Vermont’s high energy costs make it a poor place to retire

by Robert Maynard

Vermont was recently rated as one of the 10 worst states to retire in.  (We are tied with Maryland for the 7th worst spot)  One of the factors cited was the high cost of living.  The cold weather was a factor as well, but their really is not much we can do about that.  Our high cost of living, on the other hand is partially driven by policies.

Maryland and Vermont rank among the worst places to retire on Bankrate’s list for a variety of reasons.

Both have relatively high costs of living and high state and local taxes. Maryland’s crime rate also is worse than the national average, and Vermont’s weather could be tough on a lot of retirees. Temperatures have been an average of 43.1 degrees in Vermont from 1981 to 2010, making it one of the coldest states in the country.

Vermont’s regulatory environment drives up the cost of building and thus of owning a home.  Our energy costs are high as well, which is a big issue in a state with colder weather.  Here is what Vermont Business Magazine had to say about our electricity costs:

Vermont had the third highest residential electric rates in the nation in February at 18.41 cents per kilowatt hour and the seventh highest for all sectors at 14.57 cents/KWH, according to the federal government. Vermont was 2.58 cents higher than the average New England residential rate and 0.2 cents lower overall. The US average was 11.61 and 9.77 respectively. Both the Vermont and US rates were higher than for February 2012. For residential, New York and Hawaii were higher. Overall, in addition to New York and Hawaii, Connecticut, New Hampshire, Rhode Island, and Alaska were higher.

This does not tell the full story of Vermont energy dilemma.  We are overly dependent on a source of energy that our political leaders are trying to get rid of.  The Institute for Energy Research recently published a study called “Energy Regulation in the States: A Wake-up Call.”  Here is the basic thrust of that study:

Abundant and affordable energy makes our lives better in innumerable ways. It heats our homes, lights our night, fuels our freedom to move, and brings us together by powering our communication systems. Affordable energy allows us to spend more of our money on our other needs, such as families, friends, entertainment, and investment. It also helps keep jobs in America by lowering the costs of producing and exporting goods and services, making us competitive in a global economy.

But affordable energy is under assault. Many politicians and ideological special-interest groups are working to place onerous restrictions on the energy we use and on how we use it. The energy resources that supply 85 percent of our energy needs—coal, oil, and natural gas—are the most affordable and therefore the targets of this assault. The regulations are intended to make energy from these sources harder to produce and more expensive to use. But these policies not only decrease the availability and increase the price of natural gas, coal, and oil, they also force the American people to use energy sources that would otherwise be too expensive and unreliable to exist commercially.

Here is their take on how Vermont fares:

Vermont has expensive electricity prices (29 percent above the national average). Like most of the states in the Northeast, Vermont’s electricity prices are among the highest in the country. Vermont is one of just two states in the country without coal-generated electricity. Instead, the state primarily uses nuclear power, which produces over 70 percent of the state’s electricity, with most of the generation coming from the Yankee Nuclear Power Plant. Vermont uses nuclear power for a larger proportion of its electricity than any other state.

VT Energy Mix

It is hard to see the wisdom of trying to eliminate the state’s most important source of energy with no clear plan on how the energy it produces will be reasonably replaced.  Here are a few other policy related factors that contribute to Vermont’s Energy crisis:

Below are some facts about Vermont’s regulatory environment that are like to affect the cost of energy or the cost of using energy. Vermont has enacted several policies that increase the cost of electricity or gasoline. Electricity prices in Vermont are among the highest in the country, owing in part to some of its regulations. These prices, and its lack of industry, may contribute to Vermont’s status as the lowest energy consumer in the nation and one of the lowest per capita. Vermont also has the lowest demand for petroleum in the country.

  • Vermont does not cap greenhouse gas emissions. However, as a member of the Regional Greenhouse Gas Initiative, it has imposed a cap on greenhouse gas emissions from power plants.
  • Vermont is a member of the Regional Greenhouse Gas Initiative (RGGI), a regional agreement among ten Northeast states to limit greenhouse gas emissions. This agreement requires states to cap carbon dioxide emissions from the electrical generation sector and to reduce those emissions by 10 percent by 2018 through a cap-and-trade scheme.
  • Vermont requires utilities to generate from renewable sources a certain percentage of the electricity that they sell unless their goals are not met. The state has a non-binding renewable portfolio goal that utilities generate 20 percent of electricity from renewable sources by July 1, 2017.[i] However, if certain interim goals are not met, this goal will become a mandated standard. In addition, the same legislation included a goal that 25 percent of energy consumed in Vermont be generated from renewables by 2025.
    • Vermont imposes a feed-in tariff for renewables, requiring utilities to purchase renewable energy at an increased price. House Bill 446, enacted in 2009, offers this incentive to every participating renewable generator with a nameplate capacity of 2.2 megawatts or less.[ii] The law sets a program cap of 50 megawatts, after which new generators will no longer be offered the incentive. By increasing the cost of renewable energy, this law increases electricity prices for consumers and businesses.
  • Vermont does not require gasoline to be mixed with renewable fuels. However, Vermont’s governor agreed to cooperate with other Northeastern states to develop a regional low-carbon fuel standard.
  • Vermont imposes automobile fuel economy standards similar California’s, which include attempts to regulate greenhouse gas emissions from new vehicles. The Vermont Air Pollution Control Division amended its low-emission vehicles regulation in November 2005 by enacting a rule to adopt California’s vehicle emissions standards.[iii]
  • Vermont requires new residential and commercial buildings to meet energy efficiency standards. The state enforces the Vermont Residential Building Energy Standards (RBES), which is based on the 2000 International Energy Conservation Code (IECC) for residential buildings. The IECC, developed by the International Code Council, is a model code that mandates certain energy efficiency standards. Commercial buildings must follow similar statewide guidelines that are based on the 2004 IECC with amendments to include ASHRAE 90.1-2004 and state-specific amendments.[iv] ASHRAE 90.1 is a model code that mandates certain energy efficiency standards and was developed by the American Society of Heating and Refrigeration and Air Conditioning Engineers. House Bill 446, enacted in 2009, directed the Department of Public Service to amend the state’s codes to comply with the 2009 IECC or ASHRAE 90.1-2007, whichever is greater, by 2011.[v]
  • Vermont imposes state-based appliance efficiency standards. House Bill 253, enacted in 2006, established efficiency standards for medium-voltage dry-type transformers, metal halide lamp fixtures, residential furnaces and boilers, and residential furnace fans. [VI]
  • Vermont allows one electric utility to “decouple” revenue from the sale of electricity, and other utilities may apply for decoupling. Decoupling revenue from actual sales allows utilities to increase their revenue by selling less electricity and natural gas.