Capital Credits Explained
Park Electric Cooperative (PEC) tracks how much electricity you used and paid for throughout the year. At the end of the year, PEC's financial statements show whether revenue exceeded costs and resulted in a margin. PEC allocates the margins to members as capital credits based upon their use of electricity during the year. PEC's Board of Directors and employees work to ensure that your Cooperatives financial strength allows capital credits to be paid.
The difference between a cooperative like Park Electric and an investor owned utility is that a cooperative is owned by the members it serves. As a member owner, you share the profits of the Cooperative. As a nonprofit electric cooperative, Park Electric allocates our annual operating margins, or profits, to members receiving service during the year. At the close of each fiscal year, these margins are allocated back to the membership. It is based on the dollar amount of electric service each member paid for that year compared to the total electric service paid for by all members. Those allocations are called capital credits. Capital credits are used by Park Electric for operating capital or retired (paid back to our members) when the financial position of the Cooperative permits and bylaw provisions are met.
Parts of Capital Credits:
Each member has a capital credit account, which represents the member's ownership in the Cooperative. When capital credits are allocated at the end of each year, all members who received electric service during that year will receive an allocation notice.
- Allocations: Each year, you are "allocated" your portion of the previous year's profit (margin) based on the amount of electricity you used and paid for from Park Electric Cooperative in relation to the total amount of electricity purchased by all the members during the year. This amount is put into a "holding account" for a number of years (usually 15 years) and used by PEC to fund capital needs for items such as power line construction, transformers, trucks, inventory and other equipment. After 15 years, the Board will approve the distribution of these allocations if the Cooperative is in good financial standing. This is an underlying principal of the cooperative business model and is one more way we keep your electric rates as low as possible. This "allocation" adds to your equity in the Cooperative and is maintained in a separate account assigned to you.
- Discounted Amount: This amount is what your allocation is worth at the time of the distribution (calculated by inversely compounding a 6% rate over a 15 year period). This is the amount you are able to take at the time of the disbursement as a bill credit or for cash if over the amount stated in the attached letter.
- Forfeited and Unclaimed: Any forfeited or unclaimed allocations become a part of the education fund for Park Electric Cooperative. This fund provides student scholarships and training opportunities to other members that we serve.
When you receive your capital credits letter, you need to decide if you would like to leave your allocation alone and collect it in 15 years (if the Board votes to do so at that time) or if you would like to take the discounted amount now. If you would like to leave your allocation alone, you may disregard your slip. If you do not return your slip or it does not reach us before the deadline, your allocation will automatically be held for you until it comes to maturity. The discounted amount can be requested as a check if it is over the amount stated in the attached letter or can be requested as a credit on your bill (typically the bill following the due date of the allocation). If you would like the discounted amount as a bill credit, please check the box at the top of the form, sign the form, and provide the last 4 digits of your social security number. If you would your refund as a check and the discounted amount is over the amount stated in the letter, please check the box that says you do not want the amount credited to your account.
If you move:
Park Electric Cooperative requests that members and former members keep their mailing information correct at all times. When you choose to leave your allocation with us, at the time it matures and we pay it out, if we do not have updated mailing information, then your allocations will be designated as unclaimed. If you are a member who sells their property and no longer has any other services with us, we will send you a letter of early retirement giving you options for all of your remaining capital credits. If you have taken the discounted allocation at any time, these years will have a zero balance. Please note that if there is usage within the current year, that usage allocation will be offered in the following year after the Board approves it.
If the Member is deceased:
Capital credits transfer to the deceased members estate and early retirement will be offered at a discounted rate. In the event that the deceased has no estate, the funds will remain with Park Electric Cooperative. If there is usage within the current year, that will be offered the following year following Board approval. Please contact the office if you are the personal representative of a deceased member as there are legal documents that need to be filed with us.