Surety Bond Encyclopedia

Utility Deposit Bond - Arab Electric Cooperative in Alabama

Brief Summary

Arab Electric Cooperative's own deposit procedure says a commercial deposit may be made by surety bond instead of cash. For a business whose deposit is set at twice its highest monthly bill, that can mean keeping thousands of dollars working in the business instead of sitting with the cooperative. The bond is issued quickly, names Arab Electric Cooperative as the party protected, and is handed to the cooperative's office in Arab with the rest of the new service paperwork.

Arab Electric Cooperative in Arab, Alabama requires a deposit before connecting service. Residential members pay a flat $150 deposit. Commercial and industrial members on the GSA rate classes pay a deposit equal to twice the highest bill from the preceding 12 months, or an estimate based on similar businesses when no history exists. The cooperative's Deposits and Meter Sets procedure allows that deposit to be posted by surety bond rather than cash, which is the bond on this page. There is no fixed bond amount. It matches the deposit the cooperative sets for your account.

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How to Apply for a Utility Deposit Bond:

Call or visit Arab Electric Cooperative and get the deposit amount it has set for your account. Commercial deposits are twice the highest bill in the prior 12 months, or an estimate for a new location.
Confirm with the cooperative that it will accept a surety bond for your account and whether it has wording or a form it prefers.
Apply for the bond in the exact deposit amount, with the legal name of the member exactly as it appears on the membership application.
Provide owner or principal name, address and Social Security number for the surety's credit review.
Pay the premium and receive the executed bond naming Arab Electric Cooperative as obligee.
Deliver the original bond to the cooperative's office with the $5 membership fee, the $25 connect fee and the new service documents.

Detailed Information About the Alabama Utility Deposit Bond:

Who this bond is for

Arab Electric Cooperative serves homes, farms and businesses in Marshall, Morgan and Cullman Counties in north Alabama from its office at 331 S. Brindlee Mountain Parkway in Arab. New members pay a $5 membership fee and a $25 connect fee, then a deposit before the meter is set.

The deposit is where the two kinds of members part ways. A residential member pays a flat $150. A commercial or industrial member on the GSA1 through GSA3 and larger rate classes pays twice the highest bill from the preceding 12 months at that location. If there is no billing history, the cooperative estimates a deposit from similar businesses or facilities. For a shop with a $4,000 peak month, that is an $8,000 cash deposit.

The bond takes the place of the cash

The cooperative's Deposits and Meter Sets standard operating procedure lists the ways a deposit may be made: cash, money order, cashier's check, approved personal check, irrevocable letter of credit, or surety bond. The utility deposit bond is that last option. The surety promises the cooperative that if your account is closed with an unpaid balance, the cooperative can collect up to the bond amount. You pay the surety an annual premium instead of parking the full deposit with the cooperative.

The bond amount is not a published number. It equals the deposit the cooperative calculates for your account, so get the deposit figure from the cooperative first and then order the bond for that amount. Do not guess at a round figure, because a bond written for less than the deposit will be turned back.

What else to know

The cooperative pays interest on cash commercial deposits at a rate comparable to what it earns, and refunds any remaining deposit after the final bill is settled. A bond does not earn interest, which is the trade for not tying up the cash. The cooperative also reserves the right to revise deposits annually up or down as usage changes, so a growing account may be asked to increase the bond.

The cooperative does not publish a bond form of its own. Confirm with the member services office at (256) 586-3196 how it wants the bond worded and whether it wants the original delivered in person before the surety executes it.

Eligibility and Requirements for a Alabama Utility Deposit Bond:

Bond amount equal to the deposit the cooperative sets, not a fixed statewide figure.
Arab Electric Cooperative, Arab, Alabama, named as obligee.
Member name on the bond matching the membership account exactly.
A surety licensed to write business in Alabama.
Credit review of the owner or principal. Credit shapes the premium rate rather than eligibility for most applicants.
The bond stays in force while the account is open, so expect annual renewal invoices from the surety until the cooperative releases it.

Alabama Utility Deposit Bond FAQs:

How much is the bond?

Whatever deposit the cooperative calculates for your account. For commercial and industrial service that is twice the highest bill from the preceding 12 months, or an estimate based on similar businesses when there is no history. Residential deposits are a flat $150, so the bond is almost always a commercial tool.

Does Arab Electric Cooperative actually accept a surety bond?

Yes. Its Deposits and Meter Sets standard operating procedure lists surety bond alongside cash, money order, cashier's check, approved personal check and irrevocable letter of credit as acceptable ways to make a deposit. Confirm the wording the cooperative wants before the bond is executed.

Does the bond cover the membership fee and connect fee too?

No. The $5 membership fee and $25 connect fee are paid in cash. The bond replaces only the deposit.

What happens if my bills go up?

The cooperative reviews deposits annually and may raise or lower them as usage changes. If it raises your deposit, you will need to increase the bond amount or post the difference in cash.

Do I get the bond premium back when I close the account?

No. Premium is the surety's fee for carrying the risk. A cash deposit is refunded with interest after the final bill is paid, while a bond is simply released, and renewal premiums stop once the cooperative confirms it no longer needs the bond.