Capital Credits

Capital Credits

An electric cooperative is a not-for-profit entity and does not earn profits in the sense that investor owned utilities do. Investor owned utilities return excess profits in the form of dividends to the shareholders of the corporation. The shareholders typically are not the consumers of the investor owned utility. In the case of an electric cooperative, the people receiving electric service actually own the cooperative. If an electric cooperative has excess funds or margins remaining after all of the expenses have been paid, those funds  are eventually returned to the members through capital credit allocations and retirements. Each member owns a portion of the cooperative and capital credits represent each member’s share of the cooperative’s margins.

It is important that an electric cooperative be able to cover all of the expenses related to providing electric service to its members. At the end of the year, hopefully there will be excess margins and if there are, they are allocated to each member based on the amount of electricity consumed. Different factors are taken into account when determining whether or not capital credits can be retired and distributed to the members. If a cooperative is strong financially and can adequately satisfy the equity requirements specified by lenders, then the Board of Directors will authorize the retirement of capital credits. Osceola Electric Cooperative currently holds the capital credits for about 13 years before retiring them.

If a member moves off the Osceola Electric Cooperative electric system and ceases to be a member of the cooperative, the member will still retain their capital credit allocations and be eligible for capital credit retirements. Such former members should make sure that the cooperative is aware of their current address so that they can receive payments in the mail when capital credit retirements are made. If a member passes away, the capital credits can continue to be paid to a spouse under a joint membership, or to an estate. Another option allows the executor of the estate to have any outstanding capital credits paid, at a discounted rate.