Regulators, utilities warn S.65 changes to efficiency charge could raise electric rates and shrink weatherization

At a Senate committee hearing on S.65, regulators, utilities and business groups expressed widespread concern that the bill’s proposed changes to how the state’s electric efficiency charge is used could push up electric rates and reduce funding for weatherization and other low‑income energy programs.

Tim Perrin, director of energy management at Vermont Gas Systems, told the committee Vermont Gas serves about 56,000 customers in Franklin, Chittenden and Addison counties and that the company has delivered weatherization and efficiency programs for more than 30 years. He said S.65 “introduces the potential for increased customer confusion” and that defining energy‑efficiency budgets in the bill without a preliminary potential study “does not align with the principles of least cost utility planning.”

The testimony mattered because the electric efficiency charge currently funds programs that reduce electricity demand statewide; witnesses said those investments lower long‑term supply and infrastructure costs and also generate revenue in the regional forward capacity market. TJ Poor, director of regulated utility planning at the Public Service Department, said the Public Service Department “cannot support this bill, for three real fundamental reasons,” listing (1) it would upend the foundation of efficiency work, (2) it could raise electricity costs, and (3) it would reduce prioritization of weatherization for vulnerable households.

Witnesses described how the current efficiency charge operates: money collected from electric ratepayers is used to buy energy‑savings measures that reduce grid demand; that avoided demand, in turn, can generate regional capacity payments that the state has used to fund weatherization and thermal programs. Poor and other witnesses illustrated the point with an example used in testimony: roughly $50 million collected for electric efficiency produces grid benefits that the department estimated at about $70 million in avoided supply and infrastructure costs, and diverting those funds to non‑electric programs would require utilities to replace the saved power.

Alec Gansack, director of the Energy and Efficiency Division at the Public Service Department, said a prior potential study tied to the Clean Heat Standard identified about $1 billion of cost‑effective greenhouse‑gas reduction opportunities in a year’s time for the thermal sector alone, underscoring the scale of demand for funding if the bill broadens program scope to include heating and possibly transportation measures.

Business groups and manufacturers also testified. A representative for Associated Industries of Vermont warned the bill is a “very significant” change in how programs are funded that could erode benefits for commercial and industrial customers and make Vermont less competitive. Advocacy and industry witnesses raised equity concerns as well, noting that some of the most electrified customers currently pay more of the charge while some potential benefits under S.65 could flow to less electrified customers, creating distributional tensions.

Witnesses and committee members discussed pilot programs that previously allowed limited use of efficiency funds for thermal measures and said those pilots were not equivalent to the broader authority proposed in S.65. Several senators and witnesses urged that a study or clearer drafting should precede any transfer of substantial funding authority. Committee members discussed options including freezing the three‑year budget cycle or tightening statutory language to limit unintended consequences.

The committee did not take a formal vote on S.65 during the hearing. Multiple senators said they were not comfortable advancing the bill without clearer technical language or additional analysis from regulators; at least one senator urged developing a narrower, tighter proposal that could be reconsidered quickly. Several senators also noted the bill is a priority for other legislators and that procedural options exist to move the bill on an expedited timeline if the committee can agree on revisions.

The hearing record shows a mix of technical objections from the state’s regulators and practical concerns from utilities and business groups about cost, equity and the potential loss of regional capacity revenues that currently support weatherization. Committee members asked regulators to identify the specific criteria and drafting changes they would need to support a narrower version of the bill, and several senators signaled they would consider returning to the item after further work.

Ending: The committee paused further action and requested clearer analyses and tighter language; no formal motion or vote was recorded on S.65 at the hearing.