The legislature passed the Clean Heat Standard (S.5) into law in the Spring of this year (over the governor’s veto) with a provision that Vermonters can start banking the so-called “Clean Heat Credits” – earned by installing heat pumps, insulating buildings, etc. – retroactive to January 1, 2023.
The program itself doesn’t go into full effect until 2025. So, the geniuses in Montpelier created a situation in which folks, in order to get their early credits, are supposed to somehow file paperwork that doesn’t exist with a bureaucratic entity that is not yet in place following rules that have not been written. What could go wrong?
And, yes, this is perhaps the dumbest thing ever.
The level of dumb was highlighted in a recent letter the Public Utilities Commission (PUC) sent out in reply to a request by the Vermont Fuel Dealers asking for instructions on how to apply for/claim their early action carbon credits. The PUC is the entity charged under S.5/Act 18 with writing the rules by which the Clean Heat Standard program is supposed to work. Their letter reads in part:
On August 4, 2023, the Vermont Fuel Dealers Association (“VFDA”) and the Heating and Cooling Contractors of Vermont (“HCCV”) filed comments requesting clarity on what documentation and other record keeping will be required to substantiate early action credits pursuant to 30 V.S.A. § 8124(c). VFDA and HCCV maintain that such clarity is essential to equitable implementation of Act 18 [aka S.5] and will help to incentivize early participation in activities that are designed to reduce greenhouse gas emissions. Section 8124(c) of Title 30 of the Vermont Statutes Annotated provides that beginning January 1, 2023, “clean heat measures that are installed and provide emission reductions are creditable,” and that “[u]pon the establishment of the clean heat credit system, entities may register credits for actions taken starting in 2023.” The Commission seeks feedback on the topic of early action credits, including what documentation and recordkeeping should be maintained to allow for verification of clean heat measures seeking early action credits, and any other information or suggestions participants may have on the topic of early action credits. Any comments on this topic should be filed by October 5, 2023, with reply comments due by October 19, 2023. SO ORDERED. 09/18/2023
In other words, we have no clue. SO ORDERED!
A couple of points to highlight here. The bill passed in April after significant testimony in both the House and Senate in which the PUC played a large role. They knew way ahead of time that this was something they were going to have to deal with. They had plenty of opportunity to object to the impossible nature of the requirement, and/or to ask the legislators for clarification about how they expected this aspect of the law they were passing might to function in the real world. They didn’t.
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The PUC’s S.5/Act 18 funding ($825,000 of it) and authority came online on June 30/July 1. The Fuel Dealers and Cooling Contractors reached out in early August with their request for rule clarification and it took a month and a half (until September 18) for the PUC to even respond! And then with this lame, “We have no clue, you tell us what to do” farce. They plan on waiting until October 19th for suggestions to come in, at which point one assumes they will maybe start the process of figuring out how to bank early action credits – going on a year after people were supposed to be able to bank them.
None of this speaks well of the competency with which this program will be managed. And it is going to be exceedingly complicated.
The law (S.5/Act 18) states, ““Clean heat credit” means a tradeable, nontangible commodity that represents the amount of greenhouse gas reduction attributable to a clean heat measure [emphasis added].”
So, it’s not enough to document that one, for example, installs a heat pump. Someone from the PUC is also going to have to verify in addition to installation actually taking place, what system the heat pump is replacing, because depending upon whether or not it is a natural gas, propane, oil, or wood system the greenhouse gas reduction calculation – which is what the credit value is legally based on — will be different. Someone will also have to verify the intended use of the heat pump. If it’s primarily being used in the summer for air conditioning, for example, it’s likely adding to greenhouse gas output, not reducing it. Is the space it’s being installed into well insulated or not so much? We need to know this too.
Beyond these scientific factors, the law has “equity” components built into it as well, stating, “The Clean Heat Standard shall be designed and implemented to enhance social equity by prioritizing customers with low income, moderate income,” and, “each obligated party shall retire at least 16 percent from customers with low income and an additional 16 percent from customers with low or moderate income.” So, someone from the PUC is going to not only verify all the factors that impact the greenhouse gas reduction (or lack there of) regarding each clean heat measure, they will also have to verify the income status of the person/family/business installing the measure.
And lastly, how is the PUC going to verify who is claiming ownership of the credit? The installer? The Homeowner?
You can’t mess around with this because a “clean heat credit” is a financial instrument with a monetary value, and leaving their creation open to opportunities for fraud by making false claims will open someone(s) up to some serious legal jeopardy. The way the law is written makes every single clean heat measure is unique, and to meet the greenhouse gas reduction mandates under the Global Warming Solutions Act there must be literally hundreds of thousands of such measures falling under at least a dozen different categories of activities. This is a virtually impossible task.
So, if I were with the Fuel Dealers/Heating & Cooling Contractors, I would reply to the PUC with a reminder of what the law states a clean heat credit must be based on, and a list of every single factor they can think of that might impact on greenhouse gas emissions a clean heat measure can affect. Remind them that it’s the PUC’s job to figure out how to document and verify all this, not the dealers/contractors. And sign off with a hearty, “Good luck with it!” And, “PS, if you have any questions about how this is supposed to work, kindly direct them to the jackasses in the legislature who wrote the law the this way. Surely, they thought this all through before voting YES.” Right?
Rob Roper is a freelance writer with 20 years of experience in Vermont politics, including three years of service as chair of the Vermont Republican Party and nine years as President of the Ethan Allen Institute, Vermont’s free-market think tank. He is also a regular contributor to VermontGrok.
