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Solar Debate and Emerging Law

5 min read

Late last month, Delta Solar CEO Douglas Hutchings made a strong argument against legislation to essentially halve the electricity bill credit future owners of solar panels will receive for the power they put onto the grid.

After some compromise amendments were added to the Senate version of the “net metering bill,” SB295, he was more optimistic. The original legislation, House Bill 1370, would have “gutted” solar development here, many witnesses testified in committee hearings.

“The eventual outcome … offers some certainty in the near term in exchange for [accepting] some seemingly arbitrary roadblocks to non-utility solar beyond 2024,” Hutchings told Arkansas Business last week, describing how existing solar generation systems and those commissioned before October 2024 will benefit from the current rate structure for the next 17 years. This “grandfathering,” in legislative parlance, extends to new systems, but they must be interconnected to the grid before Oct. 1, 2024.

Doug Hutchings

“I am always the optimist,” Hutchings said. “Two years from now there will be more data that highlights the value that solar adds.”

School leaders, nonprofits, water treatment executives, major electricity users and businesses like Lexicon Inc. of Little Rock all spoke against the bill.

The Arkansas Advanced Energy Association vigorously fought the original bill, sponsored by Rep. Lanny Fite, R-Benton, and Sen. Jonathan Dismang, R-Beebe. The AAEA decided to drop its opposition in exchange for a 2024 deadline rather than the original cutoff for grandfathering, the end of this year. Other concessions came on the allowable size of net-metered systems and an allowance for solar panels within 100 miles of their user, rather than the original bill’s 5-mile limit. “What we can say is that we do not oppose the legislation as revised,” AAEA Executive Director Lauren Waldrip said.

The bill passed in the Senate on Tuesday and was approved by the House on Thursday afternoon. 

Glen Hooks of Audubon Delta, the environmental group, said Audubon also dropped its opposition after seeing the legislation wouldn’t be stopped in committee.

“Our strategy then pivoted to trying to make a bad bill better,” he wrote in an email. Hooks said the bill “is still terrible, but much better.”

Hutchings even sees some short-term benefits. “It will be extremely nice to get back to work and execute projects that create long-term value,” he said. “In the medium term I believe everyone [in the industry] will need to figure out their core strengths and make sure they’re maximizing them.”

In the long term, he fears fewer solar development companies will survive.

Incentive for Storage

Hutchings said the legislation will ramp up the value of power storage systems. “Long term I am not convinced that the utility authors of this bill will be happy with this.” More solar plus battery storage, he figures, “will only shift even greater revenue away” from utilities.

Those considering solar adoption should act soon though, he said. “Note that grandfathering is by the facility and it can be modified, upgraded or sold and retain the grandfathering,” providing stability for those who engage early, he said.

Jordan Tinsley, a Little Rock lawyer representing Arkansas Electric Consumers Inc., a trade organization of large industrial and agricultural power users including Acme Brick, Clearwater Paper, Commercial Metals Co., Reynolds Manufacturing, Weyerhaeuser and many others, said his clients still oppose the legislation.

They already pay “demand charges” on their electric bills and shouldn’t be punished economically for creating their own clean power to offset large bills that already cover grid infrastructure costs.

Today’s net-metering policy also allows utilities a charge for cost shifting, opponents of the legislation say, but utilities have not provided the Arkansas Public Service Commission with data to demonstrate it.

Those testifying for the bills were all current or retired utility officials.

Buddy Hasten, CEO of Arkansas Electric Cooperatives, congratulated lawmakers for asking “the right questions.”

Hasten said he’s been dedicated to power generation and distribution “for 36 years of my life, ever since I left the farm.” He has operated or managed every form of power, he said, “whether that’s nuclear reactors at the North Pole [as a Navy nuclear submarine officer], solar fields, wind farms, natural gas, coal, hydro.”

As a cooperative leader, he noted, he has no profit motive.

“I’m here today representing 1.2 million Arkansans … who belong to cooperatives. …  I think it’s fair to say there is a cost shift. You can go out and spend days on Google and find it; it’s real. We can haggle about how much is reasonable. … But we’ve had 1-to-1 retail in this state for 20 years, and there was an expectation [in the last general legislative session] that this would come to an end.

“We are not able to end the current cost shift nor are we asking to,” Hasten continued, referring to the grandfathering provisions. “All of the cost shifting that has gone on for 20 years, and all that will go on for the remainder of this year, and will continue to go on until 2040, that will continue, and that would be considered reasonable.” That was a reference to existing solar systems and those with interconnections completed by the end of September 2024 that will keep their current rate of credit  through 2040.

But he said solar installation is growing exponentially. “There are going to be solar panels everywhere in this state and they’re going to keep coming to this state.”

Hasten said he himself has commissioned

a 122-megawatt solar array that will come online this summer. “I’m not anti-solar; I’m all of the above.” A diverse power portfolio is good, he said. “I’m here today because it matters who pays for it.”

When a cooperative member benefits from solar power and another member pays for it, “as a cooperative that’s not fair,” he said. “We are absolutely about fairness down the line for all our members.”

Before the same panel, Hutchings, of Delta Solar, said the bill ignores factors that actually favor utilities.

“What 1-on-1 net metering allows I would classify as an interest-free loan from a net metering customer to the utility,” Hutchings argued. “If you’re a farmer in Arkansas with grain bins, for instance, you’re using that facility three months out of the year.” During the other nine months, the power generated by the solar panels dedicated to the grain bin provides “an interest-free loan of power to the utility, which is likely selling it at retail rates, which I am told by others are 10 to 14 cents [per kilowatt-hour], right?”

When the farmer begins using the grain bin in the fall, the credit is probably “6 to 8 cents,” Hutchings said. “Now, that sounds like a very attractive deal from a utility perspective. But we’re hearing that that is not fair to the utility and they want more. So the question is, how much more do we want to give them? What is fair to that farmer in that situation?”

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