A cooperative does not earn profits in the sense that other businesses do. Instead, any margins, or revenues remaining after all expenses have been paid, are returned to the members in proportion to their usage of the co-op’s services through capital credits allocations and retirements. Capital credits represent each member’s share of the cooperative’s margins and ownership of the co-op.
Capital credits are allocated to each member of the cooperative every year based on participation in the cooperative. The board of directors determines the basis for the allocation. The allocations are based on the total dollar amount of services purchased.
Not necessarily. The cooperative has established a retirement cycle, approximately 18 years, for the retirement of capital credits. Under an 18-year retirement cycle, capital credits that were allocated in 1990 would be fully retired in 2008.
In addition to the normal retirement cycle, capital credits of a deceased member are paid to the member’s estate.
Capital credits in the member’s account belong to the member’s estate. In order to assist the member’s heirs in closing the estate, the co-op offers a special capital credits retirement of the outstanding balance of the deceased member’s capital credits account, at a discount.
A member who terminates service no longer receives additional capital credits allocations. The balance in the member’s capital credits account is maintained until it is retired in full.
It is the member’s responsibility to notify the co-op of any changes in address so that the member can be located when it is time for the co-op to retire capital credits allocated to the member’s account.
Capital credits are a return of money paid for electricity in a previous year and are generally not taxable income for residential consumers. Commercial and industrial consumers should discuss any capital credits retirements with their tax advisers.