MANAGER'S MESSAGE: UNDERSTANDING CAPITAL CREDITS

Capital credits, patronage dividends, patronage refunds—these are all familiar terms with similar meanings: the allocation of operating margins as equity and, when appropriate, retiring them to the members of the co-op in the form of money or credit on the bill.

Unlike for-profit organizations, at KEM Electric Cooperative we operate differently from traditional utilities, and one of the key benefits of your membership is the opportunity to earn capital credits.

What are capital credits?
Capital credits represent your share of the cooperative’s margins. Unlike other utilities, each year, after we calculate our revenues and expenses, any remaining margins are allocated back to you, the members, based on usage of electric services from our cooperative.

How are credits allocated?
Each year the cooperative allocates a portion of the year’s margins back to the membership and are reflected in your account statement. Each member’s allocation is determined by the amount paid for services allowing us to equitably distribute the cooperative's earnings. Once these credits are allocated, they are recorded in your account but not paid out.

Retirement of credits
Electric cooperatives use a long-term financial model that balances returning profits to members with keeping the cooperative stable and affordable. That is why retirements happen 20-30 years after allocation. The money stays in the cooperative for a time to help maintain power lines and equipment, avoid borrowing money, investing in reliability and infrastructure. 

The KEM Electric’s board of directors keep this in mind when determining when to retire capital credits. Typically, the board retires a portion of the capital credits on an annual basis. When credits are retired, members will receive a check sent in the mail. This is why it is important to keep your mailing address up to date – even if you move away and no longer are an active member. 

Why it matters
Capital credits are a significant way for our cooperative to provide tangible benefits to you, our valued members. They reflect the success of our cooperative and reinforce the idea that you are not just a customer, but an owner. Your membership not only provides you with essential services but also offers you a stake in our financial success.

If you have any questions about capital credits, how they are calculated, or how they benefit you, please don’t hesitate to reach out. We are committed to ensuring that you fully understand the advantages of your membership and the cooperative model.

Thank you for your continued support of our cooperative.