Capital Credits

Cap­i­tal cred­its rep­re­sent each member’s own­er­ship of the coop­er­a­tive. They are the mar­gins cred­it­ed (or allo­cat­ed) to the mem­bers of the coop­er­a­tive based on their pur­chas­es from the coop­er­a­tive the pre­vi­ous year. These mar­gins are used by the coop­er­a­tive as cap­i­tal to oper­ate the busi­ness for a peri­od of time.

Cap­i­tal cred­its should not be con­fused with prof­its, which are a return on cap­i­tal. Retire­ment of cap­i­tal cred­its is a return of mem­ber-fur­nished cap­i­tal. Coop­er­a­tives exist not to make a prof­it but to pro­vide elec­tric­i­ty “at cost.”

Cap­i­tal cred­it funds are used for reli­a­bil­i­ty improve­ments and maintenance—and these are long-term invest­ments. Cap­i­tal cred­its can­not be refund­ed all at once because they help the coop­er­a­tive remain finan­cial­ly sound, there­by ensur­ing a sta­ble, reli­able elec­tric ser­vice for the ben­e­fit of the mem­bers we serve.

The amount of cap­i­tal cred­its you earn in a giv­en year is based on the amount of cap­i­tal you con­tribute to the coop­er­a­tive through pay­ment of your month­ly bills. The more elec­tric ser­vice you buy, the greater your cap­i­tal cred­its account – although the per­cent­age will remain the same. The sum of your month­ly bills for a year is mul­ti­plied by a per­cent­age to deter­mine your cap­i­tal cred­its.

Allo­cat­ed cap­i­tal cred­its appear as an entry on the per­ma­nent finan­cial records of the coop­er­a­tive and reflect your equi­ty or own­er­ship in Coastal Elec­tric Coop­er­a­tive. When cap­i­tal cred­its are retired, a check is issued to you and your equi­ty in the coop­er­a­tive is reduced.

Cap­i­tal cred­its are cal­cu­lat­ed by Coastal Elec­tric Coop­er­a­tive for every­one who pur­chased elec­tric­i­ty dur­ing a year in which the util­i­ty earned mar­gins. No spe­cial action is required to start a cap­i­tal cred­its account. Your mem­ber­ship with Coastal Elec­tric Coop­er­a­tive acti­vates your cap­i­tal cred­its account.

Cap­i­tal cred­it allo­ca­tions are pooled togeth­er and used as oper­at­ing cap­i­tal so that we can serve our mem­bers with reli­able pow­er. These funds pay for pow­er reli­a­bil­i­ty improve­ments and main­te­nance such as replac­ing pow­er lines or build­ing sub­sta­tions.

If we refund­ed the total amount of allo­ca­tions, we would have to bor­row that amount of mon­ey in order to con­tin­ue oper­at­ing. Hav­ing oper­at­ing cap­i­tal helps the coop­er­a­tive min­i­mize the amount of high-inter­est mon­ey it must bor­row, which in turn helps low­er mem­bers’ costs by sta­bi­liz­ing rates.

When­ev­er Coastal Elec­tric Cooperative’s finances per­mit, we return cap­i­tal cred­its to our mem­bers. The deci­sion is made by our board of direc­tors after a thor­ough exam­i­na­tion of the co-op’s finan­cial posi­tion.

No. Allo­cat­ed cap­i­tal cred­its may not be used to pay cur­rent bills. Your elec­tric bill is due now, where­as you may not be enti­tled to be paid your cap­i­tal cred­its for many years.

Your cap­i­tal cred­its remain on the books in your name and mem­ber num­ber until they are retired. So, you should ensure that Coastal Elec­tric Coop­er­a­tive always has your cur­rent mail­ing address.

The cap­i­tal cred­its of a deceased mem­ber may be paid with­out wait­ing for a gen­er­al retire­ment. How­ev­er, these estate pay­ments are not auto­mat­ic. A rep­re­sen­ta­tive of the estate must request the cred­its by sub­mit­ting a Cer­ti­fi­ca­tion of Enti­tle­ment form and a copy of the death cer­tifi­cate. These will be con­sid­ered by the Coastal Elec­tric Coop­er­a­tive Board of Direc­tors. If retire­ment is approved by the board, a check will be issued to the estate and the account closed.

You do not nor­mal­ly have to report your cap­i­tal cred­its pay­ment on your income tax. How­ev­er, if you have ques­tions con­cern­ing tax lia­bil­i­ty, con­tact the IRS or your tax pre­par­er.