You might not realize it, but when you signed up to receive electric service from Mid-Yellowstone Electric you became a member—and owner—of an electric cooperative. While investor-owned utilities return a portion of any profits back to their investors, electric co-ops operate on a not-for-profit basis. So instead of returning leftover funds, known as margins, to investors who might not live in the same region or even the same state as you do, we issue capital credits based on how much you paid the co-op for electricity during a specified time period.
WHAT ARE CAPITAL CREDITS?
Capital credits represent each member's ownership of the cooperative. They are the margins credited (or allocated) to the members of the cooperative based on their purchases from the cooperative the previous year. These margins are used by the cooperative as capital to operate the business for a period of time. Capital credits should not be confused with profits, which are a return on capital. Retirement of capital credits is a return of member-furnished capital. Cooperatives exist not to make a profit but to provide low-cost electricity.
WHAT'S THE DIFFERENCE BETWEEN AN ALLOCATION AND A RETIREMENT?
Allocations are made annually for each member, based upon the amount of electricity purchased the previous year. An allocation is the amount set aside into a separate account to be used as operating capital for reliability improvements and maintenance over a period of years. Your allocation notice is mailed out annually.
Retirement is the amount you receive back as a capital credit refund. It is a percentage of your total capital credit balance. The percentage to retire is decided by the board of directors annually, based upon the financial condition of the cooperative.
WHERE DOES THE MONEY COME FROM?
Member-owned, not-for-profit electric utilities, like Mid-Yellowstone Electric, 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, the co-op subtracts 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. This principle states: “ Members allocate surpluses for any or all of the following purposes: developing the cooperative, possible by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the cooperative; and supporting other activities approved by the membership.”
ARE CAPITAL CREDITS REFUNDED EVERY YEAR?
Each year, Mid-Yellowstone Electric’s board of directors makes a decision on whether to refund capital credits based on the financial health of the cooperative. During some years, the co-op may experience high growth in the number of new accounts added or severe storms may result in the need to spend additional funds to repair lines. Both events might keep member equity low, causing the board to defer any capital credits refunds. For this reason, Mid-Yellowstone Electric’s ability to return margins to members in the form of capital credits reflects the cooperative’s strength and financial stability.
WHAT IF I HAVE MOVED?
If you move or no longer have electric service with Mid-Yellowstone Electric, it is important that you keep your address current with us so that future disbursements can be properly mailed. Capital credits are reserved for members even if they move out of MYEC's service area. We will make a diligent effort to send a check by mail.
As nice as it feels to receive a check for past patronage, more importantly, capital credits remind us of who owns the co-op—YOU.