Arkansas Democrat Gazette 
Andrew Moreau

For the past 3½ years, Arkansas utility regulators have muddled through dockets set up to establish rules related to the use of renewable energy and how to best structure rates for solar customers.

Across the state, power providers, consumer groups and trade associations have weighed in with filings — thousands of pages of testimony and studies — and there still is no clarity around key issues. Over that time, however, the solar industry has blossomed and created more pressure for better-defined rates, especially addressing net-metering customers.

Today, the three-member Arkansas Public Service Commission holds a public hearing to gather comments and feedback related to net-metering policy and related issues. Net metering, at its most basic, refers to how customers who have solar panels are credited for the excess power they return to the electric grid.

As of December 2018, commission filings noted there were more than 1,500 net-metering systems in the state. That’s up more than 50% from the previous year.

The dozens of power providers, businesses and organizations that have filed to be a party to the docket want the commission to resolve how residential customers who install solar for their own on-site use should be credited for any renewable energy that they send to the utility grid.

Entergy Arkansas, the largest electric provider in the state with 700,000 customers, would like the commission to clarify issues such as net metering so the utility has better-defined rules around how it can charge customers for its fixed costs, or infrastructure investment. Electric utilities across the state side with Entergy on the top issues.

“This whole process is about establishing the rules we operate by,” said David Palmer, director of regulatory affairs at Entergy. “We need the commission to give us the rules for how to make all of this work. We really need clarity and rules that are fair for everybody.”

Entergy contends that it pays too much for the power solar users return to the grid and that leads to cost shifting that puts more of a financial burden on non-solar customers. Solar advocates say existing rules that call on utilities to pay full retail rates for net metering should continue and do not result in unreasonable allocations of costs to other customers.

Opposing Entergy are organizations that are advocates for environmental issues and solar power, which they say needs flexibility to be a viable and less costly alternative to more traditional electric providers. The Audubon Society of Arkansas, the Sierra Club and the Arkansas Advanced Energy Association are in this camp.

“Ultimately solar developers and customers need certainty to support this emerging market,” said Katie Niebaum, executive director for the Arkansas Advanced Energy Association. “And the commission has an awesome opportunity to support the growth of emerging energy markets in a way that’s good for all ratepayers.”

Sen. David Wallace, R-Leachville, sponsored an act in the 2019 legislative session that led to this latest hearing.

“The intent was to make this process consumer driven and to give the consumer more choices and to level the playing field,” Wallace said of the legislation. “We’re seeing the positive results now — every week it seems like there is another new solar project popping up.”

In November 2017, the commission held a similar public hearing before a packed house about the benefits and challenges of net metering. Commissioners were expected to establish a net-metering policy, but the panel issued no ruling.

Two years later, more twists are complicating the rate issue.

Solar technology has improved, costs have dropped and implementation has exploded. The legislation approved earlier this year ignited solar expansion by giving public agencies, governments and schools the ability to sign service agreements with solar providers.

This summer the commission formed a working group to collaborate and establish rules to oversee solar and put a cost structure in place for net metering. The parties failed to agree on any substantial issues.

Now, the cost-structure issue is back before the commission to decide.

As regulated utilities, Entergy and electric providers in Arkansas are obligated to build infrastructure that delivers safe and reliable power to customers.

The commission approves utility rates that guarantee a fair rate of return for those investments. That structure has been in place for decades, providing a means for electric providers to charge all customers for the power lines, poles, generators and other equipment that is put in place to deliver electricity to homes and businesses.

Solar installations and usage disrupt the rate structure. Customers get credited for solar power they generate but don’t use and return to the grid for overall usage. That means, the utilities contend, that those users aren’t paying for the infrastructure that has been built out and will be expanded to meet future needs. As a result, other electric customers who don’t have solar shoulder more of a financial burden for infrastructure.

“For every kilowatt hour that customers that net meter avoid paying fixed costs for, those fixed costs get borne by all of our other customers,” Entergy’s Palmer said.

Under current rules, Entergy credits net-metering customers about 10 cents for every kilowatt hour returned to the grid. That’s money that comes out of the pockets of other customers who don’t use solar but rely on Entergy and other utilities for all their electric needs, the power companies say. Net-metering credits are higher than the rates Entergy would pay for that same power in the wholesale market, the company says.

The commission staff has developed seven recommendations, including keeping the current net-metering credits in place for residential customers and for large customers who use more than 5,000 kilowatt hours per month. And the staff has recommended that any utility that wants to change those policies should file a rate case.

“We have an overarching objective of promoting customer-owned renewable energy and supporting economic development in Arkansas,” said Donna Gray, executive director of the commission.

This is the rare case where the Arkansas Electric Energy Consumers group supports Entergy and other power providers. The group, which represents large industrial and commercial customers statewide, most often opposes utilities in cases that involve potential rate changes.

“The current rate design that we have never anticipated things like solar generation,” said Steve Cousins, executive director of the organization. “The people that put in solar are basically getting subsidized by people who don’t put in solar, and that’s happening in all the rate classes. It would be nice to redesign rates so that doesn’t happen but that’s a huge issue — and it’s taken us decades to get where we are today with rate design.”

The group and the utility companies want the commission to ensure that all customers, regardless of whether they use solar, pay their fair share of the fixed costs for infrastructure. One option is to add a grid charge for solar customers. Another option would be to adjust the rate that is credited to net-metering customers.

“This docket was set up to make sure that the costs that need to be recovered are recovered from the right group of people, and that one group doesn’t unfairly pay for another group — and that’s what we think is happening right now,” Cousins said.

Solar advocates contend added costs and regulations will only slow progress and hinder job growth. A study by the William H. Bowen School of Law in Little Rock found that the service agreements approved by the Legislature could double or triple solar-related job growth in the state.

Solar customers are a net benefit to the utility system overall, Niebaum said. “Those customers are less expensive to serve and all customers will pay less over the long term due to that [solar] investment,” she added. “Those customers are financing themselves.”

There is no timetable for the commission to issue a ruling. “I am not aware of any legal requirement that includes a timetable for the commission to issue a ruling,” Gray said.