Arizona Utility Deposit Bond: A Comprehensive Guide

January 13, 2023

Arizona Utility Deposit Bond

This guide provides information for insurance agents to help their customers obtain an Arizona 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 Arizona
  • 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 Arizona: Utility companies in Arizona that provide services to the general public

Background

Utility companies in Arizona 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 Arizona allow customers to purchase and maintain a surety bond in lieu of a security deposit. Unlike most surety bonds, utility deposit bonds are not required by a government agency but by the utility company providing the service.

What is the Purpose of the Arizona Utility Deposit Bond?

Utility companies in Arizona 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.

Arizona Utility Deposit Bond Form
Arizona Utility Deposit Bond Form

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

BondExchange makes obtaining an Arizona 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.

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

Surety companies will run a credit check on the applicant to determine eligibility and pricing for the Arizona 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 Arizona Utility Deposit Bond Cost?

Most Arizona Utility Deposit bonds will 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.

$10,000 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

Utility Deposit bonds required by the Salt River Project Agricultural Improvement and Power District cost between 2% to 7.5% of the bond amount per year. Below is the approximate cost for a $10,000 bond required by the Salt River Project Agricultural Improvement and Power District.

$10,000 Salt River Project Agricultural Improvement and Power District Bond Cost

Credit Score* Bond Cost (1 year)
800+ $200
650 – 799 $500
600 – 649 $750

*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 Arizona?

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

Arizona Public Service Company

Requires businesses to either deposit cash or purchase a surety bond in an amount up to 2.5 times the highest monthly bill generated at the location in the last 12 months. If the location is newly constructed or the business has different operating procedures than the prior owner, the Arizona Public Service Company will use the location’s total square footage to determine the required bond amount.

Agents can contact the Arizona Public Service Company here.

 

City of Safford Utilities Department

The City of Safford requires commercial businesses to either deposit cash or purchase a surety bond in an amount equal to 1.5 times the highest monthly bill for the location in the previous 12 months. If the location is newly constructed, the city will base the required bond amount on those required at similar locations.

Agents can contact Benton Utilities here.

 

Salt River Project Agricultural Improvement and Power District

Requires high-use customers that do not qualify for a credit waiver to deposit cash or purchase a surety bond. The bond amount must be equal to the customer’s estimated two highest consecutive monthly bills (as determined by the company).

Agents can contact the Salt River Project Agricultural Improvement and Power District here.

 

Southwest Gas Corporation

Commercial businesses that have not utilized Southwest Gas in the past or have not established a satisfactory payment history with the company for the past 24 months must either deposit cash or purchase a surety bond in an amount determined by the company.

Agents can contact Southwest Gas Corporation here.

 

Tucson Electric Power Company

High-use customers may purchase a surety bond instead of making a cash deposit. The bond amount will be determined by the company based on the estimated monthly bills the consumer will accrue.

Agents can contact the Tucson Electric Power Company here.

How Do Arizona Utility Customers File Their Bonds?

Utility customers in Arizona 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 from 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
  • Date the bond is signed
  • Date the bond goes into effect

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

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

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

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.