Capital credits are a benefit that sets cooperatives apart. Below is an FAQ to offer a better understanding of the annual process of allocating and retiring capital credits.
Q: What are capital credits?
A: Capital credits are each member’s share of the cooperative’s annual revenue minus expenses (margins). Once the books are closed at year end, we calculate the margins and allocate each member’s percentage of shares based on how much electricity they purchased that year. Members’ capital credits represent ownership in the co-op; they continue to build up as long as the member continues to buy electricity from WCEC.
Q: What happens to the capital credits that build up?
A: As authorized by WCEC by-laws, the co-op uses capital credits as a source of capital for operations and improvements. This allows us to continue to provide low-cost, reliable service. Each year, the board of directors analyzes whether to refund capital credits to members in the form of cash. This is called “retiring” capital credits. The decision to retire capital credits is based on the financial status of the cooperative.
Q: How and when are retired capital credits paid to members?
A: Capital credits are generally paid in December. The amount paid is determined by several factors: federal guidelines, financial ratios, system goals and objectives, interest rates and our co-op by-laws.
Q: How does it work?
A: Capital credits appear in the form of a credit on your bill, typically in the month of December.
Inactive members will have checks mailed out mid-December. With holiday postal delays, it can take up to 30 days for a capital credit check to be delivered. Therefore, lost checks will only be re-issued after February 1. This will give adequate time to stop payment on the original check and reissue a replacement check.
Q: Why are these bill credits instead of checks?
The bill credit process is eco-friendly and eliminates costs associated with sending checks. As a non-proﬁt electric cooperative, WCEC strives to keep your bills low. One of those ways is to adopt efﬁciencies. This one reaps costs savings, while simplifying the process for the cooperative and our members both.
Q: Is there any reason an active member wouldn’t receive a bill credit?
A: Yes. Credits are assigned from previous years. Not the current year. So, at retirement, a member would have had to be active the prior year to be included in the capital credit return process.
Q: Is there any reason an inactive member with a remaining capital credit balance wouldn’t get a check in a year that capital credits are being retired?
A: Yes. There are four possible reasons:
Incorrect Address – We will reissue a check once we have your current address.
Low Capital Credit Balance – Shares of the general retirement are based upon your capital credit balance. Only checks greater than $10 are generated. Those amounts less than $10 will be set aside until they reach the $10 point.
Unpaid items to Wood County Electric Cooperative – Only those members without debts and fully paid final bills receive checks. The credit for those with unpaid balances will be applied to their account against the unpaid balance.
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 make contact with us.
Q: Why can’t a member just “cash out” and collect all of his/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.