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Arkansas Senate passes amended net metering after companion bill stalls on House floor

When solar panels are clean — like the ones on the rooftop of Delhi's Habitat Center, a conference and office complex in the central part of the city — solar energy production typically doubles, according to a new study led by Duke University researchers.
Julie McCarthy
Solar panels are seen on the roof of the Indian Habitat Center, a conference and office complex in the central part of Delhi.

A thrice-amended bill that opponents say would upend the state’s burgeoning solar industry easily passed the Arkansas Senate on Tuesday.

Senate Bill 295, sponsored by Sen. Jonathan Dismang (R-Beebe), passed on a vote of 24-9 and was immediately sent to the House, where a twin bill awaits on the lower chamber’s floor that will likely face further revisions.

In speaking for SB 295 at the Senate well, Dismang told fellow senators that is not his intent to kill the state’s flourishing rooftop solar industry only three years after the Legislature passed the Solar Access Act of 2019. That law, largely negotiated and authored by former Public Service Commission (PSC) chair Ted Thomas, put the state’s existing 1:1 net metering policy in place.

When the PSC promulgated new rules for Act 464 in June 2020, it reinstated the existing 1:1 rate of what utilities pay for electricity from solar power that is fed back onto the power grid by residential and commercial consumers. Those same rules also allow existing agreements between so-called net-metering customers and utilities to remain in place, or grandfathered, until 2040.

After the companion House Bill 1370, sponsored by Rep. Lanny Fite (R-Bentoon), stalled on the House floor earlier this week, Dismang said he brought his version to the Senate as part of ongoing negotiations over the past month to phase out the 1:1 credit after six to eight months.

“I think, members, that you are as excited as I am to see this bill on the floor regardless of what your position may be,” Dismang panned. “But this bill completes a commitment that was made in 2019 in regard to net metering and our state policy.”

Dismang continued his argument with a nod to Sen. David Wallace, noting that the Leachville Republican corralled support for Act 464 in the 2019 legislative session by getting lawmakers to agree to adopt an alternate net-metering rate structure in 2023.

“We were unsure of what direction we wanted to go, but we knew it was either going to be two-way billing or a grid charge,” Dismang said. “We have been debating this for a while and it’s at a stalemate. But it is our job to set policy, and that’s why we are here today.”

Retail vs wholesale

Major utility companies like Entergy Arkansas and Arkansas Electric Cooperative Corporation want to stop paying retail rates under the 1:1 policy for electricity they purchase from solar consumers and move to paying wholesale rates. They maintain that their non-solar customers are unfairly subsidizing solar users.

Dismang’s compromise legislation creates a dual path for regulated utilities regarding residential and commercial solar – two-way billing or a grid charge.

Residential customers with sun-power arrays can be charged the lesser of 25 kilowatts (25 kW) or 100% of the customer’s highest monthly usage in the previous 12 months. However, that clause would not apply if a customer’s metering facility is included in their interconnection agreement executed before the end of 2022.

Commercial customers would be charged less than 5,000 kW or 100% of their highest monthly usage over the past year. However, the customer’s solar array would have to be physically located within the utility’s allocated service territory and behind a meter representing all that customer’s energy use.

Dismang said if a residential and commercial customer chooses a grid charge, the PSC must approve that option. Nearly a year ago, the Arkansas Court of Appeals turned back a PCS ruling that utilities could charge a grid fee for solar facilities that generated more than 1,000 kW of power or shifted costs to other customers.

“I’m not aware of any utility that wants to do that, but we wanted to make the provision available because that was originally part of what we did here in the state,” he said.

Dismang’s proposal would also cap new solar projects at 5 megawatts (MW) and set a 100-mile limit for new developments behind the meter. For example, the longtime White County senator said Bank OZK has a 4.8 (MW) solar array in Fordyce that produces enough electricity to power the Arkansas regional bank’s new corporate headquarters in west Little Rock and up to 40 branch locations across the state. Since Fordyce is located about 70 miles from Bank OZK’s headquarter, the bank’s $6 million project would be allowed under Dismang’s proposal.

“These were both concessions that we made for the other side on this bill,” he said.

Interruptible or net metering, not both

SB 295 also states that a utility consumer in Arkansas cannot be both an “interruptible customer and a net metering customer.” Under PSC rules, interruptible customers contract with a utility for service on an interruptible basis that requires the availability of alternate fuel such as solar or wind power. Hospitals are an example of an interruptible customer; if they lose electric power, the utility must provide a backup source of electricity.

Dismang said some small industrial power users had requested they be allowed to build new solar projects and remain interruptible customers. But that concession would amplify cost-shifting to non-solar power users, he said.

“Now, I know some small industrials that reached out to (lawmakers) that would like the ability to do that, but I’ve advocated they should file their own bill if that is what they’d like to do,” Dismang argued. “We should have a further discussion on that cost-shift and the impact it would have on residential customers.”

Lastly, Dismang’s measure would add “consumer protections” that allow the Arkansas attorney general’s office to use the state’s deceptive trade practices law to pursue “bad actors” in the solar industry space that defraud residential and commercial customers. Since the 2019 law was passed, the senator said there has been an uptick in consumer complaints.

Dismang admitted that once SB 295 is sent to the House, other amendments may be proposed on bonding requirements for solar developers.

After Dismang pitched his bill, Sen. Stephanie Flowers (D-Pine Bluff) peppered him with several questions about his legislation’s impact on solar jobs and economic development.

“If we want to prop up any industry, then let’s be transparent about it,” Dismang responded. “Someone can come and file the subsidy bill for the solar industry.”

In the original HB 1370 filed on Feb. 8, Fite and Dismang first proposed that utility customers who fed excess electricity to the big suppliers receive 10 cents per kilowatt-hour for their net generation through the last day of 2022. Entergy Arkansas officials have testified that the current retail rate in Arkansas is about 11 cents and wholesale ranges from 4-6 cents.

Both amended bills in the Senate and House would also extend net-metering grandfathering rules through 2024, which Dismang said would allow anyone that wants to benefit from rooftop solar energy under the 1:1 policy to get in before the rules change.

Little Rock native Wesley Brown has more than 40 years of experience in the news industry as a financial and political journalist. Most recently, Brown oversaw the editorial and advertising operations of the Daily Record as publisher of Arkansas’ oldest weekly business publication.