Manager’s Message — December 2021
General Retirement of Capital Credits
This month, Wasco Electric will retire the remainder of the 1991 capital margins to members, along with the 1992 capital margins and a portion of the 1993 capital margins. The total capital credits to be sent to members who received service in 1991 is $81,031; in 1992 is $283,452; and in 1993 is $135,517.
In addition to these general retirements, this year the co-op has retired $31,320 to the estates of deceased members through October 2021, bringing the total capital credits returned to members in 2021 to $531,320.
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 not-for-profit basis and allocate margins from their operating income back to their members.
Capital credits represent your share of the cooperative’s operating income, which is the operating revenue (margins) 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.
Next February, each member who received service in 2021 will be mailed a statement of their 2021 capital credit allocation. The member’s allocation amount is based on the year-end operating margins.
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.
Ned Ratterman
General Manager