Solar-power advocates and Arkansas' largest utilities, continuing a four-year battle over compensation for implementing the alternative-energy source, clashed again Wednesday at the state Capitol over legislation that would reduce reimbursements for solar users.
House Bill 1370, presented to the House Insurance & Commerce Committee in a daylong hearing, was developed "to prevent cost-shifting and ensure fairness to all ratepayers" by reducing compensation to solar users for the excess power they generate and return to electric grids -- electricity that is then distributed to utility customers across the state.
"This bill creates a level playing field for all electric customers in the state of Arkansas," said Rep. Lanny Fite, R-Benton, a sponsor of the legislation along with Sen. Jonathan Dismang, R-Beebe. "There is a cost shift and that's why we're here today."
The bill's supporters, generally the state's largest electric utilities, contend cost shifting is occurring because solar users do not pay the same costs to maintain and improve the electric grid as do customers who rely solely on the utilities to supply power. In effect, they argue net-metering compensation acts as a subsidy for solar customers.
In 2021, about $18 million in costs were shifted to utility-grid customers because of compensation paid to solar customers, Fite told the committee Wednesday. Electric customers will be saddled with an additional $290 million in costs by 2040 to make up for solar users who are credited retail rates for the excess power they generate and return to the electric grid.
HB1370 would lower that compensation to wholesale rates the utilities pay other power providers -- a difference of about 5 cents per kilowatt hour. Retail rates mean the utilities pay one-to-one compensation to solar users, who are credited at the same amount the electric providers charge to deliver power to homes and businesses. The policy is commonly known as net-metering. Entergy Arkansas says the current retail rate is about 11 cents and wholesale ranges from 4 to 6 cents.
"Under this bill, we would still have one of the most progressive solar policies than other states surrounding us," Fite said.
At the end of Wednesday's hearing, Dismang said the bill would be amended in agreement with the Arkansas Advanced Energy Association to extend net-metering through 2024 and allow solar arrays to be built within a 100-mile radius of the user's facilities. Net-metering for new solar customers would have expired this year and the radius was five miles before the amendment was offered. Existing solar customers and those who interconnect to the grid by the end of 2024 would continue to be compensated at retail rates under the legislation. An official with the consumer group said it would withdraw its opposition to the legislation with approval of the amendment.
During the hearing, the only advocates testifying for the bill were either utility executives or former utility executives. More than a dozen opponents including a public school leader, businesses, consumer-advocate groups, municipalities, wastewater utilities and other public utilities such as Central Arkansas Water that have generated cost savings by implementing solar arrays testified before the committee.
Executives with Entergy Arkansas and Arkansas Electric Cooperative Corp. appeared alongside Fite to support the bill and were given an open-ended opportunity to speak on behalf of the legislation. The committee then voted to limit opponents to five minutes of testimony, a decision that rankled former Public Service Commission Chairman Ted Thomas, who said he was speaking in opposition as a private citizen and did not represent any organization.
Thomas resigned from the commission in September and during testimony Wednesday he said he was the chief architect of policies that Fite's legislation would erode and "gut the solar program" in Arkansas. Thomas rebuked the legislation and criticized the presentation limits imposed on opponents.
"Five minutes isn't a fair way to discuss this," he said. Thomas also questioned the evidence presented on cost-shifting, noting that the figure is closer to about $1.4 million annually and minimal when evaluated against the cost savings and other benefits to solar users.
The Public Service Commission approved net metering in 2020 under legislative guidelines enacted in 2019. Utilities' arguments that cost-shifting occurs have been rejected by state regulators and a court. Utilities challenged the Public Service Commission ruling upholding net-metering but did not present sufficient data that cost-shifting was a burden to other electric consumers, Thomas said, noting that the Arkansas Court of Appeals also ruled against the utilities' cost-shifting arguments.
"Why are we here?" Thomas asked the committee, noting that the Public Service Commission is the proper regulatory body to consider the issue and he called on the power providers to "show us the data" that proves unreasonable cost-shifting is occurring.
"This is a flawed bill and it's a flawed process," he said, noting that the legislation is "incomplete and it's intended to deceive" Arkansans.
Altering net-metering rules would restrict future investments, Thomas said. "We'll keep the projects we have and there will be no more," he added. "This is how we get to 49th in everything."
John Bethel, director of public affairs at Entergy Corp., appeared with Fite to speak in favor of the legislation.
"Currently, with cost-shifting, the customers with panels shift costs onto customers without panels and they don't pay their fair share of the costs" of maintaining and improving electric grids, Bethel told legislators. HB1370 ensures solar customers "pay their fair share of using the system."
Bethel was asked why the utilities favored legislation over going before the Public Service Commission.
"Arkansas' statutes and policies as set right now are far extreme when you compare them to policies nationally so it's necessary to make it less so," he responded.
Opponents of the legislative change contend the bill would create barriers that would deter alternative-energy investments and drive up costs for residents, businesses, colleges, hospitals and universities by reducing energy savings that are returned to business customers, taxpayers and public employees.
Mike Hester, superintendent of the Batesville School District, said schools were an early adopter of solar about four years ago and have used energy savings to give raises to all 250 of the district's teachers. "We took all those savings and gave them to our teachers," he said, adding that salaries increased by $10,000 annually above base rates.
Diluting incentives to install solar systems would lead to higher patient costs at hospitals and increase costs for the state's universities and educational system, according to Ed Tinsley of Bernhard LLC, a nationwide company that advises large facilities, including hospitals and universities across Arkansas, on implementing energy policies that will save money and reduce costs. Tinsley said he was speaking on his own behalf and did not represent the company.
The legislation "would directly kill large-scale solar projects for Arkansas hospitals, universities and colleges," said Tinsley, adding that changes advocated by the utilities "will increase health-care and higher-education costs in Arkansas."
Federal statistics show that net metering customers in Arkansas grew from 2,098 in 2019 to 6,562 at the end of 2021. In 2010, there were only 117 net metering customers in Arkansas.