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4.1. ERMUSR 02-09-2016 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: February 9th, 2016 4.1 SUBJECT: g Customer Deposit Policy(Security Deposit Policy) BACKGROUND: Based on recent commercial customer experiences and direction from the Utilities Commission,staff has been reviewing the Customer Deposit Policy. The goal of the new policy is to have measures in place that are consistent with industry standards and minimize the financial risk to the Utilities and all customers. A number of items regarding the policy were discussed at previous commission meetings.Per commission direction,staff has identified several options to strengthen procedures and minimize risk. Please note that in previous Commission meetings and memorandums the title of the policy was Security Deposit Policy. In all cases this policy should have been titled Customer Deposit Policy. DISCUSSION: The goal of the revised customer deposit policy is to minimize the risk to all ratepayers,yet still provide an environment that encourages businesses 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 also realizes there needs to be a balance between policy/procedure and customer satisfaction. The ability to calculate and collect a more appropriate security deposit from all commercial customers will help protect all rate payers. These changes will also allow ERMU to collect more detailed information on each commercial customer. Following is a list of improvements that will be achieved with the revised customer deposit policy: • The policy clearly outlines that all new customers and existing customers that are setting up new accounts or adding an additional service location will be subject to a deposit based on risk factors. • The customer will be required to complete a service application and sign a service agreement. The service application will allow ERMU staff to more accurately establish customer deposits and gather important contact information for the business customer and property owner if the business is in a leased space. The signed service agreement will provide local accountability and establish the mechanism for collecting the deposit amount and issuing a receipt for the deposit. 'POWERED 11 El Page 1 of 2 NATURE Reliable Public® Power Provider P OwEREo T O S ERVE 87 • The minimum deposit for demand billed customers reflects accurate charges that are associated with a customer using 50 kW of demand or more. • The customer may ask ERMU to review the deposit amount if they have significantly changed the amount of energy and water use in the property. • The risk assessment matrix will be a tool to determine credit risk. Factors in the risk assessment matrix include,but are not limited to,credit score,payment history with ERMU or other utilities, ability to obtain a financial institution secured line of credit,providing an individual tax ID number,commitment to the community,and type of business. • Each customer will be billed a new account processing fee. For 2016,the new account processing fee will be$20.00. The new account processing fee will be included in the Fee Schedule and may be updated from time to time as needed. ACTION REQUESTED: Approve the revised Customer Deposit Policy. The additional attachments are for reference only to provide a broad picture of the process ERMU staff will apply to new customer accounts. ATTACHMENTS: • ERMU Policy A.6—Customer Deposit Policy—Proposed Revision • Service Agreement • Commercial Service Application • Risk Assessment Matrix POWERED IT Page 2 of 2 NATURE Reliable Public Power Provider P O W E R E D T O S E`R V E 88 i Elk River Municipal Utilities A.6—Customer Deposit Policy 1.0 Policy In order to protect all customers from those customers who default on their accounts, new customer accounts are subject to a security deposit when setting up utility service accounts with Elk River Municipal Utilities. Deposit Required: All residential, commercial and industrial customers of ERMU will be required to submit a deposit in the acceptable form set forth below subject to the exceptions set forth below. In addition, existing customers who have been disconnected by ERMU for non-payment of amounts due shall be required to submit a deposit in addition to all amounts owed before service will be reconnected. Existing customers that are moving and establishing a new account or adding an additional account are also subject to the deposit policy. Failure to submit the required deposit at the time of application for commercial accounts, or when due for residential accounts, shall be cause for ERMU to immediately terminate service. Amount of Deposit: Residential Customers: The amount required to be deposited for residential services shall be: $100 for apartments $100 for water and sewer service $150 for electric service $250 for all services Commercial Customers: The amount required to be deposited for commercial and industrial services shall generally be equal to two times ERMU's estimate of the customer's highest monthly utility bill. For commercial and industrial customers on the non-demand rate, the minimum deposit will be $250. For customers on the demand electric rate, the minimum deposit will be $1,000. ERMU may increase or decrease the security deposit based on assessment of risk. 1 89 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: At the time the deposit is made ERMU will furnish the customer with a written receipt specifying the conditions, if any,the deposit will be diminished upon return. 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 is 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 will complete an application for service that identifies the individual or business entity that will be entering into a service agreement and will pay an application fee per the fee schedule. All commercial and 2 90 industrial customers shall submit the required deposit and enter into a service agreement with ERMU prior to the time service is desired. The service agreement shall be an agreement on the part of the 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,reduce or increase 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 reduce or increase the deposit required based on its analysis. Adopted 3/9/2010 Revised 2/14/2012 Revised 6/16/2015 Proposed Revision 2/9/2016 GP:2740880 v4 3 91 4*-' Elk River Municipal Utilities -w A.6—Customer Deposit Policy -4,---- e 1.0 Policy In order to protect all customers from those customers who .; . t ori a it accounts, customer accounts may be subject to this deposit with Elk Rimer ,, ci Utilities. -4r ,ate Deposit 4 osit Re uired: All residential, commercial and us 1 cup mers of ERMU will be required to submit a deposit in the accepta' ( ',,=.-,31,..,,s-� .rl subject to the exceptions set forth below. In addition, exis i custmersK-who have been disconnected by ERMU for non-payment of amounts due shae required req*ed;f46 submit a deposit in addition to all amounts owed before will bcoected. Existing customers that are moving and establishing a new account adding additional account are also subject to the deposit policy. F e submhe required deposit at the time of application for commercial a' 's unts, or when due for residential accounts, shall be cause for ERMU to immediate .r s rvic , x=r Amount of Deposit: : ���� Residential Cuomer _ The amo �,,4 requires ' `eleposited for residential services shall be: $100 ap 4ar��r'' ts $1 1 17 or terad sewer service $150 f, c '.,;.:::'i $250 fo 1'se''.r. s Commercial Customers: The amount required to be deposited for commercial and industrial services shall I generally be equal to two times ERMU's estimate of the customer's highest monthly utility bill. For commercial and industrial customers on the non-demand rate,the minimum deposit will be $250. For customers on the demand electric rate, the minimum deposit will be $1,000. ERMU may increase or decrease the security deposit based on assessment of risk. 1 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: At the time the deposit is made ERMU will furnish furnis*the customer with a written receipt specifying the conditions, if any,the deposits return. diminished upon ' i`` , Return of Deposit: Any deposit received by ERMU shall be ret d_see the customer within 45 days of termination of service,provided that the « t ? er e said in full all amounts due on the account. If the customer has not paid inj n days of the o 'nyt termination of service,the deposit will be applied tui ¢ -4.'r.,'unts owed by the customer to ERMU. If the deposit exceeds the amount due,f balance will be returned to the customer. If the deposit is not .... n a.. ‘' .,th amount due,the customer shall remain liable to ERMU for theialanc , .fall Pay the balance due within 15 days of notice from ERMU. ERMU serves rt to use reasonable legal means to collect amounts due. Interest on Deposits: Interest111 paid on 1 deposits in excess of$20 at the rate established by Minnesota Sta s ERMU ma at its option,pay the interest at intervals it chooses, but at least . lydirect"s *A 't or as a credit on the customer's account. Via; Submission of andEx tions to° eposit Requirement: 1 A. Residence . ..tom s ' -- gra, 'esn custo may submit the required deposit at the time service is req=i c3 'r 'a,p the deposit billed with the customer's first bill for services provided. Fail toy a . a s :: when billed shall be cause for ERMU to immediately terminate service 'i'''44,1 a ,in its discretion,waive the required deposit for residential customers 1. he customer consents to ERMU's collection of credit history data on the customer,th-` ustomer's credit score is 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 will complete an application for service that identifies the individual or business entity that will be entering into a service agreement and will pay an application fee per the fee schedule. All commercial and 2 industrial customers shall submit the required deposit and enter into a service agreement with ERMU prior to the time service is desired. The service agreement shall be an agreement on the part of the 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,reduce or increase 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 reduce or increase the deposit required based on its analysis. Adopted 3/9/2010 Revised 2/14/2012 3� Revised 6/16/2015 .. Proposed Revision 2/9/2016 *4. GP:2740880 v4 44k 4g4 � Q at at, 3 Elk River i Municipal Utilities Phone: 763-441-2020 Fax -8099 13069 Orono Parkway • P.O.Box 430 Email:: Custo763-4merService@EIkRiverUtilities.com Elk River,MN 55330-0430 CustomerService@ElkRiverUtilities.com 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. 3. 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. Customer agrees 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 92 Service Address if Customer has defaulted under the terms of this Agreement or has failed to make payment of any amount billed by ERMU by the date such amount was due. 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. 6. 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. 7. 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. 8. 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 fully completed and submitted to ERMU to establish utility services at the service address listed above Customer: ERMU: By: By: Print Name : Print Name: Title: Title: 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: 93 Personal Guarantee By signing below, agrees to personally guarantee and be responsible for Customer's payment obligations under this Agreement. By: Print Name: Date: Eg, POVEIEI Ir [ATURE Reliable Public Power Provider POWERED TO SERVE 94 Elk River -- Municipal Utilities 13069 Orono Parkway 763.441.2020 PO Box 430 Fax:763.441.8079 Elk River,MN 55330 www.elkriverutilities.com Commercial Electric Service Application Service Address: Unit/Suite: City: State: Zip: Business Name (as shown on tax return): DBA: Type of Business (retail,restaurant,production, general office) Federal Tax ID#: Social Security#(Req. for Sole-Proprietor) Authorized Signer/Contact: Title: Contact Phone: Email: Business Phone: Fax: Accounts Payable Contact: Phone: Is the business Sales Tax Exempt? n Yes n No If yes, complete and return ST3 form. Check one: n Rent ❑ Own If rent, Name of Property Manager/Owner: Phone: If own,Name of Property Manager: Phone: Lease Start/Closing Date: Service Start Date: 1 95 Load Information (ERMU requires information to estimate load and monthly usage) Hours of operation: Service size (amps) Square footage of facility: Rewire? ❑Yes-Proposed add'l kW No Square footage office space ❑ Single Phase ❑ Three Phase Production/retail space Voltage: Machinery/equipment description: ❑ 12 months past electric bills and previous facility square footage(if applicable) ❑ Electrician contact information: ❑I am an authorized agent/signer for the business named above. I agree to pay a$20 application processing fee required for all new Commercial Utility Applications. I understand that a credit check will be completed for the business and the business owner for sole-proprietorships. I also understand that a Service Agreement must be signed and a deposit will be required to be paid before service is started. The deposit amount will be outlined in the Service Agreement and shall be up to and no more than 3 times the highest estimated monthly usage. Signature Date Printed Name Title: Internal Office Use Only: Estimated monthly bill: Calculated by: Date: Deposit required: Calculated by: Date: 2 96 ffi 2. � &I f_ a4t ' ! ! | . 0 ! ! ` & - bn CaE \ > H_ 1N_ i% � \, 19 4i t� • \ k §7! f7� 22 - ■ � ! o a!I - Si7, 8 !-e 2 - ». 2 - - - - - %k \ \ 0 0. § > . f - ! { A _ � E - \ ( ( } \ 5 ® _ : e IA, } | j \ / ` 5 § 2• T. ( E. - \ ai \ k } ! \ § § a ) ! ! ! § [ - 2 2 .2 ! f ] _ ! § - § a ! ! / ' Si § , - . ) ! k §! \ ) ) ` \ ! }\ - - \ { ! ® f {i _ -3 3 \j ! §J a-, : _ = - S \ 2 } > 2 \ - » < ;