At the July 2021 Board meeting, the PEC Board of Directors (Board) approved the allocation of capital credits totaling more than $36 million to current and former PEC members. If your account earned an allocation for electricity used during 2020, look for the allocation amount on your August bill.
What are capital credits?
At PEC, we are more than just an electric provider, and you are more than just a customer. Our members are owners with a financial interest in the cooperative. 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.
Each year, any funds remaining after expenses have been paid (margins) are allocated to your capital credits account. Capital credits, which are based on the amount of electricity each member uses, vary from member to member and year to 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 simply a record of your investment or ownership in the cooperative. Each year, any funds remaining after expenses have been paid (margins) are allocated to your capital credits account.
Retired capital credits represent a return of capital credits allocated to members in prior years. When the cooperative retires capital credits, 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, or a check will be mailed to former members.
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. 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 on an approximate 30-year rotation. To the extent the Board approves the return of capital credits earlier than the 30-year rotation to the benefit of its members, the capital credits will be retired at a discounted rate. After reviewing the cooperative’s financial condition annually, the Board will determine the method, basis, priority, and timing of all capital credit retirements. For more information on capital credits, read the policy online at pec.coop/capital-credits.