Why Do Texas Electricity Providers Require a Deposit?
3 minute read • Graham Lumley • Last update August 2024
What is an electricity deposit?
An electricity deposit is a sum of money that an electricity provider may require from a customer before starting service. This deposit serves as a security measure for the energy company, ensuring that they have some financial protection in case the customer fails to pay their electricity bills.
Why do you have to pay an electricity deposit?
Texas electricity companies may require you to pay a deposit before starting services as a way to protect themselves from potential financial risks. The deposit is a security measure against customers who do not pay their bills on time or at all.
When is an electricity deposit required?
Here are a few reasons why a deposit might be required to begin electricity services in Texas:
- Credit Risk: If a customer has a low credit score or a history of late payments, the electricity company may require a deposit as a precaution against the possibility of non-payment.
- New Customers: For customers who are new to the service area or have no established credit history with the utility, a deposit might be necessary because the company has no prior payment history to assess their risk.
- Past Due Balances: If a customer has had service with the company before and left an unpaid balance, a deposit might be required to re-establish service.
- High Usage: In some cases, if a customer is expected to have high electricity usage, a deposit might be requested to cover the potential for a higher bill.
- Security: The deposit acts as a financial buffer for the utility company, allowing them to recover some of the costs if the customer fails to pay their bills or defaults on the account.
How much does an electricity deposit cost?
Electricity deposit costs vary by residential energy provider in Texas. According to the PUCT, the amount of the deposit may be up to 1/5th of the estimated annual billing or the sum of the estimated billings for the next two months.
For post-paid plans, electricity deposits may range between $50 and $500. The amount can vary based on factors such as the length of the plan and your credit history. If you select a pre-paid or no-deposit plan, you would expect to pay $0.
Do you have to pay a deposit?
You do not always have to pay a deposit to receive electricity. Here are a few ways to get around paying an electricity deposit in Texas:
Good credit
If you provide a social security number during the enrollment process, most electricity providers will run a credit check to determine the risk of providing electricity to your home. If you have a solid credit score, you will likely not need to pay a deposit.
No deposit electricity plans
There are some Texas REPs who do not charge a deposit for specific plans, such as a pre-paid plan. Pre-paid plans or other plans without deposit requirements are typically much more expensive. Providers hedge the risk of non-payment through a higher energy charge rather than through an upfront deposit.
Deposit waivers
Alternatively, you may qualify for a deposit waiver. The Public Utility Commission of Texas requires that REPs waive deposits for customers who can provide proof that they fit into three categories:
- History of Good Standing: If you’ve had exemplary payment history on your electricity bills for the last 12 consecutive months, you are eligible to have your deposit fee waived. Contact your current electricity provider to provide a credit reference letter on your behalf confirming that you have not had a late bill payment more than once in the last 12 months.
- Victim of Family Violence: If you are a victim of family violence, you are eligible to have your deposit waived. A signed certification letter from the Texas Council on Family Violence is required to claim this waiver.
- Age 65 or Older: If you (or your spouse) are 65 years of age or older you are eligible to have your deposit waived. If you provide a valid form of identification (such as state issued driver’s license/ID or passport), you can claim this waiver. You must not have any overdue electricity payments to qualify.
Do you get the deposit back?
In Texas, the Public Utility Commission requires that the deposit is refunded after 12 months with interest, if the customer has a good payment history, or the deposit is applied to the final bill when service is terminated.
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