Champagne was flowing last week at Seal Solar in North Little Rock.
State regulators had just announced a long-awaited ruling on renewable energy policy, and Seal President Heather Nelson and CEO Josh Davenport were ready to pop a cork.
The Arkansas Public Service Commission, deciding a four-year case over what utilities should pay for the power that private solar panels put onto the grid, had decided not to lower compensation for the excess power put back onto the grid by homes and businesses with solar arrays.
“My first reaction is that it’s good news for renewable energy and good news for Arkansas,” Nelson said June 1. “The solar industry is a powerful force in our state’s economy,” she added, predicting that the ruling will be “a shot in the arm” for job creation, economic development and “energy independence for Arkansans.”
After four years of debate, filings, counter-filings and testimony, the regulatory ruling — with some caveats — went against utility companies that had suggested that solar customers get less than the current 10-cents-per-kilowatt-hour rate now credited for the excess power generated by customers under net metering, the accounting system that credits their electric bills.
The 10-cent rate is the same as the average retail rate utilities charge for electricity, and will apply at least through the end of 2022.
Environmental groups and the Arkansas Advanced Energy Association joined solar installation companies in cheering last Monday’s decision in a case that was opened in April 2016. Utilities, heavy electricity users and the Arkansas State Chamber of Commerce expressed doubt.
Projects ‘Stacked Up’
Former Lt. Gov. Bill Halter, CEO of Scenic Hill Solar of North Little Rock, told Arkansas Business he’s immediately moving forward with $125 million worth of announced solar projects, including work for Bank OZK, Producers Rice Mill, Central Arkansas Water and several other solar arrays for cities, schools and counties.
“These projects have been stacked up for months and in some cases for years while we’ve waited for clarity with respect to net metering rules,” Halter said Wednesday. The ruling is crucial to economic development in the current business crisis, he said, though the ruling does hold out the possibility of added grid charges on net-metering customers in the future.
“Contracts have been signed, and all of these clients have been extremely patient. Now it’s time to build,” he said.
Utility representatives used an unfairness argument against the 1-to-1 credit, about 10 cents per kilowatt-hour, quite low for the national average but far above the 3-cent rate often available on the wholesale power market. It’s also unfair, big power-using industries said, for solar customers to get a “subsidy” for their power, effectively skirting what they should pay for grid infrastructure.
One utility-backed option was a two-channel billing system: one rate for the power they sell and a lower rate for crediting customers for their power.
The three-member commission rejected that approach, at least for now.
Essentially, commission Chairman Ted Thomas and members Justin Tate and Kimberly A. O’Guinn decided to let rates alone for small systems under 1 megawatt and for residential rooftop systems. While utilities can seek the grid fee on new projects, the PSC will “grandfather in” announced projects at the current rate structure.
That was welcome news for Halter, who in addition to the projects above has work scheduled for Forrest City, the cities of Stuttgart and Camden, Ozark Mountain Regional Water Authority, Ouachita County, Camden Water Utilities, Ouachita County Medical Center and North Little Rock Wastewater.
“We believe that solar power is a high-return investment for individuals, companies and other entities,” Halter said, calling price certainty essential for potential clients in sizing up investment.
Chamber Leader Objects
Randy Zook, CEO of the Arkansas State Chamber of Commerce/Associated Industries of Arkansas, said his members were upset that the decision “does not require the customers with private solar systems to pay their fair share of the costs required to serve them.”
“Although the order provides the opportunity to implement a grid charge,” he said, “it ensures that all other customers will be forced to bear a disproportionate share of the costs of the electric grid used to serve a significant number of existing and prospective customers with private solar systems.”
Arkansas must preserve its low rates by ensuring fair treatment of all, Zook said, calling bargain electricity “critical to economic recovery and stability.”
Caleb Gorden, president of Shine Solar in Rogers, hailed the ruling as a victory for choice, giving home and business owners options on where to buy their power. “Solar panels do exactly that. They give people a choice.” The ruling, he said, affirms that Arkansas is a forward-looking state in solar power.
The Arkansas Advanced Energy Association argued in proceedings that customer-financed distributed solar generation is a “net benefit for utility systems.” Executive Director Katie Niebaum said the group was reviewing the order “to ensure new rules align with the economic benefits provided by solar technologies.”
Environmental groups like the Sierra Club and the Audubon Society sent out press releases praising the decision. Glen Hooks, director of the Sierra Club’s Arkansas chapter, said he was happy and excited, but not necessarily surprised. “We had a very strong fairness argument … along with an undeniably booming solar energy presence in Arkansas.” He said the PSC members listened closely and did their homework.
“I was reasonably optimistic, but it’s a relief to have it confirmed,” Hooks said. “As a lifelong Arkansan, I’m exceedingly proud of my state.”
Entergy Arkansas, the state’s largest electric company and an investor-owned utility with 700,000 Arkansas customers, noted that the commission committed to keeping the 1-to-1 rate only until the end of 2022, after which the utilities may offer two-channel proposals.
Entergy intends to do so, said David Palmer, director of regulatory affairs, who called two-channel billing “the most reasonable approach” to credit solar owners “without causing unreasonable cost-shifting to other customers.”
He also emphasized the order’s possibility of a grid charge, which the utility sees as another means to address cost-shifting.
The ruling recognizes cost-shifting as a reality in the case of large private solar systems, Palmer said, adding that Entergy plans to file for grid charges quickly “so that this measure can be instituted as expeditiously as possible to protect all other customers.”
Entergy’s full response is at ArkansasBusiness.com/EntergyResponse.
Arkansas Electric Cooperative Corp., which provides wholesale power to the state’s 17 distribution cooperatives, said it was reviewing the 671-page ruling, but repeated its opposition to net-metering rules it says will shift costs away from solar customers reaping “a premium for their power” while other customers foot the bill. “We believe that it is inequitable to shift subsidies for net-metering consumers to non-net-metering consumers,” spokesman Rob Roedel told Arkansas Business.
But Mark Cayce, general manager of Ouachita Electric Cooperative in Camden, a hotbed of solar development, followed the flexible cooperative tradition. He went his own way, saying OECC “was pleased with the outcome” and “looking forward to working with additional solar customers moving forward.”