The University of Tennessee, Knoxville

Tennessee County Municipal Advisory Service

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Reference Number: MTAS-1384
Tennessee Code Annotated
Reviewed Date: September 05, 2017
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Customers can be charged a deposit adequate to ensure that the city will not lose appreciable amounts of money from unpaid bills and bad debts. A deposit should be sufficient to cover the amount that would be outstanding before the service would be cut off for non- payment. In calculating deposit amounts remember that the customer is still using the water/sewer service from the time the meter is read through whatever time period the city uses for cut offs. The deposit amount needs to be enough to cover this usage period as much as possible.

Some utilities have policies that provide for the waiver or refund of deposits if the customer meets certain requirements. For instance a homeowner who provides a notice of good payment history from a previous utility provider may have the deposit waived, or all residential customers who maintain a good payment record for two consecutive years of service will have their deposits refunded. If you establish these types of policies, remember that the purpose of a deposit is to ensure payment for outstanding bills if the customer is unwilling or unable to pay.