All of us have been honored to serve in Arkansas in policy making roles. We include Republicans and Democrats, consumer advocates and business organizations, and former state officials who have spent years trying to bring all sides together for positive compromise. Today we are united by an issue that is vital to economic development in Arkansas, especially our rural areas, and to the future of the State.
Four years ago, the Arkansas General Assembly passed a law allowing businesses, schools, and local governments to develop their own renewable energy. It has been a massive success for business, taxpayers, and especially for rural economic development.
This is an Opinion
Under this law, leading businesses like Walmart Inc., Producers Rice Mill, and Bank OZK have kickstarted a competitive solar industry that is bringing new technology to Arkansas and driving down energy prices.
Under this law, leading public institutions like the Central Arkansas Water, Ouachita County Medical Center, the City of Hot Springs, Ozark Mountain Public Regional Water Agency, and the City of Fayetteville and Forrest City are taking charge of their own energy supplies and lowering costs that would otherwise be passed on to ratepayers, patients, and taxpayers.
Numerous public schools and the University of Arkansas are investing in renewable energy as a learning laboratory for their students and a boost to self-reliance. A side benefit: Everybody is getting cleaner air and water.
The biggest benefit has been in the rural counties of Arkansas that are often starved for economic development. Every renewable energy project begins with a search for land. Often this land is hard to develop for other purposes, lacks infrastructure like sewer and water, or is in communities with high unemployment.
In four short years, and focused almost entirely on rural Arkansas land, renewable energy projects have created a $500 million development pipeline that is creating jobs, increasing property values, and providing tax revenue in corners of the state that have never seen such quiet, non-polluting, steady, profitable investment.
All of these things are exactly what the law was intended to do. It is working.
Some utility companies, however, are struggling to cope with the change. Every private electric company in Arkansas is owned by an out-of-state corporation. As Arkansans increasingly own their own renewable energy production facilities, utility companies see less money flowing to their parent companies. Arkansas-based power is displacing imported energy sources, and there is less need to build utility power plants that would earn an almost-automatic 10% return for their owners.
Some of the nonprofit power companies that serve our rural areas have helped customers develop solar projects. But some have imposed punitive fees on customers and fought losing legal battles against the successful law.
A coalition of these rearguard utilities have gotten the ear of a few legislators and proposed a bill that would halt customer-owned renewable energy in its tracks. The bill would make Arkansas the only state in the country with an automatic rate increase on all customers to help the utility companies make up for every cent of profit they lose when Arkansans produce their own renewable energy.
House Bill 1370 would also impose new fees and rate increases on solar projects within four months, so that current projects will be disrupted and customers will have no choice except to buy from the utility company.
The bill imposes numerous arbitrary changes to current rules, most of which apply to larger non-residential solar projects, such as requiring solar to be located within 5 miles of the customer’s electricity consumption. This new and completely unnecessary change would dramatically reduce the number of solar power plants that would be legally allowed. Had these provisions been in place previously, the projects for Central Arkansas Water (CAW), Bank OZK, the City of Hot Springs, and countless others would have been eliminated.
This limitation also undermines the economic development possibilities across rural Arkansas communities. For example, Central Arkansas Water’s solar power plant is located in Cabot while CAW’s electricity consumption is spread across more than 100 square miles. Similarly, Bank OZK’s solar power plant is located in Stuttgart while Bank OZK’s electricity consumption is spread across its headquarters and 40 bank branches in multiple counties.
Had this new geographic limitation been in place, both the CAW and Bank OZK projects would likely not have happened — reducing rural economic development by almost $20 million for these two projects alone. We believe that this new provision undermines over 40 projects totaling several hundred million dollars of investment which are either currently under contract or under development with devastating and unnecessary consequences to rural communities across Arkansas.
Similarly, a 75% reduction in the size limits on solar net-metering facilities would severely undermine commercial and industrial customers who wish to pursue renewable energy by placing a cap on their power plants that are much below their electricity consumption. Had these size limits been in place previously, current projects for Producers Rice Mill and the City of Hot Springs would have not been allowed. These two projects alone reflect more than $75 million of economic development for the Arkansas economy.
A completely new and unnecessary provision of the bill limits the total amount of solar power that a customer may deploy. This severely restricts the ability of our largest employers to deploy solar and leaves them captive to the monopoly utilities. A conservative estimate is that this single, unnecessary provision of the bill would eliminate over $250 million of economic development for Arkansas in the next two years.
In a complete breach of faith with Arkansas customers that have already deployed solar, this bill opens them up to additional new charges from the monopoly electric utilities several of which would not require approval by the Public Service Commission.
In an unprecedented money grab, the bill would allow monopoly utilities to include the credits to net metering customers in the fuel rate charged to all ratepayers. This would shift costs to ratepayers, and raise the bills of all utility customers.
If the automatic rate increase sounds familiar, that is because the utility companies did get an automatic-rate-increase law passed several years ago and it, too, has worked. It has steadily increased rates in Entergy territory, for instance, by 29%. In that regard, the successful solar law provides some measure of fairness and relief: the higher the utilities raise their rates, the more customers will consider providing their own energy.
Fundamentally, however, the change we are seeing is not legislative. It is technological. New and better technology is taking over and will require new approaches and ownership structures. Power companies formed to meet the needs of the 1920s and 1930s will no longer own 100% of Arkansas’s energy supply. Fighting this positive development will only hold our state back.
Current law in Arkansas is not perfect, but it sets a balance under which utility companies are making substantial profits, but must also consider that customers have a right to develop their own renewable energy supplies.
Arkansas could become a leading, self-reliant state if legislators preserve this balance. We urge legislators to reconsider before passing a reactive law opposed by a broad coalition of Arkansans from across the state. We urge them to pause and take time to fully understand the changes happening in the energy economy in Arkansas. We urge them to thoughtfully maximize the opportunities presented by solar power and battery storage for Arkansas, our Natural State blessed with abundant land and the 11th largest amount of sunshine in the United States.
