Fast-growing energy firm Powerhome Solar uses misleading tactics to lure customers into home solar deals that cost more than a car, insiders, legal claims, and leaked memos suggest

  • Powerhome Solar, a fast-growing solar company in the US, has been accused in lawsuits of misleading customers into buying solar-energy systems.
  • The company has exhibited a pattern of inflating the benefits of its products, interviews with a dozen current and former employees, a review of legal records, and internal documents suggest.
  • A Powerhome representative said in a statement that the company would never allow its employees to engage in misleading sales practices.
  • For more stories like this, sign up here for our weekly energy newsletter.

For years Jim and Beth Rickenbaugh had resisted putting solar panels on top of their brick home in Charlotte, North Carolina. They wanted to wipe out their utility bill, but the price seemed too steep.

Then, in late 2016, the couple came across a deal they felt they couldn't refuse.

A salesman from Powerhome Solar, an energy company headquartered in nearby Mooresville, visited their home and offered them a solar-energy system for no upfront cost that he said would nearly erase their utility bill, according to the Rickenbaughs.

They'd just have to make monthly payments for the panels that would be no more than the savings on their electricity bill from Duke Energy, they said.

In 2017, the Rickenbaughs signed up, agreeing to pay more than $15,000 for their system. Documents show they signed a 20-year loan with a 6% interest rate, meaning they'll pay an additional $11,765 in interest.

Then they waited for their bill to plummet. It didn't.

In the months after the panels were installed, the energy savings were "a fraction" of those promised by the sales rep, according to a complaint in a class-action lawsuit the Rickenbaughs filed against Powerhome last year.

Data we reviewed from Duke Energy showed that the couple actually drew more electricity from the grid in an average month in 2017 and 2018, relative to the two previous years.

Stuck with 2 monthly energy bills

Now the couple say they're stuck with two pricey bills — one for the panels, and one for electricity from Duke Energy.

"Power Home's executives designed its sales process to intentionally mislead customers into believing they would experience a guaranteed drop in their energy bills," the complaint says.

A Powerhome spokesperson declined to discuss the Rickenbaughs, saying the company cannot comment on pending litigation.

The Rickenbaughs are not the only ones complaining.

Bo Caudill, an attorney at Weaver, Bennett & Bland, the law firm representing the couple, said his firm has received 10 or so similar complaints from homeowners, whom the firm also represents.

A review of legal records, interviews with 12 current and former employees, and internal company documents we obtained reveal additional accusations of misleading sales practices at Powerhome Solar.

We found three other lawsuits that allege deceptive sales practices involving Powerhome Solar. All three cases claim that Powerhome's system failed to perform as promised by the company and included claims for relief under fraud. They all led to settlements.

"In the beginning I thought Powerhome was great," Jewel Farmer, a former Powerhome sales rep in Ohio, said. "But they are not. It's very, very unethical what they do."

We also found suits alleging misleading sales practices that were filed against ISI Alarms NC, an alarm company that was run by Powerhome's founding CEO, William Jayson Waller.

In one case, filed by the State of North Carolina against ISI Alarms and Waller, the state's attorney general alleged that Waller's company placed illegal robocalls that cited nearby break-ins to sell its systems. The parties settled, and ISI Alarms agreed to pay the state $136,000. (In entering the settlement, ISI Alarms did not admit to any wrongdoing.)

In another case, filed in 2012 by Cynthia Grice, which ended in a settlement, Grice claimed that Waller's company took advantage of her elderly father to sell him an alarm system for a house he didn't own.

A Powerhome representative said in a statement that the company does not allow its employees to engage in misleading sales tactics.

"Powerhome Solar's sales and marketing teams are provided comprehensive training (and continuing training and education) as to proper execution of their responsibilities, and POWERHOME SOLAR has robust compliance protocols and policies to ensure that all their efforts comply with applicable requirements," the representative said.

The ultimate salesman

Waller, who is 40, cofounded Powerhome in 2014, according to the company, and he's since built the firm into a top solar provider in the Midwest and Southeast, claiming to have installed more than 400,000 panels.

While the company is smaller than giants like Sunrun and Tesla, Powerhome's installations have about doubled every year since 2015, according to the research firm Wood Mackenzie. It now has about 1,600 employees, up from 850 six months ago, the company said.

Under Waller's leadership, Powerhome has picked up more than a dozen industry honors, from a handful of Stevies to an award for excellence in customer service from the Business Intelligence Group. When Business Insider began reporting this story, Powerhome Solar also had an A+ rating with the Better Business Bureau.

After we contacted BBB ahead of publication, the firm changed the company's grade to "no rating," saying it would investigate Powerhome and contact the company for an explanation. The Stevie Awards and Business Intelligence Group said they do not verify information submitted by nominees.

Waller has also received an Ernst & Young entrepreneur-of-the-year award, and this year he was honored as one of the Charlotte Business Journal's most admired CEOs.

Waller, who publicly shares his rags-to-riches story, tries to exude success, current and former employees we spoke with said.

He flaunts his wealth in front of Powerhome staff, they said, often talking about his Lamborghini or his mansion in Michigan. Waller's face is painted on the side of some Powerhome sales cars.

The idea is, if you work hard, you can have what he has, the employees said. 

Even the coronavirus pandemic hasn't slowed Waller and Powerhome.

Beginning about March, people began spending more time at home and on platforms like Facebook, where Powerhome advertises. The company's sales have shot up as a result, a current sales employee in Pennsylvania and a former sales rep in North Carolina said. Powerhome confirmed its sales were up April through September.

These current and former reps — in addition to eight of the other current and former employees we spoke with — asked to speak on the condition of anonymity for fear of retaliation. We have verified their identities.

Insiders say the deception starts in Powerhome's ads

There are several things about the solar industry that can make homeowners vulnerable to deceptive marketing and sales tactics.

For one, most arrays of solar panels are leased or bought with a loan, which is commonly spread over 15 years or more, according to Wood Mackenzie. Monthly payments pitched to consumers can factor in tax incentives and various rebate programs, for which not all consumers qualify.

The value of a system also depends on whether a consumer lives in a region with something called net metering, in which utilities credit customers for the excess solar energy they generate and put back on the grid.

Taken together, it can be difficult for consumers to know the real value of a solar-energy system. Plus, the stakes are high: Price tags for solar arrays rival that of a new car, and the panels are on your roof for 20 years or more.

"The solar industry is complex," Spencer Ashby, a former inside sales manager at Powerhome Solar, told Business Insider. "We're playing off of everyone's ignorance."

For Powerhome, the deceptive claims start in online advertising, according to one current and one former employee.

In several Facebook ads we reviewed, which linked to pages run by Powerhome Solar, the company references a solar stimulus program that appears as if it's specific to a particular county.

Ads like these are misleading because they might imply there's a government stimulus program, which isn't the case, said Joshua Buswell-Charkow, deputy director at the California Solar and Storage Association, an industry trade group that helps monitor ads. (At our request, he reviewed the two ads included in this story.)

"Deceptive ads like these distract from these more compelling points and can undermine consumer trust in the long term," he said.

One of the Powerhome ads, shown above, also appears to be associated with an "Energy Bill Relief Program," which also seems misleading, Buswell-Charkow said. To his knowledge no such program exists.

Powerhome currently offers customers a $2,000 cash payment when they sign up, which the company refers to as a "stimulus package."

Another ad we reviewed showed a type of solar-energy system that Powerhome doesn't sell, according to the Pennsylvania employee, who has direct knowledge of the firm's products.

In its statement, Powerhome said all its marketing materials go through a "robust compliance review."

"Powerhome Solar takes its marketing and advertising responsibilities very seriously," a company representative said.

'Manipulating the numbers'

Online ads are used to find prospective customers. It's then on the sales reps to close the deals, which, our investigation suggests, is where the bulk of questionable tactics come into play.

A big part of the Powerhome pitch is offsets — that is, how much the company's products will lower your monthly energy usage and, thus, your bill, six former sales reps said. 

The energy produced by solar panels is factored into the offset pitched to homeowners. But so are various energy-efficiency upgrades that Powerhome offers, collectively known as an energy-efficiency package, or EEP.

The package includes things like installing LED light bulbs or blowing insulation into an attic, and it increases the offset that reps pitch to customers by up to 25%, three of the reps said.

While upgrades can improve a home's efficiency, the EEP offered by Powerhome often doesn't deliver the energy savings that sales reps promise, six employees said. Instead, it's a way for reps to make the deal look more enticing.

The EEP package "doesn't do anything," Farmer said.

Taken together, it isn't uncommon to tell customers that panels and the EEP would dramatically reduce a customer's utility bill, whether or not it's true, three former sales reps said.

"A lot of times, in order to make the sale, we're showing it and manipulating the numbers to show customers how beneficial it is," Ashby said. 

The sales rep who visited the Rickenbaughs said that the company's package — including solar panels, a smart thermostat, LED light bulbs, blown-in insulation, and a blanket for their hot-water heater — was "guaranteed to save the Rickenbaughs at least 97% on their energy bills," the complaint says.

"They are making large monthly payments for solar panels and other supposed 'energy efficiency equipment' that have little-to-no benefit when compared to the benefits guaranteed by Power Home," the complaint alleges. (Public records show the company is registered under the name Power Home Solar.)

Other lawsuits included similar complaints.

In one case, filed in 2017, a couple in Wake County, North Carolina, sued Powerhome alleging fraud and negligent misrepresentation, among other claims, saying in the complaint that the company "failed to truthfully describe the effectiveness" of the couple's panels.

The solar panels produced "less than one-sixth of the electricity predicted in Defendant Corporation's performance and financial analysis," the complaint read. Powerhome wrote the couple a substantial settlement check, Dan Gibson, the lawyer who represented them, said.

Enticing consumers with a generous federal tax credit

Buying home solar panels comes with a big perk: You can get 26% of the cost of the system back through a federal tax credit. (In 2021 the credit steps down to 22%.)

The catch is that you have to have enough taxable income.

Powerhome, which sells panels using third-party loans and for cash, makes it clear in its contract and some internal sales guidelines we reviewed that there's no guarantee that a customer will receive the credit.

But some reps have been encouraged to tout the tax incentive when selling systems to homeowners even if they know those customers are unlikely to get the credit, according to one current and two former sales employees and an internal email exchange we reviewed.

Sales reps say they're also advised by managers or other more-senior staff to close the deal while they're in the home. In doing so, customers, who may be unable to claim the entire credit (if, for example, they're retired) have little time to consult a tax professional, they said.

"They're hoping that you close the deal within an hour," a former sales rep in Pennsylvania said. "There's no possible way someone's going to ever be able to contact their CPA within an hour to confirm they'll qualify for the federal tax credit."

It's "a genius con," he said.

Powerhome told Business Insider that reps have "no way of knowing if a customer qualifies for a tax credit, which the customer is required to acknowledge in writing."

Sales reps say they're incentivized to mislead customers

Sales reps have control over what they tell customers, and what they try to sell them. For example, if a rep sees that a homeowner already has LED bulbs, they can choose not to offer that particular part of the EEP.

But our investigation revealed sources who felt that pressure to mislead comes from within the company, and sometimes the reps are just as misled as the consumers.

"The people that start out there believe everything that they tell you," Farmer said. "As time goes on, you realize what they tell you isn't really what's going on."

Sometimes, when reps realize that they're deceiving customers, they leave the company, Farmer and another former rep said. That's one reason Powerhome has high turnover, said a former employee in human resources, who had direct knowledge of the company's hiring practices.

"So many people were quitting," he said.

Reps are under a lot of pressure to sell. Though they are employees, as opposed to contractors, they're paid only through making sales. Powerhome also offers performance-based rewards.

"The higher the price they can charge the consumer, the higher their commission," Vikram Aggarwal, the CEO and founder of EnergySage, said generally of solar employees who are paid on commission. "It puts a really bad incentive on the salesperson. They are basically saying anything and everything to close the deal."

EnergySage is a review site and marketplace for solar providers. Aggarwal said Powerhome Solar is no longer allowed on EnergySage because it received bad customer reviews related to the company's sales practices.

Superstorms and blackouts could drive consumers to buy rooftop solar panels and batteries, investors say.Shutterstock

'We don't compete with other companies'

Plus, Powerhome's products aren't cheap, which only makes sales harder. In fact, in some cases, they cost double the industry average.

An internal Powerhome pricing sheet we reviewed showed that for arrays with anywhere from 13 to 21 panels, the cost per watt is more than $6 (the company offers a discount if you buy in cash, one rep said). The industry average is just shy of $3 a watt, according to Bryan White, a solar analyst at Wood Mackenzie.

Then there are Powerhome's batteries, made by Generac, which reps are required to add to most configurations. Powerhome customers pay $20,000 for the smallest battery. According to Generac, the suggested retail cost is about half that.

All together, Powerhome customers could easily end up paying $40,000 or more for solar and storage, the pricing sheet suggests.

With prices so high, reps say they have one shot with a customer. If the customer shops around, they won't win their business.

"We don't compete with other companies," a current employee said. "If a customer is shopping between companies, they're never talking to us again, because once they see another company's prices, they're going to know we're overpriced."

In response to questions about its prices, Powerhome said it has a unique full-service energy-efficiency offering and installs its systems faster than the industry average.

Through the pandemic, Powerhome has stayed open

When the coronavirus pandemic began spreading across the US, Powerhome, for the most part, stayed open. Waller said in an internal email that it was for the benefit of his workers. He didn't want people to go without paychecks.

According to Ashby and two former sales reps, staff who didn't want to go into the company's North Carolina headquarters or enter customers' homes were told they'd have to take vacation time or use sick days.

"We will allow anyone who does not wish to work under these circumstances to be off and utilize vacation (PTO) or sick days," Waller wrote in mid-March. "Once those days are used, this time off will be unpaid."

The company said it was helping the community, but it wasn't protecting its employees, Ashby said, adding that there was no guidance on wearing masks when he was working at the company's headquarters. (Ashby left the company at the end of May, he said.)

After we reached out to Powerhome for comment, the company sent a Skype message to some sales managers explaining that reps must wear a mask if they appear in pictures with customers on social media.

"There are groups out there that may target our company for non-compliance," the message said.

Powerhome told us that it had complied with all government orders regarding the coronavirus pandemic.

Where the Rickenbaugh suit stands today

After the Rickenbaughs sued Powerhome, Waller's company filed a motion to take the case to arbitration. Powerhome has language in its standard contract that says disputes will be resolved through arbitration — in other words, not in a public court.

Nearly two years later, the case is essentially at a standstill, caught up in legal tedium, Caudill said. Now in front of the North Carolina Supreme Court is the question of who gets to decide whether arbitration can take place on a class basis and not just between the Rickenbaughs and Powerhome.

"Pretty much since the time that we filed until now we've been mired in procedural hell," Caudill said. "Powerhome just wants this thing to sit still because they don't want to deal with the substantive merits of the case."

Source: Read Full Article