Solar Energy Toolkit: Residential Issues and Existing Regulatory Framework
As the cost of solar energy declines and more state and local governments adopt solar-friendly practices, solar is moving from a niche product to a mainstream energy choice. However, for many prospective residential consumers, solar is still very new. Individuals often have questions about how solar technologies work, their options for going solar, how to find a contractor, and what to look for in a contract. Confusion over these issues can lead to consumer dissatisfaction if they do not receive satisfactory answers.
The growth of the solar industry has also made consumer protection an important priority. Generally speaking, the vast majority of solar companies want to provide a positive experience for consumers. Like any industry, however, the solar industry includes some unscrupulous companies that use unethical strategies to make sales. Local governments can help educate consumers about the process of going solar and the laws and regulations that are in place.
This section of Solar Energy: SolSmart’s Toolkit for Local Governments will go over the key areas of a residential transaction, applicable laws, and resources that local governments can provide to help educate and protect consumers.
A residential transaction starts the moment a consumer sees an advertisement or speaks with a salesperson and continues through system installation. Following the installation, a consumer will continue to interact with the solar company to address any remaining issues, such as the need for repairs. Each step in the process is subject to a web of federal, state, and sometimes local laws.
Phone calls to sell or market goods or services are subject to laws and regulations. For example, it is illegal to falsify, alter, or obscure the number or name that appears on Caller ID (a.k.a. “spoofing”) to deceive a consumer.[i] The Do-Not-Call Registry rules adopted by the Federal Trade Commission (FTC) allow marketing calls to registered numbers under limited circumstances, but a consumer can still demand that the company cease future calls.[ii] Unwanted, pre-recorded calls (“robocalls”) are only allowed if a consumer gave prior written consent.
While telemarketing is highly regulated, sophisticated technology makes it extremely hard to trace the source of unwanted calls. As a result, the FTC and the Federal Communications Commission (FCC) face challenges in combating illegal telemarketing. In 2017, however, the FCC convened a task force of government and industry stakeholders to develop technical standards to block and more easily trace calls. In June of 2019, the FCC voted to give wireless carriers (i.e. Verizon, AT&T, etc.) the ability to block unwanted robocalls automatically for all customers. This technology acts much like spam filters for emails, detecting and blocking phone calls from suspicious numbers. Consumers who find themselves listening to a robocall are advised to hang up right away and file a complaint with the FTC and FCC.
ADVERTISING AND MARKETING
Advertising and marketing are core components of any customer acquisition strategy. Both state and federal laws prohibit false and deceptive advertisements and marketing claims. False advertising laws apply to both advertisements and in-person meetings.
When evaluating a claim about deceptive advertising, courts and government agencies look at two factors. One is whether the claim concerns a material term or issue, which refers to issues that are important to a reasonable consumer’s decision-making process. Typical material terms or issues include pricing, features, and performance.
Second, all claims about a product need to have a reasonable basis.[iii] This means the company should be able to cite relevant, objective sources to support the claim. For example, system savings estimates should reflect the system’s actual specifications like system size, orientation, and price. They should also reflect the consumer’s utility rates and any compensation mechanisms available, such as net metering.
State false advertising laws may direct state courts and government agencies to consult with FTC policy papers and enforcement actions to determine whether an advertisement is false or deceptive. As of 2017, the FTC has not initiated any cases on solar advertising. However, some FTC enforcement actions from other consumer-facing industries have concerned:
- Unsubstantiated energy savings claims
- Listing prices not generally available to consumers
- “Free” products which had monthly payments
- Advertised prices subject to many conditions in tiny print
- Disclaimers hidden in obscure locations or that contradicted the claims
- Company representatives masqueraded as government and/or public utility representatives
- Touting independent third-party endorsements when no such endorsements existed
- Inaccurate Renewable Energy Certificate (REC) claims
As with advertisements, both federal and state law dictate the terms and form of solar contracts. Lease agreements are subject to the Consumer Leasing Act and Regulation M, which impose requirements on how a contract must be structured and what it must disclose.[iv] Lease agreements must contain, among other terms, a description of the property; the number, amount, and due dates for scheduled payments; additional charges; maintenance responsibilities for each party; and warranties.
The Truth in Lending Act and Regulation Z are designed to help consumers make informed choices about credit offers by requiring full disclosure of an offer’s terms and conditions.[v] State laws impose additional requirements for contracts. Some states have begun to mandate that solar agreements include a disclosure form that summarizes the key terms of the agreement. These states include Arizona, California, Florida, Hawaii, Illinois, Maryland, Minnesota, Missouri, Nevada, New Mexico, New York, North Carolina, Oregon, Utah, and Washington.[vi]
In most jurisdictions, a solar contractor must possess a valid license to install a system, usually an electrical contractor’s license. Local governments oversee system permitting and inspections consistent with a state’s building code.
REAL ESTATE FILINGS
If a solar system was installed under a third-party ownership agreement, the third party (for example, the lessor or Power Purchase Agreement provider) will often file a Uniform Commercial Code-1 statement with the state corporation commission, or record a precautionary fixture filing with the local county property office. These two filings are designed to alert third parties that the homeowner does not own the solar system. This is done to protect the lessor, PPA provider, or loan provider’s interest in the system in the case of default or if the home is sold.
Additional Resources for Consumers
Local governments can help educate consumers and make the process of going solar as easy and hassle-free as possible. Some useful resources that municipalities and counties can share with their communities include:
Solar Energy Industries Association (SEIA) Customer Resource Portal
This is a landing page that provides links to a set of resources for solar consumers. These are intended to provide consumers the tools necessary to make an informed decision when considering going solar. Specific resources in this landing page include Residential Consumer Guide to Solar Power, Residential Disclosure forms, Residential Consumer Guide to Community Solar, Guide to Land Leases for Solar, and a Guide to Valuing Residential Solar Energy Systems.
Interstate Renewable Energy Council (IREC) Consumer Protection Page
This landing page provides resources for consumers, those that sell or install solar, and government agencies/oversight organizations. These resources include:
- Be Solar Smart Consumer Checklist: provides consumers with necessary knowledge before entering into a contract to install a solar system
- Clean Energy Consumer Bill of Rights: best practices for consumer interaction with solar products, sellers, installers, financiers, utilities, and others.
Provides information on local business and charities in order to create an ethical marketplace where buyers and sellers can trust each other.
Provides information to consumers regarding robocalls.
[i] “47 U.S.C. § 227(e) Restrictions on use of telephone equipment,” Legal Information Institute, Accessed August 12, 2019. https://www.law.cornell.edu/uscode/text/47/227.
[ii] “National Do Not Call Registry,” Federal Trade Commission Consumer Information, Accessed August 12, 2019. https://www.consumer.ftc.gov/articles/0108-national-do-not-call-registry.
[iii] “FTC Policy Statement on Deception,” Federal Trade Commission, 1983. https://www.ftc.gov/sites/default/files/attachments/training-materials/policy_deception.pdf
[iv] “15 U.S.C. §§ 1667-1667e U.S. Code Part E – Consumer Leases,” Legal Information Institute, Accessed August 12, 2019. https://www.law.cornell.edu/uscode/text/15/chapter-41/subchapter-I/part-E.
[v] “Compliance Guide to Small Entities: Regulation Z,” Federal Reserve System, Accessed August 12, 2019. https://www.federalreserve.gov/supervisionreg/regzcg.htm.
[vi] Hausman, Nate, Georgena Terry, Justin Cooper, State Solar Contract Disclosure Requirements, Clean Energy States Alliance, August 2018. https://www.cesa.org/assets/2018-Files/State-Solar-Contract-Disclosure-Requirements.pdf