By Rob Roper

The Joint Fiscal Office, which provides financial analysis of bills being considered by the Legislature, weighed in on S.5, the clean heat standard bill, but in a scope limited only to what costs are specifically referred to in the bill itself. Those hoping for a more expansive exploration into what the overall impact of artificially raising the cost of home heating fuels will do to industries, individuals and the state’s overall economy were disappointed.

However, Joyce Manchester of the JFO did testify that one aspect of the bill would be “challenging” to live up to in reality: the social equity promises to protect low-income Vermonters from the spike in home heating fuel prices brought about by the requirement to purchase clean heat carbon credits.

“You can expect the price of oil and traditional fossil fuel energy sources are going to rise as the price of these clean heat credits goes up,” Manchester said. “Because the importer of oil, let’s say, will have to pay higher and higher prices to get somebody to install more and more and more heat pumps, or weatherize more homes or whatever, and they’re going to pass that higher price of heat credits on to their customers, presumably, in order to be able to pay them. … That’s the increase in the price of fossil fuels over time. And how to protect the low- and moderate-income folks who have not made the switch to energy efficient methods of heating will be a challenge.”

Rep. Brian Smith, R-Derby, pointed out that many low-income Vermonters will be unable to make that switch due to the high up-front costs to do things like install heat pumps.

Manchester countered, “So, yes. But the folks who are assigned the clean heat credits must [per the law] find a way to use 16 percent of them on low-income folks, which means they’re going to make it worthwhile for the low-income folks to install the heat pumps or weatherize or whatever. So, they may have to take a lower price than market price for that job. Right?”

Several witnesses over the past few months — from fuel dealers to clean heat measure installers to social justice activists — have testified that many if not most low-income Vermonters will require a 100% subsidy in order to make switching “worthwhile.” These subsidies can reach as high as $40,000 per household, and the revenue stream to pay for these subsides comes from the very sale of clean heat credits that will drive up the cost of fossil heating fuels.

Moreover, there are 20,000 mobile homes in Vermont that cannot under any circumstances be re-tooled to accommodate heat pump technology. These Vermonters will literally be left out in the cold paying exorbitant fossil fuel prices that they cannot escape under S.5.

Rep. Smith brought attention to another important economic reality that S.5 would create.

“So how do [these businesses that install clean heat measures] keep surviving if they don’t make the money they need to make [selling to low-income Vermonters according to the legal mandate] to keep their business operating?” Smith asked.

Manchester replied “it’s the entire business you need to think about.”

“If they’re not making money installing the heat pumps for low-income folks, they’ll either raise the prices on heat pumps for those who can pay full price, or they’ll raise the price on their oil business. Somehow, they’re going to make their business whole or go out of business,” she said.

That last option seems to be the most likely. What Manchester doesn’t seem to understand is that when you raise the price of adopting clean heat measures on “those who can pay full price” you decrease the number of people in that pool. Just because someone can afford $10,000 to undertake energy transition actions doesn’t mean they can afford $15,000, $5,000 of which is above market value to subsidize someone else’s transition. It’s an insult added to injury.

The way the cycle will play out is the more customers you price out of the market for clean heat measures, the more subsidies you need to entice people back into the market, which in turn requires higher prices for clean heat credits to pay for those subsidies, which ultimately means higher prices for fossil fuels that a large majority of low-income Vermonters will be stuck paying — either because they can’t access enough subsidies to switch, the trained labor doesn’t exist to perform the work for them, or their home doesn’t accommodate clean heat technology.

In the end, the poor will end paying higher prices to stay warm in winter in order to subsidize the clean heat transitions of those who can afford to pay some or even most of the upfront costs to switch and can access available labor most quickly.

Rob Roper is a freelance writer who has been involved with Vermont politics and policy for over 20 years. © Copyright True North Reports 2023. All rights reserved.