The Public Utilities Commission ("the Commission") is a state agency that has regulatory authority over certain public utilities. The Commission works to regulate the rates customers pay for electricity and ensure that companies provide quality, safe and reliable electric service.1
When someone requests new electric service, the utility provider will verify credit.
For customers without good credit
With residential service, security deposit decisions must be based only on an individual's credit record. The utility provider cannot require a deposit on the basis of location, race, sex, age if over 18, national origin or marital status.2
If the party requesting service does not meet the requirements for good credit, a deposit may be required. The utility provider may ask for — but cannot require — a Social Security number in order to check credit history. It also may ask for valid identification (ID), which may be a government-issued photo ID or two alternative IDs, as long as one has a photo. The utility provider also may require the names and proof of identity of each adult occupant of the residence.
To establish credit, new customers must meet at least one of the following criteria:
When a spouse's credit history is a factor
That said, understand that a utility company cannot require a deposit simply because previous utility services were in a spouse's name but not in the current applicant's name. However, the spouse's utility credit history may be a factor if:
Under the Equal Credit Opportunity Act (ECOA), if the above apply, the following needs to be proven in order to establish service:
If unable to prove any of the above, the utility provider may ask for payment of the spouse's old debts, for a deposit, or for a letter of guarantee before new service is connected. In this case, the utility provider's right to take such action is governed by state law, not the ECOA.
How much should the security deposit be?
In some states, the electric company may not charge a deposit of more than 130% of the estimated average monthly bill for regulated services. The deposit may be increased or lowered after three consecutive billing periods if the deposit differs by 20% or more of the amount that would have been required based on actual usage (while considering possible seasonal changes in usage).
If the utility provider keeps a deposit for more than six months, the utility provider may have to pay at least 3% interest on the deposit, depending on the applicable state law. After 12 months, the utility provider may review the account and determine if the deposit should be returned.
Security deposits from commercial customers
With commercial service, security deposit decisions are a little more complicated. Utility providers may request a deposit based on several factors3:
If service is already being provided, but the commercial customer is not timely in paying the charges as incurred, a utility provider may require an adjusted deposit if:
If a deposit is required, alternate means can be used to provide security in some circumstances. For example, some state laws and some utility providers allow the following in lieu of a monetary deposit:
Waiving security deposits
The requirement of a security deposit can be waived, for both residential and commercial accounts, if good credit is established. Utility providers must apply all credit reviewing procedures uniformly to all customers. A utility provider may waive a deposit if the customer:
The Commission and utility providers recognize that some customers, residential and commercial, will experience difficulties in paying their bills. There also will be customers who intentionally avoid payment. As a result, every utility provider will have a number of customers that do not pay for the products and services provided. Security deposits protect against the losses that utility providers otherwise face.
1 For example, Ohio Revised Code, Section 4901.02.
2 The Equal Credit Opportunity Act (ECOA), 15 U.S.C. 1691 et seq.
3 https://www.michigan.gov/documents/mpsc/bizdepositalert_320118_7.pdf