Panel Hears Insurance Arguments

OFFICIALS URGE COMMISSION TO STRIKE WIND TURBINE CLAUSE

— A 150-foot-tall windmill stands ready to help tiny Burdette offset its energy costs, but the turbine sits idle because the Mississippi County town of less than 200 can’t afford the $1 million insurance policy Entergy Arkansas requires to connect to its electrical grid.

Burdette Mayor Tim Sullivan was among business people and lawyers for the attorney general’s office, the University of Arkansas and some state agencies who asked the Arkansas Public Service Commission to strike the insurance requirement, known as an indemnification clause, saying it’s too expensive and hinders development of alternative energy in the state.

The commission held a public hearing Tuesday as it considers whether to strike the rule in light of regulatory and court rulings it doesn’t apply to a state university.

During the public hearing, attorney Elizabeth Smith, who represented the University of Arkansas System and several state agencies, urged the commission to strike the clause.

“Requiring the state to purchase insurance, or to take on an unknown risk or unknown cost could be damaging to the state. It could open a slippery slope to other contracts,” she said.

Sullivan told the commission his town’s wind turbine, acquired and installed with a $430,000 federal grant, is projected to save his city about $10,000 a year. The mayor said it will cost the city about $11,000 annually for the $1 million insurance policy required by Entergy.

“It’s ridiculous,” the mayor said.

The indemnification clause also has kept solar panels, purchased with $550,000 in federal money and designed to reduce energy costs at the State Library, from becoming operational.

Ronna Abshure, a staff attorney for the commission, spoke against the indemnification clause requirement during Tuesday’s hearing.

“Staff believes that indemnification is unwarranted,” she said, adding it impedes growth of net metering, which measures the difference between electricity supplied by a utility and electricity generated by alternative forms, such as wind turbines and solar panels.

Under net metering agreements, a company, city or state facility using an alternative energy source can receive a credit on its utility bills for the amount of energy it sends back to the utility.

Laura Landreaux, senior counsel for Entergy, argued the indemnification clause is essential to protect ratepayers from harm or damage caused by a malfunction.

“Essentially, what the state asks is that net metering customers receive all the benefits from net metering without any of the responsibility,” Landreaux said. “They want the benefits of the credit on their bill for net metering and propose to the utilities they (take) all the risk.”

Tuesday’s hearing was requested by the commission it considers whether the clause is detrimental to developing alternative energy sources.

The clause also is at the heart of a contract dispute between Arkansas Tech University and Entergy. The state Supreme Court last year asked the commission to review its net metering rule.

In 2009, Arkansas Tech was renovating a dormitory and Entergy, which owns and maintains electrical equipment on campus, insisted the university either sign an agreement making Tech liable for any injuries related to the equipment or purchase the equipment.

Tech signed the agreement but later filed a complaint with the commission, arguing the state Constitution prohibits the state, including higher education institutions, from entering into an indemnification agreement with a corporation.

The commission decided in Arkansas Tech’s favor, ruling the university couldn’t be indemnified. The Court of Appeals ruled it was unconstitutional to require a state entity to sign such an agreement. The state Supreme Court declined Entergy’s petition to review the case.

Rick Bormann of Weiner, owner of Greenway Renewable Energy, said he closed his alternative energy and consulting business in part because of the indemnification clause.

Bormann said the requirement is one of several that make it difficult for renewable energy companies to develop in the state.

“I will tell you if a business like ours can’t see the light at the end of the day for renewable energy with the current environment, very few businesses will,” he said.

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