Feb. 22, 2023
Rep Maddox The agenda today is Representative Hudson. If you would come to the table. Please introduce yourself and you may present your bill.
Rep Hudson Thank you, Mr. Chair. May I have Jerry Coats come join me at the table, please?
Rep Maddox Absolutely.
Rep Hudson Thank you. You sit here and when you want to talk, you just push that button.
Rep Maddox Sir, if you would introduce yourself and then Representative Hudson, you can proceed.
Coats NYLIC My name is Jerry Coats, I’m from Little Rock, and I am an agent with the New York Life Insurance Company. And I have worked with Miss Hudson over the last six months on this bill.
Rep Maddox Thank you.
Rep Hudson Colleagues, this bill is an update to a statute that we already have. So we’re not doing entirely new ground. But what it does is that it’s a, it’s a clean up bill in effect that tries to correct some confusion that’s been caused by some conflicting opinions in case law. And Mr. Coats, who works in life insurance, can go into more of the technical details of it. But what it really is meant to do is to ensure that beneficiaries of life insurance policies are able to keep more of the proceeds of that policy. Part of the problem has been how life insurance proceeds are defined. There hasn’t been a good definition of it in our code, and so it has led to some inconsistent results with how it’s treated in various court cases and just, you know, depending on counties and location. And so what we’re trying to do is create a consistent treatment of life insurance proceeds so that beneficiaries have a better understanding of what it is that they can expect in a situation in which they’re-,they’re dealing with life insurance proceeds. And so, Mr. Coats, if you can kind of get into the technical issues of it, because you are the expert here.
Coats NYLIC That’s a tough introduction. As I said, I’ve been in this business for 46 years, grew up in, grew up in Pine Bluff. And began this walk in 1977. Understanding how we got to the place where we are today in Arkansas goes back to the very early part of the 20th century when they wrote the tax code. When Congress did that, they left out, for all practical purposes, life insurance as a tax target. It was a matter of social good in the minds of the Congress back then. And it’s remained that way all, all up, all the way up until today. The proceeds are ignored for income tax purposes. By and large, the cash value grows deferred. The access by the owner of the contract is tax free in most cases and over the years in Arkansas, and you can look on a handout that you have in front of you. A 2021 summary by the American Council of Life Insurance on the dollar amounts that come into the Arkansas economy on absolutely a daily basis. The number of jobs created and so on and so forth. And it’s large numbers, very large numbers. But homes have been kept together. Businesses have been able to pass from one generation to the next. The homes have remained in families and charitable purposes have been funded with the life insurance contract. About 15 to 20 years ago, states begin to see the need to protect by statute the proceeds and the values of life insurance contracts from attachment. During that time, Arkansas remained sort of where they had established. As Ms. Hudson pointed out, the definition and the understanding related to the action taken in 1973. And so here we are today. And on the back side of the ACLI report, you have a comparison of the statutes in the states that are contiguous to Arkansas. You’ll find that Texas and Oklahoma and Louisiana have fully exempted the definition, fully exempted the proceeds and the values of life insurance contracts from attachments with exceptions to that attachment in areas like fraud, child support, and contracts purchased after an action is filed. Those things that you would find normally in an exemption language. But other than that, they’re fully exempt. Mississippi, in its wisdom, existed, exempted it up to $50,000. And as you, you may know, Arkansas’ exemption is $500. Tennessee is exempted as long as the proceeds go to a family. 35 states have exempted fully the proceeds and the values. And some of them have conditions. Some of them have limits. But here we stand in Arkansas with a $500 limit. And for all practical purposes, it has no protection. And so that prompted me to begin to try to find someone that could help me address the issue. And Ms.Hudson and I came together in September and began to work in this direction. And I’ll be happy to answer any questions. But that’s what brought us here today. Thank you.
Rep Maddox Thank you, sir, for your testimony. Are there any questions by the Committee? Representative Lundstrum, you’re recognized for a question.
Rep Lundstrum Thank you for bringing this. I’m, I am confused. It may just be because I don’t understand the policy issues and some of the technical language. On page 2, I believe at the top or excuse me, on page 1, it says using this section proceeds and avails, it talks about the cash surrender value, and then it says, it starts to make exceptions. Can you explain that section? It talks about garnishment, taxment, seizure, appropriations and demands.
Rep Hudson Yeah. So, Representative Lundstrum, what this section does is it talks about what the proceeds are exempt from with the exceptions for certain things is, as Mr. Coats pointed out. Like child support obligations, Medicaid leans, alimony claims and so on and so forth. So this is just talking about all of the, all of the areas in which the, the proceeds are protected from attachment, as Mr. Coats was talking about. So it’s giving the– the section talks about the things that it is protected from, and then it goes into the next section that talks about the things that it is not protected from. The situations in which the proceeds can be attached. We took a look at several of the states that are here on this summary, and it turned out that Texas had the cleanest language. And so some of what we have here is not necessarily new, but rather working with BLR, they thought that our entire statute could use a little clean up. And so some of this we’re just cleaning up some of what was already in statute because it wasn’t very clear. But the meat of what we’re looking for really is down when it’s talking about, talking about that what’s protected and what’s not. Getting down into the claims in beginning at line 22, where it talks about the claims that are not protected.
Rep Lundstrum Okay. All right. Thank you.
Rep Maddox Representative Ken Ferguson. You’re recognized. (Inaudible) Thank you. Representative Ladyman. You have a question?
Rep Ladyman Thank you, Mr. Chairman. The exemptions. Let me find it here. So it talks about on line 25 and 26. A claim by the Department of Human Services against the state under 2076-436. So that is not exempt? Correct?
Rep Hudson That. Yes, that’s a Medicaid claim.
Rep Ladyman Can you kinda explain what that is, what kind of claim that would be?
Rep Hudson Sure. So that would that’s, that’s a requirement by federal statute. Medicaid, you know, in- in- whether you’re getting a judgment amount from courts or getting something from an inheritance or whatever. If you have outstanding debt owed to Medicaid, that has to come out of those proceeds. And that, again, is a federal statute. And so DHS reached out when we were working on this bill and suggested language that would keep us in line with the federal obligations to protect the Medicaid fund.
Rep Ladyman Follow up. So this may not even be affected here, but would would this affect the assets of a person, say, if they were going into a nursing home, they were looking at their assets would it come into play there?
Coats NYLIC I think it would be intentional that we allow those to be available. Yeah, I think Arkansas has some limits already set on, on attaching property and we want to be consistent with those. But we looked at a number of things that could happen in our state that would be important to make it available and be imperative to make it available. And that was one of them.
Rep Ladyman But that’s underlined as new law in this bill it’s. it’s an addition. It’s not current law.
Rep Hudson Well, in, in current law, the exemption is only up to $500. So, you know, when you’re when you’re thinking about there’s only $500 that’s exempt. There really was no guidance on what to do with the rest of the proceeds in current law, which is part of the problem. We didn’t have sufficient language in current law that that directed how proceeds were supposed to be handled, whether it was compliance with federal law. Whether it was compliance with some of these creditor, creditor obligations and so on and so forth, what, what the formal structure was going to be for those proceeds. And so, and some of this, again, I think Representative Gazaway ran a bill last session that, that started this outline. And so this one is kind of finishing that job by clarifying very specifically so that all involved know what those parameters are.
Rep Ladyman Yeah. Thank you.
Rep Maddox Representaive Brown you’re recognized for a question.
Rep Brown Thank you, Mr. Chair, On this claim by the Department of Human Services. I’m just curious if a person is residing in a nursing home and they own a life insurance policy. When they pass, the proceeds of their life insurance policy will go to their beneficiary. We’re not talking about– are we talking about those proceeds that would end up in the hands of their beneficiary who might be responsible for paying or, you know, if they had a let’s say they’ve exhausted all their personal money and Medicaid is, is providing the costs for their care. Would any life insurance proceeds that would go to their beneficiary at the time of death. Would those be attachable at this or not? Are we are we talking about if if I’m in a nurse– or this person’s in a nursing home and they receive life insurance benefits?
Rep Hudson Right. Sorry, the 2nd one. Because that if you go down to line 27 on page 2 and go to E-1. In order to have this exemption, we’d be talking about an exemption for a beneficiary other than the insured. So if, someone in a nursing home had a policy, maybe a whole life policy that they could access funds from during their life or, put it, you gave it to themselves, somehow that would not fall into these exemptions. But if it went to a beneficiary, it would.
Rep Brown So would they be required to access their cash value?
Rep Hudson No.
Rep Brown No, thank you.
Rep Maddox Any other questions by the Committee? Okay, Seeing none. There’s no one signed up to speak for or against this bill, that I’m aware of, but is there anyone in the audience who would like to speak for or against this bill? Okay. Seeing none. Representative Hudson, you’re recognized. Would you like to close for your bill?
Rep Hudson Yes. Thank you, Committee for this time. I appreciate the good questions about it too. Again, this this bill is is meant to clarify that, that Arkansans are able to keep more of life insurance proceeds that were bequeathed to them by a loved one who wanted to provide for them after their death. This makes sure that there is no further question about whether or not they’re able to protect more than $500 of that, of that policy to provide for you know, their home, their livelihood. Or, as Mr. Coats pointed out, charitable endeavors after their death in accordance with their wishes. So I think it’s a great bill. I’m excited about it. And I’d appreciate a good vote. Thank you for your time.
Rep Maddox Thank you, Representative Hudson. What’s the will of the Committee? Representative Richardson, you’re recognize for a motion.
Rep J Richardson Motion do pass.
Rep Maddox A motion do pass by Representative Richardson. That’s a proper motion. Is there any discussion on that motion?
Rep Brown I think this shows some glaring problems with it. I’m glad you brought the bill. But $50,000 to leave a life insurance policy and then have everybody come in and say, we want this, we want that when you’re leaving money to your children. It’s, I wish it would the amount were more, but I’m glad you ran the bill.
Rep Hudson There’s no limit on this one. That was Mississippi.
Rep Brown Oh, okay.
Coats NYLIC I apologize for not making that clear. It,when we looked at all the other states, it was really unclear.
Rep Brown All right.
Coats NYLIC And so we’re trying to do like uh some of our surrounding states did and let’s make it clear.
Rep Brown Okay. Thank you.
Coats NYLIC As much as possible.
Rep Maddox Okay. So thank you for the clarification there. We have a proper motion. We’ve had discussion on the motion. All in favor of Representative Richardson’s motion do pass say aye. Any opposed, nay. Congratulations, Representative Hudson, you’ve passed your bill.
Rep Hudson Thank you.
Rep Maddox Representative Ray, you’re recognized. Please introduce yourself and although we all know you, but go ahead and introduce yourself and proceed with your presentation.
Rep Ray Thank you, Mr. Chairman. Representative David Ray, House District 69. I’ll be very brief, colleagues, because I know we’ve spent a lot of time going over this bill, House Bill 1349. This is the paid E-sports tournaments legislation after it came out of Committee. Last time I sat down and met with several of the casinos in our state who had some concerns about how some of the language was a little bit vague. I went over all of their concerns at length and adopted several of them and put them in the bill. I’ll highlight the main ones on page one, lines 30 through 32. This was in response to, I think, Representative Flower’s question about income that just says that it’s subject to taxation. On page 2 lines 6 trough 11. This was very important to the casinos. They wanted to ensure that it didn’t include house banked games in which the participants competed or played against the house. And that it didn’t include games that are casino style games routinely customarily offered at casinos. On the same page, line 28 we added the words ‘and is limited to’ so that the definition of an e-sports tournament is just what is in this bill. And then lastly, at the bottom of page 3, starting on line 27, this was the main concern that everyone had I think in Committee. We just clarified that wagering on the outcome of an e-sports tournament is not authorized under this chapter and that, that aren’t that- that gambling can only be conducted by licensed casinos under Amendment 100. And with that, I’d be happy to take any questions.
Rep Maddox Thank you for your presentation. Members are there any questions by the Committee? Seeing none. There’s no one signed up. Would anyone like to speak for or against this bill. Okay seeing no one. Representative Ray, would you like to close for your bill?
Rep Ray I’m closed. Thank you, Committee for your time and attention.
Rep Maddox Thank you. Representative Lundstrum has made a motion do pass. Is there any discussion on that motion? Seeing none. All in favor say aye. Any oppose nay. Congratulations, Representative Ray, you’ve passed your bill.
Rep Ray Thank you, Committee. Have fun with the rest of the bills.
Rep Maddox Well, Representative Wardlaw was going to present a bill, they said, but I do not see him. So let’s go and proceed. Representative Fite, you’re recognized. Members, an amendment is being circulated. So let’s just give it a moment for you to get the amendment and start reviewing it. Representative Fite, if you would introduce yourself and then you can proceed in explaining your amendment.
Rep L Fite Okay. Thank you, Mr. Chair. Lanny Fite district 83. This is the amendment we have before you today is. The Public Service Commission reached out to us and said that they needed a little more time to promulgate the rules. And so that’s the main change that we have in our amendment right now.
Rep Maddox Thank you.
Rep L Fite Members excuse me also takes the riders out to.
Rep Maddox Thank you, Representative Fite. Members, are there any questions of Representative Fite on the amendment? Representative Eaves, you’re recognized for a question on the amendment.
Rep Eaves Thank you. Representative Fite, does, would this amended language line this bill up exactly with the Senate bill that’s been filed?
Rep L Fite Yes, it will.
Rep Eaves Okay. Thanks.
Rep Maddox Thank you, Representative Fite. Any other questions by the Committee on the amendment only? Seeing none. Representative Eubanks has made a motion to adopt the amendment. All in favor of the motion to adopt the amendment say aye. Any opposed say no. The motion to adopt the amendment has passed. Representative Fite, you’re recognized to–.
Rep L Fite Yes, I have at the table with me some, John Bethel and also Other Energy. Would you like them to introduce themselves at this time?
Rep Maddox Yes, sir. That would be fine.
Bethel EA Good morning, Mr. Chairman. Members of the committee. I’m John Bethel and I’m the director of public affairs for Entergy Arkansas.
Thompson EA Good morning. My name is Ventrell Thompson. I’m the vice president of customer service for Entergy Arkansas.
Kano ECA I’m Jennifer Loy Kano, director of governmental affairs for the Electric Cooperatives of Arkansas.
Rep Maddox Thank you. Representative Fite, you’re recognized to present your bill as amended.
Rep L Fite Okay. Thank you, Mr. Chair. Members, House Bill 1370 is a consumer bill, and it’s also got consumer protection in this bill. This bill creates a level playing field for all electric customers in the state of Arkansas. It stops the cost shift. All electricity sold to the grid is wholesale, with the exception of what is sold by the solar industry today. There is a cost shift and that’s why we’re here today. And that cost shift goes to all the customers in the state of Arkansas. This year, there was– in 2001 there was $18 million that shifted over to other customers in the state. By the contracts we have in place right now, that’ll be $290 million by the year 2040. And we have not placed the year 2023 excuse me, 2022 in that, yet. Those numbers will be available in March and that will well put us over a third of $1,000,000,000 that will be shifted in that time frame. The Public Service Commission took testimony on January the 20th and said that there was– from an expert witness. And said there was a cost shift and the recommendation was a 2 channel billing. 2 channel billing and basically it’s wholesale rate. What we’re talking about here today is the solar industry is allowed to do 1 for 1. Sell back to the grid at retail rates, not wholesale. And again, they are the only ones that are able to sell retail. Let me tell you what this bill does. I received numerous calls, as you would guess, with a bill like this. And I tried to call, return as many as I could. And they were being told that they were losing what they, their contracts, which they’re not. The solar people, if you’ve got a contract it carries you and grandfathers you for 1 for 1 to 2040, it’s still in place. Matter of fact, this bill, anybody that gets qualified and online this year receives the same benefit. And there was a lot of people that were calling and they were grateful to know about that. The changes that we have in this bill is, of course, extending the grandfathering for 1 more year to the end of this year, should I say. And also we, the changes are, it can either be two channel billing or 1 for a 1 and a grid charge. And when I say two channel billing that’s selling back wholesale instead of retail as they do right now. And also they must be within a 5, 5 mile radius where they place their solar array. 50% of it must be behind the meter. The net metering customer will be treated like any other customer in the utility business. Residential is 25 watts or the highest month in the previous 12 months. Nonresidential is 5 megawatts or higher, or the highest month from the previous. Net metering facilities cannot take territory from the utilities. We have added a consumer protection in this bill. That was one of the things that we heard a lot of is a lot of my colleagues wanted a consumer protection. And after talking to the people I’ve talked to, I think it’s appropriate to have that in there. We still have one of the most, under this bill, one of the most progressive solar policies than other states surrounding us. We’re 5 megawatts. Most states allow only 1 megawatt. About half of them do. We are dropping from 20. We were far above anybody else in the nation. We’ve made amendments on this bill trying to make sure that no one was, had a project that we could not get finished, and that’s why we’ve extended it. And I think Mr. Bethel will expand on that here a little bit, when he speaks. Recently, the California Public Service Commission, they published an order and said that the 1 for 1 net metering facilities had unfairly harmed low income customers and they went away from it. California and Hawaii both have gone away from 1 for 1 and the reason they’ve gone away from 1 for 1 is the burden that it puts on other taxpayers. Our policies, as in place today, are more liberal than California and Hawaii. And at this point, I would be willing to answer any questions, Mr. Chair.
Rep Maddox Thank you for your presentation, Representative Fite. Are there any questions by the Committee? Oh, I’m sorry.
Rep L Fite Well, was going to get Mr. Bethel on the opportunity to speak.
Rep Maddox You’re recognized Mr. Bethel.
Bethel EA Thank you, Mr. Chairman. Just briefly want to point out that the the bill does not increase utilities revenues. It’s a matter of the Public Service Commission sets the level of cost we can recover through rates, and it’s a matter of which of our customers pays. And currently, with the cost shifting, the customers with panels shift costs on to customers without panels and they don’t pay their fair share of the cost. And that’s what the bill does. It doesn’t raise the utilities revenue. It simply makes sure that the customers ultimately will pay their fair share of using the system. Secondly, it does not destroy solar or kill solar in Arkansas and currently in the, in the MISO, the midcontinent independent system operator queue, there are over 5,000 megawatts of projects that are either asking for interconnection or have received approval for interconnection. And so those projects are coming to Arkansas. They’re not coming because of net metering, and it won’t change if net metering, if the net metering laws change. Those companies are they are selling into the wholesale market and will continue to do so. The bill does not deregulate utilities. Our rates are still set by the Public Service Commission and we can’t charge customers rates that aren’t approved by the Public Service Commission. And so if we want to change rates even within the confines of the bill, it still requires us to go to the Public Service Commission and seek approval in an open public proceeding. There’s some concern about recovering the net metering surplus payments through, through fuel or through purchased energy. And that’s not anything that would change the utility’s point of view, because currently Entergy buys wholesale electric power from the Stuttgart solar facility located near Stuttgart from the Chico Solar facility located near Lake Village. And the Public Service Commission approved a settlement agreement that included a number of folks that you may hear from today from the industrial customer group, the Arkansas Electric Energy Consumers. And the commission approved a settlement among those parties that those costs would be recovered as purchased energy through that mechanism. And so it’s treating these purchases from net metering customers in the same way as you treat the purchases from, from other wholesale solar sources of power. And so that doesn’t and if, if that doesn’t happen, if it happens as it does today, those costs are included in the customers rates otherwise anyway. And so you’re moving it from one place to another. You’re not, you’re not growing the total. And in fact, when you eliminate the subsidy, you’re lowering the total. And then the law is as Representative Fite pointed out, it makes Arkansas’s net metering policy less extreme and moves toward a more mainstream approach. And with that, I’ll turn it back over to Representative Fite.
Rep Maddox Thank you, Mr. Bethel. Representative Fite. Is there anyone else at the table that you would like to to speak at this moment before we go to questions?
Rep L Fite No, Mr. Chair, we’re ready for questions.
Rep Maddox Thank you. Representative Wooten, your’re recognized for a question.
Rep Wooten Thank you, Mr. Chairman. Mr. Bethel and Representative Fite. What why?- Why am I hearing from municipalities, higher education, cities, schools and businesses that they are proposing to construct solar arrays, but they won’t, if this bill passes, they won’t be able to do that. Is that correct?
Rep L Fite I’ll let Mr. Bethel answer that. If that’s alright?
Rep Wooten That’s fine.
Bethel EA Under, Representative Wooten, under the bill as amended, if a customer has constructed and completed a project and interconnected by December 31st, 2023, they are grandfathered and they’ll maintain the 1 to 1 full retail credit as they have today until 2040. Likewise, if a customer enters into a facilities agreement where they have engineered the project and we’ve told them what it will cost to interconnect the project and they’ve paid the cost of interconnection and set up an account, if they do that by December 31st, 2023. They’re also grandfathered through 2040. So projects that are either complete today, will be completed this year or will be in a state where they have executed that agreement, paid the cost of construction and are ready to move forward. They will all be grandfathered. And so if you’re school districts and others that have contacted you fall into those categories. They would be grandfathered under the 1 to 1. If they’re not, they would go forward under the under the new rate structure, the two channel billing with the avoided cost credit.
Rep Wooten Well, the second, I’ve got, I have a school district that is, is, it will share with their board into March but they’re not going to have all this work done. So how’s this going to impact them? What will they pay? Will they have to pay more? Or will it save them money or what?
Bethel EA I don’t know the details of their project, but if they if they get it to the point where it would qualify, they would they would be grandfathered 1 to 1. If they don’t, they would be under the new rate structure where they would pay the retail rates for power they consume and they would receive the wholesale power, wholesale cost for the power that they deliver to the utility. But I don’t have the specifics on the level of cost for that system or what they might pay. I’m sorry.
Rep Wooten Thank you, Mr. Chairman.
Rep Maddox Representative Ken Ferguson, you’re recognized for a question.
Rep K Ferguson Thank you, Mr. Chairman. I think I have 2 questions, and if not you can put me back in the queue. Representative Fite or anyone at the table. When we talk about grandfathered in, page 7, line 32. We had a substitute June 30 to December 31st and on line 32 on page 7, in line 24 on page 9. Now, what constitute, does, does an entity being in the construction phase, does that constitute them to be grandfathered in? Or if they have the engineering work done, what constitutes them being grandfathered in?
Bethel EA Yes sir, customers for, and I can speak for Entergy’s process and then and I think other utilities have an equivalent process. But the customer would, would execute what we call a facilities agreement. Means they’ve done their engineering, we’ve done our engineering, and we’ve advised the customer what the construction cost will be. The customer says, I accept your proposal, I pay the construction costs. We open an account for the customer and then if that happens before December 31st of 2023, then they are qualified for grandfathering. And in that situation, if they’re at the end of December, they’re likely not to be constructed by that date, but they’ve executed that agreement and therefore under the law qualified and then they will be completed after that date.
Rep K Ferguson So they have to implement that agreement with that utility company?
Bethel EA Yes, sir.
Rep K Ferguson And both the parties have to agree?
Bethel EA Yes, sir.
Rep K Ferguson But if one party doesn’t agree before December 31st, that’s it?
Bethel EA It would, it would require executing that agreement. Yes, sir.
Rep K Ferguson Okay. So if the utility didn’t agree, then therefore they wouldn’t be grandfathered in.
Thompson EA Well, we would have to follow the APSC policies that are currently in place with regards to the time frame in which we’d have to respond. And so we’d be operating under the existing APSC policies with respect to that.
Rep K Ferguson APSC?
Thompson EA The Arkansas Public Service Commission. We’d be operating under the current guidelines that are in place today, that we’d have so long to respond and get back with customers.
Rep K Ferguson The Public Service Commission rules and regulation would govern how you guys would proceed with that agreement.
Thompson EA There are, there are policies in place today yes, that would govern that.
Rep K Ferguson All right. Thank you, Mr. Chair.
Rep Maddox Thank you. Representative Hodges, you’re recognized for a question.
Rep Hodges Thank you, Mr. Chair. Representative Ferguson covered one of my questions. The other one I have, I believe it’s on page 14 where it has the 5 mile radius. I believe that’s for aggregation. Can you just explain the five mile radius and why that’s, why that’s in the bill. Or the benefit of that?
Kano ECA So currently under the law, remote facilities are permitted and that means that a facility can be installed on one side of the state and meter against a location on the other side of the state for territories that for an electric utility service territory that’s dispersed around the state. So what this does is for those coming in after, who haven’t been grandfathered for a further distance with their facility, they can put a facility within a five mile radius and meter anything within that five mile radius. So they can aggregate those meters within that 5 mile radius from the facility.
Rep Hodges I guess my question is, what problem is this fixing? What is the, what is the problem with the larger than 5 mile radius?
Kano ECA So with the 5 mile radius is a reasonable distance because you know that the facility will be distributed to the customer within, with on that certain transformer on that certain substation. So that’s. Whereas if they’re wheeling a power across the other side of the state, that customer that built the facility isn’t actually using it and they’re just sending power to the grid.
Bethel EA And the further away from the, the source or the place where the power is consumed from the where the power is generated, they’ll use more utility facilities and potentially avoid paying the full cost of service, of serving that customer under the under the rate structure. And so this is a way to help mitigate and eliminate the the shifting of costs between customers.
Rep Maddox Thank you. Representative Ladyman, you’re recognized for a question.
Rep Ladyman Representative Ferguson asked my question, thank you.
Rep Maddox Thank you. And Representative Ferguson, you are recognized for a question.
Rep K Ferguson One more question. Thank you, Mr. Chair. My neighbor who stays a house away from me saw me out in the yard the other day. And he saw something about this bill in the paper. And he asked me, he said, Brother Ferguson, and he’s about 83 years old. And he said he was thinking about buying him a solar system. But he said, by the time I paid for it, I’ll probably be dead. But he wanted to know, and I guess if I’m understanding this correctly, this is not going to adversely affect individual and I’m concerned about senior citizens. How does this affect the indi-individual consumers?
Bethel EA The individual customers will be grandfathered in, just like the commercial and industrial customers. If they have a facility that meets the requirements by the end of December of this year. They get the same one for one deal that they have today. And then if they don’t, they would be under the new the new rate structure. And then for customers such as your neighbor that may have have questions as to whether they’re, they’re being being treated fairly or being, being handled in a way that’s in conformance with Arkansas law. The bill also adds amendments to the to the Deceptive Trade Practices Act that enable the Attorney General’s office to help protect those customers in the event that they are misled or mistreated by a provider. It also, it contains a list of requirements that those sellers are required to meet so that those customers have, have good information upon which to make a decision.
Rep K Ferguson Thank you.
Rep Maddox Thank you. Representative Lundstrum, you’re recognized.
Rep Lundstrum If I can get just a little history lesson. When this was passed originally and what the intention was and why it’s here today, because it seems like it’s gotten way out of hand. And why it’s not at the Public Service Commission.
Bethel EA In- in 2019, when the, when the legislation was last amended. There was a presentation and there was an expectation of the I think the General Assembly and everybody involved that 1 to 1 net metering would not continue. You were given assurances by witnesses in the proceeding that suggested that 1 to 1 would not continue and it would change and that nobody was expecting that to continue. And I think from Entergy’s perspective, we we took that and were expecting the 1 to 1 situation to change and expected all that to be done by December 31st, 2022 when the grandfathering ended. That made that made sense that you would start down that path and get to that point. Well, unfortunately, that’s not happened. We’re still 4 years later at the 1 to 1 rate structure with the cost shifting, having grown a lot over those 4 years. And so I think the situation as it was presented to the General Assembly, presented to the parties in the proceeding is much different in what happened. And therefore we believe it’s necessary to, to make the the policy here at the General Assembly, to make sure that what was expected happens.
Rep Lundstrum Follow up,You’re recognized.
Rep Lundstrum I understand that. But again, why is it here in front of us today? Is it a particular is it, there’s a glitch in the law? Or should I guess I’m wondering why the Public Service Commission is not handling this and why the legislature’s handling that. I’d just like some clarification there.
Bethel EA I think it’s two-fold. I think the one is Arkansas’s statutes are and policies as they’re set forth right now, are are extreme when you compare them to the policies nationally. And so it’s necessary to make it less so. When net metering started, it was really envisioned as a facility behind an individual customer’s meter offsettering, offsetting all or part of their load. And what we did in 2019 is we made it possible for facilities to be remote from the the load they serve. And we went from sizes that were more customer specific to sizes that were multiple customer are certainly multiple location sized utility scale facilities at 20 megawatt. And so it really got the policy out of sync with what net metering was intended to be. And when doing that, combined with maintaining the 1 to 1 rate structure in place, moved costs from customers that have panels to customers that don’t. And so it created that misallocation of costs. The cost shift from those with to those without and that it disproportionately falls on on low income customers. Customers that can’t afford those panels and also on mom and pop businesses, large businesses, everybody that either elected not to have them or can’t have them is paying for those that do. And so the putting in place the framework that is is contained in the bill, will, will correct that problem.
Rep Maddox Thank you. Representative Rose, you’re recognized for a question.
Rep Rose Yes, sir. Thank you, Mr. Chairman. I have a couple of questions having to do with definitions. So on line, excuse me, on page 13, starting at line 23. This has kind of already been touched on but I just. I’m a little slow but I’m worth waiting on, okay. So the terminology says allow a net metering customer that submitted a standard interconnection agreement. And I heard him a little bit ago that it was the. But, you know, both sides would need to agree. But when I look at this, it says they simply need to have submitted the agreement, but not necessarily an agreed upon. I want to make sure I understand that correctly, because I can be like, okay, here’s my agreement, whether you’ve agreed or not, now I’m grandfathered. Can you, can you walk me through that?
Bethel EA Yes, sir. The the standard interconnection agreement is a form document that is set by the Public Service Commission and approved by the Public Service Commission. And that document is executed and completed once the project is built and ready to interconnect with the utility system and go online. And so it’s not a matter of everybody has already agreed this is what we’re going to do at this location. And then that piece of paper is everything is complete, it’s ready to go online. And then the other document that’s in that, that section is the facilities agreement. And that was the situation I was discussing with Representative Ferguson. Where the customer comes to the utility and says, I’ve engineered a project at this location and this is what I want to build. And the utility does the engineering work and says, okay, to serve the facility that you want to build at that location, I have to build X amount of facilities and it’s going to cost Y dollars. And the customer says, I’ll pay you Y dollars. They pay, they make that payment that they’re required to make under the law and under the rates that were approved, we open an account. We begin our construction work. Customer begins their construction work. And at some point in the future, we get to where we execute that standard interconnection agreement that we just talked about. And so if you’ve done either of those things before, December 31st, 2023, the project’s grandfathered at the 1 to 1.
Rep Rose A follow up?
Rep Maddox You’re recognized.
Rep Rose Thank you. Under the, the terminology that you just referenced, the facilities agreement. And then it says or equivalent document. Could you just define what an equivalent document would be? And also, I know it’s kind of a two part, but with the standard interconnection agreement, it sounds like this is pretty well documented a process. Do you have an understanding of like an acceptance/denial ratio of what that looks like? If you could dive into both of those, I’d appreciate it.
Bethel EA All right, good. I’ll answer your second question first. And if you can help me with your first one. The second question is, I don’t have information on the acceptance denial process. I do know from from Entergy Arkansas’ experience we have a a good track record of working with our customers and meeting their needs. I think we have a very a good process. And the law really reflects the process that we’re using. And I think the process other utilities are using as well. And then the facilities agreement or equivalent document, the Entergy refers to that agreement as a as a facilities agreement. And the other utilities may call it something else. But is the, it’s the the document that you execute between the parties once you’re ready to– we’ve identified what the customer needs to build and what we need to build execute that we open an account for the customer they make payment, project begins.
Rep Rose They can be denied should they not meet some specifics that are laid out, correct?
Thompson EA Yeah, but that’s only on technical issues. It’s only on when the engineering there needs to be more engineering study done and that sort of thing.
Rep Rose The standard is set and it’s not changing for acceptance or denial. That’s what I was ultimately getting to.
Bethel EA Exactly.
Rep Rose Okay. Thank you. Thank you very much, Mr. Chair.
Rep M Thank you, Representative. Representative Allen you’re recognized. He just left. Representative Hodges, you’re recognized.
Rep Hodges Thank you, Mr. Chair. One more question. I’ve heard some conflicting information on this. So for 2 channel billing. If I have solar at my home and we have 2 channel billing, can I use the energy I’m producing first at my own home before I send it to the grid or under 2 channel billing is what I’m generating automatically pushed to the grid and then I’m having to pull down from the from the utility.
Bethel EA Yes. Under 2 channel billing, you can use what you, can use what you generate and if you generate more than you use then it crosses the meter and would go on to be registered on Channel 2 as coming out. And then on Channel 1, what you’re purchasing from the utility is measured and you pay the rates that are set by the Public Service Commission for that service. So but, but anything that you consume, and you generate and consume on your side of the meter is the customer you get to keep and you get to do that first.
Rep Hodges Thank you.
Rep L Fite May I may also say that in Arkansas you can self generate whatever amount you want. Now you’re if you’re going to push it on, the on the grid, then you’re limited by this bill and have been in the past. We haven’t changed it on residential. And also, you know, you’ve got the option of getting your battery in and then you’ll have 1 for 1 if you’ve got a battery and not push it back on the grid.
Rep Maddox Thank you. Any other questions by the Committee? Representative Rose?
Rep Rose Yes, thank you. I had a couple of questions about cost shift, and I’m not sure who the right person to address that. I’ll just address it to the conglomerate here. You, you mentioned the numbers, which I was glad to hear the number, not necessarily what it was, but that there was the $18 million cost shift, I think was the previous year, still waiting for the current year, is that accurate? So that is what I’m understanding, is that is being pushed on to the standard electric customer. Somebody who is not operating with solar on a net metering agreement. Is that correct? So how much cost shift or re-shift could could we realize or see, in some way, shape or form, should this bill pass? Like who is going to see that on their bill? How, how does that, how does that materialize?
Bethel EA I think what the cost shift that has occurred has occurred over time, and it’s growing because the number of systems in place is growing. And so given that we’re under the bill would be grandfathering facilities through December of this year, I would expect that as you add facilities at 1 to 1, that cost shift will continue to grow until you stop. And then once you’ve once you’ve done that after December 31st of this year, going forward, the cost shift shouldn’t grow. If you are not grow substantially, if you have then implemented the two channel billing format. So for projects that commence on that date going forward, that amount shouldn’t grow. Since those projects are grandfathered through 2040, that amount is is going to be with us, whatever that is should continue because those projects are going to continue to operate as they do today. But you’ll, you’ll cure it from happening going forward.
Rep Rose A follow up, Mr. Chair, if I understand it right, and forgive me if I get the statistics and the terminology wrong. But roughly, is it that the the retail rate of the kilowatt per hour is, is it $0.12 that is that about right? And that the wholesale rate is about 05. Is that, and so the difference is of about .07?
Bethel EA And it depends on the utility and it depends on what year you’re measuring the the market price in. But somewhere between, you know, $0.11 and $0.4 to $0.6 or $0.12 or $0.4 to $0.07.
Rep Rose For the for the sake of discussion, we’ll just have a theorize. It’s 5, 7, 12. Would we expect those numbers to change between now and 2040?
Bethel EA Yes, I would\., because one thing is the utilities are continuing to invest in our systems, build, build projects, retire things. And so over time, utility rates will change. Ours have grown at a compound annual rate of about 1 and a half percent or 1% over the last several years. But that number would change, you know, the base rate number, that the utility charges and then the market price for electricity does vary. And so it would vary year to year over that. But I think it’s reasonable to expect it would over the from now to 2040. Both would change.
Rep Rose And then but the wholesale, retail difference. That all, not that number but more or less the process remains the same for those on the net metering.
Bethel EA Yes, sir.
Rep Rose Okay. So the cost shifting will adjust roughly in parity to the rate increases. It’s all going to be 1 to 1 still.
Bethel EA For the customers that are grandfathered, it’ll be 1 to 1. Yes. And for the customers that are under the new rate structure, then the they wouldn’t be and the and the cost shift should be eliminated by the two channel billing approach.
Rep Rose Okay, I follow. Thank you. Thank you, Mr. Chairman.
Rep Maddox Thank you. Any further questions by the committee? Representative Walker, you’re recognized.
Rep Walker So, so far, all of my questions were answered but one. And I’d like to go back to where both parties have to agree on this, which where my hang ups at. So if an electric entity decides to reject a project, even though all their requirements were met. Like, let’s just say it was submitted. Everything was submitted on November 30th or whatever. Because you made a comment about there would be the Public Service Commission would have something in there about how long they would have to respond. I have no idea what that requirement would be, so this is just hypothetical. So let’s say the person gets a notice that it’s been rejected, even though they met all the requirements. Would there, is there an appeal process where they could appeal it to the Public Service Commission? Especially if the denial notice was provided after December 30th?
Thompson EA Yes. So currently today, any time a customer has an issue or a complaint with anything at the utility, they have the right to go to the Public Service Commission and open up a complaint. And so they still have that ability today and going forward. Yes, sir.
Rep Walker Follow up.
Rep Maddox You are recognized. And if the witness will get a little closer to the microphone, having a little trouble hearing. Thank you. Proceed, Representative Walker.
Rep Walker So. So it won’t affect if the appeal process is after December 30th, it will not affect them being grandfathered in. If the Public Service Commission approves, that they should have been approved.
Thompson EA Subject to check. I would think that when a complaint is at the Public Service Commission, all activities stop on that particular account and so subject to check. And based on the APSC’s guidance, I’m going to say, I’m going to say yes. That it would, things would pause until that investigation is complete. But again, that’s subject to check APSC rules.
Rep Walker Okay. Thank you.
Rep Maddox Thank you. Representative Evans, you’re recognized.
Rep Evans Thank you, Mr. Chair. Mr. Bethel, could you explain for the committee the concept of interruptible service, what that actually means? And how does this bill affect that one way or the other?
Bethel EA Interruptible service at a, at a high level. And I’ve got a I’ve got a companion here that’s pretty well versed if we need to, but. A customer receives a discount on their monthly service in exchange for being interruptible. So if we have a need for capacity either called by MISO or a system issue for Entergy, we would say, Customer, I need you to interrupt your operations down to your minimum demand. And and they, they respond. And so that’s basically what interruptible service is. And under the bill you’re not able to combine interruptible service and net metering. And the reason for that is, is a couple of things. Primarily, the biggest reason for it is, is if you have a customer that is signed up to be interruptible for 40 megawatts of capacity. And so we expect whenever we say customer interrupt that, we’ll get 40 megawatts of capacity. If that same customer has 20 megawatts of net metering that’s running all the time behind the meter feeding power to us. Then when we call for 40 megawatts of interruption from thema and we’ve given that customer a discount, that reflects 40 megawatts of interruptible capacity. But when we call for the interruption, the customer only interrupts 20 because they’ve got 20 megawatts of net metering that continues to run. And so at a real, at a real high level, that’s the problem because the customer is getting a bigger discount than what they’re providing. And then secondarily, we can take the, the capacity of the interruption to the MISO market and sell that as a resource and the revenue from that we use to offset the energy cost for all of our customers. And so we also lose that. And so that’s the reason why you need to prohibit the combination of interruptible service and net metering. And further, we’ve had decisions from the Federal Energy Regulatory Commission as well as MISO, that would indicate that you’re not supposed to have those things in combination. And so that’s, and if, that’s about as detailed as I can provide you on, on that at this at this point. But I do have a person that’s expert if you want more.
Rep Evans So I’m assuming that what we’re talking about with the interruptible service, we’re talking about manufacturing facilities, we’re not talking about residential, correct?
Bethel EA Correct. Usually large manufacturing facilities would be. or some hospitals. But it’s larger customers, usually multi megawatt loads, I think would be a fair description.
Rep Evans And of, of the clients that are currently your customers that have the opportunity for the interruptible service discount as opposed to the net mete- How many of them currently are on interruptible service contracts?
Bethel EA Of the net metering customers?
Rep Evans Yes.
Bethel EA I think there’s currently there’s one there may be more than one. But the the the bill is written such that if a customer has gone through a PSC proceeding, which they would have to for a facility that’s large enough and, and I know at least one customer has done that and they, the commission has has made a decision about, about that customer’s application. Then that customer does qualify for grandfathering. And so the facility if it, if it is constructed within the deadlines for grandfathering per the bill, they’re grandfathered and the law, and the bill as written also if that customer has the question of whether you can combine interruptible service and net metering and the commission and the, for the customer that, that we’re aware of, the commission hasn’t ruled on that issue. And let’s assume that the Commission does rule on that issue. The bill enables the customer to keep the deal that they are trying to get approved by the Public Service Commission, so it doesn’t disrupt it either, either with or without interruptible service that. That decision still lies at the Public Service Commission. And either way it goes, that facility is grandfathered provided that they are in service or under construction by December 31st. And it is you know, it would meet that.
Rep Evans Okay. Thank you. Thank you, Mr. Chair.
Rep Maddox Thank you, Representative Evans. Any further questions by the Committee? Representative Rose, you’re recognized.
Rep Rose Yes. Thank you. Thank you for your time. You’ve had to answer quite a few questions. And I just had a follow up to Representative Walker’s question. I thought it was a very good point. And I’ve heard a lot from my constituents who had concern whether they already had a project, which you guys have clearly addressed, how they will be grandfathered. But those who are in process, you said, subject to check. That you would need to verify for sure on the the appeal timeline, so to speak?
Thompson EA Yeah. I understood the question to be does– would the APSC extend, would the APSC challenge or inquiry pause or allow more time past the December 31st time frame? I think that’s how I understood the question. And I said that based on the current policies, when a complaint is made at the Public Service Commission, all activity related to that account essentially pauses. And to the extent the APSC agrees that that is the right policy that we would follow, then that’s what, that’s the policy we would follow, Yes.
Rep Rose Yeah. So I think I followed you as well, too. Hypothetically I think the the question, at least for me or for my constituents, would be should they apply, whether it’s a business or it’s individual and they’ve done their project and for whatever reason the date has passed and then they received their denial, even though maybe they submitted beforehand. Or say they were even denied right up to the date, you know, end of December or whatever. Should they be denied I would like to know, is there an appeal process for them if their denial took them past the December 31 date? That’s the, that’s the question I would I wanted a clarifying answer on.
Bethel EA And I think they could. And I can’t speak with authority. One possibility would to total that date would be to pay, the connection charge that’s been quoted to them at that point and then resolve the dispute. But I can I can certainly say from Entergy’s point of view, it would be our expectation to work, and we do each day, to work with the customers to try to resolve those issues as expeditiously and and agreeably as possible.
Thompson EA To John’s point, we’re going to work with our customers to make sure that we do the right thing by them. Yes.
Rep Rose And I appreciate the answer. And I felt like for our constituents, I just had to ask it. And I appreciate that. Thank you.
Rep Maddox Thank you, Representative Rose, any further questions by the committee? Representative Ennett, you’re recognized for a question.
Rep Ennett Thank you, Mr. Chair. Can you- ah ? Sorry. How long does it typically take a project to execute the interim connection agreement?
Thompson EA I’m not sure I can answer that question today because I think it takes it, it can vary based on the project, right. But we have 30 days to respond to an interim connection agreement to acknowledge that we received it and to provide feedback to that customer that we are working on that interconnection agreement.
Rep Ennett Follow up. And whether and how often they have been delayed in the past?
Thompson EA From Entergy standpoint, I don’t, I don’t recall that there’s been any egregious activity with delaying application. So from our perspective. I can’t speak to that, but I don’t, I don’t think that that is the case.
Rep Maddox Thank you, Representative Lundstrum? (Inaudible) Any further questions by the Committee? Seeing none. We will now turn to the public who has signed up. The first person who signed up is Ted Thomas, is going to speak against the bill. Representative Ladyman, you’re recognized.
Rep Ladyman Thank you, Mr. Chairman. Could you tell me how many people have signed up to speak for and against, total number of people?
Rep Maddox At this stage we have 20 people who have signed up to testify.
Rep Ladyman Mr. Chairman, I’d like to make a motion. Based on all the questions and the discussion that we’ve had and the number of people that we have signed up. I would make a motion that we limit the debate to 5 minutes per person.
Rep Maddox So your motion is to limit to 5 minutes on a per person for the public debate.
Rep Ladyman Yes.
Rep Maddox Is that correct? Okay. That is a that is a proper motion. All in favor of Representative Ladyman’s motion, say aye. Any opposed say no. The ayes have it. We will limit it to 5 minutes for public debate. Sir, if you would, please introduce yourself and you can proceed with your testimony.
Thomas Thank you. I’m Ted Thomas. I designed this policy. I like the movie Rambo. And there’s a great scene after Rambo has wreaked havoc, and one of the law enforcement guys says, What in and why did Rambo get created? And Colonel Trautman rocks in and said, God didn’t create Rambo. I did. I designed this policy. It’s not my policy. It’s the state’s policy. It’s your, policy. But I designed it. It had central. And the 5 minutes isn’t a fair way to discuss this. I have things that need to be heard that won’t get heard because we just got capped at 5 minutes. And so, first of all, California. Ted, hear that’s false. Our policy isn’t more liberal in California. California includes environmental benefits and we don’t. The environmental benefits exceed their avoided costs. They’re avoided cost is higher. That’s false. That’s not true. We’re not the largest. Texas is larger. There’s no monopoly in Texas. You can build as much. You can sell as much. Size is being described as liberal. It’s not. Economies of scale are what you build markets around. What capitalists know about economies of scale. When you scale and make it bigger, you save. This bill limits scale. They said they went to the PSC and they didn’t get what they thought they would get. But here’s what they didn’t tell you. They went to the PSC and didn’t get what they thought they would get and they appealed. And 6 judges unanimously on the Court of Appeals said they had not proven their cost shift. 5,000 page record. They had 2 years to decide it. Why are we here? Representative Lundstrum asked the right question. Why are we here when you create the PSC to deal with these issues? Let me give you some math on cost shift. $0.01 per customer per month. Does that bother you? Maybe, maybe not. $0.01 per month. Okay, now let’s time to buy 600 customers. Then time’s it by 12 months a year. Then time’s it by 20 years. That’s a $1.4 million cost shift. There is a $1.4 million cost shift. Well, maybe it’s a penny a month. Put that in perspective. Three things. There are key design features designed by me. This is risk management. There’s all this talk of an energy transition that appears to be happening. It’s filled with risk. Prices move. Technology moves. Federal policy moves. How can we measure this risk. In a regulated monopoly, it’s me and the utilities. When I criticized this model, it’s a model that I was in and paid a very key role. I wanted to spread that risk to other folks. If other people had a different perspective on what the environmental risk was or what the technology risk was, they could do it. Spread the risk. It’s worked. We’re talking about projects we’re telling on ourselves. We have all these projects because of this policy. We’ve got to save them. We got to save them. What’s great about this policy, when we argued it 4 years ago, there were no projects. There was hopes and dreams of entrepreneurs and risk takers. And it came through. And then we said we got to project these projects and we’re killing the projects that you can’t see. We’re killing businesses that never get started. That’s wrong. Cost shift. And again, not fair to do this in 5 minutes. I designed this policy. There’s hundreds of millions of dollars and we’re going to chop it off. That’s what the bill is designed to do. It’s completely consistent with that. Cost shift was inherent. Cost shift was protection, was inherent in the design of the bill. It was inherent in our policy. I said 1 to 1 would not stand. And people are running around with their little videos. But I also said that we would measure cost shift cumulatively so de minimis cost shift wouldn’t kill projects. We would measure it cumulatively. That’s the right way to do it. Okay. So $0.03, $0.06. Why would you do that? How many units are there? That’s the data. For 2 years I ran around this place saying show us the data. File the, they could file a grid fee at the PSC today with the data. They filed 1 round of data at the PSC. It went to the Court of Appeals. They lost all the issues. The other thing we lost with that, with this issue, I begged them not to appeal because we put a 2020 date in it. Any cost shift you could mitigate after 2020. They appealed and we lost that date and the cost shift blew up. But what do we do now?
Rep Maddox Mr. Thomas, I apologize to interrupt you. But the 5 minutes have expired. Would you be willing to accept questions?
Rep Maddox Representatives Eaves. Representatives Eaves, you’re recognized for a question.
Rep Eaves Thank you, Mr. Chairman. Mr. Thomas, when you introduced yourself I didn’t catch who you’re representing today.
Thomas I’m representing nobody. I’m a private citizen. I’m a former, and there’s lots of laws that say what farmer people can do. Those laws are good laws. I follow those laws. There’s nobody that’s paying me to be here today. I’m a private citizen exercising my First Amendment rights.
Rep Eaves All right. Let me ask you this.
Thomas There’s stuff we’re not covering in this bill, all right? This is a flawed bill and it’s a flawed process.
Rep Maddox You’re recognized, Representative Eaves.
Rep Eaves Other entities that sell power to the grid or to the electric companies. Do they sell it to them at wholesale?
Thomas Yes, if you will.
Rep Eaves Why is solar the only one that we’re trying to sell back and forth, that’s to sell back at retail?
Thomas That’s wrong.
Rep Eaves Well, it seems right to me, based on what I’ve heard today.
Thomas If you look at page 2 of the bill. At the bottom of line 32. It changes the definition of a weighted cost to the point of sale. The current definition is the point of sale. If you buy eggs, you go to the store, you buy your eggs. That’s what you pay. That’s what the marginal cost is in struck line and on the bottom. They change it to the average. So you have the utility solar system on one side of the street and the third party on the other side of the street. They both sell it at the same rate. They get credit at the same rate to MISO. But under this bill, you’re going to average in other hours when the price is lower and you’ve created an imbalance. So the utility gets the same benefit from each unit in the third party unit for MISO in SBP. But there’s a cost shift going the other way because they’re going to pay them more. The problem with this bill, the bill is complex and it’s intended to deceive and in hopes that people can’t explain it.
Rep Eaves Now, I disagree with that. That, that’s unbelievable that you say that. Are there solar entities that sell back to the power grid at wholesale?
Thomas Other entities?
Rep Eaves Are solar entities that sell to the, to the utilities or to the grid or whatever you want to call it that sell it back at wholesale?
Thomas Utility customers. I don’t understand your question.
Rep Eaves Are there facilities that that are using solar to generate electricity? Are those are there any out there that are selling it to the electric company at wholesale?
Thomas Not under the current rates. But what we should do is we should accumulate that and measure what the cost shift is. If, if the gentleman here is Mr. A and this is Mr. B and they want to do a business deal and there’s a cost shift that affects Representative Warren. The right way to do it is to measure the cost shift that influences him, not just one party hiding the data where everybody can see the data and debate it. And then if if Mr. A and Mr. B still want to do the deal, then they write a check. Instead of banning the transaction, you should mitigate the cost shift. But that’s a question of data. The utilities have the data and if not, file it with the Public Service Commission. They’re hiding what the data is so they can exaggerate it, so they can gut the solar program. That’s what’s happening. And, and this is what they systematically underpay through the change language, the solar. Utility on one side of the highway, third party on the other, MISO and SPB paying the same.
Rep Eaves Mr. Thomas, I think you’ve answered that question, but I do believe Representative Allen–
Rep Allen Yes.
Rep Maddox You’re recognized.
Rep Allen Thank. Thank you, Mr. Chairman. My colleague Representative Lundstrum, asked the question earlier to Entergy and they said when this bill was passed in 2019 and the requirements of what was supposed to be done in 2019 was not done. So why wasn’t it?
Thomas It wasn’t done because according to the, to the Court of Appeals, they didn’t provide the evidence that they what they thought would be done should be done. That’s what the Court of Appeals found. We had a 5,000 page record and the Court of Appeals said you have not proven cost shift. That’s why it didn’t happen, because they didn’t have the evidence.
Rep Allen Follow up, Mr. Chairman. Now, it’s my understanding that the PSC did not do what they were supposed to do.
Thomas The PSC entered an order that said, if you can, if you can prove– bring us a grid fee charge, bring us the data that justifies the charge. And then for anything after the date of that order, the new solar projects will have that charge added so that the cost shift is flattened out to nothing. The PSC set a good policy. They could file a grid fee today. They don’t want a data based grid fee or they would file it today. What they want is a, is a formula rammed through the legislature where you can’t even respond to questions. That changes the rates in ways that me, that I understand and a few of us understand, but most people don’t. And then it’s gone. We’ll keep the projects we have and they’ll be no more. We’ll export our grandkids and grand–. This is how we get to 49th at everything. We have a business deal that people want to do, and we have political power killing that deal.
Rep Maddox Mr. Thomas, I think you’ve answered that question. We’ve got to try and keep this moving. We do have someone else. Representative Ken Ferguson. Do you have a question?
Rep K Ferguson Yeah. Thank you, Mr. Chairman. I have a question of the chair. I have a question for the Public Service Commission. I don’t know if they’re here and I don’t know. Would you allow them to come to answer? It’s a time table question that I have.
Rep Maddox Thank you for that. I frankly do not know if the PSC is here. We can certainly find out and I will try to get someone here to assist and get you an answer to your question. So we’ll work on that right now.
Rep K Ferguson Thank you. Mr. Chair.Thank you.
Rep Maddox Representative Allen.
Rep Allen Thank you, Mr. Chairman. Did the PSC acknowledge the cost shift?
Thomas Yeah. What the PSC found was that there was potential evidence of cost shift.
Rep Allen Potential or was there a cost shift?
Thomas That there was, well, also important is the word reasonable. Because it is just a penny to everybody’s month. We probably don’t care. There are other variables that change more than that. So we wanted enough cost shift that is unreasonable. We found there was potential evidence of unreasonable cost shift. And the Court of Appeals reversed that.
Rep Allen Say, for example, it was a cost shift.
Rep Allen So who pays for it? Who pays for it?
Thomas The cost shift goes to other customers.
Rep Allen Other customers like me?
Thomas Yes. Yeah. As do–
Rep Allen –is paying for it, right.
Thomas As as are the lawyers fees. We had one co-op that had 19 customers and has spent hundreds of thousands of dollars. Those costs are also paid. The armies of lobbyists, those costs are also paid in your bill. All costs are paid in your bill.
Rep Allen So you’re saying that the consumer pays for it?
Thomas Yes, absolutely.
Rep Allen Okay. Thank you.
Thomas That’s why we had cost shift mitigation in the original policy.
Rep Maddox Thank you, Mr. Thomas. I see no further questions for Mr. Thomas. I apologize, Representative Wooten, you’re recognized.
Rep Wooten Mr. Thomas, that’s a pretty serious indictment of a corporation to say that they’re hiding data. How come you’re all at the PSC? How come you didn’t take some kind of subpoena action or something to get that information if you felt that he would, they were hiding it. And I’d like to know how you know, they’re hiding the information. That irritates me a little bit.
Thomas Representative, we did. What, when the rules were passed. —
Rep Wooten Just answer my question. You tell me how you know that they’re hiding data.
Thomas Because we asked for it in September after a Committee hearing where multiple witnesses said, we’ll give you all the data we wanted. The Public Service Commission asked for it. And if you’re not going to file for a grid fee, we want to know what the cost shift is. And their lawyers have opposed and have asked for it to delay in the PSC proceeding that was designed so that this Committee could have the evidence.
Rep Wooten But that- But that doesn’t mean they’re hiding it just because they took a legal maneuver. I mean, that’s their legal way. If you had it explained it in that manner, that’s different than saying that they hid it.
Thomas Taking a legal maneuver not to file it. So it’s not publicly known before a vote on this policy is, in my view, hiding it.
Rep Wooten Alright, thank you, Mr. Chairman. Thank you, Mr. Thomas.
Rep Maddox Thank you, Representative. Representative Rose, you’re recognized.
Rep Rose Yes, thank you. I had one quick question, followed up with an explanation for your answer. As I understood this at the end of 2022, was the 1 to 1 supposed to end?
Thomas The grandfathering–
Rep Rose I don’t mean to cut you off. I just was curious. Yes or no on that, because I’ll. I’ll ask for more expansion.
Thomas The bill, the 2019 bill gave the, the Public Service Commission the discretion to measure the cost shift. And also to measure the benefits and to accumulate it, of course, this bill deletes any consideration of benefits. So you don’t take the benefits with the cost, you just take the cost. And gave the commission the discretion going forward to set the policy. Now, the policy that we chose to set was to keep net metering and allow them to do 1 to 1 and give them a grid fee. And the appeal killed the timing of the grid fee, even though the grid fee can still be done. So the law, didn’t require us to move. We acted on evidence and then the Court of Appeals reversed part of our ruling because they said there wasn’t any evidence of cost shift.
Rep Rose Okay. Thank you. Thank you.
Rep Maddox Committee members. I see no further questions for Mr. Thomas. Mr. Thomas, thank you for your testimony. We will move now to the for side and Kurt Castleberry, if you would come to the table and speak for the bill. Sir, if you would, please introduce yourself and you can proceed with your testimony. And do remember, you are limited to 5 minutes, so try and plan that accordingly.
Castleberry Thank you, Mr. Chairman. Good morning, everybody. Members of the committee. My name is Kurt Castleberry. I’m a former employee of Entergy Arkansas. I spent 40 years at the company. I recently retired. I work now as a, as a consultant for Entergy Arkansas. And I don’t have a long testimony by any stretch. I just wanted to convey that in my previous job, I’m responsible for planning and operating the Entergy Arkansas’s power and power delivery system, as well as its generation supplier plans. And I just want to say that, let the Committee know that the solar industry is very robust in this state. You might have heard Mr. Bethel talk about how many megawatts are being planned to be added to the state, and there’s a lot of them. The MISO queue is where you pick those up. That’s public information on their website. But there’s over 5,000 megawatts there that are being planned to being added to the system. They have generator interconnect agreements assigned. Those are the contracts that allow them to interconnect to our bulk power transmission system. Lot of power. To put it in perspective, Entergy Arkansas has a peak load of little less than 5,000 megawatts. So a lot of power to be added. And then there’s a long list of others that are kind of waiting in that queue. You know, in the, in the range of more than 25,000. So the solar industry is alive and well. We have, are very excited about it for the state. We’ve added a lot of economic solar that benefits all of our customers, all 738,000 of our customers, and certainly a big benefit to our industrial customers who have sustainability goals. So we’re in wonderful situation being able to expand solar in our state. And so I think that’s a it’s a great place to be. This bill does not prohibit that by any stretch at all, as you heard Mr. Bethel say. So that’s all I want to communicate to the Committee. And if there are questions of me along those lines, I’d be happy to answer that.
Rep Maddox Thank you for your testimony. Any questions by the committee? Seeing none. Thank you.
Castleberry Thank you.
Rep Maddox Next on the list is Ed Tinsley to speak against the bill. Please plan on your testimony to last 5 minutes.
Tinsley Yes, will do. First, a little bit of background. My name is Ed Tinsley. I am the chief executive officer of Bernard. I graduated from Sheridan High School and from the University of Arkansas in Fayetteville. Bernard and its predecessor companies have provided energy services to large energy consumers in Arkansas for 30 years. During that timeframe, we have worked for nearly every hospital, university and college in Arkansas. Importantly, in this setting, there is one thing that Bernard is not. We are not solar developers. Bernard has never profited from solar energy or net metering. Sec– in other words, my only interest in this debate is the best interest of our customers. Second, a disclaimer. I am speaking on behalf of myself. I am not speaking on behalf of any organization, any specific customer, or even Bernard. Third, moving on to House Bill 1370. I would like to make 2 points and then conclude with a recommendation. And if I have time at the end, I would like to re-address 3 of the Committee’s previous questions. My first point. You’ve been hearing about solar energy, net metering, cost shifting, or the lack thereof from utilities and the solar industry for you– for several years, and it’s been a hotly contentious debate. Both sides act as if they are right on every point. Almost to the point of indignation. If you suspect that somebody is not telling you something, then you are absolutely right. The utilities are not telling you 2 very important things. First, the utilities primary concern about customer owned solar energy and net metering is not cost shifting, but rather an erosion of their earnings. Regulated investor owned utilities only earn a return on their assets. When customers install solar generation systems, it defers the need for utility investments in large scale power plants. In other words, customer owned solar power is the utilities competitor. Second, the utilities are also not telling you that cost shifting in Arkansas at this time is immaterial. To support this statement, I offer 2 pieces of evidence. One, the utilities have attempted and failed to make their cost shifting case on four separate occasions at the Arkansas Public Service Commission, and a fifth time at the Court of Appeals, as Mr. Thomas mentioned. Second, electricity rates in Arkansas have not increased faster than in states that do not have net metering. My second point, House Bill 1370 goes far beyond preventing cost shifting. It includes many provisions that have little or nothing to do with cost shifting, including the following. House Bill 1370 limits the size of the solar array to five megawatts, preventing large customers from realizing the benefits of net metering. House Bill 1370 also prohibits net metering for our customers, such as hospitals, universities and large industrials that take service under an interruptible rate schedule. From my perspective, the only purpose of these provisions is to restrict utility competition, limit customer choice, and expand the monopoly status of a regulated utility beyond its intended purpose. Finally, I encourage you to vote against House Bill 1370 for the following reasons. First, it will directly kill large scale solar projects for Arkansas hospitals, universities and colleges. Second, by killing these large scale projects, House Bill 1370 will increase health care and higher education costs in Arkansas. Third, by providing an uncertain price signal to consumers, the definition of avoided cost that we heard earlier. House Bill 1370 will essentially stop customer ownership of solar in Arkansas post 2023. Hundreds of jobs will be lost. Fourth, by killing large scale solar projects and essentially stopping customer ownership of solar in Arkansas, post 2023. House Bill 1370 will divert millions of dollars of federal incentives that would have otherwise been paid directly to hospitals, universities and colleges in Arkansas under the Inflation Reduction Act to other states. In short, if House Bill 1370 is enacted, bad things will happen and one of them will be higher education, higher health care and higher, higher health care and education costs for all Arkansans. In conclusion, I appreciate your consideration and your service to the state of Arkansas. Do I still have sufficient time?
Rep Maddox You have 10 seconds.
Tinsley Look. Well, I don’t have time. Yeah, I did. There were three questions that were asked early. I’d like to readdress. Hopefully I’ll get an opportunity in a minute.
Rep Maddox Well, so we’re now at that stage. Representative Allen, I believe. Did you have a question?
Rep Allen Thank you for coming in today and I appreciate your comments. It seems like you have laid out a doom and gloom scenario. So can you substantiate what you’ve seen, what you just said about killing hospital costs going up, killing economic development, so forth and so on. So you can you explain where you got your information from?
Tinsley Sure. Bernard does a lot of economic analysis on behalf of Arkansas universities, colleges and hospitals. That’s what we do. We help them identify opportunities to invest their capital in different types of transactions. Many of them have implemented aggressive energy conservation programs based on those analysis. And so what I’m saying is that unless there is a certainty of a return on investment, they won’t make those investments. And that by changing the definition of what the how the economics work, that definition of avoided cost, which is highly uncertain. That the universities, the colleges and the hospitals will not make those investments in solar power. If you contrast that with the utility, as you heard the utility representatives state earlier, when they have an investment in solar power, they’re automatically granted recovery of those investments, either if it’s a PPA for the ECR or an investment they own through a return on rate base. So they get automatic relief and a guarantee of a return, whereas they’re denying the customer the same right under this bill.
Rep Allen Okay. Thank you.
Rep Maddox Representative Eaves, recognized for a question.
Rep Eaves Thank you. Thank you for your testimony. Did I hear you say that solar owners are competing with utilities?
Tinsley Yes. In a fashion that they are the utilities competitor. Every time that a customer owns a solar generation, it defers the need for a utility owned generation plant. The only way that the utility earns a return is on the investment in assets. It’s, it’s unlike other businesses that may have an opportunity in an unregulated, competitive environment. They have a return on assets and are sometimes called the rate base. And they’re allowed to earn a return on that. If they don’t have those investments or their investments are fully depreciated. Their, their opportunity, to earn return goes away. So what happens if the customer invests in solar generation assets? It reduces their investment. A recent study, actually a study that was done in 2014, so wouldn’t say it’s that recent. By the Lawrence Berkeley lab concluded that net metering would have little or no effect on ratepayers, but it would have an adverse impact on the stockholders of investor owned utilities.
Rep Eaves If solar is indeed competing with utilities then how does it make sense for a utility to buy at retail from their competitor?
Tinsley So you’re using why would they pay a net metering? Why would they pay a 1 to 1 credit? Is that what’s your question is?
Rep Eaves Yeah, I mean, we keep hearing retail wholesale the way I see things now. And I’m just trying to follow how this study that’s coming out.
Tinsley Actually gives me a good segway to go back to one of the questions that was asked earlier. So apologize if I wander a bit, but I will come back to yours. The question was asked earlier about 2 channel billing and how that works. And a specific example was given a residence. So a typical residence in Arkansas uses approximately 20,000 kilowatt hours per year of electricity. To produce 20,000 kilowatt hours per year, you would need approximately 10 kilowatts of solar power. But the average use at any given instant in time at that residence is only 3 kilowatts of power. So for the predominantly when the array is in use, 7 kilowatts on average of its power is going to be exported at the avoided cost rate and not credited at the retail rate. So the answer given earlier that would be first credited at the retail rate, is not quite accurate because the bulk of the output would actually be credited at the avoided cost rate, not the retail rate when the array was in use. So that, want to get that question was asked earlier. Back to your question. Why would a competitor, the utility, be forced to buy power from another competitor at the retail rate? Because in this particular case, the benefits, as alluded to by Mr. Thomas, outweigh that, that impact and the utility is made whole for those costs through, and in this case for the formula rate plan, which was enacted by the General Assembly in Act 725 of 2015. The benefits outweigh that.
Rep Eaves I don’t know any other business, mine included, that I wouldn’t be forced to buy from a competitor at the cost that I’m selling it to my customer.
Tinsley But they’re a regulated monopoly. And you are not. You’re in a private industry and you’re competing without benefit. The Public Service Commission is the only proxy for competition they have. It’s a different environment.
Rep Maddox Representative Ladyman, you’re recognized for a question.
Rep Ladyman Thank you, Mr. Chairman. You talked about a solar field that uses solar fuel is competing with Entergy or anybody else who sells power. I’m sorry, the electric. Are you aware of other entities, whether it be companies or individuals that also compete with Entergy? You know, there are people that own wind farms that sell that power. They compete with Entergy. There are companies that own power plants that are operated by coal or natural gas.
Rep Ladyman There’s hydro power. So all of these individuals and companies out there, according to your definition, are competing with Entergy. So why is solar any different than these other folks that are using just different kind of fuel?
Tinsley Because these are customers that are forced to buy their power that they need from the regulated monopoly. Those are those independent power producers are not. The key difference is that the utility has a monopoly status to sell them that power. They can’t go buy it from somebody else. When you say they’re competing with Entergy, they only competing for the generation assets, not the transmission or the distribution assets, getting the, getting the wires from the generation plant to the customer. The utility has the monopoly on that.
Rep Ladyman But that’s a different service when you talk about transmission and wheeling power from across the state. That’s a different company altogether. Anybody that’s generating power, no matter what the fuel is, they’re competing like all other businesses in their industry. So why are we giving advantage to one particular section of that industry just because they use a different kind of fuel to generate power?
Tinsley As I mentioned earlier, the simple answer is the cost, the benefits outweigh the cost.
Rep Ladyman What are those benefits? I don’t hear any benefits. What are the benefits?
Tinsley The benefits are economic benefits. The lower cost of health care. The lower cost of higher education. Increase in the affordability and access of health care and higher education to all Arkansans. The creating of jobs, the economic stimulus it provides. There’s been lots of testimony at the Arkansas Public Service Commission on those four dockets and at the Court of Appeals that I mentioned earlier that indicated substantial benefits to the citizens of Arkansas.
Rep Maddox Thank you for your testimony. Any other questions by the committee? Seeing none. The next to speak for the bill is Buddy Hasen. Sir, if you would introduce yourself and you may proceed with your testimony, limited to 5 minutes.
Hasen Sir, I’m Buddy Hasen. I’m CEO of Arkansas Electric Cooperative Corporation. For 36 years of my life, ever since I left the farm I’ve been dedicated to power generation or distribution of power. I’ve operated personally or managed every form of power that we’ve talked about today. Whether that’s nuclear reactors at the North Pole, solar fields, wind, wind farms, natural gas, coal, hydro. And I think you guys have asked the right questions. We’re here today representing the co-ops. And I may be, although everybody tries to be me, the one person that’s going to speak to you today that I do not have a profit motive. Cooperatives and internationally known as good for communities. People come together in cooperatives to band together for strength and power against monopolies. So cooperatives was formed 80 years ago for the very reasons that we’re talking about the monopolistic stuff. I am here today representing 1.2 million Arkansans who belong to cooperatives that come together to seek affordable, reliable, responsible power. I think it’s fair to say there is a cost shift. Every PSC in the country, you could, you could go out and spend days on Google and find it. It’s real. We can, we can haggle about how much is reasonable. That’s probably a good debate. Is somebody paying $10 on my electric bill reasonable, $1 or $2? I think that’s not that’s– that’s interesting. But we’ve had 1 to 1 retail in this state for 20 years. And there was an expectation on the last go around that this thing would kind of come to an end, but to expand things that we would get to avoided cost. I think Representative Fite’s bill is a good compromise to do what was originally intended, which is get us to avoided cost, which does end the cost shift and we are not able to end the current cost shift, nor are we asking to. So as they told you, as Mr. Bethel so perfectly explained, all the cost shifting that has gone on for 20 years and all the cost shifting that will go on for the remainder of this year will continue to go on till 2040. That will continue. That would be considered reasonable. But this curve is growing exponentially, not linearly, exponentially. And if you were to go out and look at SBP, if you go look at MISO, what’s in their queue to be built in the state of Arkansas, it is thousands of megawatts of solar. There’s gonna be solar panels everywhere in the state. They’re going to keep coming to the state. They’re not going to dry up and blow away. I’m here today not just to shut down solar. I’m, I’m currently commissioning 122 megawatt solar array that will come on this summer. I’m not anti-solar. I’m all of the above. I love every form of energy on the planet. I believe in diversity in every area of my life. And energy is another place that I believe in diversity. Diversified power generation portfolios are good. I’m here today because it matters who pays for it. Yes, we’re regulated by the PSC. Yes, our customers are treated as if we’re a monopoly. We’re a co-op. Most co-ops aren’t regulated by PSCs- in Arkansas, they are. But the other questions that should be asked, the gentleman that asked a question about your 83 year old neighbor that wants to put solar on. What about the 83 year old neighbor next door that doesn’t have solar? You asked, should we care about the senior citizens? I care about both of them equally. The man that wants to solar and the man that doesn’t have it. When the man that puts it on gets it at the expense of the man that doesn’t have it and receives no benefit for it as a cooperative, that is not fair. And we are absolutely about fairness down the line for all of our members. And that really is the real reason I’m here today. And I do agree with the customer protections that were put in at the end. That’s something I think is just good for everyone in the state to make sure everyone’s getting a good deal with what they buy. My job is not to run out and tear solar panels off our members homes. My job is to give them what they want. But my job is also to make sure that what they want is fair for everyone in the cooperative. And that’s why I’m here today. And I appreciate your time and I appreciate all the attention you’re given to this.
Rep Maddox Thank you for your testimony. Any questions by the Committee? Seeing none. Thank you.
Hasen Thank you.
Rep Maddox Mike Hester is next to speak against the bill.
Hester Thank you, Mr. Chair.
Rep Maddox Yes, sir. Go and introduce yourself. Who you’re with and proceed with your testimony.
Hester Mike Hester, Superintendent of Batesville School District. We were the first solar project for pre-K-12 in the state of Arkansas, and we were the largest energy efficient project for schools in the state of Arkansas. 2019, our board had established four goals. Student achievement, attract and retain staff and help create efficiencies and establish partnerships. And we were able to do that through the act of 2019, through our solar and energy efficiency mode. We were able to identify savings. And what we did, how we checked the box office is we took all those savings and we gave it to our teachers. So when you start talking about cost shifting and benefits, for me it stands like this. We were able to give our teachers a $10,000 raise on the base in just four years because of those savings. Now, that’s as big a raise as they’ve ever had. We are the oldest town in Arkansas, and that would have never happened without Act 2019. And our teachers have always been below the state average. And now, not only are we at the state average, but we’re trying to push for the upper half. Because of these kind of initiatives that we’re using to get the money back to the teachers. And here’s where that benefits. That teacher, if I put the best teacher with your kids every day, my neighbor, our community they’d get the best teacher we can afford and we can compete with. And I don’t know how you measure that, but I measure that as everything in a young person’s life. That what we put beside them are quality people because of the benefits of this law and these acts. And if we were able to then to reduce those costs, to keep pushing that for teachers. I’m working with our hospital. They’re using the savings. They saw what we did our Lyon College, the hospital, White River Health, the city, our county, they all are trying to start initiatives or they’re in the middle of initiatives because the hospital can reduce the cost for patients and insurance premiums. The city can patch streets, the county can build roads with these savings. Churches can make tight budgets stretch that meets needs throughout our communities because this act does it. And it wouldn’t have happened without this act. And so we’ve even tried to, because we were the pioneers and at Batesville, we are the pioneers, but because we are the pioneers in solar, we wanted to enjoy the the new unrestrictions that went on that you could go a little bit bigger. So we’re trying to, we’re cooperating with our hospital to be able to get into a bigger field, to get more discounts so that in volume so that we can translate those savings to our student achievement. Because when you start, when we put students first, that starts by putting the best teacher with those kids. So that’s how this translates for me as a superintendent. And as I work with other nonprofits, we don’t want to see that go away. It takes risk for a school board. For me as a superintendent, when I put my career on the line to try something, nobody else has done. When I ask board members to step out and to do something that they may get tarred and feathered in the town for. When you mess around with the initiatives, when when we come through, then we’re featured on National Tel–we’ve been honored to be featured on national television, international media groups, and we tell our stories because we’ve checked all the boxes to bring it around to a benefit for our company. But when you limit that and start messing with it, superintendents get all tense and boards of education get tense. Because if you’re going to allow corporations to come in and then tinker with it and reduce it, you’re going to scare everybody off on initiatives. And so that’s my fear. We’ve got this thing rolling. It’s, it’s working. And we don’t want nonprofits to lose that for what they’re doing for their communities. And I appreciate you considering all this and hearing me today. Thank you for having me here.
Rep Maddox Thank you for your testimony. Would you accept questions?
Rep Maddox Representative Allen, you’re recognized.
Rep Allen Thank you. And thank you for coming today. My question is how much of your savings were tied to energy efficient versus solar?
Hester About, about a half of them. We had a $5.4 million project in energy and solar, and we had $2 millions, we were guaranteed $2 million over 20 years of savings. But with the cost of things and everything, especially HVACs and all that, we think it’s actually going to be $4 million now, but about half of it was solar, half was the energy efficiency.
Rep Allen Okay. So you would agree using less energy sounds like the best approach, right?
Hester Using less energy? Yeah. We try to be efficient. Yes. As well as find. And what’s– here’s what’s unique. Nowhere, in my 30 year career have we been able as a nonprofit to generate revenue. And that’s I mean, that’s wonderful. Because now when you talk about not having to go ask for a millage on my community because I need it for raise for teachers or a help with facilities or whatever. I mean, I have to cooperate then with the city and the county and higher ed and we all have to come to understandings on millages. And so if we can cooperate and work with things like this, we all can do with less because of this. And so it saves everybody then on taxes.
Rep Allen Okay. Thank you for coming in. Thanks for being so passionate.
Hester Thank you. Appreciate it.
Rep Maddox Thank you, Representative Lundstrum. You’re recognized for a question.
Rep Lundstrum Yes. Thank you for what you did for your school. I’m a little confused. This bill doesn’t impact you because you’re grandfathered in. What am I missing here?
Hester What you’re missing is the impact of non-profits to still continue with that and other school districts to jump in on it, to make it a bigger impact for the state. And you will scare off when, this is perceived, in my opinion, as corporate greed that tries to monopolize. And then that means you’re going to be in a mess as a school board and a superintendent or as a hospital administrator when you try to jump in here and this thing is is volleying around and so you’re going to lose. You’re going to lose people wanting to take the risk and take initiatives.
Rep Lundstrum They’ll still be able to do this and still be able to participate, correct?
Hester I don’t I’m not sure of that. And I’m not sure if it will be at the same cost savings because, you know, it almost was not worth it for $2 million in 20 years. But the efficiency side also kicked in.
Rep Lundstrum Okay. Thank you.
Rep Maddox I apologize. Representatives Eaves, you’re recognized for a question.
Rep Eaves Yes, sir. How many teachers did you give a $10,000 raise to?
Hester We had, let me think. Of the base that was every teacher, that was our base. The $10,000 raise went up. Plus, here’s what else we did.
Rep Eaves How many were there?
Hester We have 250 teacher certified folks. And we have we gave a, we were a 20 year stipe– a 20 year experience. We moved it up to 25. We only paid to a masters and we moved it up to a doctorate, which is two more steps for degrees and beyond that.
Rep Eaves You’re saying that solar gave you $2 and a half million dollars in savings to give to your teachers?
Hester It gave us it gives us more than that with the efficiencies and all.
Rep Eaves But those efficiencies have nothing to do with solar though right?
Hester Uh- no other than just energy.
Rep Eaves Thanks.
Hester Yes, sir. No, it wasn’t just solar energy, solely solar, it was energy efficiencies as well.
Rep Maddox Seeing no further questions. Thank you for –.
Hester Thank you. Appreciate it.
Rep Maddox Sir, I apologize. If you would take one more question, Vice Chair Brown has a question.
Hester Well sure.
Rep Brown Thank you for taking one more question. Today, we’ve been talking about cost shifting and we’re talking a lot about utilities, cost shifting, solar customers, cost shifting costs for infrastructure and maintenance and building out the utility lines and what have you. Shifting all of that cost on to non-solar customers. But now you and the gentleman from Bernard have and maybe Ted Thomas, were talking about these benefits that accrue to the community because we have such a robust solar program. But I’m having a problem with that. We should not be building those kinds of benefits off the backs of people who do not have solar. Who are not paying their rightful share of those overhead costs that the utility companies are bearing. That’s– that’s my. That’s a question, wouldn’t you agree? I mean, do you understand my question?
Hester Yeah, I believe I do. And what I would say is, when you’re in the hospital and the kid I educated is got your life in your hands. You’re going to want them to have had the best teacher that they had could, could get to work with you and that benefit how you- you know, I know you can’t crunch that in the formula at that moment in time, but the quality of life that we’re able to benefit our nonprofits with, with these benefits, our quality of life issues that make a big difference in everyone’s life. And so if I can attract and retain the best teachers to stay in the profession, there’s not anyone that you can see in society that doesn’t get the benefit of that.
Rep Brown I understand, but I think we’re trying to address that with our education bill. I’m just, I’m just having a problem with, you know, the claim that we’ll keep our insurance premiums down or our education costs down by even allowing solar. And I don’t, I’m not quite certain how much. I mean, are you were you selling solar back to the grid or were you just producing for your school and then drawing whatever overage you needed from the grid.
Hester We’re putting it into the grid and getting the credits for it against our bill. And yes, ma’am, the institution that gets the benefit of solar has to make those decisions about how they use those profits or those credits or revenue. And in our district, we chose to put it back to our teachers because, again, for us to put students first, we have to start with our staff. And we feel like that’s where the most money is gained for what we do. And it’s a people business.
Rep Brown And I do commend you for raising your teacher salaries. Thank you.
Hester Thank you.
Rep Maddox Thank you for your testimony. No further questions for you. The next on the list is Lance McAvoy. If you’re in the audience, please come forward.
McAvoy Well, I’ll still say good morning, since that’s before noon. On behalf of Mayor George McGill, Administrator Carl Geffken and myself, I am Lance McAvoy, utility director for Fort Smith. They send their their warmest regards. Some of you may know George. He couldn’t be here with me today. So as a city, we are opposed to the bill. As someone who fully understands the impact of rates, both water and sewer, and understands what goes into that, which is not as simple as what it sounds. And much of that same principle goes into electrical rates and things that are passed on because you’re looking at infrastructure cost. This is still not a good bill. We are looking at solar because solar makes sense in the aspect of dropping the overall impact on the taxpayers and ratepayers. A question was asked about, well, why solar and why not gas or coal? Solar has much less environmental requirements than the gas generated plants, coal generated plants, and nuclear electrical plants. Otherwise those would be going up all over the place. When was the last one that you remember being built? In addition to that, we have 4 treatment plants. 2 of those are water. 2 of them are wastewater. The wastewater plants are on either end of the city, and we have room at those plants to put in solar panels. But if under this current bill with a 7 mile difference between as the crow flies, if we put it in at one plant, there’s no benefit at the other plant because of the 5 mile radius. Our 2 water plants are in different counties. Which means if we installed it there, yes, we may have some benefit because when it comes to utilities, water and wastewater, electrical is our highest cost. Even exceeding personnel. Electrical is our highest percentage cost. But if we did that there, we’re, we’re selling into a smaller area than what we could. You know, it limits the size of a field that we could do. But yet we just heard about 120 megawatt that the energy company can put in. But yet the city of Fort Smith would have been limited under this bill. This would eliminate a choice of of being able to save taxpayer and ratepayer dollars. And again, City of Fort Smith is against this because it’s not good for Fort Smith. It’s not good for the River Valley. And as we view it, it is not good for Arkansas. And I thank you for your time.
Rep Maddox Thank you. Representative Ladyman? If you would accept a question, Representative ladyman has a question.
McAvoy Yes, be more than happy.
Rep Ladyman Thank you, Mr. Chairman. Thank you for being here. I don’t know, I don’t quite understand why you’re limited. Because I’ve run water plants and treatment plants and got a license to run both have been a mayor and I understand. You’re big enough that you could do your own PP agreement, a power purchase agreement. Well, why wouldn’t you do that? Why are you limited if you need 500 megawatts, you could put in that many panels. There’s a thousand acre solar farm going in up by Newport right now. So I don’t understand why you couldn’t just do that, have your own agreement. Why couldn’t you do that? Instead of this net metering?
McAvoy The issue is– and you’re right, this has gotten very cloudy. Because it started off with a talk on net metering. And you’re hearing about a lot of other issues that are tied into this bill, not just net metering. I’ll be truthful with you. I had a talk with someone who works in electric company, a highly respected person. We agreed to disagree on net metering for the simple fact that if we were to build our own farm, our own solar farm, and we became the the mass producer for Fort Smith, the potential of us having to also build the infrastructure, the lines and the and all of that that’s already existing, would be greater. So I’m looking at kind of a holistic aspect, not just net metering, although net metering– again, as you as this Committee has heard it, where is the data? I am a chemist by training. Data is what drives my decisions and I have not seen the data that there is. Now, to that point, my understanding of the Public Service Commission, they do allow for grid fees and a grid fee says that if you’re going to put it into a grid and it’s going to cost, you know, there’s going to be depreciation of that grid of the lines and all that, they can, the public entity that owns that grid could charge something. That’s how I understand it. And if I’m wrong, I’d be more than happy to defer to the experts. But the fact is that hasn’t been done. Those calculations haven’t been done. Instead, going with something that has been in place with the Public Service Commission, who have done a great job. They looked at it, they said, I don’t think so. Court said, I don’t think so. The next thing to do is, well, we didn’t like what the court said, we didn’t like what the public service said. Let’s just change the law. And that’s how it appears and that’s what we’re seeing. So I hope that answers your question.
Rep Ladyman Well, not really. Can I have a follow up? I worked at power plants for 20 years. And when you’re talking about building a power plant the size for your needs, the infrastructure wouldn’t be that bad. And it should be economical for you to do that. You don’t have to look to the grid. If you’ve got a big load you’re better off just doing your own stuff. The higher –and that sort of thing that you need wouldn’t be that much money if you’re going to benefit the savings that you’re talking about you might get with solar. So, I don’t understand your, your point on that. So why are you opposed to other fuels? I don’t understand that.
McAvoy I’m not opposed to other fuels. In fact, I think we–
Rep Ladyman You just said–.
McAvoy I said it takes more environmental, there are more environmental regulations for those other fuels to generate. To me, I’ll be truthful with you and please don’t hang me out. But nuclear power is safe and it’s clean. The reason we don’t see more of it in the United States, but we see it all over Europe in other countries is because we have in our memory Three Mile Island and Three Mile Island scared the bejesus out of a lot of people.
Rep Ladyman Well, that’s another discussion for later date. But thank you.
Rep Maddox I agree. I don’t see any further questions for you.
McAvoy Thank you so much.
Rep Maddox Next to speak against the bill is Jeff Weatherly. I know I’m repeating myself, but please introduce yourself, limited to 5 minutes. And members do remember, I know it’s confusing, but you do not have to ask me for permission for a follow up. Just ask your questions.
Weatherly Hi, my name is Jeff Weatherly. I’m representing Lexicon Inc. We are a family owned construction and fabrication company headquartered here in Little Rock. I’m also representing myself as an individual. We think we were one of the first private companies to build arrays. We have 2 arrays. We have one in north- northeast Arkansas, in Mississippi County, in Mississippi County Electric Cooperative Service area. We have 1 in central Arkansas, in the Entergy service area. We’ve spent– our company, you know, individually, we spent about $6 and a half million building these two arrays. One thing that we did do, we had to pay the interconnection fees. That’s one thing that’s not been talked about today. We spent, we paid and I’m still getting rebates and everything, but approximately $800,000 I paid Entergy to, to hook up into their substation. So all, all ratepayers would benefit from that. That’s something that hadn’t been talked about. When everybody hooks up, you pay an interconnection that everybody. So we basically upgrade the substation. We went into this in 2019. It was purely financial. We looked at it. Mr. Schick, who’s now passed away, he got with me, he said, Hey, look at this thing and see if it makes sense. And we looked at it and, and we’re here for the long. We celebrated 50 years in 2018. We were here for the long term. We looked at it and we said, as a long term investment, this made sense. We weren’t looking to cost shift, but just the way the law was was written, it made sense. So we did it that way first. Secondly, our customers started asking us about our social and environmental. We’re privately traded or privately held. We don’t have to, we don’t have all the same requirements, but we’re now able to tought that we are that we’re, you know, green, that we provide most of our electricity through our, through our solar farms. But the most important thing for us was we didn’t go into this for cost shifting. And I think the one thing that we haven’t talked about today that and maybe that you guys need to consider is that solar, and the reason I think that maybe cost shifting isn’t occurring in that and I welcome Entergy to, to come present because I don’t want our– we have several hundred employees in Arkansas. We don’t want them paying any more. But solar provides energy at the very peak of the day when it’s the most expensive time that they would other–the utility would otherwise be running a peaking unit or they would be on the, out in the market buying power. So that’s the thing that I that I think is offsetting. Yes I’m, I’m tying in I but I do pay demand charges. I’m only offsetting about 50% of my utility bill. The other fee, every meters different. I’ve got multiple meters but it averages about 50% of my bill is, is energy that I’m able to offset with my solar arrays and the other 50%. I continue to pay demand charges. If those demand charges aren’t sufficient, the PSC has rules and that’s what, that’s what energy went. And I want them to, I want them to present those. And if I need to pay more demand charges, I want to pay more demand charges because I don’t want my employees. But if we move away from 1 to 1, you know, for, you know, hopefully it’s not retroactive. I still cannot understand this bill. But if it’s retroactive, then my financial– how I was going to pay for this thing is totally blown out of the water. Now, if it, if I if I’m grandfathered until 2040, then I’m okay. But you will prevent other people from doing what we did. Now, I do believe that what we are doing is we are competing with the, with the utilities. But what you’ve got is you’ve got private people, private people like us, and you’ve got school districts that we’re building. It’s just like they said, instead of the utility building an asset, we’re building it. But I think everybody’s benefiting from it. But all we did was we, we looked at the law, it made sense. It’s you know, it depends on what our utility is, what the rates are. But it’s a it’s a 6 to 8 year payback for us. But we’ve been in business for 50 years. And so we said, this makes sense for us. We did it, like I said, for financial, but also for marketing reasons. The one thing they did talk about was the 5 mile radius. I hope you guys– and I could see where maybe they’re talking about that. But if you build something further than 5 miles from your factory or wherever you’re going.
Rep Brown Oh, my apologies. I hit I hit a button up here.That I didn’t know what it did.
Weatherly But if you’re if you’re without if you’re outside 5 miles, my understanding is they have the ability to ask for an additional.
Rep Brown Mr. Weatherly, oddly enough, your time is up. So do the Committee members have questions? Mr. Ladyman.
Rep Ladyman Thank you, Madam Chair. And I apologize. I was out for a minute and may have missed this. But you talked, you were talking about demand when I came back in, that you’re producing power during the day when that’s peak demand. Actually, the peak is normally 5 to 6 in the afternoon because you have heat build up. So you may not be producing during that time because it might be dark. But I don’t understand how you could, I mean, all other power plants, I mean, there’s all kinds of different, you know, wind farms, gas plants, whatever. They’re all producing power during the day as well during the peak time. So should I get 1 to 1 metering like. I mean, why are you different than them? They’re producing all day. They don’t shut down during the day. And, you know, I worked at a peaking plant and at the peak– you’re paid extra for having equipment available so that if, if a– if you’re going to have a brownout and they realize they need 100 megawatts, then they call you up and they say start up 100 megawatts. You’re paid for having that equipment available 24/7, 365. The solar panel is not available 24/7, 365. So how can you say you’re a peaking provider?
Weatherly I understand, sir, but I still– solar are still producing during the daylight hours, which tend to be the highest peaking times. And that I welcome it when- we’ve always said as a company we said if, if there’s cost shifting, we want to see the facts just like the prior gentleman said. But if, if there’s cost shifting that that are, that the solar panels are not producing, you know, enough to cover the offset, you know that if there’s cost shifting, we want to pay more demand charges. But I think, go ahead.
Rep Ladyman Follow up. Good. So do you know, any power plant that shuts down during the day?
Weatherly I’m sure there’s lots of peak-
Rep Ladyman So they’re providing power during the peak time as well, right?
Rep Ladyman Okay. Thank you.
Rep Maddox Thank you. Any further questions by the Committee? Seeing none. Thank you for your testimony, sir. Next to speak against the bill is Michael Clayton. If you’d come to the table, please. Just introduce yourself and proceed with your testimony.
Clayton Yes. Thank you for the opportunity to speak. My name is Michael Clayton and I’m the director, executive director for North Little Rock Wastewater. We serve, the wastewater provider for Maumelle, North Little Rock and parts of Sherwood in Pulaski County from the Galloway area to the Morgan Interchange. And we have about 105,000 people that we serve. We have 4 treatment plants, and I have 2 hats that I’m wearing today. One has the Northern Little Rock Wasewater as a utility. We actually 2 years ago, we provided, we built a solar facility just a little under a megawatt that we own ourselves. We we hired a firm to do the design and build. But we’re the actual owner of the facility. And we worked with our energy provider to do a net metering set up. Now prior to the completion of that project we spent nearly a year and a half of analyzing the numbers and the margins were really close on whether it was financially feasible to move forward with the project. And we spent roughly $1.4 million for the project and our electricity that we, we spend about one point almost $1.2 million a year in electricity for our 4 treatment plants and 75 pump stations like we have. So we’re, we’re a hog when it comes to electricity. So we’re trying to find ways to reduce our cost. And one way, as we did, was putting in a solar facility for one of our facilities. Now we have 4 treatment plants, one in Maumelle, one in the White Oak area, and another Burns Park facility, one in Sherwood, which is over by Sam’s Club area, and then one over at east side of town over there. So we’re scattered. We’re more than 5 miles apart on the treatment plants. And so one of the oppositions that I have, I want to be careful with the our, our position. We’re in favor of the solar facilities and the net metering laws. But one of the things we want to be careful with is the grandfathering portion of it, from what I understand, was to 2040. And we completed a project 2 years ago, or a year and a half ago, and we expected about a 30 year life for our facilities. And using the numbers or the estimated numbers that we believe that we would acquire for the 1 to 1, or the net metering approach. So after 20 years, my understanding is we rerun the risk of our numbers changing based on the investment we’ve already made. And that concerns me and concerns at the utility for an investment. We would like to have more of a assurances to, that our investments are solid and that we’re not at risk at the end of 20 years for our investment there. The other hat that I want to say that I’m wearing, I’m also the president on the Arkansas Water and Wastewater Managers Association. And our board has taken a position that we want to be careful here that in the sense that we just want assurances that our constituents or our members have the protections and assurance that their current projects that they have already completed or that’s in the planning stages are not impacted in a negative assurance there. So that’s the short answer, and we’re trying to keep the testimony very short. That’s my approach here that I would like to talk about in both sense for North Little Rock Wastewater as and also for the Water, Wastewater Manager Association. Thank you.
Rep Maddox Thank you for testimony. Any questions by the Committee? Seeing none. Thank you.
Clayton Thank you.
Rep Maddox Committee, my intention is to do one more witness before we recess for lunch. Doug Meyer is next on the list to speak against the bill.
Meyer Good afternoon. My name is Doug Meyer, and I own Rusty Tractor Vineyards just off of Colonel Glen and David Ododd. We’ve installed 2 solar rooftop solar plants, not plants, but arrays. And we’re almost 100% self-sufficient. We’re the first solar powered winery in the state of Arkansas. I have a couple, couple of concerns with this bill. One is, as you know, for commercial accounts, they have a demand charge. Residential clients do not have a demand component. They only have a customer charge and an energy charge. A demand charge is based on a 15 minute period of greatest use during the month. It is my understanding that this bill addresses residential and commercial the same. Why are these addressed the same commercial and residential? They’re, to me they’re apples and oranges and it would only make sense to look at each rate schedule differently when it pertains to cost shifting. And then I want to talk a little bit about retroactive. It concerns me greatly that we’re talking about grandfathering all these companies for 2023, but we’re 9 months away from being no more grandfathering. So like I said, I have 2, 2 arrays now. If you look at page 9, line 24 of the bill. By June 30th, 2023, a commission shall approve modifications to each electric utilities rate schedules applicable to net metering customers to ensure that all existing and prospective net metering customers pay all applicable riders and surcharges– existing and prospective net metering. So that to me, that’s pretty ambiguous. I’d like to have a legal wording on that. When the grandfather language in Act 464 says on page 8, line 36 to remain under the rate structure in effect when the net metering contract was signed for a period not to exceed 20 years. So this concerns me with the new language that all existing is included. I’d like to talk just a minute about the 5 mile radius. If the state capitol building right here, right now wanted to do net metering and do a solar array. Not only would you have trouble finding 5, 10, 20 acres within 5 miles of here, but it’s not just 5 miles. You have to be relatively close to a substation. If you’re not relatively close to a substation the cost to hook up would be just astronomical. So I don’t understand the 5miles at all. In my opinion, should be 50 miles. It should be anywhere within their, their grid. But the 5 miles would greatly, greatly inhibit future solar issues. And the last thing I’d say is and the gentleman with Lexicon talked about this, it’s it’s a return on investment. You know, I made a considerable investment doing this solar. And with the the 2019 bill it made sense. It went from a 15 to 20 year payback to 6 to 8 years. Would I have done it January 2024? Absolutely not, because it’s return on investment. If it takes 15 to 20 years to get my money back from savings, it’s just not worth it. So in my opinion, starting January 1, 2024, this is greatly, adversely impact the solar industry in Arkansas. Thank you.
Rep Maddox Thank you for your testimony. Would you accept a question?
Rep Maddox Representative Eaves, you’re recognized.
Rep Eaves Thank you. Appreciate your testimony. I just wanted to clarify something you said. On page 9, line 24, that was amended to be December 31st. You said June.
Meyer This is, this is by June 20, 2030, Commission shall approve modifications.
Rep Eaves That’s the line that was amended to be December 31st.
Meyer Okay. But my point still being to issue it, it affects existing customers.
Rep Eaves Right.
Meyer That to me, that’s not grandfathering. If a different rate reschedule to existing customers, that’s not what we’ve been told.
Rep Maddox Anything further, Committee? Any further questions by the Committee for this witness? Thank you, sir, for your testimony. Members, just to kind of let you know what my intention is. We still have numerous people signed up to speak on this matter. It’s my intention to, frankly, let people speak. I know there’s a lot of interest in it, and that is what I intend to do. So Representative Ferguson, you made a mention of the PSC. I’m working on trying to get someone over here to answer your question specifically.
Rep K Ferguson Thank you.
Rep Maddox And I will do our work on that during lunch. So we are going to adjourn until 15 minutes after session today.