Why this isn’t a relevant question…

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It seems I get asked the same question with each Utility Fee Survey:

“Why aren’t deposits included with the Utility Fee Survey?”

For starters, the obvious answer is a security deposit isn’t a fee. By definition, fees are non-refundable and security deposits are, of course, refundable. For some utilities this is after a sustained period of good payment history, for others not until the account is closed.

Additionally, I don’t believe comparing deposits between utilities is a useful exercise, which I’ll explain.

Comparing fees

The results of the Utility Fee Survey provide a useful tool for utilities to compare themselves to other utilities to determine if their fees are up-to-date and reasonable. I’ve had several utilities tell me they’ve implemented new fees, or increased existing fees, based upon learning what other utilities are doing.

Periodically reviewing your fee schedule, and comparing it to other utilities, is a useful exercise. Because fees are assessed only to customers who are provided a specific service, they generate additional revenue without raising rates across the board. And, as any utility knows, generating increased revenue without raising rates is a good thing!

Not a relevant question

Periodically, on some of the listservs I follow, someone will ask what other utilities charge as a security deposit. Presumably, this question, much like the question in the opening paragraph, originates from trying to determine if the utility asking the question is charging a fair deposit, compared to other utilities.

The reason for charging a security deposit is to ensure your utility gets paid the final bill when a customer closes an account. A fair and adequate security deposit depends on several factors, including your rates and delinquency policies.

Trying to compare security deposits between utilities without taking into consideration the difference in rates, customer usage patterns, and business practices is pointless.

Is your security deposit adequate?

To assist utilities in determining if their security deposit is adequate, I’ve developed a formula I call Days of Exposure. Days of Exposure is the total number of days of service a customer ends up owing for if they are disconnected for non-payment and never reinstate service.

I’ve developed an online tool to calculate your utility’s Days of Exposure. If you’re interested in finding out if your security deposit is sufficient, please click here to calculate your Days of Exposure.

No takers!

No one stepped forward after the last Utility Information Pipeline to volunteer to track the time involved in taking various types of payments.

If you remember, my premise is that taking cash and check payments isn’t “free” and I’m looking for a few utilities to gather real data to help me analyze the true cost of taking payments.

If you’re willing to participate, please email me and I’ll give you a call to discuss the process in more detail.

Unsure if your security deposit is adequate?

If you’re wondering if your security deposit is adequate, please give me a call at 919-232-2320, or email me at gsanders@edmundsgovtech.com for more information about how a business review could help you find out.

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