Security Deposits after CCAA or bankruptcy filing

September 22nd, 2014 by Questions

If a commercial customer has a Utility account (Hydro) and files either CCAA or Bankruptcy, Can the Utility ask for a security deposit when a customer opens a new account? (when CCAA or Bankruptcy is filed, the Utility closes the existing account and opens a new one so that no collection action occurs for the “Protected” amount owing. In the case of an Electrical Utility, bills are issued after the fact (customers are billed after they have consumed the power).
Thank you

Posted from: Ontario

Questions

One Response to “Security Deposits after CCAA or bankruptcy filing”


September 22, 2014 at 12:56 pm, Doug Stuive, CA | Trustee | CIRP said:

In a bankruptcy scenario the Trustee would open a new account in their name if hydro is required and the requirement for a security deposit would be based on the trustee’s payment history and therefore is generally not required.

In a CCAA proceeding the company may have to open a new hydro account if required. If a sizable security deposit is required in a CCAA, the debtor can make an application to the court requesting that an order is granted deeming a supplier to be a “critical supplier”. This would mean that the supplier would have to supply their utility as they had before the CCAA began. In such a case, if the electricity supplier is deemed a “critical supplier”, it would not be able to withhold electricity until a deposit is paid. Unless this Court Order is obtained the security deposit would need to be paid.

The Bankruptcy and Insolvency Act does not contain any legislation that would protect a company from having to pay a deposit to open a new hydro account. The Ontario Energy Board outlines the criteria used to determine if a security deposit is charged when opening an account. The criteria according to the Ontario Energy Board is as follows;

-You have received more than 1 disconnection notice in the past year
-You have bounced more than 1 cheque
-You have failed to pay more than one pre-authorized payment
-You have been disconnected over the past year
-You have been subject to a collect trip by the utility
-You have had your deposit applied to your outstanding balance and must pay it back

There is more detailed information on their website: http://www.ontarioenergyboard.ca

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