Texas Utility Deposit Bond: A Comprehensive Guide
This guide provides information for insurance agents to help their customers obtain a Texas 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 individuals and businesses that do not want to pay a cash deposit before receiving utility services
- Purpose: To ensure utility companies receive compensation for financial harm if the customer fails to pay their utility bills
- Who Requires Utility Deposit Bonds in Texas: Utility companies that provide services to the general public
Background
Utility companies in Texas 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 Texas 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 Texas Utility Deposit Bond?
Certain utility companies in Texas 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 Texas Utility Deposit Surety Bond?
BondExchange makes obtaining a Texas Utility Deposit Surety 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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Which Companies Allow Utility Deposit Bonds in Texas?
The following Tennessee utility companies allow customers to purchase a surety bond in lieu of depositing cash:
AEP Southwestern Electric Power
Commercial customers must either purchase a surety bond or deposit cash before receiving service. The bond amount is determined on a case-by-case basis based on the location’s estimated usage.
Agents can contact AEP Southwestern Electric Power here.
Atmos Energy Corporation
Businesses may opt to purchase a surety bond instead of depositing cash. The bond amount is determined based on the location’s estimated usage.
Agents can contact Atmos Energy Corporation here.
Burleson Utilities
Commercial customers that are required to pay a security deposit can choose to purchase a surety bond or deposit cash. The bond amount is calculated based on either the location’s meter size or two months’ average billing for a similar location.
Agents can contact the City of Burleson Utilities Department here.
City of Dallas Water Utilities Department
Non-residential customers must either purchase a surety bond or deposit cash in an amount that is determined based on their estimated usage.
Agents can contact the City of Dallas Water Utilities Department here.
City of Fort Worth Water Department
Commercial customers are required to either purchase a surety bond or deposit cash. The bond amount is calculated by the Department based on the previous six months of billing of a similar business.
Agents can contact the City of Fort Worth Water Department here.
City of Houston Public Works Department
Commercial customers whose required deposit amount is at least $5,000 may purchase a surety bond instead of depositing cash. The city determines the required bond amount on a case-by-case basis based on the location’s estimated usage.
Agents can contact the City of Houston Public Works Department here.
City of Midland Water and Wastewater Utilities Department
High-use customers can choose to purchase a surety bond instead of depositing cash. The bond amount is determined by the city on a case-by-case basis based on the customer’s estimated usage.
Agents can contact the City of Midland Water and Wastewater Utilities Department here.
City of San Antonio (CPS Energy)
Non-residential customers must either purchase a surety bond or deposit cash. The bond amount must equal twice the location’s actual or estimated average monthly bill or the current average monthly invoice for the selected class of services.
Agents can contact CPS Energy here.
El Paso Electric Company
Businesses are required to purchase a surety bond or deposit cash before initiating service. The bond amount is calculated by the company based on the location’s estimated usage.
Agents can contact the El Paso Electric Company here.
Entergy Texas
Commercial customers must either purchase a surety bond or deposit cash in an amount calculated by Entergy Texas based on the location’s estimated usage.
Agents can contact Entergy Texas here.
Greenville Electric Utility System (GEUS)
Commercial customers that must pay a security deposit can either purchase a surety bond or deposit cash. GEUS classifies customers as good, fair, or poor based on their credit history. Customers classified as good do not need to pay a security deposit. The deposit amount for customers classified as fair must equal twice the location’s actual or estimated highest monthly bill. Lastly, the deposit amount for customers classified as poor must equal three times the location’s actual or estimated highest monthly bill.
Agents can contact GEUS here.
Magnolia Electric Power
Commercial customers must purchase a surety bond or deposit cash. The bond amount must equal twice the location’s highest monthly bill. For new constructions, the bond amount must equal twice the location’s estimated monthly bill.
Agents can contact Magnolia Electric Power here.
Mesquite Water Billing Office
Commercial customers are required to purchase a surety bond or deposit cash. The bond amount must equal three times the location’s actual or estimated average monthly bill.
Agents can contact the Mesquite Water Billing Office here.
Ralls County Electric Cooperative
Businesses must either deposit cash or purchase a surety bond before receiving service. The bond amount is calculated by the Cooperative based on the location’s estimated usage.
Agents can contact the Ralls County Electric Cooperative here.
Reliant Energy Retail
Both residential and non-residential customers can choose to purchase a surety bond instead of depositing cash. The bond amount is calculated by Reliant Energy Retail on a case-by-case basis.
Agents can contact Reliant Energy Retail here.
TXU Energy
High-use customers may choose to purchase a surety bond instead of depositing cash. The bond amount is determined on a case-by-case basis based on the location’s estimated usage.
Agents can contact TXU Energy here.
Texas-New Mexico Power Company
Customers may opt to purchase a surety bond in lieu of depositing cash. The bond amount must equal twice the location’s actual or estimated average monthly bill.
Agents can contact the Texas-New Mexico Power Company here.
Is a Credit Check Required for the Texas Utility Deposit Bond?
Surety companies will run a credit check on the applicant to determine eligibility and pricing for the Texas 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 Texas Utility Deposit Bond Cost?
Most Texas Utility Deposit bonds 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 |
| 650 – 799 | $500 | $50 |
| 600 – 649 | $750 | $75 |
| 550 – 599 | $1,500 | $150 |
Utility deposit bonds required by Entergy Texas are priced differently and can cost anywhere between 2% to 7.5% of the bond amount per year. Below is the approximate cost on a $10,000 bond requirement.
| 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.
How Do Texas Utility Customers File Their Bonds?
Utility customers in Texas 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 Texas Do to Avoid Claims Against Their Bonds?
To avoid claims on their bonds, utility customers in Texas must ensure they pay their utility bills on time and in full.
What Other Insurance Products Can Agents Offer Utility Customers in Texas?
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.