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Capital Credits

Logan County Electric Cooperative is a not-for-profit electric service provider. When the Cooperative has margins (which are excess revenues over expenses) at the end of its fiscal year, these margins are credited back (allocated) to the people who use the electricity - our members. This money is then used as a source of capital for the Cooperative - thus the name 'capital credits'.

After being assured of the financial condition of the Cooperative, the board of trustees approves a refund (retirement) of a portion of the capital that has been credited to the accounts of its members, both current and former. In 2014, a combined total of $450,000 was returned to our members!

Since its inception in 1936, the Logan County Electric Cooperative has refunded $8,112,827 in capital credits to its member-owners. Capital credit retirements promote our cooperative business model of 'service at cost'. It is a true representation of the Cooperative's way of doing business.

Frequently Asked Questions (FAQ's)

What are Capital Credits?
Capital credits distributions from member owned, not-for-profit utilities like your electric cooperative are somewhat similar to the dividends paid to shareholders of investor owned utilities. The difference is that a co-op’s “shareholders” are also the members that it serves and the “dividends” (capital credits) are distributed to the co-op’s member/owners.

What's the difference between allocated and retired capital credits?
Allocated capital credits appear as an entry on the permanent financial records of the association and reflect your equity or ownership in Logan County Electric Cooperative. Every year, the Cooperative notifies its member-owners of the amount added to their patronage capital account through a printed notice on the electric bill. When capital credits are retired, a check is issued to you and your equity in the association is reduced.

How are capital credits calculated?
The amount of capital credits you earn in a given year is based upon the amount of capital you contribute to the association through payment of your monthly bills. Members who use more electric service, receive a greater amount of capital credits to their account.

Will I receive a capital credits check every year?
Not necessarily. The Board of Trustees must authorize a retirement before you receive a check. When considering a retirement, the Cooperative Board of Trustees must consider the financial condition of the Cooperative, the need for cash and the availability of loan funds. The Board of Trustees will not authorize a retirement if Logan County Electric Cooperative cannot afford it.

What happens to my capital credits when I leave the Logan County service area?
Your capital credits remain on the books in your name and member number until they are retired. Because payments are made to current and former members alike, you should ensure that Logan County Electric Cooperative always has your current mailing address.

Since 1936, your Cooperative has distributed a total of $7,500,000 in capital credits to members.

Capital credits, returning all of the ‘profits’ to you ... ... one aspect of the
cooperative difference!

More details ...
Logan County Electric Cooperative is organized as a cooperative, owned by its members. As a cooperative, we do not earn profits. Instead, any revenues and other income over and above the cost of doing business during a given year are considered "margins." A percentage of the margins are allocated to each member of the cooperative who bought power from the utility during the year they were earned. Each retail member earns the same percentage on their purchases, although the actual dollar amount so "credited" will vary from member to member because it is based upon total individual annual purchases. Each member's annual credit allocation is accumulated and totaled over the period of time that the member continues to receive service.

Margins are treated as capital contributed by the membership to the cooperative to help reduce the cost of borrowing and hold down rates. Margins are used for a variety of operating and capital costs and are typically repaid in the future to the members of record for the year in which they were earned.

A Certificate of Capital Credits, issued to members, shows the individual member's capital credits allocation for a year; that is, each member's individual share of the margins and represented by an accounting entry in the Cooperative records. An allocation is not the same as stock or cash.

Allocated credits are typically paid to current members as a credit to their account; inactive members are paid in cash over time through a process called capital credits retirement. The Cooperative board of directors usually considers a retirement of capital credits annually. When a capital credits retirement is authorized by the Board, both the dollar amount and year(s) to which the allocations relate are specified. Current member equity refers to the dollar value of a member's allocated — but not yet retired — capital credits.

Immediate payment of a deceased member's capital credits is permitted to allow timely settlement of the estate.

In addition to general retirements the Cooperative does retire in-full accounts of deceased patrons. The Cooperative’s Code of Regulations provides the board with authority at any time upon death of any patron that the capital credited to any such patron be retired prior to the time such capital would otherwise be retired. Legal representatives of the deceased member’s estate should request payment in writing on behalf of the deceased member. In addition to a written request you’ll legal representatives are required to provide a copy of the Death Certificate and Letter of Authority signifying their power as Executor of the Estate.

 

 

Terms and Conditions for Estate Retirements

The Code of Regulations of the Cooperative permits the Board of Trustees to pay to estates and qualified trusts of deceased member’s capital credited to each member or trustees of their trusts. It is the purpose of this policy to establish procedures to retire the capital credits of deceased members based on the present value of such credits determined as set forth herein.

POLICY STATEMENT:

It shall be the policy of Logan County Cooperative Power & Light Association, Inc. to retire the capital credits of deceased members whether held by the member or a qualified trust. The balance of capital credits to be retired will be discounted for the present value of money over the rotation cycle in place at the time of death. The discounted payment shall be made to the estate of the decedent or to trustees of qualified trusts created by decedents to which such credits have been assigned. A qualified trust is one in which the member has reserved the right to revoke or amend.

In lieu of being paid the present value of capital credits, the estate or trustee may elect to assign such capital credits to the beneficiaries or heirs entitled thereto, in which case the capital credits shall be retired on the same cycle as for all members of the Cooperative.

PROCEDURES:

1. Upon the death of any member who was a natural person, and upon the written request of the legal representative of the estate of the member or the trustee of a qualified trust, as the case may be, the Cooperative will provide a listing of acceptable documentation required to retire the account.

2. Upon receipt of the completed documentation, the amount of capital credits eligible for retirement will be ascertained. If the account was currently receiving service, the lawful heir(s) or estate will be provided the opportunity to elect to receive the distribution based upon the current capital credit balance or defer payment until the current year’s margins are assigned.

3. The discount rate shall be set on the first business day of each year and shall match the National Rural Utilities Cooperative Finance Corporation (CFC) long-term interest rate with the Cooperative’s most recent rotation cycle. 

4. The net present value for each year will be calculated using the most recent rotation cycle number of years for the term. Example: If death occurs in 2000, the most recent rotation cycle is 20 years; therefore, 1999 assigned capital credits will be discounted for 20 years, 1998 for 19, 1997 for 18, etc.

5. The discounted amount will be reduced by any obligations due the Cooperative incurred by the deceased member and outstanding at the time of death. The balance will be paid to the estate or trustee, as the case may be.

6. If, in lieu of being paid the present value of capital credits, the decision is made by the estate or trustee to assign such capital credits to the beneficiaries or heirs, the option to elect the future lump sum payment of discounted capital credits shall not be available.

7. This policy shall be effective as to estates and trusts of members dying on and after January 1, 2001.

For more information and to obtain forms contact Logan County Cooperative at 592-4781 or send e-mail to rpetty@logancounty.coop.

 

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