Central Maine Power Company won an important victory in the Maine Bankruptcy Court recently. Section 366 of the Bankruptcy Code provides that any debtor filing bankruptcy must provide a utility company with "adequate assurance of payment" to address unreasonable future risk to the utility from the debtor's bankruptcy filing. CMP is the only utility company in Maine to require a 2 month deposit from customers when they file bankruptcy. The deposit is equal to the 2 highest consecutive month's usage during the past 12 months.
In the case of In re Andrews, the debtors were current with CMP for the 2 years prior to filing bankruptcy. The Bankruptcy Court made reference to the debtors' stellar payment record in its decision. The Andrews asked the Bankruptcy Court to permit them to pay a month's bill in advance as their "adequate assurance of payment". The Bankruptcy Court sided with CMP, however, and concluded that CMP's requested deposit was reasonable, notwithstanding the debtors' perfect payment record.
For many debtors, there is a perception that if they stay current with CMP before filing bankruptcy, they will not need to pay a deposit, nor will they need to list CMP as a creditor. CMP's position is that every debtor must list CMP on every bankruptcy petition where CMP provides the debtor with electricity. The Andrews case tells us that CMP will be entitled to a deposit in every bankruptcy case. It will not matter whether a debtor is current pre-petition with CMP.
What is the lesson from this case? Debtors who have to choose between staying current with CMP, or buying food, or fixing their car, or buying oil to stay warm in the winter will need to reevaluate their priorities. Clearly, staying current with CMP before bankruptcy will not give debtors any special treatment or benefit.