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It is hereby enacted by the General Assembly of the State of Vermont:


(a)  The general assembly finds that it is in the public interest to:

(1)  encourage public and private investment in environmentally sound, sustainable, and renewable energy resources, as well as in existing energy conservation technologies, and thereby to increase the degree to which Vermont’s energy needs are met through nonpolluting, sustainable, and renewable energy sources;

(2)  enhance the continued diversification of energy resources in Vermont;

(3)  provide appropriate flexibility in the regulation of electric and natural gas companies;

(4)  create the opportunity for the development of a financially strong and dynamic electric utility industry in Vermont;

(5)  promote efficiencies and innovation in the provision of electric service to the citizens of Vermont; and

(6)  stimulate the development of the Vermont economy.

(b)  The general assembly further finds that programs to provide incentives for the private and public development of renewable electric energy generation, to authorize and clarify the nature and scope of renewable pricing programs for electric utilities, to authorize alternative regulation of utilities, to encourage development of combined heat and power systems, and to establish standards for the proportion of electric supply derived from renewable energy sources are ways to achieve the purposes in subsection (a) of this section.

Sec. 2.  30 V.S.A. chapter 89 is added to read:


§ 8001.  Renewable energy goals

(a)  The renewable energy programs authorized under this chapter shall be designed and implemented to achieve the following goals:

(1)  Environmental quality shall be protected and promoted in renewable energy programs.

(2)  Renewable energy resources shall be developed, commercialized, and used to provide an increasing fraction of the state’s electric energy needs.

(3)  The continued acquisition of cost-effective end-use energy efficiency measures shall be preserved and enhanced in renewable energy programs.

(4)  Programs shall, to the extent practicable, support development of renewable energy and energy efficiency industries and infrastructure in Vermont.

(5)  Programs shall, to the extent practicable, be designed and implemented in a manner that balances program benefits and costs.

(b)  The public service board shall provide, by order or rule, regulations, and procedures as are necessary to allow the board and the department of public service to implement and supervise programs pursuant to this chapter.


For purposes of this chapter:

(1)(A)  “Renewable pricing” means an optional service provided or contracted for by an electric company:

(i)  under which the company’s customers may voluntarily either:

(I)  purchase all or part of their electric energy from renewable sources as defined in this chapter; or

(II)  cause the purchase and retirement of tradeable renewable energy credits on the participating customer’s behalf; and

(ii)  which increases the company’s reliance on renewable sources of energy beyond those the electric company would otherwise be required to provide under section 218c of this title.

(B)  Renewable pricing programs may include, but are not limited to:

(i)  contribution‑based programs in which participating customers can determine the amount of a contribution, monthly or otherwise, that will be deposited in a board‑approved fund for new renewable energy project development;

(ii)  energy‑based programs in which customers may choose all or a discrete portion of their electric energy use to be supplied from renewable resources;

(iii)  facility‑based programs in which customers may subscribe to a share of the capacity or energy from specific new renewable energy resources.

(2)  “Renewable technology” means a technology that relies on a resource that is being consumed at a harvest rate at or below its natural regeneration rate.

(A)  For purposes of this subdivision (2), methane gas, and other flammable gases produced by the decay of sewage treatment plant wastes and anaerobic digestion of agricultural products, byproducts, or wastes shall be considered renewable energy resources, but no form of solid waste other than agricultural or silvicultural waste shall be considered renewable.

(B)  For purposes of this subdivision (2), no form of nuclear fuel shall be considered renewable.

(C)  For purposes of this subdivision (2), “biodiesel fuel,” a renewable, biodegradable, mono alkyl ester combustible liquid fuel derived from agricultural plant oils or animal fats and that meets American Society For Testing and Materials Specification D6751-02 for Biodiesel Fuel (B100) Blend Stock for Distillate Fuels, shall be considered renewable.

(D)  For purposes of this chapter, hydroelectric power produced by a plant with a generating capacity of up to 45 megawatts shall be considered renewable.

(3)  “Sustainable technology” means a technology the board has determined meets the needs of the present without compromising the ability of future generations to meet their needs and, specifically, consumes renewable resources at rates at or below their natural regeneration rates, depletes nonrenewable resources, if at all, at a rate limited to the rate of creation of renewable substitutes, and results in waste streams or pollution emissions that do not exceed the assimilative capacities of affected ecosystems.  For purposes of this chapter, no form of nuclear fuel or solid waste other than agricultural or silvicultural waste shall be considered sustainable.

(4)  “Tradeable renewable energy credits” means all of the environmental attributes associated with a single unit of energy generated by a renewable energy source, where:

(A)  those attributes are transferred or recorded separately from that unit of energy;

(B)  the party claiming ownership of the tradeable renewable energy credits has acquired the exclusive legal ownership of all, and not less than all, the environmental attributes associated with that unit of energy; and

(C)  that exclusive legal ownership can be verified through an auditable contract path or pursuant to the system established or authorized by the public service board pursuant to subsection 8004(c) of this title or any program for tracking and verification of the ownership of environmental attributes of energy legally recognized in any state and approved by the board.


(a)  Upon petition of an electric company subject to this title, upon request of the department of public service, or on its own initiative, the public service board may approve one or more renewable pricing programs for one or more electric utilities.  These programs may include tariffs, standard special contracts, or other arrangements whose purpose is to increase:

(1)  the company’s reliance on, or the customer’s support of, renewable sources of energy; or

(2)  the type and quantity of renewable energy resources available.

(b)  A standard special contract for renewable pricing that has been approved as to form and substance by the board under this section shall not require further approval by the board under section 229 of this title as to individual customers who choose to execute that contract.

(c)  Renewable pricing programs may be priced in the form of a premium relative to the tariff that would otherwise apply; provided that the premium shall be cost‑based, shall reasonably reflect the difference between acquiring the renewable energy and the utility’s alternative cost of power, including administrative costs, and shall be adjusted via such periodic adjustment mechanisms, including adjustment clauses, as the board shall approve as part of a renewable pricing program.  Any renewable pricing program shall require that any costs of power in excess of the company’s alternative cost of power shall be borne solely by those customers who elect to participate in the renewable pricing program.

(d)  Tradeable renewable energy credits (with or without other features), tradeable emissions credits, emission offsets, or other market instruments created or obtained by energy resources acquired pursuant to or as part of a renewable pricing program approved under this section shall be permanently retired by or on behalf of the program’s subscribers, and shall not be sold or otherwise disposed of.  However, if a program is not fully subscribed, any such instruments created or obtained by the unsubscribed portion of the program may be sold or disposed of at no less than market value if the net proceeds of that sale or disposal are used to reduce the cost paid under the renewable pricing program. 

(e)  The board shall ensure that disclosures and representations made regarding renewable pricing programs are accurate, reasonably supported by objective data, disclose the types of technologies used, and clearly distinguish between energy or tradeable energy credits provided from renewable and nonrenewable sources, existing and new sources.

(f)  Renewable pricing programs offered by a company shall be available to such customer classes as the board may determine.

(g)  The board shall consider the following factors in deciding whether to approve a proposed renewable pricing program:

(1)  minimization of marketing and administrative expenses;

(2)  auditing or certification of sources of energy or tradeable renewable energy credits;

(3)  marketing and promotion plans;

(4)  effectiveness of the program in meeting the goals of promoting renewable energy generation and public understanding of renewable energy sources;

(5)  retention by the program of renewable energy production incentives, tax incentives, and other incentives earned or otherwise obtained by energy resources acquired pursuant to or as part of a renewable pricing program approved under this section to reduce the cost of any premiums paid under this section; and

(6)  costs imposed on nonparticipating customers arising on account of the implementation of the renewable pricing program.


              ELECTRIC ENERGY

(a)  No company shall sell or otherwise provide or offer to sell or provide electricity to ultimate consumers in the state of Vermont without ownership of sufficient tradeable renewable energy credits, tradeable landfill gas capture credits, or, if authorized, tradeable renewable energy precursor credits, as provided for by the renewable energy portfolio standards to be established pursuant to this section.

(b)  The public service board shall prescribe, by rule or order, and may, from time to time, amend a standard for renewable energy resources, as well as requirements for implementation of that standard and compliance with that standard, and for recovery of reasonable costs, including transaction costs, incurred due to compliance with that standard.  The standard shall include a portfolio requirement that shall be applicable to each company providing electricity to retail consumers in this state.  The standard shall require that each company possess a quantity of tradeable energy credits sufficient to constitute a specified percentage of the company’s sales in Vermont.  The schedule for implementation of the standard may vary from company to company.  In establishing an implementation schedule for a company, the board shall consider the nature, duration, and value of the company’s existing power supply portfolio.  The tradeable credits may be any combination of renewable energy credits derived from qualifying renewable technologies, landfill gas capture credits derived from qualifying landfill gas capture technologies, or renewable energy precursor credits as they may be authorized under this section.  The required percentage shall be determined by the board in accordance with this section.

(c)  The board shall establish a system of tradeable renewable energy credits that may be earned by electric generation qualifying under the standard.  Under the system, the owner of a facility may apply for a certificate entitling the facility to earn tradeable renewable energy credits based on its electric energy production.  The board may authorize the use of an alternative, independently‑administered system of tradeable credits in lieu of or in addition to the system prescribed in this subsection.

(d)  The board shall prescribe, by rule or order, and may, from time to time, amend a definition of qualifying renewable technologies and a definition of qualifying landfill gas capture technologies.  Those definitions may include facility-by-facility determinations of whether a particular facility qualifies, as well as criteria and procedures for such determinations.

(e)  A fuel cell technology may be deemed to be eligible to earn tradeable renewable energy precursor credits that may be used toward compliance with standards adopted under this section, even for installations currently using nonrenewable fuels, if the board finds all of the following:

(1)  the technology is an emerging technology that holds special promise for enabling or enhancing the future sustainable use of renewable resources;

(2)  the technology is significantly less polluting than existing technologies in the use of similar fossil fuels, and, as such, warrants special consideration in the public interest;

(3)  the technology is not in widespread use for utility, residential, or commercial applications, will be readily convertible to renewable fuels, and is significantly less expensive with fossil fuels than renewable fuels; and

(4)  the use of the technology with fossil fuels will accelerate its use with renewable fuels.

(f)  Eligibility to earn tradeable credits shall be subject to such periodic compliance and auditing requirements as the board may direct.  Eligibility shall be for a specific facility and shall establish any necessary conditions for eligibility to continue in force.  Owners of self-generation and net metering customers under section 219a of this title may apply for and may be awarded certificates upon meeting all other applicable conditions.

(g)  In establishing the definition of qualifying renewable technologies and qualifying landfill gas capture technologies, and in making facility-by-facility determinations, the board shall do so in a manner that achieves the purposes set forth in subsection (h) of this section.  The board shall also set the percentage level required by subdivision (b) of this section to achieve those same purposes, taking into account the board’s definitions of qualifying renewable technologies and qualifying landfill gas capture technologies and its criteria for and decisions regarding facility-by-facility determinations under this section.   To the extent that the percentage level set by the board under subsection (b) of this section includes or reflects a specific percentage for technologies required under subdivision (h)(8) of this section, that percentage shall be no more than one percent for 2004, two percent for 2005, three percent for 2006, and thereafter at the percentage established by the board.  In order to limit potential rate impacts of this standard, the board may set an alternative payment to be made in lieu of acquiring tradeable credits under this standard.  These alternative payments shall be made in a manner directed by the board and shall be used for the purposes set forth in this section.

(h)  In carrying out the provisions of this section, the board shall achieve the following purposes:

(1)  diversify the state’s electric energy sources by including an increasing percentage of sustainable and nontraditional technologies;

(2)  encourage reliance on electric generation sources whose costs, availability, and reliability are not tied to global or regional fossil fuel markets;

(3)  reduce the risk of exposure to negative economic and availability impacts from future increases in environmental regulations, standards, or requirements;

(4)  encourage active, prudent management of electric resource portfolios by companies subject to this section, giving due regard to the integrated resource plans required by section 218c of this title;

(5)  support and advance the development and maintenance of efficient and effective markets for the trading of environmental characteristics of electric generation sources;

(6)  advance the state’s capacity to benefit from technological advances in sustainable and renewable electric generation technologies and, as appropriate, maintain benefits to the state from existing renewable electric generation technologies;

(7)  stimulate development of the state’s economy, industries, and businesses providing renewable energy technologies and services;

(8)  ensure a market share for photovoltaic, wind, fuel cell, and biomass gasification technologies for the generation of electricity that will materially assist in providing economies of scale and levels of investment sufficient to make those technologies commercially viable within a reasonable period of time; and

(9)  reasonably balance long-term benefits of renewable energy technology, diversification of energy supplies, and impact on electric energy costs.

(i)  Nothing in this section shall be implemented in a manner that will likely result in greater costs to the ratepayers over the long term.

Sec. 3.  30 V.S.A. § 218d is added to read:


              GAS COMPANIES

(a)  Notwithstanding section 218 and sections 225 - 227 of this title, upon petition of an electric or natural gas company, the public service board may, after opportunity for hearing, approve alternative forms of regulation for an electric or natural gas company, provided, however, that in the case of a municipal plant or department formed under local charter or chapter 79 of this title, or an electric cooperative formed under chapter 81 of this title, any alternative forms of regulation approved by the board shall also be approved by a majority of the voters of a municipality or cooperative voting upon the question at a duly warned annual or special meeting held for that purpose.  Before doing so, the board shall find that the proposed form of alternative regulation will:

(1)  establish a system of regulation in which those companies have clear incentives to provide least-cost energy service to their customers;

(2)  provide just and reasonable rates for service to all classes of customers;

(3)  deliver safe and reliable service;

(4)  offer incentives for innovations and improved performance that advance state energy policy;

(5)  promote improved quality of service, reliability, and service choices;

(6)  encourage innovation in the provision of service;

(7)  establish a reasonably balanced system of risks and rewards that encourages the company to operate as efficiently as possible utilizing sound management practices;

(8)  provide a reasonable opportunity, under sound and economical management, to earn a fair rate of return, provided that such opportunity must be consistent with flexible design of alternative regulation and with the inclusion of effective financial incentives in those alternatives; and

(9)  provide a high probability of material net gain for the company’s ratepayers and the state of Vermont.

(b)  In the case of a municipal plant or department formed under local charter or chapter 79 of this title or an electric cooperative formed under chapter 81 of this title, alternative regulation, if found to be appropriate, may include authority for the municipal electric utility or cooperative electric utility to set and revise rates; but in evaluating such a proposed provision, the board shall consider the extent to which some customers may not be represented by elected officials who have authority over the relevant electric utility.

(c)  Alternative regulation may include such changes or additions to, waivers of, or alternatives to traditional rate making procedures, standards, and mechanisms, including substantive changes to rate base and rate of return rate setting, as the board finds will promote the public good and will support the required findings set out in subsection (a) of this section.

(d)  The public service board may establish, by rule or order, requirements governing the filing of a petition to approve an alternative regulation plan.

(e)  The board shall act on the petition within 12 months of the filing of a petition that complies with the board’s rules.

(f)  An alternative regulation plan shall take effect not sooner than 30 days following its approval by the board.

(g)  The board may establish by rule or order, and may amend from time to time, standards and procedures by which the effectiveness of the alternative form of regulation can be determined.

(h)  The board, on its own motion, or the motion of the department of public service or a company operating under an alternative regulation plan pursuant to this section, may investigate any alternative regulation plan that is in effect.  Following notice and an opportunity for hearing, the board may terminate or modify the alternative regulation plan upon a finding of good cause.  Where the board revokes prior approval, the board shall determine whether the company’s current rates are just and reasonable, and, if not, shall establish new rates that are just and reasonable.

(i)  Notwithstanding any provision of this section, a company may file for rates determined under and in accordance with sections 218, 225, 226, and 227 of this title, to be effective at the time of the termination of any approved alternative regulation plan.

(j)  In the case of a municipal utility, the board shall approve an alternative regulation plan only if the board finds that the plan:

(1)  will permit the municipal plant or department to fulfill all of its obligations, including its obligations to the holders of bonds issued under local charter or state law;

(2)  will not violate existing covenants in outstanding municipal bonds or in contracts securing bonds issued by the Vermont public power supply authority;

(3)  will not impair the municipality’s access to capital, including in the municipal bond market.  The board will consider the opinion of the utility’s bond counsel in making this decision; and

(4)  will not impair the municipal utility’s ability to participate in future bond issues by the authority as contemplated by chapter 84 of this title.  The board will consider the opinion of the Vermont public power supply authority in making this decision.

(k)  In the case of an electric cooperative, the board shall approve an alternative regulation plan only if the board finds that the plan will not violate covenants in existing mortgages, or impair the cooperative’s access to capital.

(l)  In the case of an investor owned company, the board shall approve an alternative regulation plan only if the board finds that the plan will:

(1)  not have an adverse impact on the electric company’s eligibility for rate regulated accounting in accordance with generally accepted accounting standards, if applicable;

(2)  reasonably preserve the availability of equity and debt capital resources to the company on favorable terms and conditions.

Sec. 4.  30 V.S.A. § 218(b) is amended to read:

(b)  The department of public service shall or an affected company may propose, and the board through the establishment of rates of return, rates, tolls, charges, or schedules shall encourage the implementation by electric and gas utilities of energy-efficiency and load management measures which will be cost-effective for the utilities and their customers on a life cycle cost basis and enable electric utility customers to voluntarily participate in renewable pricing programs pursuant to section 8003 of this title.


(a)  The sum of $750,000.00 is appropriated from petroleum violation escrow funds for use by the department of public service.

(b)  The department shall establish a program of incentive payments to promote the installation of renewable energy systems in residences and businesses.  This program shall promote active solar technologies, including solar photovoltaic generation and solar water heating systems, both small-scale and intermediate‑sized wind systems, and other innovative renewable energy projects. 

(c)  The program designed by the department shall encourage, to the extent reasonably possible, investments in energy efficiency at the time of renewable energy investment.

(d)  The department shall report to the general assembly by January 30, 2005 on the results of this program, and on the potential for an ongoing renewable energy incentive program to create an active renewable energy market, develop a renewable energy installation infrastructure, and stimulate the development of new renewable energy businesses.


Any company subject to a standard set pursuant to 30 V.S.A. § 8004 may book and defer, with carrying costs, incremental transaction or power costs that it incurred:

(1)  due to compliance with that standard; and

(2)  prior to the filing of its first rate change request following the effective date of the public service board rule or order setting that standard.

Sec. 7.  REPORTS

(a)  By no later than January 16, 2005, the department of public service shall submit a report and recommendations to the general assembly regarding the advisability of adopting statutes that establish additional energy efficiency appliance standards and regarding statutory and regulatory provisions related to the development, siting, and permitting of renewable, sustainable, and efficient energy generation sources, including wind, solar, biomass, methane, and fuel cell installations, and combined heat and power applications.

(b)  In preparing its report and recommendations, the department of public service shall engage in a process of consultation with interested parties, including the public service board; the environmental board; electric and gas utilities; representatives of the wind, solar, biomass, methane, fuel cell, and combined heat and power industries; representatives of citizens, environmental, and energy user groups; regional planning commissions; and municipal governments.

(c)  The report shall include:

(1)  A summary of past and current activities undertaken by interested parties to address barriers and to facilitate and promote development, siting, and permitting of renewable, sustainable, and efficient energy generation sources;

(2)  Identification of statutory and regulatory provisions that either facilitate or act as barriers to the development of renewable, sustainable, and efficient energy sources;

(3)  A comparison and contrast of the existing processes for siting renewable, sustainable, and efficient energy sources, including the processes under Act 250, 30 V.S.A. § 248, local zoning and land use regulation, and regional development plans;

(4)  Recommendations for changes to statutes, regulations, and processes that will facilitate and promote the orderly and efficient development, siting, and permitting of renewable, sustainable, and efficient energy generation sources;

(5)  Recommendations for changes to statutes, regulations, and processes that will minimize regulatory burdens and expense, and efficiently utilize existing governmental expertise through intergovernmental partnerships and cooperation, while preserving and enhancing the public good, including public safety, energy conservation and efficiency, economic development, and environmental protection; and

(6)  Recommendations regarding the advantages and disadvantages of the general assembly adopting legislation establishing appliance and equipment energy efficiency standards, with particular consideration having been given to model legislation as prepared by the American Council for an Energy-Efficient Economy and the Appliance Standards Awareness Project.

(c)  By January 15, 2009, the department of public service shall report to the general assembly on the implementation of this act. 


(a)  The department of public service is charged with planning for proper utility service and representing the public interest in proceedings to set electric rates.

(b)  The department’s planning function includes creation of an electrical energy plan pursuant to 30 V.S.A. § 202, which looks out over a 20-year planning horizon.

(c)  Achieving and maintaining the lowest possible electric costs that provide safe, efficient, and reliable service while maintaining a financially stable electric utility industry is integral to the department’s planning function and to the electrical energy plan in order to maintain and promote Vermont’s economic well-being and growth in all regions and for all electric customers.

(d)  The department of public service, as the state’s ratepayer representative and the state’s electrical energy planning agency, is the appropriate agency to study and make recommendations on how or the extent to which, among the other factors studied in the electrical energy plan, rates can be reduced from present levels in the short term and reduced or controlled throughout the 20‑year planning horizon.

Sec. 9.  30 V.S.A. § 202 is amended to read:


* * *

(b)  The department, through the director, shall prepare an electrical energy plan for the state.  The plan shall be for a twenty-year 20-year period and shall serve as a basis for state electrical energy policy.  The electric energy plan shall be based on the principles of "least cost integrated planning" set out in and developed under section 218c of this title.  The plan shall include at a minimum:

* * *

(2)  an assessment of the all energy resources available to the state for electrical generation or to supply electrical power, including among others, fossil fuels, nuclear, hydro-electric, wood biomass, wind, fuel cells, and solar energy and strategies for minimizing the economic and environmental costs of energy supply, including the production of pollutants, by means of efficiency and emission improvements, fuel shifting, and other appropriate means;

(3)  estimates of the projected level of electrical energy demand;

(4)  a detailed exposition, including capital requirements and the estimated cost to consumers, of how such demand shall be met based on the assumptions made in subdivision (b)(1) (1) of this section subsection and the policies set out in subsection (c) of this section; and

(5)  specific strategies for reducing electric costs to the greatest extent possible in Vermont over the most immediate five‑year period, for the next succeeding five‑year period, and long-term sustainable strategies for achieving and maintaining the lowest possible electric costs over the full 20‑year planning horizon consistent with the goal of maintaining a financially stable electric utility industry in Vermont.

(c)  In developing the plan, the department shall take into account the protection of public health and safety; preservation of environmental quality; the potential for reduction of rates paid by all retail electricity customers; the potential for reduction of electrical demand through conservation, including alternative utility rate structures; use of load management technologies; efficiency of electrical usage; utilization of waste heat from generation; and utility assistance to consumers in energy conservation.

(d)  In establishing plans, public hearings shall be held and the director shall:

(1)  consult Consult with members of the public, the legislative energy committees, representatives of electric utilities, energy providers and other interested state agencies, whose views shall be considered in preparation of the plan

(A)  the public;

(B)  Vermont municipal utilities;

(C)  Vermont cooperative utilities;

(D)  Vermont investor-owned utilities;

(E)  Vermont electric transmission companies;

(F)  environmental and residential consumer advocacy groups active in electricity issues;

(G)  industrial customer representatives;

(H)  commercial customer representatives;

(I)  the public service board;

(J)  an entity designated to meet the public’s need for energy efficiency services under subdivision 218c(a)(2) of this title;

(K)  other interested state agencies; and

(L)  other energy providers.

(2)  To the extent necessary, the director shall include in the plan, surveys to determine needed and desirable plant improvements and extensions and coordination between utility systems, joint construction of facilities by two or more utilities, methods of operations, and any change that will produce better service or reduce costs.  To this end, the director may require the submission of data by each company subject to supervision, of its anticipated electrical demand, including load fluctuation, supplies, costs, and its plan to meet that demand and such other information as the director deems desirable.

(e)  Before adopting a plan, the department shall conduct public hearings on a final draft.  The department shall then accept the plan or modify it in accordance with conduct public hearings on the final draft and shall consider the evidence presented at such hearings in preparing the final plan.  The plan shall be adopted by April 1, 1983 no later than January 1, 2004, and shall be submitted to the general assembly.

* * *

(g)  The director shall annually review that portion of a plan which extends extending over the next five years.  The department, through the director, shall annually extend the plan by one additional year; and from time to time, but in no event less than every five years, institute proceedings to review a plan and make revisions, where necessary.  The five-year review and any interim revisions shall be made according to the procedures established in this section for initial adoption of the plan.

* * *


This act shall take effect upon passage.


Published by:

The Vermont General Assembly
115 State Street
Montpelier, Vermont