Capital Credits Retirement
In December, Wasco Electric Cooperative retired the remainder of 1985 and all of the 1986 capital margins to members. The total capital credits sent to members who received service in 1985 and 1986 was $367,773.
In addition to these general retirements, the co-op retired $31,273 to the estates of deceased members throughout the year, bringing the total capital credits returned to members in 2016 to $399,046.
Capital credits are unique to cooperatives, such as Wasco Electric. Private power companies make profits and pay dividends to stockholders. But cooperatives work on a nonprofit basis and allocate leftovers from their operating income back to their members.
Capital credits represent your share of the Cooperative’s operating income, which is the operating revenue that remains after operating expenses.
The amount designated in your name each year depends on your energy purchases for the year. To calculate this, we divide your annual energy purchase by the cooperative’s operating income for the year. The more electricity you buy, the more capital credits you earn.
Late next month, each member who received service last year will be mailed a statement of his or her 2016 capital credit allocation. The member’s allocation amount is based on the year-end operating margin.
Capital credits are not necessarily dollars in a bank account. They represent funds that have been invested in the co-op’s utility plant.
Most months, Wasco Electric receives more cash from operations than is necessary to pay for operating expenses. However, the cooperative needs cash for purposes other than paying for operating expenses. Wasco Electric must pay principal and interest on money it has borrowed.
The cooperative also must use cash to pay for capital expenditures. The amount of cash needed for capital expenditures is largely determined by the growth of the utility and the replacement schedule of its aging system.
The distribution of capital credits and its effect on the financial well-being of the cooperative is an issue your board of directors deals with each year. It is the policy of the cooperative and the discretion of the board to return capital credits as long as the cooperative is financially fit to return them without borrowing more or raising rates to pay capital credits.
If you have any questions regarding your capital credit retirement, please contact the office at 541-296-2740.