Casting a shadow on solar: Aggressive sale pitches target uninformed consumers

May 17—ALBUQUERQUE, N.M. — Los Lunas homeowners Yvonne and Richard Padilla purchased a $27,000 rooftop solar system in October 2019 that solar marketers told them would eliminate their monthly electric bills.

The sales pitch included a promise to pay back double the amount charged by Public Service Company of New Mexico during the first year of operation if the solar panels didn't immediately wipe away the couple's net electric consumption from PNM.

During late fall 2019 and winter 2020, the Padillas' PNM bills did fall to about $8 per month to cover the fixed service charge that all solar customers must pay to remain connected to the grid to receive utility-generated electricity when the sun isn't shining.

If working as promised, the system should overproduce electricity during the day, with the excess production sent to PNM for use by other electric customers. PNM then credits solar-connected homeowners like the Padillas for the electricity they supplied to the grid to offset their nighttime consumption, ideally canceling out any net utility charges.

But in May 2020, the couple received a $150 PNM bill as the weather warmed up and they cranked up their air conditioning and use of their built-in pool. Then, over the summer, the utility bills shot up over $300 a month.

The charges declined significantly again in fall and winter as they do for all PNM customers after homeowners shut down their summer cooling systems. But the Padillas' bills remain well above the $8-per-month fixed utility charge, ranging from $65 to $85 in the four months from last December through March of this year, Richard Padilla said.

"They promised to pay us double our PNM bills at the end of the year, but when I called them about it, they denied it and hung up on me," Padilla said. "... They said we would end up with zero PNM bills. That was the selling point — that we would never have another PNM bill."

The couple has tried repeatedly to get their grievances addressed over the past year, but now say they have difficulty even getting company representatives to answer the phone.

"They installed the panels, got their money and went away," Padilla said. "Now they've just left us on our own."

Like the Padillas, many New Mexico homeowners have experienced consumer shock after purchasing solar systems that don't perform as promised, according to numerous Journal interviews with industry experts.

And many others have signed long-term contracts to lease rooftop systems — or to allow operators to install systems that the company owns and operates — under promises of significant savings from lower electric bills. But after system installation, many find they've been locked into 20-year commitments for systems that don't produce the promised monthly savings, or that bind them to even higher monthly bills than they previously got from PNM.

In addition, in many cases, homeowners who lease systems or sign "power purchase agreements" to receive electricity from a company-owned system later learn that the installation company has "clouded" the homeowner's title with filings that make it appear like there is a lien on the home, complicating future sale or refinancing.

Consumer woes

In 2018, the New Mexico Attorney General's Office filed suit in 2nd Judicial District Court in Bernalillo County accusing out-of-state firm Vivint Solar Inc. of deceptive sales practices resulting in consumer fraud and racketeering involving nearly 3,600 homeowners in central New Mexico. The attorney general reached a settlement in the case last fall, shortly after Vivint was acquired by the publicly traded company SunRun, now billed as the country's No. 1 solar installation firm.

Vivint didn't admit to any of the allegations in the original lawsuit. But the settlement committed it to significantly modify its marketing practices to ensure that, going forward, solar customers are supplied with all needed information in clear and understandable language before signing a contract that fully spells out what the consumer is committing to and what the real production expectations are for the system that will be installed.

Vivint also agreed to a $1.95 million settlement payment, including about $709,000 in legal expenses and attorney fees for the private law firm that represented the attorney general in the case. The rest will go to the Attorney General's Office to help investigate and protect more consumers from potential deceptive marketing practices in the future.

"The litigation will improve the contractural and disclosure process," Attorney General Hector Balderas told the Journal. "It mandates that the solar company's employees improve their practices in engaging consumers in New Mexico. And it will hold many other companies who choose to misrepresent promises or take advantage through abusive sales tactics accountable in the marketplace."

The settlement may certainly strengthen legal efforts by homeowners in future cases of deceptive marketing, but it did nothing to compensate the thousands of consumers who signed contracts with Vivint and who were mentioned in the case. Those homeowners are now left to pursue legal recourse on their own, according to local lawyers representing some of the affected consumers.

SunRun didn't respond to requests to comments for this story.

City campaign

Perhaps more importantly, reports of ongoing abuses by other companies continue, prompting the City of Albuquerque's Consumer Financial Protection Initiative to launch a new solar panel public awareness campaign in March. The campaign aims to educate homeowners about the types of solar contracts that companies offer and what to look for to choose the best option for themselves.

Consumers need clear, simple explanations of what are often complex contracts to better distinguish between a potentially-deceptive marketing pitch and legitimate offers that may in fact be a good deal for them, said initiative Director Karen Meyers.

"It's clear many homeowners are not getting effective or helpful information on the different kinds of solar contracts being marketed, and they can end up in agreements they don't understand and that's not necessarily the best arrangement for them," Meyers told the Journal. "Some agreements may be initiated with deceptive practices that may end up costing much more than anticipated."

The campaign includes multilingual explanations in English, Spanish and other languages to break down the differences, including risks and benefits, between buying a system outright, leasing a system, or signing agreements to purchase power from a company that owns and operates the system on a homeowner's roof. That's in direct response to reports of consumers who signed contracts they don't understand, ended up with higher energy bills than expected, or only later realized they don't actually own the solar panels on their house.

"Homeowners need to take time to research the company selling a solar system and understand the contract before signing anything," Meyers said. "At the same time, companies that take advantage of consumers through high-pressure outreach, misleading statements, or deceptive marketing should be held accountable because those practices violate the law."

Industry response

The problem is, as the industry becomes more established and competition heats up, some companies have launched aggressive marketing campaigns to sign up customers, often with unrealistic promises about benefits, little explanation about risks and commitments, and sometimes outright fallacies regarding returns on investment, according to local industry leaders.

"We do see a lot of bad business practices out there with exaggerated promises to customers and over-priced systems," said Nick Kadlec, president and CEO of the homegrown, statewide installation company New Mexico Solar Group. "We've heard about a lot of people having bad experiences after signing contracts. ... It's hurting our industry."

Consumer complaints almost always involve out-of-state companies that enter the local market through subsidiaries or third-party marketing firms, Kadlec said.

"There are no local companies on my radar doing it," Kadlec said. "There's a real distinction between out-of-state and local firms."

Adam Harper, founder and CEO of homegrown Albuquerque firm OE Solar, said national companies started aggressively entering the local market about five or six years ago, after picking off the low-hanging fruit in other states among wealthier homeowners who can more easily afford solar systems. Companies began targeting middle- and lower-income consumers with new products, such as leasing solar systems or setting up company-owned panels on people's roofs to just sell them the electricity.

Many began canvassing neighborhoods with door-to-door sales representatives who use iPads to rapidly sign up customers electronically with little explanation of what the consumer is actually signing. That turned it into a "used-car sales mentality," Harper told the Journal.

"It's like fast-food solar — cheap, easy and not good for you," Harper said. "That's tarnished the industry on the whole. I cringe about it."

Agreements to lease solar panels, or to buy power from company-owned rooftop systems, can be good options for some people, especially lower-income consumers with little or no tax liabilities who can't take advantage of tax credits to purchase systems outright.

But some companies offer contracts that appear "too good to be true," and that should raise red flags among consumers, Harper said.

That's what led to the Attorney General's lawsuit against Vivint, which offered "free systems" under power purchase agreements allegedly claiming the panels would immediately lower electric bills by up to 30% or more.

"That turns the industry into a dog-eat-dog world," Harper said. "It becomes a race to the bottom among companies trying to sign up customers. Consumers can get tricked because everyone wants the cheapest power they can get."

Non-English speakers

Some non-English-speaking homeowners said they feel duped after signing agreements they didn't fully understand.

Longtime Albuquerque resident Maria Varela, for example — who is originally from Mexico and speaks little English — signed a contract last October with Meraki Solar LLC to install an $11,900 solar system on her West Side home after Meraki representatives knocked on her door while canvassing the neighborhood. One of the salesman, native Spanish-speaker Isidro Vasquez, told Varela during the home visit that the company would arrange for a 25-year bank loan to install the system, reducing her PNM bill to $8 per month with a monthly loan repayment of $46.

Vasquez told her she would be eligible for a $3,000 tax credit on the system. But Varela understood that to be a $3,000 cash refund from the company.

That encouraged her to sign the contract, which she did by electronic signature on her own phone. The document was entirely in English, and Varela never read it.

Florida-based Meraki is an authorized sales company for out-of-state solar installer Solcius LLC — the firm that is now contracted to install Varela's system. Varela has rejected repeated calls from the company to arrange for system installation since she never received the cash refund she expected. And once she finally understood — through phone conversations with company representatives and a follow-up visit with Vasquez — that there is no forthcoming cash refund, Varela asked to terminate the contract. But to do that, the company said she must pay a fee for services rendered to date of between $2,500 and $5,000.

"The truth is, I didn't understand anything," Varela told the Journal. "But I wanted the solar system and they told me I would receive a check for $3,000. They told me so many things all at once and I really didn't understand any of it."

Vasquez said he explained the tax rebate to her twice on his first visit in October, and again when he returned to her home this year.

"I explained thoroughly what it was about," Vasquez told the Journal. "She said multiple times that she understood, and she put her initials on it. It's then up to her."

No executives from Meraki nor Solcius returned numerous email and phone inquiries from the Journal.

In a separate incident, Southeast Albuquerque homeowner Jorge Mercado, also a Spanish speaker originally from Mexico, said he had to pay a $350 fee to Meraki to cancel a contract he signed for a $30,000 solar system after he learned the 26% federal tax credit could be stretched out over three years, depending on his annual tax liabilities. That would eliminate his ability to make a significant down payment on a bank loan to keep monthly payments affordable. But he said Meraki never explained how the tax credit would work before he signed the contract.

"They told me I'd get the tax credit at the end of the year," Mercado told the Journal. "But after signing the contract I found out on my own through a tax consultant that that's not true."

Growing pains?

The Padillas in Los Lunas said the company that sold them their solar system, Louisiana-based Sunpro Solar, also never explained that the tax credit on their purchase could be stretched over three years. As a result, the monthly repayment on their loan from a California-based credit union, which Sunpro facilitated, was scheduled to rise from $166 to nearly $190 in April because they couldn't make the full down payment needed to keep payments low, Richard Padilla said.

The couple signed their contract through DocuSign on an iPad with a Sunpro representative in their home. They never got a hard copy from the company until this year, and even then, it's only part of the full contract, Yvonne Padilla said.

"It's just a few pages — not the whole thing — and what I did read has raised red flags," she said. "None of the promises they made to us when we signed are documented in the contract."

Apart from the verbal pledge to pay back double anything that PNM charged the couple in the first year, other unfulfilled promises included a year's worth of free heating and air conditioning filters, a complete home air-leak assessment, and installation of a digital thermostat, the Padillas said.

In addition, the company was supposed to install 25 solar panels on the roof of the couple's single-story, 2,803-square-foot home. But after climbing on the roof himself to examine the system, Richard counted only 20 panels.

If accurate, it could, at least in part, account for why the system isn't producing enough electricity to offset consumption from PNM.

Sunpro Solar marketing strategist Vincent Pisciottano said he wasn't aware of the Padillas' individual contract and experience, but he said similar incidents have happened as the company rapidly expands into more markets.

"Things like this unfortunately do happen," Pisciottano told the Journal. "It's growing pains."

The company, which launched in 2008, now operates in 18 states and is billed as the country's fifth-largest residential solar firm. Rapid expansion has created problems in some divisions, particularly in the customer service division, Pisciottano said.

"To have a 100% infallible service, that doesn't exist," he said. "... We've had a boom in business, even during the pandemic, and it's brought some issues more to the top, particularly in customer service. Our team is consistently growing, or outgrowing, some of our service capacity, and Sunpro may have dropped the ball in some cases like this."

Pisciottano promised to review the Padillas' records and try to address the issues.

Standards ahead?

Local business leaders, however, say establishing more state-level, industrywide standards on structuring contracts and agreements could help reduce consumer abuse. That's something the New Mexico Renewable Energy Industry Association is considering, said Harper, who currently serves as the association's vice president.

"We've had discussions about industry certification with standards on what should be acceptable in New Mexico's solar industry," Harper said. "... You can't cut corners and consumers should be wary of the cheapest solar bids."

Attorney General Balderas said state and federal legislators also need to consider stricter regulation as the industry evolves with more complex contracts like leases and power purchase agreements between solar companies and homeowners.

"It's like in the 2008 housing crisis when there were many new mortgage products and contracts and consumers weren't informed enough," Balderas said. "We don't want the solar industry to make the same mistakes as they introduce new products. The industry needs to ensure there are safeguards and that companies are not taking advantage of consumers with complex financial agreements."

Just as important, consumers need to educate themselves before signing with a solar company, said REIA Executive Director Jim DesJardins.

"This is a young industry and people are not very familiar with it," DesJardins said. "Similar things happen in other industries like used auto sales or real estate, but everyone by now is conscious about things like used-car scams. ... Always do your homework before committing — that's the bottom line."