Capital Credits

Capital credits are margins, or any money 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 Washington Electric. 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.

Member-owned, not-for-profit electric utilities like Washington 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, we subtract operating expenses from the total amount of money collected during the year. The balance is called a margin.

Capital credits are allocated to members based on their purchases from the cooperative -- how much power the member purchased within a given year. Member purchases may also be called patronage.

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, possibly 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."

Each year, the Washington Electric Cooperative Board of Trustees 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, Washington Electric's ability to return margins to members in the form of capital credits reflects the cooperative's strength and financial stability.

In 2011, the Washington Electric Board of Trustees adopted an official policy stating that in May of each year, the board will make a decision whether or not to refund capital credits. When the cooperative is strong enough financially and the member equity levels high enough, the board directs staff to refund past years' capital credits. To make this decision, the board relies on information in the co-op's 10-year financial forecast as well as the co-op's current operating budget. It is the cooperative's goal and intent to retire at least one year of capital credits each year whenever financially feasible.

Capital credits are not cash. The credits accumulate in a holding account in your name. That way, the cooperative can use the funds for leveraging loans to finance new lines and equipment, offset unexpected expenses such as storm damage, and for general operating funds. This is one way Washington Electric saves money on interest costs and keeps electric rates low.

Regardless of whether you are a current member or not, all of the credits in your capital credit account belong to you. This is why it is important to keep your current mailing address up to date so we may pay what is owed to you. 

If a member or former member dies, any remaining capital credits accumulation is a part of the estate and can be assigned to the heirs or beneficiaries.