I was recently asked for help from a friend at my church who is a widow and only uses 500 or less kilowatt hours a month. She wanted to save money by shopping each year for the cheapest electric rate. She didn’t mind the hassle of shopping each year in order to shave off a little from her energy bill.
I came over to her house and we went through the providers looking for one that would save her more money. Each provider would ask for a deposit even though she had good credit and had been paying her bill on time every month. It didn’t make much sense because she was an excellent customer, why is there a deposit?
The deposit requirements have more to do with trade secrets the electric companies keep close to the chest than whether you are a good honest paying customer. The finer details on why each provider asked for a deposit is something that I could not make clear because the providers are not clear on this either.
What she had going for her is that she had paid her electric bill on time each month and was in good standing with her current electric company. The rates to renew with her current provider weren’t too bad in comparison with the providers we looked at when shopping. I told her if she renews with her current provider she will not be asked for a deposit because she is in good standing with them.
My friend only had $600 in savings in her bank and so taking $200 out of that account to pay an electric deposit just didn’t make sense for her situation. By renewing with her current provider she kept a good buffer in her savings account and still saved money. The renewal rate was not enough difference in cost to make much difference compared to going with someone different.
For those in a low income situation just starting out, you may have to initially pay a deposit with a traditional electric company. Keep in mind though after 6 months to a year the electric company will no longer ask you for a deposit if you renew with them. Showing you are a good paying customer with an electric company will help guarantee that provider will be more lenient in not asking you for a deposit in the future.
There are also “no deposit electric companies” but these companies aren’t always the cheapest. It pays to consider what it means for someone in a low income situation to sign up with a regular electric company that checks credit. They initially will ask for a deposit, but future years provided you are a good customer will show that they will waive future deposits.