With a final public hearing coming Wednesday on a utility rate case that has loomed for years over the state’s growing solar energy industry, the Arkansas Public Service Commission appears to be within weeks of ruling on what compensation solar-generating customers should get from power companies.
PSC Chairman Ted Thomas said that a ruling could come within three or four weeks, "and that will be a big deal."
Solar panel providers and other advanced energy proponents favor keeping an equal rate for the electricity solar homes and businesses put onto power grid and the retail rate they pay for taking it off, about 10 cents per kilowatt hour. They cite tens of millions of dollars in economic development, environmental benefits from renewability and an overall public benefit.
Utilities like Entergy Arkansas Inc. argue that the equal rate allows solar-generating customers to pass along their share of costs for grid infrastructure and upkeep.
David Palmer, the investor-owned utility’s director of regulatory affairs, said concerns about legal notice requirements led to Wednesday’s hearing, set for 9 a.m. at the PSC’s headquarters in downtown Little Rock. He generally advocates a “two-channel” approach that would allow charging 10 cents per kilowatt-hour for power used in solar homes and businesses while compensating the owners about six cents for the electricity they return to the grid.
The 4-cent difference would account for grid infrastructure and upkeep and would mean “we won’t be shifting those costs to everybody else, because it really is a zero sum for us in the big picture,” said Palmer, who has overseen regulatory matters for Entergy Arkansas since 2018.
“We certainly advocated for [two-channel billing],” he added. “It’s fairly simple in terms of what actually happens: Our meters read the usage where the solar panels are, tracking kilowatt hours into the house and kilowatt hours coming out. The two-channel approach just says apply the retail rate for the electricity coming in, and apply this other rate on the power coming out, back onto the grid.”
He expects most speakers on Wednesday to favor keeping the current one-to-one rates, but he says the two-channel path would be fairer to all. Another approach that he said might be more palatable to the three members of the commission — Thomas and Commissioners Justin Tate and Kimberly A. O'Guinn — could be a “grid charge” on the bills of customers getting full compensation for their solar return to the grid.
One voice for the current rates in net-metering, the process of compensating solar customers by crediting their bills, is Katie Laning Niebaum, executive director of the Arkansas Advanced Energy Association, a trade group.
“The Feb. 19 hearing is for public comments only,” Niebaum told Arkansas Business earlier this month. “It is likely we will see a final order a few weeks after the hearing. Throughout deliberations, AAEA has argued that distributed generation is a customer-financed investment that is a net benefit for utility systems and benefits all ratepayers.”
Palmer said the commission has no obligation to issue a ruling on any particular time frame, “but I hope they’re going to give us some clarity in a timely way because there are issues beyond the rate.”
Palmer said solar power clearly presents economic development opportunities throughout the state, and perhaps not so surprisingly for a trained engineer working for the state’s largest electric utility, he believes the most economical way to tap that economic potential is to harness solar power at a large utility scale.
Entergy has the state’s largest solar plant, an 81-megawatt array near Almyra in Arkansas County, known as Stuttgart Solar. It has also built a 100-megawatt facility near Lake Village, Chicot Solar, and is seeking regulatory approval for another 100-megawatt power plant near Searcy. All three projects are in partnership with NextEra Energy Resources of Juno Beach, Florida. NextEra owns and operates the Stuttgart and Chicot facilities, selling the power to Entergy at a lucrative rate. NextEra plans to build and operate the White County plant, but Entergy will own it.
“We have an economic development opportunity, with land to be developed and areas of the state that really could use the growth,” Palmer said. “But you’re going to get more value in total from the large utility scale projects. We go through competitive solicitation and make sure it’s done in an economic manner. So the bigger bang for the buck is going to come from larger utility-scale resources.”
Solar installation entrepreneurs like former Arkansas Lt. Gov. Bill Halter of Scenic Hill Solar and CEO Josh Davenport of Seal Solar of North Little Rock point to dozens or projects that have provided jobs and solar opportunities at businesses, farms, schools and the government and nonprofit sectors.
“A good portion of these financed projects are cash-flow positive, putting money into our clients’ pockets every month,” Davenport testified before the PSC in earlier proceedings. “The current net-metering structure is helping households in Arkansas … and any minute change could negatively shift the ability of some clients to take advantage of this technology.”
He also said a two-channel billing system would make it much harder to project savings for potential clients. "A one-to-one ratio is easy to explain to customers. Two-channel billing is extremely hard to explain, and we believe the confusion will dramatically decrease the adoption of solar."
Palmer said Entergy Arkansas recognizes that Arkansans enjoy some of the least expensive electricity in the nation, and the utility is determined to keep cost pressure from driving up power rates.
“We are trying to maintain that total bill, and when you’re making sound economic choices at the utility scale, it kind of works itself out,” Palmer said.
Palmer stated the obvious, that customers need electric power at night and on cloudy, foggy days like Monday, the day of the interview on the socked-in 40th floor of the Simmons Tower. “Solar’s not worth a whole lot on foggy, cloudy days like today,” he said. “So you have to balance that, and you have to have at least for now baseload resources to provide that steady energy.”
He said Entergy’s ownership of the Searcy solar project, if approved, will give the company another path to diversifying its portfolio.
“That’s part of what we were doing with the third-party purchase-power arrangements we negotiated with NextEra [in Stuttgart and Lake Village]. So there’s a decent amount of risk that we’ve mitigated with the negotiated price in that PPA,” he said. “Ownership [in White County] would become another way to diversify the same resource.”