Key Net-Metering Provision to Expire With New Year, Industry Warns

Gov. Asa Hutchinson speaks to the Arkansas Advanced Energy Association on Oct. 12, 2022

Despite assurances from Gov. Asa Hutchinson that a key assurance in solar energy system pricing in Arkansas was due for an extension, solar developers were dismayed last week when the Arkansas Legislative Council held its last meeting of 2022 without guidance from state regulators, meaning the price guarantee will lapse at midnight Dec. 31.

The policy is a “grandfathering” rule for net metering that lets customers installing solar arrays lock down the price they will receive for the power their systems contribute to the web over the systems’ lifetimes.

On Oct. 12 at the annual convention of the Arkansas Advanced Energy Association in Little Rock, Hutchinson told the industry group that the state was poised to extend the rules, which govern rates utilities must assure to net-metering customers — those with systems that create their own energy and supply some of the excess to the electric grid. Those rates, in the same range of the rates residential customers pay for the power they use from the grid, have been the subject of years of debate and rule-making at the Arkansas Public Service Commission, which regulates utilities.

Though Hutchinson and leaders like AAEA Executive Director Lauren Waldrip had expected the commission to offer guidance to state lawmakers before the end of the year, that hasn’t happened. Waldrip said last month that her association and particularly its members in solar development were “laser-focused” on the issue, which she called “really our only priority” for the end of the year.

Hutchinson is completing his second term as governor and his successor, Gov.-elect Sarah Huckabee Sanders, will be sworn in on Jan. 10. The Public Service Commission also installed a new chair, Katie Anderson, in October. Hutchinson named her to the position to succeed Ted Thomas, a solar power advocate who had chaired the commission for eight years and cited what he called utility resistance to solar power development as one frustration that led him to resign his post early.

A request for comment to Hutchinson’s office last week on the net-metering topic drew no response.

Waldrip and other industry leaders, including several top executives at solar developers around the state, deferred commenting on the situation, apparently hoping for a quick and favorable resolution.

But in addressing the AAEA in October, Hutchinson had this to say:

“Let me mention one other thing that might be of interest to you, and I know the [Arkansas Public Service Commission] has been working on net net metering rules. And because we have a deadline that is coming Dec. 31 of this year for our net metering rules, let me tell you very clearly that that deadline … needs to be extended. There needs to be a fixed rate for the interconnectivity agreement for 20 years for consistency in locking in the rates for investments in solar,” Hutchinson continued. “I think really the only debate is how long the extension [of grandfathering in a 20-year fixed credit rate] should be.”

The governor said he envisioned an extension of at least two years.

In that time, he said, “our policymakers can continue to examine it and fine-tune the rules… But that deadline needs to be expanded.”

Jeff Hilton, interim executive director of the Public Service Commission, told Arkansas Business that there has been no delay in reporting to the legislative council, but he noted that rule-making cases, known as dockets in the PSC, can be time consuming because they require filings by many interested parties, as well as a hearing and testimony.

“A rulemaking docket can be difficult, because the commissioners have to weigh all the various interests and come up with a reasonable ruling,” Hilton said. “I’m sure they want to make sure they’re doing all they can to be fair and complete. The normal process in a rulemaking docket is to put out an order after changes are proposed in the rules. And in the case of net-metering rules, you have to allow opportunities for comments and testimony and a hearing, and whatever else the commissions feel they need to get the information they require.”

All that has occurred, he said, but there is no deadline for issuing an order. “I don’t know of anything that’s pending at this point, except for the issuing of a final order,” Hilton said. “But again, there’s no schedule specifically. So there’s no actual requirement for the order to come up in the next two weeks, or the next two months for that matter.”

The “grandfathering” would extend the current net-metering rate for projects being built, industry leaders said, and a general expectation was that the PSC would advance a proposal to extend the price stability guarantee through 2040. The price guarantee gives customers a basis for calculating when their power systems will pay for themselves, and any lack of certainty could hold up a billion dollars’ worth of projects planned in the state, solar developers say.

“You couldn’t get a new customer to do a project as of today” because of the uncertainty around grandfathering, Waldrip said back in October. “We have to close the loop on that. The University of Arkansas has a huge RFP [for solar power] out right now. Northwest Arkansas National Airport has a project that they’re starting right now, but these projects are coming to a screeching halt until we can get some certainty of what the guarantee will look like.”

She compared the net-metering rate to the fixed rates most homeowners get on their mortgages. Who would buy a house, she asked, not knowing how many payments are due until payoff, or how much those payments would be?

“It’s good policy, and it’s something other states have extended indefinitely,” she said. “Any sort of investment, whether it’s in this industry or another, requires that certainty, and grandfathering provides that in this case.”

Opinions differ on net-metering as a whole, “but there’s no good reason to oppose grandfathering,” she said. “Net metering is just the rate that you receive for the power you generate, and in Arkansas that happens to be 1-to-1. That is very attractive; it’s why we’re seeing lots of business interest in keeping the rate, whatever it is, stable over the life of these projects.”