Report Cites Need for More Consumer Protection in Solar Rooftop Deals
A new report, “Solar Power on the Roof and in the Community: Recommendations for Consumer Protection Policies”, addresses the need for essential consumer protection policies to govern the burgeoning markets for residential rooftop solar systems and community solar projects, with particular focus upon consumer protections specific to solar lease and sale transactions, with disclosures and contractual provisions that flow from the long standing consumer protection policies that have governed retail sales of products and services to residential customers.
The U.S. residential solar market has experienced explosive growth in the last five years, fueled by lower costs, state and federal incentives, and new financing options, including leases and purchased power agreements, also known as third-party ownership. Community solar, where a consumer subscribes to shares in a solar system that is located in a neighborhood or community, is a relatively new and growing option.
However, it is not easy to comparison shop for solar power. Consumers will be faced with comparing the costs of outright purchase, a purchase power agreement, a lease, or a loan. Whether purchased or leased, the consumer is making a long-term financial commitment with the expectation that savings on utility bills will offset the monthly cost of the system. Achieving these savings in reality is dependent on a variety of factors—including contract terms, federal, state, and local subsidies, the estimated increase in the customer’s cost of electricity, and the performance of the solar panels themselves. It would be easy for a consumer to be misled into a purchase based on exaggerated assumptions about future savings. Indeed, consumer complaints have prompted states to take action in the courts, and propose consumer protections to address actual and potential abuses and misconceptions.
This important new Report describes the marketing, sales practices, disclosures, and contractual terms concerning the costs and benefits of installing rooftop solar systems or participating in community solar systems. While several existing laws and regulations may be applicable to residential rooftop solar installations, those policies are not specifically targeted to solar installations and the associated financial transactions. This Report recommends that solar energy providers that engage in sales, leases and purchase power agreements, as well as those offering community solar projects, should be subject to oversight by a state agency and be required to provide consumers key disclosures, fair contract terms, and be subject to penalties for violating state laws and regulations.
The key recommendations set forth in Chapter IV include the following policies:
Registration or Licensing; State Agency Authority: Consumer protections are not effective unless a governmental agency has the authority to investigate complaints and take action against bad actors, and such enforcement cannot occur without registration or licensing. Regulators should know how to contact authorized representatives, investigate the background of a business, and take action against a provider for violations of state laws and regulations.
Disclosures: A Customer Template: This Model would not regulate the financial contents of the solar provider’s offer, but would require all solar providers marketing to residential customers to use the same terms and definitions and make their offers in a manner that allows a comparison of impacts on the customer’s electricity bills and obligations under the applicable financial arrangement.
Contract Provisions: Standardizing contract terms and disclosures does not in any way regulate or limit the price charged for a solar lease, purchase power agreement or sale. However, certain contract terms should be specifically addressed and, in some cases, mandated or prohibited to prevent unfair dealing and one-sided bargains about fine print terms and conditions.
Sales and Marketing Conduct: Consumer protection regulation applicable to retail solar providers should explicitly prohibit misleading and deceptive sales and marketing statements and reference the state’s specific unfair trade practice or general consumer protection law. A seller cannot misrepresent the nature of the formal agreement or use statements that are directly contradicted by the formal agreement or contract.
Terms at the Sale of a property: There have been complaints about third party financing arrangements including a provision giving the solar provider (the owner of the solar panels in several types of financial arrangements) the right to approve a new home owner before the lease could be transferred to the new owner. Several states have addressed this situation in their proposed legislation, and the rights and obligations at the time of the sale of property are a key disclosure in the recently enacted Arizona law.
Enforcement and Penalties; Customer Complaints: The proposed consumer protections cannot be effective unless those regulations can be enforced and violators penalized. Enforcement requires that an agency have the authority and necessary resources to investigate complaints, access the solar provider’s records demonstrating compliance with the underlying consumer protection and contract requirements, take actions to revoke licenses or registration, and assess fines or penalties to ensure customers are protected.
The preferred approach for oversight of solar energy providers offering residential rooftop or community solar projects should be uniform and comprehensive jurisdiction by the state utility commission, or other equivalent state agency. Solar energy businesses are marketing to residential electric utility customers for a product that is inexorably linked not only to the customer’s monthly electric bill (and the purchase of which might even appear on the utility’s electric bill under some proposals), but is also located in the utility’s distribution grid.
To some extent, utility commissions already regulate solar power with their detailed pricing decisions on net metering and value of solar tariffs that are crucial to the marketing claims related to lowering a household electric bill. Often state policy requires the state public utility commission to promote solar power specifically as part of the effort to achieve renewable energy and carbon emission reduction goals. Commissions then typically require utilities to make investments to accommodate the integration of distributed generation and solar energy facilities, whether through individual customer rooftop installation or local community solar programs.
Thus, it follows that state utility commissions are the most logical focus to oversee retail solar sales, and suggestions to limit the jurisdiction of utility regulators to only a few types of solar transactions would result in likely confusion by consumers as to their rights and remedies when shopping for solar systems. However, states may decide that a different state agency should exercise this oversight and jurisdiction and the Report’s recommendations would accommodate an alternative approach.
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“Solar Power on the Roof and in the Community: Recommendations for Consumer Protection Policies”, is authored by utility consumer affairs consultants Barbara Alexander and Janee Briesemeister.