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Capital Credits Retirements — One of the many benefits of being a co-op member-owner

Posted on Jul 25 2017 in Southern Indiana Power

Steve Seibert

There are so many benefits that come with co-op membership, but perhaps one of the best benefits is capital credits.

What are capital credits? At the end of each year, Southern Indiana Power calculates our operating margin, which is the amount our income exceeded our expenses during the year. We then allocate (assign) the operating margin as “capital credits” to each member based on the amount of electricity you purchased throughout the year. Over time, these capital credits are retired (paid back) to our co-op members.

You might wonder why we do this. As an electric cooperative, we are here to provide at-cost electric service, not to make a profit. As a member of an electric cooperative, you invest in the efficient operation of your co-op by simply paying your bill each month. This effectively makes you, as well as all co-op members, our shareholders. Conversely, an investor-owned utility is a for-profit company and has only a few shareholders. They pay dividends to these shareholders, some who may not even purchase energy from them.

Every year, Southern Indiana Power’s board of directors evaluates the cooperative’s financial position and capital needs, and approves a capital credit retirement plan. In 2017, Southern Indiana Power’s board of directors voted to retire more than $430,000 in allocated capital credits from the years 1990-1992. Since 2012, your co-op has retired more than $5 million in capital credits that were allocated from the periods of 1964-1992.
This year, we made a change in our capital credit retirement processing. Current members will no longer be required to complete a “pre-retirement” notice.

Previously these “pre-retirement” notices were mailed out in August and completed notices were due back in the office by October. Moving forward, the co-op will publish the official board action on capital credit retirements annually and then simply distribute these funds to current members each year in November. Former co-op members will still need to complete the “pre-retirement” notice process. The main reason for the change is to ensure all current members receive their retired capital credits.

Capital credits benefit all co-op members by keeping costs and electric rates as low as possible. We use the allocated, but unretired, capital credits to improve and expand our electric system and to meet our other capital needs. Utilizing this process reduces our need to borrow money and helps us provide the reliable electric service co-op members have grown to expect. It also ensures that non-customer shareholders don’t profit from the cooperative’s operations. Capital credit allocations help qualify Southern Indiana Power for cooperative tax status under federal income tax law.

As you can see, capital credits are just one of the many benefits of being a member of Southern Indiana Power. In the future, if you happen to leave the co-op, please provide us your updated address so you receive your capital credits as they are retired in the future. Southern Indiana Power maintains a list of retired unclaimed capital credits on our website.

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