Utility service in Chapter 11: plan for adequate assurance

Map essential services before an interruption

Power, water, and other utility services can determine whether a business remains operational. Section 366 limits certain changes or refusals of service based solely on a bankruptcy filing or an unpaid prepetition utility debt. It also permits demands for adequate assurance of payment and contains special Chapter 11 rules.

Start with an account-level list: provider, service address, customer name, account number, existing deposit, average consumption, and the person responsible for notices. Multiple locations or meters can create a gap between the company's central contract file and the accounts a utility actually services.

Do not confuse priority with assurance

For Chapter 11, section 366(c) lists forms of assurance, including cash deposits, letters of credit, certain other security, and mutually agreed arrangements. Administrative-expense priority does not by itself qualify as assurance under that subsection. The statute includes a 30-day period beginning on the petition date and a procedure for court modification of the amount.

The separate 20-day language in section 366(b) is a reason to check the applicable chapter and subsection carefully. An internet summary that supplies one deadline for every bankruptcy case can be misleading. Read the case's utility order and notices alongside the statute.

Turn the legal requirement into a funding task

An illustrative food distributor may need several deposits at once, while its cash-collateral budget contains only a general utilities line. The finance team should identify the amount, due date, funding source, and authorization for each assurance payment. Ongoing consumption and security deposits should appear separately in the forecast.

Disputed amounts need prompt attention through the appropriate process. Do not assume that a pending informal negotiation alone prevents interruption. Record what has actually been agreed or ordered, including any procedure for additional providers or later adjustments.

Keep these records together

• Service-account inventory and recent bills.
• Existing deposits and the proposed form of assurance.
• Relevant court orders and notices from each provider.
• Evidence of payment or delivery of approved security.