1. (1) A municipality or cooperative in the State of New York which purchases power from the authority may require, subject to the restrictions set forth in this section, a new or current residential customer to whom such municipality or cooperative shall supply electricity to deposit a sum of money, which shall be in the amount specified in paragraph (9) of this subdivision, to secure payment for such electricity or for the rental of fixtures, instruments and facilities actually supplied.
2. (2) For the purposes of this section, a new residential customeris an applicant for electric service to a dwelling unit which such customer uses for his or her residential purposes and where business rates do not apply to the service, and who does not qualify as a current residential customer. A current residential customer is a customer who receives electric service to a dwelling unit which such customer uses for his or her residential purposes and where business rates do not apply to the service. A current residential customer includes an applicant for electric service who has transferred dwelling units within a municipality's or cooperative's service territory and for whom there is a recent payment history. A seasonal customer is a person who applies for and receives electric service periodically each year, intermittently during the year, or at other irregular intervals. A short-term customer is a person who requires electric service for a specified period of time that does not exceed one year. A customer who receives continuous electric service for more than one year shall not be considered a seasonal or short-term customer.
3. (3) Unless authorized by the authority under paragraph (6) of this subdivision, no municipality or cooperative shall require any new residential customer to post a security deposit as a condition of receiving electric service, unless such new customer is a seasonal or short-term customer as defined in paragraph (2) of this subdivision.
4. (4) As of December 1, 1985, no municipality or cooperative shall, unless authorized by the authority under paragraph (6) of this subdivision, require a current residential customer, other than a delinquent customer, to post a security deposit, and deposits held on September 1, 1986 shall be returned promptly to nondelinquent residential customers, and in no event later than the next bill for service thereafter.

5. (5) Notwithstanding the requirements of paragraph (4) of this subdivision:

   1. (i) A municipality or cooperative may continue to demand deposits as a condition of receiving electric service from customers who are seasonal customers or short-term customers as defined in paragraph (2) of this subdivision.
   2. (ii) A municipality or cooperative may require a deposit from a current residential customer as a condition of service if that customer is delinquent in payment of his or her electric bills.

   3. (iii) A customer is delinquent for the purpose of a deposit assessment if such customer:

      1. (a) accumulates two consecutive months of arrears without making reasonable payment, defined as one half of the total arrears, of such charges before the time that a late payment charge would become applicable, or fails to make a reasonable payment on a bimonthly bill within 50 days after the bill is due, provided that the municipality or cooperative requests such deposit within two months of such failure to pay; or

      2. (b) had electric service terminated for nonpayment during the preceding six months.

         A municipality or cooperative intending to require a deposit under clause (a) of this subparagraph shall provide a customer with written notice, at least 20 days before it may assess a deposit, that the failure to make timely payment will permit the municipality or cooperative to require a deposit from such customer.

   4. (iv) If a municipality or cooperative requires a deposit from a current residential customer who is delinquent by virtue of his or her failure to make a reasonable payment of arrears, as provided in this paragraph, it shall permit such customer to pay the deposit in installments over a period not to exceed 12 months.
6. (6) Notwithstanding the requirements of paragraphs (3) and (4) of this subdivision, a municipality or cooperative may demand and hold deposits from new or current residential customers as a condition of electric service if the authority, after investigation and hearing, so authorizes such practice, upon a finding that the collection and maintenance of such deposits is cost-effective for the municipality or cooperative as a whole without regard to the municipality's or cooperative's cash flow and the availability of capital to the municipality or cooperative.
7. (7) No municipality or cooperative shall require any person it knows to be a recipient of public assistance, supplemental security income benefits or additional State payments, to post a security deposit after November 30, 1985, nor shall any municipality or cooperative hold such deposit from such known recipient after January 31, 1986.
8. (8) No municipality or cooperative shall demand after November 30, 1985, or hold after January 31, 1986, a deposit from any new or current residential customer it knows is 62 years of age or older unless such customer has had service terminated by the municipality or cooperative for nonpayment of bills within the preceding six months.

9. (9) In any case where customer deposits are authorized by this section, a municipality or cooperative may require a new or current residential customer to deposit a reasonable amount of money, not greater than twice the average monthly bill for a calendar year, except in the case of electric space-heating customers, where deposits may not exceed twice the estimated average monthly bill for the heating season, in order to secure payment for services actually rendered or for the rental of fixtures, instruments and facilities actually supplied.

   (b) Calculation and crediting of interest.

   Every municipality or cooperative shall allow every residential customer, from whom a deposit is required, interest on the amount deposited at a rate prescribed quarterly by the municipality or cooperative. Each quarter, the municipality or cooperative shall select the lowest interest rate available from a pool of local area bank savings accounts. The selected rate shall be used to accrue interest on consumer deposits each quarter. A weighted average interest rate shall be calculated using the quarterly interest rates over the period a customer's deposit is held; and shall be paid to the customer upon the return of the deposit.

   (c) Return of deposit.

   If any customer is not delinquent in the payment of bills, as defined in paragraph (a)(5) of this section, during the one-year period from the payment of the deposit by the customer, the deposit shall be refunded promptly without prejudice to the municipality's or cooperative's right to require a future deposit in the event that the customer thereafter becomes delinquent.

(a) Deposit.