If you own stock in any large, publicly traded corporation, you probably receive dividends. That’s how the company returns some of its profits to shareholders. In much the same way, cooperatives like CoServ share our profits with member-owners.
Unlike publicly traded utilities, though, CoServ is a not-for-profit organization. That means we don’t mark up the cost of power to provide a return for investors. After our board of directors decides we’ve invested enough funds to grow the cooperative and keep it in good financial condition, we return the rest to our members in the form of “Capital Credits.” In Dec. 2009, we returned a record $4 million in Capital Credit retirements to our member-owners. That 2009 retirement brings our total Capital Credit retirements to approximately $25 million in Capital Credits!
For review of the documents you received regarding your 2008 retirement, take a look at the allocation notice, the member letter, and the check and credit brochures explaining the calculation process. To learn more, review Article 7 of our bylaws.
Here’s a closer look at how the process works:
What exactly are Capital Credits?
Each year, CoServ Electric invests our profits back into the cooperative. At the same time, we proportionally allocate the value of the profit (based on electric purchases during the year) to Capital Credit accounts maintained for each of our members. When the board of directors determines that the cooperative has met its financial requirements, they may decide to “retire” (pay) the Capital Credits to members.
How is my allocation calculated?
We allocate Capital Credits to each member based on his or her purchases of energy during the year and the margins generated as a result.
When will I be paid for my Capital Credits?
We retire (pay) Capital Credits at the discretion of our board of directors when the cooperative has met its financial obligations. A retirement cycle is the period of time between the allocation and retirement of the Capital Credits and can typically be 20 years or more. Recently, however, CoServ Electric’s sound financial position has enabled us to retire a percentage of additional credits on a shorter retirement cycle.
Why are more recent years' Capital Credit retirements paid at a discount?
Net discounting is a way to allow our members to benefit from Capital Credit retirements today rather than waiting for the normal retirement cycle, which can typically be 20 years or more. The early payment discount amount represents money retained by the cooperative as permanent equity and is payable on a pro-rata basis to members and former members upon any dissolution or liquidation of the cooperative.
What happens to my Capital Credits if I move and terminate service with CoServ Electric?
Once you terminate service, you become a former member and will no longer receive additional allocations. However, your existing Capital Credit balance will still be maintained in a Capital Credit account in your name until it is retired (paid) in full.
When our board of directors elects to retire any of your Capital Credits in the future, we’ll mail a check to the last forwarding address on record. Note: You must maintain a correct mailing address with CoServ Electric to ensure you receive future payments or information concerning your Capital Credits.