Cooperative News

Check your August bill for capital credit allocations

PEC Board of Directors approve more than $58M in allocations

At the July meeting, the PEC Board of Directors approved capital credit allocations totaling more than $58 million to current and former PEC members. If your account earned an allocation for electricity used during 2019, look for that allocation amount on your August bill. However, the actual distribution of capital credits will appear on your December bill.

What are capital credits?

At PEC, we are more than just an electric provider, and you’re more than just a customer. Our members are owners with a financial interest in the cooperative, and capital credits are one of several benefits unique to the membership. As a not-for-profit cooperative owned by its members, when revenues exceed expenses, PEC doesn’t technically earn profits; instead, it earns margins.

Each year, these margins are assigned to the members in proportion to the amount of electricity billed during the year. Capital credits reflect a member’s ownership in PEC, but are not immediately returned to the member. Capital credits are used to fund operating activities and reduce borrowing, with the intent of returning the funds to members in later years.

 What’s the difference between allocated and retired (returned) capital credits?

Allocated capital credits are the amount of cooperative earnings allocated to its members based on the amount they have contributed to the cooperative through payment of their monthly electric bill.

Retired capital credits represent a return of capital credits allocated to members in prior years. The cooperative typically retires capital credits in December, and the amount returned to its members will appear as a reduction on the member’s electric bill, reducing the member’s allocated capital credits balance. After reviewing the cooperative’s finances, the board will determine the method, basis, priority, and timing of all capital credit retirements.

Why is the allocation factor different between a residential account and small business account?

The policy approved by the board in November 2019 changed the allocation methodology. As the cooperative strives for constant improvement with its members, this allows PEC to align the allocation of capital credits more equitably among the membership based on contribution to the gross margin from each revenue class.

When will my capital credits be retired?

Because the capital is reinvested to support the cooperative’s operating activities, the entire balance allocated to its members cannot be retired at once. Allocations act as a record of the member’s ownership in the cooperative and are currently distributed in-full on approximately a 30-year rotation. To the extent the board approves the return of capital credits earlier than planned to the benefit of its members, the capital credits will be retired at a discounted rate.

According to the cooperative’s current policy, a portion of capital credits will be retired each year to the following five groups:

  1. A portion to the oldest outstanding year(s) which have yet to be retired.
  2. A portion to the most recent year(s) which have been allocated.
  3. All consumers which have been inactive for five years, upon request.
  4. The estates of deceased members, upon request.
  5. Consumers with a total distribution balance less than $10 on an inactive account, upon request.

Read our policy and learn more about capital credits.