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Capital Credits Explained
As a not-for-profit cooperative, SVEC is more than just an electric provider, and you’re more than just a customer. Members have a financial interest in the cooperative, and capital credits are one of several benefits unique to cooperative membership.
SVEC does not raise capital from outside shareholders or investors. When revenues exceed expenses, SVEC doesn’t technically earn profits; instead, it earns margins. Each year, members are allocated equity in the cooperative based on the amount of electricity billed to them during that year. This represents a member’s ownership in SVEC, but the funds are not immediately available to you. That happens later in the form of capital credit returns, or retirements.
It is the cooperative’s intent to return capital credits when financial conditions meet reserve requirements of the Rural Utilities Service and upon conditions outlined in the cooperative’s bylaws.
Several financial factors influence retirements, including margins, cash and equity. During some years, SVEC may have high growth in new services, requiring significant capital expenditures. Similarly, severe storms may require unbudgeted funds to repair infrastructure. Each year, SVEC’s Board of Directors considers these factors and decides whether to retire capital credits based on the financial health of the cooperative.
Capital credit equity held in your membership account is used for reliability improvements and maintenance. These are long-term investments.
Frequently Asked Questions
The SVEC Board of Directors decides whether to retire capital credits every year, usually in the month after approving the annual notice of equity allocation. This decision is based on many factors, including restrictions put in place by government institutions and the overall financial health of the cooperative.
Each year, the SVEC board of directors approves the annual allocation of equity into members’ accounts. Amounts shown on notices do not necessarily reflect the amount of capital credits that might be returned later.
The equity allocation is a record of your ownership in the cooperative, based on the amount of electricity you paid for in the previous year. SVEC uses these funds as operating capital for investments such as system reliability improvements and maintenance.
Under the cooperative business model, it’s customary for SVEC to hold capital credits as equity in member accounts for an extended period. This allows SVEC to fund capital projects and unplanned expenses over time.
Capital credits cannot be refunded all at once because they help the cooperative remain financially sound, ensuring a stable, reliable electric provider for the benefit of the members we serve.
Current members receive a bill credit, while anyone who no longer receives electric service from SVEC is mailed a check.
If you have an address change, please keep the cooperative informed so SVEC may issue your capital credits retirement in the future when approved by the board. At the time of retirement, if SVEC does not have updated mailing information, then retirements will be designated as unclaimed and revert to the cooperative. Please see the list of unclaimed equity for more information.