduce their fossil fuel consumption — would eliminate $275 million in energy savings. It would also cut in half the projected greenhouse gas reductions, reduce job growth associated with the program and create a 4 percent rate increase, he said.

Springer said the Tier 3 section allows utilities to offset their fixed costs with additional electricity sales at times when demand is already low; as a result, they can make more efficient use of the existing poles and wires. This drives down the cost to serve each customer, he said.

“It’s like a factory and you’re using two shifts. If we’re able to do heat pumps and [electric vehicles], it’s like adding a third shift in the same factory. So you’re going to get more production out of that factory,” he said. “You’re going to get more production out of the same grid. That’s a ratepayer benefit.”

The bill spurred a much broader debate about how utilities should pay for their obligations under the policy. As it stands, Vermont regulatory law allows utilities to recover money for prudent investments from their customers. But some lawmakers say this is like a hidden tax that is going to rise under the proposed program.

Rep. Cynthia Browning, D-Arlington, offered an amendment to prevent utilities from recovering the cost of certain investments from ratepayers. She said ordinary ratepayers should not have to finance projects designed to meet state policy goals.

“This new program will inevitably end up in the rate base,” she said. “I don’t consider this a good way to go forward. I like arm’s length. I don’t consider it a good thing when we impose what are essentially taxes on ratepayers to meet state goals.”

The amendment would have created a hurdle for utilities to make investments necessary to meet their obligations under the bill, utility officials say.

Another amendment by Browning would have added siting standards on energy generation projects. As the state seeks to build more renewable energy generation in Vermont, neighbors near wind and solar farms have pushed back. Residents and towns have little say in the Public Service Board Section 248 permit process. Attempts by lawmakers to change the process have been opposed by renewable energy advocates.

Rep. Tony Klein, D-East Montpelier, chair of the Natural Resources and Energy Committee, planned to take up an energy siting bill Tuesday. He agrees that the state should do more to encourage responsible development. There are at least nine energy siting bills introduced this session. A hearing on energy siting will be held March 24 at the Statehouse.

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