Retailers and exempt operators that are operating under the National Energy Retail Rules (NERR) must follow strict conditions when requiring, holding, and returning security deposits from small customers (residential or qualifying small business customers).

Retailers may only require a security deposit under clear, limited circumstances. They must manage these funds transparently, pay interest at a fair market rate, and return the deposit promptly once conditions are met. Non-compliance can result in civil penalties. Below is a concise guide to these obligations. 

 For further details, refer to Rules 39 to 45 of the National Energy Retail Rules.

 When Security Deposits Can Be Requested (Rule 40)

 Residential Customers:

• Only when the customer first requests energy supply (not during the contract).

 Business Customers:

• At the start of the contract or any time during its term.

 Retailers cannot request a deposit unless they first:

• Seek permission from the customer to conduct a credit check.
• Consider the results of the credit check, the customer’s provided credit history, and any other relevant information (Rule 39).

When Security Deposits Cannot Be Requested

• If the customer is identified as a hardship customer (by the current or any previous retailer).
• From residential customers, unless payment plan options have been offered and either declined or defaulted on.

Limits on the Deposit Amount (Rule 42)

• The deposit must not exceed 37.5% of the customer's estimated annual bill, based on historical usage or a comparable customer profile.

Interest Requirements (Rule 43)

• Retailers must pay interest on held deposits at the bank bill rate.
• Interest must:
  • Accrue daily.
  • Be capitalised every 90 days if not already paid.

Managing and Using Security Deposits (Rule 44)

• Retailers must keep deposits in a separate account and reflect them in their company records.
• Security deposits (plus interest) can only be used if:
  • A customer fails to pay and the premises are de-energised.
  • A customer vacates, transfers retailers, or requests de-energisation, and the final bill remains unpaid.
• Energy charges must be settled first before applying deposits to other amounts.
• Retailers must inform customers within 10 business days when a deposit is applied.

Returning the Deposit (Rule 45)

Retailers must refund the deposit and accrued interest within 10 business days if:

• A residential customer completes 1 year of on-time payments.
• A business customer completes 2 years of on-time payments.
• The customer vacates, transfers retailers, or requests disconnection, and the deposit is not required to settle the final bill.

If no repayment instructions are given, the retailer must apply the credit to the customer's next or final bill.