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 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: We have recently changed the process. Instead of mailing checks to active members, you will now see these appear in the form of a credit on your bill in the month of December.
Inactive members will have checks mailed out 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: Why did the process change?
A: Foremost, it’s to reduce postage expenses and administrative costs associated with preparing all those checks. And, it’s eco-friendly.
But there are even additional valid reasons. After checks are mailed, there is always administrative effort and cost to track and account for the checks. Many members just forget to cash the checks, or they may lose them. Or, checks are returned because a member has not updated a new mailing address with us. Too, there are the lost checks that must be reissued. That’s a lot of accounting!
This new process will also be better for newer members, because they will receive credits back much sooner. Past practice was to only send checks for credits worth $10.00 or more. But now, even pennies will be returned to eligible members once they are retired. As a non-profit electric cooperative, we strive to keep your bills low, and one of those ways is to adopt efficiencies when they present themselves. This new process will have economic savings and simplify the process for all.
Q: Is there any reason an active member wouldn’t receive a bill credit?
A: Yes. This new process will get capital credit payments into the hands of newer members sooner. However, capital credits are assigned from the previous years, and 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.