MasterCard Fraud

I just closed my MasterCard account after it was used fraudulently — for the second time in less than a month.

This isn’t the first time a card of mine has been compromised but it is the first time it’s happened twice in a row. Even weirder, we have never used only used the new replacement card that MasterCard sent us one time at a 76 gas station. And finally, this compromised card was an EMV chip card, supposedly more secure.

MasterCard’s fraud detection seems to have worked well. Out of the 51 million transactions MasterCard handles every day, it flagged a $642 purchase at Nordstrom’s that some criminal made with my card on Dec. 23 in San Diego. The MasterCard agent told me that the purchase was refused at the store and I was notified before I even knew a problem existed.

It’s not clear how my information was obtained in the Dec. 23 incident but MasterCard notes in its SEC filing that data breaches “typically involve external agents hacking the merchants’ or third-party processors’ systems and installing malware to compromise the confidentiality and integrity of those systems.”

That’s happened before with my American Express card and others. But then came the dealbreaker. After MasterCard sent me a new replacement card with a new number — it flagged a $99 purchase today at a gas station in Los Angeles. (Update: The folks who have my card tried to use it again yesterday at a gas station in San Francisco). Again, the fraud detection system worked, but there’s something more troubling afoot.

How was the information on my new replacement compromised so quickly? This time there was no hacking; the number had never been used. Tracing this backwards,  the breach like occurred at the 76 gas station. Or someone penetrated the computer of MasterCard, Citibank or the third-party processing systems.

But who knows?  Maybe the postman has sticky fingers. Or maybe, since my card has a chip that can be read at a distance using RFID, could someone have obtained my information that way?  It’s theoretically possible, but not likely.

So who pays?  Not me. By law, if my credit card number was stolen, but not the card, I’m not liable for unauthorized use. Someone is paying, though, and it’s either the merchant that processed the card, the third-party that processed it or the bank that issued it, in my case Citibank.

My SolarCity Experience

It was time to choose a solar installer.

My first call was to SolarCity, which bills itself as “the world’s largest solar provider.” The chairman of the company’s board is Elon Musk, the man behind Tesla Motors, the maker of beautiful (and expensive) electric cars. So I was excited to talk to SolarCity. I suppose I was expecting a glimpse into the future of solar.

Instead, I was routed to SolarCity’s “call center” where I spoke to a guy named “Russ.”

“Do you hate utility companies?” Russ told me excitedly. “Good. Because this is your chance to do something good for the environment and stick it to the utilities!”

“Our partners include the U.S. Armed Forces, Google, Walmart, BMW, Bank Of America, Tesla, Ebay, Paypal, Hewlett Packard and the list goes on…”

“There’s a reason why every 36 seconds we do two of every three installs in America today.”

SolarCity would be happy to send someone out to my house, Russ told me. But first I had to sign a contract.

I wasn’t comfortable signing anything. By this point, I had called a few other companies. SolarCity was the only one that wanted me to sign a contract before they sent someone out to my home.

“Smaller companies will do that all day,” Russ told me. “They don’t carry our overhead, nor are they responsible for the type of partnerships we are. We spend $2,500 every time we schedule a site survey. That cost is absorbed by SolarCity. However, our partners demand accountability. So to re-cap, I can help you. In fact your, deal is a no brainer. But you have to help me help you.”

Help me help you? Was I talking to Jerry McGuire?

If Russ’s pitch rang alarms, a closer look at the company’s SEC filings sent me running. SolarCity was losing money at alarming rate. The company’s after-tax losses went from -$113 million in 2012 to -$375 million in 2014. And losses in 2015 were on track were on track to be even bigger.

Revenues were growing fast, but they were not outpacing the cost of attracting new customers like me. SolarCity spent nearly every dollar in revenue in 2014 on sales and marketing, including the sales team that pesters me in The Home Depot.

SolarCity’s business model was to sign up customers with little or no up front costs to 20 year leases on solar panels. In exchange you receive a lower bill. However, these bills can increase by as much as 2.9 percent a year, much like a utility.

In essence, your power bill becomes a mortgage to SolarCity. These leases are bundled together and sold to investors, along with the federal solar tax credit for your panels. Or you can buy Solar Bonds.  SolarCity has started lending money to buy your panels outright.

SolarCity’s growth has been heavily subsidized by taxpayers. The company has collected $400 million in federal solar tax credits. When the federal tax credit eventually goes away — along with net metering — what will become of the company? Will bonds fill the void? Who knows?

What was Elon Musk doing putting his name on this company? SolarCity’s founders are Musk’s cousins, and I wondered whether that relationship was hurting his judgement.

I might have been willing to overlook all of this if the price was right. SolarCity likes to tell investors that its position as industry leader gives it “economies of scale” that allow it offer lower prices than its competitors. As it turned out, that wasn’t true.

SolarCity wanted to charge me $18,900 for a 3.71 kw system.

The best way to compare solar contracts is to look at dollars per watt. SolarCity’s offer worked out to more than $5 per watt.

A fair price for a solar system is $3.50 per watt. Even better if you can get it for less.

So much for the “economies of scale.”

Going Solar, Part II

Another factor pushing me toward solar was net metering.

Net metering is a billing system that credits solar homes for the electricity they produce. If the solar system was properly designed the inflows and outflows will balance.

There is a misconception that people who install rooftop solar panels go “off the grid.”  Unless you are willing to pay the extra expense for an array of massive batteries, that’s not true.

When the sun is up my solar panels generate electricity. They generate more power than I can use, and the excess is fed back in the electric grid.

At night, the situation is reversed. My solar panels generate no power.  But I keep the lights on, cook dinner, watch TV, and so on. That power comes from the grid.

The catch is that, under California’s net metering law, solar homes are credited for excess power at the retail electricity rate. My average retail electricity rate in 2015, if you recall from the previous post, was 20 cents per kilowatt hour — among the most expensive in the United States.

The wholesale cost that my utility pays for power, according to the U.S. Energy Information Administration (side note: do we really need another government bureaucracy for this?), is around 4 cents per kilowatt hour.

That 16 cents per kilowatt hour difference covers San Diego Gas & Electric’s costs for generating electricity, transmitting it, distributing, and maintaining the grid. Some of it goes to SDG&E’s $500 million annual profit (in 2014).

This is a good deal for me. But it’s a bad deal for the utility’s non-solar customers. They are subsidizing my cost of maintaining the electric grid. SDG&E estimated that families without solar panels pay an extra $100 per year to cover the costs of solar homes.

California’s net metering law capped the number of solar homes at 5 percent of a utility’s aggregate peak demand. Here you can see how close we are to the cap in San Diego. The limit will probably be reached sometime this year.

What happens then? Right now it’s unclear. But my guess is that new rooftop solar customers will eventually have to buy solar at retail rates and sell it at wholesale rates. If you get in under cap you get a 1-to-1 credit for 20 years.

So there was another reason for going solar.

Going Solar, Part I

My wife had been urging us to go solar for years.

She saw it as a way to send a message to our community and ourselves that we care about the environment and the future of our planet. We live in sunny San Diego, so it made total sense.

Looking back, I can’t exactly say why I was reluctant to agree. We had the money. I don’t believe that global warming is some giant hoax. I was just … apathetic.

When panels started to pop up everywhere, I decided to run the numbers. As you can see below, I paid an average of 20 cents an hour per kilowatt/hour of electricity.

To put this in perspective, 20 cents per kilowatt hour is about as expensive as it gets for electricity in the United States.

How did this compare to solar?

First off, I wanted to buy my solar panels outright. We had the money to do this and it was a far better investment than leasing. Most people in California choose to lease, which is the most expensive way to go solar. Buying panels outright locks in electricity at a low price, while leasing panels leaves you vulnerable to rising rates, just like with your utility.

I was budgeting about $21,000 for my 4.73kw solar system (including a new electric panel). The U.S. government’s 30 percent tax credit brought the total cost down to around $14,700.

That’s a lot of money but buying a solar system is essentially paying for power up front.

Over 20 years at 20 cents/kWh I will hand over $24,820 to my utility, San Diego Gas & Electric. Running my solar system for 20 years would save me $10,000.

And that’s assuming that rates don’t change (unlikely) and my electric use remains the same (also unlikely).

Solar was starting to make sense.