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‘New reqs will provide CUC add’l income’
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Posted on Aug 17 2005
The new regulations allowing security deposits to earn interest will mutually benefit the Commonwealth Utilities Corp. and utility customers, according to CUC executive director Lorraine Babauta.
In an interview, Babauta said the new regulations were adopted for equity reason and to provide an additional funding source for CUC as well.
She explained that, before the regulations were passed, only commercial customers received interest for the security deposit they paid for utility service. Babauta said the new rules expanded this benefit to cover residential customers.
“The payment of interest for these security deposits will not cause additional burden to CUC. We will place the funds [in] a bank account and whatever interest they earn will be used to pay the customers,” Babauta said.
She also said that the new regulations would actually allow the security payment to earn interest at a higher rate than before.
Furthermore, CUC now has greater flexibility in handling the security deposits. The firm can invest the security deposits and use it to earn funds, Babauta said.
Adopted on an emergency basis—or upon less than the normal 30-day notice—the new regulations require CUC to maintain an account indicating the name of the customer, the date he or she paid the security deposit, and the amount of the deposit.
Effective Jan. 15 of each year, CUC should credit each account an amount equal to the average “passbook” savings rate payable during the past year. The interest amount will be based on rates from at least three banks insured by the Federal Deposit Insurance Corp.
In January of each year, the corporation’s comptroller is now also required to prepare for the board of directors an annual report which explicitly details amounts of deposits received, interest rate to be paid for the previous year, and CUC’s total account liabilities.
According to the regulations, any customer who terminates a utility account is entitled to a full, cash refund of any deposit in excess of any remaining unpaid charges.
This refund must be provided to the customer within 30 days after the account is closed, unless the amount of the charges or security account balance is in dispute.
