Capital Credits

If you receive power from an electric cooperative, you are a member and an owner of a not-for-profit business. As a not-for-profit electric cooperative, CAEC not only is owned by the people it serves – its members – it also returns surplus revenue to you – our member owner. No other business form has this characteristic.

These surplus revenues are called margins and are assigned to your “capital credit” account annually. These capital credit accounts are based on how much business you did with the cooperative that year. Your capital credit account represents your member ownership or equity in the cooperative. The money itself is reinvested in the cooperative until it is returned to you in the form of CAEC’s planned general retirement of capital credits.

Unlike investor-owned utilities that operate on a for-profit basis to make a return on investment to their shareholders, cooperatives charge just enough to cover expenses and a slight margin. Margins provide CAEC with extra dollars to increase the co-op’s financial strength and meet financial obligations to our lenders. These margins are reinvested in the co-op in the form of capital improvements, and they are used to reduce the need for borrowing 100 percent for those system improvements

CAEC’s Board of Trustees has adopted an equity management plan that sets a projected equity level for the cooperative and a plan that continues to return our members’ investment through retiring capital credits. The plan calls for paying capital credits about 30 years after they are earned. Electric distribution utilities operate within a 30-year financial cycle. Thirty years is a normal life expectancy of the use for infrastructure – poles, transformers, etc. – that deliver electricity. Additionally, most debt on construction of the facilities is on 30-year loans. This is the reason why capital credits, or member equity, are returned on or near the same type of cycle.

Below are some FAQs concerning capital credits.

How do I get started with capital credits?

Capital credits start accruing once you start paying your monthly bills with CAEC. If you have multiple accounts, your dollars are assigned to one member number. This allows you to receive one check once the retirement process begins.

When do I receive the capital credit amount?

The process of returning capital credits is called retirement. CAEC currently operates under the First In, First Out system (FIFO) for retirement. The philosophy is that the members who first contributed to the system will receive retirements as they become available. CAEC has performed retirements over the last 20 years. Our Board of Trustees determines both the retirement method and the amount of retirement.

What is done with the capital credit amount until it is retired?

The dollars are invested in our electric distribution system in the form of maintenance and upgrades, which help provide reliable service for our members.

Example: You have equity in the co-op like you have equity in your home. You’ve built equity in your home by maintaining and improving it through the years. We’ve built equity in our system, plant and infrastructure by maintaining and improving it through the years. In either case, the equity in your home is not cash to spend and the equity in our system is not cash to retire capital credits.

What if I move away before my capital credits retire?

Your assignment of capital credits are held in your account until they are retired, which is one reason why it is important to keep us informed of your address each time it changes.

What if I pass away before my capital credits are retired?

If an estate exists, the capital credits will be distributed based on your wishes. However, without an estate, the distribution can go to a surviving spouse or your children. The surviving family member will need to complete a Deceased Member Information Form and have their signature notarized in order to qualify.

I should have received a check, but I didn’t. What happened?

You may not have received a check for a few reasons:

• Your account didn’t have any margins in the year(s) that we are currently retiring.

• We issue a check for a minimum amount of $20. If your qualifying credits were under that amount, then they will be accumulated towards the next retirement amount.

• We may have mailed the check, but it was returned to us marked as “undeliverable”. If you haven’t updated your address with us since you had service with us, then please contact us.

Why don’t other companies have capital credits and perform retirements?

Unlike CAEC, many companies are for-profit corporations and not cooperatives. With those types of organizations their margins, or profit, are either kept by the company or distributed to shareholders.

Can I view my capital credits?

Yes. You can do so by visiting our online billing service. Once there, you will need to select the Account Profile option from the My Account tab. You will then be required to login. Then select Capital Credits from the Account Information menu.