Operation at cost is part of the cooperative difference.
Electric cooperatives aren’t like other utilities. You, as a consumer and a member, own a portion of the business. And one benefit of that membership involves the allocation of excess revenue, called margins, in the form of capital credits.
Electric cooperatives operate at cost, collecting enough revenue to run and expand the business but with no need to raise rates to generate profits to distant shareholders. When an electric cooperative has money left over, it’s allocated back to you and other members as capital credits when the co-op’s financial position permits. The capital credits are typically returned to members in cash or as a bill credit.
Allocating and retiring excess revenue to members helps distinguish cooperatives. Indiana’s electric cooperatives are proud to support their communities by putting money back into the local economy — and into the pockets of those they serve. It’s one way the cooperative business model is so special.
The retirement of capital credits — so-called because members provide capital to the cooperative for it to operate and expand — depends on the co-op’s financial status. Electric cooperatives can hold onto allocated capital credits to cover emergencies like a natural disaster and other unexpected events, and to expand their electric system. After all, large scale construction of poles and wires is costly. This action decreases the need to raise rates or borrow money to pay for their infrastructure. After a number of years, if financial conditions permit, a cooperative may decide to retire a set amount of capital credits.
Consumer-members are annually allocated capital credits based on the amount of electricity they consumed during a year.
Retiring capital credits is just one more way your electric cooperative is looking out for you.