Utility Deposit Bond - Southern Maryland Electric Cooperative (SMECO) in Maryland
Table of Contents
Brief Summary
SMECO's own published credit rules say a business can establish credit with a surety bond acceptable to the co-op. That means the deposit on a new commercial account does not have to come out of your operating cash. You pay a premium, SMECO holds a bond for the deposit amount, and the money you would have parked with the utility stays in the business.
The Southern Maryland Electric Cooperative (SMECO) can require a security deposit before it serves a new account. SMECO states that prospective nonresidential members may establish credit by furnishing an irrevocable commercial letter of credit or a surety bond acceptable to the co-op, among other options. Under COMAR 20.30.01.04 a nonresidential deposit cannot exceed the estimated charges for two consecutive billing periods or 90 days, whichever is less, except for short term or special occasion service. The bond amount matches the deposit SMECO sets for your account.
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How to Apply for an Utility Deposit Bond:
- Ask SMECO for the deposit amount on the account in writing and confirm it will accept a surety bond for it.
- Get any bond form or wording SMECO requires before the bond is issued.
- Provide the legal business name and service address exactly as on the SMECO account.
- Provide owner information for the credit review, and business financials if the surety asks for them.
- Pay the premium and receive the executed bond naming SMECO as obligee.
- Deliver the original bond to SMECO and confirm the deposit requirement is marked satisfied on the account.
Detailed Information About the Maryland Utility Deposit Bond:
A bond is one of SMECO's listed options
Many business owners assume an utility deposit has to be paid in cash. SMECO's Connect Service page says prospective nonresidential members may be required to establish credit by any one of these methods:
- Showing the applicant has been actively engaged in its current business as a proprietorship, partnership or corporation for at least four years
- Showing the applicant has made payments on credit accounts when due
- Furnishing SMECO with a satisfactory guarantee in writing
- Furnishing an irrevocable commercial letter of credit or providing a surety bond acceptable to the co-op
- Otherwise establishing the applicant's credit to the co-op's satisfaction
The same choices appear in the Maryland Public Service Commission rule for nonresidential customers, COMAR 20.30.01.02. A business that has been operating for four years or can document a good payment record may not need a deposit or a bond at all.
How the amount is set
There is no fixed bond amount. The bond stands in for the deposit SMECO would otherwise collect. COMAR 20.30.01.04 says a nonresidential deposit may not be less than $5 and may not be more than the maximum estimated charge for service for two consecutive billing periods, or 90 days, whichever is less, or as may reasonably be required for service for short periods or special occasions. Ask SMECO for the deposit figure in writing and have the bond written for that amount.
Existing accounts
Under COMAR 20.30.01.03, an existing nonresidential customer who fails to pay a bill by the expiration date of a termination notice can be required to reestablish credit, which can mean a new deposit, payment of the outstanding bill and a reconnection charge. A bond can be one way to meet a new deposit demand if SMECO accepts it.
Deposit waivers for new customers
SMECO says all new customers are assessed a refundable security deposit, but it can be waived with a letter of good credit from a prior utility or a credit report showing a FICO score of 650 or higher obtained within the past year. If the waiver is not met within 30 days, the deposit is billed in two or three installments.
Cash deposits earn interest, bonds cost a premium
SMECO says a cash deposit may be refunded with interest one year after it is paid in full if the service was not disconnected for nonpayment, there were no more than two late payments, the account is not past due and there were no returned checks. SMECO lists the 2026 interest rate as 3.65 percent, according to the Maryland Public Service Commission. A bond keeps cash free but is not refunded, so compare the premium with the deposit and how long SMECO would hold it.
Eligibility and Requirements for a Maryland Utility Deposit Bond:
- Southern Maryland Electric Cooperative as obligee.
- Bond amount equal to the deposit SMECO sets, which COMAR 20.30.01.04 caps at two billing periods or 90 days of estimated charges, whichever is less.
- A surety bond acceptable to the co-op, as SMECO's published credit rules state.
- Bond form and wording approved by SMECO before the bond is issued.
- The bond kept in force for as long as SMECO requires security on the account.
Maryland Utility Deposit Bond FAQs:
SMECO's Connect Service page says prospective nonresidential members may establish credit by furnishing an irrevocable commercial letter of credit or providing a surety bond acceptable to the co-op. Confirm SMECO's acceptance of your specific bond and any wording it requires before the bond is issued.
The same as the deposit SMECO would require. For nonresidential customers, COMAR 20.30.01.04 limits the deposit to the lesser of the estimated charges for two consecutive billing periods or 90 days, except for short term or special occasion service.
Possibly. SMECO and COMAR 20.30.01.02 also let a business establish credit by showing at least four years in its current business, a record of paying credit accounts when due, or a satisfactory written guarantee.
Yes, in some cases. Under COMAR 20.30.01.03, a nonresidential customer that fails to pay a bill by the expiration date of a termination notice can be required to reestablish credit before service is restored or continued.
The surety looks at the owners' credit, the company's finances and its payment history. A business with steady payment records and solid credit pays less than a new or thinly capitalized one.
