Capital Credit Policy

CAPITAL CREDIT POLICY #A012

PAULDING PUTNAM ELECTRIC COOPERATIVE, INC.

PAULDING PUTNAM ELECTRIC COOPERATIVE, INC. GENERAL POLICY ON THE RETIREMENT OF CAPITAL CREDITS

I. OVERVIEW: 1. This policy shall support the intentions of the Code of Regulations and shall in no way supersede or change the Code of Regulations. In all cases, the Code of Regulations shall be the final determination in regard to capital credit retirements. See Article VIII of PPEC’s Code of Regulations.

2. It is the desire of the Board of Trustees to retire capital credits annually to the membership, this includes both general and estate retirements. PPEC’s management shall plan and budget for the annual retirement and such amount shall be approved by the Board of Trustees as part of the annual operating & capital budget of the PPEC.

3. All funds collected in excess of total expenses (operating & non-operating margins) on an annual basis shall be allocated to member patronage capital credit accounts on a pro-rata basis.

4. The Board of Trustees shall approve, as part of the annual budget, the amount of capital credits to be retired during the budget year – both estate and general retirements. Management shall recommend a level of retirement consistent with PPEC’s Budget, Equity Management Plan, Cash Flow Analysis, and the Financial Forecast.

5. The general retirement of patronage capital shall be paid annually to all members of record (for the years being retired) during the month of January. The Board of Trustees approved general retirement amount shall be divided equally between the oldest year on record and the most recent year on record.

6. The Board of Trustees limits estate retirements during the year to a maximum of 25% of the budgeted capital credit retirement amount for that year. Any estate retirements submitted that exceed the 25% will be retired in the following year on a first in first out basis.

7. Surviving Spouse – Estate retirements will NOT be processed to a surviving spouse and that the account simply changes to the spouse and capital credits continue under the spouse’s name.

8. Discounted Estate Retirements – All estate retirements will be discounted to present value based on the established rotation cycle. The discount rate shall be set each year based on PPEC’s average cost of debt for the previous year.

9. Business Retirements – Retirements to a business shall be treated in the same fashion as any other member leaving the system. Businesses that close or transfer ownership must provide legal documentation as to the status of the capital credits. Lacking any legal documents PPEC shall consider the capital credits as assets sold or transferred to the new business or owners. It shall be the responsibility of the business owners to provide legal documents establishing the status of the capital credits.

 

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