Capital Credit Retirement Fast Facts:
In 2019, the Board of Directors approved the retirement of the 1961 capital credits.
Retirement of Capital Credits is a Board of Directors decision that is made on an annual basis.
A 30-year retirement schedule is typically based on the estimated useful life of the electric distribution plant that serves the co-op's members.
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Capital Credit Allocation, Retirement and What it means to be a Cooperative
“The allocation and retirement of capital credits essentially defines cooperatives as cooperatives”
Q: I already filled out a claim form, do I need to fill out another one?
A: No. If you previously filled out a claim form, you do not need to fill out another one.
Q: What is a cooperative?
A: A cooperative is a business that is owned and controlled by the people who use its services.
Q: What are capital credits?
A: When you signed up to receive electric service from Orange County REMC, you became a member of a not-for-profit electric cooperative. While investor-owned utilities return a portion of any profits back to their shareholders, electric cooperatives operate on an at-cost basis. So instead of returning leftover funds, known as margins, to people who might not even live in the same state as you, Orange County REMC allocates and periodically retires capital credits based on how much electricity you purchased during the year.
Q: Why haven’t capital credits been retired before now?
A: The retirement of capital credits has not been done in several years due to a number of different factors including equity, operating capital, and overall financial performance of the cooperative.
Q: What capital credits are not:
A: Capital credits should not be confused with profits. Retirement of capital credits is a return of member-furnished capital. Cooperatives exist not to make a profit but to provide low cost electricity.
Q: How does the cooperative determine who receives capital credits?
A: Capital credits are allocated to each member of the cooperative every year based on the total dollar amount of services purchased.
Q: Why do you use a capital credit system?
A: Cooperatives operate on a set of seven ethical Cooperative principles that include a self-supporting system of operations. This system calls for a portion of any funds left over at the end of the year after all expenses are covered to be allocated to those who used and paid for their services, the members. Capital credit allocations help a cooperative qualify for cooperative status under federal income tax law, which reduces cost to the members. Furthermore, the capital credits system of allocations and refunds helps keep member’s rates lower by reducing the amount of the cooperative’s debt.
Q: What happens to a deceased member’s capital credits?
A: Capital credits in the member’s account belong to the member’s estate. This claim form must be filled out by the executor, administrator, beneficiary or heir.
Q: What happens to a member’s capital credits if the member moves away from the system?
A: A member who terminates service no longer receives additional capital credit allocations. The balance in the member’s capital credits account is maintained until it is retired in full. It is the member’s responsibility to notify the co-op of any changes in address so that the member can be located when it is time for the retirement of their capital credits.
Q: How are my capital credit allocations used until they are retired?
A: Capital credit allocations are pooled together and used as operating capital so that we can serve our members with reliable power. These funds pay for power reliability improvements and maintenance and act a resource in the event of a natural disaster that significantly damages the plant. If the co-op refunded the total amount of allocations, we would have to borrow that amount of money to continue operating. Having operating capital helps the cooperative minimize the amount of interest bearing money it must borrow, which in turn helps lower member’s costs by stabilizing rates.
Q: Why didn’t I receive a check?
A: There are several reason you might not receive a check, including:
We are paying out 1960 capital credits. You had to have been a member during that year.
Your allocation amount was less than $10.
Members in 1960 that have continued service with us, will receive a credit on their bill for an allocation amount under $10.
Members in 1960 that do not have active accounts, with an allocation of less than $10, will get a check once the allocation amount is over $10, probably during one of our next capital credit retirements.
We did not have an updated address from you. Please stop by the office or fill out this claim form and return it to us.
The check was applied to the money you owed Orange County REMC. If you left still owing us money that was uncollected, the capital credit check amount was applied to your account.
Q: Does a member have to report capital credits on tax returns?
A: Capital credits are a return of money paid for electricity in a previous year and generally are not taxable income for residential consumers. Commercial and industrial consumers should discuss any capital credits retirements with their tax advisers.