PSC gives city go-ahead for solar project

Hot Springs is on the verge of being the state's largest city to use fully renewable energy for municipal operations, City Manager Bill Burrough recently told the Hot Springs Board of Directors.

The Arkansas Public Service Commission recently granted the city's request to build out its solar net-metering project beyond its current 1-megawatt of generation. Last month's ruling allows Scenic Hill Solar to build five net-metering sites in addition to the 1-MW facility currently operating at the Southwest Wastewater Treatment Plant on Winkler Road.

All five locations qualify for the 1:1 credit, meaning Entergy Arkansas will credit the city at the full retail rate for every kilowatt-hour the five solar arrays export to the grid.

According to the PSC's order, the 8,670 KWs from the five sites will provide 78% of city government's electricity needs. The panel granted the city's request to use the generation from the more than 30,000 solar modules to offset the consumption of 29 of its highest-demand meters, including the Ouachita Water Treatment Plant that treats raw water collected by the city's intake on upper Lake Hamilton.

"We had a very favorable ruling out of the Public Service Commission on all of our points regarding our solar project," Burrough told the board last month. "We may require some additional property to reach what we need as far as our total megawatts. We'll have a lot of activity happening at three major sites over the next several months."

Scenic Hill will install, own and operate the arrays. Per the energy services agreement the city entered into with Scenic Hill in 2019, the city will pay Scenic Hill 5.90 cents per kwh generated by the arrays. The rate will increase 1% each year, reaching 9.97 cents at the end of the 28-year agreement.

Scenic Hill CEO Bill Halter said the cost certainty will insulate the city from volatility in the energy market.

"Now the city government of Hot Springs knows in advance what it's going to pay for electricity," he said, noting the current retail rate is about 10 cents per kWh. "When the external market goes up, as it is right now, the Hot Springs city government meters are protected from those rate increases now and in the future."

Net metering rules the PSC promulgated prohibit two generation meters from offsetting the same consumption meter. A waiver the commission granted allows the city to use generation from the 3,400 KW AC solar plant proposed for the Davidson Drive wastewater plant to net against the plant's consumption and the energy needs of the water treatment plant on upper Lake Hamilton.

According to testimony the commission heard, land constraints at the upper Lake Hamilton site and the cost of connecting to the grid a solar facility large enough to offset the water plant's consumption necessitated the waiver. The 670 KW AC facility proposed for the site is insufficient to serve its average load of 1 MW, which is equal to 1,000 KWs.

The city proposed using 90% of the generation from the Davidson Drive's solar plant's 3.4-MW array to net against the upper Lake Hamilton site's load.

"The ground at the (upper Lake Hamilton site) is hilly and rocky," Halter said. "There's precipitous fall offs to the water. It wasn't optimal from the perspective of building a big enough power plant there. We made the argument to the commission, and they agreed with us."

The waiver was conditioned on prohibiting the upper Lake Hamilton site from being credited for excess generation it would add to the grid.

"With the total of the consumption (at upper Lake Hamilton) relative to the size of the power plant we will build there, it's really not an issue," Halter, noting the solar plant won't be large enough to offset the site's energy needs, said of the commission's decision to prohibit the site from exporting energy to the grid on a net basis.

If the Davidson Drive solar array couldn't be used to net against the consumption of the upper Lake Hamilton site, its excess generation would exceed what's required to offset the city's electrical needs. That would violate the Renewable Energy Development Act, which prohibits net-metering customers from producing more energy than they consume in aggregate.

"The net metering law says you can't systematically overproduce your consumption in aggregate," Halter said.

Entergy has argued that self-generation enabled by the Solar Access Act of 2019 shifts the utility's fixed costs to other ratepayers. When public entities self-generate, they're not paying rates that help maintain the distribution grid, the utility has said.

A statement it issued in June 2020 said the city's net-metering project will shift about $900,000 a year in costs to other ratepayers. Entergy reiterated its stance in a statement it issued earlier this month.

"As Entergy Arkansas and others have noted in numerous APSC proceedings and other forums, net-metering facilities shift infrastructure costs to other customers under the current rate structures," the statement said. "This ultimately leads to higher rates and shifts costs onto other customers without net-metering facilities.

"Other states are contending with this cost-shifting as well and some have taken steps to adjust the rate structures to eliminate or mitigate the inequitable rate structures that lead to cost-shifting. Entergy Arkansas looks forward to further commission actions addressing the cost-shift, including approval of modified rate structures for these net-metering facilities so all customers pay their fair share of the costs required to serve them."

The commission ruled last month that the city's net-metering project will not result in an unreasonable allocation of costs to other customers.

A witness who testified on the city's behalf said the project will create a direct benefit of $600,000 a year for other ratepayers. Entergy's director of utility rates and pricing testified that the utility's analysis determined the project would result in a potential cost shift of $3.6 million.

The city doesn't own the land for the 600-KW site it got approval to build on Aldridge Road, north of the 1-MW site currently operating on Winkler Road. Halter said Scenic Hill will buy the property.

Government entities and nonprofit agencies couldn't be net-metering customers prior to the Solar Access Act of 2019, which allows tax-exempt entities to contract with solar providers such as Scenic Hill.

"In my view, if you're a citizen of Hot Springs, you should be quite proud of what the city leadership has done," Halter said. "They pursued this on behalf of Hot Springs in a way that clearly is going to provide financial benefit. And it's going to provide financial certainty."

Appeared in The Sentinel-Record
By David Showers