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Tennessee Utility Deposit Bond: A Comprehensive Guide

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This guide provides information for insurance agents to help their customers obtain a Tennessee Utility Deposit bond.

At a Glance:

• Average Cost: Between 2% to 7.5% of the bond amount per year based on the applicant’s credit
• Bond Amount: Determined on a case-by-case basis
• Who Needs it: Certain individuals and businesses that do not want to pay a cash deposit before receiving utility services
• Purpose: To ensure utility companies receive compensation for financial harm if the customer fails to pay their utility bills
• Who Requires Utility Deposit Bonds in Tennessee: Utility companies that provide services to the general public

Background

Utility companies in Tennessee often require customers expected to generate large monthly bills to pay a security deposit before initiating service. The security deposit protects utility companies from losses if the consumer fails to pay their monthly bills on time and in full. However, certain utility companies in Tennessee allow customers to purchase and maintain a surety bond in lieu of depositing cash. Unlike most surety bonds, utility deposit bonds are not required by a government agency but by the utility company providing the service (unless a municipality owns the utility company).

What is the Purpose of the Tennessee Utility Deposit Bond?

Certain utility companies in Tennessee require consumers that do not wish to pay a security deposit to purchase a surety bond as a prerequisite to obtaining utility services. The bond ensures that the utility company will receive compensation for financial harm if the consumer fails to comply with the provisions laid out in the bond form. Specifically, the bond protects the utility company if the consumer does not pay their monthly bills. In short, the bond is a type of insurance that protects utility companies if the consumer fails to remit all required payments.

How Can an Insurance Agent Obtain a Tennessee Utility Deposit Surety Bond?

BondExchange makes obtaining a Tennessee Utility Deposit Surety Bond easy. Simply login to your account and use our keyword search to find the “utility” bond in our database. Don’t have a login? Gain access now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone (800) 438-1162, email, or chat from 7:30 AM to 7:00 PM EST to assist you.

At BondExchange, our 40 years of experience, leading technology, and access to markets ensures that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.

Not an agent? Then let us pair you with one!

Click the above image to find a BX Agent near you

Is a Credit Check Required for the Tennessee Utility Deposit Bond?

Surety companies will run a credit check on the applicant to determine eligibility and pricing for the Tennessee Utility Deposit bond. Applicants with excellent credit and work experience can expect to receive the best rates. Applicants with poor credit may be declined by some surety companies or pay higher rates. The credit check is a “soft hit”, meaning that the credit check will not affect the applicant’s credit.

How Much Does the Tennessee Utility Deposit Bond Cost?

A Tennessee Utility Deposit bond can cost anywhere between 2% to 7.5% of the bond amount per year. Insurance companies determine the rate based on a number of factors, including your customer’s credit score and experience. The chart below offers a quick reference for the approximate bond cost on a $10,000 bond requirement.

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$10,000 Utility Deposit Bond Cost

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*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.

BondExchange now offers monthly pay-as-you-go subscriptions for surety bonds. Your customers are able to purchase their bonds on a monthly basis and cancel them anytime. Learn more here.

Which Companies Allow Utility Deposit Bonds in Tennessee?

The following Tennessee utility companies allow customers to purchase a surety bond in lieu of depositing cash:

BrightRidge

Commercial customers may opt to purchase a surety bond in lieu of depositing cash. The bond amount must equal twice the location’s actual or estimated highest monthly bill.

Agents can contact BrightRidge here.

Bristol Tennessee Essential Services (BTES)

High-use customers have the option of purchasing a surety bond instead of depositing cash. The bond amount is determined on a case-by-case basis and must equal twice the location’s estimated highest monthly bill.

Agents can contact BTES here.

Chattanooga Electric Power Board

Businesses must either purchase a surety bond or deposit cash before receiving service. The bond amount is determined on a case-by-case basis based on the location’s estimated usage.

Agents can contact the Chattanooga Electric Power Board here.

Chattanooga Gas Company

Commercial customers are required to purchase a surety or deposit cash. The bond amount is determined based on the location’s estimated usage.

Agents can contact the Chattanooga Gas Company here.

City of Clinton Utilities Board

Commercial and industrial customers must either purchase a surety bond or deposit cash before initiating service. The bond amount must equal twice the location’s actual or estimated highest monthly bill.

Agents can contact the Clinton Utilities Board here.

City of Cookeville Electric Department

Commercial and industrial customers whose estimated monthly electric bill exceeds 5,000 kilowatt hours are required to purchase a surety bond or deposit cash. The bond amount must equal twice the location’s actual or estimated highest monthly bill.

Agents can contact the Cookeville Electric Department here.

City of Cookeville Gas Department

Commercial and industrial customers whose estimated monthly gas bill exceeds $500 are required to purchase a surety bond or deposit cash. The bond amount must equal twice the location’s actual or estimated highest monthly bill.

Agents can contact the Cookeville Gas Department here.

City of Dayton Utilities Department

Commercial customers must either purchase a surety bond or deposit cash. The bond amount is calculated on a case-by-case basis based on the customer’s estimated usage.

Agents can contact the Dayton Utilities Department here.

City of Dayton Utilities Department

Commercial customers must either purchase a surety bond or deposit cash. The bond amount is calculated on a case-by-case basis based on the customer’s estimated usage.

Agents can contact the Dayton Utilities Department here.

Clarksville Department of Electricity

Commercial customers must either purchase a surety bond or deposit cash. The bond amount must equal twice the location’s actual or estimated highest monthly bill.

Agents can contact the Clarksville Department of Electricity here.

Cleveland Utilities

Commercial customers are able to purchase a surety bond instead of depositing cash. The bond amount is determined on a case-by-case basis based on the location’s past usage history, the location’s estimated usage, and the business’s past pay history and that of any other responsible parties.

Agents can contact Cleveland Utilities here.

Columbia Power & Water Systems (CPWS)

Commercial customers must either purchase a surety bond or deposit cash. The bond amount must equal twice the location’s actual or estimated highest monthly bill.

Agents can contact CPWS here.

Covington Electric System

Commercial customers are required to either purchase a surety bond or deposit cash in an amount equal to twice the location’s actual or estimated highest monthly bill.

Agents can contact the Covington Electric System here.

Cumberland Electric Membership Corporation (CEMC)

Businesses may purchase a surety bond instead of depositing cash. The bond amount must equal twice the location’s actual or estimated highest monthly bill.

Agents can contact CEMC here.

Dickson Electric System

Commercial and industrial customers are required to purchase a surety bond or deposit cash before receiving service. The bond amount is calculated by Dickson Electric System on a case-by-case basis using any combination of the following:

• • Twice the location’s highest monthly bill during the last 12 months
  • A service demand contract
  • The location’s estimated usage

Agents can contact Dickson Electric System here.

Duck River Electric Membership Corporation (DREMC)

Commercial customers must either purchase a surety bond or deposit cash. The bond amount is determined on a case-by-case basis based on the location’s estimated usage.

Agents can contact DREMC here.

Gallatin Department of Electricity (GDE)

General power customers are required to either purchase a surety bond or deposit cash. The bond amount must equal twice the location’s actual or estimated highest monthly bill.

Agents can contact GDE here.

Holston Electric Cooperative

Non-residential customers whose required security deposit exceeds $500 may opt to purchase a surety bond instead of depositing cash. The bond amount must equal twice the location’s actual or estimated average monthly bill.

Agents can contact Holston Electric Cooperative here.

Knoxville Utilities Board

Businesses must purchase a surety bond or deposit cash. The bond amount is determined on a case-by-case basis and must equal twice the location’s actual or estimated highest monthly bill.

Agents can contact the Knoxville Utilities Board here.

LaFollettee Utilities Board

General power customers are required to purchase a surety bond or deposit bash before initiating service. The bond amount must equal twice the location’s actual or estimated highest monthly bill.

Agents can contact LaFollettee Utilities Board here.

Lenoir City Utilities Board

Commercial and industrial customers must purchase a surety bond or deposit cash in an amount equal to twice the location’s actual or estimated average monthly bill.

Agents can contact Lenoir City Utilities Board here.

Memphis Light, Gas, and Water

General power customers are required to purchase a surety bond or deposit cash. The bond amount must equal 2.5 times the location’s second highest metered service. For newly constructed locations, the bond amount is determined based on the location’s size, load requirements, and the type of business being conducted.

Agents can contact Memphis Light, Gas, and Water here.

Metro Water Services

Commercial customers must purchase a surety bond or deposit cash in an amount equal to two months of estimated billing.

Agents can contact Metro Water Services here.

Middle Tennessee Electric Membership Corporation

General power customers must purchase a surety bond or deposit cash before receiving service. The bond amount is determined on a case-by-case basis and must equal twice the location’s estimated highest monthly bill.

Agents can contact the Middle Tennessee Electric Membership Corporation here.

Morristown Power System

Commercial customers are required to deposit cash or purchase a surety bond in an amount equal to twice the location’s estimated highest average monthly bill.

Agents can contact Morristown Power System here.

Nashville Electric Service (NES)

Commercial customers whose required security deposit is at least $1,000 may opt to purchase a surety bond instead of depositing cash. The bond amount must equal twice the location’s average monthly bill.

Agents can contact NES here.

Piedmont Natural Gas

Commercial customers must purchase a surety bond or deposit cash. The bond amount is determined by the company on a case-by-case basis based on the customer’s estimated usage.

Agents can contact Piedmont Natural Gas here.

Pickwick Electric Cooperative

Commercial customers whose accounts are rejected by the TVPPA Credit Insurance Program must purchase a surety bond or deposit cash before receiving service. The bond amount must equal the location’s two highest estimated monthly bills.

Agents can contact Pickwick Electric Cooperative here.

Plateau Electric Cooperative

General power customers must purchase a surety bond or deposit cash in an amount equal to 60 days of estimated billing.

Agents can contact the Plateau Electric Cooperative here.

Powell Clinch Utility District

Commercial and industrial customers must purchase a surety bond or deposit cash before receiving service. The bond amount is determined on a case-by-case basis and must equal two months of the location’s actual or estimated highest bills.

Agents can contact Powell Clinch Utility District here.

Sevier County Electric System

Commercial customers whose required security deposit is at least $1,000 can choose to purchase a surety bond instead of depositing cash. The bond amount must equal twice the location’s highest bill during the previous 24 months. The bond amount for newly constructed locations is determined based on its estimated usage.

Agents can contact the Sevier County Electric System here.

Sevier County Utility District

Commercial customers are required to either purchase a surety bond or deposit cash. The bond amount is determined on a case-by-case basis based on the customer’s estimated usage.

Agents can contact the Sevier County Utility District here.

SouthWestern Tennessee Electric Membership Corporation

General power customers must purchase a surety bond or deposit cash. The bond amount must equal twice the location’s estimated average monthly bill.

Agents can contact the SouthWestern Tennessee Electric Membership Corporation here.

Sparta Electric and Water System

Commercial customers are required to purchase a surety bond or deposit cash in an amount that is at least twice the location’s actual or estimated average monthly bill (customers deemed to be at higher risk for nonpayment may have a higher required bond amount).

Agents can contact Sparta Electric and Water System here.

Sweetwater Utilities Board

Commercial customers must purchase a surety bond or deposit cash. The bond amount must equal twice the location’s highest monthly bill during a 12 or 14 month period. Newly constructed locations will have this amount estimated.

Agents can contact the Sweetwater Utilities Board here.

Tri-County Electric Membership Corporation

Commercial customers that are required to pay a security deposit have the option of purchasing a surety bond instead of depositing cash. The bond amount is determined on a case-by-case basis based on the location’s estimated usage.

Agents can contact the Tri-County Electric Membership Corporation here.

Tullahoma Utilities Board

General power customers must purchase a surety bond or deposit cash before receiving service. The bond amount must equal twice the location’s actual or estimated highest monthly bill.

Agents can contact the Tullahoma Utilities Board here.

Upper Cumberland EMC

General power customers are required to purchase a surety bond or deposit cash. The bond amount is determined on a case-by-case basis and must equal twice the location’s estimated highest monthly bill.

Agents can contact Upper Cumberland EMC here.

How Do Tennessee Utility Customers File Their Bonds?

Utility customers in Tennessee should submit their completed bond forms, including the power of attorney, to the company requiring the bond. The surety bond requires signatures from both the surety company that issues the bond and from the customer. In some instances, the bond will require witness signatures as well. Generally, the surety company will include the following information on the bond form:

• Name and address of entity/individual(s) buying the bond
• Surety company’s name and address
• Entity requiring the bond
• Bond amount
• Date the bond is signed
• Date the bond goes into effect

What Can Utility Customers in Tennessee Do to Avoid Claims Against Their Bonds?

To avoid claims on their bonds, utility customers in Tennessee must ensure they pay their utility bills on time and in full.

What Other Insurance Products Can Agents Offer Utility Customers in Tennessee?

Utility companies generally only require businesses to be bonded. As such, agents can offer their customers general business and liability insurance in addition to the utility deposit bond. Bonds are our only business at BondExchange, so we do not issue liability insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.

Should Your Customer Purchase a Surety Bond or Deposit Cash?

Surety bonds are generally considered the better option for businesses, as they free up working capital that would otherwise have to be deposited with the utility company. For more information on whether your customer should purchase a bond or deposit cash, check out our Surety Bonds vs. Letters of Credit article here.

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