Editor’s note: Jon Margolis is VTDigger’s political analyst.

Starting Jan. 1, electric utility companies in Connecticut will no longer be buying renewable energy credits from Vermont wind and solar power projects.

A bill passed last month and signed by Gov. Dannel Malloy declares that power from Vermont projects “shall not be eligible for compliance with the renewable portfolio standards established (in the new law).”

The statute does not mention Vermont. But Jessie Stratton, the director of policy for the Connecticut Department of Energy and Environmental Protection, said the new law effectively targets Vermont because “renewable generation sources counted elsewhere may not also be used to satisfy Connecticut’s RPS (renewable portfolio standards) requirements.”

Vermont is the only state that allows its wind and solar power producers to sell their RECs and at the same time apply them toward meeting the state’s own “renewable energy” requirements. This feature of the Sustainably Priced Energy Development (SPEED) law of 2005 enables utilities in other states to burn as much fossil fuel as the Vermont wind project “saves.”

Hence the quotation marks. Many energy policy experts doubt that Vermont wind energy qualifies as renewable, or that it allows any perceptible reduction in burning the fossil fuels that aggravate global warming. By banning utilities from buying Vermont RECs, Connecticut appears to be agreeing with those experts.

No one in Connecticut went so far as to call Vermont’s system “a sham,” as does Kevin Jones, an economist who teaches at Vermont Law School. But Stratton did describe it (in an email) as “double counting of the resource.”

Connecticut is not the only state in which utilities have been buying Vermont RECs, and so far there are no reports about other states following Connecticut’s lead. So the impact of the new Connecticut law on Vermont’s present and planned wind projects, or on utility rates, is unclear.

“A lot will depend on how they (Connecticut officials) implement any changes,” emailed Dorothy Schnure, the spokesperson for Green Mountain Power, developer of the Lowell Mountain wind project. “So it is too early for us to make a determination of how many RECs and which ones held by Vermont utilities will be affected.”

But Jones, an advocate of wind power but a critic of Vermont’s system, said that if Massachusetts were to adopt a similar law, “that would change the system.”

Because of the sale of RECs, Jones said, Vermont utilities can keep their rates 5 or 6 cents per kilowatt hour lower. If the RECs can no longer be sold, rates are likely to increase.

If nothing else, the new Connecticut law might persuade Vermont officials – both in government and in the utility industry – to begin discussing a subject they seem to have been trying to avoid: the increasing evidence that the entire“renewable energy” system in Vermont is fraudulent.

That’s essentially the judgment of the Federal Trade Commission.

“If a marketer generates renewable electricity but sells renewable energy certificates for all of that electricity, it would be deceptive for the marketer to represent, directly or by implication, that it uses renewable energy,” the federal agency noted in a report last year.

More significantly, it seems to be the conclusion of Vermont’s Public Service Board, the agency that has approved construction of several Vermont wind and solar projects.

The PSB is a quasi-judicial regulator, not a policy agency. The three-member board itself does not express policy opinions. But the board cited that FTC statement in a recent report, and in several internal communications, senior PSB attorneys and economists stated even more bluntly that wind and solar power in Vermont should not be considered renewable energy as long as the RECs are sold rather than “retired.”

“Any policy that does not entail the generation (or purchase) and subsequent retirement of RECs should not be considered a renewable energy,” wrote utility analyst Thomas Knauer in November.

“Subsidies for renewables make sense only if they’re achieving a societal benefit,” said staff attorney Ed McNamara in a handwritten note on one draft report.

“Without retirement of RECs, the only societal benefit of Vermont’s program is economic development (and through) an inefficient method.” By “subsidy,” McNamara appeared to be referring to the higher utility bills caused by the state requirement that wind and solar power make up 20 percent of each utility’s total output by 2017.

Nowhere in the documents did any PSB official disagree with the assessment that Vermont projects do not produce renewable energy.

But the rest of state government has been acting as though there is no contradiction between common assurances that Vermont’s wind projects are producing “renewable energy” and the equally common (but ignored) conclusions that they are not. The Public Service Department (which unlike the board, is a policy-setting agency) has been silent on the matter, as have legislators and leaders of Vermont’s major environmental organizations, most of which have endorsed the SPEED law.

It would appear to be an exaggeration to suggest a conspiracy of silence. But there seems to have been an unspoken agreement to ignore.

Darren Springer, deputy commissioner of the Public Service Department, noted that some Vermont wind power could be considered renewable because some of the out-of-state utilities that buy the RECs don’t use all of them, but instead pay an “alternate compliance fee” to an agency in their own state. To the extent that they pay the fee rather than use the RECs, he said, “there is a renewable energy benefit.”

But Springer did not know how extensively utilities in other states pay those fees, information that is apparently not open to the public.

“It happens from time to time,” said Paul Belval, an attorney with the Hartford law firm Day Pitney, which represents the New England Power Pool, the operator of the renewable energy credit system in the region.

The public also does not have access to details on the sale of the RECs.

“The names of the REC buyers for specific transactions are not public record because they are competitive business transactions,” said Robert Dostis, head of external affairs and customer relations at Green Mountain Power.

Dostis did disclose that GMP earns 5 to 6 cents per kilowatt hour from selling its RECs from its Kingdom Community Wind project on Lowell Mountain.

“If you’re buying wind at 10 cents and can turn around and sell the RECs at 5 or 6 (cents per kWh) the cost comes down to 5 or 4 cents per kilowatt hour,” he said. “This year alone, GMP helped depress the need for rate increases by 2 percent” by selling the RECs.

Dostis, who was the chair of the House Natural Resources Committee when the SPEED law was adopted, and Rep. Tony Klein of East Montpelier, who holds that position now, both said that holding down rates was the basis for the law. They agreed that SPEED was in a sense a ploy, not to fool the public (both insist that Vermont wind power is renewable) but to get around then-Gov. Jim Douglas’ firm opposition to the alternative: renewable portfolio standards, the system in the other New England states and about 25 others.

“Douglas was against (RPS) standards because it was too big a hit to ratepayers,” Klein said. “This was our way of getting around his opposition and holding down the cost to the ratepayer.”

The rates would have remained still lower had there been no “renewable” requirements at all because wind power is more expensive. Critics such as Kevin Jones think “it would have been better policy not to have a mandate than to have a sham renewable mandate. I’m a supporter of renewable energy, but this has been one of the most unfortunate and fouled-up public policies I’ve ever seen in my life.”

While acknowledging SPEED’s imperfections, Klein said it allowed the state to get the wind projects built. After 2017, he said, the system would no doubt be changed.

“The SPEED goals will be reached 2017,” Klein said. “We’ll let it run its course. If we’re smart we’ll start planning its replacement in 2015 and probably go to RPS.”

That might well mean higher rates. But it also might mean Vermont’s wind and solar projects would really be producing renewable energy.