A Valuable Benefit for Members of Electric Cooperatives.
What Are Capital Credits?
Capital credits reflect each member’s ownership in the cooperative. Electric cooperatives like Lane Electric do not earn profits in the sense that investor-owned utilities earn profits for their investors. Instead, any margins or revenues related to the sale of electric service remaining after all expenses have been paid are returned to the cooperative’s members in proportion to their electrical usage.
How Are Capital Credits Returned to You, The Member?
“Retiring” i.e., paying back or returning capital credits is a two-step process:
Step 1: Allocation
An allocation determines your share of the cooperative’s margin in a particular year. Margins are “allocated” or assigned to members who belong to the cooperative during the year in which a margin is generated. The allocation is based on the member’s proportion of electrical usage for that year. Each member’s portion is referred to as a “capital credit allocation.”
Step 2: Retirement
Once capital credits are allocated they are retained by the co-op for up to 30 years, which is the rotation period. They are retained because capital credits are the most significant source of equity for the cooperative. Equity is used to help meet the expenses of the co-op, such as paying for new equipment to serve members and repaying debt. Capital credits help keep rates at an affordable level by reducing the amount of funds that must be borrowed to grow and maintain Lane Electric’s existing electric system.
Upon completion of the rotation period, the board of directors will review the cooperative’s financial health and can declare a retirement (your cash back payment), whereby a portion of your capital credits are returned to you.
What Does Lane Electric Do With Unclaimed Capital Credits?
Lane Electric seeks out the former member-owners who are due capital credits, even if they are no longer on our system. Approximately once a year, the co-op will post the names of the member-owners who have unclaimed capital credits in local papers. If the member-owner does not claim them and the capital credits remain unclaimed, then they are transferred to a fund for charitable and educational purposes.
Other Capital Credit Questions?
If you have other capital credit questions, please call 541-484-1151.