Manager’s Message – November 2023

General Retirement of Capital Credits

In September, the Wasco Electric Cooperative (WEC) Board of Directors approved a general retirement of $600,598 to members. This action retires the remainder of the 1995 capital margins to members, along with the 1996 and 1997 capital margins. Members can expect to either see a bill credit or receive a check in December.

Capital credits are unique to cooperatives such as Wasco Electric. Private power companies make profits and pay dividends to stockholders. Cooperatives work on a nonprofit basis and allocate margins from their operating incomes back to their members.

Capital credits represent your share of the cooperative’s operating income, which is the operating revenue—or 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. In February, each member who received service last year will be mailed a statement of their 2022 capital credit allocation. The member’s allocation amount is based on the yearend operating margins.

Capital credits are not necessarily dollars in a bank account. They represent funds that have been invested in the co-op’s physical infrastructure. 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. WEC 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 for 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.

Interim General Manager
Paul Titus