Arkansas energy stakeholders begin talks on new net-metering compensation bill

Negotiations have begun on legislation intended to give Arkansas residential solar energy users extra cash on any excess power generation that goes into the energy grid.

Under HB 1047, filed Jan. 3, so-called “net-metering” retail customers in Arkansas would be compensated for any excess solar generation. For residential utility customers with solar panels or other renewable energy generators connected to a public utility power grid, Rep. Stephen Meeks’ proposal would allow any surplus power to be transferred onto the grid. Those same customers could then be compensated for the excess electricity.

But the version of HB 1047 that came before the Arkansas House Insurance and Commerce Committee on Wednesday is not likely to get out of the panel in its current form, said Meeks (R-Greenbrier). The Faulkner County legislator called his first draft of HB1047 “a temporary placeholder” as key stakeholders begin revisions on a draft that could take several weeks to complete.

“This bill is to bring clarity to the “net-metering” issue. There is a lot of confusion right now, and the industry does not like confusion,” Meeks told the Arkansas Advocate. “As of right now, everything is still in flux on the (bill), and it is a work in progress.”

As currently written, Meeks’ bill would expand the Arkansas Renewable Energy Development Act of 2001 and update the state’s net-metering regulations promulgated by the Solar Access Act of 2019 (Act 464). Clean energy advocates in Arkansas have hailed that legislation as a game-changer for the state’s fledgling renewable energy industry.

According to the Solar Energy Industries Association (SEIA), Arkansas ranked 30th in the U.S. for solar generating capacity overall with 587.9 megawatts (MW) of total solar capacity in 2022. About one-third of that solar capacity includes project installations that began after the approval of Act 464.

Data from the U.S. Energy Information Administration (EIA) shows solar energy now accounts for 6% of the electric power generated in Arkansas, which is 60 times more solar power than was generated in the state in 2015.

Act 464 impact

Act 464 opened the door for third-party financing of solar projects, which is especially helpful to tax-exempt organizations and government entities that otherwise would not qualify for federal tax incentives for installing solar panels. 

Across Arkansas, several municipalities, colleges, school districts, counties, small businesses, and nonprofit organizations have taken advantage of Act 464 by signing leasing agreements with third parties that install solar power systems.

Act 464 also made another notable change in regulations governing the production of electric power by raising the limit for commercial customers of electric utilities that have solar systems, from 300 kilowatts to 1,000 kilowatts.

During the 2019 legislative session, Meeks played a key role in tense, closed-door negotiations that led to a final compromise on the state’s new solar law. That deal was worked out by a coalition of partners and interests, including the state Public Service Commission, legislators, state policymakers, Entergy Arkansas, and various utility and renewable-energy stakeholders. 

The push to overhaul the state’s renewable energy regulations in the 2019 session occurred four years after the General Assembly approved Act 827 of 2015, also sponsored by Meeks. That legislation required the Arkansas Public Service Commission (PSC) to study the adoption of guidelines for Arkansas’ net metering rules.

In conjunction with the net metering docket, the PSC opened a companion regulatory schedule to consider various issues concerning renewable energy generation in Arkansas beyond net generation. Out of that process, the PSC assigned a net metering working group to hold meetings to discuss PSC rules, a possible revised rate structure, and other renewable energy policies under Act 827.

Conflicting positions

Two subgroups formed to make recommendations to the PSC on the future of net metering split into separate sides. Members of Sub-Group 1, which included state conservation, environmental and renewable energy groups, argued that state utility regulators should hold fast with existing policy until further study can be completed.

Sub-Group 2, which included Entergy Arkansas, Pulaski County, Arkansas Electric Cooperatives, the PSC staff, a group of industrial power users, and the Attorney General’s office, have supported an embedded cost-of-service approach to determining the costs and benefits associated with net-metering.

After the PSC announced new net-metering rules regarding solar development on June 1, 2020, Arkansas saw a huge boom in utility-scale, commercial and residential solar installations. 

But uncertainty and confusion regarding solar generation rules remains, and Meeks said Wednesday that today’s confusion mostly concerns how residential utility customers are compensated for excess power that is returned to the grid.

Today, Meeks said the confusion surrounding Arkansas’ net metering rules mostly concerns how Arkansas’ residential utility customers are compensated. The net-metering rules promulgated in 2020 only allow existing agreements between net-metering customers and utilities to remain in place, or grandfathered, for 20 years.

Starting this year, a utility can request an alternate net-metering rate structure “that is in the public interest and will not result in an unreasonable allocation of, or increase in, costs to other utility customers,” according to the new PSC rule.

Another change in the net-metering rules regards commercial systems with a generating capacity of between 1 megawatt and 20 megawatts. Commercial utility customers with such systems will receive a 1:1 retail credit for net electricity generation but will face a utility grid charge. The charge will initially be set at zero, but utilities may request to change the charge.

Those varied regulations have left Arkansas with a mish-mash of net metering policies, Meeks said, depending on the utility. Entergy Arkansas, the state’s largest utility and solar developer, has raised a number of objections to the PSC’s net-metering rules.

Following the PSC landmark net-metering Order No. 28 nearly two years ago, Entergy Arkansas officials said the PSC decision fell short of achieving a balance between public and private interests. Specifically, Entergy Arkansas sought a re-hearing on various issues in the PSC order that it called “unlawful and not aligned with the General Assembly’s intentions on net-metering.”

Order No. 28 extends the subsidies to private solar developers like the 1:1 full retail credit and provides for the continuation of those subsidies far into the future through the provisions on grandfathering,” Entergy Arkansas officials said in a statement following the PSC’s order in the summer of 2020.

After Wednesday’s committee hearing, Entergy Arkansas representative John Bethel said the state’s largest electric utility was studying HB 1047 and would not provide further comment. Bethel is a former PSC executive director, who left the state regulatory agency in 2018 to join Entergy.

Former Arkansas Lt. Gov. Bill Halter also attended Wednesday’s committee meeting on HB 1047. Following the one-hour meeting, Halter said there would likely be ample changes to Meeks’ bill. Halter is the CEO of privately held Scenic Hill Solar Inc. of North Little Rock, one of the state’s largest solar energy developers.

“As I understand it, Rep. Meeks will be making a number of revisions,” said Halter, whose company has announced dozens of new solar energy projects across the state since 2019.

No date has been set for the next hearing on HB 1047.