Let's Talk Capital Credits
For some members, April could be the month for free cash back -- not only through your tax return, but also through a certain cooperative benefit known as “capital credits.”
What are Capital Credits?
As you may have read in previous pages, the local Cooperative Board establishes rates, based upon what it actually costs to provide dependable electric service and to meet payment schedules on loans.
Rates are designed so that revenues exceed expenses by a small margin. This small “margin” is allocated back to members of the Cooperative in the form of capital credits. Members receive money back based on the amount of electricity they have used during the allocation period. This return of capital maintains the non-profit status of the Cooperative.
Why doesn’t SWRE keep the profits?
Capital Credits (margins) are to a Cooperative what profits are to a private business. Because we are a member-owned entity, SWRE strives to operate all segments of operation at cost. As a result, any margins (profits) are returned to you, the co-op member. Your share of these margins is called Capital Credits.
At the end of the year, net margins are allocated to each member in proportion to the member’s Cooperative purchases during the year. The Board of Trustees decides when to retire Capital Credits based on the Cooperative’s financial condition.
In the meantime, SWRE utilizes the money as working capital for operating and reinvesting in the Cooperative until a determination is made.