Capital credit acceleration part of rate realignment

Posted on Nov 03 2021 in Kankakee Valley REMC
Kankakee Valley REMC CEO Scott Sears

Providing you with safe, reliable, cost-effective electric service is a promise that your cooperative stands behind. We do this while being committed to prudent fiscal management.    

Last month I announced your board of directors’ recent decision to implement a rate realignment. Though the cost of doing business has gone up through the years, your cooperative has not passed along those costs. Instead, we have offset the increase with margins from energy sales. Your cooperative’s budget is based on kilowatt-hour sales. With the current rate structure and budget, any revenues are dependent on the weather and changes in your electric use habits. The rate realignment will set a goal to collect 100% of its fixed costs through an increased facilities charge, allowing us to lower energy (kWh) rates. The lower energy rate and increased facilities charge will go into effect in January 2022.

Capital credits

Another critical element of the rate realignment is our commitment to providing capital credit retirements. Capital credits are the past year’s margins the co-op returns to its member-consumers.

How do capital credits work? As an owner of the co-op, you invest in your REMC each month through your electric bill. This investment provides for substation improvements, poles, wires and other equipment to keep the lights on. 

Any margins the company earns over and above our expenses are returned to the membership as capital credits. When capital credits are allocated, your portion of the capital credits is based on your energy use. Each member-consumer dollar amount will be different.  

Proposed changes

As part of the rate realignment, your board has elected to accelerate the retirement schedule of capital credits to the membership. With the goal of the rate realignment to collect 100% of the fixed costs, your co-op can use the additional margins to return more capital credits. An example of this acceleration: Over the last 5 years your cooperative has returned, on the average, .79% of its equity in capital credits. The board of directors would like this increased to 3.3% by 2023.

The ability to return capital credits to the membership reflects KV REMC’s strength, financial stability and our commitment to the cooperative model. Your leadership team is committed to controlling your cooperative’s costs and exceeding your expectations. Please contact us if you have any questions.