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Rochester Gas & Electric security deposit policy in bankruptcy

It has been a while since I have reviewed the policy of our local utility, Rochester Gas and Electric, as to what they do when someone who owes them money files bankruptcy. My friend, attorney Christopher K. Werner, Esq. of Boylan Brown took the trouble of calling Kim Mays of the Bankruptcy Department at RG&E, and I appreciate him sharing with me what he learned. Basically, if they are a creditor in the case, RG&E will assert a security deposit of two months of average billing, to be paid within 30 days of when they send out the security deposit request.

The bankruptcy code requires utilities to continue to provide service after a bankruptcy filing, as everyone needs heat and light, and the code also allows a utility to charge a security deposit in exchange for providing this service. When RG&E receives a notice that they have been listed as a creditor on a bankruptcy, they will close the existing account and open a new account (with a new account number) for the customer.

They will calculate what is owed on the account as of the petition date, based on meter readings before and after (if the case is filed March 1, the last meter reading is Feb. 15, and the next reading is March 15, they will calculate the balance on the account as of March 1 using those two readings.)

RG&E will then request a security deposit equal to two times the average monthly billing for that address. They will send out a bill for the security deposit, which must be paid in THIRTY DAYS. This deadline apparently will not be extended. However, if timely payments are made for a year, the security deposit will be refunded.

Our bankruptcy judge in Rochester, John C. Ninfo II, had written a decision on utility security deposits back in 1998 (In re Spencer; WDNY Bk #97-23123; decision Feb. 12, 1998). The bulk of that decision was on the policy of lifting the automatic stay of bankruptcy by a utility during a chapter 13 bankruptcy. In Spencer, the Court decided:

1) Absent extraordinary circumstances, public utilities, pursuant to bankruptcy Section 366(b) may require a Ch. 7, 11 or 13 residential customer to pay a security deposit equal to the highest two months, w/o late charges, of the previous twelve months.

2) While a case is still open, if a post-petition utility payment is more than 10 days late, the utility may apply to the court (on two business days notice to debtor and attorney) for an order authorizing termination of service should the debtor fail to pay any two consecutive monthly statements by the due date. The Attorney can set up a telephone conference and oppose the application in exceptional circumstances warrant.

3) Should a residential customer who has made a two month security deposit be late in paying any statement, the utility may commence "whatever procedures are available to it under applicable state law and regulations to terminate service, so that it will be in a position to terminate service at the earliest permissible time before or after the debtor's case is closed."

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Peter R. Scribner, Esq.
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