Capital Credit Retirements
Members could see a bill credit on their July bill for their portion of retired capital credits. This is for the amounts that were allocated or assigned to members for patronage in specific years to be determined by the board.
The FreeState board decided to use a hybrid method for returning capital credits called First-in-First-Out/Last-in-First-Out or LIFO/FIFO. This method manages equity by retiring a combination of the oldest and newest years and provides value to both new and longtime members of the cooperative. This means more members will receive money back for their investment. This is just one example of the cooperative difference.
Special retirements are made to members leaving the system, estates of deceased members, or a surviving spouse. Special retirements are generally discounted to avoid unfair advantages to members receiving their retirement earlier than the normal cycle.
As a not-for-profit cooperative, any revenue over and above the cost of doing business is considered margin. These margins allow FreeState to finance operations and infrastructure with the intent it will be repaid to the member in later years. Margins are allocated, or assigned, to members who purchased electricity each year in proportion to their kilowatt-hour purchases. The co-op keeps a permanent record of each member’s capital credit account, which is where the allocated amount remains until it is paid or “retired.”
After reviewing the financial health of the cooperative, the board may declare a retirement, at which time all or part of each member’s allocated amount is refunded. FreeState has both short-term and long-term financial goals that aim to keep rates stable for the next three to five years. The ability to retire capital credits means the cooperative is on track with these goals and is financially viable.
For more in-depth information on capital credits and how they work, visit www.freestate.coop/capitalcredits or call our office at 800-794-1989 where our staff will be happy to assist you.