BILL ANALYSIS                                                                                                                                                                                                    



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          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