Re: Solar Electricity Project No. P161200
Dear Chairwoman Ramirez,
Public Citizen attended the June 21, 2016 FTC workshop Something New Under the Sun: Competition & Consumer Protection Issues in Solar Energy which addressed opportunities and challenges for households utilizing distributed solar resources. The workshop covered arrangements in which consumers lease their solar system from a corporate third-party. As a follow-up to the workshop, the FTC solicited comments on consumer protection concerns with the rooftop solar industry.
Public Citizen hereby submits comments concerning mandatory arbitration clauses that the solar leasing industry imposes upon consumers. The most important consumer protection that the FTC can promote is to issue a rule forbidding such mandatory arbitration clauses in solar lease contracts.
About Public Citizen, Inc.
Public Citizen is a nonpartisan, not-for-profit research and consumer advocacy organization representing the interests of our more than 400,000 members and supporters across the United States. We promote policies that provide affordable, sustainable and reliable energy for our members. We intervene in cases before the Federal Energy Regulatory Commission and state utility commissions to advocate those electric power market reforms that ensure fair and affordable rates for household consumers. Public Citizen Energy Program Director Tyson Slocum serves on the U.S. Commodity Futures Trading Commission’s Energy and Environmental Markets Advisory Committee, where he advises federal regulators on oil, natural gas, electric power and other energy markets. Slocum also frequently testifies before the U.S. Congress on a variety of energy and climate change related policies and regulations on behalf of consumers, and has testified at FTC hearings on energy market competition issues.
Distributed Generation Solar Power
Public Citizen supports policies that allow households to enjoy the financial benefits of distributed generation solar power. Technological innovations are transforming elements of the electric power industry away from centralized sources of generation and towards distributed sources. Plummeting production costs, combined with a variety of financial incentive and tariff programs, have placed photovoltaic solar ownership in reach for many families. Concerns that state net-metering policies shift costs onto consumers lacking solar can be successfully addressed with basic reforms. Innovative financing arrangements such as third-party solar leasing have expanded rooftop solar access to families that cannot afford ownership. Leasing represented three-quarters of all new distributed solar deployment over the last year.
It is important to note, however, that as much as third-party leasing has expanded solar access, millions of low- and moderate-income families are shut out of the solar leasing market. Solar leasing is not a low-income access program, and it does not serve the needs of renters, those with poor credit, and those in structures unsuitable for rooftop solar. Additional government initiatives that prioritize equitable solar deployment are needed to ensure that all families will benefit from the technological revolution that will continue to occur in power markets. But that broad issue is beyond the scope of FTC jurisdiction, and is best remedied by state and other federal agency initiatives.
Solar Leasing, Consumer Risks, And Abusive Mandatory Arbitration Clauses
Leasing solar panels can provide financial benefits for families that own their homes but lack the money to buy panels. In a typical arrangement, the solar leasing company retains ownership of the panels, installing them for free with no money down, in exchange for the consumer’s agreement to a long-term lease or power purchase agreement (PPA). The consumer pays the solar lease company each month for utility service in lieu of their local utility or other competitive supplier. And because the solar leasing company retains the financial value of any tax incentive (Investment Tax Credit, etc.) and regulatory incentive (Renewable Electricity Credits, net metering, etc.), it is possible for the leasing company to charge a monthly fee that may be less than what the consumer previously paid the utility or competitive supplier.
A result is that the solar leasing company, in effect, becomes the utility for the consumer. As the solar leasing market continues to grow and attract millions of consumers, some solar leasing companies will become larger than traditional utilities, in terms of the number of customers served. The terms of service and other leasing contract details essentially serve as utility service for the consumer.
For a variety of reasons (some quite legitimate), solar leasing companies are not regulated by state utility commissions in the same way that traditional utilities or even competitive retail suppliers are. But because state utility commissions do not regulate the leasing contracts, consumers may find themselves in a regulatory-protection limbo should a dispute arise.
Solar leasing arrangements pose significant financial risks for families. The terms of the contracts typically leave the consumer financially responsible for panel removal and re-installation costs should any roof repairs be required during the lease term. The consumer is responsible for the lease if the house is sold and the new buyer elects not to take on the lease. And, importantly, the consumer is typically liable for any underlying changes in state net-metering or other incentive programs that could ultimately result in significantly larger monthly payments for the consumer.
Because utility commissions do not regulate to protect solar leasing consumers, it is critically important that households have every means of legal recourse available to them in the event of a disagreement. However, mandatory arbitration clauses are standard in solar leasing contracts (See Appendix I). Mandatory arbitration robs the consumer of the ability to resolve a dispute with a solar leasing company in a court of law; instead, the terms of the contract require use of a company-friendly arbitration process that advantages the solar leasing company and leaves the consumer unable to appeal.
These mandatory arbitration clauses, when combined with the lack of effective state utility regulatory oversight, expose consumers to unnecessary harm.
The FTC has authority to ban binding mandatory arbitration clauses through its general authority to regulate unfair and deceptive acts or practices,2 since solar leasing contracts currently exist in a regulatory void, and most consumers are unaware that the terms of their contract essentially binds them to an unregulated utility. In light of the unique regulatory situation of the solar leasing industry, it is unfair and deceptive to deprive consumers of redress for grievances.
While third-party solar leasing has experienced explosive growth and has provided financial opportunities for some families, there are a number of significant risks associated with solar leasing contracts. State utility regulatory commissions do not have jurisdiction over the solar leasing industry in the same way they do over traditional utilities, a state of affairs that leaves consumers with inadequate protections. Unfortunately, the solar leasing industry standard contract features mandatory arbitration clauses, denying consumers access to U.S. courts in the event of a dispute. Given the lack of adequate state regulatory oversight over the solar leasing industry, it is necessary for the FTC to protect consumers by issuing a ban on mandatory arbitration contracts in the solar leasing industry.
Tyson Slocum, Energy Program Director Public Citizen, Inc.
215 Pennsylvania Ave SE
Washington, DC 20003 (202) 454-5191