bungled tax credit program
02 / 24 / 17

A bungled tax credit program has clouded the forecast for Louisiana’s solar power industry

From TheInd.com (ABiz / Acadia Business)
Article Written By: Sam Barnes

Louisiana’s once promising solar power industry is on the ropes, as thousands of solar system owners continue to reel from a retroactive state statute that left them each owing as much as $12,500 in installation costs. While legislation could be introduced this spring to reimburse the owners, solar installers feel their industry is irreparably damaged.

In 2015, an estimated 2,000-plus homeowners paid for solar electric panel systems thinking they would be reimbursed by a progressive state program that promised a maximum “refundable tax credit” of up to half the cost of a $25,000 system. However, that same year Act 131 of the state Legislature capped the remaining available credits at $25 million and made the cap retroactive to the beginning of 2015.

In effect, the “first come, first serve” credits had already run out by the time many had filed their tax returns. “The rules were changed after people has already purchased systems and they were basically defunded,” says Jeff Cantin, president of the Gulf States Renewable Energy Industries Association, an industry lobbying group. “These are families that spent thousands of dollars on a solar system and expected to receive a certain amount from the state, and the state pulled the plug.”

Shockwaves rippled across the state in 2015 and 2016 as homeowners realized the tax credits had run out, resulting in a tsunami of petitions to the Louisiana Board of Tax Appeals and a class action suit being filed in the 19th Judicial District Court in Baton Rouge.

All decisions on the matter have been postponed as they await legislative action this spring to rectify the problem. State Rep. Franklin Foil, R-Baton Rouge, plans to introduce a bill during the fiscal session to reimburse those affected by the retroactive portion of the legislation, although he admits it’s a tough time to come up with the necessary $15 million to $20 million.

“I’m going to have to find the money, and I haven’t figured out exactly where I’m going to draw the money from yet,” Foil says. “It just depends on how big the fiscal note is. I think there is a will from the Legislature to do something about this, because people are speaking up around the state and making them aware of it.”

Foil says his bill will seek to “make everyone whole. It puts them back to where they would have been before the law changed. It just simply says they’re entitled to the money.”

Hitting Home

Peggy Moseley, an 84-year-old retired teacher in Ville Platte, was one of hundreds who filed a petition to the tax appeals board in 2016. A self-described environmentalist, Moseley drives a Toyota Prius and lives on 25 acres designated as a “Stewardship Forest” by the Louisiana Department of Agriculture and Forestry. She moved to the family land following her husband’s death.

“I installed my solar panels in 2015 with assurances that the state would reimburse me $11,000,” Moseley says. “It was my hope and desire to leave an unencumbered cabin in the woods to my children. I was wrong. I was slammed into the dirt by politicians. Am I angry? I’m more disappointed than angry.”

Moseley filed the petition in hopes of avoiding long-term debt. “I did it because I didn’t want to die with debt, with debt for my children. Louisiana defaulted after the fact,” she says. “The terms of my contract were completed in full prior to the cancellation by the Louisiana Legislature.”

Brandon Juneau, an attorney at Bryson Law Firm in Baton Rouge who represents Moseley, says his firm has up to 50 clients who filed similar petitions with the Board of Tax Appeals. “Most of the arguments are based upon the constitutionality of the statute,” Juneau says. “They had some 300 to 400 petitions that were filed for this. The Louisiana Department of Revenue decided to stay the proceedings, waiting for the Legislature to address the issue this session.

Juneau says he has heard the governor’s office, LDR and Legislature all want to fix the issue, but the major obstacle—as it so often is—remains finding the money to do so. “If the Legislature can fix it, then they don’t have to go through all of the court proceedings to determine the statute’s constitutionality,” he says. Alternatively, should the Legislature not find a solution, the matter could take months or years to resolve and eventually find its way to the Louisiana Supreme Court.

Regardless of how it plays out, Matthew Newman, managing partner of Optimize Solutions LLC in Baton Rouge and a GSREIA member, fears it’s too late to revive Louisiana’s solar industry. “That was the death knell for most solar companies,” Newman says. His company has since shifted its focus to generator installation and spent the past 18 months building a new customer base.

Boom To Bust

In Louisiana, more than 20,000 solar customers are currently connected to the public utility power grid. Many of the systems were installed earlier in the decade by consumers cashing in on the lucrative state tax credit, as well as a 30% credit offered by the federal government. The industry grew exponentially during this period, as new installers set up shop to tap into the growing demand.

After the retroactive legislation was passed in 2015 it didn’t take long for installers to realize that the end was near. GSREIA’s Cantin, who owns Solar Alternatives in New Orleans, immediately reduced the size of his staff from 40 to 12 and expanded his territory to compensate for the loss in business. “In many states and regions, there’s still a growing interest in solar and people are looking at how they can make it work for their businesses and homes,” he says, noting rising energy costs and lowering solar installation costs have contributed to the growth.

Ironically, while Louisiana’s power companies have resisted the use of solar energy by individual homeowners, some have turned to the alternative energy source to meet their own needs. In August 2016, Entergy began generating electricity at a new solar power plant in New Orleans East. Entergy says the plant’s more than 4,000 solar panels can produce up to one megawatt of electricity, or enough to power roughly 160 homes.

In addition to solar panels, the pilot project incorporates new battery technology that will test ways to store power on cloudy days. The electricity is fed directly into the distribution grid to service New Orleans customers.

The protection of the state’s current “net metering” policy will be another priority for industry proponents in 2017. Regulated by the Louisiana Public Service Commission, net metering allows solar customers to mitigate energy costs by transferring surplus power to the public utility power grid. The excess power is then credited back to the customer.

In November 2016, the solar industry scored a victory when the Public Service Commission effectively reinstated net metering by rejecting certain restrictions that had been imposed by the state’s utilities. “The patchwork of utility caps and restrictions over the past two years was a real impediment for customers who want to go solar,” Cantin says. Some of the state’s investor-owned and co-operative utility companies have hindered previous net metering rules by capping participation and imposing fees, charges and restrictions.

Cantin says the recent PSC decision created consistency across the state, whereby any residential or business customer will be credited for every kilowatt hour of electricity they put onto the grid.

“We have to make sure that future policies don’t over-regulate the industry in a way that discourages ownership,” he adds. “I think one of our challenges is to keep information going to the commission, to help them make good decisions. What’s needed at this point is consistent policy.”