Utility Deposit Bond - Alabama Power Company in Alabama

Brief Summary

When Alabama Power asks for a deposit to open or keep service, its own rules let you post a surety bond for a similar amount instead of handing over cash. The deposit is sized at roughly twice the estimated monthly bill, which for a commercial or industrial account can be a large sum. A bond keeps that money in your operating account for an annual premium.

Alabama Power Company may require a security deposit of approximately twice the estimated monthly bill from an applicant for electric service. Section 2.1 of its Rules and Regulations for Electric Service, approved by the Alabama Public Service Commission, allows an irrevocable letter of credit or a surety bond for a similar amount from an approved institution in lieu of the cash deposit. Alabama Power is the obligee and sets the amount from its own estimate of your bill.

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How to Apply for a Utility Deposit Bond:

• Get the exact deposit figure from Alabama Power for the account. The bond amount should match it.
• Confirm with Alabama Power that it will accept a surety bond in lieu of cash for this account and request any required bond form.
• Have the customer name exactly as it appears on the Alabama Power account or service application.
• Provide the owner or business financial and credit information the surety asks for.
• Pay the premium and deliver the executed bond to Alabama Power before the deposit due date.

Detailed Information About the Alabama Utility Deposit Bond:

How the amount is set

There is no fixed bond amount. Section 2.1 of the Alabama Power Company Rules and Regulations for Electric Service, effective October 4, 2022 under Alabama Public Service Commission Docket U-3170, says the company may require a cash deposit amounting to approximately twice the estimated monthly bill, with the estimate made by the company. The bond replaces that deposit and is written for a similar amount. Your bond amount is therefore whatever figure Alabama Power quotes you for the account.

The Commission puts a ceiling on it. General Rule 770-X-1-.08 of the Alabama Public Service Commission limits a required deposit to an estimated bill for two regular billing periods, or one billing period where bills are payable in advance.

When Alabama Power asks for security

The deposit is required at the option of the company, to guarantee payment of all bills and to protect company property on the customer's premises. For residential accounts, Alabama Power says it decides whether a deposit is needed by running a credit check through Equifax. The company can also ask for a deposit after service begins, or increase an existing one, and PSC Rule 770-X-1-.08 lets a utility do this on five days' written notice when an account is not in good standing, when a deposit was refunded or found inadequate, or when usage rises enough to warrant more.

Bond, letter of credit or cash

Section 2.1 names three ways to satisfy the requirement: a cash deposit, an irrevocable letter of credit, or a surety bond from an approved institution. The phrase approved institution matters. Alabama Power must accept the surety, so confirm the current bond form and any wording requirements with Alabama Power before the bond is issued.

Cash deposits earn interest at the rate set by Commission General Rule 8, which PSC Rule 770-X-1-.08 fixes at seven percent a year, credited on the December bill. A bond is not money held by the utility, so that interest does not apply. The trade is an annual premium against tying up two months of electric bills in cash.

Prior balances

Section 2.4 lets Alabama Power decline service to an applicant who owes it for similar service at a former location. If the debt is disputed, service continues on the normal deposit plus a special deposit equal to the net balance in dispute.

Eligibility and Requirements for a Alabama Utility Deposit Bond:

• Alabama Power Company named as obligee.
• Bond amount similar to the required deposit, which is approximately twice the estimated monthly bill.
• A surety that Alabama Power treats as an approved institution under Section 2.1.
• Bond kept in force for as long as Alabama Power requires security on the account.
• Credit review by the surety, which shapes the premium.

Alabama Utility Deposit Bond FAQs:

Official and Additional Resources for the Alabama Utility Deposit Bond: