Manager’s Message — January 2022
General Retirement of Capital Credits
Last month, Wasco Electric Cooperative (WEC) retired the remaining 1991 balance, all of 1992, and a portion of the 1993 capital margins to members and former members. The total capital credits returned to these members was $500,000.
The co-op also retired $38,312.02 to the estates of deceased members during the year, bringing the total capital credits returned to the members in 2021 to $538,312.02.
Capital credits are unique to cooperatives such as WEC. Private power companies make profits and pay dividends to stockholders. Cooperatives work on a not-for-profit basis and allocate their operating income back to their members.
Capital credits represent your share of the cooperative’s operating income—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 larger your share of the capital credits.
Next month, each member who received service last year will be mailed a statement of their 2021 capital credit allocation. The members’ allocation amounts are based on the year-end operating margin.
Capital credits are not necessarily dollars in a bank account. Instead, 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 service its debt—payment of 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 a utility and the replacement schedule of its aging system.
Your board of directors considers distribution of capital credits and the effect on the financial well-being of the cooperative each year. The board has the discretion to return capital credits as long as the co-op is financially fit to return them without any additional borrowing to pay capital credits.
Board of Directors
Congratulations to our reelected board members: District #1, Bob Durham; District #2, Stacy Eakin; and District #3, Mike Collins.
Thank you to our members who attended our virtual meeting. Your attendance was much appreciated.
If you have questions about your cooperative, feel free to reach out to me at (541) 296-2740.