Two of the largest solar rooftop companies in the nation are again under investigation for potentially fudging their books. This time, it seems the companies have been failing to disclose the true percentage of their customers that cancel contracts prior to having the solar panels installed.

Customers that have cancelled contracts after signing have claimed they were “strong armed” or even threatened by sales people. In 2016, approximately half of SolarCity’s contracts were cancelled prior to installation, and nearly 40 percent of Sunrun’s were.

SEC investigates Bay Area solar power companies Sunrun and SolarCity

By Riley McDermid, May 4, 2017

Two Bay Area solar technology companies are being probed by the Securities and Exchange Commission over whether or not they have adequately disclosed how many customers signed up for solar systems but later canceled their contracts.

San Francisco-based Sunrun and San Mateo-based SolarCity (which is owned by Tesla) are now being investigated by the SEC for potentially obfuscating how many customers they are losing, a person familiar with the matter told the Wall Street Journal.

“The SEC recently issued a subpoena to Sunrun and interviewed current and former employees about the adequacy of its disclosures on account cancellations, said the person familiar with the investigation,” the paper reports. “The SEC is also looking at SolarCity, the person said.”

The issue is an important one because cancellations can gauge the financial health of a company — and because there have been ongoing allegations that some customers feel pressured into buying solar services, which they then cancel.

“Some customers say they were strong-armed into buying solar-energy systems by sales representatives who threatened to sue them if they didn’t proceed with a project or to place a so-called mechanic’s lien on their homes—a measure used to force a homeowner to pay for a home-improvement project,” the Journal reports.

“Others say they didn’t realize they had actually signed contracts. Many said they believed they were just giving permission for a consultation.”

These cancellations at both companies, which are publicly traded, have become increasingly important to investors worried about their growth and the future of solar tech in general.

“Cancellations grew to be so large at SolarCity that in early 2016, before the company was sold to Tesla, about half of its customers were backing out of contracts before solar panels could be installed, according to people familiar with the matter,” the Journal reports.

“At Sunrun, that cancellation figure grew to be as high as 40 percent earlier this year, according to people familiar with the figure. The cancellation rates were especially high among customers who were approached by salespeople at their doorstep or while they were shopping at big-box stores, these people say. The increase in cancellations caused Sunrun to halve its growth expectations in 2016 from 80 percent to 40 percent, one of these people said.”

Sunrun did not return a request for comment on Thursday. SolarCity said in a statement that the Elon Musk-backed company narrows its financials only to services that have actually been installed.

“[SolarCity] has remained focused on reporting the quality of our installed assets, not pre-install cancellation rates,” a spokesperson said in a statement. “Our growth projections have always been based on actual deployments.”

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