Op-Ed: Vermont’s Energy Affordability Conundrum

When it comes to energy affordability, 2024 may be the year Vermonters look back on as the straw that broke the camel’s back. Various policies introduced in the legislature will raise costs for Vermont families and businesses under the guise of protecting them from the harms of climate change. If elected officials really want to help the state’s most vulnerable residents, they should focus on keeping energy costs low and its supply abundant. Sadly, they continue to do the opposite.

Because of its unique natural environment, Vermont produces quite a lot of hydropower. According to the U.S. Energy Information Agency, 52% of the state’s utility-scale electricity generation comes from hydro. But despite its clean hydropower abundance, Vermont residents still consume more than three times the energy they produce. This means they are still heavily reliant on energy imports. They get a lot of hydro-based electricity from Canada, and they bring in natural gas and other fossil fuel products for home heating and transportation.

Since Vermont doesn’t produce much energy, its energy costs are higher than the national average. Its residents pay $.05 more for residential electricity per kilowatt hour than the average American does, and the rates they pay for commercial and industrial electricity are similarly high. States like New York and Massachusetts blocking natural gas pipeline development that could bring more energy to the region certainly isn’t helping this problem. But the unfortunate way that the government makes its approved utility monopolies operate.

The government allows the utilities to make a reasonable profit, but only if that profit comes from recouping capital improvement and new infrastructure project costs. In short: if they build it, they can raise your rates for it. That makes new forms of energy generation like wind and solar and the transmission lines they require much more attractive than, say, a more affordable natural gas plant that has a 30-year lifespan.

The federal government is also promoting this counterproductive business model by providing lavish tax credits and funding opportunities for the deployment of these so-called clean energy sources. There is nothing clean about solar panel and wind turbines, but I digress.

And yet, with all of this energy negativity in the backdrop, the state legislature is doubling down on failed, regressive policies that will exacerbate vulnerable Vermonters’ current problems.

Soon, members’ Clean Heat Standard era will go into effect, establishing an emissions credit scheme for fossil fuel-based heating delivery companies to pay into, which the state will then use to fund various pet energy transition projects.

The one immediate issue is that many residents pre-buy their winter heat fuel when costs are lower. But right now, heat fuel providers cannot say what those costs will be due to the uncertainty surrounding the law’s implementation date.

The longer-term issue, of course, is that this program is, for all intents and purposes, a tax on fuel delivery companies. And if their costs to operate go up, Vermont families’ costs will go up too. Nearly 60% of Vermont residents rely on fossil fuels for heat, and thanks to this policy, they’ll soon be paying more for it.

Next, we have the statehouse’s Renewable Energy Standard bill, which will require utilities to purchase 100% of their power from renewable energy sources by 2030. Again, Vermont is somewhat fortunate due to how much hydroelectricity production it produces on its own and its close proximity to Canadian clean hydro. But as more and more neighboring states enact similar requirements, the demand for renewable energy is going to increase. And as demand increases, as it almost always does, Vermont will likely find that there will only be so much renewable power to be found. The law’s provision that power be sourced from renewable sources built after 2010 will further strain supply options.

States like California and New York that have pursued these types of targets and mandates all have one thing in common: cost increases. This comparison is not a hypothetical. They’ve already done what Vermont now seeks to do and their residents pay more because of it.

Finally, there is perhaps the most misguided of them all — the Superfund clean-up bill. This legislation calls for large energy companies like Shell and Chevron to compensate the state of Vermont for the climate change damages the emissions from their products have allegedly wrought in the so-called Freedom and Unity State.

There are obvious mechanical issues with the legislation, not the least of which is that no one can prove that any emission from any company has contributed to some alleged harm. But on top of that, this legislation will almost certainly see Vermont drawn into a lengthy and expensive litigation process that, more likely than not, will increase taxes and result in the superfund penalty concept being ruled invalid. And if by some chance Vermont manages to recoup some of the penalty payment from the energy companies, it will have still made their operating costs go up, which, in turn, raising energy costs on the residents who will continue to rely on fossil fuels for years to come.

No one in Vermont thinks the legislature should ignore the health of our natural environment. It’s one of the things that makes the state so special. But members can support the environment in ways that don’t directly raise energy costs for. With the cost of food, housing, and retail goods up all around the region, the last thing Vermont needs is to add higher energy costs to the mix.

Legislators should consider these consumer impacts as they weigh whether they should — or shouldn’t — advance these bills and other energy-related measures.

Andrew Langer is the Director of the CPAC Foundation Center for Regulatory Freedom