Thursday, March 3, 2011

Arkansas Legislative Update: The Arkansas Clean Energy Act (SB 721)

Will Arkansas make the use of renewable energy technologies and resources a part of its sustainasphere? SB 721, filed earlier this week, is a step in that direction.

SB 721 would create the Arkansas Clean Energy Act and would establish that, as a matter of public policy, that it is in the public interest to promote, encourage, and foster investment, development and use of renewable energy resources.

In simple terms, the Arkansas Clean Energy Act would require Arkansas’s electric utilities to purchase renewable energy and include renewable energy resources “as an integral part of its energy resource plan.”

Under the proposed Act, the purchase of renewable energy would be governed by a “feed-in tariff.”  Electric utilities would be required to file with the Arkansas Public Service Commission for the tariff, which in turn would require the utility to purchase renewable energy produced in Arkansas for a period not to exceed 20 years.
Significantly, the Act would require electric utilities to purchase at least 20% of their electricity supply requirement from an electric generation facility that is:
  • Located in Arkansas;
  • Is fueled by a renewable energy resource (which means a solar, wind, water, geothermal, or biomass resource located in Arkansas); and,
  • Has an effective capacity of not more than 20 megawatts.
The Act would also permit electric utilities to recover the costs associated with the purchase of renewable energy and with the construction and upgrade of facilities necessary to receive the purchased renewable energy.

The deadline for filing bills is looming, and we can expect SB 721 to be hotly debated. The 20% purchase requirement is significant, as are the costs associated with building and upgrading the facilities that will be necessary to receive the renewable energy.  Utilities will themselves heard on those points.

And the Act does not specify how utilities could recover their costs, though it seems logical that at least part of any recovery plan would include passing those costs onto consumers through a rate increase or surcharge. Given the ongoing debate over the state’s fiscal condition and the overwhelming focus of the current legislature on tax cuts and increases, expect a flash point for debate here, as well. 

One thing, however, is certain: the Arkansas Clean Energy Act would be vast improvement over current Arkansas law on the subject, the Arkansas Clean Energy Development Act.  That Act, a toothless statement of aspiration, states only that, "All electric public utilities subject to the jurisdiction of the Arkansas Public Service Commission shall consider clean energy and the use of renewable resources as part of any resource plan."

In the end, if Arkansas wants to be a player in renewable energy technology and generation, it is going to need to find a way to push the technologies, build capacity, and, attract venture capital investment from outside the state – indeed, from outside the country. SB 721 is a strong move in that direction.

(Department of Citation: The Arkansas Clean Energy Development Act can be found at section 23-18-701 et seq. of the Arkansas Code Annotated)

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