Capital Credits

A valuable benefit for members of electric cooperatives.

What are capital credits?

Capital credits reflect each member’s ownership in the cooperative. Electric cooperatives like Coast Electric do not earn profits in the sense that investor-owned utilities earn profits for their investors.  Instead, any margins or revenues related to the sale of electric service remaining after all expenses have been paid are returned to the cooperative’s members in proportion to their electric use.

How are capital credits returned to you, the member?

Retiring, or returning, capital credits to members is a two-step process:

Step 1: Allocation

Margins are anything Coast Electric makes above operating expenses in any given year. An allocation determines your share of the cooperative’s margin in a particular year. Margins are allocated, or assigned, to members who belong to the cooperative during the year in which a margin is generated.  The allocation is based on the member’s proportion of electrical use for that year.  Each member’s portion is referred to as a capital credit allocation.

Step 2: Retirement

Once capital credits are allocated, they are retained by the co-op for up to 20 years, which is the rotation period. They are retained because capital credits are the most significant source of equity for the cooperative. Equity is used to help meet the expenses of the co-op, such as paying for new equipment to serve members and repaying debt. Capital credits help keep rates at an affordable level by reducing the amount of funds that must be borrowed to grow and maintain Coast Electric’s existing electric system. 

Upon completion of the rotation period, the board of directors will review the cooperative’s financial health and can declare a retirement - your cash back payment - whereby a portion of your capital credits are returned to you. 

For example, a cooperative like Coast Electric using the first-in, first-out method and a 20-year rotation period would return capital credits allocated in 1987 in 2007. In addition, Coast Electric’s board will vote to return capital credits from more recent years to members so that newer members can still receive this tangible membership benefit.

What does Coast Electric do with unclaimed capital credits?

Coast Electric seeks out the former member-owners who are due capital credits, even if they are no longer on our system.

When does Coast Electric retire capital credits?

Coast Electric’s board of directors votes on capital credit retirements each year. The announcement about the amount of the retirement is made at the cooperative’s annual meeting in November. Those who receive credits that year will receive a check in December.

I haven’t received a check. Why not?

As a member, you begin to earn capital credits when you become a member. When you get your check, however, depends on several things, including the rotation period. For example, if you were a Coast Electric member in 1990, in 2010 you probably received the capital credits that were allocated to you in 1990. Coast Electric does not mail capital credit checks to members if the check is for less than $10. This cuts down on expenses and allows members to receive a more significant payment in a future year.

How much has Coast Electric retired in capital credits?

In December of 2011, Coast Electric members received $2,801,621in capital credits. To put it in perspective, Coast Electric’s first capital credit retirement in December of 1961 was more than $70,000. During the cooperative’s 75-year history, $35,580,969.00 have been returned to members through 2011.

For more information about capital credits, call us at 877-769-2372.