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Utilities call foul on ruling on solar rate

Cooperative ‘disappointed,’looks at challenging order by Andrew Moreau | June 7, 2020 at 1:53 a.m.

Solar supporters are rejoicing over a regulatory ruling last week that allows them to continue receiving 1:1 compensation for rooftop power systems, while the state's electric providers are steaming over the decision.

One of the large utility providers, Arkansas Electric Cooperatives Corp., is considering challenging the ruling from the Arkansas Public Service Commission that has been four years in the making.

"We're very disappointed in the order," said Sandra Byrd, vice president of public affairs and member services for the cooperative. "The results of this order are not appreciably different than they were before and, in fact, things have gotten worse than they were before."

Solar advocates are on the opposite end – proclaiming victory for a ruling they say supports alternative energy and creates jobs in Arkansas.

"The state's solar business leaders have created careers, produced local community investment and generated energy savings across Arkansas," said Katie Laning Niebaum, executive director of the Arkansas Advanced Energy Association. "The commission has reaffirmed the economic benefits provided by solar technologies, setting the stage for solar energy to continue to grow in powering Arkansas' economy."

Business leaders back the utilities, noting that sustainable economic development depends on low electric rates that attract new businesses to the state. The commission's order could lead to cost shifts that burden electric customers and potentially lead to higher rates, they say.

"The Arkansas Public Service Commission order does not require the customers with private solar systems to pay their fair share of the costs required to serve them," said Randy Zook, president and chief executive of the Arkansas State Chamber of Commerce/Associated Industries of Arkansas.

"Low rates are a valuable economic development tool for Arkansas, and low rates are critical to economic recovery and stability," Zook said. "Part of maintaining low rates, however, is ensuring that all customers pay their fair share of the costs required to serve them, and the [Public Service Commission] order does not appear to accomplish that."

Arkansas Electric Cooperatives may challenge the net-metering order from the commission, Byrd said. "We're internally evaluating our options and deliberating on it."

The state's largest electricity provider, Entergy Arkansas, said "we are continuing to evaluate the order and have not yet determined which issues may require clarification or additional detail" in a statement provided by regulatory affairs director David Palmer.

Entergy believes "there is far more work to be done to ensure that private solar does not increase rates for all other customers and disadvantage this state from economic development opportunities," Palmer said in the statement.

Entergy will act quickly to apply for a grid charge on solar systems of more than 1 megawatt as allowed under the commission order, the company said. The grid charges would be monthly fees added to the bills of solar users.

Solar development companies and customers have argued that solar generation is a customer-financed investment that is a net benefit for utility systems and their ratepayers. They note that there is insufficient evidence to prove that solar deployment leads to cost shifting that harms the majority of ratepayers, as the electric utilities insist is happening.

Utilities have fixed costs that are recovered through customers' monthly electric bills. Those fixed costs include administrative expenses and the poles, wires, generators and other equipment needed to deliver electricity.

Cost shifts are driven by customers leaving the traditional electric grid, in this case solar users, and not having to pay for imbedded infrastructure and other fixed costs.

The remaining customers who solely rely on the utility's electric grid to power homes and businesses then have to make up the difference – compensating for the revenue lost when solar customers leave the grid.

The utilities contend that all electric customers are obligated to cover fixed costs and that the 1:1 compensation paid to net-metering customers is too costly for an inferior product.

The 10-cent credit far outweighs the value of the power the solar users provide, according to the utility companies.

"Net-metering customers are getting a full-retail rate but what we get from them and put back on the system is not anything close to the value of the full retail rate," Byrd said.

The utilities contend the commission's order does not provide full compensation for all the elements – costs to generate, transmit and distribute power – that are part of an electricity system.

"We're already overcompensating today for what solar users provide," said Lori Burrows, vice president and general counsel for the Arkansas electric cooperatives.

Though the commission's order allows utility companies to request a grid fee for solar systems of more than 1 megawatt, Burrows said "that's just a de minimis contribution" that will not make up for the harm produced by cost shifting.

Today, there are 2,320 net-metering customers in Arkansas, and only five of those would be subject to a potential grid charge under the commission's order, Burrows said.

Grid charges won't make up for the economic harm caused by the rate structure, Zook said.

"Although the order provides the opportunity to implement a grid charge for some customers with private solar systems, it ensures that all other customers will be forced to bear a disproportionate share of the costs of the electric grid used to serve a significant number of existing and prospective customers with private solar systems," he added.

Solar advocate emphasize job creation and economic benefits in touting their projects.

For example, Producers Rice Mill of Stuttgart filed a petition with the commission in April seeking approval of a 20 megawatt solar development supported by battery storage.

The company, filing at the height of the coronavirus pandemic, said the project is critical at a time when the national and state economies "are hemorrhaging jobs and income," the filing said. "This project will put Arkansas to work quickly – electricians, civil contractors, mechanical installers, fencing contractors and more."

Yet Thomas notes that job creation can't be a primary consideration when evaluating solar's impact.

"The jobs thing is pretty tricky," he said. "What we don't want to do is add $5 to everybody's bill so that $5 can be used to go and hire a bunch of people. That would just be economically inefficient and there's nobody I know who does that. Keeping rates low is a benefit to the economy so there is a balance that has to be considered."

Before the commission's order is finalized, docket participants have 30 days to ask for more clarification. The order then undergoes legislative review and approval before becoming law.


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