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Consumer Scams

Making Sound Decisions About Solar Panels

Solar power scams have become big business in Arizona. A few years ago, the problem was so pervasive it prompted legislation requiring solar companies to use at least 10-point type in their contracts and forcing them to disclose some of the onerous terms they routinely included.  Solar panels on homes have also become a point of controversy with Arizona utility companies.  The utilities complained that solar homeowners were not paying their fair share of the costs of building and repairing electrical grids.  All these issues lead to the big question: “Is it worth it to install solar panels on your roof?”

As you would expect, the answer is “It depends.”

How Do Solar Panels Work?

Sunlight reacts with materials in a solar panel to create an electrical charge. When sunlight hits the photovoltaic modules in a solar panel, a reaction is produced that creates a charge of direct current.  That current goes to an inverter where the direct current (DC) is converted to alternating current (AC).  Throughout the U.S. and much of the world, AC is the type of current used to power home appliances.  The AC then flows from the inverter to the home’s electrical panel where it becomes available to power the home.  During a typical Arizona day with our ample sunlight, any power produced in excess of that needed to power the home can be fed back into the local power grid.  That will cause your electric meter to run backwards.  At night, when there is no sunlight, the household will be drawing its power from the regular power grid.  That is the typical urban system.  There are also systems where the solar is not connected to the power grid.  In those, excess power is stored in batteries to be used at night or on cloudy days.

Solar Purchase Options

Because solar power sounds so attractive in our sunny, southwestern climate, solar scams have sprung up seemingly overnight.  Most scams involve solar leases or PPA’s.  It is imperative that we understand the various options for installing a solar system before meeting with a dealer. Without knowing the pros and cons of each type of financing, an informed and rational decision is impossible.   

  • With a solar lease, the homeowner does not own the system.  Instead, he allows the contractor to install the system and pays monthly lease payments to the installer for the term of the contract.  Leases can be problematic for the following reasons:
  • Most involve long-term contracts, often 20 years or more;
  • Selling your home with a solar lease may prove difficult.  Many prospective buyers do not want to assume a solar lease in addition to the purchase price of the home;
  • Some contracts require home buyers assuming a solar lease to pay an onerous assumption charge;
  • Some leases make the homeowner responsible for maintenance and repair of the panels;
  • Leasing companies will often put a lien on your home to secure their interest in the system.  That may make it difficult for you, as the homeowner, to obtain a loan or to sell the house.  
  • While the homeowner usually believes he will own the solar system at the end of the lease, that may not be true.  Some lease contracts require a final buyout at the end of the lease.

A solar PPA has some of the same properties as a lease.  Like with a lease, the homeowner does not own the solar system.  PPA stands for Power Purchase Agreement.  With a PPA, a company arranges for a solar system to be installed on your roof.  Then, you, the homeowner, purchase your electricity from the PPA company rather than your local utility.  PPA contracts normally run from 10-25 years.  There have been issues with PPAs.

  • Like with a lease, selling your home may be difficult with a PPA in place;
  • In the early years, the PPA company sells you electricity for less than you would pay your local utility company.  However, many have escalation clauses that allow them to raise their rates.  In some instances, homeowners end up paying more for power from the PPA than the rate charged by the local utility.
  • Here again, the company may put a lien on your house to secure its interest in the panels.

The third option is to purchase your solar panels outright.  While buying the solar panels is an expensive investment, it is the best option economically.  Buying the panels allows you to choose the brand and quality of panel and the type of inverter. You do not have to worry about dealing with a leasing or PPA company, and there is no transfer issue with the sale of your home.  In fact, owning solar panels may be a positive factor in selling your home rather than a negative. The biggest drawback to owning the panels is the high cost of buying and installing the system.

Scams Involving Solar Power

The lease and PPA plans have provided great opportunities for unscrupulous companies to scam homeowners out of their hard-earned money.  A February, 2015 article in the Arizona Capitol Times described one of these questionable leases.  The article described an elderly couple calling state Senator Debbie Lesko.  They had been trying to sell their home for over a year because they needed to move to an assisted living facility.  Despite the couple being in their 80’s, a solar company talked them into a 20-year solar lease, telling them the solar panels would increase the value of their home by at least $25,000.  The lease had the opposite effect.   It was a stumbling block for selling the property.  The house remained unsold after the realtor had shown the property to prospective buyers 149 times.  Senator Lesko responded by introducing legislation to require clarity and disclosure in solar agreements.

That legislation required solar contracts to be in at least 10-point type.  Previously, many solar lease and PPA contracts contained key provisions in tiny print that homeowners would gloss over because it was so hard to read.  Now, agreements could no longer contain blanks for the company to fill in later with added terms and conditions.  The price of the panels and total cost of the lease must be included.  All assumptions about future electric costs now need to be spelled out, and the terms and costs of a home buyer assuming the lease must be described.  This legislation was signed by the Governor in March, 2015.

While the 2015 solar legislation has helped the discerning buyer have a better understanding of contract terms, scams still abound in the Arizona market.  Just recently, one of my family members was cornered by a solar salesman canvassing her neighborhood.  He wanted to sell her a solar lease.  High pressure tactics immediately put her on guard.  Once she said she needed to research the issue, she never heard from him again.  

Solar liens are another concern.  When homeowners lease solar panels or enter into a PPA, many companies put a lien on the home to protect their interest.  They probably won’t call it a lien.  One company calls it a “fixture filing.”  No matter what term is used, this filing amounts to a lien on the home.  It is basically a second mortgage that can impact your credit score.

There are legitimate, reputable solar companies doing business in Arizona, but there are also those with questionable and shady business practices.  Adding solar panels to your home might be the right decision for you, but there are many considerations to be explored before committing to a solar contract.

Are Solar Panels Right For You?

Before making a decision, do some research and ask yourself questions about your needs and your future plans.

  • Are there other, less expensive, options for decreasing your energy bill?
  • Have you spoken to other people with roof-top solar and asked about their experience?
  • Have you asked your insurance company how much roof-top panels will increase your homeowners’ insurance premiums?  (There absolutely will be an increase.)
  • Have you asked other owners about the cost of maintaining panels?
  • How long do you plan to stay in your home?  Unless you plan to live there for more than a few years, installing solar may not be a good investment.
  • Have you read the Arizona Department of Revenue’s Publication 543 describing the Residential Solar Energy Credit? 
  • Have you done any reading on solar surcharges and demand rates by Arizona Utilities? 
  • Have you checked into which companies are the most reputable?

Solar panels are not a quick fix to your high utility bills.  If you are interested in solar power, be careful.  Avoid door to door salesmen who want to pressure you into signing a contract on the spot.  Look at more than one company before signing anything?  Read the contract thoroughly.   

Resources:

www.azleg.gov/DocumentsForBill.asp?Session_ID=114&_Bill_Number=SB1465

www.azdor.gov/Portals/0/Brochure/543.pdf

www.solaroutreach.org/wp-content/uploads/2015/03/ResidentialITC_Factsheet_Final.pdf

This website has been prepared for general information purposes only. The information on this website is not legal advice. Legal advice is dependent upon the specific circumstances of each situation. Also, the law may vary from state-to-state or county-to-county, so that some information in this website may not be correct for your situation. Finally, the information contained on this website is not guaranteed to be up to date. Therefore, the information contained in this website cannot replace the advice of competent legal counsel licensed in your jurisdiction.

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