Commentary: The Affordable Heat Act That Isn’t (affordable)

It turns out the real long-term cost of The Affordable Heat Act, S.5, proposed by the Natural Resources and Energy Committee is $5 billion dollars over a 5-year period as demonstrated in a detailed financial analysis by the Ethan Allen Institute.  Most of that cost will be on the backs of low- and moderate-income Vermonters who will pay for it through increased fuel costs in the range of $5 per gallon.  Worse, hoped-for long-term energy savings will not occur.

The detailed financial analysis, which was presented in person and as a document, is available here.

The Ethan Allen Institute analysis supersedes the administration’s previous estimate of $1.2 billion overall cost and a fuel increase of $0.70 to $1.00 per gallon to pay for it.  The Ethan Allen Institute estimate was based on more complete and accurate assumptions including:

  • The actual cost of weatherization, heat pumps and heat pump hot water systems for the average Vermont home is more than 3 times the cost presented in the earlier estimate, resulting in a $5 billion expense for the program
  • Implementation of the program over the expected timeframe will require a rapid increase in fuel price of $5.05 per gallon for all customers to fund the passthrough costs of the fuel dealers
  • The cost assumptions in the previous estimate did not take into account price inflation for goods and labor, and administrative costs, that would accrue during implementation
  • The previous calculation for the costs of the changeovers overestimated the amount of federal funding that would likely be available for subsidies by 100%. Total federal and state subsidies only amount to 7% of the total cost
  • The out-of-pocket costs for the average homeowner will be over $4,000 not $1,379 as envisioned in the earlier projection. The homeowner will pay another $33,000 over time through fuel surcharge because there aren’t sufficient government subsidies available
  • Due to an increase in borrowing rates since 2022, impacting the discount rate applied to future costs and greater upfront costs, the CAP model now results in a net expense not $6.4 million in savings for the benefits of weatherization and heat pumps

The proponents of the bill themselves can’t or won’t tell Vermonters what it will cost and how much fuel will increase to pay for it, as no financial analysis has been requested or developed by the committee.  Without a fiscal note of any kind the bill was passed by the committee on Friday, February 17.

Surely the Appropriations Committee, the next stop for this monumental legislation, will do a better job of examining “how much will it cost?” and “who will ultimately pay?”. Ethan Allen Institute’s thorough fiscal analysis should provide the foundation to answer these questions for the committee and the public. 

Wendy Wilton

Vice Chairperson
Ethan Allen Institute


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Enter Comment Here:

  • Colin Way
    commented 2023-02-21 20:52:17 -0500
    Not sure we can trust these numbers since even the basic math doesn’t hold up. You claim that it will cost 5 billion dollars and say that is 3 times the cost the committee claims, but that would require the committee to have claimed just under 1.7 billion. But you never state where this number is coming from as the only number you quote from them is 1.2 billion, which is over 4 times smaller than your estimate and thus would have aided your attempts to fear monger (which is precisely what you are trying to do regardless of if you are right or not, you want to cause people to panic). So why should we trust such poor math skills?
  • David Flemming
    published this page in EAI Commentary 2023-02-21 10:05:10 -0500