Poorly Conceived, Ineptly Written, Act 18 Requires Full Repeal

Part 3: PUC report lays bare why Clean Heat Standard is totally unworkable.

Follow BTL on Facebook, on TwitterX, and on YouTube.

After eighteen months of attempting to build a governing structure for the Clean Heat Standard, the Public Utilities Commission concluded, “…that this program is not well suited to Vermont.” It’s expensive, complicated, and, as they illustrate over a dozen pages in section X of their report, Problems with Current Clean Heat Legislation, so ineptly written and conceived as to be unworkable.

Here’s a big problem our esteemed lawmakers failed to consider when writing this law that is supposed to reduce the “lifecycle CO2e emissions” from the thermal sector: per the PUC, “[T]here is no such thing [emphasis added] as the ‘thermal sector’s lifecycle CO2e emissions.’ Pursuant to Section 8123(13), ‘thermal sector’ has the same meaning as the ‘Residential, Commercial and Industrial Fuel Use” sector as used in the Vermont Greenhouse Gas Emissions Inventory, and the Inventory does not measure emissions on a lifecycle basis. We recommend that lawmakers clarify the intent of this provision.” Yeah, how’d that one get passed the goalie!

Also, “…. Because the ultimate end-use of the fuel is not known to the seller, there is no way for sellers of fuel to know which gallons were used for space heating or some other use. This adds another element of confusion to the definition of “heating fuel”. Yes, a law that seeks to regulate heating fuel but, due to its weird complexity, can’t define “heating fuel” is a pretty fundamental problem with the law.

Here's another big swing and miss. The Clean Heat Standard requires a thing called the Default Delivery Agent (DDA) to be the on-the-ground-in-the-field entity responsible for ensuring that the work necessary to meet the objectives of the law gets done. The – we’ll call it a glitch – here discovered by the PUC: nobody in their right mind (or wrong mind either it would appear) wants the job for several sound reasons stemming from the ineptly crafted Act 18.

First, the PUC report notes that the legally specified timeline for designating a DDA is not feasible “…because it seems improbable that any entity would expend the resources necessary to respond to a solicitation seeking a DDA, absent a clear direction from the Legislature that the Clean Heat Standard is going forward.” And,

…we believe there are material upfront costs to standing up a DDA scope of services, including staff time and investment in the organizational infrastructure needed to execute its charge. There is no current mechanism to fund such an entity, other than payments from obligated parties to the DDA. To cover those start-up costs, the DDA would need to collect funds from obligated parties for some period before the DDA could implement programs that would achieve thermal sector emission reductions or generate clean heat credits on behalf of obligated parties. Presently, there is no funding available to cover these costs.

Yes, our genius lawmakers designed a program that required the start-up costs for the program be generated from the program itself before the program exists. And they did this without providing a time machine. You can’t make this stuff up!

Another problem unsolvable without a time machine: “As currently conceived, the DDA must propose programs and budgets before it knows how many obligated parties it will serve.”

So, financially untenable, logistically unworkable, it’s not a shock that nobody is jumping to take on the legal and financial jeopardy of doing THE job, without which there can be no Clean Heat Standard.

The other key players in the Clean Heat Standard are the “obligated parties,” those fuel dealers and/or wholesalers required to create or buy clean heat “credits” for the privilege of selling their products. But there are major structural problems in Act 18 dealing with these folks too, like it’s not clear who the parties are or how their obligations can be calculated. You know, minor details like that.

…it has become clear that the identification of obligated parties through existing mechanisms and using the current statutory definitions is untenable [emphasis added], and further, that the determination of which fuel dealers are obligated parties is likely to change on a yearly basis. For example, Company A imports 10,000 gallons of heating oil from New Hampshire into Vermont. Company A delivers 5,000 gallons of heating oil to its Vermont customers, sells 2,000 gallons to Company B and 1,000 gallons to Company C, and stores 2,000 gallons of oil for later use. Company B delivers 1,000 gallons to customers in Vermont and 1,000 gallons to customers in Massachusetts. Company C does not register or file a report with the Commission.

If you really want to understand just how convoluted and unworkable Act 18 is, re-read that last paragraph a few times, and try to imagine the size and cost of the bureaucracy that would be necessary to untangle this knot – if it could ever be untangled. And this mess is just in regard to the fuel dealers who register with the PUC as required. But…

The Commission identified 195 potential registrants from the fuel dealer data that had not registered with the Commission for 2023 heating fuel sales as of September 2024. While there may be opportunities to investigate and track down these entities in future years, the Commission did not have the time or resources to pursue unregistered but likely required-to-register entities in this initial registration year.

Making the “obligated party” confusion even more absurd, the way our lawmakers wrote Act 18 anyone who gets their little barbeque grill propane tank filled in New Hampshire (or any other state) and brings it back into Vermont for use is, by legal definition, an “obligated” fossil fuel importer, required to registered with the state and obtain “credits” before you cook up that cheeseburger. Or they can hit you with $10,000 fines for not doing so. Of course, this wasn’t what the folks who overrode the Governor’s veto of this law intended, they’re just incompetent. Nevertheless, that’s now the law.

Speaking of registration and the glaring absence of a time machine, the PUC notes that given the way the law is written, “It is not possible to process the fuel dealer registration data, set each obligated party’s annual requirement, and review and approve compliance plans before the beginning of the compliance year.”

Which brings us to the last key pillar of the Clean Heat Standard, the credit trading platform. This would be the SEC compliant commodities trading “bank” where clean heat measures are turned into “credits” that are given a monetary value, where ownership is established, and they can be bought, sold, and retired. Of this, the PUC politely “declines to include additional requirements or details about a trading platform at this time. If the CHS moves forward, the Commission will develop additional details related to the trading platform.” Yeah. This thing is so bat-crazy complicated they didn’t even touch it, and, with their recommendation that the legislature not adopt the CHS, clearly hope they never have to.

So, quick recap: Act 18 is so structurally and conceptually flawed that it doesn’t clearly define heating fuel, isn’t able to identify all (or even half) of the estimated number of obligated parties it seeks to regulate, isn’t able to accurately calculate what the parties’ obligations are, can’t attract an entity willing to run the operation on the ground, hasn’t even considered how to manage the trading platform necessary to have a clean heat credit market, and lacks any revenue source for funding the startup of the program that doesn’t require a time machine to collect.

It can’t be fixed. It can’t be tweaked. It can’t be left in place. Act 18 must be fully repealed. Lawmakers, do it now!

• Rob Roper is a freelance writer with 20 years of experience in Vermont politics including three years service as chair of the Vermont Republican Party and nine years as President of the Ethan Allen Institute, Vermont’s free market think tank.

---

Click that ♡ button, please. And don’t forget to subscribe and share. I’m grateful for your help with growing the BTL audience!