4.1 ERMU 01-12-2016 Elk River
Municipal Utilities UTILITIES COMMISSION MEETING
TO: FROM:
Elk River Municipal Utilities Commission Tom Sagstetter—Conservation and Key Accounts
John Dietz—Chair Manager
Al Nadeau—Vice Chair Jennie Nelson—Customer Service Manager
Daryl Thompson—Trustee
MEETING DATE: AGENDA ITEM NUMBER:
January 12th, 2016 4.1
SUBJECT:
Security Deposit Policy
BACKGROUND:
Based on recent commercial customer experiences and direction from the Utility Commission,staff has
been reviewing the Security Deposit Policy. The goal of the policy review is to have measures in place
that are consistent with industry standards and minimize the financial risk to the Utility and all customers.
At this time,the focus of the policy review is for the commercial customer class only because of the
magnitude of financial risk with the largest customers. A number of items regarding the policy were
discussed at the November and December commission meetings.Per Commission direction,staff has
identified several options to strengthen procedures and minimize risk.Below is a list of information staff
has assembled to determine next steps in the policy review. Attached is the current Security Deposit
Policy for reference.
DISCUSSION:
The goal of the security deposit policy revision is to minimize the risk to all ratepayers,yet still provide
an environment that encourages business to locate within the ERMU service territory. The policy also has
to be executable and administratively manageable for staff in order for this to be successful. Also,the
administrative costs need to be reasonable in comparison to the risk mitigation. Staff understands that
risks will always be a part of this business,but staff realizes there needs to be a balance between
policy/procedure and customer satisfaction.
It is important to remember that ERMU is currently doing a good job protecting our customer's interests.
The Average National Write-Off percentage is between.10%and.41%. ERMU's write off percentage is
well below this average at.01%currently. Also,our current policy and procedures are very similar to
other utilities. The goal of these procedure changes and the upcoming security policy changes is to
increase the ability to calculate and collect a more appropriate security deposit from all commercial
customers to protect all rate payers. These changes will also allow ERMU to collect more detailed
information on each commercial customer.
Based on the previous commission meetings,and research on other local utilities in the area,staff is
providing a revised service agreement to be used with all commercial customers and a new commercial
application form. The use of these two documents will allow ERMU staff to better assess credit risk,
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establish more accurate security deposits,and collect the security deposits upfront prior to providing
service. Attached are draft copies of the Commercial Service Application and Service Agreement.
The next step will be to finalize the Service Agreement and Commercial Service Application and
establish the risk assessment matrix. After these three components are finalized,the Security Deposit
Policy will be amended to incorporate the changes in the processes and the inclusion of the risk
assessment matrix to determine security deposits.
ACTION REQUESTED:
Provide staff with guidance on the Service Agreement and Commercial Application to allow staff to
continue with the development of the Security Deposit Policy updates.
Staff is seeking the approval of the following three items;
• All commercial customers (demand and non-demand)will be required to pre-pay the applicable
security deposit as outlined in the security deposit policy.
• All commercial customers (demand and non-demand)will be subject to a credit check as part of
calculating the security deposit.
• All Commercial customers(demand and non-demand)will be required to pay a new customer
application fee of$20.00 per account at the time the security deposit is paid.
ATTACHMENTS:
• ERMU Policy A.6—Customer Deposit Policy
• Draft- Service Agreement
• Draft-Commercial Service Application
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Elk River
Municipal Utilities
A.6—Customer Deposit Policy
1.0 Policy
In order to protect its ratepayers from customers who default on their accounts, the Elk
River Municipal Utilities(ERMU)has adopted this Customer Deposit Policy.
Deposit Required: All residential, commercial and industrial customers of ERMU will
be required to submit a deposit in the form set forth below subject to the exceptions set
forth below. In addition, customers who have been disconnected by ERMU for non-
payment of amounts due shall be required to submit a deposit before service will be
reconnected. Failure to submit the required deposit when due shall be cause for ERMU
to immediately terminate service.
Amount of Deposit: The amount required to be deposited for residential services shall
be:
$100 for apartments
$100 for water and sewer service
$150 all electric service
$250 for all services
The amount required to be deposited for commercial services shall be equal to two times
ERMU's estimate of the customer's highest monthly utility bill, at a minimum of$250.
Form of Deposit: The deposit shall be in the form of a cash deposit or an irrevocable
letter of credit. If in the form of an irrevocable letter of credit, the letter of credit shall be
renewed at least 30 days prior to its expiration. Failure to renew a letter of credit will
result in the letter of credit being drawn on and the cash recovered from the letter of
credit being held by ERMU as a cash deposit. If ERMU is not able to draw on the letter
of credit, the customer shall submit a cash deposit prior to expiration of the letter of
credit. Failure to submit the required deposit shall be cause for immediate termination of
service by ERMU.
Receipt for Deposit: ERMU shall furnish the customer with a written receipt at the time
a deposit is made. The receipt shall specify the conditions pursuant to which the amount
of the deposit will be diminished upon return of the deposit to the customer.
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Return of Deposit: Any deposit received by ERMU shall be returned to the customer
within 45 days of termination of service,provided that the customer has paid in full all
amounts due on the account. If the customer has not paid in full within 30 days of the
termination of service, the deposit will be applied to any outstanding amounts owed by
the customer to ERMU. If the deposit exceeds the amount due,the balance will be
returned to the customer. If the deposit is not sufficient to cover the amount due,the
customer shall remain liable to ERMU for the balance and shall pay the balance due
within 15 days of notice from ERMU. ERMU reserves the right to use reasonable legal
means to collect amounts due.
Interest on Deposits: Interest shall be paid on all deposits in excess of$20 at the rate
established by Minnesota Statutes. ERMU may, at its option,pay the interest at intervals
it chooses,but at least annually,by direct payment or as a credit on the customer's
account.
Submission of and Exceptions to Deposit Requirement:
A. Residential Customers.
Residential customers may submit the required deposit at the time service is
requested, or have the deposit billed with the customer's first bill for services provided.
Failure to pay a deposit when billed shall be cause for ERMU to immediately terminate
service. ERMU may, in its discretion,waive the required deposit for residential
customers if the customer consents to ERMU's collection of credit history data on the
customer, the customer's credit score falls above 90 percent probability of non-default,
and the customer has no history of disconnection for non payment to ERMU, and no
history of late payments to ERMU two times in 12 months.
B. Commercial and Industrial Customers.
All commercial and industrial customers shall submit the required deposit and
enter into a service agreement with ERMU at the time service is requested. The
customer's application for service shall identify the individual or business entity entering
into the service agreement. The service agreement shall be an agreement on the part of
this individual or business entity to make payment of all amounts billed by ERMU for
electric, water and sewer services, and to be liable for any default or non-payment of
amounts billed by ERMU. ERMU may, in its discretion,waive or reduce the required
deposit for commercial and industrial customers if a service agreement is executed by the
customer,the customer has provided ERMU with sufficient information to allow ERMU
to analyze the credit risk of the individual or business entity executing the service
agreement, and ERMU, in its sole discretion, determines to waive or reduce the deposit
required based on its analysis of credit risk. Waivers and/or reductions in the deposit
requirement shall be reserved for rare exceptions when the risk of default is minimal.
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Adopted 3/9/2010
Revised 2/14/2012
Revised 6/16/2015
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Elk River
Municipal Utilities Phone: 763-441-2020
� - Fax: 763-441-8099
1 fiY�)t)mix�I arl ast • Box 4 I.i}. it
Email: CustomerServtce@E1kRiverUuLties.com
Elk River,fit. 55330.0430
COMMERCIAL SERVICE AGREEMENT
Acct. # Date:
Service Address:
Customer/Company Name:
Contact Name:
Phone No.:
Elk River Municipal Utilities (ERMU) and The Customer identified above (Customer) enter into this
Service Agreement (Agreement) for the provision of electric/water service to the Service Address
identified above.
In exchange for ERMU's Agreement to provide electric/water service to the Service Address,
Customer agrees as follows:
1. Customer warrants to ERMU that Customer is the individual or business entity which will
be liable for any default by Customer under this Agreement or any non-payment by
Customer of amounts billed by ERMU.
2_Customer agrees to comply with the Rules,Regulations and Policies of ERMU,and the
Ordinances of the City of Elk River, applicable to ERMU's provision of electric/water
service to the Service Address.
273. ERMU is only responsible for providing electric facilities and service to the electric
transformer serving the Service Address. Customer is responsible for all facilities and costs
beyond this point of sale. ERMU is only responsible for providing water facilities and service
to the water main serving the Service Address. Customer is responsible for all facilities and
costs beyond this point of sale.
4. Customeragrees to make payment of all amounts billed by ERMU for electric/water service
provided to the Service Address, and agrees that ERMU may disconnect service to the
Service Address if Customer has defaulted under the terms of this Agreement or has failed
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to make payment of any amount billed by ERMU within 30 days of the datc such amount
was duc.by the date such amount was due.
3-5.The undersigned agrees that if there is a default and the account is referred to an attorney or
collection agency,the undersigned will pay all reasonable collection fees,attorney fees,and
court or other costs as permitted by law and as actually incurred by ERMU.
46.Customer agrees that electric/water service to the Service Address will not be provided, and
will be disconnected if currently provided, unless and until Customer submits a deposit
(Deposit) in the amount determined by ERMU's Customer Deposit Policy. All commercial
customers must prepay the deposit in full.
377.Customer agrees that the purpose of the Deposit is to secure Customer's timely payment of
amounts billed by ERMU to the Service Address, and Customer agrees that ERMU may
draw on the Deposit and apply the amount drawn to any amounts owed by Customer to
ERMU which are 30 days or more past due. Customer further agrees that return of the
Deposit following the discontinuation of electric/water service to the Service Address shall
be governed by the terms of this Agreement and the Customer Deposit Policy.
C178.Customer agrees that the Deposit shall be in the form of a cash deposit or an irrevocable
letter of credit. If in the form of an irrevocable letter of credit_--Customer agrees that the
letter of credit will be renewed at least 30 days prior to its expiration and that failure to
renew the letter of credit may result in the letter of credit being drawn on and the cash
recovered from the letter of credit being held by ERMU as a cash deposit. If ERMU is not
able to draw on the letter of credit, Customer agrees to submit a cash deposit prior to the
expiration of the letter of credit, and further agrees that failure to submit the required cash
deposit shall be cause for immediate termination of service by ERMU.
This form must be-returned-fully completed and submitted to ERMU
reeeipt4e
to establish utility services at the service address listed above.-
Customer: ERMU:
By: By:
Print Name : Print Name:
sT Ie: �tsTitle:
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By executing this Agreement on behalf of Customer, represents and warranties to
ERMU that he/she is authorized to enter into this Agreement on behalf of Customer.
By:
Print Name:
Date:
Personal Guarantee
By signing below, agrees to personally guarantee and be responsible for
Customer's payment obligations under this Agreement.
By:
Print Name:
Date:
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New Construction Commercial Service Application
Site information
Name Requested Installation Date
Service Address City State Zip
Property Owner Information
Name Mailing Address
City State Zip
Construction Information (if applicable)
General Contractor Mailing Address
City State Zip
Project Manager Phone ( ) E-mail
Job Supervisor Phone ( ) E-mail
Plumbing Contractor
Contact Name Phone ( ) E-mail
Electrical Contractor
Contact Name Phone ( ) E-mail
Construction Billing Information (if applicable)
Who should receive monthly bills during construction or renovation?
❑ Owner General Contractor ❑ Electrical Contractor Plumbing Contractor
Will you need temporary Electrical Service? ❑ Yes No
▪ Single Phase ❑ Three Phase Overhead ❑ Underground
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Service Information
Electric Service Service Size (Amps) Rewire? Yes No Proposed Added kW?
(Circle One)
❑ Single Phase ❑ Three Phase ❑ Overhead ❑ Underground
Voltage Requested? Electric Meter Location ❑ North ❑ South
❑ East ❑ West
Water Service
Water Access Units (as determined by Elk River City Building Department)
Water Meter Location ❑ North ❑ South ❑ East ❑ West
1. Provide a sketch of desired meter location and distances from building corner.
2. Customer-owned facilities must be located and identified (i.e. sprinkler, septic,drain field, etc).
3. Final inspection affidavits must be provided prior to installation of any electric or water meter.
4. Site must be within 4 to 6 inches of final grade and a 10'wide path clear of obstructions to meter locations.
5. Winter construction charges may apply if frost exists, additional charges may be applicable for special requests.
ERMU Office Use Only
Estimated Peak Demand (kW)
Estimated Monthly Energy (kWh) Estimated Monthly
Electric Bill
Estimated Monthly Water Use
Estimated Monthly
Water Access Charges Water Bill
Sewer Access Charges
Estimated Monthly
Sewer
Results of Credit Report
Security Deposit Required 1 to 3 times average monthly bill for Electric, Water, Sewer.
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