BILL ANALYSIS Ó
AB 2699
Page 1
Date of Hearing: April 12, 2016
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Rudy Salas, Chair
AB 2699
(Gonzalez) - As Introduced February 19, 2016
NOTE: This bill is double-referred, and if passed by this
Committee, it will be referred to the Assembly Committee on
Judiciary.
SUBJECT: Department of Consumer Affairs: solar companies:
solar energy systems.
SUMMARY: Requires the Department of Consumer Affairs (DCA) to
create a "Department of Consumer Affairs solar energy system
disclosure" document containing specified information about
solar energy systems; requires a solar company to provide to the
consumer the DCA disclosure and a separate solar company
disclosure document prior to a sale, lease or financing of a
solar system; provides specified legal remedies for solar
customers for damages; states the intent of the Legislature for
the DCA to certify a solar company and establish an insurance
pool for solar system customers, as specified; makes findings
and declarations relating to solar systems and use in
California.
EXISTING LAW:
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1)Provides for the licensure and regulation of contractors,
including home improvement contractors, under the Contractors'
State License Law (Contractors Law) by the CSLB within the
DCA. The CSLB is under the direction of the registrar of
contractors. (Business and Professions Code (BPC) Section
7000 et seq.)
2)Defines a HIS as a person employed by a home improvement
contractor licensed under the Contractors Law to solicit,
sell, negotiate, or execute contracts for home improvements,
for the sale, installation or furnishing of home improvement
goods or services, or of swimming pools, spas, or hot tubs,
except as specified. (BPC Section 7152)
3)Provides that it is a misdemeanor for any person to engage in
the occupation of a salesperson for one or more home
improvement contractors within this state without having a
registration issued by the Registrar for each of the home
improvement contractors by whom he or she is employed as a
HIS. (BPC Section 7153)
4)Establishes the DCA to advance the interests of consumers by
facilitating the proper functioning of the free enterprise
market economy by educating consumers, fostering competition,
and promoting the consumers' interest. (BPC Section 300)
THIS BILL:
1)Defines the following:
a) "Customer" to mean any person, firm, corporation, or
other entity that is solicited by, inquires about, or seeks
the service of a solar company for the purchase, financing,
or lease of a solar energy system;
b) "Department" means the DCA; and,
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c) "Solar company" to mean any company and its broker,
brokers, or agents that sell, finance, or lease solar
energy systems.
2)Requires a solar company, prior to the completion of sale,
financing, or lease of a solar energy system, to provide each
customer with a "solar energy system disclosure document"
(disclosure).
3)Requires the disclosure to include all of the following
information:
a) A list of current residential or business electric rates
by kilowatt hour, as specified;
b) If a payback calculation for the solar energy system is
provided, the calculation must be based on the customer's
current electric rate;
c) A notification that electric rates are subject to change
in the future and that estimates of savings are based on
today's electric rates, as specified;
d) A link to a page on the customer's electricity
provider's Internet Web site that provides information
about the electrical providers filings regarding future
rates;
e) A description of the solar company's contractor's
license, license number, and name of the qualifier for each
of the solar company's licenses for solar system
installation;
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f) Valid, current certificate of insurance for the solar
company's commercial general liability and workers
compensation insurance policies;
g) A description of the average level of electricity per
month that would be produced by the solar panels planned
for installation; given the actual physical limitations and
conditions specific to the customer;
h) A notification that, when renewable energy attributes
are retained by the solar company, the customer is not
buying solar power, nor buying renewable energy;
i) A notification that the balance of any financing or
lease arrangement is payable to the solar company in the
event of the death of the customer during the term of the
agreement;
j) An estimate of the cost of removing and reinstalling
solar panels in the event that the roof material beneath
the solar panel is replaced;
aa) An explanation of the potential change in electricity
production of a solar energy system if the panels become
dirty, along with instructions on how to maintain the solar
energy system; and,
bb) A notification that customer bill credits are
compensated by other customers of the electricity provider.
4)Requires a solar company that sells, finances, or leases a
solar energy system to a customer primarily in Spanish,
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Chinese, Tagalog, Vietnamese, or Korean, whether orally or in
writing, to provide the disclosure in that same language.
5)Requires the DCA, subject to the Administrative Procedures
Act, to adopt a regulation that includes a "Department of
Consumer Affairs solar energy system disclosure document"
informing customers of the risks and rewards of solar energy
system ownership and warrant issues, and protecting those
customers from unscrupulous or unfair business practices.
6)Requires the solar company to provide both disclosures at the
same time.
7)Requires the disclosure created by the DCA to include, but not
be limited to, information about the following:
a) Solar energy system malfunctions;
b) Installations not performed to code;
c) Roof intrusions and related structural concerns;
d) Bankruptcy, insolvency, default takeover, or closure of
a solar company with existing customers, especially with
respect to solar companies who lease systems; and,
e) Loss of warrant on solar energy systems caused by
bankruptcy, insolvency, default, takeover, or closure of a
solar company or a solar manufacturer.
8)Prohibits solar companies from using the trade dress of other
energy providers, as specified, when marketing its services to
customers.
9)States that a violation of the disclosure requirements is
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punishable by an undisclosed fine amount.
10)Authorizes, in addition to the fine in number 9 above, a
customer damaged by a willful violation of the disclosure
requirements, may bring a civil cause of action against a
solar company for damages, including, but not limited to
general damages, special damages, and punitive damages.
11)States that a court may award equitable relief, including,
but not limited to an injunction, costs and any other relief
the court deems proper, and the rights and remedies are in
addition to any other rights and remedies provided by the law.
12)States that it is the intent of the legislature to enact
legislation that would require the DCA to certify a solar
company and establish an insurance pool, as specified.
13)Makes findings and declarations relative to the million solar
rooftop initiative and the need to ensure that solar customers
are provided accurate, clear, and concise information to make
informed decisions about solar energy system installation.
FISCAL EFFECT: Unknown. This bill is keyed fiscal by the
Legislative Counsel.
COMMENTS:
Purpose. This bill seeks to increase consumer awareness about
solar energy systems by requiring the DCA to create a "DCA solar
energy system disclosure" (disclosure) document which a solar
company must provide to a customer prior to the completion of
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the sale, financing, or lease of a solar energy system. In
addition, solar companies will be required to provide their own
additional disclosure document. The disclosure documents are
intended to inform consumers about the potential risks and
rewards of solar energy systems. The disclosure must contain
specified information about electric rates, payback
calculations, the contractor's license information, information
about a person's electricity provider, information about lease
arrangements in the event of a leaseholder's death, estimates
for removal and reinstallation of roofing materials, explanation
about loans and potential changes in electricity production,
among others. In addition, this bill states it is the intent of
the legislature to establish an insurance pool for customers of
solar energy systems, under specified circumstances, and
provides specified legal remedies for solar customers for
damages.
This bill is sponsored by the author. According to the author,
"Californians are committed to aggressive action to address the
ongoing threats of climate change, including the adoption of
aggressive goals for renewable energy production. These
benchmarks serve as a model for the entire world and continue to
motivate entire countries to take stronger steps of their own.
Essential to achieving these goals and mitigating the dangerous
impact people are having on our climate is ongoing investment in
home solar systems. To their credit, Californians across the
state have embraced this challenge enthusiastically, leading to
a major boom in the solar industry. It's critical that our
oversight and disclosure keep pace. As is too often the case,
rapid expansion has led to uncertainty and occasional bad actors
in the marketplace, where multiple incentive programs have
presented the general public with unprecedented options but
often without the levels of clarity or disclosure those other
large-scale financial products carry. As a result, many
consumers have been surprised by long-term financial impacts,
often hindering their ability to stay in or sell their homes.
Complaints have been lodged nationwide over the lack of clear
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disclosures, prompting widespread efforts to improve consumer
protections. We can't rely on commission-driven salespeople in
an under-regulated industry to ensure that all customers
reliably receive all the information they need to make informed,
responsible decisions. California has wisely used its
legislative influence to help spur the growth of the home solar
market, and now has an obligation to ensure that home solar
customers receive accurate, clear, concise information about the
installation of home solar systems."
Solar Industry. According to the Solar Industries Association,
California continues to be the leading solar market in the
United States. The California Solar Initiative program provides
incentives for solar systems installed on existing residential
homes, existing and new commercial, industrial, government,
non-profit, and agricultural properties within the service
territories of the state's three investor-owned utilities:
Pacific Gas and Electric Company Southern California Edison and
San Diego Gas and Electric.
Information retrieved from the U.S. Energy Information
Administration stated that "One of the biggest developments in
the U.S. residential solar photovoltaic (PV) market over the
past few years has been the significant growth of residential
solar PV systems not owned by homeowners. These are often
referred to as third-party-owned systems. Data from the
California Solar Initiative (CSI) program, the largest and
longest-running residential and commercial solar incentive
program in the United States, show that third-party-owned
residential installations grew rapidly as the solar industry
created and refined the third-party ownership model. In 2012 and
2013, more than two-thirds of residential installations in the
CSI program were third-party owned. Industry reports have
indicated that the growth in popularity of third-party-owned
residential solar PV systems is occurring in other states as
well."
The need for information to be provided to consumers regarding,
the installation, purchase or lease options, and professional
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licensing about solar energy systems is intended to enhance
awareness about the options of solar energy systems and the
types of financing options available to consumers. According to
information provided by the author, installation companies,
driven mainly by the "rooftop" sector, are responsible for 54
percent of all solar jobs in California, totaling 40,597, and
saw a 29 percent growth rate in 2015. There are over 1,000
contractors or installers in California. The rooftop solar
industry has a limited track record and limited regulatory
oversight. Since the early bloom in the rooftop solar industry,
it has been criticized for its business and deceptive marketing
practices.
According to the July 15, 2014, article by National Public Radio
titled Leased Solar Panels Can Cast A Shadow Over A Home's
Value, "Installing solar panels on a house to generate
electricity often costs $20,000 or more, and many homeowners
have turned to leasing programs to avoid those upfront costs.
But most leases are for 20 years, and that can present problems
if someone wants to sell the house before the lease is
completed."
In order to help consumers navigate the complex system of
choosing to purchase or lease a solar system, this bill will
requires consumers be provided with specific information about
sale and leased systems, along with information about energy
rate calculations, maintenance of the solar systems, electric
rate fluctuations, the contractor's license number, and a
notification about the balance of lease agreements upon death.
Licensure and Registration Requirements for Solar Installers.
Except for those systems that are self-installed, all systems
must be installed by appropriately licensed California
contractors in accordance with rules and regulations adopted by
the CSLB. Installation contractors must have licenses specific
to PV systems. All systems must be installed in conformance
with the manufacturer's specifications and with all applicable
electrical and building code standards. This bill will not
alter current licensing or other requirements for installers of
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solar systems or companies that offer the sale of solar
services, this bill will require consumer disclosures be
provided with disclosure documents containing relevant
information about the installation of solar systems in
California
According to information provided by the CSLB, between 2010 and
October 2015, the CSLB received 802 complaints against licensees
connected to a contract for solar construction. Misleading
power generation claims, cost savings that do not match what has
been promised, and hard-sell, deceptive financing are the
leading cause of solar complaints filed with CSLB.
Many of these complaints relate to leases and power purchase
agreements. Consumers often are not provided a clear
explanation between customer-owned, leased and power purchase
agreements, as well as the terms of purchase contracts and
equipment leases. Additionally, the CSLB noted that it has
investigated several reports of consumers who have signed leases
with companies that dispatch a licensed contractor to install a
system, but are not licensed themselves.
Contractors State Licensing Board. The CSLB is within the DCA
and is responsible for implementation and enforcement of the
Contractor's State License Law; the laws and regulations related
to the licensure, practice and discipline of the construction
industry in California. All businesses and individuals who
construct or alter, or offer to construct or alter, any
building, highway, road, parking facility, railroad, excavation,
or other structure in California must be licensed by the CSLB if
the total cost (labor and materials) of one or more contracts on
the project is $500 or more.
The Board licenses approximately 290,000 contractors in 44
license classifications and two
certifications. In addition, the CSLB registers some 9,600 home
improvement salespersons who are engaged in the sale of home
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improvement goods and services.
According to information from the CSLB, only contractors with
specified license classifications are authorized to perform
solar construction or installation. Those without any of these
license classifications are not authorized to perform this type
of work. Those licenses include: "A" General Engineering, "B"
General Building, or C-46 Solar licenses can perform solar
construction and installation. Contractors with a C-4 Boiler,
Hot-Water Heating and Steam Fitting; C-10 Electrical; C-36
Plumbing or C-53 Swimming Pool license can only do solar work
within their classification as defined by CSLB regulations
Solar sales and financing personnel must register as home
improvement salespersons with CSLB
A person who solicits door-to-door or negotiates the terms of a
contract is required to be a registered home improvement
salesperson. A registered salesperson is less likely to mislead
or misinform potential customers about the benefits of
installing a solar system. Although this bill does not revise
current licensure requirements for solar companies, it does
require the disclosure to contain a contractor's license number
and the name of the qualifier for each of the solar company's
licenses for solar system installation.
ARGUMENTS IN SUPPORT:
The California Municipal Utilities Association (CMUA) writes in
support, "The [CMUA], representing over 60 locally owned
electric utilities, utility districts and water agencies writes
in support of AB 2699 (Gonzalez) a bill to require solar
companies selling or leasing solar roofs to provide a specified
disclosure document to prospective customers. This bill also
requires the [DCA] to create a disclosure document. CMUA
members value our customers and the choices they make. As
locally owned utilities and water agencies, we often help
consumers with incentives, rebates and giveaways on energy and
water efficient appliances and fixtures, all in an effort to
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help customers conserve energy and water. Our intent is to
provide additional services and incentives that are fully
disclosed to our customers that provide a benefit."
ARGUMENTS IN OPPOSITION:
None on file.
POLICY ISSUE(S) FOR CONSIDERATION:
This bill requires the DCA to adopt a regulation to include a
"Department of Consumer Affairs solar energy system disclosure
document" that must be presented to a customer prior to the
sale, lease or financing of a solar system. At that same time,
a solar company would be required to provide a separate "solar
energy system disclosure document." Both disclosures are
similarly titled and would possibly contain overlapping or
inconsistent information. In addition, many of the disclosure
requirements are applicable to individual customers and contain
information that may change frequently. In order to alleviate
any unnecessary confusion for the consumer, it may be beneficial
to create one standardized disclosure document. In addition, it
may be more appropriate to require a regulatory entity within
the DCA to create the consumer disclosure document. Given that
the CSLB has primary jurisdiction over the licensing and
enforcement of contractors, the CSLB may be better suited to
create and make available to its licensees a standard solar
disclosure document for consumers which must be provided to a
consumer prior to the completion of a sale, financing, or lease
of a solar energy system.
This bill requires the DCA to establish an insurance pool for
customers to access in order to obtain compensation for solar
energy claims. Instead of this model, the author would like to
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require a performance bond for a solar installation.
AMENDMENTS:
In order to address the policy issues raised above, the author
should consider amending the bill to delete the requirement for
the DCA to develop, through a regulation, a disclosure document
which must be provided to a consumer in addition to the
disclosure provided by a solar company, delete the penalty
provision, delete the intent language for the DCA to establish
an insurance pool and certify solar companies, delete the legal
remedies for consumers against solar companies, and instead
require the CSLB to develop and make available on its website, a
disclosure document which a solar company must provide to
consumers prior to the completion of a sale, lease or the
financing of a solar energy system, and per the author's
request, require the CSLB to establish a requirement to for a
performance bond.
On or before July 1, 2017, the CSLB shall develop, and make
available on its website, a "solar energy system disclosure
document" which a solar company must provide to a consumer prior
to completion of a sale, lease or the financing of a solar
energy system.
The "solar energy system disclosure" shall include the following
information:
(1) How much and from whom the financing is obtained,
the disclosure shall include the total cost and payments
for the system, including financing costs;
(2) The calculations used by the home improvement
salesperson to determine how many panels the homeowner
needs to install;
(3) The calculations used by the home improvement
salesperson to determine how much energy the panels will
generate;
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(4) A disclosure of any additional monthly fee's the
homeowner's electric company may bill, any turn-on
charges, and any fees added for the use of an internet
monitoring system of the panels or inverters;
(5) The terms and conditions of any guaranteed rebate;
(6) Disclosure of the final contract price, without the
inclusion of possible rebates.
(7) The solar company's contractor license number;
(8) Impacts on solar system installations not performed
to code;
(9) Types of solar energy system malfunctions;
(10) Information about the difference between a solar
energy system lease and a solar energy system purchase;
and,
(11) Information for consumers to provide complaints.
The CSLB shall establish through regulations requirements for
contractors to maintain blanket performance and payment bond for
the purpose of solar installation.
Contractors installing a solar energy system shall be subject to
the down payment restrictions in Section 7159.5(a)(3)
REGISTERED SUPPORT:
California Municipal Utilities Association
Northern California Power Agency
REGISTERED OPPOSITION:
None on file.
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Analysis Prepared by:Elissa Silva / B. & P. / (916) 319-3301