Ark. wades into net-metering debate

Source: Edward Klump, E&E News reporter • Posted: Wednesday, November 16, 2016

The state-by-state tussle over rooftop solar has arrived in Arkansas, where the future of net metering will play out over the next 12 to 18 months.

State lawmakers got the ball rolling last year when they passed legislation to adjust aspects of Arkansas’ net-metering regime, which uses a retail rate to credit customers for excess power sent to the grid. The Arkansas Public Service Commission (PSC) is now working through a two-part proceeding on the matter.

“The docket, I think, is really a reflection of the overall controversy surrounding net metering that you’ve seen in a lot of jurisdictions,” said Jordan Tinsley, an attorney who represents a group of large power users known as Arkansas Electric Energy Consumers Inc. (AEEC).

Regulators across the country have tried to juggle the interests of utilities, solar companies and consumers as they mull rate structures for excess power. Some parties worry solar customers’ use of the grid is being subsidized by non-solar residents, while supporters of net metering say solar benefits often go unappreciated.

The net-metering proceeding in Arkansas appears to be on a constructive and amicable path so far, though divisions are emerging.

The first phase involves issues such as grandfathering for existing solar users, treatment of large solar installations and whether solar leasing qualifies for net metering. A decision from the PSC on these items could come in 2016.

A second phase gets at the heart of net metering and whether the existing setup is in compliance with last year’s Act 827, which calls for rates that recover a utility’s full cost of service within each customer class. This part of the docket may boil down to a few questions.

“Does the rate level need to change? Does the rate structure need to change?” explained John Bethel, executive director at the PSC. “And if the answer to either of those questions is yes, how will that happen?”

The PSC established a working group that includes utilities and a number of advocacy groups to look at phase two. It should report back next year, so the commission may not make a decision on this section until late 2017 or early 2018.

Once a new net-metering system is in place, Bethel said each utility could “make a compliance filing that creates its own rate using the rate structure prescribed by the commission.”

Collaboration and ‘strong feelings’

The PSC is tackling the issue while net metering remains rather muted in Arkansas, whether that’s with solar or other renewable energy. Fewer than 500 customers were using net metering at the end of 2015 among power providers that file reports with the commission.

One of the big utility players in the state is Entergy Arkansas Inc. (EAI), an affiliate of New Orleans-based Entergy Corp. The company said it makes sense that customers can produce power.

“EAI also believes self-generating customers should have the ability to provide excess energy to the distribution grid,” the company said in a regulatory filing, “but they must do so in a way that does not harm EAI’s other customers or the communities we serve, either operationally or economically.”

Entergy Arkansas said it supports the use of the working group, but it said aspects of Act 827 on “cost-shifting make clear that the Arkansas Legislature shares the Company’s concern” about the effects of net metering.

Tinsley, who represents AEEC, said it’s likely that solar customers are being subsidized by other consumers because they still use electric transmission and distribution infrastructure.

“The rate design for residential net-metering customers needs to include some kind of rate component that will recover a portion of the utility’s fixed costs,” he said.

Tinsley stressed that parties in the working group appear to be making a good faith effort, even if certain areas may be contentious in the future. Members of AEEC include Tyson Foods Inc. and Weyerhaeuser Co., according to a filing with the commission.

“My clients obviously have some strong feelings about the issue, but we are prepared to listen, and we are prepared to negotiate and collaborate in the proceeding,” Tinsley said.

Casey Roberts, a staff attorney for the Sierra Club, said she hopes a traditional net-metering setup remains, though she’s open to looking at data.

Roberts said an independent study would be helpful, suggesting analysis before people assume “a dramatic change in the rates is needed.” She’s hoping parties can agree on which benefits and costs to include and possibly the methodology.

“It will be very difficult to reach consensus on every issue,” Roberts said. “We are optimistic that we’ll be able to narrow the issues that are under contention.”

The Alliance for Solar Choice, which is a familiar name in solar dockets around the country, has sought to detail the variety of benefits it sees from net metering. They include reducing utility load, boosting grid resiliency, lowering residents’ exposure to changing fuel prices and helping utilities avoid the expense of more infrastructure.

Seeking ‘the right mix’

Tyson Grinstead, a spokesman for the alliance who also works for Sunrun Inc., said a full picture of costs and benefits is needed in Arkansas. He said net metering needs to be preserved, adding that a retail rate is fair based on what solar panels provide.

Grinstead backed the idea of net metering for customers who lease panels from third parties, while saying he opposed moving toward extra charges that could discriminate against solar or confuse customers.

“What we’ve got to do is figure out kind of what is the right mix in Arkansas for there to be potential to have growth like we have in other states,” he said.

In the initial phase of the net-metering docket, there’s a good deal of support for protecting existing solar customers from policy changes, though some opposition remains. One question is when grandfathering might begin. On installations over 300 kilowatts, the PSC is looking at how to consider net metering and whether any size cap might come into play.

The PSC staff, meanwhile, has recommended a lessee not be part of net metering unless lawmakers direct a change in the understanding of ownership.

Pulaski County, a major population center in Arkansas, has argued that state lawmakers “intended for the broadest interpretation of owner, which would include those with a leasehold estate.” The county also said renewable generation and a “robust” framework for net metering would enable the county to lower electricity payments, calling it logical that a fair setup would help attract business.

Entergy Arkansas has said it would be willing to work with Pulaski County and other local governments to find a way for possible solar projects to move ahead.

Arkansas has another docket with a broader discussion of distributed generation, though it’s not clear what may come from that proceeding.

Some of Arkansas’ neighbors also have batted around distributed generation issues, including Louisiana and Texas.

Donna Nelson, chairwoman of the Public Utility Commission of Texas, said last week she’s concerned about the potential lack of jurisdiction over a third party that signs an interconnection agreement. The PUC plans to consider the matter further, and Texas lawmakers could examine it.

In Arkansas, Tinsley said establishing a fair rate structure is the most important goal among the issues being examined.

“I think that’s really where the rubber meets the road because a lot of these other issues are non-issues if the rates are right,” he said.