Capital Credits FAQ
In October, Sumner-Cowley Electric retired (paid by bill credit or check) $123,544 to 1,200 current and 580 former cooperative members. When you signed up to receive electric service from Sumner-Cowley you became a member of an electric cooperative. While investor-owned utilities return a portion of any profits back to their shareholders, electric co-ops operate on an at-cost basis. So instead of returning leftover funds, known as margins, to folks who might not live in the same region or even the same state as you do, Sumner-Cowley allocates and periodically retires capital credits based on how much electricity you purchased during a year. This year, members receiving service in 1995 received a capital credit retirement through a bill credit or by check reflecting their contribution of capital to, and ownership of, the cooperative during that year. That may seem like a long time ago, but those funds helped us keep the lid on rates, reduced the amount of money we needed to borrow from outside lenders to build, maintain, and expand a reliable electric distribution system, and covered emergency expenses. Here are some commonly asked questions regarding capital credits.
What are Capital Credits?
Sumner-Cowley is a cooperative, owned by its members so it does not necessarily earn profits. Instead, if revenues exceed the cost of doing business (expenses), the co-op has earned margins (profits). Each year, margins earned are assigned to Sumner-Cowley members in proportion to the amount paid for electricity during that year. These are called capital credits. Capital credits represent the most significant source of equity for Sumner-Cowley. Since a cooperative’s members are also the people the co-op serves, capital credits reflect each member’s ownership in, and contribution of capital to, the cooperative. In contrast, shareholders of investor-owned utilities may or may not be customers of the utility.
Where Does the Money Come From?
Member-owned, not-for-profit electric co-ops set rates to generate enough money to pay operating costs, make payments on any loans, and provide an emergency reserve. At the end of each year, we subtract operating expenses from the operating revenue collected during the year. The balance is called an operating margin.
How are Margins Allocated?
Margins are allocated to members as capital credits based on the amount a member paid to the cooperative during the year.
What is the Difference Between Allocated and Retired Capital Credits?
Allocated capital credits are the amounts assigned to each member billed for service during a year in which margins were earned. Allocated capital credits reflect your ownership in Sumner-Cowley. A retirement occurs when the cooperative refunds the allocation by issuing checks or bill credits.
Do Evergy (Westar Energy/KCPL) or Local Municipal Systems Retire Capital Credits?
No. Within the electric industry, capital credits only exist at not-for-profit electric cooperatives owned by their members.
Are Capital Credits Retired Annually?
Each year, the Sumner-Cowley board of directors makes a decision on whether to retire capital credits based on the financial health of the cooperative. During some years, the co-op may experience high growth in the number of new accounts, or severe storms may result in the need to spend additional funds to repair lines. These and other events might increase costs and decrease member equity, causing the board not to retire capital credits. For this reason, Sumner-Cowley’s ability to retire capital credits reflects the cooperative’s strength and financial stability. The board alone decides whether to retire capital credits.
Do I Lose My Capital Credits in the Years the Co-op Decides Not to Make Retirements?
No. All capital credits allocated for every year members have been served by Sumner-Cowley are maintained until such time as the board retires them.
What Years Were Retired in 2019?
Sumner-Cowley retired all capital credits to members who purchased electricity from the cooperative in 1995.
What Was the Total Amount Retired in 2019?
I Did Not Receive Electric Service from Sumner-Cowley in 1995. Will I Get any Retirement?
No. This year, capital credit retirements were only made to members who purchased electricity in 1995.
How Often Do Members Receive Capital Credit Retirements?
The Sumner-Cowley Board of Directors makes a decision each year whether or not to retire capital credits. When the cooperative is strong enough financially and member equity levels high enough, the board directs staff to retire some portion of past years’ capital credits.
How Does the Retirement Work?
Inactive or former members who no longer purchase electricity from Sumner-Cowley (but who purchased electricity during the years being retired) received a check. Active members who purchased electricity during the years being retired saw the retirement as a separate line item credit on their electric bill.
What if I Move?
If you move or no longer have electric service with Sumner-Cowley, be sure to inform the cooperative of your current address, so future retirements can be properly mailed to you. If you purchased electricity during the years being retired, you are entitled to a capital credit retirement, even if you move out of the Sumner-Cowley service area. If we have your current address, Sumner-Cowley will send your retirement check by mail.
How Many People Got Retirements?
Roughly 1,200 currently active members received a bill credit on their primary electric account in October. There are 580 inactive members who received checks.
Do you still have questions? Call us at 888-326-3356.