4.1 ERMUSR 08-11-2020UTILITIES COMMISSION MEETING
TO:FROM:
ERMU CommissionJennie Nelson – Customer Service Manager
MEETING DATE: AGENDA ITEM NUMBER:
August 11, 2020 4.1
SUBJECT:
Deposit Policy
ACTION REQUESTED:
None
BACKGROUND:
At the April commission meeting Chair Dietz requested a review of our Customer Deposits
Policy, specifically on how deposit refunds are processed. ERMU refunds deposits for residential
and commercial accounts after the account is closed. This policy was commission directed and
has been in place for many years. Staff was directed to survey neighboring utilities as well as
other Minnesota municipal utilities to analyze different policies.
DISCUSSION:
The Minnesota Municipal Utilities Association sent a survey to all their members on ERMU’s
behalf with questions about the utilities’ respective deposit policies and received 31 responses.
Staff also surveyed two neighboring utilities.
Among the utilities that responded to the survey about a third refund the deposit when the
account is closed. Some utilities refund the deposit after 12 months of consecutive timely
payments, some do not charge deposits, and others have waivers for signing up for automatic
payments, etc.
For an ERMU residential customer, their potential risk is assessed at the account origination
(brand new account, account change, etc.). If there is no deposit required at account
origination, and the account falls into arears resulting in disconnection, the risk is assessed
again at that time. For commercial customers, a deposit is required at account origination and
the amount is determined by risk assessment as well. Given the potential changes in economic
circumstances for a customer throughout the span of their account with us, this is the most
secure way to ensure a lower write off percentage, which protects all customers from steep
rate increases due to bad debt. Staff is recommending that the policy remain the same.
ATTACHMENTS:
ERMU Policy – G.4j3 – Customer Deposits Policy – For Reference Only
______________________________________________________________________________
Page 1 of 1
45
G.4j3 Customer Deposits
1.0 Policy
In order to protect all customers from those customers who default on their accounts,
customer accounts may be subject to this deposit with Elk River Municipal Utilities
(ERMU).
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 who
are 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
generallybe equal to two
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
46
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 owedby
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 c
account.
Submission of and Exceptions to Deposit Requirement:
A. Residential Customers.
Residential customers may submit the required deposit at the time service is
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
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
industrial customers shall submit the required deposit and enter into a service agreement
2
47
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
Revised 2/9/2016
Revised 1/9/2018
GP:2740880 v4
3
48