Capital credits are one of the benefits that set cooperatives apart. Below are some common questions we routinely receive regarding capital credits. We hope these offer a better understanding of the processes we implement annually in allocating and determining retirement of 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 member’s’ 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 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: I know that I should get a check. Why don’t I have it yet?
A: All checks are mailed in mid-December. With the holiday season, delays in the mail process are inevitable. In the past, it has taken 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: Is there any reason a member 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. It usually takes several years to build up a balance sufficient to receive a check. Also, 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 payment 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 cash the check.
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.