Capital Credits
As a member of Pedernales Electric Cooperative, you’re also an owner. When you make a payment to PEC, a portion of that money goes toward strengthening the operations that power your life. Those funds are called capital credits, and they are used to invest in capital additions and improvements to ensure system reliability and meet the growth demand PEC is experiencing. This reduces the need for interest-bearing loans, which helps to keep costs down. A record of your investment, or capital credit account, is established in your name when you become a member of the cooperative.
Each year, any funds remaining after expenses have been paid (margins) are allocated to your capital credit account. Capital credits, which are based on the amount of electricity each member uses, vary from member to member and year to year. The PEC Board of Directors, after assessing the financial condition of the co-op, determines what portion of margins can be returned or distributed to members.
This process helps keep the cooperative financially stable, while offering members the benefit of a distribution whenever possible.
2021 Capital Credits Information
The PEC Board of Directors approved a $5.3 million capital credit distribution to current and former PEC members who accumulated capital credits in 2020 and 1994.
Capital Credits FAQs
What are capital credits?
Capital credits are funds you, as a member, invest (through your monthly bill payment) in the cooperative for capital improvements to ensure system reliability and to meet the growth demands. Capital credits are based on the amount of electricity each member uses, and vary from member to member and year to year.
What is a capital credit allocation?
A capital credit allocation is simply a record of your investment/ownership in the cooperative. Each year, any funds remaining after expenses have been paid (margins) are allocated to your capital credit account.
What is a distribution?
Distribution is the payout of capital credits to members. This typically happens in December. The PEC Board of Directors determines what portion of margins can be returned or distributed to members. Anyone who was a member in the previous year may receive a capital credit distribution.
Capital credit distributions are on an approximate 30-year rotation. The PEC Board may elect to pay distributions earlier than their 30-year rotation on a discounted basis. Active members may opt out of receiving a discounted amount when capital credits come up for distribution in advance of their 30-year rotation. Active members who elect not to receive a discounted amount on early payouts will receive the full amount when the balance comes up for payout in its 30-year cycle (for example, prior year distributions would be paid out approximately 30 years later if the member elects not to receive a discounted early payout).
What is a discounted distribution?
A discounted distribution are capital credits paid to former cooperative members at a discounted value prior to the targeted 30-year rotation.
What does PEC do with capital credits when they are not distributed?
Electric utilities are capital intensive businesses requiring large investments in equipment. PEC, like all businesses, must maintain a balance between debt and equity to ensure financial stability. Capital credits are a significant source of equity and help fund growth and maintenance of the system. By reinvesting your capital credits into the system, PEC can keep rates competitive by reducing the amount of money it must borrow from banks.
Who received distributions in 2021?
In November 2021, the PEC Board of Directors approved capital credits distributions totaling $5.3 million to current and former PEC members, raising our lifetime distribution to more than $140 million since 2007. Active PEC members who accumulated capital credits in 2020 and 1994 received a distribution as a bill credit in December 2021. Former members received a distribution in the form of a check.
How do I receive my distribution?
Your discounted distribution will appear as a credit on your December 2021 bill. Former members with a current address on file will receive a check in the mail for their distribution amount.
How do I receive non-discounted credits?
You may opt out of receiving a discounted capital credits distribution during your time as an active member if you prefer to receive non-discounted credits in a future distribution, which we predict to be on a 30-year cycle.
How do I receive my distribution if I’m a former member and don’t receive a bill?
Former members with a capital credits distribution totaling more than $10 will receive a check. Checks may be issued for distribution under $10 by request. Former members are encouraged to contact us to ensure their current address is on file. PEC Capital Credits Specialists can be reached at 1-800-230-2207, Monday – Friday, 8 a.m. to 5 p.m.
What happens to the capital credit account of a deceased PEC member?
When a member passes, the capital credits allocated to the account belong to the member’s estate. For an estate to receive a refund, a relative or representative must provide PEC with:
- Certified death certificate
- Legal document (Letters of Testamentary, Last Will and Testament) stating your position as executor/executrix
- PEC Affidavit of Heirship
Legal documents may be emailed to [email protected] or mailed to Pedernales Electric Cooperative, P.O. Box 1, Johnson City, TX 78636.
The capital credits specialist will go over the payout amounts with the executor/executrix or heir once legal documents are received.
Please contact Member Relations at [email protected] or 1-800-230-2207 for additional information and assistance.
Do I have to claim capital credits as income on my taxes?
Capital credits is the return of money paid for electricity in a previous year and are generally not taxable income for residential customers, unless the electric bills were deducted for tax purposes. Businesses may be subject to different IRS guidelines. Members should consult a tax professional for questions related to income tax filings. PEC does not provide legal, tax or accounting advice and this information is provided as a courtesy only.