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Texas Residential Electric Deposit Rules

You see a great electricity rate from an energy supplier and start the online enrollment process.  You are almost through the process when you see that a deposit will be required to initiate electric service.  What do you do now?  Fortunately, you have several choices to explore other than paying the deposit.  First, read this article on Texas electric credit rules to see if you qualify for an exemption or are otherwise able to demonstrate satisfactory credit.  You could also try enrolling with another retail electric supplier as credit standards can vary significantly from supplier to supplier.

However, you may find that suppliers with more stringent credit requirements offer the lowest rates.  They keep their rates low by limiting their exposure to bad debt.  Another option is to obtain a copy of your credit report to see what information might have led to the decision to require a deposit.  Dealing with credit reporting agencies can be a lengthy process and will not be of much help if you need to electric service quickly.  There are also prepaid electric plans that can be used on an ongoing basis or as a placeholder to buy you more time to shop for plans or deal with credit reporting agencies.

Assuming that you decide that paying the deposit is the best way to proceed, the Texas Public Utility Commission has rules that govern the amount of the deposit, how the deposit is safeguarded, interest paid on the deposit, and when the deposit is returned.

The total deposit collected by a retail electric provider cannot exceed the greater of one-fifth of your estimated annual billing or the sum of the estimated billings for the next two months.  The electric supplier can use reasonable customer class usage averages to estimate the amount of the deposit required.  After 12 months of electric service, you can request your supplier to recalculate the amount based on your actual usage.  If you are a customer that qualifies for a rate reduction program, any deposit that exceeds $50 can be paid in two equal installments.  Otherwise, expect to pay the deposit upfront in a single payment.

Texas retail electric providers are required to keep meticulous records on all deposits held.  They are required to maintain records of the name and address of each depositor, the amounts and dates of each deposit, and a log of all transactions relating to each deposit.  The retail electric provider is also required to make reasonable efforts to return any unclaimed deposits.

Deposits held by retail electric providers must be paid interest at an annual rate no lower than that established by the Texas Public Utility Commission.  The commission sets the deposit interest rates each December.  These interest rates tend to be slightly lower than those offered by financial institutions and can be negligible depending on prevailing money market rates.  Interest is paid only on deposits held more than 30 days.  Based on your preference, the interest can be paid to you, credited to your account, or returned with the deposit.

A deposit held by an energy supplier must be returned to a Texas residential electric customer when that customer has paid bills for service for 12 consecutive months without having any late payments.  If you switch to a new retail electric service provider, the deposit and accrued interest can be transferred to the new provider based on mutual agreement of all parties.  The retail electric provider can also return the deposit as a bill credit or subtract from it any amounts that you still owe.

Finally, be sure to check the Your Rights as a Customer disclosure or the Terms of Service provider by the electric supplier for information about their deposit policy, your right to post a guarantee in lieu of a deposit, how the deposit may be refunded, and the circumstances under which the provider can increase the deposit amount.

About: Charlie Hewitt

Charlie Hewitt has more than 25 years of in-depth energy experience having served in executive and managerial roles at some of the largest retail energy providers in North America. His expertise covers a wide range of retail energy disciplines including pricing, contracting, risk management, and credit. He holds an MBA from UT Arlington, MA and BS degrees in geology from UT Austin, and was a TXU environmental research fellow.

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