In a state that ranked 30th in solar installed in 2021, the recent ruling in favor of net metering could boost Arkansas, “the land of opportunity,” to a new level of sustainability. Recently the Arkansas Court of Appeals ruled in favor of solar power, ending a battle among the Arkansas Public Utilities Commission, solar companies including Scenic Hill Solar, utilities including the Arkansas Electric Cooperative Corp. and Petit Jean Electric Cooperative of Clinton. The ruling essentially upheld the rate structure for net metering, which previously had stated that solar customers would receive the full retail rate for excess energy they send to the grid. In addition, the ruling simplifies the approval process for small solar systems and to aggregate smaller systems.
The history of this legislation dates back to 2001, when the Arkansas General Assembly enacted the Arkansas Renewable Energy Development Act (AREDA). In the ruling, the found that the increasing consumption of renewable resources “promotes the wise use of Arkansas’s natural-energy resources,” Calling solar an “indigenous energy fuel,” the ruling states that increased solar reduces dependence on imported fossil fuels. The General Assembly further found that “net energy metering encourages the use of renewable energy resources and renewable energy technologies by reducing utility interconnection and administrative costs for small consumers of electricity” and that “net-metering would help to . . . attract energy-technology manufacturers, to provide a foothold for these technologies in the Arkansas economy, and to make it easier for customer access to these technologies.”
The AREDA required the Commission to establish appropriate rates, terms, and conditions for net-metering contracts. The Commission instituted a rate structure directing that net-metering customers would be credited for excess energy at full retail rate.
As in other states, such as California, where utilities object to crediting solar customers the full retail rate, Arkansas utilities alleged that net-metering customers were not paying their share of costs of transmission and distribution. The utilities instead wanted to discontinue 1:1 compensation for net-metering customers and adopt “two-channel billing” in which those customers got a credit for what the utilities call “avoided costs.” Alternatively, the electric utilities argued that net-metering customers could pay their share of maintaining the grid through a monthly grid charge.
The Commission stated that it was approving the continuation of 1:1 full retail credit “for now” as the default net metering structure. It also rejected two-channel billing for residential and nonresidential customers without a demand component. The Commission also found that after December 31, 2022, “a utility may request approval of an alternative [rate structure] that is in the public interest and will not result in an unreasonable allocation of, or increase in, the costs to other utility customers.”
Additionally the Commission found “that there is some evidence of potential cost-shifting”, and while it retained the 1:1 compensation for demand-component facilities generating over 1,000 kW it also added a grid charge that the Commission “initially . . . set at zero.” According to the Commission, “once the Net-Metering Rules become effective, a utility may request approval of a revised grid charge rate based upon evidence that an unreasonable cost shift to non-net-metering customers is occurring or has already occurred on a cumulative basis.”
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“The Commission stated that it was approving the continuation of 1:1 full retail credit “for now” as the default net metering structure.” Wow, surprised this happened in Arkansas but we’ll see what changes next year.
This is BS. If everyone suddenly had electric cars and none was buying fuel and paying the related fuel taxes, where would the money come from to build roads and maintain them? It is wrong for the judge to rule in favor of perceived social desires while ignoring the reality of the costs associated with maintaining infrastructure. It only works for the moment because PV penetration is at such a low level overall, but this is real cost shifting to consumers.
That argument doesn’t hold water. In addition to the existing taxes, a road tax will be added on electricity for charging EVs just like it’s already put on dirty fossil fuels.
One reason the argument you have made is incoherent is that solar installations on homes are typically located at the farthest points in the grid. Distributed energy resources placed at end points in the grid actually save ratepayers money, because the power they generate (and often store) typically prevents the grid operators from needing to make upgrades. You can read about that here:
When there are only 1-2 large sources of electricity, that’s when the grid upgrades are very large, and very expensive. When people install normal-sized solar on their roofs, the grid upgrade costs are zero. People don’t need a new substation for rooftop solar.
Yes, when too many people have solar, that does change the picture. But that is a long way off, and we already have precedent for how to solve any ‘problems’ that arise from too much rooftop generation. Take a look at Hawaii, where rooftop solar was so successful that owners are now effectively required to add energy storage in order to take advantage of their solar system, since new net metering opportunities have ended.
Remember that the utility makes money on the infrastructure they build. One of the main reasons utilities fight against solar because solar reduces the amount of infrastructure they need to build.
Remember, utility companies are guaranteed by law to make a profit, on top of the salaries they pay, equipment they purchase, etc. It is a guaranteed monopoly. You don’t need to feel sorry for them, they’ll be OK.
If we were to seek out an unfair aspect of 1:1 net metering, it’s that ratepayers without solar panel ownership inevitably tend to be lower income than those who can afford solar panels.
I am not an authority in this field and so I welcome any corrections by industry experts.
My Tesla has an EV road tax of $200 per year.
Most people do not pay $200 per year in gasoline road taxes because they don’t drive enough to buy enough gallons of gas. So unless I drive way more than average I am being overly taxed.
Also, the judge did not make a social commentary. That part of the article is referencing what the Arkansas State Legislature said when they passed the law/rule as a reason for their action. The judge is just validating that the commission can do what it did.
Andrew – well said!
Net-metering (up to 10 kW) is permitted here in Ontario, Canada. Our residential electricity bills are separated into three (3) different components as follows:
1. Electricity Used – if any (i.e. that not produced by solar generation)
2. Delivery (which is ≈2/3rds of my ‘Electricity Used’ charge!)
3. Regulatory (which is ≈5% of the ‘Electricity Used’ charge)
Delivery are the costs of delivering electricity from central, remote generating stations (> 50% nuclear here) across the (huge) province to one’s LDC, then to your home or business and includes the costs to build & maintain the T&D lines, towers, poles, substations, and operate the provincial (i.e. IESO) and local electricity systems. A portion of the Delivery charge is fixed and remains for billing even after net-metering is done. This addresses the “net-metering customers not paying their share of maintaining the grid” argument and avoids any additional monthly grid charge for net-metering. Also, some of the Delivery Charge is for the cost of electricity lost in distributing electricity to your home or business (e.g. I squared x R losses or heat), which are eliminated with solar power. So it could be argued that solar power owners should get an additional grid CREDIT rather than a grid charge!
I strongly agree Vince. Every KWh generated locally is a KWh that the utility doesn’t have to generate themselves and transmit for tens or hundreds of miles which saves them from spending more on the construction and maintenance of more transmission lines and substations. If the utilities were operated by people who wanted to benefit the public, they would be encouraging more residential solar. Instead, it’s obvious many are only interested in extracting as much money from the public as the regulators will let their monopolies get away with.
Sorry to say that Arkansas has not been “the land of opportunity” since 1995 when it changed its motto to “the natural state”.
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