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I understand the city requiring the exterior portion of the electrical service to be replaced. However, under the circumstances presented, I've never known them to force a homeowner to replace the interior breaker panel. Did the $4700 price tag include a new electrical system for the entire structure?
In other words, what all was replaced?
Thank you for the additional information. That price, for the scope of work performed, sounds significantly higher than necessary to me. Did the same electrician who did the troubleshooting of the problem complete the repair work for you?
Even though the work was completed by a licensed contractor, he was aware of the situation you were in (being forced by the city to have the repairs done). I'm not accusing the electrician of doing anything wrong, but it sounds like the price was pretty high for the work that was completed. For that price, I'm pretty sure I could have done the work you listed, plus replaced the interior breaker panel, and still made a good profit on the job.
I'm curious as to what drove the price so high, just for replacing the exterior portion of the service. You could ask a couple of other local electrical contractors to come out and give estimates, or explain the scope of work to them over the phone, and see if they can ballpark a price for you, just to see if the electrician who did the work is in the right price range. But it sounds high to me.
Unfortunately, the city can rightfully claim that they have no liability for anything. It's okay for an unlicensed electrician to respond to and troubleshoot a problem. However, because he isn't licensed, he can't pull a permit for the repair work. If all he did was look at and diagnose the problem, but he didn't perform any repairs, the city can say all he did was look.