PUC delivers check‑in on Act 18 ‘clean heat’ plan; legislators hear costs, equity risks

Montpelier — Lawmakers from the Senate Natural Resources and Energy Committee and the House Energy and Digital Infrastructure Committee met Jan. 16 to review the Public Utility Commission’s (PUC) check‑in on Act 18 of 2023, the Affordable Heat Act, and to hear reports from the PUC staff, the act’s Technical Advisory Group and its Equity Advisory Group.

The hearing focused on how the Clean Heat Standard established by Act 18 would work in practice and on the PUC’s findings after 18 months of implementing tasks directed by the statute. The PUC delivered draft rules and a check‑in report to the legislature the evening before the hearing; the PUC told legislators it cannot file final rules with the Secretary of State until the General Assembly enacts specific authorizing legislation.

Sen. Anne Watson, chair of the Senate Natural Resources and Energy Committee, opened the session by emphasizing process: “This is an opportunity for us to be receiving. . . . This is not a time for us to be opining. . . . We are just receiving, we are just learning, today,” she said, describing the day as a level‑setting briefing for both chambers.

Ellen Tchaikovsky of the Office of Legislative Counsel summarized the statutory framework in Act 18 and highlighted key design elements: the Clean Heat Standard creates tradable clean‑heat credits tied to measures that reduce lifecycle greenhouse gas emissions in Vermont’s thermal (residential, commercial and industrial fuel‑use) sector; obligated parties include the state’s regulated natural gas utility (Vermont Gas Systems) and entities that import or produce heating fuels for consumption in Vermont; and the PUC must establish rules, a system of credits, and a default delivery agent (DDA) to carry out statewide work.

Ed McNamara, chair of the Public Utility Commission, told the committees the PUC’s review produced preliminary economic results and administrative recommendations and cautioned that the PUC’s work is unfinished. “The Clean Heat Standard is not fundamentally wrong program. We just don’t think it’s a good fit for Vermont,” McNamara said, stressing that the PUC’s report identifies gaps, implementation risks and alternatives for funding and program design.

Key statutory mechanics described to the committees include: - Annual credit requirements will be expressed as a percentage reduction applied to each obligated party’s prior‑year emissions; the PUC must set the first 10 years of requirements in rule and update them every three years. - Act 18 requires that 16% of an obligated party’s required credits each year come from low‑income customers and 16% from low‑ or moderate‑income customers (a combined 32%), and that half of those low/moderate credits be generated by installed measures (for example weatherization or heat pumps) rather than fuel swaps. - The PUC must appoint a default delivery agent and establish its budget; the statute directs that the PUC approve a budget for the DDA by Sept. 1, 2025. - All fuel sellers were directed to register with the PUC (the statute sets an initial registration date of Jan. 31, 2024 and an annual update by June 30). The PUC will then identify which registrants qualify as obligated parties.

The PUC presented preliminary cost and benefit estimates produced for the commission. McNamara said program costs the PUC quantified (program incentives and administration) total about $956 million over 10 years and that the PUC’s draft benefit estimate (fuel savings plus a social cost‑of‑carbon value) was about $1.5 billion over the same period. McNamara cautioned the committees that the PUC’s numbers are incomplete: participant (household) capital costs were not included in the PUC’s program‑cost total at the time of the briefing, and results depend heavily on the assumed “measure mix” (how much of the work will be heat pumps, weatherization, biofuel blending, etc.).

Advisory groups raised equity and practical delivery concerns. Mia Watson, chair of the Equity Advisory Group and special programs manager at the Vermont Housing Finance Agency, said the group unanimously warned that low‑ and moderate‑income households, renters and residents of manufactured homes face limited ability to access the Clean Heat Standard benefits without large, complementary investments. “Low‑ and moderate‑income households are at high risk of being left behind in the climate transition,” Watson said, pointing to high energy burdens, older housing stock that requires costly repairs before weatherization or heat pumps can be installed, and split incentives for renters.

The Technical Advisory Group (TAG), which provided technical input to the PUC and its consultants, presented design work on the technical resource manual and measures verification. Rick Weston, chair of the TAG, emphasized the long‑term, least‑cost framing: “Reducing emissions and reducing costs are not alternative mutually exclusive choices. In my view, they are the same choice,” he told the committees. TAG members also urged further work on measuring lifecycle emissions, public health impacts of certain heating technologies and on the structure of a credit trading system (from a simple administrative registry to a fully liquid market).

The PUC outlined a handful of administrative and policy issues it believes require legislative direction if the program is to proceed: clarify who counts as an obligated party (PUC staff told lawmakers the current import‑based definition is administratively complex and estimated roughly 90 obligated entities under current rules), decide whether to allow biofuels and advanced wood heating in the long term, and authorize funding or a mechanism for program administration and the DDA. McNamara presented alternatives the PUC discussed in their report, including a thermal energy charge (an energy‑efficiency‑style charge on fossil heating fuels) or changes to the fuel tax, as methods to generate predictable, long‑term funding for low‑income and weatherization programs.

Lawmakers asked clarifying questions about the timeline and legal limits in Act 18. Legislative counsel and PUC staff reiterated that although the PUC submitted proposed final rules and the check‑in report to the legislature, the rules cannot be filed with the Secretary of State or take effect until the General Assembly enacts specific authorizing legislation, and the statute imposes no deadline on the legislature to act. The PUC stressed some statutory deadlines remain in force even if the legislature does not approve the rules — notably the registration requirement and the Sept. 1 DDA budget step — which the PUC said could create implementation complications.

No formal legislative decisions or votes were taken at the hearing; the session served as a technical briefing and an opportunity for members of both chambers to hear the same information as the PUC continues rulemaking and stakeholder engagement.

What’s next: the PUC and its consultants will continue to refine technical manuals, lifecycle emissions data and the economic model; the committees signaled they will call for follow‑up briefings that include the PUC’s full economic modelers and representatives of entities that deliver weatherization, heat‑pump installations and fuel supply. If the General Assembly wants the PUC to move the rules forward to filing and final effect, lawmakers must pass enabling legislation; otherwise the PUC’s rule filing cannot proceed to final effect under the statute.