Vermont Legislature SmartTranscripts:

[Peter Conlon (Chair)]: Its way through the senate, and we just are taking advantage of rule time with availability of legislative council on one addition of a word to the to one section of energy performance contracting. So, John, can you talk to us a little bit about whether this is a substantive change, a necessary change, or what any unintended consequences might be?

[John (Legislative Counsel)]: Okay.

[Peter Conlon (Chair)]: And then if you actually wouldn't mind, you could talk a little bit about why we have a section on energy performance contracting at all.

[John (Legislative Counsel)]: Okay, I will do my best. Obviously did not air for this. I just ran over, but I think that's a good place to start is that there is a separate section for energy performance contracting from the standard measures for authorizing school construction aid. So under the program that's under moratorium, and this is what's current law until July 1 when you get the new state aid program from act 73 plus any updates that are in September. Section thirty four forty eight is your general piece that deals with your standard construction aid. So that's the application process you guys will be familiar with, with that two step preliminary and final application, the prioritization points and the like. There's a separate section, that's what you're seeing a minute here that relates specifically to energy performance contracting. I was at around when this was created, but presumably the legislature elected to decide that certain kinds of costs could go around that standard process and you could access some limited funding through this separate process. So just a second, and the way that energy performance contracting works, it has its own standalone application process. It has its own standalone prioritization list. It's not on the same prioritization list as the other kinds of applications. And just to call out the things that are here, they're really, one way to think about it, it's kind of a narrow thing that you're facilitating with aid here. So there are specific defined terms for energy performance contracting. A performance contract for one is a contract for the valuation recommendation and implementation of one or more cost saving measures for the purpose of realizing energy and operational cost savings. And important for these performance contracts, which are what you would be authorizing state eight or under the section, payment for these contracts that's contingent on achieving those energy or operational cost savings reports and the way that it results. And so the way that it would work is you'd have to have an audit essentially that predicts what the savings would be over time, and then you need to realize those savings and payment is contingent on achieving those particular savings. I used a bunch of words when talking about what performance contract is, so it's helpful to talk about the pieces of that. A cost saving measure, that's any facility improvement, repair, and this is kind of where we're looking. A cost saving measure is any facility improvement, repair, or alteration, or any equipment fixture or furnishing to be constructed or installed in any facility that is designed to reduce energy consumption and operating costs, or to increase the operating efficiency of facilities for their appointed functions that is cost effective and further defined by state board rule. So I'm gonna pause there and try to do this in clauses rather than as one big sentence. So one thing, just at the beginning of this, state board rule speaks to the I don't know the rules they build out on this, but you should know that these are further built out in rulemaking from the state board of education. The other piece is to know, under existing law, only certain kinds of things fit into the eligibility conditions here. They need to be a facility improvement, repair, or alteration, which does not sound like adding a new facility. It just sounds like you're changing an existing structure in some way to improve it and make it more efficient or any equipment fixture or furnishing that is to be constructed or installed in the facility. So those are the only kinds of things that can get in and then they need to meet the qualifier. They have to be designed to reduce exactly as you would expect to achieve any savings. They have to be designed to reduce energy consumption and operating costs or increase operating efficiency. So only certain kinds of things get in, facility improvements, repairs or alteration, or the installation or construction of equipment fixtures or furnishing. And in any case, those things need to be designed to reduce energy consumption or increase operating efficiency. So those are the kinds of things that get in. Before I come to the language change itself, I want to talk about energy and operational cost savings because that's another technical term. I think it's probably obvious from the name, but it's any expense that is eliminated or decreased on a long term basis as a result of any cost saving measured, but does not include shifting personnel costs or similar short term cost savings. So what you can see through this set of interlocking definitions is that the state aid you're making available through this section is for a relatively narrow kind of thing. And it's going to have to be You're going to have to actually achieve the cost savings for any payment to occur under the contract for it to be something functional. So the expansion that is proposed here that you see oh, didn't even realize that you were scratching, okay, thank you, is to add the word addition to cost saving measures. So when I was talking before about what a cost saving measure is, I would say it's certain kinds of things, and specifically it doesn't seem to be a new facility. So the new addition, which is included, I think, at the request of EEI, And the idea is that, and I think this might have even come through you guys' committee, so you heard the testimony, but there are particular kinds of things like expanding a room for a boiler replacement or replacing modular defective facilities with a new those conceivably may not fit into what constitutes an improvement, repair, alteration, or equipment fixture or furnishing. There's like two sets of questions you would ask yourselves about the language change. One is does it capture the kinds of things that you want to have captured? And I think conceivably if you liked the things that were being presented in that presentation, I think this does capture those kinds of things, which is what generated the request. But there's a second question that you should ask, which is what else is included in the language that would now be picked up by these pieces? So my first thought when I looked at this was try to ask the question of like what would a bad faith actor do in these instances? Like do they try to smuggle something into this section that would otherwise need to be routed through the standard state aid provisions with its more restrictive measures? So that was kind of my first place of thinking is if I was responding to this, I wanted to get something built in an easier way, could I use the energy performance contracting section to get state aid where I previously couldn't? And what I would say is, I don't know the answer to that question, and I don't know the sorts of things that people are going to pursue as additions, but there are some things that I think mitigate that risk and make it maybe less likely than you might be led to speculate. So one is you still have to meet all of the independent restrictions of the section. So it still has to achieve energy cost savings. You still have to have the financial audit that shows that that's going to happen. It still has to meet the state board. There's all sorts of things that it still has to meet, and then it still has to go through the application process. And one of the things I hang my hat on when I think about is the risk high or low, and it really is just me predicting and I don't know. Approval of the aid sections is discretionary. So if a bad faith actor was trying to route things that should be routed somewhere else through this program, it would be within the Secretary of Education's discretion to say, this isn't the sort of thing that belongs here. So that's something I a little bit hang my hat on. So that's just like the set of considerations I would have about this. I would ask myself, does this capture what I wanted to capture? And then do I worry that this opens the door to state aid for things I might not want to encourage? And personally, I feel a little bit heartened by the amount of restrictions that are in the section. You're not gonna be able to do an addition that doesn't achieve energy cost. It has to be something that is designed to reduce energy consumption and operating costs or increase the operating efficiency of facilities for their appointed functions. It can't even be an expansion of their functions, right? Just intended to achieve that particular purpose. So that plus the discretionary approval, those are just the sorts of things I would say are worth considering. There may be more when thinking about whether you want to make this language change. I think when I was first asked about this, I hesitate. People will say, is this a clarifying amendment? And I almost always say, no, it's a change. He does clarify in a way. And so to back up to what happens if you don't make this change, the way that I think about it is let's say that folks are saying, we think standing in as though I think that my project, the boiler room expansion, is exactly the kind of thing this section covers. Under existing law with no language change, you would have to make an argument that what you're doing is an improvement, repair, or alteration, or it's the installation or construction of equipment, fixture, or furnishing. Basically, you would have to shape the way you make your argument as to what you're doing. They're saying they would like clarifying because it will make it so much clearer to them that they don't need to make that kind of argument. They can just submit it and it's obviously included. In the future, if you make this addition, they just don't have to shape their argument in that way. But conceivably, if folks think that they're already conceivably covered, they're just today having to make the argument that their expansion or replacement of the modular classrooms is an improvement repair alteration or construction installation. Does that make sense?

[Peter Conlon (Chair)]: For a one word change, that was a fabulous explanation of everything that goes behind it. Thank you very much, especially having done it on the fly. Any questions from anybody else? I think that for me, modular classroom, if you're getting rid of free modular classrooms and having to build an addition to replace them, but there's huge cost savings and you can meet all of those. It's probably a great example of something why the clarity of addition makes sense. I appreciate you talking about sort of the, it's not as simple for a bad actor. Not that there's really a bad actor in any sort improvement world, but yeah.

[John (Legislative Counsel)]: And just to be clear, I'm not suggesting that there are bad actors. That's just what I think too when anyone requests a language changes. I was trying to gain this, what would I do?

[Peter Conlon (Chair)]: Any other questions?

[Unidentified Member (House Education Committee)]: All right. This section are about the bill in general.

[Peter Conlon (Chair)]: Well, we have both legislative councils here, so bill in general will be fine too.

[Unidentified Member (House Education Committee)]: Right, so are they done working on it? No. So there will be a new draft?

[Peter Conlon (Chair)]: Yes.

[Unidentified Member (House Education Committee)]: Okay, when is that draft gonna be posted?

[Peter Conlon (Chair)]: When they finish working on it.

[Unidentified Member (House Education Committee)]: Okay, so then the changes that we're seeing in this draft really are

[Peter Conlon (Chair)]: This bill continues to sit in Senate Education, they continue to work on it, We just were taking advantage of time to get a pretty good point going on.

[Unidentified Member (House Education Committee)]: But we should but I guess what I'm asking is should I don't know what I'm saying. Never mind.

[Peter Conlon (Chair)]: Yeah. We don't we don't need to debate any of the parts of it. I mean, if your concern is the statewide healthcare negotiation section of it, I would definitely say we don't need to discuss that right now because they're continuing to discuss it downstairs. That would sound good. Yeah, okay. So that's probably the biggest part of it that they will be, I assume, discussing further. All right, everybody.