What are capital credits? Capital Credits reflect the non-profit nature of our Cooperative. Capital Credits are actually the amount of money that is “credited” to a member’s account at the end of each year. This amount is based on revenue remaining after expenses have been paid. Investor-owned utilities return this margin (profit) to the stockholders through dividends. In the case of a member-owned non-profit cooperative. . . like Haywood EMC . . . the margin is credited to the member owner on a pro-rata basis as capital credits.
Capital credits are allocated annually to each member based upon the amount of revenue received from members divided by the coop’s margins. To determine an individual’s capital credit allocation, the margin (profit) percentage is applied to the amount they paid for electric service for the year. Once a year HEMC notifies our members the percentage of margins to be allocated. This notice appears in the April or May issue of Carolina Country Magazine.
The Coop retains these capital credits for two reasons:
1. As working capital to keep the Coop financially sound and to allow for emergencies such as storm damage.
2. To retire debt and build equity in the Coop.
As capital credits accumulate, the Coop still retains the amount needed for financial strength, but distributes an amount determined by the Board of Directors and within RUS regulations to their members in a general retirement of capital credits.
In addition, retirements are made to the estates of deceased members immediately at the present day value of the total unretired allocated amount.