Capital Credits
What are Capital Credits?
The purpose of any electric cooperative, like Niobrara Electric Association, is to provide electric service to its consumers/owners at the lowest possible cost, rather than generate a profit for investors. The cooperative does, however, have profits, or margins, as they are sometimes called, because providing service exactly at cost on a day-to-day basis is a practical impossibility.
Once a year, a formal accounting determines the cooperative’s income and expenses. Income remaining after deducting all expenses is the net margin, which represents capital credits. This amount is divided among the owners in proportion to how much each uses, following a cooperative principle that ownership benefits are generally proportion to use.
When are Capital Credits paid back to the members?
Capital credits, or patronage refunds, as they are sometimes called, represent an important source of financing for the cooperative. During the time that the capital credits are not retired they are retained by the co-op and used as working capital to build lines, for emergency funds, to make debt payments, and to build equity.
Once a year, the board of directors will discuss the possibility of a capital credit retirement, and if the cooperative is in good financial condition, they can authorize the payments. The board also decides which years the retirement will include.
What happens in the case of a deceased member?
Niobrara Electric Association’s bylaws provide for an early retirement of the capital credits of a deceased member. Representatives of a deceased member’s estates must contact the office and supply the necessary legal documents before a refund can be made. In the case of dissolution of a corporation or partnership, no early retirement is allowed. In these situations, an assignment of the capital credits to another member would be allowed with the required documentation.
What if a member of a joint membership is deceased?
Upon the death of either spouse in a joint membership, the name of the deceased person is removed from the membership and the membership is then held solely by the surviving spouse. A joint membership is not eligible for an early retirement upon the death of one of its members.
What if a member had a bad debt with the cooperative?
If a member leaves a bad debt on their account when they discontinue service with Niobrara Electric, any capital credit refund the member would be eligible for will automatically be applied to the bad debt until it is paid in full.
What should a member do if he/she moves from our service area?
Inform the Niobrara Electric Association office of any changes in his/her mailing address. It is a member’s responsibility to make sure the cooperative has current address information at all times. Each year, many refund checks are returned to the cooperative with invalid addresses.
How does a member know the amount of his/her capital credits?
Each member has a separate capital credit account which represents the member’s ownership in the cooperative. When capital credits are allocated at the end of the year, all members who had service during the year will receive an allocation notice showing their current year’s allocation and the outstanding balance of all years of service. Former members who are unsure about the amount of their capital credits can call the office.
What happens to those checks that are returned to the cooperative?
The checks that are returned to the cooperative are held until the end of the year and then voided if not claimed. The names of those members whose checks we received back are advertised in our newsletter in an effort to locate them. They are left on the list of "lost members" for five years. A member can contact NEA any time (even if it's 20 years after their membership became inactive) to claim their capital credits. Keep in mind, we only print the annual retirement checks once a year...we do not re-print a check that has been lost or voided. The amount of those checks will be added to the next general retirement (usually in May).
What does the cooperative do with unclaimed capital credits?
At the present time, some of the unclaimed capital credits are being used to finance the Niobrara Electric Association, Inc. scholarship program for student/dependents whose parents or guardians are members of the cooperative. Even though the capital credits are not being returned to the members (at this time) who earned them, the money is still being returned to the membership and communities that Niobrara Electric serves.
For any additional information or to receive all forms/paperwork needed to complete an estate retirement/removal of joint name/etc. please call the office at 307-334-3221.