S 138 Vermont Senate · 2025-2026 Regular Session

An act relating to commercial property-assessed clean energy projects

S.138 expands Vermont's property-assessed clean energy program to include commercial and industrial buildings, which were previously excluded. The bill allows municipalities to create "clean energy districts" through voter approval, enabling property owners of commercial/industrial buildings to voluntarily enter written agreements with their town or city. These agreements would subject qualifying properties to a special property tax (replacing traditional financing) to fund renewable energy or energy efficiency projects, with requirements for energy savings analysis and financial underwriting. The law takes effect July 1, 2025, and directly affects commercial property owners seeking to finance clean energy upgrades.

Bill status passed 3 of 5 stages cleared

Introduction

Apr 2025

Committee Review

Mar 2026

Senate Passage

Mar 2026

House Passage

Governor

Introduced Apr 1, 2025 Last action Mar 24, 2026

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What changed between versions

As Passed By the Senate (UnofficialOpens in a new window) → As Passed By the Senate (OfficialOpens in a new window) · 3 edits · Mar 19, 2026

MINOR

The official Senate version of S.138 adds a new section (Sec. 1) that amends the existing residential PACE program (subchapter 2) to explicitly extend it to commercial and industrial buildings, and adds underwriting criteria requirements for municipalities entering into PACE agreements. The official version also adds standard legislative metadata (sponsor, committee referral, date, subject, purpose statement). The new C-PACE subchapter 3 content is substantively unchanged between the two versions.

Scope change

The bill's scope expanded to modify the existing residential PACE program (subchapter 2) in addition to creating the new commercial C-PACE program (subchapter 3). The existing program now explicitly covers commercial/industrial buildings with a broader definition than the new C-PACE program, and gains new underwriting requirements.

SCOPE

New Sec. 1 amends existing subchapter 2 to explicitly include commercial and industrial buildings in the scope of the municipal PACE program, defined as 'any building other than a residential dwelling' (broader than the C-PACE definition which excludes only dwellings with fewer than five units).

REQUIREMENT

New Sec. 1 adds underwriting criteria requirements: municipalities must follow criteria established by the Department of Financial Regulation, establish additional qualifying criteria to ensure property owners can meet assessment payments, and must refuse agreements with owners who fail to meet those criteria.

TECHNICAL

Standard legislative metadata block added including sponsor (Senator Chittenden), committee referral (Natural Resources and Energy), introduction date (April 1, 2025), subject line, and statement of purpose.

As IntroducedOpens in a new window → As Passed By the Senate (UnofficialOpens in a new window) · 13 edits · Mar 19, 2026

MAJOR

The Senate-passed version of S.138 fundamentally restructures Vermont's PACE financing framework by creating a new standalone subchapter (Subchapter 3) exclusively for commercial and industrial property-assessed clean energy (C-PACE), separate from the existing residential/mixed PACE program in Subchapter 2. The most significant policy shift is that C-PACE districts now require only a legislative body vote rather than a voter referendum, and the municipality does not pledge its full faith and credit or incur indebtedness for C-PACE projects - financing is entirely private. The bill also adds detailed lien priority rules, lender consent requirements, a 90 percent loan-to-value cap, program administrator provisions, and amends state usury law to exempt C-PACE obligations.

SCOPE

Creates an entirely new Subchapter 3 (sections 3275-3277) dedicated to Commercial PACE, separating it from the existing residential/mixed PACE program in Subchapter 2. Only commercial or industrial buildings qualify under the new subchapter.

Establishes program administrator provisions allowing a municipality, public agency, or private entity to administer C-PACE programs, but prohibits a capital provider or lender from serving as administrator in a municipality where it is also lending. The Department of Financial Regulation must consult stakeholders to identify appropriate administrators.

REQUIREMENT

District approval changed from requiring a voter referendum at an annual or special meeting to only requiring a majority vote of the municipal legislative body at a duly warned meeting. This significantly lowers the barrier for municipalities to adopt C-PACE.

Requires property owners to obtain written consent from each mortgage holder or deed of trust holder before entering into a C-PACE agreement, confirming the assessment does not constitute an event of default under the existing loan.

Requires a licensed professional engineer or engineering firm to perform an energy analysis before any C-PACE agreement, with specific certification requirements depending on project type (efficiency, renewable energy, resilience, or new construction).

Requires capital providers to disclose risks to participating property owners, including payment default risk, foreclosure risk, and prepayment provisions. Also sets a 36-month lookback period for completed improvements to qualify for financing, with discretionary waivers by the program administrator.

DEFINITION

Defines 'commercial or industrial building' as any building other than a residential dwelling with fewer than five units, meaning multi-unit residential buildings of five or more units could potentially qualify as commercial.

FISCAL

Caps the combined amount of the C-PACE assessment plus any outstanding mortgage obligations at 90 percent of the assessed value of the property, providing a debt-service limit for lenders and borrowers.

Specifies that for C-PACE (Subchapter 3), the municipality does not incur indebtedness, is not liable for project performance failure, and does not pledge its full faith and credit. Financing is entirely private, unlike Subchapter 2 where the municipality may pledge full faith and credit.

Amends 9 V.S.A. section 46 (usury law exceptions) to add C-PACE projects as a new category exempt from deposit requirements, prepayment penalty rules, and interest rate caps, enabling private lenders to offer market-rate financing for these projects.

ENFORCEMENT

Establishes that C-PACE liens are first and prior liens on the property, subordinate only to property tax liens, and run with the land. This is a major departure from the existing Subchapter 2 PACE liens, which are subordinate to existing liens and first mortgages.

TIMELINE

Limits the repayment period to the life expectancy of the project (or weighted average for multiple projects) and sets an absolute maximum of 30 years. Also requires that agreements may only be entered into after January 1, 2027.

Effective date changed from July 1, 2025 to July 1, 2026, giving municipalities an additional year to prepare before the law takes effect.

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Full legislative history

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Total actions

Key actions

Committee

Mar 24, 2026

Introduced

Read first time and referred to the Committee on Energy and Digital Infrastructure

lower

Mar 18, 2026

Upper · Passed

Recommendation of amendment by Committee on Natural Resources and Energy agreed to

upper

Mar 18, 2026

Upper · Passed

Read 2nd time, reported favorably with recommendation of amendment by Senator Hardy for Committee on Natural Resources and Energy

upper

Mar 18, 2026

Upper · Passed

Favorable report with recommendation of amendment by Committee on Natural Resources and Energy

upper

Mar 17, 2026

Upper · Passed

Favorable report with recommendation of amendment by Committee on Natural Resources and Energy

upper

Apr 1, 2025

Introduced

Read 1st time & referred to Committee on Natural Resources and Energy

upper

1 primary · 0 co-sponsors