Arkansas is considering new net metering rate structures
Net metering rate issues have been a discussion point in many states across the country, most recently in Arkansas, where the Arkansas Public Service Commission (PSC) is considering changing the rates paid to solar users across the state.
In December, the PSC heard from stakeholders on both sides about net metering rates. Like in many states, electric utilities have argued that high net metering rates are being passed along to non-solar customers. Solar owners have argued that any lowering of their rates will slow solar development.
In Arkansas, solar customers are compensated 10 cents per kilowatt-hour, the same amount Entergy charges homeowners for energy consumption. Entergy is requesting the rate be lowered to 3 cents per kilowatt-hour.
“Entergy Arkansas offers proposals that would balance the interests of the 1 percent of customers that generate their own solar energy and export excess power to the electric grid with the interests of the 99 percent that must pay for those customers’ excess solar output,” said David Lewis, senior communications specialist at Entergy Arkansas. “Entergy Arkansas is proposing two different rate structures for the Commission’s consideration for net metering.”
The first option would be the two-channel billing that many states are adopting.
“In this arrangement, Channel 1 on the meter measures the energy delivered by the utility and consumed by the customer,” Lewis said. “Channel 2 measures the excess, self-generated energy exported from the customer to the electric grid. Two-channel billing uses an avoided cost-based credit rate (essentially what the cost would be if the net-metered power had instead been bought on the wholesale market), versus a 1:1 full retail credit.”
Entergy Arkansas has also offered an alternative rate structure to regulators, in the form of a grid charge.
“A grid charge would be a fixed monthly fee added to the bills of customers who choose to use private solar but continue to benefit from being connected to the grid,” Lewis explained. “A grid charge would ensure that solar-generating customers continue to pay their fair share to maintain the grid. The grid charge is designed to cover the costs (known as ‘fixed costs’) that other customers pay for electric service but which the net metering customer is avoiding by choosing to invest in private solar. The grid charge would vary depending on rate class.”
Ashley Brown, executive director of the Harvard Electricity Policy Group, believes that net metering is an outdated metric for solar development. “Net metering results in a number of inefficiencies and unfairness,” he said. “Non-solar customers have to pay a retail price for the wholesale energy. There are no incentives for improving the productivity of rooftop solar. In fact, there are incentives for inefficiency.”
Brown added, “Costs of solar panels have declined 100 times since net metering first appeared and net metering serves no purpose today other than enriching solar vendors. Pricing rooftop at a higher price than more efficient large solar results in misallocation of capital, incentivizing investment in lower productivity than is otherwise available, and, illogically forces consumers to pay a higher price for less efficient resources.”
Brown said renewable goals would be best achieved by deploying large scale renewables, like wind, large-scale solar, hydro, or geothermal. Brown, who is a former commissioner of the Public Utilities Commission of Ohio and infrastructure advisor to numerous governments, added that rooftop solar is “less useful in reducing carbon than large-scale solar, wind, and energy efficiency. Net metering is, in the aggregate, Robin Hood in reverse. It transfers wealth from less affluent to more affluent households.”
Solar supporters in Arkansas asked that if rates do change, current solar customers be grandfathered in with the current rates for 20 years. Lewis said that Entergy Arkansas supports grandfathering of existing net metering customers, but not for 20 years.
“Under our proposal, each qualifying customer who decides to invest in net metering and has its private solar facilities fully interconnected and operational prior to the commission’s order in Phase 3 of this proceeding would be ‘grandfathered’ for no longer than 10 years,” Lewis said. “That means they would be eligible to continue receiving the current full-retail-credit net-metering billing framework.”
Like many utilities, Entergy has committed to bringing renewable energy to the state, and the company does not believe a change in net metering will affect that. Lewis said that more than half of the energy used by the utility in the state comes from nuclear and natural-gas-fired generation. Entergy Corp. also has numerous renewable energy projects underway, including two solar plants in Arkansas currently under development.
“Entergy Arkansas believes renewable energy is critical to the state’s future. It’s important that everyone shares in the benefits of clean and environmentally friendly power generation while keeping our state’s commitment to affordable, reliable and dependable electricity for every consumer,” Lewis said. “If the rates for net-metering customers are not carefully considered, customers who net meter, but continue to rely on the grid, will avoid paying their fair share of the costs of maintaining the grid. Instead, their share will be shifted to others who are not in a position to or do not wish to install private solar panels.”
Brown added, “Net metering should be for energy only. Solar customers should not be able to transfer their obligations for paying their fair share of fixed costs (e.g. transmission and distribution) to other customers.”
The PSC does not yet have a timeline for its decision.
