Solar lease companies face criticism over calcluating energy savings

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Solar companies marketing third party lease agreements have started to face increasing criticism over the way they calculate energy savings to customers in California.

Earlier this year, a class action was brought against Sunrun, a California-based residential installer that operates in 10 states. The suit filed at a Los Angeles court on behalf of Shawn Reed, a Sunrun customer, demands a jury trial over its claims that Sunrun's marketing was deceptive and overstated the savings in future electricity costs.

“Sunrun deceptively states with certainty something that is inherently unknowable. Those whose electricity prices are not as high as estimated by Sunrun are already experiencing the cost disadvantage of the Sunrun system… the promise of a system sure to result in cost advantage was false when made and likely to deceive customers into leasing a system they otherwise would not have,” it stated.

Sunrun's calculations, according to the complaint, are based on the assumption that electricity prices are going to increase 6% annually. But the plaintiff's lawyers claim that Southern California Edison (SCE) prices have levelled off for residential customers between 2009 and 2011. However, SCE has recently secured a three-year 17.5% rate increase from the California Public Utilities Commission, which works out at a 5.7% annual increase.

Reed entered into a contract with Sunrun in August 2011 on the understanding that the installation would save money on utility bills. But explicit details of Reed's system, such as size and cost and savings estimates are not described in the complaint. It is also unclear whether Reed is still the only plaintiff in the class action.

A spokeswoman for Sunrun would not comment on the case directly, but said: “Sunrun takes pride in delivering quality service and value to our customers.”

However, others in the industry have expressed scepticism over the motivation behind the complaint.

Jim Jenal, founder of solar installer Run on Sun based in southern California, is a former attorney with experience of defending class actions.

“Often the only people who benefit are the attorneys that bring them,” he said. “If you look at a typical class action settlement in most actions against companies such as phone carriers and software companies, the class gets a coupon worth $10 of the next iteration of a product. Attorneys get hundreds of thousands or millions of dollars in legal fees. As I read this lawsuit I'm not at all convinced that this isn't more of the same.

“I haven't seen enough of Sunrun's material to say whether it's deceptive or not. From what I can see in the complaint, there is nothing that strikes me as deceptive. But they may be overly aggressive on what they predict energy costs will be in the future.”

However, Jenal said that the Sunrun case demonstrates the need for standardisation of disclosure similar to other consumer purchases such cars and refridgerators.

“When you buy a refridgerator they all have the same label stuck on them so you can truly compare one against the other,” he said. “We have nothing that is the equivalent of that in the solar industry and yet these are very expensive projects that people are spending money on.

“There is a risk if we don't get our own house in order. If people think we're fundamentally dishonest, we're done.”

Professor Catherine Wolfram, co-director of the Energy Institute at the University of California, Berkeley, Haas School of Business, said that she was recently quoted for a leased installation at her home in the San Francisco bay area.

The company (not Sunrun) appeared to calculate over the odds energy savings over the 25 year life-time for a 3.5kW system. She was told that for a downpayment of $12,500, she would have saved $39,500.

But Wolfram said that the calculations were flawed because they were not inflation adjusted and assumed electricity rate increases that might not arise.

“We'd spend $12,400 up front and have to wait 25 years for some of those benefits,” she said.

The CPUC is currently considering scrapping the tiered rate structure which prices electricity at anywhere between 9c per kwh and 35c per kwh depending on levels of consumption.

“[Solar companies] are taking the rates as they are now and escalating them into the future but it's anyone's guess where prices will be; there's a lot of risk associated with that savings calculation.

“An ideal presentation of the value of the system would have lots of bounds. You'd want to say here's the high scenario, here's the low scenario but we don't really know.

“They are also assuming that the system will work as they say it will for the next 25 years. But who knows. There's technology uncertainty going forward.”

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