Capital Credits

Capital Credits:

Overview and Frequently Asked Questions

Capital Credits

When a cooperative is first formed, it takes several years before it begins to show its first profit. Even then, the entire amount is reinvested to help stabilize the business and provide adequate cash flow for growth. Therefore, instead of receiving checks, members will receive capital credit allocations to serve as promissory notes. As the financial position of the cooperative becomes stronger, with larger cash reserves and higher equity levels, the cooperative will begin to "retire," or pay back, capital credits. Co-op members are entitled to share in the cooperative’s margins.

Each year, shares for the preceding year are calculated based on the amount of revenue paid in. The members' shares are referred to as capital credits and are retired (refunded) to them based on the equity necessary to maintain the financial condition of the cooperative.

The Cooperative shall allocate and retire capital credits in a manner that:

is consistent with state and federal law.
is consistent with operating on a cooperative basis under federal tax law.
is fair and reasonable to the Cooperative's patrons (members) and former patrons.
provides the Cooperative with sufficient equity and capital to operate effectively and efficiently.
protects the Cooperative's financial condition.

Subject to law, the Cooperative’s articles and bylaws governing capital credit allocations and retirements are the sole discretion of the Cooperative's Board of Directors ("Board"). The Cooperative shall allocate and retire capital credits according to the manner, method, timing, and amount approved by the Board. When the board of directors determines that the financial condition of the cooperative would not be impaired, capital credit retirements (refunds) will be issued.

FAQs

Capital credits are each member’s share of the cooperative’s margins. Margins are calculated each year by deducting the operating expenses from income that comes from the sale of elecricty. These margins are allocated to each member’s capital credit account based on the electricity purchased by that member. The members’ capital credits represent ownership in the coop and continue to accumulate based on the members’ purchase of electricity from the co-op. When the financial condition of the cooperative is adequate to meet all normal and emergency needs, the board of directors may approve the return of a portion of these margins to the member-owners through a capital credit retirement.

Capital credits are allocated annually to each member based on the amount of electricity purchased the previous year. An allocation is the amount set aside into a separate account to be used as operating capital by the co-op over a given period of time.

A capital credit retirement is the amount each member will receive back as a capital credit payment. This amount is a percentage of a member's total capital credits balance for the year(s) retired. The amount and which years to retire are decided upon annually by the Board of Directors based on the financial condition of the Cooperative.

After deducting any final bills or bad debt amounts owed by the member or former member, capital credit retirements will be paid as follows:
Active members will receive their capital credit retirement applied as a credit to their electric bill.
Non-active members will receive their retirement benefits in the form of a check sent by mail. However, if the retirement amount is less than the $100 check minimum, a check will not be issued, and the retirement will remain in the inactive capital credit account, to be paid in future years when the total retirement amount due equals $100 or more. It is important for past members to provide a forwarding address, as capital credits are often made a number of years after the credits are earned and allocated.

Retirements are issued to those members who have capital credit balances only for the years included in the retirement, as designated by the Board. In addition, those who owe the cooperative an outstanding final bill or bad debt balance in excess of the capital credit retirement amount will not receive a retirement (refund). If the account is inactive, a check will not be issued if the retirement is less than $100, which is the minimum check amount.

The amount of the capital credit retirement (refund) depends on the amount of electricity purchased by the member during the years included in the retirement. If one member's usage during those specific years was greater than another member's, that member would have received a larger capital credit allocation and thus a larger retirement (refund) than a member who used less electricity.

Early retirement of capital credits is not allowed when electric service is terminated. When capital credits are retired (refunded), inactive accounts are included in the retirement calculation until their balances are fully retired. Of course, capital credit refunds cannot be delivered correctly if the co-op is not informed of address changes, so it is important for former members to notify us of their current address.

Capital Credits

FAQs

What are Capital Credits?

What is the difference between Allocation and Retirement?

Can Allocations be used to pay my bill?

How are capital credit retirements paid?

What if service has been disconnected?

Why did my neighbor get a retirement (refund) and I didn't?

Why was my neighbor's retirement (refund) larger than mine?

Will the total capital credit amount be retired (refunded) after I terminate electric service?

Other questions?