Capital Credits
What are capital credits & how do they work?
Northern Electric belongs to its members. As owners, members have a responsibility to help finance their business. They do this by using co-op services and by allowing the co-op to retain any money collected in excess of actual operating costs. The money is used to build and maintain the facilities needed to serve the co-op's members and to service long-term debt. This money is considered to be capital furnished by the members—capital that will be returned to the members at a later date. While the co-op uses the money, members’ capital credits are considered "allocated" but not "retired."
The other allocation made to members covers Generation and Transmission (G&T) capital credits or margins returned to Northern Electric from power suppliers Basin Electric Power Cooperative and East River Electric Power Cooperative. The Board has voted to continue allocating G&T capital credits to the members, but they will only retire this portion if Basin Electric pays a cash distribution to Northern Electric Cooperative. In the near future, the board and management agree that retaining the G&T portion of the earnings can have a greater impact if used to support current operations, supplement razor-thin revenues and help keep rate increases to a minimum.
Because members may receive capital credits at some time in the future, it is imperative that they keep the co-op informed of current and future addresses.
When are capital credits returned to members?
Capital Credits are retired at the discretion of the Board as long as the financial condition of the co-op will not be impaired. As the cash position allows, the Board votes to retire and return to members a portion of their allocated capital credits. These payouts are returned according to a retirement schedule and include a percentage of all the outstanding distribution capital credits.
What should a member do if he/she moves away from Northern Electric's service area?
If members discontinue service with Northern Electric, they should notify the co-op of any subsequent address changes so that any capital credit refunds can continue to be sent. Please note that members do not receive lump-sum refund checks upon discontinuing service with Northern Electric. Capital credit refunds are usually made on an annual basis upon Board approval and according to the financial condition of the cooperative.
What happens to the capital credits of a deceased member?
Northern Electric also needs to be notified by a relative or other legal representative when a member of record passes away so that the account can be put in another person’s name or closed. Northern Electric Cooperative will refund the deceased member’s capital credits to their estate in a lump sum payment if the account was listed solely in the member's name and is closed. For an estate to receive a refund, a relative or representative must provide Northern Electric with a Letter of Administration that designates a legal representative of the estate.