Clean Heat Standards — What You Should Know

In New England, Vermont and Massachusetts both have some version of a climate policy aimed at removing energy choice and steering consumers to heat their homes and businesses with full electrification. The policy is called the Clean Heat Standard (CHS). There is also a similar policy in New York called the Cap and Invest Program. If you don’t live, work or own a business in one of these states, you might think you won’t be impacted by them, but the truth is these state policies impact the entire energy industry with unintended consequences. Policymakers are pushing these disruptive policies, ignoring government officials’ warnings of cost barriers. This type of legislative authority and policymaking impacts us all.

Here is what you should know about the CHS and what you can do about it.

Unintended Consequences

State regulators are openly combatting the home heat, oil and propane industry in favor of electrical systems (i.e. heat pumps). While these policies are designed to reduce emissions, the mechanism used to implement this transition leads to costly and inefficient forced electrification throughout the state. The CHS policy puts a burden on the already insufficient electric grid, drives up costs and limits energy choice. The CHS, as written, is a credit system that requires heating energy providers (natural gas, heating oil and propane) to replace fossil fuels with clean heat over time. The CHS would require energy providers to either implement clean heat solutions (full electrification via heat pumps, geothermal, etc.) or purchase clean heat credits to meet state-mandated greenhouse gas reductions.

This will have an impact on the cost of energy for all consumers, but the policymakers are marching ahead aimlessly and recklessly. For example, in 2023, Phil Scott, the governor of Vermont, vetoed the Affordable Heat Act that establishes the Vermont CHS. The legislature overrode the veto. Now, the governor of Vermont is reminding the state’s citizens what he stated clearly in 2023 when opposing the Vermont CHS:

“The fact is 70% of Vermonters rely on fossil fuels to heat their homes. To change this, we need to help people through this transition, not punish them. We must also answer some tough questions, which I get asked all the time, like, ‘Can our electrical grid handle the load needed for a cleaner and more affordable energy future? How will we make sure people stay warm or charge their vehicles when — not if — the power goes out? … How do we make sure lower and moderate-income families can afford the switch?’ There are solutions to these questions, and I share the sense of urgency here. But we’ve got to get this right.”

The point is, in many states, the legislature and agencies are avoiding these tough questions and quietly pushing through harmful legislated policy that will drive up costs and reduce reliability. In Vermont, the governor’s office stated that the CHS plan is costly — upwards of $10 billion — and could result in an increase in heating oil costs of $1.70 per gallon. A recent report from the Vermont Public Service Department reported a price tag of up to $2.12 per gallon on propane and over $4.00 per gallon on heating fuel.

We know that anytime a mandated credit system is implemented, it is ultimately a tax on products and a tax that will be borne by the consumer. The states of Massachusetts and Vermont seemingly want to penalize natural gas, oil and propane in order to force the adoption of higher-cost, less reliable electrification solutions.

In a recent ruling, the Vermont Public Utilities Commission (PUC) highlighted that a credit system to implement a Clean Heat Standard is too complex for a small state to manage and a fee on fossil heating fuels would be preferred. This type of statement, of course, acknowledges that the CHS credit system is problematic, but do not ignore the fact that the PUC is still in favor of putting a fee on our heating fuels.

The Massachusetts Department of Environmental Protection, which is responsible for implementing a Clean Heat Standard, has yet to be able to confirm how much this program might cost consumers. I believe this omission is intentional, because if the consumer knew how much this was going to cost, the policy would likely not move forward.

There is still time before either the Vermont or Massachusetts CHS programs are implemented, but now is the time for business owners, suppliers and consumers to speak up! Our concerns on cost, reliability and the importance of energy choice must be heard.

These climate policies in many New England states will not stop until consumers are entirely forced into the electrification of their homes, their cars and their businesses. If you live in a New England state with a proposed CHS, it’s crucial to let your legislators and policymakers know that forced electrification is simply not acceptable.

In Vermont, you can learn more about the CHS, its complexity and its consequences for residents and the heating industry at cleanheatvt.com. In Massachusetts you can contact the Propane Gas Association of New England or visit their newly launched website at smarternewenglandenergy.org to learn more about how to take action.

Disclaimer from the author: The reason I got involved with this topic is because I want to see a thriving energy industry with protected energy choice for the consumer. This includes safe, reliable and affordable energy for all. Truthfully, our M&A firm helps oil, propane and HVAC business owners sell their companies. If the Clean Heat Standard is implemented in New England, many business owners will likely not be able to keep up with the costly penalties and may be forced to sell their business. This CHS policy could be a boon to our small, family-owned M&A practice. But I am more interested in stopping these harmful policies than getting more business. We believe business owners should exit and retire on their own terms — not forcibly by poorly conceived state policies that attack freedom of energy choice and taxation of useful heating solutions.