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Capital Credits

When was the last time you received a check from your utility provider?

Your electric cooperative makes every member an owner of the business. Unlike other electric utilities, your co-op exists to make sure your needs are always met, not to make a profit. Instead, any revenues over and above the cost of doing business are considered ‘margins’. These margins represent an interest-free loan of operating capital by the membership to the cooperative. This capital allows Tanner Electric Cooperative (TEC) to finance operations and — to a certain extent — construction, with the intent that this capital will be repaid to you in later years. We have provided answers to some questions for a better understanding of capital credits.

 

  • What’s the difference between allocated and retired capital credits?     Allocated capital credits appear as entry on the permanent financial records of the association and reflect your equity or ownership in TEC. When capital credits are retired, a check is issued to you and your equity in the association is reduced.

 

  • How often will I receive an allocation notice?       You should receive an allocation notice annually after the finances for the previous year’s books have been completed.

 

  • What do I have to do to start accumulating capital credits?     Capital credits are calculated by Tanner Electric Cooperative for every member that purchased electricity during a year in which the utility earned margins. No special action is required to start a capital credits account. Your membership agreement activates your capital credits account.

 

  • How are capital credits calculated?      The amount of capital credits you earn in a given year is based upon 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.

 

  • What percent of my bill is returned as capital credits?      The percentage of your total payment that is allocated as capital credits varies from year to year, depending upon the success of the cooperative. Capital credits are only allocated for a year in which TEC earns margins. Since capital credits are a member’s share of the margins, no credits are allocated for a year with no margins.

 

  • Do I have to be a member for an entire year to earn capital credits?       No. Capital credits are calculated based upon a member’s monthly bills. If you are billed for service for even one month, you will accumulate some capital credits if TEC earned margins in that year.

 

  • What happens to the capital credits of a member that dies?     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. If the membership is jointly held by a spouse, the estate will only be retired after both the member and spouse are deceased.

 

  • Will I receive a capital credit check every year?     Not necessarily. The Board of Trustees must authorize a retirement before you receive a check. When considering a retirement, the Board analyzes the financial health of the association and will not authorize a retirement if TEC can not afford it.

 

  • What happens to my capital credits when I leave the TEC service area?      They remain on the books in your name until they are retired. You should ensure that TEC has your current mailing address.
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