Coming out of the last legislative session, net metering of electricity was not something that was likely to knock the LEARNS Act or prison reform from headlines above the fold. However, for consumer and commercial owners of solar generating systems — and those still on the fence about it — the legislation was reason to sit up and take notice.
Act 278, supported by utility company Entergy Arkansas, overhauled existing policy by changing the rate at which excess electrical power can be sold by consumers back to the electric company in the form of bill credits. Today, owners of photovoltaic systems generate the power for their home or business, and the excess goes back on the grid at, basically, an accepted retail rate. The new law changes that rate, essentially, to wholesale.
Entergy contends the new law is about fairness since power generators are increasing demands on infrastructure without bearing a share of the cost of maintaining such systems.
“Whether they’re using power coming from the utility to them or whether they’re in a situation where they’re putting power back to us, they’re still using all of that system at all times,” said John Bethel, Entergy Arkansas’ director of public affairs. “As net metering continues to grow under that rate structure, the cost shifting and the unfair treatment for all other customers gets larger.”
John Bethel
Opponents of the new law, which included existing PV system owners and alternative energy interests, say the electricity being generated is actually assisting the utility by providing power during the most critical times of the year, thereby reducing strain on the grid.
What is more, said Lauren Waldrip, executive director of the Arkansas Advanced Energy Association, there was already a mechanism in place in the old law that allowed for PV system owners to bear their share of infrastructure costs without completely overhauling the rate system.
Lauren Waldrip
“A metric was already in place that would have allowed solar customers to pay for fixed costs via what’s called a grid charge,” she said. “The Public Service Commission would have accepted data from the utilities to show and to prove a cost shift. This was all in the previous law, so the utilities had the ability to come to the Public Service Commission to prove and show that there was a material cost shift, and that would have merited a grid charge for solar customers.”
Waldrip said a comparable example would be the driver of an electric vehicle enjoying the same benefit of roads as combustion-engine-driven vehicles but without paying the gas tax charged at the pump to maintain said roads.
“If I drive a Tesla, I pay a flat fee of $200 a year to pay my fair share to drive on the roads,” she said. “It’s similar for solar customers; there was already a placeholder for a grid charge in place where the Public Service Commission would have looked at that data, they would have determined that flat fee, and we could have handled things that way that would have not required a change in law.”
In Entergy’s view, that mechanism wasn’t enough to satisfy the second issue, that being a disparity in what the utility was paying one energy source over another when, in their view, both satisfy the same definition as an energy wholesaler.
“What normally would happen, and the way we buy power to serve our customers, we either generate power using our own facilities, or we buy power in the wholesale market. In the wholesale market, we pay the wholesale market price,” Bethel said. “The fact is the utility is buying power from that customer at a premium. We’re buying it at the retail price. Nobody would think that’s fair because, essentially, I’m paying the customer to use my facilities instead of the other way around. It’s a fair cost recovery issue.”
Waldrip countered by saying the new law could have a dampening effect on adoption of solar and other alternative energy, which would not only hurt the industry but ultimately affect everyone because fewer systems means less excess electricity being generated to ease pressure during peak-use periods.
“Solar is helping to shave that peak because it’s putting power on the grid,” she said. “One co-op in particular, because they got into solar a few years ago, filed a rate decrease for their consumers because they were able to utilize solar to help them shave their peak demand and, ultimately, their cost for all of their consumers. There is a way that we can all work in tandem and everyone can win from this situation.
“I’m here to tell you, solar is not the end-all-be-all. It’s not a good solution for everyone. It’s not going to solve all our problems. We shouldn’t move all of our power to it, but it does play a unique role in diversifying our energy sources in our portfolio and, ultimately, increasing our national security.”
To blunt the impact on the industry, the bill allows for grandfathering of current and future systems up to Sept. 30 of next year. Those systems will continue to be paid at the retail rate until June 1, 2040.
Rep. Lanny Fite of Benton sponsored the legislation in the Arkansas House of Representatives and said he felt the grandfathering clause was a good compromise for owners of current PV systems and those weighing their options.
Rep. Lanny Fite
“We amended the bill five times trying to make sure that no one was damaged,” Fite said. “Right now, if you get [a system] under contract, and you’ve got your contract signed by September of ’24, you will be grandfathered in, and you will be able to sell at retail costs, but [for systems] after that date, it will be avoided costs or wholesale costs.”
Ventrell Thompson, Entergy Arkansas’ vice president of customer service, said the utility agreed with the grandfather clause, saying it was in the best interest of the consumer.
Ventrell Thompson
“It was about the pricing, but it was also about making sure that customers had time to digest all of the information they were getting from all sides,” he said. “We pushed the timeline out so that no customers would feel rushed or feel like they were under a crunch to make a decision. This was a negotiated position, and I think all parties ended up with a good result because of that.”
Fite said he saw potential damages to all ratepayers under the old system, necessitating the creation and passage of Act 278 sooner rather than later.
“One of the things that’s been said is you’re killing solar in the state of Arkansas,” he said. “Well, 96 percent of the solar that’s sold in Arkansas on the grid is not net metering. It’s sold at avoided, or wholesale, costs. Only 4 percent is at net metering, but that 4 percent represents close to a $20 million a year impact right now.”
Waldrip said with a clearly defined deadline of next September before it, the industry is on message to prospective and existing customers to outline their options, enabling customers to maximize their investment before the law shifts next fall.
“Our primary concern right now is trying to educate consumers who would like to elect to produce their own power,” she said. “[The association] works for some solar developers, but to me, it’s really about the farmers and the school districts and the churches and the cities and the counties that are able to save their taxpayer and ratepayer dollars and to reallocate that to do other things, like give teachers pay raises.
“With farmers, for so long, they’ve been forced to accept so much volatility with market prices, with weather, with trade wars and trade markets; this is one input that they can control. That is something that they’ve never been afforded before. Those are really the advantages that we are trying to communicate to Arkansans.”
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