Vermont lawmakers gear up for a possible mileage-based fee on electric vehicles



Published: 04-08-2023 11:42 AM

Vermont’s policymakers have known for years that as more people opt to buy electric vehicles, the money the state brings in from its gasoline tax will decline significantly.

That’s led to a conundrum: Officials want to replace that cash — which pays for vital infrastructure projects and constitutes more than a quarter of all state transportation revenue — while still encouraging Vermonters to switch to electric. This year’s omnibus transportation bill, H.479, tasks officials with fleshing out a solution.

The legislation, which cleared the Vermont House last month and is now in the Senate, would charge the Agency of Transportation with designing a system by July 1, 2025, to charge electric vehicle drivers a fee based on how many miles they drive.

Officials have described a possible framework: The Department of Motor Vehicles could calculate the amount drivers owe using odometer readings, which are already collected during annual vehicle inspections.

The fees would be comparable to what the average gas-powered car driver pays in state gas taxes, which is about $150 a year, said Patrick Murphy, sustainability and innovations project manager at the Agency of Transportation. Drivers would likely be able to pay in multiple installments over a year.

A 2022 study commissioned by the agency determined that a mileage-based user fee was the best option for replacing gas tax revenue in the state.

In that sense, it “is really not a new fee. It’s just a different kind of road usage charge,” Murphy said. “And it’s adapted to changes in vehicle technology.”

Some environmental groups, though, have pushed back on that proposal. Robb Kidd, conservation program manager at the Vermont Sierra Club, wrote to lawmakers last month stating his organization opposes any new fees for electric vehicle owners, which he argued would discourage people from purchasing electric vehicles and hinder the state’s progress toward its legally mandated climate action goals.

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H.479 also recommends charging hybrid-vehicle owners a higher registration fee — but not a mileage-based user fee — to make up for gas taxes those drivers are not paying. Murphy noted that the state can’t determine how many miles a hybrid car drives on gas versus its battery.

The bill doesn’t propose changing the fees for gas-powered cars.

This year, the state estimates it will miss out on about $1 million in revenue because fewer people are driving gas-powered cars.

As of January, the state had registered roughly 4,800 fully electric vehicles and 4,100 plug-in hybrids, according to the Agency of Transportation. (Plug-in hybrids, such as a Toyota Prius Prime, rely primarily on a battery — whereas traditional hybrids use a battery only to supplement an internal combustion engine.)

Lawmakers have penciled in July 2025 to launch a mileage-based user fee program because that’s when the state aims for 15% of all new vehicles to be fully electric or plug-in hybrids.

About 8% of new cars registered in the state last year fell into those two categories, Murphy said — though it’s an open question whether the state will meet its goal. Matt Cota, management director for the Vermont Vehicle and Automotive Distributors Association, called it a “pretty steep climb.”

The organization, which represents car dealerships, does not have a position on the mileage-based fee, Cota said.

This year's transportation bill proposes to expand the number of households eligible for electric-vehicle purchase incentives, which Murphy thinks will help increase the rate of adoption. He said the state is confident that 15% by mid-2025 is a realistic goal.

Murphy acknowledged, though, that the mileage-based user fee is “not a perfect system.”

Drivers who regularly travel out-of-state may think it’s unfair to pay Vermont for miles they drive on other state’s roads, he said.

Similarly, the mileage-based fee would not cover electric vehicle drivers from other states who drive in Vermont — but who might have fueled up at a gas station here, had they been driving a gas-powered car.

The state estimates that about 20% of its annual gas tax revenue — slated to be about $78 million this fiscal year — comes from out-of-state drivers, according to Murphy.

Legislators have also contemplated creating another fee on the energy dispensed through electric vehicle chargers, and H.479 says the state should “work towards” this.

That concerns Kidd, of the Sierra Club. Such a fee may be the best way to capture revenue from out-of-staters, he said, but he worried about the impact on Vermonters who have lower incomes and are less likely to have access to a charger at their home.

Were the state to also levy a mileage-based fee, he suggested those people could end up paying double.

The 2022 study concluded that officials didn't know enough about how to implement a fee at electric vehicle chargers to recommend one at the time.

Kidd contends that the state should examine the sources of its transportation fund more broadly and shift them away from fossil fuel-based sources, such as a gas tax.

Nationwide, several states have enacted mileage-based user fees on electric vehicles, according to the Vermont Agency of Transportation.

About 30 levy an annual fee when electric vehicles are registered — akin to what H.479 is proposing for hybrids only.

Wayne Weikel, a lobbyist for the Alliance for Automotive Innovation — which represents car and truck manufacturers nationwide — told members of the Senate Transportation Committee on Thursday that his organization supports such a “flat fee” model.

He noted that other states have considered requiring an additional tracking device be placed in people’s cars in order to more accurately record miles traveled — but “people really hate that idea,” and it raises questions about personal privacy.

In Montpelier, some senators have raised their own concerns with the “flat fee” model, arguing it is akin to a regressive tax.

“Should an EV car that puts 5,000 miles on next year pay the same fee as a car that puts 25,000 miles on?” Sen. Thomas Chittenden, D-Chittenden Southeast said Thursday. “That’s why I’m inclined to support the trajectory towards vehicle miles traveled.”

The committee is slated to continue taking testimony on H.479 next week.