2009 members to receive capital credit payments November 20 – December 15
In recent years, members may have noticed capital credit retirements appearing as credits on their electric bills. What are capital credits? Will you receive them this year? If so, how?
If you invest in a business, you may later receive money in return for your investment. Likewise, investor-owned utilities return their profits to their investors in the form of dividends. Profits are earnings left over after a business meets its expenses, such as wages, raw materials, and loan payments.
Cooperatives, like Flathead Electric, are different. Member-owned cooperatives exist only to provide electricity to members – not to make profit for investors. When a co-op receives excess revenue (the amount of money collected from members above what is necessary to meet expenses), that overage is allocated back to members as “capital credits.”
The allocation is then held by the co-op for a number of years to fund future needs like bucket trucks, transformers, and power poles. Instead of borrowing money with interest, members borrow from themselves, saving money and reducing the need to borrow over time. This practice helps keep electric rates low.
Each year, Flathead Electric’s democratically elected, nine-member Board of Trustees closely examines your Co-op’s financial health to determine whether previously allocated capital credits can be “retired,” or paid. The Board’s decisions are guided by the Co-op’s bylaws, lender requirements, and IRS regulations.
Tod Young, Chief Financial Officer, notes, “The Board must allocate excess operating margins each year and determine whether previously allocated capital credits can be retired. The Co-op’s lenders permit the retirement of capital credits if there are no equity concerns. The Co-op has experienced good financial health and capital credits have been retired to members regularly.”
Young continues, “At a co-op, there is no incentive to charge members more than what is needed for electricity. In recent years, it’s been very meaningful for me, personally and professionally, to witness the year-end injection of at least $3M into the local economy with the retirement of capital credits. Everything Flathead Electric does is based on what is best for members, and as a result, my job is filled with purpose.”
This year, the Board elected to retire a percentage of the capital credits allocated to member accounts in 2009. That means just over $3.5M from 2009’s unretired capital credit balance will be returned to members in 2024. If you were a member in 2009, be sure to check your electric bill (between November 20 and December 15) for capital credits!
