Updated: PSC Rejects, for Now, Entergy’s Plan for Solar Power Offering

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Arkansas utility regulators on Monday rejected, for the time being, a plan by the state’s largest electric company, Entergy Arkansas, to offer power from its new solar stations to customers at a special rate, a plan that the rising private solar development industry had labeled a “job killer.”

In an order filed this afternoon, June 15, the Arkansas Public Service Commission denied Entergy’s proposal for a a solar energy purchase option that would sell solar power to towns, counties and other nontaxed entities at a lower “tariff,” or rate, than the 10 cents per kilowatt hour that it charges for basic retail power.

Former Arkansas Lt. Gov. Bill Halter, CEO of Scenic Hill Solar in North Little Rock, had argued before the commission that the special rate would derail private solar development in the state and “kill jobs in the middle of a pandemic and unemployment crisis.”

The 99-page ruling was the second to go against Entergy Arkansas in a week. The PSC decided June 8 not to lower compensation for the excess power put back onto the grid by homes and businesses with solar arrays. The accounting system for that credit, known as net metering, had been argued before the PSC for more than four years, and the ruling was hailed as a victory for private solar developers, who could guarantee potential clients a higher rate for the excess power they return to the grid.

The ruling kept the compensation equal to the average retail rate for power consumed, or about 10 cents a kilowatt hour. Utilities had petitioned for the net-metering rate to be reduced, perhaps to as low as 3 cents, to avoid what they said was shifting costs to non-solar customers. 

In this week’s decision, the three-member commission, which regulates public utilities in the state, ruled that Entergy’s proposal, known as SEPO Option B, “does not adequately protect the interests of non-participating ratepayers, and is not just and reasonable or in the public interest.”

However, the PSC noted that the utility had committed to re-evaluating its plan in light of the commission’s recent ruling on the net-metering rate structure in Arkansas, and could resubmit its SEPO Option B offering to comply with the order.

If Entergy revises and refiles the plan, “the commission will determine … whether the revised offering constitutes a competitive solar product that is more attractive to customers than that originally offered” under an earlier plan, SEPO Option A.

The special solar rate would have applied to power sold to cities, counties, and nonprofit entities and companies.

Nontaxed entities like schools, governments and public water districts became fertile ground for solar development after last year’s passage of Arkansas Solar Access Act, which allowed arrangements for third-party ownership of solar equipment. By leasing arrays, the customers can reap the solar savings while the private developers capitalize on tax breaks.

Participants in the case, Docket 19-042-TF, included Entergy, the state attorney general’s office, Scenic Hill Solar, Arkansas Electric Energy Consumers, the Arkansas Advanced Energy Association, Walmart Inc. and the University of Arkansas system, among others.

The AAEA had argued that the plan was noncompetitive with private solar, and Halter, who couldn’t be reached Monday afternoon, saw it as an effort to undercut a growing industry. His filing, which had asked why the state would even consider a program “guaranteed to eliminate jobs in Arkansas,” outraged the utilities, who saw Halter as capitalizing on the coronavirus pandemic to score political points.

David Palmer, Entergy Arkansas’ director of regulatory affairs, said that Halter considered Option B as a job killer only because Scenic Hill couldn’t compete with it economically, and he noted that the offering wouldn’t impede clients from doing business with private developers. “The very classification of an additional option as a ‘job killer’ is evidence that Mr. Halter knows the option he’s offering cannot compete,” Palmer said in a June 8 statement.

But the commission rejected the rate schedule Entergy had filed in August, and gave the utility 30 days to file a tariff plan incorporating the directions of Monday’s order.

The commission said that in the wake of the net metering ruling, which held open the possibility of a “grid charge for certain large customers,” the PSC said Entergy “may proceed to revise and resubmit its SEPO Option B offering in this Docket to demonstrate compliance with the Commission’s findings and directives.”

The utilities’ main argument in the net-metering rate case was that a high rate for power from customers with solar generation would shift the burden of grid infrastructure and upkeep to other customers, those without solar arrays. The PSC’s June 8 ruling held out the possibility of grid charges to prevent any such cost shifting.

The power for the solar purchase plan would come from an 81-megawatt solar farm near Stuttgart and eventually from a 100-megawatt array near Lake Village. Both projects are partnerships with NextEra Energy Resources of Juno Beach, Florida, which sells the power to Entergy. The utility, which has 700,000 customers in Arkansas, would have basically passed along the power at their cost.

UPDATE: Responses from Entergy Arkansas and Scenic Hill Solar CEO Bill Halter.

Statement from David Palmer, Entergy Arkansas director of regulatory affairs:

“Entergy Arkansas continues to believe that SEPO Option B, as proposed, best protects the interests of non-participating customers. In fact, Entergy Arkansas quantified the cost shift and demonstrated how SEPO Option B reduced it by approximately 54 percent relative to the cost shift that occurs under the net metering order recently approved by the APSC for private solar installations.  

“While the order denied Entergy Arkansas’ original request, it identifies two amendments that, if incorporated in a compliance filing, would allow the commission to approve Entergy Arkansas’ offering. First, the commission set the capacity available to 50 percent of Entergy Arkansas’ existing solar resource, or 40.5 MW. We have an online enrollment process nearing finalization and will be able to utilize that process working with customers who have signed letters of intent for SEPO Option B. Secondly, the order requires Entergy Arkansas to amend the term of Option B from one year to the remaining life of the purchase power agreement for the existing resource. Based on the letters received thus far, we know our customers are very interested in this offer.

“Although the order establishes the capacity for SEPO B at 40.5 MW, Entergy Arkansas has additional economic solar resources coming online that offer even more competitive pricing. These resources provide additional opportunity for Entergy Arkansas to offer renewable options under even more favorable terms. As we have said throughout, we will continue to advocate on behalf of all our customers and to offer solutions that meet their needs.”

Response from Bill Halter, CEO of Scenic Hill Solar of North Little Rock:

“Yesterday the Public Service Commission ratified and confirmed the view that we have been expressing since the very beginning of the docket, which was that the Entergy offering was unjust and unreasonable. It was contrary to a previous commission rulings, it was unfair, and it was a diversionary tactic designed to prevent or slow down government and nonprofit entities in Arkansas from accessing solar offerings that were available to them ⁠— all with the idea of promising people a pig in a poke.

“The main way that Entergy was proposing to compete with a long-term offering was to offer essentially a free one-year deal: No real obligation, no real commitment, and it was on the backs of other ratepayers. The commission looked at that and said, ‘that’s unfair.’ It’s unfair to all Arkansas ratepayers, it’s anti-competitive and it undermines the very reason that Act 464 was put in place.”