When Kentucky lawmakers drafted Senate Bill 100, which affects the rate utilities "pay" homeowners with solar panels for the excess energy they generate, they included a grandfather clause.

The bill that Gov. Matt Bevin signed into law gives the Public Service Commission authority to set the rate utilities pay homes with solar for excess power. That rate, which will appear as a credit on a homeowner's energy bill, is expected to be lower than the retail rate utilities pay solar customers. Currently, utilities buy solar power from customers at the same retail rate they use to sell power.

The PSC will set the rate after the beginning of 2020. Included in Senate Bill 100 is a provision that residential solar systems installed before the new rate goes into effect will keep receiving the retail rate for 25 years.

That provision has created a mini-boom in the rooftop solar industry.

"Interest has increased substantially," said Clint Merritt, owner of Driven Solar, a Whitesville-based solar panel company. "Not everyone I've talked to is going with it, but the people (who were) on the fence are on board."

Merritt's company is currently installing solar panels "seven days a week" to meet demand, he said.

"I'm scheduling out through October now," Merritt said. "I'm going to do as many as I can, and quit taking orders in mid-November. I don't want to get into a situation where we have an install complete but the inspection isn't done before the first of the year and (the home) isn't grandfathered in."

The increase in business for solar installers was not the goal of Senate Bill 100, and the installers don't expect the boom to last beyond the first of next year.

The argument behind Senate Bill 100 was that solar panel owners who sold power back to utilities were not paying their share of the cost to maintain utility lines and other infrastructure in the power system.

For utilities like LG&E/KU, and for the Kentucky Chamber of Commerce, passing Senate Bill 100 was a priority of the 2019 session. Similar bills were filed in the 2016 and 2017 legislative sessions but failed to pass.

Kate Shanks, vice president of policy development for the Kentucky Chamber of Commerce, said the organization's interest in the bill was about "protecting Kentucky's low-cost, affordable energy," and solar households who sell power back at the retail rate are not paying "the fixed costs of running the utility."

"If you're not paying the full cost ... someone is going to cover those costs," Shanks said.

Chris Whelan, vice president for communications and corporate responsibility at LG&E/KU, said the bill strives to eliminate what she and others describe as a disparity between solar customers that sell power back to utilities, and customers who don't have solar systems.

"For us, it was always about being fair to all of our customers," she said. "Customers who don't have solar panels are subsidizing" those who do.

Utilities are required to purchase extra energy generated by homes with solar panels, Whelan and others said. That "payment" comes as a credit to the energy customer's bill that can carry forward from month to month.

Whelan said utilities are interested in lowering the rate utilities pay homeowners for solar power now while the number of homes with solar panels is relatively low.

"The cost of solar has declined and interest has increased, so we know it will be a problem" in the future, she said.

An indication of utility companies' interest in the bill can possibly be seen in their campaign contributions. In 2018, LG&E's political action committee spent $74,740 on campaigns between Jan. 1 and Nov. 6. By comparison, LG&E spent $38,750 on campaigns in 2016.

Other utilities and organizations interested in the bill also increased their contributions. Speak Up For Rural Electrification, a political action committee representing the state's electric cooperatives, spent $68,750 on campaign contributions in 2018, compared to $26,500 in 2016. American Electric Power and Duke Energy also increased their campaign contributions that year, and the state Chamber of Commerce spent $69,036 on campaigns last year. In 2016, the Chamber spent $31,000 on campaigns.

Rep. Jim Gooch, a Providence Republican who sponsored a House version of the bill in previous sessions and championed Senate Bill 100 this year, said there isn't a connection between increased campaign contributions and the bill. The state raised the amount political action committees can contribute to individual candidates from $1,000 to $2,000 per candidate in 2017, he said.

"I wasn't going to let the poor people ... who can't afford rooftop solar, pay more for their connection to the grid," that someone who can afford solar panels, Gooch said.

Whelan and Shanks also said there was no connection between campaign contributions and the passage of the bill.

Lane Boldman, director of the Kentucky Conservation Committee, which opposed the bill, said the lobbying by utility companies during the session was intense.

"Anyone we met with, we were followed by two or three lobbyists behind us, or before us," she said.

The Kentucky Conservation Committee advocates for environmental issues in Frankfort. While the group successfully lobbied against the bill in 2017 and 2018, attitudes among legislators changed during the 2019 session, she said.

"This is our third year challenging a similar bill. We received a lot of bipartisan support when the dialogue first began," Boldman said. "... But we did notice, this time, representative support was eroding and we don't think it's because (our) argument was less compelling.

"Utilities have quite a lot of contractual lobbyists. We counted as many as 20 at one time," she said.

Danny Tolson, operations manager for Wilderness Trace Solar in Danville, said the campaign money didn't sway the votes of every legislator.

"I can tell you I talked with some legislators who took LG&E's money, and they still voted against the bill," Tolson said. Like Merritt, the bill's passage into law has resulted in an increase in Tolson's residential solar panel business, but he said he doesn't know if that will last.

"Right now, every solar installer I know is busy," Tolson said. Looking ahead, there is uncertainty in the residential market.

"The biggest impact (the bill) is having right now is (the PSC) has to do a rate study," Tolson said. "... I think it's going to be very detrimental to the residential market." He said what's likely to happen is the bulk of solar panel sales after 2020 will be to businesses that aren't interested in generating and selling excess power.

"They are going to absorb all the power they are going to create, anyway," he said.

Merritt said he still expects homeowners will want solar panels, but it's likely they'll install smaller systems that don't generate excess energy.

"I think we'll probably get more commercial (customers), Merritt said, but, "I think the residential side will still be there."

Boldman said the bill will likely impact some solar panel installers.

"I think, unfortunately, it's going to hurt smaller businesses," she said. "The figure we had was there are 1,500 jobs in this industry."

Gooch said he doesn't think the bill hurts the solar business because there are still tax breaks for people who install solar panels. Currently, a person can deduct 30 percent of the cost of installing solar panels from their federal taxes, although that will decline to 26 percent in 2020 and fall to 10 percent by 2022.

"There will still be people who will do that and take advantage of the tax breaks," Gooch said. "I still think there will be plenty of people" interested.

James Mayse, 270-691-7303, jmayse@messenger-inquirer.com, Twitter: @JamesMayse

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