The solar installer industry is growing at breakneck speed in the United States, and with that expansion comes calls from utilities and legislators to regulate industry practices. In particular, critics say they are concerned that some installers make improper claims in marketing and selling their rooftop PV systems, especially about costs and potential energy savings.
A group of congressional lawmakers recently asked the Fair Trade Commission and the Consumer Financial Protection Bureau to look into solar leasing company marketing practices, and at least two other states have proposed new consumer protection standards.
SolarCity, a pioneer in solar leasing and the leading U.S. solar installer, has suffered allegations of shoddy installations. But SolarCity has the Better Business Bureau’s A+ rating, and solar industry officials regularly argue that larger companies are under too much scrutiny to have deceptive financing or marketing practices. And typically, Watchdog found, SolarCity resolves consumer complaints.
“There is a grain of truth in stories about complaints and deceptive practices,” said Nicholas Mack, General Counsel to Clean Power Finance (CPF), another leader in solar leasing. “Any industry has outliers on the fringes. But the core of the solar industry has valuable products and services that consumers embrace because they save them money.”
As is often the case in solar-utility battles, ground zero for this controversy is Arizona.
“In Arizona there is a claim about not enough protection for consumers, but just recently the Arizona Attorney General charged Stealth Solar with false claims that misled customers and found the principals guilty and punished them," said SolarCity General Counsel Seth Weissman.
In addition to Stealth Solar, another Arizona installer named Going Green Solar also admitted fraud and paid $250,000 to settle claims it conducted high-pressure sales presentations in potential customer homes, and sold products that did not result in a reduction of energy bills.
"The system to deal with these things works,” Weissman said. “The noise from legislators is being drummed up by utilities that don’t want to compete with us.”
Up in the Midwest, the Indiana Energy Association (IEA), which represents the state’s 14 utilities, did indeed back a failed legislative effort with provisions solar advocates say are redundant. The bill included, according to IEA spokesperson Dave Arland, “important consumer protections, including a disclosure requirement about the details of the lease.” It also would have authorized the Indiana Attorney General “to deal with bad actors.”
The consumer protections for solar leasing customers in the defeated Indiana bill were “what are known in regulatory proceedings as burdensome and unnecessary obstacles,” according to Citizens Action Coalition Executive Director Kerwin Olson, who led the bipartisan effort against the legislation.
For solar leasing, “there are at least 12 to 15 statutes in place," Weissman said.
“Regulation M under the Fair Trade Commission (FTC) governs solar leasing. It is the same law that applies to car leasing," he said. "Selling solar systems with financing is governed by the Truth in Lending Act, Regulation Z. There are uniform deceptive and unfair trade practices acts and FTC’s Fair Credit Reporting Act. The industry is well-governed by statute.”
Yet alleged complaints that some customers did not get the savings they were promised led 12 Republicans and 4 Democrats, including several from Arizona, to ask the FTC and CFPB to investigate whether lease offerings are made “in good faith” and “with accurate disclosures.”
In response, the Arizona Corporation Commission (ACC) opened a docket last December to investigate.
So far, the several investigations have only turned up a dearth of complaints, according to Mother Jones. One Representative’s office reported actually seeing none. Another’s would not provide details. As of mid-February, the ACC docket had one complaint.
And it was subsequently revealed that the December 12, 2014, letter to the FTC from Arizona Republican Representatives Trent Franks, Paul Gosar, and Matt Salmon was allegedly drafted by Energy Innovation Program Consultant David Peterson, an employee of Arizona Public Service (APS). APS is the state’s dominant electricity provider with a long history of animosity with the solar installer industry.
About those savings claims
The utilities’ involvement seems to many to validate Weismann’s accusations about the origin and motivation of allegations against solar leasing companies. But that alone cannot allay concerns that the companies promise more than they deliver.
“If a homeowner is paying 20 cents per kWh and they lease a SolarCity solar system and it promises to pay 15 cents per kWh, then that is what that homeowner will pay from day one and that means a savings of 5 cents per kWh,” Weismann said. “We tell you what your rate will be for the next 20 years. That is the selling proposition.”
But when pressured, Weismann acknowledged it is not quite that simple.
“You can never perfectly predict the customer’s usage,” he said. “If the use is higher, the customer buys from the utility at a higher rate. We sell the power we contract for at the rate we contract to, full stop.”
“When you go solar, you can reduce the amount of utility-generated electricity you use, but it does not guarantee that you won’t at times purchase it,” explained SolarCity Public Affairs Director Will Craven. “A person with an electric vehicle will likely need utility electricity but will save from having solar because of all the electricity they can get at the lower rate.”
The solar industry responds
Instead of new regulations, the solar industry is working to create model contracts and best practices that meet existing laws precisely and completely and make the details, complications, and possibilities entirely clear.
“It’s about getting the industry to mature and prepare for rapid growth in the consumer finance sector so we can withstand resistance from entrenched incumbents,” Mack said.
The SAPC working group created standardized templates for consumer leases and power purchase agreements (PPAs) now used in the majority of third party ownership deals. It was vital the document templates pass vetting by a small army of SAPC lawyers, bankers, and rating agency representatives, Mack explained. Flawed contracts that allow unfair business practices would undermine securitization, one of the solar industry’s important emerging sources of capital.
“The contracts can be used by any solar company because they are fully compliant with all the laws applicable to solar,” Weismann added.
SEFA is now working to standardize and validate loan agreements and retail installation contracts, Mack added. It will own and update the templates and consider standardizing other industry forms.
SEFA has also formed its own consumer protection working group. It is working on a “Truth in Solar Act” based on the FTC’s Truth in Lending Act.
“We want to make sure membership in SEFA means you care about consumers and how they are treated and about being truthful with them and about being careful about setting their expectations,” Weismann said. “That starts with the contracts.”
SEFA’s longer term objectives include:
- Contract templates designed to be written in plain, legible English and to comply with state and federal laws
- Consumer education FAQs on the SEFA website
- Memos on legal compliances for SEFA members
- Model disclosure forms
- Sales force training videos
Such efforts address allegations made by solar opponents even though most in the solar industry believe they are “wildly overblown,” Mack acknowledged.
“We get that it’s better to be proactive and come up with best practices and disclosures and documents when we have time to collaborate, rather than down the road when we’re locked in battle with fossil fuel and utility industries that are flexing their legislative muscle,” he said.
Despite the history of animosity, SEFA would welcome utility participants willing to embrace distributed generation and think collaboratively about renewables, Mack added.
“Our general orientation is to do well by doing good," he said. "We’re for-profit but the product we sell and services we offer are intended to save consumers money. If they didn’t, we wouldn’t be growing the way we are.”
Correction: An earlier version of this article stated that SAPC is transforming itself into SEFA and that SEFA was formed when the funding for SAPC ran down. That is incorrect. The two organizations, for the time being, are working together on solar financing issues.