It’s almost time for you to get the credit for helping build, sustain, and grow your local electric cooperative. This fall, Miami-Cass REMC will begin to retire more than $800,000 in capital credits to our early customers served by the co-op.
If you receive electric service from Miami-Cass REMC, you became a customer of an electric utility. While investor-owned utilities return a portion of any profits back to their shareholders, electric co-ops operate on an at-cost basis.
This year, customers will begin receiving capital credit retirements reflecting their contribution of capital to, and ownership of, the cooperative. Capital credits are those funds which help us keep the lid on rates; reduce the amount of money we needed to borrow from outside lenders to build, maintain, and expand a reliable electric distribution system; and cover emergency expenses.
Hear are some commonly asked questions about capital credits.
WHAT ARE CAPITAL CREDITS?
An electric cooperative operates on an at-cost basis by annually “allocating” to each customer, based upon the member’s purchase of electricity, operating revenue remaining at the end of the year. Later, as financial conditions permit, these allocated amounts — capital credits — are retired. Capital credits represent the most significant source of equity for Miami-Cass REMC.
WHERE DOES THE MONEY COME FROM?
Customer-controlled, not-for-profit electric co-ops set rates to generate enough money to pay operating costs, make payments on any loans, and provide an emergency reserve. At the end of each year, we subtract operating expenses from the operating revenue collected during the year. The balance is called an operating “margin.”
HOW ARE MARGINS ALLOCATED?
Margins are allocated to consumers as capital credits based on their purchases from the cooperative — how much power the member used. Consumer purchases may also be called patronage.
ARE CAPITAL CREDITS RETIRED YEARly?
Each year, our board of directors makes a decision on whether to retire capital credits based on the financial health of the cooperative. During some years, the co-op may experience high growth in the number of new accounts, or severe storms may result in the need to spend additional funds to repair lines. These and other events might increase costs and decrease member equity, causing the board not to retire capital credits. For this reason, the board alone decides whether to retire capital credits.
DO I LOSE MY CAPITAL CREDITS IN THE YEARS THE CO-OP DECIDES NOT TO MAKE RETIREMENTS?
No. All capital credits allocated for every year customers have been served by the co-op are maintained until such time as the board retires them.
HOW OFTEN DO consumers RECEIVE CAPITAL CREDITs?
The board of directors makes a decision each year by June whether or not to retire capital credits. When the cooperative is strong enough financially and member equity levels high enough, the board directs staff to retire some portion of past years’ capital credits.
WHAT IF I HAVE MOVED?
If you move or no longer have electric service with us, it is important that you inform the cooperative of your current address, so that future retirements can be properly mailed to you. If you purchased electricity during the years being retired, then you are entitled to a capital credit retirement, even if you move out of the service area. If we have your current address, then Miami-Cass REMC will send your retirement check by mail.
ROB SCHWARTZ is CEO at Miami-Cass REMC.