As much as 20% of public charging goes to non-residents who contribute nothing to highway maintenance. The state has studied—and largely rejected—direct solutions.

by Compass Vermont

The Free Rider Problem

Vermont faces a growing fiscal paradox: as the state aggressively pursues transportation electrification to meet climate goals, it’s simultaneously eroding the primary funding source for maintaining the roads those electric vehicles drive on.

For over a century, Vermont’s highway system has been funded primarily through the motor fuel tax—a user fee that worked on a simple principle. Drivers who used the roads more bought more gas, and therefore paid more to maintain those roads. But electric vehicles don’t use gas, and that traditional funding model is breaking down.

While Vermont has implemented new registration fees for resident EV owners to partially offset this loss, a specific gap has emerged: out-of-state travelers who historically contributed to Vermont’s roads by paying gas tax at the pump now traverse the state in electric vehicles without making any comparable contribution to the infrastructure they use.

Research conducted by the Vermont Agency of Transportation suggests this isn’t a trivial concern. Studies estimate that approximately 15-20% of charging sessions at Vermont’s public charging stations are initiated by vehicles registered outside the state.

The Surcharge That Can’t Happen

The seemingly straightforward solution—charging non-residents more to use public charging stations—turns out to be far more complicated than it appears.

Vermont officials specifically examined whether the state could implement a per-kilowatt-hour surcharge on out-of-state electric vehicles at public charging stations. According to the Vermont Road Usage Charge Study, the advisory committee ultimately concluded this approach is “not feasible” in the near term.

The problems fall into three categories: constitutional law, technology, and basic economics.

Legal Roadblocks

The most significant barrier is the U.S. Constitution’s Commerce Clause, which prohibits states from discriminating against interstate commerce. Legal scholarship on state user fees makes clear that charging different prices based solely on a driver’s state of residence would likely be unconstitutional when applied to private charging networks.

There is a narrow exception: when a state acts as a direct seller of services rather than a regulator, it can set its own prices. This means Vermont could theoretically charge more at state-owned charging stations—like those at Park & Ride facilities or state office buildings. However, the vast majority of Vermont’s charging infrastructure is privately owned or operated through public-private partnerships, making this exception largely irrelevant for revenue generation purposes.

Technical Challenges

Even if the legal path were clear, implementing such a system would require identifying which vehicles are from out of state at the moment of charging.

The most obvious solution—cameras that read license plates—faces serious practical problems in Vermont’s climate. Automated License Plate Recognition (ALPR) systems work well in ideal conditions but struggle when plates are covered in road salt, snow, and slush during Vermont’s extended winter season. The technology would also be expensive, with commercial ALPR systems typically costing $5,000 to $15,000 per unit, plus installation and ongoing software fees.

Alternative approaches, like using credit card billing addresses or future vehicle-to-charger communication standards, have their own accuracy and implementation challenges.

Perhaps more importantly, Vermont law currently restricts ALPR use. Under 23 V.S.A. § 1607, these systems can only be used for “legitimate law enforcement purposes” such as investigating crimes or commercial motor vehicle violations. Using them to collect revenue would require amending state privacy statutes—a politically difficult proposition given Vermont’s strong privacy protections and active civil liberties advocacy, as documented by the ACLU of Vermont.

The Math Doesn’t Work

Even setting aside legal and technical hurdles, the economics are unfavorable. The Road Usage Charge Study estimated that a surcharge on non-resident charging would generate less than $5,000 per year in total revenue for the state in the near term.

This minimal revenue reflects a fundamental reality: most EV charging happens at home, not at public stations. The 15-20% of public charging sessions used by non-residents represents a small slice of overall electricity consumption.

Meanwhile, equipping Vermont’s hundreds of public charging locations with the necessary surveillance and billing infrastructure would cost millions in capital investment, plus ongoing operational expenses for maintenance, software licensing, and dispute resolution.

The state’s analysis concluded the revenue would be “insignificant” compared to the cost and complexity of implementation.

Vermont’s Actual Solution

Rather than trying to tax electricity at the charging station, Vermont is pursuing a different approach: taxing miles driven, regardless of what powers the vehicle.

The legislature has enacted a series of bills creating a roadmap toward Mileage-Based User Fees (MBUF). Act 148, which took effect January 1, 2025, implemented an interim flat annual registration fee of $89 for battery electric vehicles (and $44.50 for plug-in hybrids) to capture some revenue while a more sophisticated system is built.

This is temporary. Act 43 mandates that a full MBUF system begins January 1, 2027. Under this system, resident EV owners will pay a per-mile charge—estimated around 1.5 cents per mile—designed to be revenue-neutral compared to the gas tax paid by drivers of conventional vehicles.

Solving the Out-of-State Problem

The mileage-based approach addresses the out-of-state driver issue through regional cooperation rather than individual charging station surcharges.

Vermont is participating in pilot programs with the Eastern Transportation Coalition to develop interoperability systems. The concept works similarly to E-ZPass for tolls: a Massachusetts driver would pay mileage fees to Massachusetts, but when their vehicle’s onboard system detects travel in Vermont, Massachusetts would remit the appropriate share of that revenue to Vermont.

This clearinghouse model allows states to capture revenue from out-of-state drivers without requiring expensive enforcement infrastructure at every charging station or running afoul of constitutional commerce protections.

What Happens Next

Vermont drivers should expect the current flat EV registration fee to remain in place through 2026. The state is using this transition period to develop the technical and administrative framework for the mileage-based system.

By January 1, 2027, Vermont EV owners will need to have their vehicles equipped with systems that can track and report mileage. The exact implementation details—including privacy protections, opt-in versus mandatory participation, and the specific technology platforms—are still being refined through the ongoing Road Usage Charge Study process.

For out-of-state drivers, the immediate impact is minimal. They won’t face surcharges at Vermont charging stations. But as more states adopt mileage-based fee systems and join regional clearinghouses, drivers from participating states will eventually contribute to Vermont’s roads through their home state’s fee collection system, just as they once contributed through gas taxes paid at Vermont pumps.

The transition represents a fundamental shift in how states fund transportation infrastructure—moving from taxing fuel consumption to taxing road usage directly. For Vermont, with its aggressive electrification goals and significant tourist traffic, getting this right is essential to maintaining the roads everyone depends on, regardless of where their license plates are issued.