Louisiana Utility Deposit Bond: A Comprehensive Guide
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 Louisiana
- 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 Louisiana: Utility companies that provide services to the general public
Background
Utility companies in Louisiana 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, certain utility companies in Louisiana 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 Louisiana Utility Deposit Bond?
Certain utility companies in Louisiana 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 Louisiana Utility Deposit Surety Bond?
BondExchange makes obtaining a Louisiana 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.
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Is a Credit Check Required for the Louisiana Utility Deposit Bond?
Surety companies will run a credit check on the applicant to determine eligibility and pricing for the Louisiana 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 Louisiana Utility Deposit Bond Cost?
A Louisiana 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.
$10,000 Utility Deposit Bond Cost
| Credit Score* | Bond Cost (1 year) | Bond Cost (1 month) |
|---|---|---|
| 800+ | $200 | $20 |
| 680 – 799 | $300 | $30 |
| 650 – 679 | $500 | $50 |
| 600 – 649 | $750 | $75 |
| 550 – 599 | $1,500 | $150 |
*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 Louisiana?
The following Louisiana utility companies allow customers to purchase a surety bond in lieu of depositing cash:
Alexandria Utility Department
Commercial customers may opt to purchase a surety bond instead of depositing cash. The bond amount must equal twice the location’s average monthly bill during the previous 12 months. If the location is a new construction, the city will determine the bond amount based on the location’s estimated usage.
Agents can contact the City of Alexandria Utility Department here.
Cleco Power
Businesses must deposit cash or purchase a surety bond before initiating service. The bond amount is determined by Cleco Power on a case-by-case basis based on the business’s estimated usage. The minimum deposit amount for businesses is $250.
Agents can contact Cleco Power here.
Entergy
Businesses whose required security deposit amount exceeds $2,000 purchase a surety bond in lieu of depositing cash. The bond amount is determined by Entergy based on the location’s square footage and the type of equipment required to maintain service.
Agents can contact Entergy here.
Southwestern Electric Power
Businesses are required to either deposit cash or purchase a surety bond before initiating service. If the business is requesting service in a location previously operated by a business of a similar type and size, then the bond amount must be equal to the average monthly bill for that location during the previous 12-month period. If the location is a new construction, then the company will determine the required amount based on the monthly usage of similar businesses.
Agents can contact Southwestern Electric Power here.
How Do Louisiana Utility Customers File Their Bonds?
Utility customers in Louisiana 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 Louisiana Do to Avoid Claims Against Their Bonds?
To avoid claims on their bonds, utility customers in Louisiana must ensure they pay their utility bills on time and in full.
What Other Insurance Products Can Agents Offer Utility Customers in Louisiana?
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, check out our Surety Bonds vs. Letters of Credit article here.