Capital Credits

A cooperative is a business that is owned and controlled by the people who use its services. 

A cooperative does not earn profits in the sense that other businesses do. Instead, any margins, or revenues remaining after expenses have been paid, are allocated to the members in proportion to their usage of the co-op's services. Capital credits represent each member's share of the cooperative's margins and ownership of the co-op. 

Every business needs to maintain a suitable balance between debt and equity to ensure its financial health and stability. Capital credits are the most significant source of equity for most electric cooperatives. In addition to expenses the cooperative has capital expenditures (poles, conductor, transformes, equipment, etc.) that must be financed through either debt (borrowed funds) or equity (rates). Using equity (capital credits) to finance a portion of capital expenditures helps keep rates at a competitive level by reducing the ammount of funds that must be barrowed. 

Capital credits are allocated to each member of Ozark Electric Cooperative every year based on the participation in the cooperative. The allocations are based on the total dollar amount of services purchased. 

Ozark Electric Cooperative notifies its members of annual capital credit allocations through the "Electric Sparks/Rural Missouri" newsletter. Also, each member receives notification of prior years allocation amount on their June/July billing statement. 

Each year the Board of Directors determines whether the co-op's financial position permits the return, or retirement, of capital credits and, if so, what amount of capital credits will be retired. 

The board of directors decides the method for determining how capital credits are returned. 

In 2024, the board authorized retiring capital credits using the First-in, First-out, or FIFO, method for 50% of retirement of 2005. That means that the capital credits that have been invested in the cooperative for the longest period of time are returned to the members first. 

The board also chose to retire 10% of 2023, which would be the most recent allocated year.

2024 retirements will be for the years of 2005 (50%) and 2023 (10%) and total $2,424,837. Members who were active in 2005 and 2023 and are still members at the time of disbursement will receive a credit on their December bill statement. Previous member who have made claims will receive checks in mid-December. 

Cooperatives do not pay interest on capital credits because the money to pay that interest would have to be collected from members through higher rates.

Capital credits in the member's account belong to the member's estate. The heir of the estate should submit an Affidavit of Heirship (see link below) in order to claim the deceased member's capital credit retirement.  Download Affidavit of Heirship Form Here

The board of directors has a fiscal responsibilty to maintain the financial integrity of the cooperative in a way that provides competitive rates and allows the return of capital credits to members. Having a sound equity management plan and a commitment to serving the members are key to achieving this. 

Capital credits 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 credit retirements with their tax advisers.