Marketing Solar Energy to Retail Customers · Marketing Solar Energy to Retail Customers...

Marketing Solar Energy to

Retail Customers

Advertising Claims and SEIA’s

Solar Business Code

January 12, 2016

Agenda

• Communicating and Marketing to Consumers

– Discussion of Sections 3.12 and 3.13 of the SEIA Solar Business

Code (“Projections of Future Utility Prices Must be Based on

Accepted Sources and Methods”)

• Advertising From a Consumer Protection Perspective

• Resolving Advertising Disputes

– Federal and State Enforcement, Self-Regulation, and Private

Actions

• Q&A

© 2015 Solar Energy Industries Association® 2

Crowell & Moring Presenters

Richard Lehfeldt Peter Miller

Partner | Washington, D.C. Senior Counsel | Washington, D.C.

Energy Advertising & Product Risk Management

Privacy & Cybersecurity

Chris Cole

Partner | Washington, D.C.

Co-chair, Advertising & Product Risk Management


Communicating and Marketing to

Consumers


Focus on Rooftop Solar Marketing and Sales

• What is the developer selling?

• “Green Attributes”

• Utility bill savings


Green Attributes

• Generally easier to substantiate than utility bill

savings

• A zero-carbon emitting rooftop solar array will

almost always beat the environmental profile of

the resources it displaces

• Some customers are willing to pay more for

“green power” than brown or blended power

• Even here, though, beware imprecise, general

terms like “green” (e.g., Green Mountain Power, to

be discussed later)


Utility Bill Savings

• 20- to 30-year PPAs

• Value proposition: “save $$ on your energy bills,

at no cost or risk to you”

• Typical PPA: lock in an initial rate that is below the

current utility default rate, with escalators over the

life of the contract

• So will the PPA rate “beat” the utility rate over the

life of the contract?

• What materials may the developer rely on in

projecting future savings? (SEIA Solar Business

Code § 3.12, 3.13)


How Is A Utility Rate Set?

• (1) Load Forecasting

– “Long-Term Planning” – but usually revisited every 1-5

years, thus not matched with the tenor of a long-term

PPA

– “All Forecasts Are Wrong” (“Load Forecasting Case

Study,” prepared by NARUC for the Eastern

Interconnection States’ Planning Council

– Beware of: volatility, unanticipated natural (El Nino),

economic (the Great Recession) and technological

(fracking leading to collapsed natural gas prices)

phenomena


How Is A Utility Rate Set? (cont.)

• (2) Putting One’s Thumb on the Scale

– Ratemaking is social engineering

– Regulators still “own” the lion’s share of ratemaking,

even in restructured markets

– Renewable portfolio requirements, net metering

approaches, demand response incentives, regional

capacity and energy markets, tax and other subsidies

all affect rates


Why This Matters

A simple example:

• BigSun, a rooftop solar developer, is marketing a

20-year PPA, with a starting rate below the local

utility’s rate, escalating 2% per year

• Will the customer save money?

• Answer #1 (always correct): “We don’t know”

(see slides 8-10)


Why This Matters (cont.)

• Answer #2: “Maybe.” The chart below (Source: EIA) shows average

national residential rates between 2003 and 2013. Rates went up

approximately 3% per year, so if the next 20 years are like the past 10,

BigSun can market vigorously. But see Answer #1


(From Table 2.4.) Average Retail Price

(Cents per Kilowatthour)

Year Residential Commercial Industrial Transportation Other Total

2003 8.72 8.03 5.11 7.54 N/A 7.44

2004 8.95 8.17 5.25 7.18 N/A 7.61

2005 9.45 8.67 5.73 8.57 N/A 8.14

2006 10.40 9.46 6.16 9.54 N/A 8.90

2007 10.65 9.65 6.39 9.70 N/A 9.13

2008 11.26 10.26 6.96 10.71 N/A 9.74

2009 11.51 10.16 6.83 10.66 N/A 9.82

2010 11.54 10.19 6.77 10.56 N/A 9.83

2011 11.72 10.24 6.82 10.46 N/A 9.90

2012 11.88 10.09 6.67 10.21 N/A 9.84

2013 12.12 10.28 6.84 10.55 N/A 10.07

Advertising From a Consumer Protection

Perspective


Advertising and the SEIA Solar Business Code

• § 1.5 – “Companies should always act in full compliance with

federal, state, and local laws regarding truth in advertising,

consumer protection, contract law and other relevant

regulations”

• § 2.1 – “[E]ach Company shall conduct all aspects of its

business that touch on Consumers or their interests without

any unfair, deceptive, or abusive acts or practices (“UDAAP”)

• § 3 – “Claims should be accurate, easily understandable and

based on facts” – “No advertising claim by any Company

should be deceptive or misleading, whether by affirmative

statement, implication or omission”

• § 3.3 – “Companies should be familiar with all advertising

laws, rules, regulations and guidance, including the FTC

guidance”


Electricity and the Federal Trade Commission

• “[P]otential for abuse of environmental claims because of the premium price, and because consumers cannot verify any of these [environmental] advertising claims themselves”

• In addition to FTC Act – false advertising and unfair or deceptive acts and practices – other enforcement tools: Telemarketing Sales Rule, Cooling Off Rule, Truth in Lending Act, Equal Credit Opportunity Act

• FTC expects to see consumer protection issues similar to those associated with telecommunication deregulation

FTC Staff Report (July 2000)

Competition and Consumer Protection Perspectives on Electric Power Regulatory Reform

14© 2015 Solar Energy Industries Association®

Key FTC Concept – “Advertising”

• FTC interprets “advertising” broadly to be

commercial speech, in any medium, that conveys

a claim about a company, product, or service to a

consumer in a manner that influences, or

potentially influences, a consumer’s decision in

the marketplace (subject to First Amendment free

speech limitations)

– Customer testimonials, blogs, and social media

activities solicited or adopted by company

– Expert endorsements, including seals, certifications,

and similar quality assurances

– Search terms, meta tags, links to third-party materials


Key FTC Concept – “Claims”

• “Claims” are statements or representations about a

company, product, or service that a consumer is

likely to interpret as a fact

– Express claims are direct, verifiable statements of fact

– Implied claims are all other claims that an ad conveys

– Puffery: not claims; subjective, vague assertions that

are not verifiable

• Existence of an implied claim is determined by the

net impression conveyed by an advertisement

• Marketers are responsible not only for the claims

they intend to make, but also for all implied claims

conveyed to a significant minority of consumers


Key FTC Concept – “Substantiation”

• “Substantiation” is reasonable support for the

express or implied claims conveyed in advertising

• The amount of substantiation required depends on

the nature of the claim

– The more specific the claim, the more specific the

support must be

– Must have at least the support the claim says you have

– Science-based claims require science-based support

– Health, disease, and safety claims require a high level

of scientific support, often including human clinical trials

• Environmental claims must comply with the FTC

Green Guides (16 C.F.R. Part 260)


FTC Advertising Basics

• Advertising must be truthful and not misleading

• Advertisers must possess a reasonable basis for all objective claims about their products

• Advertisers are responsible for all reasonable interpretations of their claims

• Advertisers cannot use disclosures or disclaimers to contradict an asserted claim, only to provide context

• Performance claims must reflect what a reasonable consumer is likely to experience, not an outlier (“up to” claims can be problematic)

• Disseminating a false advertisement is unlawful and constitutes an unfair or deceptive act or practice under the FTC Act. 15 U.S.C. § 52.


FTC Act Section 5 (15 U.S.C. § 45)

January 14, 2016 © 2015 Solar Energy Industries Association® 19

• Deceptive practices

– material representation or

omission

– likely to mislead consumers

– acting reasonably under the

circumstances

• Unfair practices

– substantial injury

– not reasonably avoidable

– not outweighed by benefits

Potential Liability Under the FTC Act

• Companies

• Individual employees and officers with “knew or

should have known” involvement and/or ability to

control conduct

• Endorsers and experts

• Affiliates, agents, and other third parties directly

involved in unfair or deceptive practices

• Upstream and downstream entities (not “aiding and

abetting” but “means and instrumentalities”)

20


• Conduct Relief– Bans

– Conduct-specific requirements (disclosures, limits on degree of activity, etc.)

– Oversight of third parties (contractors, affiliates, marketers, business partners, etc.)

– Organizational activities (e.g., training, monitoring personnel, terminating non-compliant business partners, implementing specified practices)

– “Follow me” disclosures for individual defendants working in new capacities

• Reporting and monitoring requirements (20 years!)

• Recovery of funds generated by conduct (a.k.a. “ill-gotten

gains”)– Consumer Redress (FTC-run refund program when possible)

– Funds may be shared with state co-plaintiffs under certain conditions

– Remaining funds returned to U.S. Treasury

FTC Remedies

21


FTC Green Guides (16 C.F.R. Part 260)

It is deceptive to misrepresent, directly or by implication, that:

• A product or service offers a general environmental benefit

• A carbon offset represents emission reductions that have already occurred or will occur in the immediate future

• A product or service has been endorsed or certified by an independent third party

• A product or service uses renewable energy


Disclosures and Disclaimers

• “[T]he large print giveth, and the small print taketh

away.”Singer/Songwriter Tom Waits, “Step Right Up”

• “[T]he Federal Trade Commission ensures that

consumers can have confidence that the ads they see

are not hiding important information.”Director of FTC Bureau of Consumer Protection Jessica

Rich, Operation Full Disclosure (9/23/14)

• “Those who use small print and hidden fees to inflate

charges to unwitting consumers must be held

accountable.”NY AG Eric T. Schneiderman, Joint FTC/NY AG $8 Million

Settlement with AllStar Marketing (3/5/15)


Disclosures and Disclaimers (cont.)

• Disclosures must be “clear and conspicuous”

• Consumers should be able to notice, read, and

understand

• FTC uses “The 4Ps” when evaluating disclosures and

disclaimers

– Prominence – easy to find and to see?

– Presentation – easy to comprehend?

– Placement – located where consumers will see it?

– Proximity – near the claim it modifies?


FTC Example of Inadequate Disclosure –

Network Solutions: 6/26/15 FTC Settlement


FTC Example of Inadequate Disclosure –

Planet Hyundai: 10/20/15 FTC Settlement

• FTC Complaint notes the following language near the

bottom of the two-page newspaper ad, “in miniscule print”:All advertised amounts include all Hyundai incentive/rebates, dealer discounts and $2500

additional down from your trade in value . . . 1.14MY Accent - *Price excludes tax, title,

license, doc, and dealer fees. MSRP $18075 - $2451 Dealer Discount - $2650 HMA rebates

-$4000 Trade Allowance = Net Price $8974. Lease 36 months with $0 Cash down payment.

On approved credit. Must trade qualifying vehicle . . . All payment and prices include HMA

College Grad Rebate, HMA Military Rebate, and HMA Valued Owner Coupon. Must be

active military or spouse of same to qualify for HMA Military Rebate. Must graduate college

in the next 6 months or within the last 2 years to qualify for HMA College Grad rebate. Must

own currently registered Hyundai to qualify for HMA Valued Owner Coupon.


“Deceptive Marketing Practices of Green Mountain

Power”: 2/5/2015 FTC Staff Closing Letter

• “[W]hile Vermont consumers do not have a choice of

electricity providers, they can choose to use less electricity,

generate their own electricity at their homes, or switch fuel

types”

• “A utility should avoid unqualified or poorly qualified

representations that state or imply that its customers will

receive renewable electricity from its renewable facilities

when, in fact, the utility has sold or will sell RECs from those

projects”

• “[W]e urge GMP… to ensure that Vermont customers, and

other market participants, clearly understand that GMP has

forfeited its right to characterize the power delivered as

renewable [if RECs were sold]”

• “If we identify concerns in the future, we reserve the right to

take further action”


State Law Equivalents of FTC Act

• All 50 states have consumer protection statutes,

although the scope and degree of protection

varies

– “UDAP Statutes”

– “Little FTC Acts”

• State enforcement actions regarding advertising

and marketing tend to apply same principles as

those articulated by the FTC

• State AGs often proceed jointly

– Multi-state consumer protection enforcement actions

– Joint FTC/state enforcement actions


Selected Consumer Protection Resources

• General FTC Advertising and Marketing Materials, www.ftc.gov/tips-advice/business-center/advertising-and-marketing

• Guides for the Use of Environmental Marketing Claims

(“Green Guides”; rev. October 2012), www.ftc.gov/news-

events/press-releases/2012/10/ftc-issues-revised-green-guides

• Endorsement Guides (rev. May 2015), www.ftc.gov/tips-

advice/business-center/guidance/ftcs-endorsement-guides-what-

people-are-asking

• FTC Online Advertising Disclosure Guidelines (“.Com

Disclosures”; rev. March 2013), www.ftc.gov/news-

events/press-releases/2013/03/ftc-staff-revises-online-advertising-

disclosure-guidelines


Selected Consumer Protection Resources (cont.)

• State Attorneys General websites

• National Conference of State Legislatures,

www.ncsl.org

• National Consumer Law Center, www.nclc.org

• SEIA, www.seia.org/policy/consumer-protection


Resolving Advertising Disputes


Options for Challenging False and Misleading

Competitive Advertising

• §43(a) of the Lanham Act, 15 U.S.C. §1125(a)

– Private right of action in federal court for injunction and

damages

• National Advertising Division

– Self-regulatory forum for resolution of advertising

disputes

• Private arbitration

• Complaint letters to regulators

• SEIA Complaint Resolution Process


Interesting Competitor Challenge Theories

• “No contract” doesn’t really mean no contract

when customer still owes money and must pay up

before leaving

– T-Mobile, NAD Case Report No. 5899 (Oct. 2015)

• Claims of money-savings must have reasonable

basis at time made, and quantified savings must

be based on a bona fide regular price. All material

qualifications must be clearly and conspicuously

disclosed

– H.H. Gregg, NAD Case Report No. 5406 (Dec. 2011)


Absolute promise of $ savings

What is the time limit of the promise?


Buy from the Solar Bro’s!• No upfront costs

• We save you thousands over your

local electricity company

• No risk! Cancel anytime!

More complete disclosure of basis provided


Class Action Threats

• Urbino v. Ambit Energy LP, et al., Case No. 3:14-cv-05184, D.NJ. (dismissed

in 2015 because TOS disclosed that rates depended on 3d party energy

prices)

• Basile et al v. Stream Energy Pennsylvania, LLC; Stream Energy

Pennsylvania, LLC d/b/a Stream Energy; Stream Energy d/b/a Stream Energy

Pennsylvania, LLC, Case No. 15-cv-3204, E.D. PA (alleges Stream

deceptively promised customers will pay competitive market-based rates and

save when, in reality, Stream customers may pay more than 50% more)

• Melville et al v. Spark Energy, Inc. and Spark Energy Gas, LP, Case No. 15-

cv-8706, D. NJ.(alleges Spark promised customers who switch will save and

pay competitive variable rates based on market rates when, in reality, the

company routinely increases its rates after customers switch and, as a result,

customers pay up to 4X more)

• Steketee et al v. Viridian Energy, Inc., Case No. 15-cv-585, D. CT. (alleges

Viridian deceptively entices customers to switch by offering “teaser rates”

followed by a “variable rate” tied to the market rate when, in reality, the

company routinely charges customers 4X and 5X underlying market rate after

the “teaser rate” expires)


Questions?


Richard Lehfeldt Peter Miller

Washington, D.C. Senior Counsel | Washington, D.C.

[email protected] [email protected]

+1 202.624.2882 +1 202.624.2506

Chris Cole

Partner | Washington, D.C.

[email protected]

+1 202.624.2701

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