What are Capital Credits Payments?
One of the major benefits of being a cooperative member is the receipt of capital credits, which is like money back from your power company. In 2022, we are paying out $2.5 MILLION to our members (see drop-down section below).
Here’s how it works: money remaining after Paulding Putnam’s bills are paid each year is known as margins (it is the margin between income and expenses). This money is used for capital expenditures, such as building or replacing lines, and is not paid back immediately. This becomes your investment or equity in the company. In a for-profit company, this money would be called profit. To be a true nonprofit cooperative, we believe this money should be returned to you – we call it capital credits.
We keep track of your capital credits in a special account. You receive a notice each year telling how much money from the previous calendar year’s margins was allocated to your account. This is money we will eventually refund to you or your estate. The amount of patronage capital allocated to your account is in proportion to the dollar amount of electricity you used. In other words, if you paid for 1 percent of the power we sold, you would receive a 1 percent share of the margins left over at the end of the year. If a member passes away, we pay all capital credits at its net present value.
$2.5 million in cash back to members
Check your December bill for capital credits... your piece of the pie!
Paulding Putnam Electric is distributing $2,500,000 in capital credits to over 23,000 current and former members this December (make sure to check your bill for a credit!). It’s noteworthy that we are able to give this cash back without raising electric rates, despite the current inflation and price spikes we’ve seen this year. Your co-op staff and management take pride in being responsible stewards of PPEC’s costs.
Capital credits represent the cooperative’s margins or profits. We use the margins to help pay for capital investments, such as building or replacing power lines and other electric system improvements. Then, at a later date, the margins are returned to you as capital credits. It represents each co-op member’s ownership — or equity — in their cooperative.
Since 1997, PPEC has returned more than $30 million in credits back to its members. For this month’s payment, eligible members will receive the refund either as a credit on their December electric bill due in January or as a separate check mailed in January 2023.
The electric co-op model is not an investment tool but a way to provide an essential community-based service at reasonable costs. If positive margins are made, then it can be invested back into electric system upgrades and assigned and returned to those that used the service and provided the margins. It is a perpetual service that should always benefit its users.
Every product or service anyone purchases includes a margin for the business to be able to survive and continue providing the service or product. Our business model is the only one that ever pays those margins back to (and only to) its member-owners.
Capital Credits usually are issued or returned to you in December, because we know many members need the extra cash during the holiday season. If you are a current member, you will see this as a credit on your energy bill. If you are a past member who is owed a capital credit, you also will receive this refund. This is why it’s important to keep your address with us updated, even after you move, so we can always mail you your due money.
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.
PPEC needs your help to locate former members
Paulding Putnam is requesting your assistance in locating these members so they may receive the refunds due to them. These former members’ refunds were returned as “undeliverable” by the U.S. Postal Service. Their names are listed below. If you recognize a name on the list, notify the person. If the person is deceased, let one of their relatives know about the unclaimed check. Each year active members receive a statement showing the amount of their individual capital credit accrual. The money is refunded as designated by the board of trustees. There is a check re-issue minimum of $15.00. For questions, please call PPEC office at 1-800-686-2357.