In September, the Wasco Electric (WEC) Board of Directors approved a general retirement of $390,154 to members. This general retirement will retire the 1998 capital margins to members.
Capital credits are unique to cooperatives such as Wasco Electric. Private power companies make profits and pay dividends to stockholders. However, cooperatives work on a nonprofit 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 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.
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 must also 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 a discussion your board of directors has each year. It is the policy of the cooperative and the discretion of the board to return capital credits if the cooperative is financially fit to return them without borrowing more or raising rates to pay capital credits.
How Capital Credits Work
Active WEC members will have their capital credits applied to their account as a credit in December. If you are not a current member, your retirement check is mailed to you at the address on file.
What Are Capital Credits & How Do They Work?
Wasco Electric Cooperative is a not-for-profit cooperative. Each member has a share in the ownership, construction, maintenance, and prosperity of the co-op through capital credits. Capital credits have 2 steps, or stages, they can be in.
Step 1: Allocation
An allocation is made annually for each member based on the amount of electricity purchased. The allocation is the member’s share of the net margins. The co-op sets this money aside to be used as operating capital for improvements and maintenance over a period of years.
- When a person establishes service with us, they become a member and are eligible for capital credits.
- Capital credits represent a member’s share of the cooperative’s margins during the time they have membership.
- At the end of each year, any funds remaining after WEC expenses (margins) are paid are allocated to the member based on the percent of electricity purchased.
- The allocated funds are used for operating capital for system improvements and maintenance until the board of directors retires capital credits.
Step 2: Retirement
A retirement is the amount a member receives back as a refund. It is a portion of the total allocation. When capital is no longer needed for operating expenses, it is retired. The amount paid is decided annually by the board of directors based on the financial conditions of the cooperative.
- Annually, your board of directors evaluates the financial condition of the cooperative to determine whether to retire capital credits.
- When the board elects to retire capital credits, WEC calculates the amount to pay each member based on historical allocation.
- Capital credits will be returned to members in the form of a bill credit if there is an outstanding balance on the account or mailed as a check if there is no outstanding account balance.
Our Mission:
Wasco Electric Cooperative provides our Members with cost-effective energy while maintaining the goals of Safety, Service, and Reliability.