The difference between a cooperative such as Coastal Electric and an investor-owned utility is that a cooperative is owned by the members it serves. As a member-owner, you share in the profits of the co-op. At the close of each fiscal year, all revenue received in excess of expenses (i.e. profits) is allocated back to the membership in the form of capital credits. This allocation is based on the dollar amount of electricity purchased during the same year.
Capital Credit FAQ's
You need to know two things about capital credits in order to understand how they work for you:
1. Allocations: Each year, you are "allocated" your portion of the previous year's profit based on the amount of electricity you purchased from Coastal Electric Cooperative (CEC) in relation to the total amount of electricity purchased by all members during the year. This amount is put into a "holding account" for a number of years and used by CEC to fund capital needs for items such as power line construction, transformers, trucks, inventory and other equipment. This is an underlying principle of the cooperative business model and is one more way we keep your electric rates as low as possible. This "allocation" becomes your equity in the cooperative and is maintained in a separate account assigned to you.
2. Retirement: This is what you will get in cash at a later date. CEC uses the amount "allocated" to you for a time, but then returns this amount to members in the form of "retirements," which are actual "cash back" dollars to you.
Per cooperative bylaws, your locally elected Board of Directors determines the amount of retirement (cash back) each year, based on the financial condition of the cooperative and other considerations. These payments are usually made in December in the form of checks that are mailed out to the membership.
For individuals, capital credits are generally not taxable. We suggest you seek the advice of a tax professional for any specific questions.
The member should inform our office of any changes in his or her mailing address. It is a member's responsibility to make sure the cooperative has up-to-date address information at all times. Each year, hundreds of refund checks are returned to the cooperative with invalid addresses. CEC can be contacted by phone, fax, or email to update an address.
Capital credits of a deceased member are paid to his or her estate following the same retirement methods that all members are subject to. Representatives of a deceased member's estate will receive a check each year for every year in which that member received service. Of course, all capital credit checks, including those to estates, will only be written when it is deemed that the cooperative is financially strong enough to retire capital credits that year. Contact us if you have questions about a deceased member's capital credits.