Capital Credits
Capital credits are one of the things that set us apart from other companies. Below are some common questions we get regarding capital credits. We hope this helps you better understand the process we go through annually in the allocating and retiring of capital credits.
As always if you have any questions please don’t hesitate to call or come by. We will be more than happy to help you understand one of the ways that we continue to connect our communities.
Q: What are capital credits?
A: Capital credits are each member’s share of the cooperative’s annual revenue minus expenses (margins). After our books are closed at the end of each year, we calculate this amount and allocate each member’s share based on how much electricity the member has purchased that year. Members’ capital credits represent ownership in the co-op; they continue to build up as long as you continue to buy electricity from us.
Q: What happens to the capital credits that build up?
A: As authorized by our by-laws, the co-op uses members’ capital credits as a source of capital for operations and improvements. This allows us to continue to provide low-cost, reliable service without having to borrow money. Each year, our board of directors makes a decision about whether to refund a certain amount of capital credits to members in the form of cash. This is called “retiring” capital credits. The decision to retire capital credits is very important and critical to the financial health of your cooperative.
Q: How and when are retired capital credits paid to members?
A: Capital credits are generally paid in December in the form of a check to members who have a capital credit balance. The amount paid is determined by a number of factors, including federal guidelines, financial ratios, system goals and objectives, interest rates and co-op by-laws.
Q: How is the amount of my check determined?
A: The amount of your capital credit check is based upon a combination of the margins earned, your electricity purchases and your number of years of membership. This year, it would take approximately 3 years of normal usage to accumulate a capital credit balance of $308 and receive a $10 check. This equates to a 3.25% return of equity. The payment is based on your share of purchases made by all members.
Q: I know that I should get a check, why don’t I have it yet?
A: All checks will be mailed on December 15, 2005. With the holiday season upon us, delays in the mail process are inevitable. We have seen it take up to 30 days for a capital credit check to be delivered. With this mind, any checks that need to be reissued will be done after February 1, 2006. This will give us adequate time to stop payments and issue a replacement check.
Q: Is there any reason a member wouldn't get a check in a year that capital credits are being retired?
A: There are four possible reasons you may not receive a check:
1. Incorrect Address - We will reissue a check once we have your current address.
2. Low Capital Credit Balance - For 2005, your capital credit balance must be greater than $308 for a check to be generated. Since your share of our general retirement is based upon your capital credit balance you are more likely to get a check the larger your balance is. Also, only checks greater than $10 are generated. Those less than $10 will be set aside until they reach the $10 point.
3. Unpaid items to Wood County Electric Cooperative – only those customers without bad debts and no unpaid final bills receive checks. The payment of those with unpaid items is applied against their unpaid balance.
4. Prior year’s check uncashed – If you have received a check in the past and have not cashed it, then no check will be written. No further checks will be written until you cash the check.
Q: Why can’t a member just “cash out” and collect all of his or her capital credits?
A: Capital credits are not like money in a bank account or an amount owed. They are also not payable on demand. They simply represent the member’s allocated credits, which are paid out in cash from time to time as authorized by the board of directors.