With an average retail price of 8.36 cents per kilowatt-hour, Texas is among the top ten states with the lowest electricity rates in the country. And it makes sense, given that Texas is the country’s largest electricity producer and consumer, according to the U.S. Energy Information Administration (EIA).
But this doesn’t exempt Texans from paying electricity deposits when purchasing from retail electricity providers (REP) for the first time or activating an electricity plan. If you’re wondering why you need to pay electricity deposits in Texas and what they’re for, you’ve come to the right place.
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At Power Wizard, we’re dedicated to helping you find the best electricity plans in Texas and educating you about fundamental processes in the energy market, like deposit policies, to keep you well informed.
That said, let’s discuss deposits for electricity in-depth.
What Do You Need To Know About Electricity Deposits?
First, you should know it’s common for Texas REPs to ask for electricity deposits before connecting you to electrical service. However, if you want to avoid electricity deposits, you can opt for a prepaid electricity plan or select no-deposit electric companies in Texas.
Policies and procedures guiding electricity deposits in Texas are established and governed by the Public Utility Commission of Texas (PUCT). Some of the critical guidelines from PUCT regarding electricity deposits include:
- When a deposit is required from you, the electric company shall provide you with a “Your Rights as a Customer”, brochure documenting all pertinent information.
- The electric company shall archive records detailing your name, address, date, and amount of deposit and issue you with a receipt of deposit.
- The electric company shall outline a process of claiming deposits if you lose your receipt.
- Your residential deposit shall earn interest if the electricity provider company retains it for more than 30 days.
Although reading and understanding these guidelines is essential, you shouldn’t lose sleep over the fine print. Power Wizard has your back. When you trust us to find you the best electricity deals and plans, we ensure deposit policies don’t take advantage of you.
What Are Electricity Security Deposits?
An electricity deposit is the sum of money that retail electricity providers require you to pay upfront before supplying electricity to your home. According to PUCT subrules, the maximum deposit amount that electricity companies can demand from you must be equal to or less than one-sixth of your estimated annual billing.
Security deposits are designed to shield REPs from financial losses if you default on utility bills or make late payments for consecutive months. In such scenarios, your electricity provider would use your electricity security deposit amount to offset the balance as the last resort.
Besides shielding REPs from fiscal losses, security deposits empower providers to continue service delivery to other customers. For instance, if a substantial portion of a provider’s customers defaulted, the electric company would fail to pay its Transmission and Distribution Utility (TDU) provider if they hadn’t asked for deposits. That would interrupt service delivery even to paying customers.
Why Do I Need To Pay an Electricity Deposit?
An electricity provider may require you to pay an electricity deposit because of any of the following reasons:
- Your payment history is poor or unverifiable. If you had previously defaulted on your water, cable, or telephone bills, a REP would profile you as a risky customer likely to default again. As a precautionary measure, the REP will ask you to pay a security deposit in advance.
- You have been issued a disconnection notice within the past 12 months.
- You’re a first-time renter or homeowner without a utility payment history.
- You have unpaid bills owed to other utility companies, which have sent your account to a collection agency.
- A major credit bureau has issued a fraud alert against your account.
Electricity providers request deposits to safeguard their financial and operational positions in case you default payment. And it makes sense, given that electricity plans are typically post-paid, meaning you pay for electricity after using it.
What Determines the Cost of Electricity Deposits?
Naturally, the most pressing question on your mind is most likely about the deposit amount. You may wonder how much is the deposit for electricity and how electricity companies arrive at an amount.
Let’s discuss three top factors that influence how much deposit electricity providers may charge you.
Credit Score & Credit History
Although having a good credit score doesn’t automatically exempt you from paying electricity deposits, it gives you a good standing in the eyes of an electricity provider. Resultantly, you may be charged a fairer amount because you pose less risk of defaulting.
Even so, it’s upon the discretion of an electric company to determine how much deposit for the electricity you should pay. Some providers may charge you a flat rate despite your excellent credit score. A resourceful partner like Power Wizard will help you shop for providers with the most budget-friendly and manageable deposit policies.
Naturally, the bigger your home, the more electricity you’ll use, and the more you’ll pay. While this translates to more revenue for the electric company, it also means a higher risk ratio if you fail to honor your electricity bill. Thus, to lower their risk margin, providers may require you to pay higher deposit amounts than if you had a smaller home.
Local Electricity Rates
When assessing how much to deposit for electricity, you must factor in the average electricity rates in your area. If the average retail price in your area is high, you can expect your electricity deposit to be higher, too.
Can I Get My Electricity Deposit Waived or Refunded?
For the most part, electricity providers are unyielding and will insist you pay the deposit upfront. If you’re not financially prepared to raise the lump sum, your electricity company may calculate the amount into your monthly bills, so you pay in installments.
However, there are unique situations where providers may waive your residential deposit. They include:
- If you prove you’re a victim of family violence by duly filling out the certification letter for victim of family violence waiver for electric and telephone service deposit
- If you strike a guarantee agreement with an electricity agreement in which a guarantor commits in writing to assume ownership of your account in case your default on payments
- If you’re a senior citizen over 65 years old with a good payment history and a driving license
- If you present a legitimate letter of credit from your current electricity company showing an excellent repayment history with zero or only one late repayment
Remember that electricity providers hold the privilege to deny or approve the above deposit waivers as they see fit. Even so, most reputable electric companies will honor the above deposit waiver requests.
For deposit refunds, your provider should return your deposit plus the accrued interest after 12 consecutive months of electrical service without a late payment or nonpayment. If you don’t meet these conditions, your electricity provider will issue a refund check when you discontinue service. If you have an outstanding balance at the time of discontinuation, your provider will deduct the balance from your electricity deposit and pay you the remaining amount.
Invest in the Best Electric Service To Save Money Monthly
Because the Texas energy market is deregulated, there’s stiff competition among retail electric providers. As a Texan, this is good news because you have more options to choose from. But on the flip side, choice paralysis can hold you back.
Admittedly, browsing through hundreds of electricity plans from the close to 30+ REPs in Texas is quite burdensome. Even if you have the time to compare different plans and REPs, you may not know what factors to scout for. And the fine print would likely mix you up.
On the contrary, a team of energy professionals like Power Wizard is a better place to shop and get the best electricity deals for your residential or commercial use. When you trust us to manage the enrollment and all things electricity on your behalf, you’ll enjoy monthly cost savings and have peace of mind knowing you’re in good and experienced hands.