According to the policies of the Ontario Energy Board, electricity and natural gas utilities have the option of requesting the payment of a security deposit before starting service. This deposit is used to pay your bill if you fail to pay it.
If they ask for a deposit, you must pay it. Otherwise, they are within their rights to refuse service, or disconnect your service. Typically, deposits are required from new customers, but utilities may request a deposit from existing customers when they move to a new location.
Reasons for Having to Pay a Deposit
Utilities will typically perform a credit check in order to determine whether they should require a new customer to pay a security deposit, and how large the deposit should be. Reasons for new customers to pay a security deposit include:
- Having no previous payment history with any utility
- Late or missed payments with a previous utility
- Poor credit history
Even existing customers of a utility may have to pay a security deposit in some circumstances, such as:
- Payments have been missed in the past, or a cheque was bounced
- A warning notice of disconnection has been sent in the past year, or service was actually disconnected
- A utility representative has met with you regarding payment concerns or disconnection due to nonpayment
- A previous deposit has been exhausted by being applied to past debts, and you must renew your deposit.
Exceptions for Paying a Deposit
There are two ways you may be able to avoid having to pay a deposit. If you can demonstrate that you have been in good standing for at least one year with your previous utility, your new utility will usually waive the deposit.
Secondly, customers who meet the qualifications for being considered low-income can have deposits waived. However, natural gas customers will be required to show 2 years of good standing with a previous utility, and may be required to sign up for a budget payment plan, in which payments are averaged out over the course of a year.
How Much Will My Security Deposit Cost Me?
There is no singled fixed amount for security deposits. Instead, deposit amounts are based upon how much you’ve paid for energy service in the past. These calculations vary depending on how frequently you were billed by your previous utility, but they are very straight forward. The maximum security deposit an electricity provider can require you to pay is equal to:
- If you were billed monthly: 2.5 times your average bill
- If you were billed every other month: 1.75 times your average bill
- Any other schedule: 1.5 times your average bill
If you have never before received service from a Canadian electricity provider, the deposit amount will be calculated based upon the usage of the previous occupant at that address.
If, after you have paid your deposit, your average consumption increases significantly, your utility may ask you to pay an additional deposit. However, the total amount is still subject to the above limitation.
The calculation for natural gas utilities is much simpler. Union Gas requires a deposit equal to twice your average monthly usage, while Enbridge Gas requires a $250 deposit.
If it’s difficult for you to pay your electricity or natural gas deposit all at once, you can request to pay your deposit in monthly installments for up to six months.
When Can I Get My Deposit Back?
Utilities cannot hold deposits indefinitely. If you have one year of perfect payment history, you may request the return of your deposit. If you move or close your account, the utility has 6 weeks to return your funds.
All deposits are returned with interest, calculated at a rate of 2% less than Bank of Canada prime interest rates, paid annually.
