In Montpelier, a new initiative is taking shape to impose a fee on electric vehicle (EV) users based on mileage, aimed at compensating for lost gas tax revenue. After extensive planning, the proposal is part of a broader transportation policy bill that has recently passed key tax and budget committees in the Vermont House and is expected for a floor vote next Wednesday.

The Vermont Agency of Transportation has worked on this potential fee structure since 2023. Recent developments have clarified how this charge will function, with the intention of addressing a budget deficit that jeopardizes funding for vital transportation projects and has already resulted in job cuts within the transportation sector.

The proposed legislation, known as H.944, outlines a rate of 1.4 cents per mile for EV owners and lessees. The charge will be calculated based on odometer readings taken during annual inspections and subsequently reported to the Department of Motor Vehicles (DMV). The DMV will then determine the owed amount and issue bills to drivers, available for payment as a lump sum or in installments.

Unlike fully electric vehicles, plug-in hybrids will not be affected by the changes. Revenues from this new fee are not anticipated until 2028, and will be based on the distance driven between inspections after January 1, 2027. Estimates suggest that the first year could generate up to $1 million, with projections of around $2.5 million for the following year. The entirety of the collected funds will go towards the state’s Transportation Fund.

The average driver of an EV in Vermont could expect an annual fee of approximately $154, drawing from studies conducted by the University of Vermont earlier this year. Proponents, including Governor Phil Scott’s administration, emphasize fairness in funding for road use, as traditional gasoline tax revenues dwindle due to increasing EV adoption and improvements in the fuel efficiency of gas vehicles.

Several other states, including Hawaii and Oregon, are likewise establishing mileage fees, although the specifics of these implementations differ. Adjustments to the original bill have been made, including the introduction of a new tax on renting fully electric vehicles, which will not fall under the mileage-based fee framework. A proposed proactive payment system for EV drivers was also removed to allow for more revenue collection starting in 2028.

There is ongoing dialogue regarding the potential extension of this fee structure to all vehicle types in the future, with discussions suggesting a possible timeline in the early 2030s. However, such an expansion is viewed as contentious and currently lacks support from the administration.

The Vermont House continues to deliberate on this significant policy shift, underscoring the balance needed between promoting electric vehicles and addressing the fiscal realities of transportation funding.