When a cooperative is first formed, it takes several years before it begins to show its first profit. Even then, the entire amount is reinvested to help stabilize the business and provide adequate cash-flow for growth. So instead of receiving checks, members will receive capital credit allocations to serve as promissory notes. As the financial position of the cooperative becomes stronger, with larger cash reserves and higher equity levels, the cooperative will begin to “retire,” or pay back, capital credits on a first-earned basis.
As a co-op member, you are entitled to share in the cooperative’s margins. Each year, shares for the preceding year are calculated based on the amount of revenue paid in. Your share is referred to as capital credits and is refunded to members based on the equity necessary to maintain the financial soundness in the cooperative.
Capital Credit Policy
The Cooperative shall allocate and retire capital credits in a manner that:
Is consistent with state and federal law.
Is consistent with operating on a cooperative basis under federal tax law.
Is fair and reasonable to the Cooperative’s patrons and former patrons.
Provides the Cooperative with sufficient equity and capital to operate effectively and efficiently.
Protects the Cooperative’s financial condition.
Subject to law, the Cooperative’s articles are the sole discretion of the Cooperative’s Board of Directors (“Board”).
The Cooperative shall allocate and retire capital credits according to the manner, method, timing and amount approved by the Board.
At such time as the board of directors shall determine that the financial condition of the cooperative shall not be impaired, capital credit refunds will be made.
Frequently Asked Questions
What are capital credits?
Margins are calculated each year by deducting the expenses of operating the cooperative from the income from the sale of electricity. These margins are allocated to each member’s capital credit account based on electric use. When the financial condition of the cooperative is adequate to meet all normal and emergency needs, the board of directors may approve the return of a portion of these margins to the member-owners.
What if service has been disconnected?
As long as you maintain a current address with the cooperative, we will mail your capital credit checks to you as the board approves refunds.
Why did my neighbor get a check and I didn’t?
Checks are allocated to those members who have capital credit balances for the years retired. Those who owe the cooperative an outstanding past-due balance in excess of the capital credit will not receive a check. If the name and address information on record at the cooperative office is incorrect, the check may be returned by the post office. If this should happen, it can be retrieved at the cooperative office with proper identification.
Why was my neighbor’s check larger than mine?
The amount of the capital credit check for the period is based on the amount of electricity used. If one member’s usage has been greater than another’s, he/she would receive a larger check than a member who has used less electricity.
Will the total capital credit amount be refunded after I terminate electric service?
Early retirement of capital credits is not allowed when electric service is terminated. When capital credits are retired (paid back), inactive accounts are included in the retirement calculation until their balances are fully retired. Of course, capital credit refunds cannot be delivered correctly if the co-op is not kept abreast of address changes, so PLEASE keep us informed of you current address!
If the person whose name is on the check is deceased, can the payee name be changed?
No. The capital credit is assigned to the name in which the account is, or was, carried at the time of allocation. The check can be legally cashed only by that person or his/her estate.
What happens when capital credit checks are not cashed?
The co-op keeps a record of all capital credit checks that are not cashed. Claims on these accounts can be made indefinitely, but after three years, unclaimed amounts must be transferred to the Texas Unclaimed Property fund. Some of these unclaimed funds are returned to the co-op to be used for scholarships and economic development.