Arkansas PSC continues current net metering rates, but utilities look ahead
The Arkansas Public Service Commission (PSC) recently issued a decision on the future of net metering in the state.
Energy company Entergy had requested a reduction in the current 10 cents/kilowatt-hour rate, which is 1-to-1 in the state. But the Arkansas PSC voted on June 1 to retain the current 1-to-1 full retail credit for net excess generation, for both residential and non-residential customers.
The PSC will allow for requests for adjustments by electric utilities after Dec. 31, 2022, if it is in the public interest and will not result in an unreasonable increase in costs to other utility customers.
“For non-residential customers up to 1 MW with a demand component, the Commission finds that continuation of 1:1 full retail credit for net excess generation is required,” the PSC said in its decision. “For demand-component customers installing net-metering facilities with generation capacity from over 1 MW to 20 MW, the Commission finds that there is some evidence of potential cost-shifting which justifies a change in the net-metering rate structure to 1:1 full retail credit for net excess generation plus the adoption of a grid charge. The grid charge will initially be set at zero.”
The PSC added that electric utilities may request approval of a revised grid charge rate based on evidence “that an unreasonable cost shift to non-net-metering customers is occurring or has already occurred on a cumulative basis, rather than on the basis of an individual net-metering customer’s proposed facility(ies).”
Entergy Arkansas, which provides electricity to approximately 700,000 customers in 63 counties, said it is reviewing the findings of the PSC and how it will affect its net metering customers. The company plans to pursue adjustments in the future.
“The order makes a step in the right direction by recognizing the cost-shifting from large private solar systems and establishing a process for implementing a grid charge applicable to facilities over 1 MW,” said David Lewis, senior communications specialist with Entergy Arkansas. “With the level of cost-shifting that is occurring and will continue to occur, Entergy Arkansas plans to file its application for approval of a grid charge and remote-generation fee.”
With utilities left to pay for any hard costs for managing net metering customers, those fees will likely be passed on to non-net metering customers.
The Arkansas Electric Cooperative Corporation is also concerned about those customers.
“After six years of discussions, Arkansas Electric Cooperative Corporation is disappointed that little or no adjustments were made to the original order,” said Rob Roedel, director of corporate communications at Electric Cooperatives of Arkansas. “As a member-owned cooperative, we strongly believe that the current order creates a cost-shifting situation that unfairly impacts non-net metering consumers.”
Entergy Arkansas agrees. Lewis said the area of most concern is that customers are paying the cost of building, maintaining, and upgrading the grid, instead of those who own solar facilities.
“When costs are shifted from the private solar-generating customers to everyone else, eventually rates increase,” he said. “One of Arkansas’ most powerful incentives for attracting business and jobs to the state is our comparatively low electricity rates. Therefore, cost-shifting, in the long run, is likely to hurt the development of the economy of Arkansas.”
Entergy plans to propose two-channel billing and other rate structures after Dec. 31, 2022, as well as seeking a grid charge for larger net metering customers, which will help maintain and upgrade the electric system that serves them.
“The grid charge needs to be set at a level that ensures that customers installing larger solar systems pay their fair share of the cost of the grid, which they continue to depend on for power,” Lewis said. “Entergy Arkansas will propose what we believe to be a fair and appropriate amount for a grid charge.”
Lewis added that costs have already been shifted to a degree and rates have already begun to rise, and “the grid charge and eventual transition to alternative rate structures such as two-channel billing are ways to address that cost shift.”
Many states have implemented new net metering rate structures, including two-channel billing, which will help mitigate any impact to non-net metering customers.
“Both California and Hawaii are examples of two states that have taken seemingly bigger steps towards addressing the subsidy in net metering than what this order attempts to do,” said Lewis.
According to Roedel, the net metering rate in Arkansas is around 0.10 cents per kWh, with a market price of 0.03-0.04 cents per kWh, which creates a subsidy of 0.06-0.07 cents in favor of the net metering customer.
“Our state’s policy that allows meter aggregation and the use of remote facilities is also fairly unique and creates a larger subsidy in favor of these net metering customers than a traditional behind-the-meter customer,” he explained. “A 0.06-0.07 cent subsidy is created in favor of net metering customers while the rate paid for energy is higher than the market price. Arkansas, unlike other states that have shifted away from a net metering rate above market, remains higher and thus creates a subsidy that must be paid by other customers.”
Roedel said Arkansas’ rule creates other subsidies with the allowance of meter aggregation and remote facilities, while states like California have rules that allow limitations like capping the size of net metering facilities at 1 MW (Arkansas’ cap is 20 MW).
“California’s rule follows more closely to FERC’s guidance of paying for generation at the average avoided cost of energy for those generators who do not compete in the market, which is what should be used as the guidepost for all net metering rates,” he added.
Entergy Arkansas has been growing its solar portfolio in the state. The company currently has 81 MW of solar generation near Stuttgart, Arkansas, a 100 MW facility being constructed near Lake Village, Arkansas, and a 100 MW facility about to begin construction near Searcy Arkansas.
“The power from these solar facilities goes onto the Entergy Arkansas grid and is consumed by all customers on the grid,” Lewis said. Entergy Arkansas currently offers a Solar Energy Purchase Option plan that allows customers to subscribe to purchase solar energy.
Entergy believes investments in solar power, including improving accessibility and scalability, as well as proper regulations, will add value to the state and could attract new business investments and jobs that will help grow the state’s economy.
“Entergy Arkansas is pro-solar energy, as long as the solar power is provided in a manner that does not unfairly shift costs to and raise rates for non-solar customers. Entergy Arkansas is leading our state’s effort to advance clean energy while keeping electricity prices reasonable and stable for our customers,” Lewis said. “One of our priorities throughout this proceeding has been to ensure all customers have access to low-cost, environmentally friendly power generation without over-paying for that resource.”
