Capital Credits

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What are capital credits?

Member-owned cooperatives like Magnolia Electric are not-for-profit organizations, which are operated for the benefit of their members. Accordingly, if there are revenues in excess of operating costs and expenses, those funds are credited to a member’s capital account based on their patronage. Such funds, which are also called “capital credits,” are the lifeblood that enables cooperatives to satisfy the future growth and power needs of its members.

 

How do members earn capital credits, or how are they calculated?

Each member is allocated capital credits based on how much energy they get from the cooperative. The more energy a member purchases, the greater the amount of capital credit allocated to the member’s account.

 

 

What is Magnolia Electric’s history on returning capital credits?

Since 1960, MEP has refunded a total of $43,817,213 in capital credits to its members.

 

How much is returned to members?

The amount returned to members is decided by our local board of directors and depends upon the financial condition of the cooperative and its strategic plan for growth and operations.

 

Why is it important to keep reserves?

We all depend on electricity every day. When power goes out, members expect, and need their power to be restored as soon as possible and the cooperative must maintain the financial means to make that happen. Retirement of capital credits must be done prudently and in the best interest of the cooperative. Retiring too much in any particular year can necessitate a corresponding increase in rates, as well as adversely impact the cooperative’s ability to borrow funds that are required to operate without incurring further rate increases.

 

Who makes decisions regarding capital credits?

Each cooperative has a local board of directors. The board members are all members of the cooperative and motivated by a desire to maintain reliable service at a fair rate. The board decides how to use the capital provided by the members and the amount, if any, that may prudently be retired to members.