Derailing two-track energy billing in Arkansas

Last November’s meeting of the Arkansas Public Service Commission (PSC) played to a full house. Extra chairs had to be brought into the room to accommodate the public. More than 150 people filled the room to hear arguments over how Arkansas should compensate solar owners for the electricity they generate. At issue was how the PSC should interpret a 2015 law with respect to net metering.

Commissioners heard testimony from the state’s investor-owned utilities and electric cooperatives, as well as from the state’s Attorney General. These parties argued that the commission should lower the rate of compensation for energy produced by distributed generation (DG). Solar advocates, for their part, contended that the state should retain the current net metering policy.

In their arguments, utilities cited the 2015 Arkansas law, Act 827, as part of their claim that the PSC should establish “two-track billing” (also known as “two-channel billing”). Two-track billing means that excess energy sent back to the grid would no longer be compensated at a 1:1 ratio with the cost of energy consumed from the grid, but at a considerably lower rate.

Solar advocates found an unexpected ally: Act 827’s original author, conservative Republican state representative Stephen Meeks.

“There should be no two-channel billing whatsoever interpreted in this language [of the bill],” Rep. Meeks was quoted as saying. “The state of Nevada tried it; it devastated their solar industry… I encourage this commission to not make the mistake of going to two-channel billing here.”

According to this PSC order, “Act 827… requires the Commission to examine the balance of costs and benefits of net metering, within the framework of a statutory subchapter aimed at promoting customer-owned, distributed renewable energy production” (emphasis ours). Thus, the PSC itself explicitly stated that the intent of the law is to promote DG. Some critics maintained that the two-track proposal would thus contradict the intent of the law by creating consumer uncertainty, since solar customers couldn’t know what their produced energy would be worth, and this would be fatal to the solar industry.

Jason Keys of Scenic Hills Solar was quoted as saying that the new proposal “would decimate the residential market. … [It’s] not a minor inconvenience that can be overcome with consumer education. It is a fundamental, intractable barrier to customers’ ability to determine whether solar is a good deal or not, and therefore it will bring the market for residential rooftop solar to a halt.”

For Karl Rábago, Executive Director of Pace Energy and Climate Center, who at the hearing represented Audubon Arkansas and its conservationist members, as well as Arkansas Advanced Energy Association and their clean energy businesses, the issue is one of customer choice.

“The empowerment of customers to make choices in the electricity market is what the utilities and the [PSC] staff and the AG opposed, and they are only using the net metering proceeding as the vehicle for that opposition,” Rábago said.

The PSC earlier convened a working group, consisting of representatives from interested parties, to study net metering’s costs and benefits. But this group then split apart along ideological lines, with Sub-Group 1 (also sometimes called “Working Group 1”) representing renewable energy advocates and Sub-Group 2 representing the utility and its allies. This division was significant in that it demonstrated the extreme degree to which the views of the two sides diverged. According to Rábago, Sub-Group 1 agreed with Rep. Meeks’ conclusion that the rate change was inconsistent with the intent of the law. Rábago calls this inconsistency “a fatal flaw in the position taken by the anti-solar parties.”

Sub-Group 1 also filed an original document with their findings: a cost-benefit study commissioned by the Sierra Club that asserted that net metering was good for all ratepayers and even the utilities themselves, and does not result in “cost-shifting.”

“Assertions have been made in many states that net metering is unfair for non-participating ratepayers (i.e., it causes a ‘cost shift’),” said Tom Beach of Crossborder Energy. Beach was a co-author of the document.

Beach says his report presents in detail the limitations and flaws in the analysis by the utilities and their supporters of net metering, “in particular the limitations of a cost-of-service analysis that looks only at a single test year, considers a limited set of costs and benefits, and only considers the perspective of non-participating ratepayers.”

“Since a definitive showing of a cost shift is a prerequisite to a new rate design, the Crossborder study supports the [Working Group 1] position that no change in net metering is warranted,” Rábago said. “And it is important because it dramatically reveals that the anti-net metering parties had no such evidence to support their position.”

“Making decisions without facts,” Rábago said of the solar opponents, “is out of step with what the public expects from government.”

The PSC is expected to reach a decision on the proposed rule change sometime in early 2018.

Rábago concludes that his Working Group was a model that other states might emulate. “We offered the best, best-reasoned, most comprehensive position,” he said. “The public support we garnered [at the hearing] was great praise and clear recognition of the merits of our work. We hope the decision of the Commission reflects that as well.”