As a member of the cooperative, you share in the margins in the form of capital credit refunds. Unlike other electric utilities, electric cooperatives exist to make sure your needs are always met, not to make a profit. The allocation and retirement (refund) of capital credits is one of the most unique and rewarding benefits of being a Victory Electric Cooperative member.
The Victory Electric board of trustees recently approved the retirement of $2.1 million in capital credits. In December, $563k will be paid to members who purchased electricity between 1995 and 1998. This capital credit refund reflects the contribution of capital to the cooperative during those years. Over time, those funds helped Victory Electric stabilize rates and reduce the amount borrowed to build, maintain and expand the distribution service providing our members with safe, reliable power. It also helped to build and sustain the cooperative in an industry experiencing massive changes and even more technological advances.
At the 2020 annual meeting, the members voted to give the board of trustees more flexibility in determining the timing and method of retiring capital credits. The board chose to exercise this flexibility to retire $1,537,000 million received from the capital credit distributions of our three power suppliers, otherwise known as generation and transmission (G&T) cooperatives, to Victory Electric members who purchased electricity in 1995, 1996, 2008 and 2012.
Members receiving $50 or less will receive a bill credit on their December electric bill. Checks are expected to be mailed to those members receiving more than $50 in early to mid-December.
Updated Contact Information
If Victory Electric does not have a current address on file, a check will not be issued. For Victory Electric members who may be leaving or have already left the cooperative service area, it is important to provide us with an updated mailing address to ensure future capital credit refunds can be returned as they are retired. If you think you may be a former member without a current address on file, please contact our office to arrange for your capital credits payment to be issued.
Also, remember you must be a member and have service in your name to have capital credits allocated/retired to you. If you are receiving electric service with someone else’s membership or the service is in the name of a deceased person, you will not receive capital credits. Capital credits are non-transferrable and any current or future capital credit retirements will be issued in the name of the person on the membership or the estate of a deceased member.
Why am I getting money back?
Electric cooperatives are not like other utilities. We operate on a not-for-profit basis, which means we operate at cost. For investor-owned utilities, margins represent profit for its investors and stockholders. Not-for-profit businesses can still have money left over (margins) after all expenses are paid in a given year. But the difference between being a member of a cooperative like Victory Electric and other types of utilities is any margins (capital credits) are returned to YOU, instead of outside investors. While Victory Electric works hard every day to keep rates as low as possible it’s sure nice to know when there are extra margins at the end of the year, the money goes directly back to our members.
What happens to my money in the time between allocation and retirement?
Margins are allocated to members each year based on how much electricity used in that given year and is retired (paid back) at a later date. Between the year the margins are allocated and the time they are retired to members, the funds are used help Victory Electric stabilize rates and reduce the amount required to borrow from traditional lenders to build, maintain and expand our electrical system.
As a not-for-profit utility, Victory Electric is limited to two options for raising capital: borrowing or raising capital from its members. By combining capital credits funding obtained from members with borrowed money on which Victory Electric must pay interest, the cooperative is able to lower its cost of capital. Therefore, capital credits help Victory Electric remain in good financial standing and keep rates as low as possible for our members. The capital is used for improvements, such as substations, power lines and other electrical system facilities that serve our members. It also helped to build and sustain the cooperative in an industry experiencing massive changes and even more technological advances.
After each fiscal year, and once the determination has been made that the financial condition of the cooperative is stable and adequate to meet operating costs and debt covenants, the board of trustees may elect to return excess capital by retiring capital credits to Victory Electric members.
Commitment to Our Members
Victory Electric’s board of trustees is committed to retiring capital credits with fairness to all members and former members within the authority granted to the board by the bylaws, while maintaining a healthy financial state for the cooperative. Capital credit management requires reliable information, a commitment to the financial health of the cooperative, and an obligation to the members. The board must balance the equity of today’s members against the equity of both yesterday’s members and tomorrow’s members. While margins are allocated to members every year, the board of trustees is responsible for determining when and how much capital credits are retired based on the financial condition of the cooperative. The board of trustees and management at Victory Electric work to implement sound financial strategies aimed at increasing the equity level to the threshold required to retire capital credits. With the upcoming December retirement, 100% of capital credits allocated through 1997 and 46% of 1998 will have been paid out to Victory Electric’s members.
Only your local electric cooperative makes every customer an owner of the business. It is just another way we are looking out for our members.
Visit our capital credits web page for more information and a Q&A on capital credits.