Capital Credits—A Powerful Return on Your Investment
Each month when you pay your electric bill, it isn’t just payment for service, but an investment in a company you own. One of the many benefits of being a member-owner of Beartooth Electric Cooperative is receiving both Capital Credit Allocations (your earned equity in the Cooperative) and Capital Credit Retirement (payout in the form of a check to you) as a return on your investment, much like a dividend on stocks. As a member you build equity in the cooperative each year you receive service. Member equity is the essential tool Beartooth Electric uses to build, maintain, and upgrade the facilities necessary to provide you the reliable, low-cost electric service you have become accustomed to receiving. Retirement of Capital Credits is a return of member-furnished capital. Beartooth Electric is a not-for profit electric cooperative, so any money left over after paying for all fiscal-year operating costs is returned to our members.
This year, your Board of Trustees has authorized the return of $412,273.00 in retired capital credits (also known as patronage capital) for the unretired 39% of the year 1994, 100% of the year 1995, and 52% of the year 1996. This retirement (and subsequent check issued to you) represents your monetary credit based on how much you paid BEC for electric service during those years. “On behalf of the Beartooth Electric Cooperative Board of Trustees, it’s a privilege for Beartooth Electric to retire Capital Credits to our members-owners,” said Kevin Owens, General Manager. “It clearly demonstrates our commitment to our members.”
What are the steps to receiving a capital credit refund?
Step 1: When you sign up for electric service with Beartooth Electric, you become a member-owner of the cooperative. As you purchase electricity from the cooperative, you build equity in it.
Step 2: Each year, Beartooth Electric designates a portion of what you pay in purchases to your Capital Credits account. This is called an allocation. The amount of the allocation is determined by using a multiplying factor that is common to all members. This ensures each member’s allocation is a fair and equitable percentage.
Step 3: Capital Credits are retired at the discretion of the Board of Trustees, and as the financial conditions of the cooperative allow. Capital Credits are your investment in Beartooth Electric and our goal is to return them to you on a reasonable and systematic basis. When the Board of Trustees determines the cooperative has met its financial requirements, they may decide to “retire” (pay) the Capital Credits to our members. Note: If you move, make sure to give your new address to Beartooth Electric so we can continue to refund your investment you are eligible to receive.
Non-taxable Income: Capital credit retirements are a return of money paid for electricity in a previous year and are generally not taxable income for residential consumers. Commercial and industrial consumers should discuss any capital credits retirements with their tax advisers.
Unclaimed Capital Credits
Unclaimed Capital Credits are Capital credit retirement checks mailed and returned to Beartooth Electric or otherwise gone uncashed. Unclaimed Capital Credits remain in the member or previous member’s account.
A cooperative shall, upon the action of the board of trustees, retain retirements of patronage capital allocated to its members that remain unclaimed for a period of 5 years after the end of the year in which the retirement is made. Unclaimed retirements retained by the cooperative must be used for educational purposes. This is in accordance with Montana Code Annotated 35.18.316.
Captial Credit Frequently Asked Questions (FAQs)
Capital credits represent each member’s ownership of the cooperative. They are the margins credited (or allocated) to the members of the cooperative based on their purchases from the cooperative. These margins are used by the cooperative as capital to operate the business for a period of time.
Capital credits should not be confused with profits, which are a return on capital. Retirement of capital credits is a return of member-furnished capital. Cooperatives exist not to make a profit but to provide low-cost electricity.
Allocations are made annually for each member, based upon the amount of electricity purchased the previous year. An allocation is the amount set aside into a separate account for the cooperative to use as operating capital for reliability improvements and maintenance over a period of years. Your allocation notice will be mailed to you usually during the month of April.
A retirement is the amount you receive back as a capital credit refund. It is a percentage of your total capital credit balance. The percentage to retire is decided by the board of trustees annually, based upon the financial condition of the cooperative permits, determined by the Board, and as BEC bylaw and policy provisions are met, and according to Rural Utilities Service (RUS), and BEC lender regulations of the cooperative.