In 2019, America produced 4.17 trillion kWh of electricity, according to data from the U.S. Energy Information Administration. Utility companies, including electricity and gas providers, are what literally keep the country running. Without stable sources of revenue, however, the delivery of these utilities suffers for all, which is why Utility Deposit Bonds exist. A Utility Deposit Bond is a surety bond required by some public utilities. Utility Deposit Bonds are typically used in place of an actual deposit. A Utility Bond is not always required. The utility has its own guidelines for determining when a bond may be required. Often, when a Utility Deposit Bond is required, it is required of a business that does not have an established payment history with the utility.
The Utility Deposit Bond, when put in place, protects the Utility. The bond essentially guarantees payment of the amounts due, up to the bond amount, for the utilities used at the location or locations. If the business fails to pay the utility, the utility can place a claim on the Utility Bond. The Surety, the entity that provides the guarantee behind the bond, will now have to pay the utility up to the amount of the bond. To understand exactly how this arrangement works, it helps to see a breakdown of the three parties involved:
A paid claim does not get the business off the hook for the unpaid amount; it just passes the debt collecting responsibility to the Surety. The Surety pays the utility and then attempts to collect from the business the amount paid on the claim. The business is still ultimately financially responsible for any amount paid out on a claim by the Surety.
Having to obtain a bond before getting access to utilities can feel frustrating, especially if those utilities are for a new business trying to get off the ground. But it's important to understand why these bond requirements exist and how they actually benefit all involved. For utility companies, bonds provide some insurance that the customers they serve will pay for the utilities they consume. Even though utility companies provide a public service, they still rely on revenue to deliver that service effectively. If these companies had no way to hold customers accountable for unpaid bills, revenue would become uncertain and unpaid bills would become more common. Requiring a surety bond for a utility deposit gives the companies providing electricity or gas a guarantee (from the surety company) that bills will be paid.
The principal has to bear the utility bonds cost and also the cost of claims, but they benefit from the bond agreement too. Since utility companies know that unpaid bills won't become a financial problem, they're more enthusiastic about extending service to new customers or customers with a spotty payment history. Without the protection the utility bond provides to these companies, it may be harder for customers to access critical services. If the choice is between a small upfront cost or having no gas or electricity, it's obvious which is better. And since the utility companies have more stable revenue sources, utility delivery improves for all.
Rates for Utility Deposit Bonds vary widely. The rates are determined based on various factors which include credit standing and may include financial standing as well. Typically, the poorer the credit, the higher the quotes are for Utility Bonds.
The best way to get a truly accurate quote for a Utility Bond is to apply for the bond and let the underwriter review the request and put a quote together. It's rare that someone is denied access to a utility bond because of their credit — after all, bonds are actually a good thing for people with bad credit. And even though a low credit score or a bankruptcy may translate to higher premiums, the cost may only be a few percentage points higher than someone with good credit.
will always attempt to get the best rate for the bond request. In instances where the rate is high to start due to challenged credit, our renewal department can remarket the bond if there has been an improvement in credit and/or financial standing.
When you need to get your utilities activated ASAP, the last thing you want to do is go searching for a good bond company. Luckily, Viking Bond Service issues utility bonds nationwide, and we make every step of the process as quick and easy as possible. If you need more information before getting started, please call us at 1-888-278-7389 or fill out the contact form on this page. If you're ready to get started, you can complete an online application anytime.
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