TWEED Nationals MP Geoff Provest has defended the O'Farrell Government's decision to push ahead with slashing rebates paid to households which installed solar panels, saying the government is preparing to compensate people facing hardship.

He revealed about 500 households in the Tweed and 1000 in the electorate of Lismore, which includes Murwillumbah, are affected by the retrospective legislation, which has led to criticism of the government for breaking a promise to leave the solar bonus in place.

Under the controversial scheme still to get through the NSW Upper House, the tariff paid to people who spent thousands of dollars putting solar panels on their rooftops will be slashed from 60 cents a kilowatt hour to 40 cents.

Mr Provest said the proposed “hardship package”, which he considered to be “a fair deal package”, would compensate people, especially pensioners, who faced hardship because they entered contracts and loan agreements based on the government's commitment to pay 60 cents.

Mr Provest rejected calls by the solar industry for the government to charge electricity companies for the solar electricity they now received for free.

“They are getting that electricity technically for free, but if we start charging them they will be forced to put up the prices for the consumer,” he said.