Texas Utility Deposit Bonds
Before starting or continuing electric, natural gas or water service, a utility may require a security deposit. However, when the utility accepts a surety bond, a utility deposit bond can meet that requirement without tying up the full amount in cash. As a result, Texas businesses and individuals can keep their working capital free for other needs.
What Is a Utility Deposit Bond?
Utility providers often require customers to provide financial security before service begins. Typically, that security is a cash deposit.
A utility deposit bond, on the other hand, is a surety bond that guarantees your obligation to the utility up to the bond amount. In other words, the surety backs the deposit, so you pay a premium instead of handing over the entire amount.
Keep in mind, however, that you’re still responsible for paying every utility bill. Moreover, if the surety pays a valid claim, you’re generally required to repay the surety.
Not every utility accepts surety bonds for every customer, account or service class. Therefore, before you apply, confirm the required security amount, whether a bond is acceptable and whether the utility requires a specific bond form or wording.
Utility Bonds Available Through Lavon Insurance
To get started, select your utility provider to learn about its deposit bond and application process.
Atmos Energy Deposit Bond
Facing an Atmos Energy security requirement? An approved bond may replace the cash deposit.
Atmos Energy Deposit Bond →CenterPoint Energy Deposit Bond
When CenterPoint accepts a bond for your account, it can satisfy the financial security requirement.
CenterPoint Energy Deposit Bond →Reliant Energy Deposit Bond
Reliant recognizes surety bonds as one way to satisfy an enrollment deposit requirement.
Reliant Energy Deposit Bond →Fire Hydrant Water Meter Bonds
Similarly, contractors renting hydrant meters in Dallas and North Texas can often use a bond instead of cash.
Hydrant Water Meter Bonds →Utility Deposit Bonds Can Apply to Different Services
Ultimately, the right bond depends on the utility provider and the security requirement on your account.
Electric Deposit Bonds
Electric providers may require deposits for residential or commercial accounts based on credit, payment history or enrollment circumstances.
Natural Gas Deposit Bonds
Likewise, gas utilities may request security before starting or continuing service, especially for commercial or high-usage accounts.
Water & Municipal Bonds
In addition, cities and utility districts may accept bonds for water, sewer, hydrant meter or other utility deposits.
Utility Deposit Bond vs. Cash Deposit
| Feature | Cash Deposit | Utility Deposit Bond |
|---|---|---|
| What you pay up front | The full deposit amount | A bond premium, a fraction of the deposit |
| Who holds the security | The utility holds your cash | A surety company guarantees the amount |
| Impact on cash flow | Money is unavailable until refunded | Keeps working capital free |
| Your monthly bills | You still pay every bill | You still pay every bill |
| If the utility makes a claim | The utility applies your deposit | The surety pays, and you repay the surety |
How Texas Electric Deposits Work
For retail electric providers, the Public Utility Commission of Texas sets deposit rules in 16 Texas Administrative Code §25.478. For instance, a residential deposit generally can’t exceed the greater of one-fifth of your estimated annual billing or your estimated billing for the next two months.
Furthermore, deposits are refunded after a run of on-time payments. Consequently, a deposit bond can be especially valuable for businesses, which wait twice as long as residential customers for a refund.
- Residential deposits refunded after 12 consecutive on-time billings
- Non-residential deposits refunded after 24 consecutive on-time billings
- Deposits earn interest at a rate set under state law
- Governmental entities are exempt from deposits
- Residential customers 65 or older and not delinquent may avoid a deposit
Who Can Benefit From a Utility Deposit Bond?
Businesses
Commercial deposits tie up money that could otherwise go toward payroll, inventory or equipment.
Developers & Contractors
New projects often need several utility accounts at once, so managing cash flow matters even more.
Residential Customers
Meanwhile, some providers let qualifying residential customers use an approved bond or other alternative to cash.
How the Utility Deposit Bond Process Works
Identify the Requirement
First, find out which utility requires security and the exact deposit amount.
Confirm Bond Acceptance
Next, ask the utility whether a surety bond can satisfy the deposit for your account.
Apply for the Bond
Then provide your customer, utility, bond amount and underwriting information.
Submit the Bond
Finally, once the bond is issued, deliver it to the utility according to its instructions.
Information You’ll Need to Apply
If the utility sent you a letter, email or deposit notice, keep it handy when you apply. That’s because it often contains the exact bond amount, account number, obligee name or required bond language.
Not sure which bond applies? Call (972) 853-8884 before you buy.
- Legal customer or business name
- Utility provider and service address
- Utility account number, if assigned
- Required bond or deposit amount
- Requested effective date
- Utility bond form or wording, if any
- Business ownership information, when applicable
- Financial or credit information requested by the surety
Utility Deposit Bond FAQs
What is a utility deposit bond?
A utility deposit bond is a surety bond that provides financial security to a utility provider. When accepted, it lets you satisfy a deposit requirement without placing the entire amount in cash.
Which utilities accept deposit bonds?
Deposit bonds may be available for certain electric, natural gas, water and municipal utility accounts, including Atmos Energy, CenterPoint Energy and Reliant. However, acceptance depends on the utility, the account and its requirements.
Does every utility accept surety bonds?
No. Bond acceptance varies by utility, customer class and account. Therefore, always confirm acceptance before you buy a bond.
How much utility deposit bond do I need?
The utility sets the amount of security required for your account. Generally, that amount becomes your bond amount, subject to the utility’s instructions.
Is the bond amount the same as what I pay?
No. The bond amount is what the surety guarantees. Instead, you pay a premium based on the surety’s underwriting.
How long does a Texas electric provider keep my deposit?
Under PUC rules, retail electric providers refund residential deposits after 12 consecutive on-time billings and non-residential deposits after 24. As a result, a bond can free up business cash for two years or more.
Does a utility deposit bond pay my utility bills?
No. You’re still responsible for every utility charge. In other words, the bond secures the deposit obligation but doesn’t replace monthly payments.
Can a business use a utility deposit bond?
Yes, when the utility accepts it and the surety approves it. In fact, deposit bonds are especially useful for businesses that want to preserve working capital.
What happens if the surety pays a claim?
Unlike insurance, if the surety pays a valid claim, you’re generally required to repay the surety under the bond and indemnity agreement.
Can I get a utility deposit bond online?
Yes. Many utility deposit bond applications can be started online. Simply select your utility provider above, or call Lavon Insurance for help.
Other Texas Surety Bonds
Construction Bonds
Bid, performance, payment and lien release bonds for contractors.
Construction Surety Bonds →License & Compliance Bonds
Bonds required for Texas business licenses and permits.
License & Compliance Bonds →All Surety Bonds
Browse every bond type we offer in Texas.
View All Surety Bonds →Find the Utility Deposit Bond You Need
If an electric, gas or water utility has asked for a deposit, a surety bond may be a smarter alternative to cash. Start online, or call us for help.
Bond acceptance, availability, required amounts, premium and underwriting vary by utility, account, applicant and surety. PUC deposit rules are summarized for general information; confirm requirements with your provider.