Utilities tell Natural Resources & Energy committee S.65 risks duplicating roles, raising costs for customers

Officials from Vermont Electric Cooperative and the Vermont Public Power Supply Authority told the Senate Committee on Natural Resources & Energy on Feb. 18 that S.65’s proposal to shift certain electrification and demand-management responsibilities from distribution utilities to the state efficiency utility could duplicate effort, raise costs for customers and leave distribution utilities exposed to penalties under the state Renewable Energy Standard.

The committee heard testimony from Antoinette Cohen, who identified herself as a representative of Vermont Electric Cooperative, and from Ken Nolan, general manager of the Vermont Public Power Supply Authority (VEPSA). Cohen told the committee: “Who should do this work? … Really important to identify who should be responsible and even as important, if not more so, who should pay for this work.”

The bill before the committee would expand the efficiency utility’s role to include activities described in S.65 as “beneficial electrification, storage and flexible management,” language that witnesses said overlaps with current distribution-utility programs. “We collect about $5,000,000 a year over to the efficiency utility,” Cohen said, arguing that the distribution utilities already run many electrification and demand programs and that those funds could be used more efficiently on distribution-side projects.

Nolan described VEPSA’s statutory role and the services it provides to smaller municipal utilities, saying: “We were created to help the small utilities in Vermont reach economies of scale.” He noted the potential for confusion and added administrative cost if two different entities pursue similar incentives: “There’s already tension between the utilities doing Tier 3 work and the efficiency utility doing work with its TEPF funds where they’re also trying to do carbon reductions.”

Both witnesses said distribution utilities in Vermont already operate programs that promote fuel switching and reduce fossil fuel use under Tier 3 of the Renewable Energy Standard. Nolan described a 2022 congressional earmark that provided $1,000,000 to create a revolving loan fund for commercial and industrial fossil-fuel conversion projects, and he cited examples of utilities offering rebates and low-interest loans to support conversions.

Witnesses urged clearer statutory boundaries if the committee intends to expand the efficiency utility’s role. Cohen said distribution utilities have operational reasons to retain control of storage and active demand management programs because they “know our system” and can target interventions in ways a separate entity could not. Nolan recommended that if incentives shift to the efficiency utility, the distribution-utility Tier 3 obligation should be adjusted or reduced to avoid duplicative spending and the potential for alternative compliance payments.

Both witnesses urged the committee to take time to resolve ambiguity in the bill. Nolan specifically recommended restoring cross-utility coordination requirements that had been deleted from the draft: “It’s more important than ever that all of the utilities coordinate together.”

The committee did not take a vote on S.65 during the session. Committee members asked clarifying questions about how customers currently receive incentives; Nolan replied that, for some measures, efficiency-utility midstream incentives are combined with distribution-utility incentives “so to the customer it looks like one rebate,” even though two funding sources contribute.

Why this matters: S.65 touches program design, funding flows and regulatory obligations that affect affordability and reliability for customers, particularly in service territories with a high share of fixed-income and older households. Witnesses pressed the committee to specify who will be responsible for program delivery and who will pay for new carbon-reduction programs before the legislature changes statutory roles.

The committee indicated it will continue drafting and expects further conversation with utilities and stakeholders before any final action.