In a significant decision for solar energy, Arkansans who now get credit on their utility bills for electricity they generate at their homes and businesses will be able to continue at current rates for 20 years.
The Arkansas Public Service Commission decided to “grandfather in” existing customers last week in its first of two rulings on net metering, the accounting process that gives utility customers the ability to get credit for the amount of energy they contribute to the grid. The commission has been assigned by the state Legislature to revise the state’s rules on net metering, which lets consumers offset up to 100 percent of their electric bills.
The ruling came after months of filings and testimony by the state’s utilities, electric cooperatives, interest groups and the public, and was the first of two PSC decisions on on-site generation. The second, expected in September at the earliest, will tackle potential rate changes after an examination of the costs and benefits of on-site electricity generation.
Ken Smith, policy director of the Arkansas Advanced Energy Association, called the ruling a generally good one for electricity consumers.
“The grandfathering provision allows existing net metering customers to continue on the existing rate,” Smith said, and it allows people who want to be net metering customers to join under the current rate up to when the PSC issues any new rate order later.
“There may or may not be a new rate, or tariff, coming,” Smith said. “But if you want to be a net metering customer and have a standard interconnection agreement with your utility signed by you by the date the new rate order is signed by the PSC, then you’re grandfathered under the old rate for up to 20 years.”
As part of the core decision, Smith said, the PSC ruled that the grandfathered rate stays with the net metering facility — the term for the solar array or other generation equipment installed in a home or business — not with the utility customers themselves. This was crucial to giving the generation equipment a more stable value as an asset.
“If you’re selling your house and generation equipment, the buyer will know what his net metering rates will be for the remainder of the 20-year period,” Smith said. “Otherwise ownership of the system would have less value, and that could hurt the spread of solar power. Many of the utilities had argued that the sale of the net metering facility should qualify as a triggering event for setting new rates. The PSC ruling disagreed.”
One part of the ruling that went against solar power advocates was a confirmation that customers must own the generation equipment to qualify for net metering. Lawyers for Pulaski County and other intervenors had argued that those who lease solar equipment should be able to qualify. The ruling, however, pointed to statutory language requiring net metering customers to be “an owner.”
But another section of the ruling found that net metering facilities can have more than one owner.
“If a property owners association or community solar group wants to sell shares in a generation facility, they can,” Smith said, noting that customers would reap net-metering benefits in proportion to the shares they own in the system. “It helps clarify the concept of a community solar project.”
The PSC also declined to set a limit on the size of a net metering facility, something that some utilities had argued for.
“They wanted facilities over one megawatt to fall under co-generation rules,” Smith said. “There are some generation facilities that produce power and sell it through regional markets like MISO and SPP [the Midcontinent Independent Transmission System Operator and the Southwest Power Pool]. Under that system, the markets would drive the value of kilowatt-hours. Projects like the Aerojet Rocketdyne solar array in East Camden supplies energy that way to SPP.”
But the commission found that the concept of net metering itself limits the amount of power generated, since net metering customers can get credit for no more than 100 percent of the energy they consume. “It was the perfect decision,” Smith said.
The other big outcome in the decision chipped at a policy of Entergy Corp. that disallows seasonal application of net-metering credits, a crucial issue to farmers who use vast amounts of power during the growing season to irrigate their crops. “The PSC staff said that seasonal applications should not be excluded, which we view as positive.”
Business leaders like Josh Davenport, CEO of Seal Energy Solutions of North Little Rock, were also pleased. His company is very interested in reducing electric bills for farmers who use energy to irrigate and dry crops through crop dryers.
“We’re excited now about solar,” Davenport said. “Farmers want to put solar panels on levees, and this could speed their way in moving toward that.”
State Rep. David Hillman, R-Almyra, a farmer from what he proudly calls the Grand Prairie, spoke Tuesday at the Arkansas Advanced Energy Association luncheon at the Capitol.
“We have a lot of good things there. We have lots of farm ground,” he said. “We have lots of sunshine, and I hope in the next few years we’ll have a lot of solar energy.”
He said one of his constituent businesses, Stratton Seed, has seven locations and hopes to build a solar facility capable of providing all his electricity.
“He wants to bank it at the utility company so that he can use it at all seven of his sites,” Hillman said. “I’ve been working on this with the PSC, which has assisted on this in every need.”
Hillman’s other concern was for farmers like himself.
“Most of our crops in eastern Arkansas are irrigated, and it takes a lot of energy,” he said. “The problem is that it’s only for a short period of time, three or four months out of the year.
“But if the farmers were allowed to put in solar panels, they would be able to recover about a third of the cost of irrigation. The problem is they use it through the summertime, and they want to bank it to used that electricity all year long. There’s been some resistance to that. But when I look back on the early history of net metering, I seem to recall there was some resistance to that, too.”
Hillman put in a good word for Entergy, noting that the investor-owned utility is “putting in 400 acres of solar panels” two miles from his house. “They’re to be commended for that, because it’s the wave of the future. And to an old farmer like me, it just makes common sense.”