Colorado Utility Deposit Bond: A Comprehensive Guide
At a Glance:
- Average Cost: Between 2% to 7.5% 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 Colorado
- 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 Colorado: Utility companies in Colorado that provide services to the general public
Background
Utility companies in Colorado 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 Colorado allow customers to purchase and maintain a surety bond in lieu of a cash 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 Colorado Utility Deposit Bond?
Utility companies in Colorado 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.
How Can an Insurance Agent Obtain a Colorado Utility Deposit Surety Bond?
BondExchange makes obtaining a Colorado 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? Gain access 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 Colorado Utility Deposit Bond?
Surety companies will run a credit check on the applicant to determine eligibility and pricing for the Colorado 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 Colorado Utility Deposit Bond Cost?
The Colorado Utility Deposit bond can cost anywhere between 2% to 7.5% 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) | Bond Cost (1 month) |
|---|---|---|
| 800+ | $200 | $20 |
| 650 – 799 | $500 | $50 |
| 600 – 649 | $750 | $75 |
*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.
BondExchange now offers monthly pay-as-you-go subscriptions for surety bonds. Your customers are able to purchase their bonds on a monthly basis and cancel them anytime. Learn more here.
Which Companies Allow Utility Deposit Bonds in Colorado?
The following Colorado utility companies allow customers to purchase a surety bond in lieu of depositing cash:
Colorado Springs Utilities
Certain customers must either deposit cash or purchase a surety bond in an amount equal to four times the average bill for the premises during the previous 12 months. If the premises is newly constructed, the company will determine the required bond amount by multiplying the estimated (as determined by the company) monthly bill by four. The bond or cash deposit is primarily required for commercial locations. However, the company will waive the bond requirement for commercial accounts:
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- That have had continuous service to another commercial location during the past 12 months and have had no delinquent payments during that period
- Opened by a customer with an existing residential account, provided there have been no delinquent payments on the account within the past 12 months and the company determines the utility usage at the commercial location will not significantly exceed that of the residential one.
- Where the customer has acceptable credit (contact the company for credit guidelines)
The deposit requirement for commercial accounts will expire after 36 months of consecutive on-time payments.
Residential accounts are required to deposit cash or purchase a bond if the customer has a history of delinquent payments. The deposit requirement will expire after 12 months of consecutive payments.
Agents can contact Colorado Springs Utilities here.
CORE Electric Cooperative
Certain customers are required to purchase a surety bond or deposit cash in an amount equal to their estimated average (as determined by the company) 60-day bill. CORE Electric Cooperative requires customers to purchase a surety bond or deposit cash in the following situations:
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- The customer has had one or more delinquent payments during the past 12 months
- The customer has no payment history with CORE Electric Cooperative
- An account is disconnected for non-payment, or its consumption becomes more than 100% of the historical consumption at that location
Agents can contact CORE Electric Cooperative here.
Public Service Company of Colorado
High-use customers may be required to purchase a surety bond in an amount equal to three months of estimated service fees (as required by the company). The Public Service Company of Colorado is a subsidiary of Xcel Energy.
Agents can contact Xcel Energy here.
How Do Colorado Utility Customers File Their Bonds?
Utility customers in Colorado 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 Colorado Do to Avoid Claims Against Their Bonds?
To avoid claims on their bonds, utility customers in Colorado must ensure they pay their utility bills on time and in full.
What Other Insurance Products Can Agents Offer Utility Customers in Colorado?
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.