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PSC Ruling Gives Solar Industry a Year-End Lift, Extending Rate Lockdown

4 min read

The Arkansas Public Service Commission gave a victory to solar power development companies Tuesday, issuing a ruling that, with legislative approval, will lock down the rates that customers will receive from utilities for the solar power they contribute to the power grid until 2040.

The ruling by the commission, highly anticipated by firms that install solar arrays and the residents and businesses who are turning to renewable energy, was also endorsed Wednesday by Gov. Asa Hutchinson. The governor had backed the rate extension, once called grandfathering but renamed in the ruling as a “rate structure lock,” as a necessary move to give solar array businesses and customers a guaranteed rate of return and break-even point on arrays that can last 20, 25 and 30 years.

The rate lock, once approved, is expected to clear the way for a billion dollars’ worth of solar energy projects planned in the state, according to the Arkansas Advanced Energy Association, an industry group that lobbied aggressively for the extension.

Industry leaders had feared a major disruption in solar development as the rate guarantee expires at the end of the year. The Arkansas Legislative Council had been expected to take up the issue at its December meeting, and alarms went off among industry leaders when its meeting came and went without any PSC action. Wednesday’s ruling makes it likely that legislative approval will come quickly and that major disruptions will be avoided.

The decision should add momentum to plans by the University of Arkansas to begin a large solar power project, as well as a solar power initiative at Northwest Arkansas Regional Airport in Highfill.

The ruling by the PSC, which regulates public utilities in the state, was unanimous and extends the current structure — a favorable one-to-one rate that gives solar customers roughly the same price for the power they put on the grid as the retail rate paid for power from utilities — until the arrangement sunsets in 2040.

AAEA Executive Director Lauren Waldrip said the ruling was “certainly a win that will be beneficial going forward, but added that the trade group’s attorney is reviewing it, and “there is much to navigate in such an untraditional rulemaking situation occurring among so much transition.”

The governor’s office said Hutchinson has signed off on the extension, which he explicitly called for at the AAEA’s annual fall meeting. Legislative committees overseeing utility regulation will also have to approve the rulemaking before the extension takes effect.

“Because the Arkansas Legislative Committee has no more meetings prior to the start of the legislative session on January 9, the rule will be considered for approval by the Joint Budget Administrative Rules Subcommittee after the General Assembly Convenes,” Waldrip wrote in an email.

Douglas Hutchings, a solar panel engineering entrepreneur and CEO of Delta Solar of Little Rock, a commercial array developer, called the rate lock fundamental “for any projects that have their [return on investment] dependent on putting power back onto the grid.” He said arrays couldn’t even be responsibly sold without certainty on the rate rules.

The ruling, which he hailed, was adopted unanimously by new PSC Chair Katie Anderson, Commissioner Justin Tate, and Commissioner Kimberly O’Guinn — who is leaving the panel Jan. 9 to join Southwest Power Pool. It addresses only the uncertainties associated with the expiration of the rate structure on Dec. 31. The structure will still expire, but for the time between Jan. 1 and when lawmakers take action, the PSC “absolutely has the authority” to apply the rate structure lock case by case as projects come up for approval, Waldrip said.

The PSC order said the rulemaking procedure modifies and clarifies Arkansas’ laws on net metering, the system by which power-generating customers are credited for their contributions to the grid. The commission, it said, “shall allow the net-metering facility of a net-metering customer who has submitted a standard interconnection agreement … to the electric utility after the effective date of the act but before December 31, 2022, to remain under the rate structure in effect when the net-metering contract was signed, for a period not to exceed 20 years.”

The ruling rejected a motion by a minority of the state’s electric cooperatives to dismiss the rulemaking for a “lack of jurisdiction over the subject matter,” and dismissed separate dismissal motions by Carroll Electric Cooperative of Berryville and Arkansas Electric Cooperative Corp. of Little Rock. It also rejected a motion by Entergy Arkansas to hold proceedings in abeyance temporarily.

The ruling finds that the rates “as revised herein are reasonable, appropriate, and in the public interest and are hereby adopted to be effective upon review and approval by the Governor and the Arkansas Legislative Council.”

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