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Sunrun Gets Sued - But is a Bad Deal Deceptive?


  08:58:00 am, by Jim Jenal - Founder & CEO   , 1328 words  
Categories: Solar Economics, Solar News, Ranting

Sunrun Gets Sued - But is a Bad Deal Deceptive? UPDATED x2

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SECOND UPDATE - Over at PVTech, Felicity Carus has written about the Sunrun lawsuit and quoted Run on Sun Founder & CEO, Jim Jenal at length.  Here’s a link to her article: Solar lease companies face criticism over calclulating energy savings.

UPDATE - The lawsuit against Sunrun was covered in the March 1, 2013 issue of California Energy Markets (an independent news service from Energy Newsdata) and Run on Sun Founder & CEO, Jim Jenal, is quoted at length.  The article, titled Lawsuit Charges Sunrun with Deceptive Marketing, begins on page 8 of the attached pdf and Jenal’s remarks begin on page 9.

Solar leasing giant Sunrun now finds itself the target of a statewide, class-action lawsuit, alleging that its business practices in marketing residential solar leases are false and deceptive. But just because a lease is a bad deal for the consumer doesn’t make Sunrun’s marketing actionable or a lawsuit justified.  Here’s our take.

Readers of this blog will know that we are far from fans of residential solar leases.  In our view, those leases are a boon to finance companies but not such a great deal for homeowners.  By luring potential customers with the enticing prospect of getting something for nothing, residential solar leases have become the driving force in the residential market - even though the customer would be far better off financially if they purchased the system and collected the rebate and tax credit for themselves.

But the lawsuit against Sunrun does not allege that the Plaintiff, Shawn Reed, got a bad deal from the company.  Instead, the Complaint claims that:

The central premise of SunRun’s [sic - misspelled throughout the Complaint] uniform marketing campaign is that increases in electricity prices will result in cost savings by installing the SunRun Solar system.  But 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.  Others whose electricity prices will not rise as high as estimated by SunRun will experience the cost disadvantage in the future.  But whether the cost disadvantage is experienced or not, the promise of a system sure to result in cost advantage was false when made and likely to deceive consumers into leasing a system they otherwise would not have.

Complaint, ¶ 3 (emphasis added).

To be sure, there are other allegations in the Complaint, including the claim that Sunrun acted as a contractor without a contractor’s license and that Sunrun’s contracts are less than clear about whether a customer can terminate their contract when they move without penalty.  However, for our purposes we are only going to focus on the allegations about Sunrun’s “central premise” in their “uniform marketing campaign.”

Knowing the Unknowable

The gist of Reed’s claim is that Sunrun told him that his system would save him money - “tens of thousands of dollars” according to the Complaint - based on a prediction as to what future energy prices would do, namely rise.  Sunrun claims, according to the Complaint, that “Nationwide, electricity rates have been increasing 6% per year over the last thirty years,” but this, according to the Complaint, is itself deceptive, citing data from the California Public Utilities Commission showing the increase from 1982 to 2010 was only “3.25% annually.”

Leaving aside the nit of California data (cited by Plaintiff) versus national (allegedly cited by Sunrun), the larger question arises: what is a fair basis for predicting future costs of electricity?  After all, this is an issue that affects far more than solar leasing companies.  Every seller that markets a good or service designed to reduce your usage of grid energy - whether by generation or efficiency - makes assumptions about future energy costs as a basis for predicting your return on investment.  There simply is no other way to do the calculation. Are all of these folks engaged in “deceptive” marketing tactics?  As long as the assumptions are disclosed - and without seeing the contract at issue we cannot say whether they were or not - it is hard to see how even an erroneous prediction could be deceptive.

Moreover, anyone who has looked at a graph of the cost of energy in California over the past fifteen years knows that it more closely resembles a roller-coaster ride than anything consistent - what with a trader-generated energy “crisis” followed by the greatest recession in living memory.  With that much noise in the system, what is a “fair” prediction?

We know for a fact that SCE just secured a three-year, 17.2% rate increase from the CPUC.  That works out to 5.7% per year - pretty close to the allegedly “deceptive” prediction of 6% cited in the Complaint.  As California’s cap-and-trade law begins to be felt, it is expected that there will be more upward pressure on energy prices, yielding even greater cost increases in the future.  Add-in an economy recovering from recession and suddenly a prediction of 6% annual increases doesn’t seem to be particularly unlikely, let alone deceptive.

A Better Approach

Of course, asking a potentially unsophisticated consumer - no offense intended to Mr. Reed - to push back on the assumptions made in any ROI calculation may be asking too much.  But is a lawsuit really the best way to address this problem?  Litigation is a painful process which rarely provides societal benefits, and class-action lawsuits are often the worst of the worst with no one really benefiting - except, of course, the lawyers.

A better approach would be to see some appropriate legislation passed that would standardize the disclosures provided to potential clients by all solar companies.

There are plenty of examples that could serve as a model.  Think of shopping for a major appliance - when you go to compare two different refrigerators, you will see a prominent label that reveals how much energy each one will consume in a year and how that usage compares relative to other, similar units.  You will also see an estimated cost to run that unit for a year - with all of the assumptions set out on the label so that a GE product uses the same assumptions as one made by LG.

The time is ripe to devise a system by which any seller of solar power systems in California would have to provide standardized, regulated disclosures.

You could make it more palatable to solar companies by providing a “safe harbor” against deceptive business practice lawsuits like the one facing Sunrun - as long as the solar company provides the necessary information in a standardized manner, they would be deemed to have satisfied their disclosure requirements to the potential client.  (They could always add more information as long as it didn’t obscure the meaning of the required disclosures.)

This would also be a boon to consumers since a properly designed set of disclosures would allow competing proposals to be judged as apples against apples - something that is almost impossible to do now.

So what should those disclosures include?  Here is our (non-exhaustive) list:

  • Disclosure of all major system components (modules, inverters(s) and racking) including manufacturer, model, country of origin, price and warranty.
  • Disclosure of total system cost, including the total added cost of any financing being provided.
  • Disclosure of all assumptions included in any cost-savings projections.  For the controversial energy cost increase factor, the CPUC should provide annually updated figures based on historical data and any approved rate increases scheduled to go into effect.
  • Disclosure of the actual cost of energy produced based on total lifetime cost (including component replacements not covered under warranty and other required maintenance) divided by total energy to be produced (accounting for a system performance decline factor based on the module manufacturer’s performance warranty) over the projected 25-year system lifetime.

Such a law would work no hardship on reputable solar companies as we are already providing that information to our clients.  But putting it in a standardized format would move the solar industry forward and help avoid pointless litigation like that now facing Sunrun.  As responsible members of the solar industry, it is up to us to make this happen.


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Comment from: cbdh19  
5 stars
cbdh19Great piece Jim! I’m glad someone is finally stating the obvious: The whole question/issue of how solar companies represent ROI is not unique to solar leasing, but is an industry-wide issue. Seems to me, the anti-solar leasing crowd has used this case, and other similar ones with similar allegations but where no formal action has been taken, to smear solar leasing. This while many of these same folks have been using the same/similar ROI models while trying to sell solar outright. That’s not fair, it’s also incorrect. You set the record straight here in sophisticated fashion. Nice job :-) P.S. – Would love to see you write a piece in which you address the following: Would solar adoption in the U.S. be where it is right now without solar leasing (I think the clear answer is no, but that’s my personal take)? And, if solar leasing is not the fair/best way to grow solar in the U.S., what is a fair/realistic way to do so, something that actually has a political and economic chance of succeeding? I still say the primary reason so many go for solar leasing over buying is because they’ve been conditioned to paying their electric bill on a monthly basis, not paying it forward with a big upfront payment; if you can overcome this consumer conditioning with an alternative model to solar leasing that recognizes this reality – the monthly-bill mentality, then I’m all for it. But right now, I see solar leasing as playing a crucial role in growing solar in the U.S., and that, more than anything else, is what I have my eye on. –Christof Demont-Heinrich Editor, SolarChargedDriving.Com
02/27/13 @ 09:59
Comment from: Jim Jenal - Founder & CEO  
Hi Christof - I always appreciate your comments, thanks for the kind words. Given that 70% of residential installs in CA are leased systems, I do not believe that anyone can doubt that leases have played a major role in growing solar. I maintain it is the promise of something for nothing that induces customers to go the leasing route - even though, at the end of the day, the piper must be paid. But is there a better solution? Without a doubt - PACE. Keep in mind that PACE was about to take off at a time when solar leasing barely existed. Had the PACE programs that were ready to roll - like the one here in LA County - been allowed to go forward, leasing would have died aborning, in my view. Instead, using highly questionable logic, Fanny & Freddie killed PACE and leasing filled the void. But make no mistake - a low-interest PACE program would have grown solar much faster at lower cost to homeowners. Of course, a bunch of well-connected finance types would have had to find a different industry to game… Jim
02/27/13 @ 10:22
Comment from: cbdh19  
cbdh19It’s a shame that PACE didn’t win out then. Do you think PACE would have been able to spread beyond California and take off in other states?
02/27/13 @ 12:20
Comment from: Jim Jenal - Founder & CEO  
Absolutely - indeed, on the commercial side, it has. But residential was where it would have had the greatest impact.
02/27/13 @ 12:23
Comment from: ccasey  
ccaseyCap and trade, nuclear decommissioning and the extremely cyclical economics of natural gas are all going to make the rate payers wish they could lock in a rate escalation of 5% over the next 10 years. The question is where the money for that sort of long term planning ends up. The federal and state agencies all but gave it away to tax equity investors (read: hedge funds) when residential PACE was hung out to dry.
02/27/13 @ 23:34
Comment from: txsolarguy  
txsolarguyThe solution for the specific complaint and crux of the article is to charge in a manner similar to coop electric utilities. If one years electric utility expenses [maintenance, overhead, fuel purchase, etc] are less than the revenue taken in from monthly retail electric bills, the following year customers electric rate per kWh are lowered. The inverse is true if costs are higher. National and state electric rates are well documented and could provide a clear standard that all leases will have to follow. Lease customers don’t seem to realize that the cost escalation for an owned PV system is zero while the ROI on a leased system is also zero. Let the buyer beware…
02/28/13 @ 17:32
Comment from: david  
davidHi I have to comment on sunrun. I have sunrun panels on my roof. When sunrun came to my door I told the rep that we wernt interested because we herd all about people getting stuck in a lease agreement. The rep assured us there were no lease agreement. He also told us that if we were not happy we just tell sunrun to get the system off our house. He also told us if we wanted more panels all we had to do is call them. I asked him if we were to sell the house what would happen to the panels. He told us if we sold the house they would count on the new owners wanting to save money and turn the system back on. There was no catch or strings. The rep told us that sunrun would maintain the panels for 15 years. I asked him if I still had the house what would happen to the panels after fifteen years and he told me the panels would be mine they wouldnt want them because technology would have got better. We signed everything had them installed and right to the end he assured us we would not be stuck in a lease or anything like it. Over the last week I have had solar companys call me and asked me who I had and what kind of agreement I had and I told them everything I just said. They told me I needed to call sunrun because they thought I was in a power purchase whicth they said was the same as a lease. I called sun run and they said I was responsible for 20 years and if I wanted more panels then I would have to have a whole new system put on my roof. After I found that out I started looking on line and found out I wasnt the only one lied too. Sunrun reps told other people the same line. I contacted a lawer and he said I was already part of the law suit against sun run for the same thing. I dont want to be stuck with these panels for 20 years. The receipt shows they only cost 15 to 16 thousand dollars. These big companies keep taking advantage of people they got whats coming to them. Thank you
04/02/14 @ 15:11
Comment from: Jim Jenal - Founder & CEO  
David - I am sorry to hear about your experience. Leases and PPAs make sense for large-scale commercial operations, but they are a poor fit for residential clients like you. The solar industry really needs standardized disclosures so that all consumers can fairly evaluate what is being offered to them and properly compare one proposal against another. Jim
04/02/14 @ 16:46
Comment from: ken
5 stars
kenSounds like SunRun did an end-run and is now on-the-run. Consumers need to do their homework or someone else will do it for them and that’s when it gets expensive.
05/19/14 @ 19:00
Comment from: denise  
deniseDavid - We are currently in a lease with Sunrun & have experienced things very similar to what others have posted. We are trying to find out the status of the lawsuit. Can you give us any updated information? Is the lawsuit still pending or was it settled?
10/05/14 @ 22:42
Comment from: Lou Reyes
Lou ReyesHey Guys We bought in to the whole dog and pony act. The first 2 years were great and our end of the year reconciliation from SCE was under $50. Roll forward to the last 3 years where they have averaged around $500 + a year. And this year after 9 months, we owe SCE around $1000. Combine that with the $156 that we pay Sunrun and it comes out to over $2500 yearly bill. We are retired senior living on a fixed income of around $3500 and it eats up a sizable chunk of money that we can’t afford. Does anyone know how the lawsuit is going.
12/17/14 @ 00:38
Comment from: harry_hamilton  
5 stars
harry_hamiltonPlease keep me informed of all things happening with this Sunrun Company. I thought i was doing a good thing, but my electricity is higher than when I started with Sunrun. It really does make me upset that companies take advantage of senior citizens and veterans, and other people.
02/27/15 @ 14:13
Comment from: Michael
MichaelSunRun is the worst option in solar. Completely deceptive sales and it is a bad deal. The power company buys your electricity for .o4 cents and charges you retail. You also have to pay sunrun high tier price for electricity that you can get cheaper from the power company. The power company and sunrun make out and you the customer are left holding the bag. Read every word of a contract and run from SunRun.
09/02/15 @ 13:51
Comment from: walter_lukowski  
3 stars
walter_lukowskiI to got duped into Sunrun, On my electric bill it shows that I owe SEC around $ 15.00 for electricity. But what they are not telling you is there is about $130.00 in generation and delivery charges, which makes my bill including Sunrun part $345.00. I have never had an electric bill over $300.00 before. Boy did I get ripped.
09/24/15 @ 22:54
Comment from: Jim Jenal - Founder & CEO  
Hi Walter - I’m sorry to hear about your experience. As you can see from these comments, your experience is not unique.
09/25/15 @ 08:20
Comment from: tom_combs  
tom_combsJim, Reading all the comments on SunRun, did anyone actually come up with someone who is pursuing this issue? I did some research and it looks like the original class action lawsuit by Reed, is dead in the water. Interesting enough we are trying to sell my mother-in-laws house and are having a BIG problem with potential buyers not wanting to assume the lease. Apparently this is becoming quite an issue in the real estate community. There are apparently many sellers who find themselves in the same position. Your site is the only one I have come across that is not a PR site for solar installation.
10/09/15 @ 13:23
Comment from: Jim Jenal - Founder & CEO  
Hi Tom - we try really hard to give people the most straight-forward info we can provide. Solar is a great investment, but not every seller of solar has the client’s best interests at heart. I have not been able to learn anything more about this case, or any other litigation against Sunrun. But I am very concerned that such litigation is sure to come, given how some of these programs have been sold to consumers.
10/09/15 @ 13:29
Jim Jenal is the Founder & CEO of Run on Sun, Pasadena's premier installer and integrator of top-of-the-line solar power installations.
Run on Sun also offers solar consulting services, working with consumers, utilities, and municipalities to help them make solar power affordable and reliable.

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