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When you can be asked to pay a security deposit
Rules for security deposits are set out in Standard Licence Condition (SLC) 27.
Electricity suppliers may ask for a security deposit if:
    you refuse to take a supply through a prepayment meter; or
    it is not practicable to install a prepayment meter; and
    it is reasonable in all the circumstances to do so (a tariff supplier’s power is expressed as the right to ask for reasonable security, which amounts to the same thing).
When a contract supplier asks for a security deposit, it must inform you of when it will be returned (see here) and of the power of Ofgem to determine any dispute about the deposit. As an alternative, action through the County Court (or sheriff court in Scotland) can be used to recover a deposit which is owed to you and which a supplier refuses to refund (see Chapter 14).
If you are a new customer, you may be routinely asked for a security deposit by electricity suppliers, particularly if:
    you refuse to provide information about previous addresses, or you cannot demonstrate a satisfactory payment history at a previous address and you do not otherwise provide sufficient information about your creditworthiness; or
    you have been assessed as having a poor credit rating; or
    you are in short-term accommodation. You should not be treated as being in short-term accommodation if you are a secure or assured tenant.
Suppliers cannot insist on both a prepayment meter and a security deposit (see here).
Your supplier’s code of practice on the payment of bills should include a statement of its policies on security against the non-payment of future bills. The code should also state if and how policy differs for new and existing customers and what, if any, credit-vetting procedures are used. It should indicate the steps you need to take to improve your creditworthiness or to ensure that security is no longer needed.
Security deposits may also be required from existing customers if:
    your payment plan has broken down. You will almost always be able to have a prepayment meter as an alternative. Remember that the requirement for a security deposit must be reasonable. If the reason your payment plan broke down was that you could not afford it, you may be able to negotiate another payment plan instead of either having to pay a security deposit or having a prepayment meter installed (see Chapter 7); or
    theft, tampering or damage to meters/equipment has occurred (see Chapter 9).
It is unlawful for a supplier to discriminate unduly in how it supplies customers, including in respect of security deposits – eg, if people who live on a particular estate are asked for a security deposit. Contracts are individual agreements and a supplier should avoid discriminating against any particular class of customer. A complaint about this may be made to the supplier and also to the Ombudsman. Details of the codes may be referred to in court if a case leads to legal action.1Laverty and others v British Gas Trading [2014] EWHC Ch 2721
1     Laverty and others v British Gas Trading [2014] EWHC Ch 2721 »
Gas suppliers can, under the terms of their licence, incorporate demands for security deposits in their contracts and ‘deemed contracts’ (see here). Deposits may be cash deposits, or a secure method of payment such as a direct debit or a prepayment meter. Conditions in the supplier’s licence will limit the circumstances and amounts of deposits that may be requested. Suppliers cannot ask for a security deposit if you agree to a prepayment meter, unless your conduct makes it reasonable to ask for a deposit.
A gas supplier must not require payment of a deposit where ‘it is unreasonable in all the circumstances of the case to require that customer to pay a security deposit.’1Condition 27.3(b) SLC The wording indicates that the supplier is required to consider the individual circumstances of a customer and cannot apply a blanket policy of imposing deposits upon particular classes of customers or certain areas. The deposit must not exceed an unreasonable amount.2Condition 27.4 SLC
Your supplier’s code of practice on the payment of bills will provide a statement of its policies. All suppliers are subject to the same obligations in respect of security deposits. If you do not provide the security requested, the supplier may refuse to connect your supply, if you are a new customer, or disconnect your supply, if you are an existing customer. Security can mean:
    you pay a cash deposit; or
    you join a gas payment plan; or
    a prepayment meter is fitted or your smart meter is switched to prepayment mode.
Suppliers may ask for security if:
    you live in short-term accommodation. You should not be treated as being in short-term accommodation if you are a secure or assured tenant; or
    you have a poor payment record at your present or last address; or
    you are a new customer and you do not give proof of your identity or your last address.
A gas transporter is also entitled to ask for a security deposit if connecting premises to the gas pipe network where the premises are no more than 23 metres from the gas main and it will be laying the pipes needed for the connection. The transporter may refuse to supply and lay the pipe if you fail to pay the security requested.
1     Condition 27.3(b) SLC »
2     Condition 27.4 SLC »