House committee on environment and energy energy and this morning we have a little change. Denda is our first witness had a different time of his schedule than what we had on ours. So we will transition into a committee consideration of the amendment that we were from representative derpy. Yesterday morning. And I'll just give an update which is that. One of his members are sponsoring that amendment or cosponsoring that amendment. So they are sort of, and one has chosen not to. So, that's that's the news I know about the amendment. And I'll make, I'll just let you all know that I support it. I think it's good. It's just clarifying some of the things that I think we already intended in our bill. So, I don't know where Laura is. She's here. Okay, she aware that we're meeting. Yeah, great. Right out there on texture. Does anyone have any comments or this before we through it. And we comment on it before we're live. We are live. We are live. Perfectly. Yeah. Page four. No, I just come on and join us. She's on her way. So, sorry, can you start over. Yeah, I can. Page four and line 10. It starts a land of waters and farce. You're in the. Yes. Yeah. So that's all North. That's all the same language. I know it is. What page is for, sorry. For, or do you want just comments on the amendment itself? I mean, we're talking about the amendment right now. And then I'll, I'm fine. Okay. So we are talking about each one to six amendment as presented to us yesterday by representative Durfee. And the update that I was, I have this. Mary has a 10 of its members have signed on to it. One has not. And so. What we're doing right now is discussing it if we need to. There has not been any discussion. I need to discuss it and then. So we'll be back later. I have a question about this. I'm not. I indicated my support for it. And I'm looking for a motion of not a motion. I mean, we'll do a straw when folks are ready. So I've read it and. It's great solution. Together really well, yeah, okay. Right. So I guess I'll do the straw poll and say this. I know all those in favor. those posts. This is may I ask a question? This is this straw poll is strictly on the amendment is not the bill. Okay. I'll support the amendment. Okay, so that's 10 to one. It was 10 one on a straw ball. Great. Um, the other update will actually Laura knows because she was the one that ran into Senator Bray yesterday. Um, I think we have, um, we also need to discuss the bottle bill amendment. And so, um, we have Michael Grady coming in at nine. And we could wait until nine to do that discussion. If it would help members, if you have clarification questions on the on the amendment, it would certainly help to counsel with us. If members have other general comments they want to talk about before Michael gets here, we can go right into it. What is your pleasure? We'll just to be clear. We had the amendment presented. And I think the consensus of the committee, just to remind people where we are, if I remember this, but was that we were fine with a lot of the amendment, but not with the part that took out the escalator. And we had that extra language that we talked about for making it 50% percent of each other's way in regards to the sheets after the five years. So those two things I think were the areas where we wanted to remit there. Yeah, we do have played escalator. The escalator was, I'm not going to build that. I want to shoot the bottles. It's five cents right now. Yeah. And that if we don't hit the targets, anytime we don't hit the target, it's enunciated in the bill for two years. And it automatically goes to 10 cents. The same with my lift close to 20. If we don't hit the targets. And we had originally talked about just doing that. And then the industry would prefer that we didn't. And we thought, okay, well, we really care about us if we're hitting the targets. And if we hit the target, so we can do that at five cents fine. But if we don't hit the target, then we go to 10 in order to do self redemption rate. And we took out, we had a much larger risk for longer. We had other steps in it. What we took, we narrowed that down to just the, just the one time in each instance. So are we going to hear any more testimony on this? No, it's not so much testimony. So it's just deciding what we so, you know, so my read of the room, not the whole room, but I don't know what it was that that was that was that felt like the consensus to me is that we wanted to stick to our initial way of doing it. The escalator representative sexes. I did have an additional couple additional thoughts around that around those topics. And one was that we talked about the amount of money going to the clean water fund, money that was proposed. And the amendment was $3 million as a as a minimum. And they got if I if I understand it properly, that month that amount was taken was was created. It's figured out as an average over what the last few years was. But if I remember right, the amount of money going to the clean water fund has been sort of slowly increasing over the last few years. And so taking an average would actually is sort of a hit to the what it would have otherwise expected to get over the next few years. And so I would propose increasing that number to something which would better reflect where that fund has been going the last sort of what the trajectory has been. We can we can ask Michael O'Grady when he comes in, if my collection is right about what those numbers have been going. If you're talking about an increase, do you mean like instead of going to five to ten cents? Are you are you talking about the amount of money going to the clean water fund and the average over the last few years has been about three million dollars? But if I remember right, that amount actually has been more in recent years. I think it's more like three and a half million dollars is what it has hit recently. Well, the amendment proposes the first four million. Three of them. Oh, OK, let's look at which starts off at three million on January 1st, 2026. OK. And then it goes to four million. What's when it comes when it comes back and when it gets extended, I think, oh, yeah, 30. Yeah, I think it would be good to look at those numbers to make sure that the water fund is does anyone know where the three million goes for the clean water fund? Typically, or is there no specific spot where it does go? Right. It goes into the far and then that fund gets allocated by the water board. Well, there's a clean now agents and natural resources chairs of committee that oversees the funds when they go. I think it'd be great if we could err on the side of making sure the clean water fund has more money otherwise had rather than possibly less. Except that the remainder goes to the. Solid waste management account, which to me is a really strong nexus to the need and we need that solid waste management account also to be addressing solid waste issues. I thought I thought a big chunk of that was going back to the PRO for a time for a time, right? So that's really why we had it is that during that time, right? Well, did they change the 50 percent to the PRO? There's still it's still 50 percent, but they pointed out that 50 percent might mean that the clean water fund gets less than what it has been getting, which I think is an important note. So I'm sort of going from there and saying, yeah, let's really make sure it doesn't get less than it would have gotten next few years. By by increasing that base. I'm out that that they're going to that they're going to get and if they can get if they get more because they get a lot more unclaimed deposits, then fine, but make sure that we're not. I mean, less money into there than what would have otherwise been the case if we had not passed this bill. Other stuff, thoughts on this? This would be really difficult for me to. This can be difficult for me to support because of the issues that have been found, which part is difficult? That's it. Don't be afraid to try. Oh, I think what I'm going to recommend is we take a break until nine. Right, we're going to reconvene our meeting with our Legislative Council, Michael Grady, to look at the Ways and Means Amendment draft one point three, part 16th, four, twenty eight. Yeah, same one we walked through earlier in the week. Michael, we had just begun our discussion of this and. We're OK. Well, I'm going to speak for myself. I'm OK with most of it, but we did check in Ways and Means on the putting the escalator back in before we members have questions for Michael on that particular part of the amendment escalator part of it. Is this just the one dated four twenty eight or p.m. I mean, yes, thank you for twenty eight p.m. Yes, representatives seven. Thanks, Andrew. I guess a question to Ledge Council would be. Was House Ways and Means aware of the fact that we had already sort of made it made concessions already to the PRO in terms of, you know, it had started it even more of a requirement that the escalator would occur. Like for me, this is as. I would like to see the escalator back in and I'm wondering if they knew that that was already sort of a part of the give and take process. No, I don't think that the fact that it was a higher deposit amount. I don't think that was discussed. No, it's OK with us. Change. The members have. I mean, as representative Bongards kind of teed up before the break, seemed like folks were in favor of returning back to the escalator that we had gotten to just is anyone opposed to that? Am I go? That would be part. We would like to offer an amendment back in offer. Me or the committee or Kristi, Kristi, do you want for the committee? I can. My old stuff and I were talking about it. I don't want to excrete anybody. People can't be a committee member. I know you don't have possession of the bill anymore. OK, so you could put all your names on it. And that's that's a that's that's a fact to a committee bill. I don't have a problem with money. It's a problem with either way, if you if you're overwhelmed and would rather that one of us did it, it's not a bad idea. But if you're. But actually, there's reasons why I think. Yeah, let's have a question. Let's have a question. Yeah, I think you're the reporter of the bill. Although, I mean, I'm I'm kind of one's willing to or in whatever wants to have their name on it. Is there anyone that doesn't want to have their name on it? Let's put all our names. Yeah, let's put all of our names on it. OK, Kristi can give our, you know. Present it. Representative Pat. Yeah, I agree with doing this. My only hesitation that I've had is it's it's pretty unusual back and forth kind of dispute between two committees. One, you know, no, no dispute. Yeah, no, I don't think there's a dispute. I think it's it's sort of to what Gabrielle's point was and that that this is kind of a policy decision that we had vetted. Just I just my one comment. I was going to say this earlier when we went offline. The responsibility for the redemption system is going to be the stewardship programs when we stood up through the P.R.O. And it's their responsibility for educational standing up at additional redemption centers, et cetera, and more time they picked up, et cetera, et cetera. So we want to keep the responsibility with them. And that's where this initiative, if they don't do what we're asking to do, then the automatic inflator goes into place. If the percentages are down. So the reason it's it's keeping the foot on the gas pedal for the P.R.O.'s not for monitors. And then there's one other instance of amendment is there that South would like to offer? It was in their amendment. Where they had it on a permanent basis, the clean water fund getting four million dollars once it goes. And when Carol was in here, I think we have a representative who was in here. I think this is OK with the Ways and Means Committee as well, just to add the words or 50 percent, whichever is greater. Is that section three? A. Oh, no, that's the deposit amount into the. It's the second C1 C1 C1 section three subsection C1. I see. Yep. So line four, four million dollars, 50 percent, whichever is greater. Yeah. That's one minute. OK. Is that where it is permanent? Because this is also the part where returning to the P.R.O., which is only temporary. That's the three. So I think you want to make the permanent change. Section three A and 10 BSA 15. Yeah. Million. Right. Of the 50 percent, I would say 50 percent of the abandoned beverage container deposits for the first four million of the beverage container deposits, comma, whichever is greater into the clean water fund. Yeah, because that's the permanent. That's the permanent. Yeah, that's where it needs to go. Thank you. 2031. 2031. Yeah. Oh, the year. I'm like looking for a section. Yes. Well, I'm always out of draft that. That would be great. Any other questions or comments on this amendment for Michael before he goes? I'm not seeing any. So we will appreciate the work of this. Right. We're reconvening our meeting with our Legislative Council to view our proposal of amendment to the way the means proposal. This is like a great budget council where you have in front of you is an amendment to the House ways and means proposal of amendment to the bill as you propose it to be amended. The first instance of amendment is in section one. Tempe, you say chapter 53 and section 15 34. You are striking the subsection C that the ways and means committee added that would have required the secretary of natural resources to report to the General Assembly with the current container redemption rate and a recommendation of whether the General Assembly should enact the legislation to increase beverage container deposit. In its place, you are reinserting the language that you passed out of your committee, which would be beginning on January on 2028. Secretary determines that the redemption rate goal established in subsection A of the section was not met. One or more of the beverage container categories listed under subsection B of the section for two consecutive years. Leverage container deposit for the category shall increase by five cents, provided it's maximum deposit for any beverage container. Category shall not exceed 20 cents for virus beverage containers and microbiologists shall not exceed 10 cents for every other container. And one year following the secretary's determination under the section manufacturers and distributors to comply with the labeling requirements in section 24 of the stride before assessing irrelevant deposits up and under the subsection for the beverage container. And then the second instance of amendment, you are amending section 3A, which was added by ways and means. I don't have the amendment in front of me, but basically what you are doing on this in the second set in September is 1530 C1 is that I wanted to I struck some language that probably didn't need to strike so that I reinserted the language. It was the fear how it read because the way that I originally started doing it, it just wasn't reading very well. So I struck some of the language that I didn't need to strike so that it basically reads as a sentence. So I struck shall deposit the first four million of the of the abandoned beverage container deposits into the Clean Water Fund. And I reinserted shall deposit 50 percent or the first four million, whichever is greater, of the abandoned beverage container deposits into the Clean Water Fund. And then I started that sentence by saying the Commissioner of Taxes annually shall deposit because that wasn't very clear from the language to begin with. You mean online for the annually? Yeah. Yeah. I agree that I agree that was not clear. Thank you for catching it. Representative Smith, thank you. What will happen if if the beverage container amount is not met? Deposit will increase by nickel per bottle, wine bottle and per container. After that goes into effect in the event that it does and has to be increased, what's going to happen once that goal is achieved in the following year and fire exceeds what it achieves? Will the deposit go back down? No, there is no. There's no back and down in our now. Should there be? Well, I think it really would it took the inquiries to get it to where it needs to be. OK. And there's a there's a pretty good amount of time before this would happen, because it's. Two years, right? I could. It's pretty conservative, if you will. It's in its implementation. If the legislature doesn't want it to happen, the legislature will have plenty of time to legislate. Again, it seems better than defaulting to having us legislate. Great. Thank you. Here are questions on this amendment. Michael, so all of our names are on this. We don't need to vote on it. You still have to vote on it. I would I would recommend that because you may be asked what the vote was. OK. All right, great. Thank you for this. Right, so. This is actually our amendment, so it's in our position. And so I would entertain a motion to support the amendment. So. Representative Sackowitz moves that we approve this amendment as written. Is there a second present of sevens? All right. With that, the clerk. When it's to call the roll. Give me a little chit-chit. Representative Baumgartz. Yes. Representative Piper. Yeah. Representative Logan. Yes, Senator Morris. Yes. Representative Pat. Yes. Representative Sackowitz. Yes. And I'm civilian. Yes. Representative Smith. Yes. Representative Stevens. Yes. Representative Tory. Yes. Representative Schump. Yes. That is 11-0-0. Christy, since you're the reporter, you can bring this to the clerk. You know as it's coming. Great. All right. Thanks, Michael. We're amending our amendment. Yeah, we do need to do a straw pull on the rest of the amendment. Yes, actually, could you run us through exactly what the sequence is going to be today? I'm sorry, on the floor with this 158. Oh, it'll be like any bill where Christy will start with the underlying strike all amendment that we have of the bill, which is our bill, right? And then ways and means got the bill next. So their amendment will be presented and then appropriations got it next. There's if they change anything, which I don't know that they are. And then our amendment, this one, to amend their amendment and then debate always goes in reverse order also. So it goes back up. So it starts with, I guess, probably our amendment and then works its way back up the chain. So that's a fair question. So it's supposed to be Tuesday. That was the initial word I got from the speaker. So I guess our straw pull on the proposal of ways and means amendment as amended by us is what we need to do a straw pull on. So to a straw pull on both. To me, we just did a vote on this. We just did an official vote on this because we have in our possession. And we do not have theirs. It's their amendment and we just do straw pulls on things. We don't have a position. No, I'm sorry. I meant we need to do a straw pull on those events. Well, assuming, let's say, I would happen. We have to offer some of his name back to them. That was 11. They're unamended. And I think so, yeah. I mean, I think it's a lot of things to support it. Yeah, I think we'll cross that bridge if we come to it. So what I'd like to do before we shift gears is say, do folks support the ways and means amended amendment as amended by us this morning? All those in favor. And if I by raising your hand, right, seeing 10 hands, 11 hands in favor of the ways and means amendment as amended by us. So folks, great. Thank you. Representative seven. So presumably representative Morris has to send this official vote as well. When he when he brings this to the clerk. Bring it or send it, send it, email it in the same manner you do the bills. And I'm reporting the amendment and the vote was right. Yeah. And today is would be great to do. Yeah, I'll do it right off of just wondering if. Do we have this by email? I think Michael said, sent it. Did he get it? Send it, Kate. Right. So, yes, we do have it should be actually posted. I need a PDF, I may have to refresh it. So, great, with that, we'll shift gears and welcome our legislative council. Ellen Tchaikovsky. Join us and everyone has a hard copy of S5 in front of them. Thank you, Kate, for getting the copies and we're going to do a walkthrough. I think, you know, we'll go for 40, 45 minutes, take a break and then come back. Members, this is a long bill. It'd be really great to get through it before we dive into any policy discussions today. If you have clarifying questions about the wording of something, we will, but now is a good time to get clarification on those. But please limit your questions to that for now. Turn my sound off. I heard a bird in the finger. I heard a bird in the finger. We're good to go, Ellen. Good morning. Morning. It's like 10 o'clock and we're feeling that. All right. So today, Ellen Tchaikovsky, Office of Legislative Council, S5 as passed by the Senate. I did also, I can't get on the Internet, so I can't check, but it did also send Kate, the S5 as passed by Senate summary and the timeline. We can talk about those at a different time. It is not the summary document. It's not a true section by section. It's a little bit different. It's a really high level overview of each individual section. One sentence. So if you're ever looking for something in this bill, that can be a resource. But I'm going to start with the walkthrough as passed by the Senate. It is 38 pages as passed by Senate's don't have line numbers. So I apologize if anyone, if I lose you, I'll stop and I'll make sure that we're all on the same page. But to start, S5 is an act relating to affordably meeting the mandated greenhouse gas reductions for the thermal sector through efficiency, weatherization measures, electrification and decarbonization. Section one is a short title. It may be known and may be cited as the affordable heat act. You have already heard some things about this. Last year, the Legislature passed H715. That bill was vetoed by the governor. That was the starting point for this bill. And so it has a lot of similarities from that, but it also has quite a few differences that the Senate worked on. So the structure is largely the same, but there are some differences in it. The section two is the finding section. There are two small changes in it from last year's section that I will point out. But the General Assembly finds. One, all of the legislative findings made in the 2020 acts and resolve number 153, section two, the Vermont Global Warming Solutions Act of 2020, the GWSA, remain true and are incorporated by reference here. Under the GWSA and 10VSA 578, Vermont has a legal obligation to reduce greenhouse gas emissions to specific levels by 2025, 2030 and 2050. The Vermont Climate Council was established under the GWSA and was tasked with, among other things, recommended necessary legislation to reduce greenhouse gas emissions. The initial Vermont Climate Action Plan calls for the General Assembly to adopt legislation authorizing the Public Utility Commission to administer the clean heat standard consistent with the recommendations of the Energy Action Network's Clean Heat Standard Working Group. On to page two. As required by the GWSA, the Vermont Climate Council published the initial Vermont Climate Action Plan on December 1, 2021. As noted in that plan over one-third of Vermont's greenhouse gas emissions in 2018 came from the thermal sector. In that year, approximately 72% of Vermont's thermal energy use was fossil-based, including 29% from the burning of heating oil, 24% from fossil gas, and 19% from propane. To meet the greenhouse gas emission reductions required by the GWSA, Vermont needs to transition away from its current carbon-intensive building, heating practices, to lower carbon alternatives. It also needs to do this equitably, recognizing economic effects on energy users, especially energy burdened users. On the workforce currently providing these services and on the overall economy. Vermonters have an unprecedented opportunity to invest in eligible clean heat measures with funding from new federal laws, including the Infrastructure Investment and Jobs Act of 2021 and the Inflation Reduction Act of 2022. So, findings number five and six are new to to S5, five was added by the Semi-Natural Resources Process and number six was added by the Appropriations Committee. They were very specifically interested in recognizing the federal money that's going to be available for much of this work. I will pause briefly and just say that typically in drafting, findings are not always necessary. But findings do have a specific use in bills. They are typically necessary when there is a the courts look to findings to look as one of the places where legislative intent is established. And so the findings here are very closely linked to the mandated requirements of the Global Warming Solutions Act. And that is why there are very few. And so you did hear yesterday, I believe from an attorney from the Attorney General's Office as they, if they ever were to work on a case related to this law, this is one of the areas they would look for as part of the analysis in that case. So section three at the bottom of page two starts the statutory provisions of the Semi-Natural Resources Process Act. And that is why there are many references to them here. And so section three at the bottom of page two starts the statutory provisions of this bill. It establishes chapter 94 in title 30. Title 30 is where most, if not all of the energy law is established and it is the area that's our, those are within U.C. jurisdiction and Department of Public Services jurisdiction. So the bottom of page two intent is the first section. This is 8121. It is the intent of the general assembly that the clean heat standard be designed and implemented in a manner that achieves for monothermal sector greenhouse gas emissions reductions necessary to meet the requirements of 10 VSA 578A 2 and 3. Minimizes cost to customers and recognizes that affordable heating is essential for Vermonters. It shall enhance social equity by prioritizing the customers with low income and moderate income and those households with the highest energy burdens. The clean heat standard shall to the greatest extent possible maximize the use of available federal funds to deliver clean heat measures. So a couple of things I do want to point out here. And the first intro language is pursuant to 2 VSA 205A. So this is a reference, an existing reference and statute that directs committees to a certain level of intent and make known their legislative intent when they're directing rulemaking. So L car in recent weeks have really been focusing on trying to make sure that when L car does its review of legislative of rules that have come from administrative agencies. One of the things they're supposed to look at is whether or not the rule meets legislative intent. And often committees don't necessarily include a statement of legislative intent. And so this entire section is in. The purpose is to have something that L car can look to when they're reviewing the rules that come from the PUC. And so this is acknowledging by including that statutory reference. But that's also why these these sentences were added in the first place that L car could have something to review. And then there's another statutory reference which is in the second place. So if you look at these sentences, if you look at these sentences to 10 vs a 578 a two and three, you'll become very familiar with these. If you already, if you aren't already. Seven 578 a two is the requirement that. Our missions be reduced by. 40%. Nope. That's the 2030 deadline. Yeah. It's 40% from the two. And 80% by 2050. See him. I should know them like the back of my hand, but those references are throughout. And so there's an acknowledgement that the Global Warming Solutions Act establishes these deadlines by the 2030. Emissions reduction and then the 2050 emissions reduction. And so this is what this bill is. Is aiming to align with. All right. Thank you. Thank you. Thank you. Thank you. Representative Tory. We heard yesterday, but I can't remember. Is it 1990 or 2000? It's one of them. I'm sorry. I think in the 48. Was it. The higher percentage. I'm sorry. There's a lot of other numbers in my head this morning. They get a report and write them. Yeah. They are on my on the wall of my office. So section 8122. Is the introductory introductory sections of the clean heat standard. Any of you are familiar with the removal energy standard. The language. In this chapter in S5 is. Resembles it structurally in a lot of ways. And so. This is one of the big principles of the clean heat standard. So a, the clean heat standard is established. Under this program, obligated parties shall reduce greenhouse gas emissions attributable to the Vermont thermal sector. By retiring required amounts of clean heat credits. Meet the thermal sector portion of the greenhouse gas emission reduction obligations of the global warming solutions act. So, through the program, the federation shall establish or adopt a system of tradeable clean heat credits earned from the delivery of clean heat measures that reduce greenhouse gas emissions. An obligated party may obtain the required amount of clean heat credits through delivery of eligible clean heat measures. Through contracts for delivery of eligible clean heat measures. default delivery agent. An obligated party shall inform the commission how it plans to meet its obligation through the process described in section 81.25 of this title. The commission shall adopt rules and may issue orders to implement and enforce the clean heat standard program. Question. Representative Morris. Just a brief confirmation of what obligated party is. Oh, we are going to talk so much about that. Okay, I'll hold my question. So much. It is going to be on the next page. All right, thank you. Obligated party broadly, though, are who this bill, who are bound by the terms of this bill? It is the core concept of this bill and who are the obligated parties. Thank you. Representative Clifford. Thanks Madam Chair. As the Public Utility Commission shall adopt rules and may issue orders. Yes. Such as. So we are going to talk about all of this. This is the overview section. Yeah, it really is the high level. It's the highest level. Everything I just mentioned has detailed sections coming up. Thank you. Yeah. Representative Smith. Thank you. This is a question for anybody that hasn't answered. If we have questions on her explanation of this bill, you're not the one we want to ask questions of, but will there be someone back in here so that we can ask questions and get answers on S5 before we do anything with the bill? Yeah. And if you have questions on the clarification questions on the wording or what this is trying to do, you can ask. Exactly. All right, thank you. So the next section is 8123. This is the definition section. And there are some highly technical definitions in here that you will probably want to hear more about. As used in this chapter, number one is carbon intensity value. So I will say this is a new concept that is being introduced in this bill that was not in last year's bill. It means the value of life cycle greenhouse gas emissions per unit of energy of fuel expressed in grams of carbon dioxide equivalent per megajoule. How much carbon is a type of fuel emitting per gram? We're going to come up. This is going to be used very specifically later in there is a, it's used later in the bill. So we'll get to that. Number two is clean heat credit. So that is a tradable, non-tangible commodity that represents the amount of greenhouse gas production attributable to a clean heat measure. The commission shall establish a system of management for clean heat credits pursuant to this chapter. So the easiest way I think to think of what a clean heat credit is is that it is similar to what a renewable energy credit is. It represents something about the technology. And here it's expressing the amount of greenhouse gas reduction attributable to whatever that technology is. Another big concept, it may be, so it says here that the commission is going to establish a system of these. So we're going to get to that as well. There's an entire section on that. Clean heat measure. So this is another big concept in this bill. Fuel delivered and technologies installed to end use customers in Vermont that reduce greenhouse gas emissions from the thermal sector. Clean heat measures shall not include switching from one fossil fuel use to another fossil fuel use. The commission may adopt a list of acceptable actions that qualify clean heat measures. Again, there is an entire section on this later in the bill. The commission means the Public Utility Commission. Number five, on page five, customer with low income means a customer with a household income of up to 60% of area median income as published annually by the US Department of Housing and Urban Development. Customer with moderate income means a customer with a household income between 60% and 120% of area median income by the US Department of Housing and Urban Development. Oh, Representative Logan. Thank you. I just want to flag these definitions here because we had testimony from Secretary Moore yesterday. And she gave us some information about the number of households that fall under 120% of area, so she was using a different standard, actually. She was using household median income as a standard. That was the information that she had from the tax department. And this is the AMI as published by HUD, which has regional and household composition differences from the household median income standard. So I'm really curious to find out how many households this represents and what percentage of each. Thank you. Number seven is a default delivery agent, which means an entity designated by the commission to provide services that generate clean-gate credits. This also has its own section is a significant part of the bill. Energy burden means the annual spending on thermal energy as a percentage of household income. Entity means any individual, trustee, agency, partnership, association, corporation, company, municipality, political subdivision, or any other form of organization. Fuel pathway. Fuel pathway means a detailed description of all stages of fuel production and use for any particular fuel, including feedstock generation or extraction production, transportation, distribution, and combustion of the fuel by the consumer. The fuel pathway is used in the calculation of the carbon intensity value and the life cycle, greenhouse gas emissions of each fuel. So again, this is tied to this new concept related to carbon intensity value. Heating fuel means fossil-based heating fuel, including oil, propane, natural gas, coal, and kerosene. Onto page six, obligated party. Okay, so obligated party, as we're going to get into in the next section, is who is required to comply with their requirements. Obligated party means a regulated natural gas utility serving customers in Vermont. Or for other heating fuels, the entity that imports heating fuel for ultimate consumption within the state, or the entity that produces, refines, manufacturers, or compounds heating fuel within the state for ultimate consumption within the state. For the purposes of this section, the entity that imports heating fuel is the entity that has ownership title to the heating fuel at the time it is brought into Vermont. So who owns the heating fuel when it crosses the state line into Vermont for ultimate consumption in the state? Who is going to be obligated under the clean heat standard? Who owns the fuel at the time it enters the state is obligated? Yes. Great quiz question. Get your quiz questions, yeah, representative Tori. Yeah, similar to Oregon and what they have with the transportation fuels. Yes, actually, I think it is almost identical. And this language is actually nearly identical also to what we, the state of Vermont identifies who owns the fuel in the gasoline and diesel in the transportation fuel sector for taxing purposes. This is the language that already exists elsewhere in statute for that. And then the final definition is the thermal sector definition and it has the same meaning as the residential, commercial and industrial fuel use sector as used in the greenhouse gas emissions inventory and forecast. So just a point of clarification back up to B, other heating fuels, the obligated party. So at the time it is enters the state. So say a distributor has a depot in New Hampshire in a fuel delivery corporation company that's going to deliver to the homeowner goes and gets it and comes into the state. Yep. Who owns it? Whoever owns it when it crosses the border. It will be the delivery. And from what the testimony was in the Senate it can happen in many different configurations. So whoever owns it when it crosses the state line. And I'm sure that we are going to spend a whole hour at some point just the Senate natural resources committee spent a significant amount of time thinking about the different types of companies and the different models that they use. But this is a very neutral way of expressing whoever owns it when they come to bring it into Vermont for consumption in Vermont. They're bound by this. So section 8124 is sets of clean heat standard compliance. So now we're going to start talking about some of the details required amounts. The commission shall establish the number of clean heat credits that each obligated party is required to retire each calendar year. The size of the annual requirement shall be set at a pace sufficient for Vermont's thermal sector to achieve life cycle carbon dioxide equivalent emission reductions consistent with the requirements of the GWSA in 578A2 and 3 expressed as life cycle greenhouse gas emissions pursuant to 8127G, which is later in this title. So what we're saying here is that the commission is going to establish an annual amount that each obligated party needs to meet by retiring clean heat credits. That amount is going to be based on the emission reductions required in the Global Warming Solutions Act. So the first one being 2030, 40% emission reduction by 2030. So they're going to need to look at the existing greenhouse gas emissions inventory and figure out how much needs to be reduced each year and how much each party needs to reduce each year to meet our GWSA requirements. Page seven, annual requirements shall be expressed as a percentage of each obligated party's contribution for the thermal sector life cycle CF2E emissions in the previous year. The annual percentage reduction shall be the same for all obligated parties. To ensure understanding among obligated parties, the commission shall publicly provide a description of the annual requirements in plain terms with translation services available. So this is similar to how the renewable energy standard is set up where every year utilities are required to increase their amount of renewable energy in their portfolio by a certain percent. And it's the same percent for all of the utilities. This is a similar structure. So the PUC is going to set a percent by which each needs to reduce their emissions every year and it will be the same percent for each based on their annual sales of fossil fuels. Number three, to support the ability of the obligated parties to plan for the future, the commission shall establish and update annual clean heat credit requirements for the next 10 years. Every three years, the commission shall extend the requirements 10 years, assess emission reductions actually achieved in the thermal sector, and if necessary revise the pace of clean heat credit requirements for future years to ensure the thermal sector portion of the emission reductions under 578A, two and three for 2030 and 2050 will be achieved. So at all times, obligated parties will know 10 years out what their emissions reductions are going to need to be. The commission may temporarily for a period not to exceed 18 months adjust the annual requirements for good cause after notice and opportunity for public process. Good cause may include a shortage of clean heat credits or undue adverse financial impacts on particular customers or demographic segments. The commission shall ensure that any downward adjustment does not materially affect the state's ability to comply with the requirements of 578A, two and three. Representative Sebelia, we had in the last version of the bill several circuit breakers, if you will, like places where if prices were going awry or something was happening, this is one of those circuit breakers. Yeah, and I'd say minimal changes have been made to it. The Senate Natural Resources Committee added that phrase a period not to exceed 18 months to say if you're going to reduce the amount of credits people need to provide because there has been a financial impact, it should only be 18 months and then there should be a reevaluation so that the Global Warming Solutions Act requirements can continue to be worked towards. But yes, if there is a shortage of credits or financial impacts on customers, this is one of the areas that allows the PUC to reduce the requirements. Good, undue means? So undue is a, well, two step. So adverse financial impacts, there can be some adverse financial impacts, but undue is exceeding that. So if there is too much adverse financial impact. So on to page eight, annual registration. Each entity that sells heated fuel into or in Vermont shall register annually with the commission by an annual deadline established by the commission. So I just want to say right there, the word that's being used here is entity. So this is anyone who sells heating fuel. It's broader than just the obligated parties and this is just for the registration requirement. And part of this is because currently the heating fuel sector is unregulated by the PUC. And so this is part of the overall data collection that's going to happen so that there can be a big picture of who in the state is selling. It's not going to obligate everyone who sells heating fuel because there are heating fuel operations of various sizes and structures, but anyone who sells need to register so that there can be a sense of the universe of heating fuel that's being sold and who the different sellers are. The first registration deadline is January 1, 2024, and the annual deadline shall remain January 31, 2024. It shall remain January 31 of each year, I guess, unless a different deadline is established by the commission. The form and information required in the registration shall be determined by the commission and shall include all data necessary to establish annual requirements under this chapter. The commission shall use the information provided in the registration to determine whether the entity shall be considered an obligated party and the amount of its annual obligation, annual requirement. At a minimum, the commission shall require registration information to include legal name, doing business as name if applicable, municipality, state, types of heating fuel sold, and the volumes of sales of heating fuels into or in the state for final sale or consumption in the state in the calendar year, immediately preceding the calendar year in which the entity is registering with the commission. The Department of Taxes shall annually provide to the commission a copy of the forms that were submitted by the entities that pay the existing fuel tax established in 33 VSA 2503 A1 and 2. If any form contains a social security number, the Department of Taxes shall redact that information before submitting a copy of the form to the commission. Notwithstanding any other provision of law, including 33 VSA 2503 C and any confidentiality provisions that would normally apply to tax forms, the fuel tax form submitted under 2503 shall be public documents and the commission shall make those documents publicly available. The Department of Taxes shall ensure that the fuel tax form required under 2503 includes a prominent notice explaining that pursuant to the section the form will be provided to the Public Utility Commission and will be publicly available. The Department of Tax shall further ensure that the fuel tax form requires that each submitting entity lists the exact amount of gallons of fuel type of gallons of each fuel type separated by type that was sold in Vermont as well as a list of exact amounts of gallons of each fuel type separated by fuel type that was purchased by the submitting entity and the name and location of the entity from which it was purchased. So there is an existing fuel tax on heating fuel. The heating fuel sellers currently pay this tax to the Department of Taxes. And so they have a lot of information that would be useful to the PUC as they begin to set up this registration system to know how many gallons of heating fuel are sold in the state and by whom and what the different fuel types are that are sold by each entity. And so this is requiring sharing of data between the Department of Tax and the PUC as well as making sure that the data is available that's separated by type of fuel and gallons for each. I think I may have missed this but you started this section talking about how not everyone who sells fuel will be and have to be an obligated party. So what's the cut off? Who owns the fuel when it crosses into the state? So I thought you just meant like a volume or like. Nope. So it is the person who imports fuel into the state. Yeah, so they would all be obligated. Yeah. So there will be people lower in the distribution chain who didn't import the state into the state directly themselves. Oh, I see. So they won't be obligated. Got it. Thank you. Yeah. At the bottom of page nine each year and not later than 30 days following the annual registration deadline established by the commission, the commission shall share complete registration information of the obligated parties with ANR from the Department of Public Service for purposes of updating the greenhouse gas emissions inventory and forecast and meeting the requirements of 591B which released inventory and forecast. So again, greater emphasis on data sharing so that all of our information is accessible to those who are doing the calculations about whether or not the GWSI is being achieved. On page 10, number five, the commission shall maintain and update annually a list of registered entities on its website that contain the required registration information for any entity not registered on or before January 31, 2024. The first registration form shall be due 30 days after the first sale of heating fuel to a location in Vermont. Clean heat requirements shall transfer to entities that acquire an obligated party. So if they purchase someone else's business, they take on their clean heat requirements. You have a question, Julia? Yes, going back to the tax forms. When we think about fuel and it has multiple purposes. So how is that fuel counted? How do we, is that fuels purposes counted? Is it bifurcated in any way or is it just counted as a type of fuel? So the bill is specific to heating fuels. The fuel form itself, I don't think mentions fuel use. The PUC is going to develop the form. And so I think it's possible that the PUC's registration form potentially would ask for fuel use on there. That hasn't been detailed too much here. I do think that there is overall a intent that only heating fuels be captured as part of this process. Okay, thank you. Number eight, entities that cease to operate shall retain their clean heat requirement for their final year of operation. Section C, early action credits, beginning on January 1, 2023. Clean heat measures that are installed and provide emission reductions are creditable. Upon the establishment of the clean heat credit system, entities may register credits for actions taken starting in 2023. We're starting to get into some of the details. So that day has already passed. The system has not been established yet, but in theory, if this bill were to pass, it would be established sometime later in this year, at which point people who have done clean heat work already this year will be able to register their credits, which could then be sold to entities that will need to purchase credits for the first reporting year. So this is making sure the market can get started and that credits can start accruing before the market actually goes live with the launch of the clean heat standard, which at the earliest would be 2026. Subsection D is a big section, equitable distribution of clean heat measures. The clean heat standard shall be designed and implemented to enhance social equity by prioritizing customers with low income, moderate income, those households with the highest energy burdens, and renter households with tenant paid energy bills. The design shall ensure all customers have an equitable opportunity to participate in and benefit from clean heat measures, regardless of heating fuel used, income level, geographic location, residential building type, or home ownership status. On page 11, number two, of their annual requirement, each obligated party shall retire at least 16% from customers with low income and 16% from customers with moderate income. For each of these groups, at least one half of these credits shall be from installed clean heat measures that require capital investments in homes, have measure lives of 10 years or more, and are estimated by the technical advisory group to lower energy bills. Examples shall include weatherization improvements and installation of heat pumps, heat pump water heaters, and advanced wood heating systems. The commission may identify additional measures that qualify as installed measures. So we're gonna talk about a lot of this later in depth, but basically what's going to happen is that hypothetically, the Public Utility Commission is going to set an annual requirement for an obligated party somewhere, maybe say 6% of emission reduction required. Of that, and that will need to translate into credits, of that required amount, 16% will need to come from customers with low income and 16% will need to come from customers with moderate income as defined at the beginning. And then of those credits, half of them need to come from installed measures. And what that basically means is they can't come from the use of biofuels, which is the other primary category of clean heat measures. Representative Smith. Thank you. Are you referring to low income and moderate income? Is this one set low income and one set moderate income for all Vermonters? Yes. Prioritized into counties. So it's anyone in Vermont that meets the definition of low income and moderate income. So those are separate categories and it could be from anywhere in Vermont. All right, thank you. Is your question the same, the definition, is the definition of those two categories the same county by county? So the definition is the same, but I think as Representative Logan mentioned, it does differentiate the amount is different based on the county. So it's not gonna be equal across the state then. The dollar amount that a household would need to earn is different based on what county you live in. Representative Logan. Thank you. And also how many people, how many people live in the household? Sure, I guess what I was getting at there is someone with a low income in Chittenden County can make more money than someone with a low income in Orleans County and still be considered, no, I guess low income in Chittenden County might be say $50,000 for a family of four or whatever. And Orleans County that same low income might be considered $30,000. So does that mean the people that are making $50,000 will have more of an advantage to get more things free out of the clean heat standard than they will in the Northeast Kingdom? The definition of air immediate income that is set by the US HUD acknowledges the regional differences of the cost of living. And so they are different numbers. And so yes, Chittenden County is a different number than other counties. And there are people who work in this area of policy and law that can definitely speak to what that translates to. But the HUD numbers were chosen because that is a very well known number set by the federal government that fluctuates based on inflation and such. And so that's an annually adopted number by the federal government. And it does acknowledge regional differences. Thank you. I have a hard time understanding that because a dollar in Burlington is 100 cents. And a dollar in Island Pond is 100 cents. That was just my point. That just seems a bit odd, that's all. Thank you. I think we're gonna talk more about that. Thanks. So number three, the commission shall consider front loading the credit requirements for customers of low income and moderate income so that the greatest proportion of please eat measures each reach for monitors with low income and moderate income in the earlier years. With consideration to how to best serve customers with low income and moderate income, the commission shall have the authority to change the percentages established above. For good cause after consultation with the equity advisory group and after notice and opportunity for public process. Good cause may include a shortage of clean heat credits or undue adverse financial impact on particular customers or demographic segments. And so again, like the earlier provision, again, the PUC has some authority to reduce the amount of credits required if there is a shortage of credits or undue financial, undue adverse financial impacts. A percentage to do the second circuit. That's what I was gonna say. Yeah. Number five on page 12. In determining whether to exceed minimum percentages of clean heat measures that must be delivered, customers with low income and moderate income, the commission shall take into account participation in other government sponsored low income and moderate income weatherization programs. A clean heat measure delivered to a customer qualifying for a government sponsored low income energy subsidy to qualify for clean heat credits required under subdivisions. Just to ask a question. Yeah, thank you, Madam Chair. Number five, when we talked about dissipation in government sponsored low income weatherization, it can be stackable. That's what that's saying. So that's not what that's saying, but that is stated later in the bill. Number five is referring to the fact that on the prior page, it does ask the commission to consider increasing the required amounts from low income and moderate income. And so in looking at that, they should consider whether or not there is participation in other government sponsored low income and moderate income weatherization programs. So if, for example, this is really deep in the details of this bill, but if, for example, so 16% of credits are required from low income customers, but there is a very large uptake in LIHEAP, one of the other programs that shows that there is a significantly more amount of customers that could potentially be in that category, that's one of the things that the PUC should look at is how many other customers are using other low income programs. And then six slightly relates to that in that it says customers who are already qualified for those low income programs would automatically fall into the category of low and or moderate income customer so that there's a bright line before the full program gets started. Representative Clifford. Thank you very much, Chair. Can you, is there a definition for government sponsored? Nope. There is. Yeah. Okay. Just a question, good. Okay, go ahead. I kind of know what government is, but thank you. So on page 12 of subsection E credit, oh, I'm sorry, seven. Customer income data collected shall be kept confidential by the Commission, the Department of Public Service, the obligated parties and any entity that delivers clean heat measures. I think we're going to take a break now and come back at, I guess, 11, yeah, 11, top of the hour. We're going to reconvene our meeting and continue our walk through the S5s. All right, so on page 12, subsection E credit banking, the Commission shall allow an obligated party that has met its annual requirement in a given year to retain clean heat credits in excess of that amount for future sale or application to the obligated party's annual requirements in future compliance periods, as determined by the Commission. So this currently happens in the renewable energy standard process where if a utility has more recs than they need, they can bank them into use them in a future year. And so this is establishing that for clean heat credits. Enforcement on the page 13, the Commission shall have the authority to enforce the requirements of this chapter and any rules or orders adopted to implement the provisions of this chapter. The Commission may use its existing authority under this title. As part of the enforcement order, the Commission may order penalties and injunctive relief. If at some point you want to hear more about this, the existing authority is under, I believe 30 VSA 30. And the PUC does with the other things that they administer have penalty authority and then injunction relief. And injunction relief is when you stop a company from operating. So if they are in violation of the law, an injunction can be issued so that they have to stop operating until the court rules otherwise. Number two on page 13, the Commission shall order an obligated party that fails to retire the number of clean heat credits required in a given year, including the required amounts for customers with low income and moderate income to make a non-compliance payment to the default delivery agent. The per credit amount of the non-compliance payment shall be four times the amount established by the Commission for timely per credit payments to the default delivery agent. So we're gonna talk about this more in an upcoming section, but the Commission is going to set the price to be paid per credit to the default delivery agent if the company is gonna choose that option. And so then if a company fails to have the required number of credits, the penalty is four times the credit price to the DDA. Representative Peck. Is that for the amount of credits that they're short? Is that? Yes. Okay. Yep. And that does include the required amounts for low income and moderate income customers as well. And we will hear later that the money accrued from that process is going to go into a fund for, or it's going to fund low income work for low income customers. Number three, false or misleading statements or other representations made to the Commission by obligated parties related to compliance with the clean heat standard are subject to the Commission's enforcement authority, including the power to investigate and assess penalties under this title. The Commission's enforcement authority does not in any way impede the enforcement authority of other entities such as the Attorney General's office. Failure to register with the Commission as required in this section is a violation of the Consumer Protection Act in nine BSA chapter 63. It's just an example of something the Attorney General's office would enforce. So to page 14, records. The Commission shall establish requirements for the types of records to be submitted by obligated parties, a record retention schedule for required records, and a process for verification of records and data submitted in compliance with the requirements of this chapter. Reports as used in this subsection, standing committee, standing committees means the House Committee on Environment and Energy and the Senate committees on finance and on natural resources and energy. After adoption of the rules implementing this chapter, the Commission shall submit a written report to the standing committees, detailing the efforts undertaken to establish the clean heat standard pursuant to this chapter. Honor before January 15th of each year, following the year in which the rules are first adopted under this chapter, the Commission shall submit to the standing committees a written report detailing the implementation and operation of the clean heat standard. The report shall include an assessment of the equitable adoption of clean heat measures required in subsection D of this section, along with the recommendations to increase participation for households with the highest energy burden. The provision of two VSA section 20D, expiration of required reports, shall not apply to the report to be made under this section. And so this is requiring an annual report on the clean heat standard, and it shall not expire. So you'll get that report every January. Page 15. Section 8125, Default Delivery Agent. This is one of the changes from last year's bill. This, the format of the Default Delivery Agent has changed somewhat from what was passed at age 715. So A, Default Delivery Agent designated. In place of obligated party specific programs, the Commission shall provide for the development and implementation of statewide clean heat programs and measures by one or more Default Delivery Agents appointed by the Commission for these purposes. The Commission may specify that appointment of a Default Delivery Agent to deliver clean heat services on behalf of obligated parties who pay the per credit fee to the Default Delivery Agent satisfy those entities corresponding obligations under this chapter. So this bill is setting up that the obligated parties are required to have a set number of credits each year. And one of the options for these obligated parties is to go straight to the Default Delivery Agent who is someone who is, which is going to be an entity that we'll talk about more, but the PUC will appoint this entity to be doing clean heat work basically year round at all times. So that there's always an option for a company to have someone doing clean heat work. And the PUC is going to set the price that is going to be paid to this Default Delivery Agent. So number two appointment. How does that work with a four times penalty if they don't? In other words, they're going to be required to somebody's default company. It's going to do alternatives. But then the company's going to be the obligated party is going to be analyzed four times. It's for lack of. And so that's setting up an incentive that a company should figure out early on what their plan is to get their credits. And if they're going to be short, they should go to the Default Delivery Agent sooner rather than later, because if they are short on credits, they're going to have to pay four times as much as they would normally. Okay. Thank you. So this sounds like it's going to place quite a big burden on fuel companies. Or am I correct or not? I can't answer that question. It sounds like it's going to be additional. Additional work for them to make sure that they don't make mistakes so that they're not fined. So Brian, we're going to just try to focus on understanding it. That's what I'm trying to do, chair. Thank you. Anytime you establish a regulatory process, there are. You will need to learn how to comply with a new law. And so I think that that is a similar thing that happens with any bill that you pass that sets up a new regulatory scheme. Good. So appointment, the default delivery agent shall be one or more statewide entities, but the default delivery agent shall be one or more statewide entities. And so that's acceptable. Providing a variety of clean heat measures. The designation of an entity under the subdivision, maybe by order of appointment or contract. A designation, whether by order of appointment or contract may only be issued after notice and opportunity for a hearing. An existing order of appointment issued by the commission under section 209, D of title 30, Section 209 of Title 30 may be amended to include the responsibilities of the default delivery agent. The Section 209 is the energy efficiency, sets up energy efficiency programs. 209D is one of the specific provisions of that, but so currently there are three entities that have been appointed under Section 209. They are Efficiency Vermont, Wellington Electric Department, and Vermont Gas Systems. An order of appointment shall be for a limited duration not to exceed 12 years, although an entity may be reappointed by order or contract. An order of appointment may include any conditions and requirements that the commission deems appropriate to promote the public good. For good cause, after notice and opportunity, the commission may amend or revoke an order of appointment. The details, there are a lot of details on this next page, but what you should know is that the language in this section is different from last year's section. Last year the bill contemplated having an existing market participant who did clean heat work, and they would essentially be hired as the alternative option for clean heat services. This is setting up that an entity can be appointed and it could be a new entity or it could be at least one of the existing efficiency utilities. The language on page 16 is going to mirror the language that exists already in Title 30 related to the efficiency utilities. What this means broadly is that the PUC regulates utilities, and it also regulates the efficiency utilities specifically, and that they have a, under that existing authority, they have a substantial authority to review all of their budgets and their documents and all of their operating documents as well as have access to their facilities and have the authority to interview and question any of the directors of that entity. So they want the direct control over how that entity is operating. And so that is setting up this for the designated default delivery agent. And so the PUC will have pretty close control over the budget of that entity and therefore how much they're charging for clean heat services. So supervision, any entity appointed by order of appointment under this section that is not an electric or gas utility already regulated under this title. So not to be considered to be a company as defined in section 201 of the title, but shall be subject to the provisions of sections 18 through 21, 30 through 32, 208, 205 to 208, subsection 209A, sections 219, 221, and section 30, subsection 231B of this title to the same extent as a company as defined under section 201 of this title. And so I can get you all those exact citations, but those are to the, those are the PUC's authority to have a direct regulation over covered entities, including a utility or an efficiency utility. The commission and the department of public service shall have jurisdiction under those sections over the entity, its directors, receivers, trustees, lessees, or other persons or companies owning or operating the entity and all of its plants, equipment and property that the of the entity used in or about the business carried on by it in this state as covered and included in this section. This jurisdiction shall be exercised by the commission and the department so far as may be necessary to enable them to perform the duties and exercise the powers conferred upon them by law. The commission and the department may each when they when they deem the public good requires examine the plants, equipment and property of any entity appointed by order of appointment to serve as the default delivery agent. A default delivery agent. It's a wall. It is a lot. And so Senate after did contemplate that this would be a entity like efficiency Vermont use of the default delivery agent on page 17. An obligated party shall meet its annual requirement through a default designated default delivery agent appointed by the commission, unless the obligated party elects to meet its requirement in whole or in part through one or more of the mechanisms pursuant to subsection 8122 C of this title. This is another change. This is strongly suggesting that obligated parties should go to the default delivery agent. Last year's bill had more of a you can pick any of the four options. The four options being an obligated party does clean heat work themselves or they contract with an entity that does clean heat work like a contractor or they buy credits on the open market or they go to the default delivery agent. And so this is setting up. It is strongly encouraged that they go to the default delivery agent unless they elect to meet their requirement through one of the other ways. And they have to tell them that. And so that's in section two here. So the commission makes sure I understand it. So if they go to the default agent, does that mean to pay for the credits? Yes. Okay. Yep, and they can do that in whole or in part. And so I'm going to lay this out. But they can they're going to have a plan and tell the PUC with their plan is if they think that they can buy credits for a certain amount, but then they want to go to the default delivery agent for the rest of that. That would probably be fine under this as well. So there's flexibility here, but the PUC wants to have some idea of how the obligated parties are planning to do this work. Representative Smith. Can you tell me how I'm still stuck on this? How are costs and values of credits going to be determined? We're going to get to that. I hope so. Thank you. It's a significant part of this bill. All right, thank you. Yeah. So the commission shall provide a form for an obligated party to indicate its election to meet its requirement. The form shall require sufficient information to determine the nature of the credits that the default delivery agent will be responsible to deliver if the obligated party elects to meet its obligation in part. The commission shall make such elections known to the default delivery agent as soon as practicable. The commission shall by ruler order establish a standard timeline under which the default delivery agent credit costs or costs are established. And by which an obligated party must file its election form, the commission shall provide not less than 120 days notice of default delivery agent credit costs or costs prior to the deadline for an obligated party to file its election form. So an obligated party can assess options and inform the commission of its intent to procure credits in whole or in part as fulfillment of its requirement. So when the default, when the commission sets the price to be paid to the default delivery agent, they have to have at least 120 days notice so that the obligated parties will know it well in advance how much those credits are going to cost so they can determine if they can do the work themselves or if they want to go to the credit market or if they want to use the default delivery agent. Representative Smith and Tori. Thank you. Is there a possibility that once the company knows what these costs are going to be that they cannot afford it and may have to close? I don't know. Potentially. The story. Yeah, my question is related to the rule or order that the commission will use to establish the timeline. We haven't really had a lot of experience or understanding yet in the committee. The PUC operates in the world. So does that mean that the rule or order at this juncture would also be proceeding that there would be hearings and there would be access? Right? Yes. OK. So and just as a preview for the very end of the bill, this bill throughout makes reference to the PUC either adopting a role through the formal rulemaking process or they also the PUC utilizes something called an order, which is a less formal process. But in substance would be similar. And that's actually in the next section just discussed more. But at the end of this bill, there is actually a freeze on the PUC actually adopting any of these either of these mechanisms until the luncheon begins as a permanent consent. And so this is what is going to be in the statute, but the PUC won't actually have this authority to do any of that specifically until the legislature gives its affirmative authorization. So this is setting up and we'll talk more about orders shortly. Orders are a very specific process to what the PUC does. But we will definitely to and you should hear from the PUC about the types of processes and order when they use with orders. So number four. Yes, number four, the default delivery agent shall deliver creditable clean heat measures either directly or indirectly to end use customer locations in Vermont. Sufficient to meet the total aggregated annual requirement assigned to it pursuant to this subsection, along with any additional amount achievable through non-compliance payments as described in section F2 of this section. So as I sort of was just mentioning, the obligated parties need to make their decision known to the PUC so that the PUC can go to the default delivery agent and say, OK, this is how many parties want to use your services. You need to be able to manage this workload this year. So on page 18, budget, the commission shall open a proceeding on or before July 1, 2023 and every three years thereafter to establish the default delivery agent credit costs or costs for the subsequent three year period. The proceeding shall include an initial potential study conducted by the Department of Public Service to include the quantification of available thermal resources, thermal market conditions and statewide and regional thermal workforce characteristics, the development of a three year plan and associated proposed budget by the default delivery agent and the opportunity for public participation. So this was added in Senate natural later in the discussion. So this language is very similar to what currently happens for the efficiency utilities, efficiency Vermont. So I do think you should hear from hear more about what goes into this potential study and how what types of things are calculated as part of it and how that is used to set the budget. That budget will then be a significant component of how much the credit costs. So that is one of the elements that goes into the price per credit that the PUC will set. Another flag that I would just say that there isn't a this says that this is a proceeding that's going to start almost immediately if this bill were to pass so that this the department can start working on it and there is funding in the appropriation section for this work. There's no deadline on this potential study. I don't know how long they typically take, but that may be something you want to consider is whether or not there needs to be a deadline by which that will need to happen. And the reason I say that because we're going to talk about at the end all of the deadlines in this bill and there isn't one currently for this, but you might want the potential study to do so that you as a legislature can review it. So on page 18, number two, excuse me. Yeah, representative Sebelia, as the bill is written now, when would what do you know when the date is that we would want to have this in order to do it along with the rest of the road? I would say probably no later than January 1 or January 15, 2025, because that is when the PUC's big rule package is going to be due to the legislature. I don't know how long they normally take, so it may be you can get it sooner. But just that is when the final big rule package is going to come to the legislature for review. Thank you. So number two, once the commission provides the default delivery agent with the obligated party's election information, the default delivery agent shall be granted the opportunity to amend its plan and budget before the commission. Compliance funds, all funds received from non-compliance payments under the prior section shall be used by the default delivery agent to provide clean heat measures to customers with low income. So this is again, making sure there's always a dedicated fund of money for low income work. On page 19, specific programs, the default delivery agent shall create specific programs for multi-unit dwellings, condo associations, renters and for manufactured homes. So these groups have an equal opportunity to benefit from the clean heat standard. Section 8126 is related to rulemaking. So as I already mentioned, and we'll get to this again at the end, this is setting up a statutory section that would relate to rulemaking. And while it says shall adopt multiple places, the PUC is not empowered to act under this section until the legislature gives affirmative consent, and we will get to that later. But just so you are aware. So the commission shall adopt and may issue orders to implement and enforce the clean heat standard program, but not until the legislature says so. The requirements to adopt rules does not in any way impair the commission's authority to issue orders or take any other actions before and after final rules take effect to implement and enforce the clean heat standard. So we're going to talk a little bit more about this, but what's happening here is that there's going to be like one large rule document on the clean heat standard program. But as you've started to see, there are multiple different components to this program. There's things related to developing the clean heat credit system and the clean heat credit market. There's also going to be specific elements related to the default delivery agent, how entities will interact with the default delivery agent. So this section is setting up that there is going to be a large rule, but in addition, the PUC may is giving flexibility to have some of these individual components appearing orders, which the PUC can adopt more quickly and a standard rulemaking. So the commission's rules may include a provision that allows the commission to revise its clean heat standard rules by order of the commission without revision being subject to the rulemaking requirements of previous chapter 25, which is the administrative procedures act, provided the commission provides notice of any proposed changes, allows for a 30 day comment period and response to all comments received on the proposed change. So this is setting up a basic order procedure that is much more streamlined than regular adoption, but does contain some of the elements. So there will be notice of proposed changes, 30 day comments, and a response to comments. And this will be how the rules, sorry, how the orders will be adopted. Any order issued under this chapter shall be subject to appeal to the Vermont Supreme Court under section 12 of this title. And the commission must immediately file any orders, a red line and a clean version of the rules with the Secretary of State. It's noticed simultaneously provided to the House Committee on Energy and Environment and Energy and the Senate Committees on Finance and on Natural Resources and Energy. So on page 20, section 8127 is on tradable clean heat credits to the credits established by rule or order, the commission shall establish or adopt a system of tradable clean heat credits that are earned by reducing greenhouse gas emissions through the delivery of clean heat measures. While credit denominations may be in simple terms for public understanding and ease of use, the underlying value shall be based on units of carbon dioxide equivalent. The system shall provide a process for the recognition, approval and monitoring of the clean heat credits. The Department of Public Service shall perform the verification of clean heat credit claims and submit results of the verification and evaluation to the commission annually. So I don't think I have said this yet, but under the renewable energy standard, there's something called REX, which I think most of you are familiar with that represents the renewable aspects of an electric generating facility. Under this program that you're establishing with the clean heat standard, new different credits are being established. They're clean heat credits, which represent the amount of greenhouse gas emissions reductions. These credits do not currently exist, and the PUC is going to need to create them as well as the system for how they're going to be monitored and tracked. So this is a new concept to the whole country. Credit ownership, the commission in consultation with the technical advisory group, which we'll talk about in a couple of minutes, shall establish a standard methodology for determining what party or parties shall be the initial owner of a clean heat credit upon its creation. The original owner or owners may transfer those credits to a third party or to an obligated party. So there has been a lot of discussion about this. Is it the entity that pays for the credit? Is it the entity that owns home where the credit is being installed? Is it some combination of that? And so because these credits don't yet exist, the PUC, that's one of the things they have to sort out here. Credit values. Could you tell us who the technical advisory group is? Is that an offset or somebody after PUC or? We're going to get to it. I think it's the next section. It is going to be a group of advisors, the expertise that are going to advise the PUC. So not members of the PUC, but we will talk about that. Thank you. Yep. And a similar group exists currently for the renewable energy standard. So it's the process that is being utilized in a different area of law. All right. Thanks. Yeah. So credit values, credit, clean heat credits shall be based on the accurate and verifiable life cycle. CO2E emission reductions in Vermont's thermal sector that results from the delivery of eligible clean heat measures to existing or new end-use customer locations in Vermont. End-use customer locations into or in Vermont. On page 21, for clean heat measures that are installed, credits will be created for each year of the expected life of the installed measure. The annual value of the clean heat credits for installed measures in each year shall be equal to the life cycle CO2E emissions of the fuel use that is avoided in the given year because of the installation of the measure minus the life cycle emissions of the fuel that is used instead of that emission. So if you picture a cold climate heat pump, what is the fuel use that was avoided minus the fuel that was actually used? You get a delta. So that number is the amount of emissions reduction. And so that's for installed measures like a clean, an advanced wood heating system or a cold climate heat pump or a cold climate or a heat pump water heater. So what is the difference? How many less emissions are there because that was installed? Isn't it obvious? It's clear. You don't, let's say it's designed to last for 10 years. You only get in year one, you get only the credit for the avoided emissions in year one. Yes. So each year you continue to get credits for the next? Yes, for the measured life of the product. Yeah, because it works on a real basis, not all months. Yes. And so this area is very technical and there's some acknowledgement further on that over the measured life of something is and if multiple technologies are combined in the same home, there will be differences over the useful life of the product. They will probably diminish over time, particularly if there are multiple things that are installed. And that's a good thing because that means there are less emissions overall. So number two relates for measures that are fuels. So these are the two big categories. We haven't spent too much time on it because it's actually the next section, but there are two big categories of clean heat measures installed technologies or fuels. So for clean heat measures that are fuels, clean heat credits will be created only for the year that the fuel is delivered to the end use customer. So unlike with technologies that are installed into a house, a biofuel is going to only be burned once. So it's going to only count towards credit once. The value of the clean heat credits for fuels shall be the life cycle CO2 emissions that is avoided. Mine is the life cycle CO2 emissions of the fuel that is used instead. So again, what this is setting up is that companies will have the option to blend biofuels into their their fuel source so that their emissions are reduced that way instead of or in addition to heat pumps. So the goal overall is to reduce the amount of emissions that are produced in the heating sector. So we're going to look at in a minute some of the ways that you determine this, but if a biofuel blend is going to produce less carbon, less greenhouse emissions that can be used as a clean heat measure. So D less list of eligible clean heat measures. Eligible clean heat measures delivered to or installed in Vermont shall include thermal energy efficiency improvements and weatherization. Cold climate air, ground source and other heat pumps, including district, network, grid, micro grid and building geothermal systems. Key pump water heaters, utility controlled electric water heaters, solar hot water heaters, electric appliances providing thermal end uses. So on to page 22, advanced wood heating, non combustion or renewable energy based district heating services, the supply of sustainably sourced biofuels, the supply of green hydrogen and the replacement of a manufactured home with a high efficiency manufactured home. Number 11 is a new one this year. So I think you have already heard and you'll hear more about that manufactured homes have different aspects to them that are different than other homes. And so this is saying if if a manufactured home is replaced with a high efficiency one that could count for credits. Representative Sebelius. Ellen, this is a list. So these measures shall be included, but other measures could also be added. Yes. This is the baseline. And so one of the things that is going to happen and we'll talk more about this in the next section just because a measure is on this list, it's going to need to be evaluated on what credit it is actually eligible for. And so there's a couple of different ways that this can come up. But if, for example, you hear about green hydrogen, I don't know how much clean hydrogen is actually being contemplated for use in homes, but there are different. But the calculation will need to be done, how much emissions reduction that it's actually going to lead to. And that will correspond to how much credit it actually gets. Maybe I shouldn't have called out green hydrogen, but any of these things, if they're not going to lead to emissions reductions, that's going to be worth zero credits. So they're on this list, but the technical advisory group, as well as the calculation consultant, is going to review these types of measures and what kind of emission reductions they're actually capable of providing. Representative Clifford. Thank you, manager. Who establishes eligibility? Eligibility. Thank you. Eligibility. So this list here is establishing a statutory list. And then I think there is somewhere in this section is another sentence that says that the PUC can consider other things to this list. But they would actually establish a PUC instead. Yes. Thank you. Yep. So on page 22, subsection E, Renewable Natural Gas or Pipeline Renewable Natural Gas and other renewably generated natural gas substitutes to be eligible. An obligated party shall purchase renewable natural gas and its associated renewable attributes and demonstrate that it has secured a contractual pathway for the physical delivery of the gas from the point of injection into the pipeline to the obligated parties delivery system. And so this is a very tech, this is a technical requirement because gas is unlike other types of things. You cannot guarantee where molecule of gas is going to end up. So for a company that wants to use renewable natural gas, they're going to have all, they're going to need to have the contractual pathway. And so they're going to need to demonstrate that they have purchased renewable gas and injected it into their pipeline so that it is part of their mix. And they also need to have the attached renewable attributes. So the REX demonstrating that it is renewably generated. Carbon intensity of fuels, subsection F. So this is a new concept in this bill this year from last year's bill. So to be eligible as a clean heat measure, a liquid or gaseous clean heat measure shall have a carbon intensity value as follows. Below 80 in 2025, below 60 in 2030, and below 20 in 2050, provided the commission may allow liquid and gaseous clean heat measures with a carbon intensity value greater than 20. If excluding them would be impracticable based on the characteristics of Vermont's buildings, the workforce available in Vermont to deliver lower carbon intensity clean heat measures costs or the effective administration of the clean heat standard. I'm going to keep reading and then I'll double back to go over this. So on page 23, subsection two, the commission shall establish and publish the rate at which carbon intensity values shall decrease annually for liquid and gaseous clean heat measures consistent with subdivision one as follows. Honor before January 1, 2025 for 2025 through 2030 and honor before January 1, 2030 for 2031 to 2050. For purposes of this section, the carbon intensity value shall be understood relative to number two fuel oil delivered into or in Vermont in 2023, having a carbon intensity value of 100. Carbon intensity value shall be measured based on fuel pathways. So in this year, 2023, number two heating fuel oil has a value, carbon intensity value of 100. This is setting up that in order for your fuel to count as a clean heat measure, starting in 2025, it would need to have a carbon intensity value of 80. And then that cap declines over time. So the biofuels used are going to need to have less and less emissions over time. You should hear testimony because I am not an expert in calculating carbon intensities, but there are states that are currently doing this. For example, Oregon and the other states that are using the clean fuel programs for transportation fuels. And so what I have heard is I believe that natural gas has a carbon intensity value of 80. And so either heating fuel or natural gas that is blended with anything additional to reduce its carbon intensity value could then be eligible as a clean heat measure. And so this is setting up a statutory decline of 80 to 60 to 20. And it's also directing the PUC to set up smaller steps along the way. Okay, on page 23, emissions schedule. So to G, number one, to promote certainty for obligated parties and clean heat providers, the commission shall by ruler order establish a schedule of lifecycle emission rates for heating fuels and any fuel that is used in a clean heat measure, including electricity, or is itself is a clean heat measure, including biofuels. The schedule shall be based on transparent, verifiable and accurate emissions accounting, adapting the Argonne National Laboratory Greete model, the Intergovernmental Panel on Climate Change, IPCC modeling and alternative of comparable analytical rigor to fit the Vermont thermal sector context and the requirements of 10VSA, 578A, two and three. So as I just mentioned, Oregon, Washington, California and maybe Colorado have all adopted clean fuels programs or their transportation fuels. So this system in S5 is a little bit different than that, but their systems do look at the carbon intensity of the fuel and how much emissions each fuel type produces. And so what they use for that to calculate those values is the Argonne National Laboratory's Greete model. So this is directing that the POC is going to adapt the Greete model to then be able to set an emission schedule so that people know how much emissions each fuel type produces, which will then lead to knowing how much emissions need to be reduced. And so just so you know the Greete model, the T in Greete stands for transportation. And so that's why we need to adapt the model because currently it is set up to calculate the emissions for transportation fuels. So we'll need to change some of the variables and change the math a little bit to adapt to heating fuels, but there is already a body of work that can be built on using those models as well as the IPCC models as well. So this is setting up, we're going to need to establish this model so that we can calculate how many emissions are generated by these types of fuel, which will then lead to how much needs to be reduced. Representative Sebelia. So Ellen, back in three, I want to make sure that we're clear on this. So that's a one year period of time in three that number two fuel oil would be eligible for credits. So they're not eligible for credits, but it is establishing that number. Counting is a measure, right? It's not counting it as a measure. It's using by way of example, number two fuel oil, which is your basic heating fuel as a carbon intensity value of 100. The first year in this bill is 2025. The program probably will be operating in 2025, but it will be well under development. To be eligible in 2025, it will need to be 80. And so that's a lot lower than fuel oil. So fuel oil will not be able to count. Something blended with fuel oil that gives it a carbon intensity score of 80 would potentially count. So it's using 100 as a baseline just so there's a known number. Okay, so on page 24, number on page four subsection two, for each fuel pathway, a scheduled shell account for greenhouse gas emissions from biogenic and geologic sources, including fugitive emissions and loss of stored carbon. In determining the baseline emission rates for clean heat measures that are fuels, emissions baseline shall be, shall fully account for methane emissions, emissions reductions, or captures already occurring or expected to occur for each fuel pathway, either as a result of local, state, or federal policies that have been adapted or adopted. So in order to calculate the carbon intensity of a fuel, the fuel pathway will need to be known. So what are all the inputs in the system? What is the exact fuel source, a makeup of the fuel, the extraction process? So all that information is going to be known, including the biogenic and geologic sources. And I think you heard a little bit about the differences of those already. And including any fugitive emissions. And so the baseline is going to include any methane emissions reductions that are required by state, local, or federal law. And so the example I have heard is if methane gas from landfills, if there's any required state or federal policy that requires that work to be done or flaring, that's going to count in the baseline and it's not going to count as an eligible clean heat measure or it's going to be reduced by the amount that's already required under state or federal regulation. Number three, the schedule may be amended based on changes in technology or evidence on emissions, but clean heat credits previously awarded or already under contract to be produced shall not be adjusted retroactively. And so this is one of the things that's looking towards, there may be changes in technology that are going to need to be updated in this work. So that needs to be kept an eye on, but things that have already been awarded shall not be retroactively adjusted. Subsection H, review of consequences. The commission shall by any only assess harmful consequences that may arise in Vermont or anywhere else in the implementation of clean heat measures and shall set standards or limits to prevent those consequences. Such consequences shall include deforestation and version of grasslands, damage to watersheds or the creation of new methane to meet fuel demand. So I think you may hear more about this, but this was added by Senate natural because there was testimony related specifically to the use and increased use of biofuels. Biofuels that are grown or produced elsewhere may have consequences potentially including deforestation or conversion of grasslands. So the PUC does have to review some of those impacts by annually, which means every other year and decide if they need to make adjustments based on information related to that. Subsection I, timestamp. Clean heat credit shall be timestamped for the year in which the clean heat measure delivered emission reductions. For each subsequent year during which the measure produces emission reductions, credit shall be generated for that year. Only credits that have not been retired shall be eligible to satisfy the current year obligation. So a clean heat credit will have a year on it and it can only be retired once. You can hold on to it longer, but you can only retire it and therefore count it towards the annual obligation once. On page 25, subsection J, delivery in Vermont. Clean heat credit shall be earned only in proportion to the deemed or measured thermal sector, greenhouse gas emission reductions achieved by a clean heat measure delivered in Vermont. Other emissions offsets wherever located shall not be eligible measures. So there are existing programs in the country related to carbon offsets. Those are not going to be eligible measures. This is really specific work done in Vermont. Credit eligibility, all eligible clean heat measures that are delivered in Vermont beginning on January 1, 2023 shall be eligible for clean heat credits and may be retired and count towards an obligated party's emission reduction obligations regardless of who creates or delivers them and regardless of whether their creation or delivery was required or funded in whole or in part by other federal or state policies and programs. This includes individual initiatives, emissions reductions resulting from the state's energy efficiency programs, the low income weatherization program and the renewable energy standard tier three program. Clean heat measures delivered or installed, pursuant to any local, state or federal program or policy may count towards both goals or requirements of such programs and policies and may be eligible clean heat measures that count towards the emission reduction obligations of this chapter. So what this means is that part of the intent here is to allow individuals to combine incentives, sort of stack programs. So there are existing incentives out there. There are existing state programs that require certain work to be done. So any of those, any of the work that meets the definition of a clean heat measure, even it's required by another program can be eligible for clean heat measures. And this means that people can combine multiple incentive sources to buy down the cost of a clean heat measure. So number two, the owner or owners of a clean heat credit are not required. So they're credit. I know what you're saying. Okay, that's, I'm sorry, go ahead. Yeah, that's a bit stated to pause for a moment. Yeah, totally understand. And part of the reason there is other programs aren't necessarily looking at whether or not something is going to generate a clean heat measure. You know, tier three is doing, is asking utilities to do similar work to the clean heat program, but for a different reason potentially, similarly with low income weatherization program. So we know that a lot of this type of work is already being done, weatherization, installation of heat pumps. And so it's giving credit for that work that's already being done and you further leveraging those incentives. Representative Tory. So is that something to do with like the, like handles that integration for a particular transaction? So this is setting up, and I think so there's probably a little more input. Yeah, so there's going to be a credit market. So the DDA will have some part of this work, but anyone, so if for, so if any work is being done and this section by the existing energy efficiency programs, that work could count and based on when the PUC decides who owns a credit when it's installed, they'll be able to sell that credit on the open market or direct this contract with a fuel importer who needs credits. So, you know, the Senate natural resources contemplated whether or not there should be an open market or whether or not it should be centralized with the DDA and they wanted to have an open market so that there was that flexibility so that people could sell their credits that way. Representative Pat. And just to follow up in the discussion I had with Ellen during the break, if the community action agency from unlawing the weatherization program, there is now a credit value, whatever that ends up being, for their work, which has additional income to the community action agency for the weatherization program. So I see that as a good thing. So subsection two, the owner or owners of a clean heat credit are not required to sell their clean heat credit. So if they generate it and they want to hold onto it themselves, they are allowed to do that. Page 26, regardless of the programs or pathways contributing, clean heat credit is being earned. An individual credit may only, may be counted only once for satisfying and obligated parties to emission reduction obligations. So again, one credit can only be retired once, it can only count towards unobligated parties obligation once. Subsection L, credit registration. So the commission can create an administrative system to register, sell, transfer and trade credits to obligated parties. The commission may hire a third party consultant to evaluate, develop, implement, maintain and support a database or other means for tracking clean heat credits and compliance with the annual requirements for obligated parties. The system shall require entities to submit the following information to receive the credit, the location of the clean heat measure, whether the customer or tenant has a low income or moderate income, the type of property where the clean heat measure was installed or sold, the type of clean heat measure and any other information required by the commission, customer income data collected shall be kept confidential by the commission, the department, the obligated parties and any entity that delivers clean heat measures. So again, this system doesn't exist currently but the PUC is going to set up this online system so that people can buy, sell, trade so that the obligated parties know where to go to look for credits. Subsection M, greenhouse gas emissions inventory and forecast. Nothing in this chapter shall limit the authority of the secretary of natural resources to compile and publish the Vermont greenhouse gas emissions inventory and forecast in accordance with 10VSA 582. And in fact, all of this very specific data will hopefully help them have more precise data in the inventory. Okay, that's great. Thank you for that intense walkthrough that got us here. Yeah. Two thirds. Page 27. With that, we will break for lunch and find another time to reconnect with Ellen to finish the walkthrough. Thank you all.