Surety Bonds for Utility Lines
(from Maine Townsman, January 2001)
by Kirsten Hebert, Legislative Advocate, MMA
According to 35-A M.R.S.A., Section 2305, municipalities may authorize a person - other than a transmission and distribution utility - to construct a utility line that runs upon, along, over, across and under the roads and streets of the municipality.
An individual seeking to install utility lines will need to comply with the permitting requirements of Title 35-A §2505, and must also meet the requirements of §2303. Section 2303 requires the applicant to identify the location of underground utility lines as well as the minimum depth of the lines. The permittee must then comply with the requirements of Title 35-A, § 2507. This provision has been referred to as the "Excavation Permit" and requires the applicant to have the permit signed by the municipality or the Department of Transportation prior to laying the lines under any surface or digging under any road or street.
Section 2305(2) requires the permittee to post a surety bond with the municipality. Though §2305 (2) references the surety bond, the law fails to provide a formula that clearly articulates the standards necessary to calculate the amount, terms, and conditions of the bond to sufficiently insure against any claims, demands and actions arising out of improper construction of the utility line. Thus, municipalities have recently questioned how to determine a sufficient surety bond to guard against the various forms of potential liability.
To aid municipalities in their decision-making process, Central Maine Power has developed a form intended to guide municipalities through the surety bond process. Nevertheless, the final authority and determination of the amount of the bond resides with the municipality.
Several considerations should be addressed when determining the amount of the surety bond. The municipality may want to contact the utility company and ask how much they charge for certain services. Service charges vary according to location and severity of the circumstances. Municipalities may want to ask the utility the costs of repairing a downed line, or a broken guide. Other extreme circumstances may include a fallen utility pole and the restoration of a live wire.
According to the Maine Torts Claims Act, the cap on municipal liability is $400,000, unless the legislature has expressly stated otherwise. (14 M.R.S.A. § 8101-8118). The municipality may be said to have waived its immunity if it has purchased insurance in excess of the $400,000. (14 M.R.S.A. § 8116). This should be a strong consideration in determining the amount of the surety bond.
In determining the conditions of the surety bond, the municipality should also consider the duration of the bond. It is the customer that retains the bond. It is possible for the municipality to insert a renewal agreement in the bond. This would provide the municipality with an assurance that the customer is still aware of the responsibilities of proper maintenance of the line.
Municipalities should remember that after the line is installed, the customer has the ultimate responsibility to properly maintain the line. If the municipality incurs expenses as a result of the improper care of the line, the municipality may then assess the owner for the failure to care for the line. [Title 35-A, § 2305 (3)].
A copy of the CMP form can be obtained by calling Linda Richardson at 626-9728.