Capital Credits -- What are they?
Tongue River Electric Cooperative (TRECO) tracks how much electricity you used and paid for throughout the year. At the end of the year, TRECO's financial statements show whether revenue exceeded costs and resulted in a margin. TRECO allocates the margins to members as capital credits based upon their use of electricity during the year. TRECO's Board of Directors and employees work to ensure that your Cooperatives financial strength allows capital credits to be paid.
The difference between a cooperative like TRECO and an investor-owned utility is that a cooperative is owned by the members it serves. As a member owner, you share the profits of the Cooperative. As a nonprofit electric cooperative, TRECO allocates our annual operating margins, or profits, to members receiving service during the year. At the close of each fiscal year, these margins are allocated back to the membership. It is based on the dollar amount of electric service each member paid for that year compared to the total electric service paid for by all members. Those allocations are called capital credits. Capital credits are used by TRECO for operating capital or retired (paid back to our members) when the financial position of TRECO permits and bylaw provisions are met.
Each member has a capital credit account, which represents the member's ownership in the Cooperative. When capital credits are allocated at the end of each year, all members who received electric service during that year will receive an allocation notice.
Each year, you are "allocated" your portion of the previous year's profit (margin) based on the amount of electricity you used and paid for from TRECO in relation to the total amount of electricity purchased by all the members during the year. This amount is put into a "holding account" for several years (Target is 20 years) and used by TRECO to fund capital needs for items such as power line construction, transformers, trucks, inventory, and other equipment. Each year the Board evaluates the Cooperatives financial standing and decides which allocated years to approve for the distribution of allocations, The Cooperatives good financial standing is an underlying principle of the cooperative business model and is one more way we keep your electric rates as low as possible. This "allocation" adds to your equity in the Cooperative and is maintained in a separate account assigned to you.
TRECO requests that members and former members keep their mailing information always correct. When the board approves the retirement of allocated capital credits, we will use the former members mailing information on file to send a check for retired capital credit allocations. If we do not have updated mailing information, then the allocations may become designated as unclaimed if we are unable to contact the former member. Any forfeited or unclaimed allocations become a part of the education fund for Tongue River Electric Cooperative. This fund provides student scholarships and training opportunities to other members that we serve.
Capital credits transfer to the deceased members estate and with board approval, early retirement will be offered at a discounted rate. If the deceased has no estate, the funds will remain with Tongue River Electric. If there is usage within the current year, that will be offered the following year. Please contact the office if you are the personal representative of a deceased member as there are legal documents that need to be filed with us.