Yes, you can do that.

But here is the catch: if they sue you in small claim, how do you convince the judge that you had the oral agreement as you described here? You don't have written contract, the utility accounts are never under the tenant's name, and he never pays you for it. If I were the judge, all evidences points to the conclusion that the utility were included in the rent. Unless there are some crucial facts that you omitted here, I would say you stand little chance in the court. Of course you can refuse to return the deposit and wait until he sues you to decide what to do.