Congressional leaders charge ‘potentially deceptive sales tactics’ by SolarCity, others

1/8/2015

AP file photo

SOLARCITY: In this June 18, 2010, file photo, U.S. Sen. Michael Bennet, D-Colorado, center, helps as SolarCity employees install a solar panel on a home in south Denver

By Tori Richards | Watchdog.org

Solar contractors including SolarCity and Sunrun are in the crosshairs of  Republicans and Democrats in Congress who seek an end to what they call “potentially deceptive sales tactics” associated with the companies’ zero-down, 20-year lease business model.

Spurred by consumer complaints that the massive savings they were promised never materialized, 12 Republicans and four Democrats have asked two federal regulatory agencies to investigate concerns that “these leases are not offered in good faith or with accurate disclosures.”

Recent letters by the GOP to the U.S. Federal Trade Commission and by Democrats to the Consumer Financial Protection Bureau come on the heels of a year-long Watchdog.org investigation into SolarCity, one of the nation’s largest solar contractors. Owned largely by billionaire Elon Musk, SolarCity pioneered the leasing business model in order to take advantage of state and federal tax breaks paid to solar-energy owners.

“I do not want the future of solar energy harmed if there are consumer scams going on that will cause thousands of people to question the entire solar industry based on their own bad experience,” U.S. Rep. Paul A. Gosar, R-Arizona, told Watchdog.org. “A free market depends on fairness, openness and honesty.”

Gosar, an advocate of solar, initiated the GOP probe after receiving complaints from constituents.

Photo courtesy of Paul A. Gosar

LOOKING FOR ANSWERS: U.S. Rep. Paul A. Gosar, R-Arizona, wants more consumer protection against solar companies

“Someone brought in an actual brochure SolarCity uses in a sales pitch and the savings were based on utility rates increasing by 4 percent annually,” said Jeff Small, Gosar’s legislative director. “At least in Arizona, this has never happened. The highest it has ever been was 3 percent. Usually it’s 1 percent.

“Every little thing we looked into raised the hairs on the back of (Gosar’s) neck, so he asked us to dive into it more and wasn’t pleased with what we found,” Small said.

In California, SolarCity customer Jeffrey Leeds encountered a similar situation. He says he was lured into a lease with scare tactics of rising electricity rates. But instead of reaping savings, his electric bill rose by $350 a month. Leeds and other customers recounted their frustrations to Watchdog.org last year in an investigation titled, “Customers tell horror stories of solar company that gets $422M in tax dollars.”

The letters by Gosar and U.S. Rep. Ann Kirkpatrick, D-Arizona, contain several pointed questions with the same theme:

• What protections exist for customers entering into a solar contract?
• What safeguards are in place to ensure customers have full disclosure pertaining to the contract?
• What is being done about consumer complaints?

“Customers are quoted savings each month on their utility bills,” Kirkpatrick wrote. “However, who calculates those estimations and are they accurate? Also, it is my understanding that early solar lease payments are teaser rates that make solar energy payments seem affordable.”

In a statement to Watchdog.org, Kirkpatrick said she “decided to take the lead on the letter to the CFPB after receiving numerous complaints about solar rooftop leasing practices in Arizona.

“It is our hope that the CFPB will review these practices and take any necessary steps to ensure consumers are protected,” she said.

Gosar was even bolder, stating in his FTC letter that SolarCity teamed up with a company that “sold large numbers of subprime mortgages to unsuspecting homeowners in the run-up to the subprime mortgage crisis.”

That company, Paramount Equity Mortgage, was fined $500,000 by federal regulators in 2008 for charging customers to buy down interest rates without giving them an actual reduction and failing to properly disclose mortgage terms. In 2013,SolarCity bought a Paramount subsidiary mostly owned by TV advertising giant Guthy Renker, which promotes products such as Proactive skin care.

SolarCity’s spokesperson Jonathan Bass disputed the notion the company is riddled with complaints and said it has a “strong commitment to consumer protection.”

Contracts are published online with guarantees, providing “a greater level of transparency into future pricing than any utility in America—ironically, many utilities will not tell their customers what they are going to pay for electricity next year, while we tell them exactly what they will pay under our agreements for the next 20 years,” Bass said.

SolarCity is expanding into the production of solar panels, building a massive manufacturing plant in Buffalo, New York, that will be funded by $750 million in tax dollars. Despite that assist and hefty state and federal subsidies, the company continues to lose money each year. A current SEC filing shows that it was $52 million in the red during the first nine months of last year, the latest period for which such figures are available.

Gosar said he was troubled by SolarCity’s financial situation and the leasing model and expansion of solar companies hinging on tax breaks. He said he had no problem collecting 11 colleagues from the congressional floor to co-sign his letter to the FTC, Small said.

Republican supporters include U.S. Reps. Matt Salmon and Trent Franks of Arizona; Lamar Smith and Ted Poe of Texas; Jeff Miller of Florida; Cynthia Lummis of Wyoming; David McKinley of West Virginia; Andy Harris of New York; Mo Brooks of South Carolina; H. Morgan Griffith of Pennsylvania; and Alan Nunnelee of Mississippi. The Democrat co-signers are Reps. Ron Barber and Kyrsten Sinema of Arizona; and Gene Green of Texas.

The Arizona state Corporation Commission decided last month to launch an investigation of its own into the solar leasing model.

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