Alabama Utility Deposit Bond: A Comprehensive Guide

January 10, 2023

Alabama Utility Deposit Bond

This guide provides information for insurance agents to help their customers obtain an Alabama Utility Deposit Bond

At a Glance:

  • Average Cost: Between 2% to 15% of the bond amount per year based on the applicant’s credit
  • Bond Amount: Determined on a case-by-case basis
  • Who Needs it: Certain businesses seeking to activate utility services in Alabama
  • Purpose: To ensure utility companies receive compensation for financial harm if the consumer fails to pay their utility bills
  • Who Requires Utility Deposit Bonds in Alabama: Utility companies in Alabama that provide services to the general public

Background

Utility companies in Alabama often require customers expected to generate large monthly bills to pay a security deposit before initiating service. The security deposit protects utility companies from losses if the consumer fails to pay their monthly bills on time and in full. However, most utility companies in Alabama allow customers to purchase and maintain a surety bond in lieu of depositing cash. Unlike most surety bonds, utility deposit bonds are not required by a government agency but by the utility company providing the service (unless a municipality owns the utility company).

What is the Purpose of the Alabama Utility Deposit Bond?

Utility companies in Alabama require consumers that do not wish to pay a security deposit to purchase a surety bond as a prerequisite to obtaining utility services. The bond ensures that the utility company will receive compensation for financial harm if the consumer fails to comply with the provisions laid out in the bond form. Specifically, the bond protects the utility company if the consumer does not pay their monthly bills. In short, the bond is a type of insurance that protects utility companies if the consumer fails to remit all required payments.

Alabama Utility Deposit Bond Form
Alabama Utility Deposit Bond Form

How Can an Insurance Agent Obtain an Alabama Utility Deposit Surety Bond?

BondExchange makes obtaining an Alabama Utility Deposit bond easy. Simply login to your account and use our keyword search to find the “utility” bond in our database. Don’t have a login? Enroll now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone (800) 438-1162, email or chat from 7:30 AM to 7:00 PM EST to assist you.

At BondExchange, our 40 years of experience, leading technology, and access to markets ensures that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.

Not an agent? Then let us pair you with one!

BX Agent Finder Link

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Is a Credit Check Required for the Alabama Utility Deposit Bond?

Surety companies will run a credit check on the applicant to determine eligibility and pricing for the Alabama Utility Deposit bond. Applicants with excellent credit and work experience can expect to receive the best rates. Applicants with poor credit may be declined by some surety companies or pay higher rates. The credit check is a “soft hit”, meaning that the credit check will not affect the applicant’s credit.

How Much Does the Alabama Utility Deposit Bond Cost?

The Alabama Utility Deposit Bond can cost anywhere between 2% to 15% of the bond amount per year. Insurance companies determine the rate based on a number of factors including your customer’s credit score and experience. The chart below offers a quick reference for the approximate bond cost on a $10,000 bond requirement.


$50,000 Alabama Utility Deposit Bond Cost

Credit Score* Bond Cost (1 year)
800+ $200
680 – 799 $300
650 – 679 $500
600 – 649 $750
550 – 599 $1,500

*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.

Which Companies Allow Utility Deposit Bonds in Alabama?

The following Alabama utility companies allow customers to purchase a surety bond in lieu of depositing cash:

Alabama Power Company

Customers of the Alabama Power Company have the option to purchase a surety bond in an amount equal to twice their estimated monthly utility bill (as determined by the company for new customers) instead of paying a security deposit. The company may increase the required bond amount to equal twice the customer’s highest recorded monthly utility bill if they have a history of late payments.

Agents can contact the Alabama Power Company here.

 

Albertville Municipal Utilities Board

General power customers may either submit a cash deposit or purchase a surety bond in an amount equal to twice their average monthly bill (determined by the company for new customers). The company may reevaluate the required bond amount if the initial estimate appears to be off.

Agents can contact the Albertville Municipal Utilities Board here.

 

Arab Electric Cooperative, Inc.

Customers required to pay a security deposit may opt to purchase a surety bond in an amount equal to twice their highest monthly utility bill paid in the last 12 months (estimated by the company for first time users). Additionally, customers must pay a $25 meter set fee before they receive service.

Agents can contact Arab Electric Cooperative, Inc. here.

 

Baldwin County Electric Membership Corporation

Customers that do not wish to pay a security deposit may purchase a surety bond in an amount equal to 3 times their estimated monthly bill (as determined by the company).   The company may increase the required bond amount to equal twice the customer’s highest recorded monthly utility bill if they deem it necessary.

Agents can contact the Baldwin County Electric Membership Corporation here.

 

Bessemer Utilities

Customers may purchase a surety bond in an amount equal to twice their average monthly bill instead of paying a security deposit. Bessemer Utilities may increase a customer’s bond amount to twice their highest monthly electric bill if the customer has a history of late payments.

Agents can contact Bessemer Utilities here.

 

Cherokee Electric Cooperative

Requires high-use customers to either deposit cash or purchase a surety bond in an amount determined by the company.

Agents can contact the Cherokee Electric Cooperative here.

 

City of Foley DBA Riviera Utilities

Customers expected to use a significant amount of resources may either deposit cash or purchase a surety bond in an amount determined by the company. Riviera Utilities may increase the required bond amount to twice the customer’s highest monthly bill at any time.

Agents can contact Riviera Utilities here.

 

Cullman Power Board

Commercial businesses must either deposit cash or purchase a surety bond in an amount equal to twice their highest estimated monthly bill (as determined by the company). The company may adjust the required bond amount based on the business’s usage.

Agents can contact the Cullman Power Board here.

 

Cullman-Jefferson Counties Gas District

Commercial businesses must either deposit cash or purchase a surety bond in an amount equal to 1 month of their estimated gas bill (as determined by the company).

Agents can contact the Cullman-Jefferson Counties Gas District here.

 

Decatur Utilities

Businesses must deposit cash or purchase a surety bond in an amount equal to one month of their estimated usage (based on the overall usage for the business’s location).

Agents can contact Decatur Utilities here.

 

Dixie Electric Cooperative

Businesses are required to either deposit cash or purchase a surety bond in an amount equal to 2.5 times either the service location’s average monthly bill or the electrical load requirements for that location, whichever is greater.

Agents can contact the Dixie Electric Cooperative here.

 

Florence Utilities

All commercial businesses must submit a cash deposit or purchase a surety bond before obtaining service. The bond amount must equal one and a half times the business’s estimated average monthly usage (as determined by the company).

Agents can contact Florence Utilities here.

 

Franklin Electric Cooperative

The company requires commercial businesses to either deposit cash or purchase a bond in an amount equal to twice the business’s average monthly bill (as determined by the company).

Agents can contact the Franklin Electric Cooperative here.

 

Huntsville Utilities

Businesses must either deposit cash or purchase a surety bond in an amount determined by the company (click here to determine your customer’s bond amount).

Agents can contact Huntsville Utilities here.

 

Marshall County Gas

Commercial businesses are required to either deposit cash or purchase a surety bond in an amount equal to twice the company’s highest, or estimated highest, monthly billing.

Agents can contact Marshall County Gas here.

 

Montgomery Water Works

The company requires businesses t0 either deposit cash or purchase and maintain a surety bond (amount determined by the company). Once the customer receives their required bond amount, they have 30 days to obtain a bond or their service will be discontinued.

Agents can contact Montgomery Water Works here.

 

North Alabama Electric Cooperative

Businesses must either deposit cash or purchase a surety bond in an amount equal to either $200 or twice the business’s estimated monthly bill (as determined by the company).

Agents can contact the North Alabama Electric Cooperative here.

 

Piedmont Water, Gas, and Sewer

All businesses must either deposit cash or purchase a bond in an amount equal to two months estimated usage. The company may revise the required amount at any time and for any reason.

Agents can contact the Piedmont Water, Gas and Sewer here.

 

Sand Mountain Electric Cooperative

General power customers must either make a cash deposit of one month’s estimated bill or purchase a surety bond in an amount equal to two months of estimated bills. The Sand Mountain Electric Cooperative may at any time require the customer to purchase a bond equal to twice their highest monthly payment.

Agents can contact the Sand Mountain Electric Cooperative here.

 

Scottsboro Electric Power Board

Instead of depositing cash, high-use customers may opt to purchase a surety bond. Scottsboro Electric Power Board will notify the customer of their required bond amount after service has been requested.

Agents can contact the Scottsboro Electric Power Board here.

 

Spire

Businesses utilizing Spire must either deposit cash or purchase a surety bond in an amount equal to twice their estimated monthly bill. Spire may at any time require a business to increase their bond amount to twice their highest monthly bill.

Agents can contact Spire here.

 

Water Works and Sewer Board of the City of Birmingham

Businesses must either deposit cash or purchase a surety bond in an amount equal to three times their average (or estimated average) monthly bill.

Agents can contact the Water Works and Sewer Board of the City of Birmingham here.

How Do Alabama Utility Customers File Their Bonds?

Utility customers in Arkansas should submit their completed bond forms, including the power of attorney, to the company requiring the bond. The surety bond requires signatures from both the surety company that issues the bond and the customer. In some instances, the bond will require witness signatures as well. Generally, the surety company will include the following information on the bond form:

  • Name and address of entity/individual(s) buying the bond
  • Surety company’s name and address
  • Entity requiring the bond
  • Bond amount

What Can Utility Customers in Alabama Do to Avoid Claims Against Their Bonds?

To avoid claims on their bonds, utility customers in Alabama must ensure they pay their utility bills on time and in full.

What Other Insurance Products Can Agents Offer Utility Customers in Alabama?

Utility companies generally only require businesses to be bonded. As such, agents can offer their customers general business and liability insurance in addition to the utility deposit bond. Bonds are our only business at BondExchange, so we do not issue liability insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.

Should Your Customer Purchase a Surety Bond or Deposit Cash?

Surety bonds are generally considered the better option for businesses, as they free up working capital that would otherwise have to be deposited with the utility company. For more information on whether your customer should purchase a bond or deposit cash, contact BondExchange.