Frequently Asked Questions About Capital Credits

About Capital Credits

As a member of Southern Pine Electric, you should know that capital credits are one of the key benefits of being a member, and vitally important to meeting both your present and future power needs.

What are capital credits?

Member-owned cooperatives are not-for-profit organizations that are operated for the benefit of their members. Accordingly, if there are revenues from electric services in excess of operating costs and expenses, those funds are credited to a member’s capital account based on their patronage. Such funds, which are also called ‘capital credits,’ are the lifeblood that enables cooperatives to satisfy the future growth and power needs of its members.

How do members earn capital credits, or how are they calculated?

Each member is allocated capital credits based on how much energy the member obtains from the cooperative. The more energy a member purchases, the greater the amount of capital credit allocated to the member’s account.

How are capital credits managed by Southern Pine?

Each member’s capital credit is maintained on the books and records of Southern Pine. Cooperatives are affected by local growth and economic conditions, weather and natural disasters, borrowing options, infrastructure and improvement needs and other factors.  It is absolutely essential to our operation that we have a sufficient amount of member equity available.  However, as a member-oriented organization, when the cooperative’s financial condition permits, the local cooperative board of directors may decide to retire a portion of the capital credits to members.

How do members get money back?

As capital credits are “retired,” the money may either be a credit on the member’s power bill or by check.

How much is returned to members?

The amount returned to members is decided by the local board of directors and depends upon the financial condition of the cooperative and its strategic plan for growth and operations. To date, Southern Pine has retired more than $78 million to members.

 Why is it important to keep reserves?

We all depend on electricity every day. When power goes out, members expect and need their power to be restored as soon as possible. Southern Pine must maintain the financial means to make that happen. Retirement of capital credits must be done prudently and in the best interest of the cooperative. Retiring too much in any particular year can necessitate a corresponding increase in rates as well as adversely impact the cooperative’s ability to borrow funds that are required to operate without incurring further rate increases.

Who makes decisions regarding capital credits?

Southern Pine is governed by a local board of directors. The board members are all members of the cooperative and motivated by a desire to maintain reliable service at a fair rate. The board decides how to use the capital provided by the members and the amount, if any, that may prudently be retired to members.

Do cooperatives all handle capital credits in the same way?

Each cooperative is unique and so it is to be expected that they may not all handle capital credits the same. Cooperatives can be affected differently by local economic conditions, weather and natural disasters, fluctuating borrowing terms, weather or catastrophic events, improvement needs and other factors that impact how and when capital credits may be retired.