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5323RE: [hreg] Fwd: want a FREE $50,000 Solar System? Can anyone comment on this offer please?

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  • Robert Johnston
    Dec 10, 2006
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      Responding to Evelyn Sardina’s post...

       

      That’s a very intriguing concept!  Some of you may recall my posting a note a long time back about how nice it would be if there were a co-op or something that one could join to own a fraction of--and thus lock-in rates on--windpower.  I still think that would be nicer than this approach, given the economic advantages of wind vs. solar, but maybe I’m missing something.

       

      I looked over this website.  The following are my observations as a disinterested observer (i.e., no personal financial interest in this company or products/services).

       

      Basically, these guys claim to install and maintain a system for you at no investment on your part.  They rent it to you on the basis of your paying for however many kwh it generates, at a rate that is your current utility rate at the time of signing the rental agreement.  You lock in whatever rate that current utility rate is, and can lock for 1, 5 or 25 years.  If the economy eases back and new generating capacity comes on-stream, etc., rates could fall.  I wonder how wise it would be to lock in today’s rates for a very long time?  But it looks like you can choose the time period for locking rates, and thus can make the bet however you want to.  At the end of your rental period you can renew or have it removed from your house (at their cost, including repairing your roof).  They include all the installation, permitting, interconnects, etc., in their cost.

       

      I’d be VERY interested to hear comments on this from our solar vendor/installer community.  Some questions that occur to me:  What are the economics driving this thing?  Can you make money renting equipment out at current utility rates for 1, 5 or 25 years?  From the homeowner’s perspective, is that better than buying/owning a system?  What is the current payback time on utility interconnect solar systems in the $50k range, if utility rates are in the 12-13 cents/kwh range?  Is this whole thing enabled primarily by the federal credits to utility companies and these guys are treated as a utility company? 

       

      If they have limited capital, I wonder if people in low utility rate areas have any chance of being accepted into their program.  I’d think they’d target the areas with the combination of highest utility charges and highest solar radiation influx.  Those installations would give them the highest ROI.

       

      Be aware that this is a new company and is selling via a multilevel marketing (MLM) program.  Currently, they only have around 1000 installations yet around 700 associates!  Reading Novar’s email and instructions for how to pass the test, sign up associates yourself, etc., to rapidly become a “sales manager” makes me wonder if this isn’t going to blow up as another MLM scam.  MLMs that focus on growing the organization instead of making sales tend to fail as giant Ponzi schemes, and often become the target of investigation by state attorneys general.  That wouldn’t bode well for its sales associates, customers or investors.

       

       

      The following is my initial analysis of their online “forward rental agreement”.  http://www.citizenre.net/extras/fra_tos.pdf  I am NOT an attorney (I’m a chemist), so please consider this a layman’s interpretation and not legal advice.  I’d strongly recommend consulting an attorney before entering into any agreement with this company, as the financial risks look high, regardless of their website’s “risk-free” marketing slogan.  I’d love to hear comments from any attorneys that might be members of our discussion group. 

       

      In this section, it LOOKS to me like they can actually change the price if they have to, regardless of your “locked-in” rate (underlining is mine). 

      2.5. Changes in Service

      Many changing considerations affect the availability, cost and quality of

      service and customer demand for it. Accordingly, Provider must reserve

      the unrestricted right to change, rearrange, add or delete Services, the

      selections in those Services, Provider’s prices, and any other Service Provider

      offers, at any time. Provider will endeavor to notify Customer of any

      change that is within its reasonable control and its effective date. In most

      cases, this notice will be about one month in advance. Customers always

      have the right to cancel their Service, in whole or in part, if the Customer

      does not accept the change see Section 9.1. If Customer cancels Service,

      an early termination fee, described in Section 7.4. or other charges may

      apply. If Customer does not cancel, the continued receipt of Provider’s

      Service will constitute acceptance.

       

      Another clause makes it sound like typical installations would not provide power backup during grid failures:

      The REnU is typically interconnected with the local load serving entity, so

      Provider can not guarantee REnU operation when there is a grid failure.

      The anti islanding features of the REnU ensure the safety and well-being

      of linemen that may be repairing a portion of the grid that caused such

      a grid failure. If the REnU is engineered to operate independently of the

      grid, such as in a grid paralleled or grid separated design, Provider does

      guarantee that the REnU will continue to operate when there is a grid

      failure.

       

      Another “gotcha” to be aware of, that distinguishes this from a utility service, is that while the REnU is warranted for defects and normal wear and tear, the customer is responsible for any damage that occurs!  This seems to me to be a big one, as you will have to include the REnU system in your homeowner’s policy (if you can—you don’t own it) or buy optional coverage from them.  Your “risk-free” system (their website’s claim) obviously isn’t—you could end up having to eat the cost of the whole thing after it is destroyed by fire, hurricane, falling tree, etc.  So, assuming you buy insurance, that will add significant cost and thus raise the rates over your current utility rates significantly.  Here are some of the relevant sections from the rental agreement:

      Provider does not insure the REnU during the period it is rented to the

      Customer. Customers may elect on there own to obtain, at their expense,

      insurance covering the REnU during the term of the rental. Exception is for

      damage protection insurance that Provider does offer at an extra charge.

      5.2. Risk of Loss, Damage, or Theft

      Customer will bear responsibility for all malfunctions, failures, damage to

      or loss of components, except to manufacturing defects and normal wear

      and tear covered under Section 3. In the event of any such damage or

      loss, Customer will promptly give Provider notice thereof and, Customer

      will elect one of the following options:

      (i) Pay to Provider an amount equal to the Stipulated REnU Value or

      fraction thereof for the damaged or lost components. In such case, the

      rental charges and other obligations of the Customer shall continue until

      the payment is made. After payment is made this Agreement will terminate

      as to the components involved; or

      (ii) Request that Provider repair or replace the damaged or lost component,

      and pay to Provider the cost of such repair or replacement. In such

      case the rental charges and other obligations of the Customer shall continue

      during the period of repair or until replacement. If Provid

       

      Regarding the above, it isn’t clear to me who ends up responsible for the cost of electricity generation capacity lost during the downtime.  If you are responsible for damage to the equipment, and it takes 3 months to get it repaired, will they hold you responsible for the value of the electricity you would have bought had you not damaged the equipment?  I doubt your insurance policy would cover this kind of “loss of use” damage.

       

      It LOOKS like they will charge you for the electricity generated by the unit, even if not actually used by you.  If you later improve your home’s energy efficiency, go on extended vacation, etc., then you may find yourself paying for more power than you use.  For this reason, the unit might need to be undersized so that you draw off the grid for the balance. 

      Customer agrees to pay for the performance of the REnU. Customer

      agrees to pay a Rent equal to the electricity generated by the REnU at the

      Contract Rate for the Term of the Agreement.

       

      A $500 security deposit is required.  If you cancel the service, you lose this, plus you pay early termination fees (?—somewhat confusing information on that, partly due to typos in their literature).  Better be sure you know your future in that house before you sign up for a long time!

      If Customer cancels Service or Provider terminates Service because

      of Customer’s failure to pay or for some other breach on Customer’s part,

      Customer forfeits the Security Deposit ...

       

      If Customer cancels Rental or changes Rental terms, Customer may

      also be subject to an early termination fee.

       

      The early termination fee is open-ended, since it is based on the difference between your locked-in price and the prices charged later by the company.  There is no limit on how high their later rates could be, and thus what your termination fee could be.  (This is outlined in Section 7.4 of the FRA, though again, somewhat confusing/contradictory information is on the website).

       

      Customer is responsible for all taxes and fees by various governmental bodies (Section 7.5).  It isn’t clear what those are or how they compare to current utilities or even if the initial locked in rate is based on your utilities tax-inclusive or tax-exclusive rates.  This could mean higher prices, again, for you.  And, for sure, think about what happens if your local taxing authority considers REnU a part of your property value and includes it in the assessed value.  If your area is like mine, $50,000 increased value may be another $750-1000 in property taxes per year.  Perhaps since this is rented, it can’t be taxed, but I’d like to hear some legal experts comment on that.

       

      Here is more detail on the risk of having to pay for all electricity generated regardless of use (Sect. 7.6):

      Customer further acknowledges that the load serving entity is subject

      to net-metering laws that may not remain in effect throughout the duration

      of the Agreement. This may have a material adverse affect on the Agreement

      and could cause the Customer to begin paying for excess electricity

      generated that may not be used by the Customer. Likewise, the banking

      of electricity generated by the REnU and delivered to the utility may not

      always work out in the favor of the Customer. There may be times that the

      utility captures the unused credits of electricity at the avoided cost, which

      may be less than the Contract Rate , or the utility may simply be granted

      the unused credit without compensation to the Customer at all. PROVIDER

      CAN NOT BE HELD LIABLE FOR SUCH LOSSES INCURRED BY THE

      CUSTOMER.

       

      Again, Section 7.7 specifically says you pay for GENERATED electricity:

      The Customer’s bill reflects the fees and charges in effect under the

      Agreement. Provider calculates the total amount of electricity generated

      by the REnU for a given month and then multiplies it by the Contract Rate .

      Once this has been done, Provider then attaches any fees, charges, or

      unpaid balances owed for a total bill. Customers can dispute their bill, but

      only within 180 days of receiving it. CUSTOMER MUST STILL PAY ANY

      DISPUTED CHARGES UNTIL THE DISPUTE IS RESOLVED.

       

      Some of this appears to contradict the claims of the website (“risk-free”), but note that this agreement supercedes all other representations (as typical in contracts):

      This Agreement supersedes all prior and contemporaneous agreements

      and representations made with respect to the same subject matter, and is

      the entire Agreement between the parties.

       

      Thus, the engineering claims made elsewhere on the website may not have legal force:

      The rate is applied to all electricity generated by the REnU; hence, Citizen will also guarantee that the REnU is engineered to produce no more than the average of your three prior years of electricity consumption in any year of the contract period, unless otherwise agreed to by you. By engineering a system to meet your historical annual needs, Citizen believes that adverse net-metering laws should not affect you negatively. If you choose to subscribe to a system that generates more than your historical annual usage, you should consider your existing net-metering law very carefully.

      One significant financial aspect that isn’t clear from the website is if the comparative utility rate is their generation charge or their delivered charge (i.e., including distribution charges—Centerpoint).  If the former, then the economics become more attractive vs. utility rates.

       

      I may have missed it by skimming the end, but I don’t see what happens if the company goes belly-up.  Who takes over the equipment, maintenance, removal, etc.?

       

      One nice feature mentioned on the website but NOT in the FRA and thus of questionable enforceability is the promise to relocate the REnU unit if you move, once, for free, if you have a longer contract:

      Our customer can simply call us and notify us of their intention to move, and furthermore, would like us to relocate the REnU their new home. Citizen is willing to do this once – free of charge – for all 5-Year and 25-Year contracts.

      The website also says that customers who have good reason to terminate their contracts only lose their security deposits, but that isn’t how the FRA reads, at least to my legally untrained eye.

       

      It would be interesting to hear more from this company and its representatives, as well as from attorneys and solar installers/vendors.  Intriguing concept, but one that ought to be fully investigated.  This is the kind of creative marketing that may be needed to build a distributed energy system in this nation.  The company is taking on some risk, as it appears to me if breakthroughs in solar panel cost etc. occur, then users might choose to break their contracts (to buy their own systems) and leave the company hanging with old unwanted equipment.  On the plus side, if you see yourself being in the same place for 25 years, or if the termination penalties can be more clearly worked out, then potentially you could save a lot of money.  Even if there is no increase in “real” utility costs, with inflation, the dollar cost will increase a lot over that period, while your billing from Citizenre will be in actual dollars.  Over 25 years that could be huge.

       

      Anyone else on this forum have comments on this company/approach?  I realize this is a commercial offer, but since Evelyn posted it, I figured worth taking a look and commenting on.  Again, I have no personal financial interest in this company.  I find it interesting to discuss as a possible way to get RE to more homeowners (including myself!).

       

      Robert Johnston

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