Not many businesses pay you for buying something you wouldn’t want to live without—but electric cooperatives do.
The ‘payment’ happens through something known as ‘capital credits’. Capital credits come from the money a cooperative has left over after paying all of its expenses in a given year. At the end of the year, that money is allocated to each member’s account, according to the amount of electricity the customer bought.
When finances allow, Horry Electric Cooperative returns capital credits to its member/owners in the form of a capital credit check. “Last year, the cooperative disbursed more than $1.6 million from the capital credits account,” said Jodi Braziel, office manager for the cooperative. “This year, we’re proud to announce we’ll be distributing approximately $1,522,000.”
A different way of doing business
Unlike other types of companies, cooperatives do not have shareholders who expect to make money from the profits generated by the company. Cooperatives are not-for-profit businesses that exist solely to provide their members with a particular service such as electricity. “In a co-op, the net margins don’t belong to the company; they belong to the consumers who paid their monthly electric bills,” said Braziel.
In effect, the members of a cooperative are the stakeholders. Because of that, when the cooperative takes in more money than is needed to run the business, the owners are entitled to a portion of it.
How do capital credits work?
A member’s ‘equity’ in the cooperative is based on the amount of power the customer has purchased during the year.
“The more electricity the customer buys, the higher their share of equity,” says Ashley Anderson, secretary and treasurer of the board of trustees of Horry Electric Cooperative. “The co-op sets up a credit account that shows on the books the share of the year’s net margins belonging to each member.”
Generally, the members don’t receive a check the same year they earned the capital credits. “That’s because electric cooperatives use their members’ equity to fund system improvements,” said Anderson.
“If we couldn’t get the operating capital from member payments, we’d have to borrow from the bank or some other source, which would cause electric rates to go up,” said Braziel.
As new member equity funds come in year after year, the cooperative is able to ‘retire’ its older capital credit funds, issuing members their share in the form of a capital credit check.
Due to the expense of processing and issuing checks, capital credit refunds below $8 will be credited to the individual’s electric account. “So if you don’t get a check, you’ll see a credit on your electric bill,” said Braziel.
Capital credit checks are expected to be delivered to members by the end of April. “It’s an exciting time for us around here,” said Braziel. “Being able to return capital credits is a direct reflection on the financial strength and stability of your cooperative, and that’s something in which we can all take pride.
“To help members calculate and estimate what their capital credit check might be, we created the chart at the top of the page,” said Braziel. “If you still have questions, please don’t hesitate to call us.”