A BENEFIT OF CO-OP MEMBERSHIP
When you signed up to receive electric service from Beltrami Electric, you became a member of a not-for-profit, member-owned electric cooperative. Electric cooperatives allocate revenue to members as "capital credits", and retire - or pay - them when the co-op's financial condition permits. That's the Cooperative Difference!
It PAYS to be a member-owner of Beltrami Electric! Earning and receiving capital credits is just one of the benefits of membership in Beltrami Electric Cooperative, Inc. As a member of Beltrami Electric Cooperative, you are also an owner. Any margins realized at the end of the year are allocated to the members based on the amount of electricity used. We credit this amount on an annual basis to a patronage allocation account in your name. This allocation is held by the cooperative as equity, which allows us to reduce borrowing costs while maintaining your distribution system.
Capital Credits Frequently Asked Questions
Capital Credits are retained margins at the end of a year at a not-for-profit electric cooperative. They represent a significant source of equity for Beltrami Electric. Since a cooperative’s owners are also the people the co-op serves, capital credits reflect each member’s ownership in the cooperative. This differs from dividends investor-owned utilities pay shareholders, who may or may not be consumers of the utility.
Member-owned, not-for-profit electric utilities like Beltrami Electric set rates to generate enough money to pay operating costs, make payments on any loans and pay for wholesale power. At the end of each year, we subtract expenses from the total amount of money collected during the year. The balance is called a “margin.”
Margins are allocated to members as capital credits based on their purchases from the cooperative—how much power the member used. Member purchases may also be called patronage. Once a year you may receive notification of an allocation. The notification is an informational notice to let you know about your share of the capital credits that will eventually be paid to you when a general retirement is issued by the board of directors. An allocation represents your share of ownership in a nonprofit, member-owned cooperative.
Doing so follows one of our seven cooperative principles—Members’ Economic Participation. This principle states: “Members are allocated surpluses for any or all of the following purposes: developing the cooperative, possibly by setting up reserves and benefiting members in proportion to their transactions with the cooperative; and supporting other activities approved by the membership.”
No. Capital credits only exist at not-for-profit electric cooperatives owned by their members.
In spite of our efforts to keep current addresses for past members, some checks are returned by the postal service without a forwarding address. In these cases we make several attempts to locate the member, or estate representatives, by placing the member's name on a listing in our member newsletter and on our website. If after an extended period of time the member cannot be located, the unclaimed capital credits amount is placed in a scholarship fund to be distributed to students within Beltrami Electric Cooperative's service area who are furthering their education at an accredited college or vocational/technical school.
Each year, the Beltrami Electric Board of Directors makes a decision on whether to refund 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 added or severe storms may result in the need to spend additional funds to repair lines. Both events might cause the board to defer any capital credit refunds. For this reason, BEC’s ability to return margins to members in the form of capital credits reflects the cooperative’s strength and financial stability.
Beltrami Electric members usually receive capital credits once a year each December. In addition, estates requesting early retirement at net-present value are processed throughout the year.
If you move or no longer have electric service with Beltrami Electric, it is important that you keep your address current, so that future disbursements can be properly mailed. Capital credits are reserved for members even if they move out of the BEC service area. We will make a diligent effort to send a check by mail.
The other time capital credits are paid out is to settle estates. Capital credits on an estate account may continue to retire during the scheduled general retirement until fully retired. However, the estate representative may elect to take an accelerated retirement of the capital credits.
The calculation for the accelerated retirement is based on the net-present value of money. The Cooperative has determined this procedure to be fair for our membership as a whole, since the rest of our members must keep their capital credits invested in the Cooperative until retired during the general retirement each year.
Capital credits are tax free if the property served by Beltrami Electric was used strictly as a residence. If the residence was used for business purposes, members should contact their tax advisors.
Capital credit allocation represents your share of "ownership" in the co-op and is paid back to you - over time - as financial conditions allow. Current cooperative members will see an allocation notice on their billing statements in April each year. The allocation is based on patronage and your proportionate share of the cooperative's revenue for the previous year. Until capital credits are returned through board approved general retirement, your allocation is invested to improve reliability and service of your cooperative.