What Are Capital Credits?
The difference between a cooperative such as Slope 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 cooperative. 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.
As a nonprofit electric cooperative, Slope Electric allocates its annual operating margins to members receiving service during the year. These margins (revenue in excess of expenses) are based on patronage or total amount paid in. These allocations are called Capital Credits.
Capital Credits are retained as capital to operate the business of the cooperative and are refunded to the members as financial conditions allow and as the bylaw provisions are met.
Refunds are allocated based on the amount of business a member does with the cooperative -- the more electricity used, the larger the capital credit check.
If you move from Slope Electric, please keep us informed of your address in future years. This will enable us to forward payment when the capital credits are refunded for the year or years of your membership.
How do capital credits work?
Each year, you are "allocated" your portion of the previous year's profit based on the amount of electricity you purchased from Slope Electric 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 Slope Electric to fund capital needs for items such as power line construction, transformers, inventory, trucks 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.
This is what you will get in cash at a later date. Slope Electric 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.
When are capital credits returned to members?
According to the cooperative bylaws, the 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 mailed in November.
Is my capital credit allocation taxable?
For individuals, capital credits are generally not taxable. We suggest you seek the advice of a tax professional for any specific questions.
What happens to the capital credits in the case of the deceased member?
The personal representative of the deceased member may elect to receive payment for the relevant capital credits on the same rotating basis as the patrons who continue to purchase power from the cooperative. In the event this settlement option is elected, the personal representative shall inform the cooperative of the person entitled to retirement of the capital credits and shall keep the cooperative informed of that persons current mailing address.
The personal representative may elect to receive payment for the relevant capital credits in a one-time lump sum payment. The first $4,000 of the Slope Electric Cooperative Capital Credits will be paid out at no discount. The amount ($4,000) shall be subtracted from the oldest capital credits owed. The remaining amount of Slope Capital Credits, and the total of G & T capital credits shall be paid and shall be computed based on the discounted value of the capital credits to be retired in future years.
In the event the lump-sum cash payment retirement method is selected, the difference between the total capital credits allocated to a deceased or terminating patron and the present value of these credits refunded in cash shall be accounted for as "Capital Credits Gain" on the books of the cooperative and shall become permanent equity of the cooperative.