Security Deposit on an Electricity Connection, Explained

What the deposit actually is

You consume electricity first and pay for it afterwards. That gap — a month of supply already delivered, plus however long the bill takes to fall due — is credit the DISCOM has extended to you. The security deposit covers it.

It is not a fee. It is your money, held by the licensee, refundable when the connection is closed and adjusted against your final bill. That distinction matters because it drives everything else on this page: the amount tracks how much credit you are actually using, so it moves when your consumption moves.

How much: roughly two months of your consumption

State supply codes differ in wording, but the common shape is about two months of your average consumption. In Uttar Pradesh that is clause 4.20(a) of the U.P. Electricity Supply Code; other states use a comparable multiple.

The important detail is which two months. It is not a guess about your future usage — it is worked out from what you actually used, typically your average monthly consumption over the preceding financial year. A single heavy summer does not reset your deposit on its own.

To make the rule concrete rather than abstract:

Computed live from the UPPCL LMV-1 urban domestic schedule at 2 kW, with the fuel surcharge set to zero so the arithmetic stays readable. This shows the shape of the rule, not a figure anyone will quote at you: your DISCOM works the demand out from your own consumption over the previous financial year, and every state words its supply code differently.

Your deposit earns interest — check that you are getting it

Because the deposit is your money, the licensee pays interest on it. The rate is set by the state regulator and is usually tied to the bank rate. It is normally credited once a year, and it should appear on your bill as a credit line rather than arriving as a cheque.

This is the single most-missed line on an Indian electricity bill. If you have held a connection for years and have never seen an interest credit, that is worth asking about — read your bill line by line and look for it around the start of the financial year.

When the DISCOM can ask for more

Two situations, and they are different:

1. Your consumption grew. Codes generally allow an annual review: if two months of your current usage now exceeds what you deposited, the shortfall can be demanded.
2. Your sanctioned load went up. A higher load implies a higher expected bill, so the required deposit rises with it. In UP this has affected a very large number of consumers at once — see why your sanctioned load suddenly increased, which works through the load side in detail.

Both are demands for a top-up, not a fresh deposit. That is the point most worth knowing on this page, so it gets its own section.

Only the difference is payable — not the whole amount again

If you already hold a deposit and your required amount rises, what you owe is the gap between the two. You do not deposit from zero again.

In Uttar Pradesh this is explicit: clause 4.20(c) of the Supply Code provides that on an enhancement of load, only the additional security covering the additional load needs to be deposited. Other states word it differently but the principle is the same, because the deposit is a running balance rather than a per-event charge.

Two consequences worth holding on to:

• Small revisions often produce no demand at all. UP's clause 4.20(e)(iii) raises a demand only where the additional security exceeds 10% of the existing deposit. A modest change can fall entirely inside that threshold.
• A bill charging the full new amount is worth questioning. If your required deposit moved from ₹1,600 to ₹2,800, the payable figure is ₹1,200 — not ₹2,800. Ask the DISCOM in writing to show the existing deposit it credited and the arithmetic behind the demand.

Checking a demand on your own bill

1. Find what you already hold. The existing security deposit is usually printed on the bill or visible in the DISCOM's consumer portal. You cannot check a top-up without it.
2. Work out two months of your own average. Use your last twelve months, not your worst month. Our bill calculator gives you a monthly figure for your DISCOM and usage; double it for the rough requirement.
3. Subtract. Required minus held is the most the demand should be.
4. Check the threshold. If the gap is small relative to what you hold, ask whether the minimum-demand rule applies in your state.
5. Ask for the working. A demand should be reducible to: required amount, existing deposit, difference. If the DISCOM cannot show those three numbers, that is the basis of your complaint.

If it still looks wrong, the complaint route for your DISCOM is one click away, and the escalation path runs to the CGRF and then the Electricity Ombudsman.

When you close or transfer the connection

On permanent disconnection the deposit is adjusted against your final bill and the balance refunded. When a connection changes hands, the deposit does not simply follow the property — it is settled with the outgoing consumer and re-established by the incoming one, which is why a transfer application asks for the deposit to be re-deposited or formally transferred.

Keep the receipt. A deposit you cannot evidence is a deposit that is difficult to reclaim years later.

Frequently asked questions