Meter surcharge flap overshadows preliminary energy bill passage

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It’s not often that the tipping point for legislative passage comes down to just 55 cents, but that bit of pocket change galvanized short-lived opposition to the omnibus energy bill, H.56, on Tuesday.

H.56 passed 99-39 on second reading, but only after a bitter dispute over an amendment to exempt low-income Vermonters from a new 55-cent per month surcharge on electric meters.

Though the annual tab is just $6.60, lawmakers were concerned about the notion of low-income Vermonters helping to offset the cost of solar systems for businesses and upper middle class residents.

The Democrats took the dispute off the floor and discussed amendments to the bill in caucus. There the debate became so heated that Rep. Paul Poirier, I-Barre City, who argued that Vermonters on foodstamps shouldn’t have to pay the fee, resorted to the L-word.

In front of the caucus, Poirier asked Rep. Tony Klein, D-East Montpelier and chair of the House Natural Resources Committee, whether he would support the amendment. When Klein said no, Poirier erupted: “Then why did you call me last night and say that you would?”

Klein started to speak and was interrupted. Poirier intoned, “Tony, Tony, Tony, you lied last year on the floor and you’re lying again!”

“He only wants to hear what he wants to hear,” Klein muttered under his breath as he turned away from Poirier.

Poirier’s amendment which is slated to be taken up on Wednesday during third reading would have raise the monthly meter fee to 65 cents for Vermonters who earn more than 185 percent of poverty level wages, or more than $40,700 for a family of four. It’s the fourth time over the course of the last few weeks that the independent representative has failed to persuade the Democrats to support an amendment. He also proposed changes to the miscellaneous tax bill and the budget that would have reinstated programs for disadvantaged Vermonters.

Rep. Paul Poirier, D-Barre City

Klein said Poirier’s energy bill amendment was impractical because there wasn’t time to determine how the exemption would be certified, or how utilities would exempt those low-income ratepayers.

“I don’t think there’s a way, in a day or two, that the (program) can actually be implemented,” Klein said. “I weigh that against the bigger need to keep the program going.”

The surcharge would raise $2.38 million a year for the Clean Energy Development Fund, which has been supported since its inception in 2005 by annual payments from Vermont Yankee of about $6 million a year. Next year, those contributions will dry up when the plant’s license to operate runs out.

The sponsor of the bill, Rep. Margaret Cheney, D-Norwich, said next year the state will have to raise all of the money no longer collected from Entergy, the owner of Vermont Yankee, through other means.

Opponents called the surcharge a “broad-based tax,” a type of tax which Gov. Peter Shumlin has pledged not to raise, and raised fears that the surcharge would be extended and increase over time.

Supporters of the omnibus energy bill, H.56, say the compendium of modest legislative initiatives move Vermont’s renewable energy programs forward. Next year, after the administration completes a comprehensive state energy plan in October, Democratic lawmakers plan to propose more aggressive energy efficiency and renewable energy measures.

A diminishing fund

H.56 lifts the cap on net metering for small renewable systems like home- or business-scale solar electricity and wind turbines, offers an extra statewide credit for net metered solar generation, directs the Public Service Board (PSB) to extend the financial viability of existing small hydroelectric facilities and the Ryegate woodchip-fired generation plant, makes permanent IBM’s unique provisions for in-house improvements in electrical efficiency and establishes low sulfur and biofuel mandates for heating oil.

Cheney, vice-chair of the House Natural Resources and Energy Committee, said in her introduction to the bill: “It’s not a leap forward, as we’ve seen in past years, but an important small step. As we wait for the October release of the Comprehensive State Energy Plan, and as two of our most important programs reach a cliff, H. 56 also ensures that we do not go backwards.”

The bill began in the House Natural Resources and Energy Committee, which took testimony from 74 witnesses, according to Cheney. The committee voted it out 9-2, with tripartisan support; two Republicans voted against it while one, Kurt Wright of Burlington, supported it. The Ways and Means Committee also considered the bill and passed it 9-2, with support of Democrats, at least one Republican, and the committee’s sole independent. The House is scheduled to give final consideration to the bill Wednesday afternoon.

Green Mountain Power's Searsburg wind turbines, EPA image

The controversial 55-cent monthly electrical surcharge would allow the CEDF to take on new projects. The Fund’s primary source of revenue, payments from Vermont Yankee, ends in March 2012, when the nuclear plant is scheduled to close. The $2.38 million the surcharge would raise is less than half the $6 million annually that Vermont Yankee has paid into the fund, but it is “enough to keep us puttering along until we identify a permanent, potentially more robust funding stream,” Cheney said. The surcharge is scheduled to take effect in August of this year and sunset after a year.

The CEDF offers incentives (grants, loans, and tax credits) for solar electric, solar hot water, small wind systems, and micro-hydro to developers and residents. Cheney said that it has leveraged more than $4 in private capital for every dollar expended. Continued funding was necessary to provide some certainty to the employers in the renewable energy field who have built or grown their companies to meet the demand generated by the fund’s expenditures, she said.

Rep. Adam Greshin, I-Warren, said that the Ways and Means Committee discussed many options for channeling additional money to the Clean Energy Development Fund, and “no one thought (the surcharge) was a great solution,” but it was better than any others. For example, if the surcharge was per kilowatt hour (kWh) of electricity used, like the efficiency surcharge that funds Efficiency Vermont, Greshin said that some industrial customers would have faced tens of thousands of dollars of additional electricity costs starting in August, after they’d calculated their annual budgets.

Greshin acknowledged the problems of replacing what he said was a “perfect fund, because it was funded invisibly” because the costs didn’t come directly from Vermonters.

“It was a tax on Vermont Yankee, no one had to worry about it,” Greshin said. “Then the federal government came in with stimulus money—yeah, it’s kind of our money, but it’s way out there. So it was great—no one had to look at the use of that money and whether it stood up to other potential uses of that money. Well now, with Yankee closing down, suddenly it’s been thrust out in the open.”

Greshin expressed some frustration that so much time had been spent on a charge of $6.60 per meter per year. Greshin is a partner in the company that owns Sugarbush Resort, which he says has 34 meters, and he dismissed the extra $224 Sugarbush would pay annually as insignificant.

Kurt Wright (R-Burlington) warned his caucus that the Natural Resources and Energy Committee had considered many alternatives that Republicans would consider worse, including a per kWh charge that would have cost IBM and ski resorts and other businesses thousands of dollars. “If you’re concerned about the job creators, they could go back to [the per kWh charge], which could be much, much worse in my opinion,” Wright said. “That’s what brought me around, not because it’s perfect, but it’s better than probably all the rest of the ideas we considered.”

During the debate on the House floor, a question from Rep. Heidi Scheuermann, R-Stowe, stumped the bill’s proponents for a while, and the subsequent debate seemed characterized by misunderstandings on both sides. Scheuermann asked why, when Vermont Yankee was paying into the fund until March 2012, the 55 cent monthly surcharge was scheduled to start in August 2011. After a huddle for a minute and a half, Greshin explained that previous, multi-year commitments meant that the fund was projected to have a deficit of $1.9 million in fiscal year 2012, which the revenue was needed to offset. Scheuermann expressed surprise that the managers of the fund had engaged in “deficit spending” before the legislature allocated money for the fund’s obligations.

According to CEDF executive director Andrew Perchlik, the projected 2012 operating deficit nonetheless leaves the fund balance in the black to the tune of $4.3 million. Tax credits that businesses are allowed to claim over five years represent future claims on rest of the fund, so additional monies are needed if the CEDF is to start new projects.

Scheuermann also asked about the cost of the bill to the state, which would be affected by the surcharge on each of its electrical meters. While Green Mountain Power had estimated that about 1,000 of its meters were on state buildings, no firm numbers were available for the total number of meters the state has. Greshin made what he called a “liberal estimate” of 5,000 or 6,000 total state-owned meters, which he said would amount to an additional expense of around $35,000. He called it “not a whole lot of dough” in a general fund of $1.3 billion.

Scheuermann commented that another bill expending $3,000 had gone through the Appropriations Committee, and she moved to send the energy bill to Appropriations. Cheney had brought the bill to Appropriations, she said, though “not formally,” and they had the opportunity to discuss it. The motion failed on a voice vote.

Scheuermann also expressed concern that the surcharge would be extended and the amount would increase, once the economy improves. “It’s Efficiency Vermont all over again,” she said. “I have some real concerns with this charge, putting it on the backs of Vermonters.” (Efficiency Vermont’s budget has increased from $8.2 million in 2000 to $40.7 million in 2011. The PSB has reviewed the cost savings through 2009 and says that total 2000 – 2009 costs of $152.6 million gained ratepayer savings of $589.9 million.)

Rep. Cynthia Browning, D-Arlington, cautioned against raising a “broad-based tax” during a recession. She indicated that she may introduce an amendment Wednesday to raise the surcharge to $1 but making it voluntary.

A compendium of provisions

The bill’s provisions for heating fuel also raised questions in caucus and on the floor. The bill reduces the allowed sulfur content in heating oil to 500 parts per million (ppm) by July 2014 and 15 ppm by July 2018, and it increases the required amount of biodiesel in heating oil to 7 percent by July 2016. Both sets of requirements would be contingent on the adoption of similar legislation in Massachusetts, New York, and New Hampshire.

Rep. Mark Mitchell, D-Barnard, said the sulfur provision was likely to add 1-2 cents to the cost of a gallon of heating oil and the biodiesel requirement would add 1-3 cents. As long as the biodiesel content was under 20 percent, he said, it would not affect the operations or maintenance of furnaces.

3D rendering of the Beaver Wood Energy biomass plant proposal for Pownal

A biomass electricity provision in the bill had been subject to some previous maneuvering and is likely to be disputed in the Senate. The bill directs the PSB to design a “standard offer,” which ensures a profitable rate, for the 20.5 megawatt (MW) Ryegate electrical plant, which is fired by wood chips. According to the bill’s proponents, Ryegate currently sells its electricity at 15 cents per kWh, under the provisions of PURPA, a federal law whose protections the plant will lose in the next two years. The cost of the plant’s wood alone is 7 cents per kWh, they said, which makes its electricity uncompetitive at today’s market rates.

The bill had previously included similar consideration for Beaverwood Energy’s proposed wood-fired generating facilities in Pownal and Fair Haven, but legislators reported that they had been removed at Shumlin’s request. Beaverwood lobbyist Margaret Laggis told the Republican caucus that they would work in the Senate to require the director of the renewable energy SPEED program to purchase the power from the two facilities.

Also affected by expiring PURPA protection are small hydroelectric plants in the state. Previous legislation has directed the PSB to design profitable rates, a “standard offer,” for new renewable energy projects up to 2.2 MW apiece and a total of 50 MW (about 6% of Vermont’s baseload consumption). If any of the reserved 50 MW remains unclaimed in at the beginning of 2012, the existing small hydro plants will become eligible for the standard offer program.

In both cases, for Ryegate and the hydro plants, the bill’s proponents said the new rates would be less than what utilities currently pay under the PURPA rules.

The bill continues the frequent tweaks to the state’s net metering program since its inception 13 years ago. Net metering law requires utilities to allow customers to install small renewable energy facilities like solar electricity and wind turbines and run their meters backwards during times of high generation and low consumption. In effect, the law requires utilities to buy electricity from these decentralized sources at retail rates.

Green Mountain Power has gone further, purchasing solar electricity from its customers at 6 cents per kWh above retail rates. They say that the value of offsetting summer peak electric loads is worth the extra cost of the solar electricity. The bill extends this program to all the state’s utilities.

The bill also makes it faster for owners of solar electric systems under 5 MW to get a certificate of public good from the PSB and modifies the rules of group net metering, where multiple customers invest in a common net metering facility, to make it easier to participate. In some places, utilities are bumping up against the current net metering cap of 2 percent of peak 1996 demand; the bill raises the cap to 4 percent and allows the PSB to raise it even further.

The bill also allows owners of net metered systems to sell more electricity to the utility. Under current law, in months when the customer has produced more than consumed, the customer receives credits for each excess kWh produced. In the new bill, the credits are converted into cash, which can be applied to the monthly service charge. However, no matter how much surplus a net metered customer generates, the utility would never cut a check to the customer for the electricity; the surplus can never reduce a bill to less than zero.

In a pilot program begun in 2009, IBM was allowed to opt out of efficiency surcharge payments that fund Efficiency Vermont and to design its own efficiency programs. That three-year pilot is scheduled to expire in 2012, and the bill makes it permanent, under the supervision of the PSB.

In a provision unrelated to renewable energy, the bill directs the PSB to study whether allowing utilities to include credit card fees in their costs of doing business—thereby spreading them among all ratepayers—is in the public interest and to draft a statute that would make that possible.

Proponents of the bill see it as delivering what Vermonters want and stimulating jobs in industries of the future. Cheney concluded her introduction of the bill by saying, “Polls have shown that Vermonters want more clean, renewable, in-state energy. We all want more good, in-state jobs. The goose that lays those golden eggs comes from reliable, predictable, and practical renewable energy policy. The provisions in this bill come at little cost to Vermonters but provide tremendous economic and environmental benefit.”

Where proponents see stimulus for new businesses, opponents see subsidies for businesses that can’t stand on their own. Topper McFaun (R/D-Barre Town) asked, “As I see it right now, to utilize renewable energy, we’re going to pay higher prices, we’re going to keep failing businesses, we’re going to prop them up, and we’re doing this to preserve jobs—is that what our energy policy is?”

Several House members have discussed offering various amendments to the bill’s 55 cent monthly surcharge when the bill comes up for final House debate on Wednesday afternoon. Regardless of how those come out, legislators and lobbyists expect the bill to pass and move on to the Senate.