State solar projects affected amid grandfathering extension uncertainty

Arkansas solar industry officials had expected grandfathering to be extended before it expires on Dec. 31. However, that is unlikely as state regulators have yet to submit a proposal to do so to the legislative body, which could have decided whether to extend it. Without grandfathering, officials said solar businesses cannot adequately project the savings that arrays provide their customers.

According to Energy Toolbase, grandfathering allows existing solar customers to maintain the old rates or rules over the lifetime of their arrays. That allows customers to preserve the savings their arrays are expected to achieve, even if utilities were to change the rates and rules.

“It’s kind of like a mortgage on your house,” said Lauren Waldrip, executive director for the Arkansas Advanced Energy Association. “Grandfathering says when you sign that note, your interest or your net metering rate – good, bad or indifferent – is not going to change halfway through the life of that loan.”

She said that’s the ask for grandfathering, and a lot of other states have it indefinitely. With grandfathering, solar customers know the rate they’ll receive before the array is installed. Without it, investors will be challenged to start new solar projects.

“We’re at a tipping point right now,” Waldrip said. “Do we want to maintain our strength in the industry that ultimately benefits every Arkansan who is a ratepayer and supports free markets? That’s what we’re trying to protect and resolve right now.”

She said the Arkansas Public Service Commission (PSC) was expected to propose a rule change to extend grandfathering that the Arkansas Legislative Council could have voted on whether to approve. However, the commission did not submit one before the council’s December meeting last week, its last meeting of the year. As a result, grandfathering doesn’t look to be extended by the Dec. 31 deadline.

Jeff Hilton, interim executive director for the Arkansas Public Service Commission, said the commission has yet to issue an order regarding a rules change to extend grandfathering.

“It’s pending an order,” Hilton said. “There will be an order at some point from the commission in this docket in relation to grandfathering. That will happen.”

After the rules are changed, then they can be sent to the council for review. He said the council’s review wouldn’t happen by the end of this year.

Asked why the rule changes to allow for grandfathering to be extended have yet to be sent to the council for review, he said he didn’t know and can’t answer that as he cannot speak for the commission. Hilton added that the docket includes 95 entries of documents of various lengths. The commission opened a docket item related to grandfathering on Aug. 18 and hosted an Oct. 27 hearing on it.

Still, grandfathering might be an issue that state legislators take up in January.

“We’ll continue to try to resolve it, but right now is pivotal for the leadership in our state,” Waldrip said, noting the organization’s ongoing economic impact research. “Hundreds of millions of dollars of economic impact is … in limbo right now waiting for the certainty in order for them to continue on with the contract.

“This is an easy ask,” she added. “It’s good business. It’s good policy. It doesn’t really have a lot to do with renewable energy; it’s just logical.”

She explained that grandfathering is separate from the 1:1 net metering credit, but grandfathering ensures that solar customers receive the credit for the life of their array. Like grandfathering, she said net metering could be something that the state legislature also looks at in January.

However, she said that the Public Service Commission can grandfather a project on a case-by-case basis. Prospective solar array customers must file with the commission to request that their project be grandfathered. She noted some of the issues with the process include bottlenecks resulting from commission staff shortages and a rise in filings for grandfathering.

“You have to pay an attorney to file that, and it could be up to $10,000 roughly,” she said.

Douglas Hutchings, co-founder and chairman of Little Rock-based array installer Delta Solar, said the cost makes seeking case-by-case grandfathering unfeasible for residential customers and likely only an option for larger projects. The process also can take months to complete.

“I don’t see how you could responsibly sell residential solar after the new year unless you’re either undersizing it so you don’t put any on the grid or you’re incorporating batteries,” he said. “You’re not going to be able to afford the PSC fees and timing for residential. Small commercial is similar. Larger commercial, you can budget the cost in there.

“I think for a large part of the industry, you’re kind of seeing a halt on any sales activity until it’s resolved,” he added. “It is hard to educate a customer on what their system would do when the rules could change dramatically.”

He said the commission has recently received multiple grandfathering requests because solar customers were concerned about reaching the deadline before their array was completed. However, the commission was awaiting decisions on the filings because if grandfathering is extended, they would be approved automatically. Still, some customers and installers are concerned the commission might not decide on the requests until after the legislative session. And if legislators extend grandfathering, it might not take effect for roughly six months.

“The bottom line is that in a few weeks, it will be incredibly impossible to provide a customer any certainty around the financial performance of a solar array,” Hutchings said. “Those that decide to proceed and make an investment could have the economics change drastically based on the legislative session results.

“I am optimistic that our state legislators understand and see the value in providing Arkansans with the choice of investing in their home or business to install solar,” he added. “Historically, the strong policy that they enabled has provided numerous well-documented benefits for the state.”

Hutchings said 1:1 net metering will remain the existing rule come Jan. 1, even if grandfathering isn’t extended. But some bordering states have rules that don’t provide the 1:1 credit for the electricity that arrays generate. He noted that Louisiana array owners receive less value for the electricity their arrays provide to the grid than what they pay utilities for electricity.

“Grandfathering means you get to keep that 1:1 net metering, and the date that the PSC originally picked in their ruling was through 2040,” said Hutchings, noting that it became effective in 2020. “It was effectively a 20-year grandfathering.”

Waldrip said that Arkansas leads in planned solar projects compared with other states within the footprint of the regional transmission organization Midcontinent Independent System Operator (MISO). She said the state leads because of its policies and other components, such as agricultural land. She questioned why the state wouldn’t protect something it does so well and enables growth, contributing to significant economic development and jobs for rural communities.

“Arkansas has done such a great job of positioning ourselves to be … not just competitive but the leader in this space,” she said. “To jeopardize that is avoidable.”