I know you have received many communications against Senate Bill #5.  I also understand the need to pass legislation that leads to a reduction in greenhouse gas emissions. It is my sincere wish that the heating fuel and heating service industry could have worked with the Senate Natural Resources Committee on a plan that makes sense for their customers. Unfortunately, that did not happen. 

It is true that the largest fossil fuel sellers and utilities support  S.5. In a complicated and convoluted credit exchange, they have all the advantages. If S.5 becomes law, Judy Taranovich, the owner of Proctor Gas, will be a new source of capital for these large for-profit businesses. Since Judy buys some fuel in the state of New York (and takes title of it when it crosses into Vermont) she is by definition an “obligated party.” She will be required to purchase credits in a “Credit Exchange” constructed by the Public Utility Commission in competition with the largest fossil fuel sellers, for-profit corporations, and electric utilities. We don’t know if Judy will pay 70-cents or $4 a gallon for these credits, because the PUC determines the rate based on what they deem necessary to comply with the 2020 Global Warming Solutions Act. Whatever the cost, Judy will have to pass it down to her customers if she wants to stay in business.  As will more than one hundred other locally owned, small family fuel dealers just like Proctor Gas.

Who will Judy buy credits from?

The legislation explicitly allows for-profit companies operating anywhere in the state to sell credits, including the utilities themselves. Under the regulatory scheme created by S.5, someone living in a mobile home in Northfield could be paying an extra $1 a gallon for kerosene (the “credit cost”) and this money could flow directly to a business that installs an electric heat pump inside a 3000 square foot home in South Burlington. There is no affordability or equity for the family in Northfield. Only higher heating bills. 

Creating a credit marketplace, corralling the obligated parties and enforcing compliance is a complicated and expensive endeavor. S.5 asks for $1.2 million in FY23 just to figure out how to get the program off the ground. Constructing an exchange where the big utilities and the small fuel dealers buy, sell and swap “non-tangible commodities” called ”Clean Heat Credits” is estimated to cost an additional $1 million just to build. The PUC has not identified how it will be funded. Nor have they identified who the obligated parties are, where their fuel comes from and how the credit market will be enforced.

This is a problem. 

Unless DMV’s enforcement division is at the borders and on every rural road making sure that trucks carrying heating oil, propane and kerosene are registered with the PUC, compliance will be extremely challenging. How will the PUC insert its authority in a private transaction between a homeowner in Lyndonville and a truck driver from Littleton? S.5 anticipates that trucks that the PUC has yet to identify, that come across the border freely at all hours of the day, will somehow make quarterly payments to purchase credit obligations based on the gallons they sold the prior year.

Who loses in this scenario?  

The consumer. Vermonters may decide to go with the fuel dealer from across the border that has no credits but a much lower price. The fuel dealer that complies will lose market share and volume. While the PUC may eventually figure out who is non-compliant, it will be too late. The heating season will be over and the honest dealer will be forced to sell or close. In rural areas of Vermont, consumers will have fewer choices. This is not an affordable or equitable plan.

Our fuel dealers live and work in Vermont’s small towns. They are already installing high efficiency oil, gas, wood and electric heating systems in addition to selling heating fuel. More importantly, they are taking care of their neighbors. They are the locally owned family fuel businesses that Vermonters have depended on to provide heat and hot water for the past 100 years. They are the ones that are asking you to carefully consider the implications of this legislation before it becomes law. Please listen to them and their customers before casting your vote.

I testified several times before the Senate Natural Resources and Energy Committee and suggested twelve substantial changes to address these fundamental flaws in the legislation. None were adopted.  You can watch my testimony here

Since these concerns were not addressed in the legislation, I encourage you to vote no on S.5.

Thank you for your consideration.

Matt Cota