All business organizations need capital to operate, usually supplied by a combination of equity and debt. A stock company, such as an investor-owned utility, can raise equity by selling shares of stock or ownership in the company to the general public. Stockholders invest in the stock expecting to earn a return on the investment through dividends and capital appreciation.
An electric cooperative like Vigilante Electric does not issue stock and pay dividends, however, we still need to maintain an adequate level of equity to ensure financial health and stability. For electric cooperatives, the most significant source of equity is the retention of margins from the sale of electricity to our members.
Electric Cooperatives are non-profit organizations. After all financial commitments are met, any excess revenue is credited back to the membership. Our capital credit system was adopted at the 1947 annual meeting and provides a method for allocating each individual member’s share of net margins.
The term “capital credits” is used because the actual money, classified as net margins, is invested in cooperative capital such as reserves or equipment. This money belongs to the members, but they have agreed to its use for capital purposes by accepting the capital credit provisions in the bylaws.
A capital credit statement is sent to members annually notifying them of the allocation of margins for the previous year. When financial conditions permit, a general retirement (or refund) of capital can be made. These retired capital credits are then paid back to the individual member. It is our policy to retire the oldest capital credits first. To date, we have made general retirements through 2008 and 50% of 2009.
One challenge of distributing retired capital credits is keeping track of every member we owe. If you do have capital credits and leave our system, please keep us informed of your current address. The link below is a list of the past members that we are seeking to contact.