Arkansas Act 278, the Cost-Shifting Prevention Act, rewrote the state’s net metering rules in 2023 by replacing full retail-rate credits for exported solar energy with compensation at the utility’s much lower avoided cost, and by adding a monthly grid charge tied to system size. Customers who locked in legacy status by September 30, 2024 keep the old retail-rate credits through June 1, 2040. Everyone installing solar in Arkansas now falls under the new framework, and the math for a rooftop system looks very different because of it.
What Act 278 Changed
Before Act 278 took effect on March 13, 2023, Arkansas net metering ran on a one-for-one exchange. Every kilowatt-hour you sent to the grid offset a kilowatt-hour you pulled from it at the full retail electricity rate. A 200 kWh surplus in a month rolled forward as a credit worth exactly what you would have paid to buy that same electricity.1Entergy Arkansas. Net Metering Services
Act 278 ended that arrangement for new customers. It directs the Arkansas Public Service Commission to compensate exported energy at the utility’s avoided cost rather than the retail price, introduces a monthly grid charge based on system nameplate capacity, and splits customers into categories with different rules for each.2Justia Law. Arkansas Code 23-18-604 – Commission Authority
What You Get Paid for Exported Energy Now
If you install solar in Arkansas today without qualifying for legacy status, your exported energy earns credits at the avoided cost rate. Arkansas law defines avoided cost as the twelve-month average of the Locational Marginal Price from the utility’s load zone in either the Midcontinent Independent System Operator (MISO) or the Southwest Power Pool (SPP) market, depending on which grid operator serves your utility.3Justia Law. Arkansas Code 23-18-603 – Definitions
In practice, that rate is a fraction of retail. SWEPCO’s Arkansas tariff listed an avoided cost of roughly $0.03 per kWh for the March 2024 through February 2025 period. A typical residential retail rate runs about 10 to 12 cents per kWh.4DSIRE. DSIRE – Arkansas Net Billing Exported solar energy earns roughly a quarter to a third of what it costs to buy the same electricity back.
On top of the reduced export credit, non-legacy customers pay a monthly grid charge expressed in dollars per kilowatt of the system’s nameplate alternating current capacity.3Justia Law. Arkansas Code 23-18-603 – Definitions It applies regardless of how much your system produces or exports. Together, the lower credit and the fixed capacity charge change the payback picture for any new installation.
Who Kept the Old Rules
Act 278 created two grandfathered categories.
Legacy customers are those whose systems met the net metering requirements as they existed before March 12, 2023, meaning they were already interconnected and operating under the old rules before Act 278 took effect. Legacy-transitional customers are those who submitted a standard interconnection agreement, executed a facilities agreement, or filed a complaint with the PSC regarding a disputed facilities agreement before September 30, 2024.
Both keep the full retail-rate credit structure until June 1, 2040.2Justia Law. Arkansas Code 23-18-604 – Commission Authority That date is fixed in the statute. It is not twenty years from interconnection, as some early interpretations suggested. A system interconnected in 2020 and one interconnected in September 2024 lose legacy protection on the same day, then transition to whatever non-legacy structure is in effect.
The September 30, 2024 deadline has passed. If you did not have a qualifying agreement or complaint on file before that date, your system falls under the avoided cost structure no matter when you started planning it.2Justia Law. Arkansas Code 23-18-604 – Commission Authority
How Big a System You Can Install
Arkansas caps net-metered system capacity based on customer type, and the limit is whichever value is lower:
- Residential: 25 kW of alternating current capacity, or 100% of your highest monthly electricity usage over the previous twelve months.
- Non-residential: 5,000 kW (5 megawatts) of alternating current capacity, or 100% of your highest monthly usage in the previous twelve months within the utility’s service territory.
The “highest monthly usage” cap means the system cannot be sized to produce more than you actually consumed in your peak month over the past year. If your highest month was 1,500 kWh, roughly a 10 kW array, you cannot install a 25 kW system even though the statutory ceiling would otherwise allow it. Systems with an executed interconnection agreement before December 31, 2022 may exceed these limits.3Justia Law. Arkansas Code 23-18-603 – Definitions
Annual Credit Expiration
Excess generation carries forward as a credit month to month within your annual billing cycle. At the close of that cycle, any remaining net excess generation credit expires. It does not carry into the next year, and the utility is not required to pay cash for it.5Arkansas Secretary of State. Arkansas Public Service Commission Net Metering Rules
For legacy customers, banked credits sit at the full retail rate and are worth holding. For non-legacy customers whose credits are worth around 3 cents per kWh, the annual reset is another reason to size conservatively and use as much of your own generation as possible in real time.
Why Batteries Matter Under the New Rules
When exported energy earns a fraction of retail, the financial logic of solar flips. Under the old rules, timing did not matter. Every kilowatt-hour exported earned full retail credit. Under avoided cost, every kilowatt-hour you export instead of using yourself costs you the gap between the retail rate and roughly 3 cents.
Battery storage changes that equation by letting you store daytime production and use it during evening hours. Instead of exporting midday surplus at avoided cost and buying electricity back at retail after sunset, a battery shifts that energy to when you actually need it. For non-legacy customers, self-consumption is where the savings live.
Batteries add significant upfront cost. The wider the spread between retail and avoided cost, however, the faster storage pays back through avoided purchases. With Arkansas avoided cost near 3 cents per kWh and retail rates near 10 to 12 cents, the gap is wide enough that storage belongs in the design conversation for any new system.
What Installers Have to Disclose Before You Sign
Act 278 also set disclosure requirements for anyone selling or leasing a solar system in Arkansas. You must receive a written proposal and at least five business days to evaluate it before committing. That proposal has to include:
- A description of the equipment, its placement on your property, nameplate generating capacity, and expected monthly and annual output in kilowatt-hours.
- An estimate of how much output the system will lose each year as panels age.
- The total cost, amounts due at signing and completion, and the full payment schedule.
- The payback period and forecasted monthly and annual bill savings in dollars, calculated using the rate structure that will actually apply to your system.
- A description and length of all warranties.
The installer must also either perform an energy efficiency audit on your property or tell you how to get one, and inform you about efficiency measures that could reduce your energy needs before you invest in panels.6Justia Law. Arkansas Code 4-88-1103 – Net-Metering Customer Protections Read the savings projection carefully. It has to be built on the avoided-cost rate that will actually apply to you, not the old retail-credit numbers still floating around in older marketing materials.
Federal Tax Credits in 2026
The federal picture shifted at the same time the state one did. The residential clean energy credit under Section 25D of the tax code, which covered 30% of solar installation costs for homeowners who buy and own their systems, expired for systems placed in service after December 31, 2025.7Internal Revenue Service. Residential Clean Energy Credit It is no longer available in 2026 for a customer-owned rooftop system.
A separate commercial credit under Section 48E of the tax code still applies to solar facilities placed in service through December 31, 2027. It primarily benefits third-party-owned systems, meaning solar leases and power purchase agreements where a company owns the panels on your roof. Residential systems under 1 megawatt that meet prevailing wage and apprenticeship requirements can qualify for a 30% credit, which leasing companies typically pass through as lower monthly rates. Standalone energy storage is explicitly exempt from the 2027 solar termination date and may still qualify under Section 48E on its own after that.8Office of the Law Revision Counsel. 26 U.S. Code 48E – Clean Electricity Investment Credit
Arkansas does not offer state-level solar tax credits, sales tax exemptions, or property tax exemptions. With the residential federal credit gone and export credits paying avoided cost, the case for a customer-owned system in Arkansas now depends heavily on how much of your own generation you can consume directly. Size the system to your actual usage, look hard at storage, and read the installer’s savings projection against the rate you will actually be paid.