Patronage Capital Credits
The Best Kind of Mail: A Check
Rural electric cooperatives such as Sulphur Springs Valley Electric Cooperative (SSVEC) are different from investor-owned utilities (IOUs), whose primary objective is to make a profit. A rural electric cooperative is a nonprofit business that exists solely to provide its members with reliable electricity.
Nonprofit electric cooperatives such as SSVEC deliver energy to their members at the cost of service, which is unlike Investor Owned Utilities, who typically distribute their profits to investors across the nation, or even the world—and not to those they serve.
Capital credits come from the margins that the cooperative has remaining after paying all of its expenses in a given year. At the end of the year, that money is credited to each member’s capital credit account according to the amount of electricity the member purchased. A member with higher bills will gain more capital credits than a member with lower electric bills.
 This year, SSVEC retired a total of $425,000 to our members for portions of service years 1988 and 2011. Amounts under $20 will be applied directly to the member’s electric energy account and will show as a credit on either the December or January bill, depending on their particular billing cycle.
Look for your check, or account credit, by early January, and experience the cooperative difference.
Capital Credits
Capital credits are unique to cooperative utilities like Sulphur Springs Valley Electric Cooperative. Investor-owned power companies make profits, and pay dividends to stockholders. Cooperatives, on the other hand, work on a non-profit basis and allocate their excess operating revenue back to their members.
Capital credits represent your share of the Cooperative’s margins – margins are the operating revenue remaining after operating expenses. The amount assigned in your name depends on your energy purchases. To calculate this, we divide your annual energy purchase by the Cooperative’s operating income for the year. The more electricity you buy, the more capital credits you earn.
The decision to retire Capital Credits each year is made by the Board of Directors. The retirement amount varies and is based on the amount necessary to maintain financial soundness of the cooperative. If you no longer have service with SSVEC and change your address, please contact the cooperative with the new information.
Capital Credit Estates
When a current or former member passes away, there are two options available with the member’s capital credit account.
One option is for the member’s beneficiaries to continue to receive a portion of the capital credit account balance each time capital credits are paid out. A percentage of each member’s balance is generally paid out each year.
The advantage to leaving the account as is, and receiving payments as they are made, is that the full balance or 100% of the account is paid.
The disadvantage is that it takes several years, likely 10 years or more, to pay out a capital credit account.
The second option and most common one is to settle the capital credit account. This means that the member’s beneficiaries, with proper documentation, can receive a discounted payout of the capital credit balance.
If an account was a joint account and one member has passed on, the deceased member’s name is removed. Settlement of the capital credit account can only be made when both members have passed away and all required documents have been received and approved.
