Utilities in Michigan require tens of thousands of residential customers to provide financial deposits. Most commonly, utilities require a deposit from customers whose electricity or gas has been shut off for nonpayment, as a condition of service restoration. Almost always, utilities require customers to provide two months of average billings as a deposit, and hold the deposit for 12 calendar months. If the customer misses a payment, the utility restarts the 12-month counter.

MI-MAUI believes deposits are generally not justified as a financial measure, that they create undue hardship for customers and drive up rates because utilities must pay interest on deposits. The basic justification offered for deposit requirements is to make sure that a customer’s account does not become uncollectible if they fail to pay again and have their service shutoff. This security is not necessary because, to get their service turned back on, customers must pay a significant part of their arrearage and agree to abide by a payment plan; if the customer fails to pay again, the utility can shut them off again, a much stronger motivator than provision of a deposit.

Utilities are not required to report how many deposits they collect, how long they hold them, what their interest expenses are, or to provide any data that would reveal whether deposits help to prevent uncollectible costs that get passed on to other ratepayers. MI-MAUI supports reform to MPSC rules that allow utilities to collect deposits, and utility reporting requirements that would support greater accountability for utilities’ deposit programs.