YOU Get the Credit - NEC Coop
Jan 23, 2020 — News
CORPUS CHRISTI (Jan. 23, 2020) – It’s time for you to get the credit —capital credits, that is― for helping build, sustain, and grow your local electric cooperative. NEC Co-op Energy is giving back to our members in the form of capital credits.
When you signed up to receive electric service from NEC Co-op Energy you became a member of an electric cooperative. While investor-owned utilities return a portion of any profits back to their shareholders, electric co-ops operate on an at-cost basis. So instead of returning leftover funds, known as margins, to folks who might not live in the same region or even the same state as you do, NEC Co-op Energy allocates and periodically retires (refunds) capital credits and power perks based on how much electricity you purchased during a year.
“Allocating and retiring excess revenue to members helps distinguish cooperatives,” points out NEC Co-op Energy Chief Executive Officer, Varzavand “Avan” Irani, “We’re proud to support our communities by putting money back into the local economy—and into the pockets of those we serve. It makes our business model special.”
This year, members will receive capital credits through checks sent directly to members mailboxes and bill credits, reflecting their contribution of capital to, and ownership of, the cooperative during 2014 to 2018. That may seem like a long time ago. However, those funds helped us keep the lid on rates, reduced the amount of money we needed to borrow from outside lenders to build, maintain, and expand a reliable electric distribution system, and covered emergency expenses.
Each year, the NEC Board of Directors decide on whether to retire 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, or severe storms may result in the need to spend additional funds to repair lines. These and other events might increase costs and decrease member equity, causing the board not to retire capital credits. For this reason, NEC Energy’s ability to retire capital credits reflects the cooperative’s strength and financial stability. The board alone decides whether to retire capital credits. NEC has retired capital credits every year since 2006, when NEC Co-op Energy first began.
Electricity provider in Texas, NEC Co-op Energy members can expect to see Capital Credits reflected on their bills now and throughout the first quarter of 2020. Still have questions? The Frequently Asked Questions (FAQs) below provides more information.
WHERE DOES THE MONEY COME FROM?
Member-owned, not-for-profit electric co-ops set rates to generate enough money to pay operating costs, make payments on any loans, and provide an emergency reserve. At the end of each year, we subtract operating expenses from the operating revenue collected during the year. The balance is called an operating “margin.”
HOW ARE MARGINS ALLOCATED?
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.
DO OTHER LOCAL ELECTRIC UTILITIES RETIRE CAPITAL CREDITS?
No. Within the electric industry, capital credits only exist at not-for-profit electric cooperatives owned by their members.
ARE CAPITAL CREDITS RETIRED EVERY YEAR?
Each year, the NEC Board of Directors makes a decision on whether to retire 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, or severe storms may result in the need to spend additional funds to repair lines. These and other events might increase costs and decrease member equity, causing the board not to retire capital credits. For this reason, NEC’s ability to retire capital credits reflects the cooperative’s strength and financial stability. The board alone decides whether to retire capital credits. NEC has retired capital credits every year since 2006.
WHAT YEARS WILL BE RETIRED IN JANUARY 2020?
NEC Co-op Energy will be retiring all the remaining capital credits to members who purchased electricity from the cooperative in 2014 and a portion of the capital credits from 2015-2018.
HOW OFTEN DO MEMBERS RECEIVE CAPITAL CREDIT RETIREMENTS?
The NEC Board of Directors decides each year by November whether or not to retire capital credits. When the cooperative is strong enough financially and member equity levels high enough, the board directs staff to retire some portion of past years’ capital credits.
HOW WILL THE RETIREMENT WORK?
Inactive or former members who no longer purchase electricity from NEC Co-op Energy (but who purchased electricity during the years being retired) will receive a check in the mail, reflecting their contribution of credit to, and ownership of the cooperative during those years. Due to the expense involved in processing printed checks, the minimum retirement check that will be written to former members will be $15. (Active members who are getting less than $15 will see the retirement as a separate line item credit on their January or February electric bill.)
WHAT IF I HAVE MOVED?
If you move or no longer have electric service with NEC Co-op Energy, it is important that you inform the cooperative of your current address, so that future retirements can be properly mailed to you. If you purchased electricity during the years being retired, then you are entitled to a capital credit retirement, even if you move out of the NEC service area. If it has your current address, then NEC Co-op Energy will send your retirement check by mail.
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