Senate advances CPACE bill allowing towns to finance commercial clean-energy upgrades

The Vermont Senate on the floor advanced S138, an act to authorize commercial property assessed clean energy (CPACE) projects, after a unanimous report from the Natural Resources and Energy Committee.

Senator Hardy, the committee reporter from Addison, told colleagues CPACE “is a financing tool that allows property owners to finance the upfront costs of qualified energy, water, and resilience projects, with funding through a voluntary assessment through a town's property tax bill.” He described a three-part entry condition: a town legislative body must vote to create a CPACE district; a licensed energy analysis must show the proposed work will save energy, water or reduce greenhouse gas emissions; and mortgage holders must provide written consent so the CPACE assessment can be placed ahead of the mortgage in the property-lien priority.

The bill’s reporter emphasized municipal protections in the draft legislation, saying a municipality “shall not incur any indebtedness or otherwise [be] liable for the failure of the performance of the project, nor pledge the full faith and credit of the municipality.” That language, the reporter said, keeps towns from being financially obligated for project performance while enabling lenders and property owners to structure longer-term, lower-rate loans secured by the property assessment.

Senators pressed the reporter on cost and feasibility. The senator from Essex asked whether required energy studies could make projects “cost prohibitive.” The reporter replied such studies are standard in other states and are intended to ensure projects will deliver efficiency benefits; lenders perform their own underwriting and must consent before an assessment is placed. The senator from Franklin sought clarity on whether a municipality or voters could later opt out of a CPACE district; the reporter said towns could vote to stop creating new districts, but existing CPACE loans would remain until repaid.

Committee witnesses included municipal officials, lending organizations, the Department of Financial Regulation, the Vermont Economic Development Authority, the League of Cities and Towns and the CPACE Alliance. The Natural Resources and Energy Committee voted 5–0 in favor of the measure, and the Senate approved committee amendments and ordered the bill for third reading by voice vote.

If enacted, the bill sets an effective date of July 1 and allows towns to begin enrolling commercial projects beginning January 1 following a town vote to create a CPACE district. The bill includes provisions limiting conflicts of interest for program administrators (a lender may not also act as the program administrator) and requires lender consent before a written assessment contract is finalized.

The Senate also accepted Appropriations’ technical amendments related to program administration and funding contingencies before ordering the third reading.

The Senate will consider third reading and final passage at a later floor session.