Patronage Capital refunds (or also known as capital credits) are retained margins left over at the end of a year at a not-for-profit electric cooperative. Capital credits represent the most significant source of equity for Southeastern Indiana REMC. Since a cooperative’s “shareholders” are also the people the co-op serves, capital credits reflect each member’s ownership in the cooperative. This differs from dividends investor-owned utilities pay shareholders, who may or may not be customers of the utility.
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HOW MUCH PATRONAGE (CAPITAL CREDITS) IS BEING REFUNDED IN 2022?
Your Board approved refunding capital credits for the years 1999, and part of 2020. The total amount of patronage to be refunded is $1,514,590.85. We typically only refund around 74% of this amount or about $1,120,797.23 due to not having a valid address for some former members.
WHERE DOES THE MONEY COME FROM?
Member-owned, not-for-profit electric utilities like Southeastern Indiana REMC set rates to generate enough money to pay operating costs, make payments on any loans, and provide an emergency reserve. At the end of each calendar year, we subtract operating expenses from the total amount of money collected during the year. The balance is called a margin.
HOW ARE MARGINS ALLOCATED?
Margins are allocated to members as capital credits based on their purchases from the cooperative – how much power the member used. Member purchases may also be called patronage.
WHY DOES MY COOPERATIVE REFUND CAPITAL CREDITS?
Doing so follows one of our seven cooperative principles – Members’ Economic Participation – through rotation of capital. Capital rotation/refund, when determined feasible by the Board, is also required to meet IRS requirements to maintain our 501 C12 tax status. Capital rotation/refund is also used as a tool to target our optimum equity range, which falls between 40% to 60%. If cash is available and equity is on the high end of the range, a capital credit refund to members is an appropriate consideration of our Board in controlling our system equity.
ARE CAPITAL CREDITS REFUNDED EVERY YEAR?
Each year, the Southeastern Indiana REMC Board of Directors decides whether to refund capital credits based on the financial health of the cooperative. During some years, the co-op may experience extreme weather patterns which significantly affects kWh sales and margins, high growth in the number of new accounts added, maintaining an optimal equity level, rate inadequacy due to inflated costs since the last rate revision, or severe storms may result in the need to spend additional funds to repair lines and restore electric service. These events might lower cash and member equity, causing the board to defer any capital credit refund. For this reason, Southeastern Indiana REMC’s ability to return margins to members in the form of capital credits reflects your cooperative’s strength and financial stability.
DO I LOSE MY CAPITAL CREDITS IN THE YEARS THE CO-OP DECIDES NOT TO MAKE REFUNDS?
No. All capital credits from every year members have been served by Southeastern Indiana REMC are maintained until such time as the board refunds them. Prior to this year, Southeastern Indiana REMC refunded all capital credits through 1998 and parts of 2017-2019.
HOW MUCH HAS SOUTHEASTERN INDIANA REMC PAID IN TOTAL CAPITAL CREDIT REFUNDS SINCE IT BEGAN IN 1939?
Southeastern Indiana REMC has paid $30,418,955.23 in capital credit refunds to current and former members to date.
HOW OFTEN DO MEMBERS RECEIVE CAPITAL CREDITS?
The Southeastern Indiana REMC Board of Directors decides each year whether to refund capital credits. When the cooperative is strong enough financially and the member equity levels are high enough, the board directs staff to refund some portion of past years’ capital credits.
HOW WILL REFUNDS BE ISSUED?
Members currently receiving electric service will see the refund as a separate line item on their electric bill in March. Inactive members (with capital credits due) will receive a capital credit check. Due to the expense involved in processing printed checks, the minimum capital credit check that will be written will be $5.
WHAT IF I HAVE MOVED?
If you move or no longer have electric service with Southeastern Indiana REMC it is important to keep your address current, so future disbursements can be properly mailed. Capital credits are reserved for members even if they move out of the Southeastern Indiana REMC service area. Southeastern Indiana REMC will make a diligent effort to send a check to a valid address by mail.
HOW MANY PEOPLE WILL GET REFUNDS?
Roughly 21,850 currently active members will receive a bill credit on their primary electric account and another 8,550 active members (i.e. Beneficiaries) will receive a check from Southeastern Indiana REMC.
We appreciate the opportunity to serve you and thank you for being a member. If you have additional questions about capital credits, please call (812) 689-4111.