The utilities are free from statutory limitations on their deposit rules, practices differ, but most utilities use very broad criteria of income and net worth to select those consumers from whom they will demand a deposit. Under these broad deposit rules it is not surprising that the poor pay virtually all deposits, or that often high income residential areas are exempted altogether from the impact of cash deposits. Such rules impose severe burdens on depositors without proportionately benefitting the utilities, for deposits usually save utilities insignificant amounts of money. For example, estimations of the California Public Utilities Commission in 1967 showed that imposition of deposit rules would save Pacific Telephone & Telegraph Co. only one tenth of one percent (00.1%) of its operating revenues. These small savings contrast sharply with the large burdens imposed on those required to pay the deposits. At most, only 13.4% of those required to pay deposits under Pacific Telephone's identification criteria were actually expected to default. In short, 87% of Pacific Telephone's deposit-paying customers were forced to furnish security for utility service on the grounds that only 13.4% of their number might default in their monthly payments. At the same time, the majority was required to pay in the form of higher utility rates for their share of the bad debt losses not eliminated by the company's deposit policy. This double burden falls on all consumers who are required to pay deposits on the basis of such imprecise deposit criteria. An additional burden falls on poor depositors because deposit amounts often are large in relation to their budgets. Moreover, unlike the affluent, the poor cannot turn so readily to alternative utilities offering less onerous credit terms. In light of these burdens, the existence and application of cash deposits raise serious issues of public utility law and constitutional law.
John B. Kirkwood,
Cash Deposits - Burdens and Barriers in Access to Utility Services, 7 HARV. C.R.-C.L. L. REV. 630