Entergy Promotes a Revised Solar Purchase Option, Expecting PSC Approval

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Just weeks after state regulators rejected an Entergy Arkansas plan to sell solar power at lower rates to customers like cities, counties and school districts, Arkansas’ largest electric utility has submitted a revised plan for approval.

The Arkansas Public Service Commission offered guidance on how to alter the solar offering in its June 15 ruling, and Entergy responded with a July 8 filing that cleared its way to send letters to 167 interested customers the same day, according to Michael Considine, Entergy Arkansas’ vice president of customer service.

Considine noted that the commission rejected his company’s plan, known as SEPO-B (Solar Energy Purchase Option B), but offered a roadmap to make it acceptable. “I like to say it differently than the headlines read,” Considine told Arkansas Business in a conference call. “I’d say we were approved with modifications. We took a few weeks pulling things together and complying with what was requested.”

The June ruling was considered a victory for the growing third-party solar installation industry in Arkansas, which has been increasingly building arrays for schools, local governments, water companies and other nontaxed entities. That business was spurred by the Arkansas Solar Access Act of 2019, which aimed to promote renewable energy by removing Arkansas’ ban on solar leasing and power purchase arrangements known as third-party financing. Under that rubric, private installers often own the power plants, reaping investment tax credits, while the not-for-profit entity enjoys lower electricity costs.

Several leaders in the third-party solar industry said they were reviewing Entergy’s filing and would wait to comment on the record. One, speaking on the condition of anonymity, said private companies’ original objections to the Entergy SEPO plan still apply — that it’s not competitive and fails to serve the public interest. 

Considine said Entergy sent letters last month to 167 customers who had signed letters of intent to subscribe to the SEPO-B program informing them that the plan had been revised to gain swift approval by the PSC. 

“We fully expect that it will be approved quickly because that filing does exactly what the commission told us to do in Order No. 9 [the June 15 SEPO ruling],” Considine said.

Entergy had offered the special solar option, in which customers can claim a certain lot of power produced by Entergy’s Stuttgart Solar station in Arkansas County, on a yearly basis, something that regulators found uncompetitive. The terms of the solar option are now tied to the life of the Stuttgart facility, roughly 18 years, Considine said.

The commission also limited the amount of solar power Entergy can offer under the SEPO plan to 40.5 megawatts, about half the Stuttgart generation facility’s capacity. That means Entergy, an investor-owned utility and division of Entergy Corp. of New Orleans, will not be able to meet the solar demands of all 167 customers, Considine said.

“So we started a registration process with a select group of customers on July 8, giving priority to customers that had submitted letters of intent with us prior to that June 15 order,” he said. “I don’t think I’m privy to disclose the names, but we’re talking about the city of so and so, so and so county, or so and so water and sewer — all recognizable names.”

Entergy alerted those customers with a June 25 letter from Considine anticipating the July 8 filing of the revised SEPO-B plan urging them to register for the remade plan through a website that went up July 8, the same day as the new filing.

“I’m happy to report that we’re getting very close to the same group of 167 that have turned around and reaffirmed their desire for this product,” Considine said. “So we’ve kicked off that subscription process in earnest; we’re selling this product on a first-come-first-served basis.”

Under the 40.5-megawatt restriction, Entergy will not be able to subscribe all those customers, but it hopes to use those registrations as evidence that the commission should raise the cap.

“At some point we will probably need to disclose to the commission a list of who these people are who have registered,” Considine said. 

While each electric customer is different, he said calculations for most customers indicated that they could save 15% to 25% of their electric costs under the SEPO-B plan as opposed to the rates they’re paying now. 

In one case, he projected that an unnamed customer would save $4.6 million over 18 years.

“Our biggest issue is the 40.5-megawatt limit placed on us by Order No. 9,” Considine said, saying that won’t be near enough to serve all interested customers. “We’ve got incredible demand, but we just don’t have the supply approved. We physically have the capacity in that facility [Stuttgart] and in additional facilities that are being built in Lake Village, which will be online in less than three months, and in White County. We just have the current restrictions from the commission limiting that.”

He also said the Entergy solar option shifts less cost to non-solar customers than third-party systems do, though renewable energy advocates have disputed that any cost-shifting actually occurs. The Arkansas Advanced Energy Association has argued that solar customers using net metering to get credit for the power they create actually provide a net benefit to the grid.

Scenic Hill Solar CEO Bill Halter, the former lieutenant governor, made a vivid argument against SEPO-B, suggesting that Entergy’s plan would kill third-party solar projects and hurt solar job prospects during the COVID-19 unemployment crisis. Scenic Hill has $125 million in solar projects lined up for entities like schools, water systems and municipalities.

Entergy representatives took umbrage at Halter’s making an issue of the pandemic, and Considine rejected an argument by the AAEA that Entergy was using its size and clout to offer a special and noncompetitive solar rate to certain customers. The advanced energy trade group had called the original SEPO-B plan an attack on “both the regulatory agenda of the Commission and the clear intent to the General Assembly,” former AAEA Executive Director Katie Laning Niebaum said. “The proposal was contrary to the public interest and rested on the assumption that a monopoly utility should be able to use regulatorily approved tariffs to undercut the emergence of competitive markets.”

Considine said that Arkansas’ low electric rates, some of the cheapest in the nation, are the real key to economic development. 

“I would remind people, first and foremost, that all Arkansas residents have the privilege of paying very low electric rates,” he said. “I’m completely unapologetic about that, because it’s a great thing. Low rates drive business and economic development, and that benefits all.”

He also said that large utility-scale solar systems produce cheaper power than third-party arrays, citing what he called the “levelized” cost of energy. “It is certainly cheaper than building on a small scale,” Considine said. “It’s just as simple as that.”

The PSC’s 99-page ruling on SEPO-B on June 15 was the second regulatory decision in a row to go against Entergy Arkansas. The commission 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. 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.