Commercial solar energy users across Arkansas won a major victory this week with an appeals court ruling that rejected a Public Service Commission order that allowed utilities to impose a grid charge.
Arkansas Court of Appeals Judge Phillip Whiteaker rejected the commission's finding that utility companies could add a grid fee for solar facilities generating more than 1,000 kilowatt hours of power, which would include most commercial facilities. Household solar users typically do not produce that much solar energy.
PSC Chairman Ted Thomas said Friday that the panel is discussing whether to ask the court to "reconsider" its ruling rejecting the grid charge and cost-shifting requirements.
Solar deployment has been a contentious issue in Arkansas for years as utilities and solar installers and users have battled over how to compensate homeowners and businesses for unused power generated by solar facilities.
The court decision sanctions most of the commission's June 2020 order supporting solar deployment and the court freed commercial solar usage by removing permission to impose a grid charge -- essentially an added fee -- that the commission would have allowed if utility companies could prove that the solar facility placed an undue financial burden on utility customers by shifting more costs to them to pay for infrastructure, or the grid that delivers electricity to homes and businesses.
The case centered on the order, which outlined net-metering issues involving compensation for solar customers and other activities connected to what regulatory approvals are necessary to deploy solar facilities. The order was appealed separately by Scenic Hill Solar of Little Rock, the Arkansas Electric Cooperative Corp. (AECC) and Petit Jean Electric Cooperative Corp. The court agreed to consolidate the cases.
Scenic Hill Chief Executive Officer Bill Halter and other solar proponents praised the ruling.
Utility companies argued "the whole thing should be torn up," Halter said, referring to the commission's 2020 order. "The court, of course, denied every single thing the co-ops argued; I mean literally every one. So it was a great ruling for net metering. The co-ops were seeking to effectively eliminate net metering and gut" Arkansas law that supports the issue.
Solar systems often produce more power than the user needs. Net metering allows those solar users to send power back onto the grid to be available to other electric customers. The solar customer is compensated for returning that power. The Arkansas commission has ruled the compensation to solar customers must be equal to what electric utilities charge ratepayers to receive power from the company.
The appeals court decision will lead to lower electric bills, a cleaner environment and more jobs in Arkansas, according to Glen Hooks, policy manager for Audubon Delta in Arkansas. The ruling "is great news for Arkansas ratepayers and clean energy businesses," Hooks said. "The court confirmed that our state's net metering rate structure is fair and well-reasoned while also making it easier for more kinds of solar systems to be approved."
Delta Solar Chairman Bob East noted that solar deployments do not burden traditional electric-utility customers. "To date, no utility has demonstrated that a solar array is detrimental to other customers who do not have solar," East said Friday. "Customers investing in solar do not impose additional costs on their neighbors, and we believe they add value to their communities."
Whiteaker wrote that the commission was correct in requiring electric utilities to pay solar users the same price utilities charge customers to receive electricity; reversed the commission's approval of a grid charge; and eased regulatory approval for small, residential solar systems of under 20 megawatts.
In addition, the court dismissed AECC's bid to stop remote-generation solar arrays, meaning those not located on the actual premise of the facility they serve. It is common for large companies to build solar plants in distant locations. For example, Bank OZK just announced Thursday that it is now using solar energy from a site in Stuttgart to provide electricity to its Little Rock headquarters and 40 other locations in Central Arkansas.
Electric providers have consistently challenged PSC orders favoring solar deployment and their resistance has been rejected by the Arkansas legislature, the commission and now the state appeals court.
AECC did not respond to requests for comment Friday.
Entergy Arkansas, the state's largest electric utility, said it is reviewing the court's decision, which was issued Wednesday.
"The court did not determine that the commission could not impose a grid charge but rather that the commission needed additional evidence to do so," the company said, noting that it has not implemented a grid charge in Arkansas.
Entergy said cost shifts fueled by solar deployments put "a higher financial burden on non-net metering customers. Entergy Arkansas continues to support reform of the rates that net metering customers pay to ensure that those customers pay their fair share and do not shift the costs of serving them to other customers throughout Arkansas."
In the ruling, Whiteaker wrote that the commission's order allowing a potential grid charge "proved vain for such evidence." He added: "There was no evidence, in other words, that unreasonable cost shifting had actually occurred."
PSC Chairman Thomas said in a statement Friday that the court "did not find that the PSC lacked the authority to charge a grid fee but under the order I think the PSC is only permitted to impose a grid fee at a future date. The problem with a future date is that it creates a rush to deploy to beat the date and then a collapse in demand because the date artificially brought forward the demand for solar."
The Arkansas Advanced Energy Association says there were 334 net-metering systems in the state in 2013. At the end of last year, Arkansas had just more than 7,000 systems operating. From 2020 to 2021, deployments climbed by 78%.