In a Co-op, Every Member Gets a Piece of the Pie – Capital Credits Overview
THE COOPERATIVE ADVANTAGE – November 2021 CCL CEO Article
By Jim Herron, MVEA CEO
As a Mountain View Electric Association member, you are more than a customer: you are both a member and an owner of the cooperative. Your investment in the cooperative helps to ensure the financial health and stability of the co-op and is returned to you through the allocation and retirement of capital credits. It’s an aspect of being a co-op member that is unique: when financial conditions allow, every member of an electric co-op gets a piece of the pie.
While the allocation and retirement of capital credits is one of the most exciting aspects of electric co-op membership, it is also the topic of many member questions. This month, we will focus on answers to the most frequently asked capital credits questions.
What are capital credits?
Electric cooperatives aren’t like other utilities. When MVEA’s cost of doing business is accounted for, members share in the financial prosperity through the retirement of capital credits. We operate at cost — collecting enough revenue to run the co-op, without the demand to generate profits like investor-owned corporations. MVEA’s rates and fees are set by an elected Board of Directors to generate revenue to cover operating costs, pay debts on construction loans and provide an emergency financial reserve. Any excess revenues that remain once all expenses have been paid are divided among MVEA members as capital credits. Capital credits represent your investment in MVEA — your piece of the co-op pie.
Allocation vs. retirement
MVEA members receive a capital credits allocation every year after the cooperative’s audit for the previous year is complete. Net margins, the difference between MVEA’s income and its expenses, are “allocated” or assigned to members who belong to the cooperative during the year in which a net margin is generated. An allocation is your share of the net margins MVEA sets aside into a separate account with your name on it. These are used as operating capital for reliability improvements and maintenance over a period of years. Capital credits allocation notices are provided on your billing statement annually.
A retirement is the amount of cash you receive back from your capital credits allocation. The amount retired is decided annually by the MVEA Board of Directors. After a number of years, if financial conditions permit, and MVEA’s mortgage requirements and by-law provisions are met, the Board may decide to retire a set amount of capital credits to its members. Last year, they retired over $3.8 million and issued more than 36,675 checks to active and inactive members with a balance over $10. Dedication to fiscally responsible business practices and planning has enabled MVEA to retire more than $71.5 million in capital credits back to members since MVEA’s first retirement.
Should the MVEA Board of Directors retire capital credits this year, details will be available in the December issue (including how payments will be made and the amount of the retirement). If we don’t have your current address, we cannot get your capital credits payment to you — where it belongs. Be sure to provide us with your new mailing address every time you move.
Make sure to look at your November bill to review your 2020 capital credits allocation. Depending on how long you have been an MVEA member, you may also receive a capital credits retirement payment in December. If you have any questions about your capital credits allocation or retirement, please call 800-388-9881.
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