Frequently Asked Questions
What are capital credits and why do I receive them?
Capital credits are unique to cooperative utilities like Kootenai Electric Cooperative. Private power companies make profits and pay dividends to stockholders. Cooperatives, on the other hand, work on a nonprofit basis and allocate its operating income back to their members. Capital credits represent your share of the Cooperative's operating income (operating revenue remaining after operating expenses). The amount earmarked in your name depends on your energy purchases. To calculate this, we divide your annual energy purchase by the Cooperative's operating income for the year. The more electricity you buy, the more capital credits you earn. Capital credits are not dollars in a bank somewhere. Capital credits represent funds that have been invested in the Cooperative's utility plant. The Board of Directors decides when the Cooperative is financially able to pay prior years' capital credit allocations.
Are there other names for capital credits?
Yes. In the cooperative industry, several other terms are used, such as: patronage capital, deferred patronage capital, membership dividends and patronage dividends. They all refer to the same thing – the Cooperative’s way of tracking and paying members their share of excess revenue over KEC’s expenses.
I received information in the mail about the Early Discounted Capital Credit program. Can you tell me more about this program?
Learn more about this program here.
On my bill, I received a notice which says I’ve been “allocated” capital credits. What does that mean?
Capital credits represent your share of KEC’s operating margins (operating revenue remaining after operating expenses). The amount allocated or earmarked to your account represents your portion of the Cooperative’s patronage for that year. Over time, capital credits are refunded (or “retired”) to members and this typically occurs near the end of the useful life of the equipment or facilities those dollars were invested in. This is why it can take between 25-30 years for capital credits to be returned to you. Until then, it is used to keep our Cooperative financially healthy and your rates low. Some members would prefer to receive the current value of their capital credits today. Others move away from the area and do not wish to keep KEC informed of changes in their mailing address. Without that, future capital credit retirement checks cannot be mailed to them. In 2014 we started giving qualifying members a new choice. The Early Discounted Capital Credit program gives some members the choice to receive the current value of the capital credits they contributed last year or, you can leave it invested in the Cooperative and have it fully returned to you when it is no longer needed to maintain healthy equity.
How does Kootenai Electric Cooperative raise capital for operations and improvements?
Cooperatives usually obtain capital to build and maintain the electrical system in two ways: borrowing from lenders and/or retaining capital supplied by members through the purchase of electricity.
Do my capital credits earn interest or dividends?
No. The money retained by KEC as capital credits is invested in the Cooperative so KEC borrows less money and therefore is able to maintain lower rates for our members. The lower rates are what a member sees immediately as a benefit. Not interest or dividends.
Will I receive a capital credits check every year and if so, how much?
KEC cannot make a guarantee as to if and/or how much of a retirement will be paid each year. That decision is made annually, usually in December. The KEC Board of Directors is strongly committed to paying capital credits each year and they are responsible for authorizing a retirement before you receive a check. When considering a retirement, the board analyzes the financial health of the Cooperative and will not authorize a retirement if KEC cannot afford it.
What happens to the capital credits of a member who dies?
An estate representative should contact KEC at (208) 765-1200.
Does the size of my capital credit account affect voting rights in Cooperative elections?
No. In a cooperative, each membership has one vote.
Why doesn’t KEC simply lower rates instead of paying capital credits?
The KEC Board of Directors has a fiscal responsibility to maintain the financial integrity of the Cooperative in a way that provides competitive rates and allows the return of capital credits to members. KEC needs to finance a portion of our assets with equity and cannot finance 100% of the Cooperative assets with debt.
If the board decides not to retire capital credits sometime, do I lose capital credits?
No. All capital credits from every year members have been served by KEC are maintained until the Board returns them back to the members.