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| member matters


Capital Credit Q&A When was the last time you received a check from your utility?


At Choctaw Electric Cooperative (CEC), every member is an owner of the business. Unlike other electric utilities, CEC exists to meet member's needs, not to make a profit. Instead, any revenues over and above the cost of doing business are considered “margins." These margins represent an interest-free loan of operating capital by the membership to the co-op. This capital allows CEC to finance operations and sometimes construction with the intent that this capital will be repaid to you in later years.


Below are answers to common questions for a better understanding of capital credits. What are capital credits?


An electric co-op operates on an at-cost basis by allocating its margins annually to each member's capital capital credit account. This allocation is based on the amount of electricity purchased by each member. Later, as financial condition permits, these allocated amounts—capital credits—are retired.


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 expenses from the revenue collected during the year. The balance is called a “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 are also called patronage.


What’s the difference between allocated and retired capital credits?


Allocated capital credits appear as an entry on the permanent financial records of CEC and reflect your equity or ownership in the co-op. When capital credits are retired, a check is issued to you and your equity in the co-op is reduced. Under current CEC policy, checks are generally issued 28 years after the year in which the margins were earned.


How often will I receive an allocation notice?


You should receive an allocation notice annually after the finances for the previous year have been audited.


Are capital credits retired every year?


The CEC board of trustees decides 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 cost additional funds to repair lines. These and other events might increase costs and decrease member equity, causing the board to decide against retiring capital credits. CEC’s ability to retire capital credits reflects the co-op's strength and financial stability. The board alone decides whether to retire capital credits.


Do I lose my capital credits in the years the co-op decides not to make retirements?


No. Capital credits are allocated for every year members are served by CEC and are maintained until the board retires them. CEC's last capital credit retirement occurred in 2014 when the co-op retired all capital credits through 1984.


What if I have moved?


If you move or no longer have service with CEC, 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


4 | DECEMBER 2016 | CEC Inside Your Co-op


How Do Payouts To Individual And Joint Memberships Differ?


Individual Membership


Joint Membership


Member Dies


Capital credits


are disbursed to the estate upon completion of claims process.


Member A Dies


Capital credits transfer to surviving member.


Membership converts


from joint to individual.


Member’s Estate


during the years being retired, then you are entitled to a capital credit retirement, even if you move out of the CEC service area.


What happens to the capital credits of a deceased member?


The capital credits of a deceased member may be paid without waiting for a general retirement; however, these estate payments are not automatic.


A representative of the estate must request the credits by submitting a certification of entitlement form and a copy of the death certificate. If the membership is jointly held by a spouse, the estate will only be retired after both the member and spouse are deceased, or the surviving spouse applies for an individual account.


Certification of entitlement forms may be picked up at any CEC office or call your co-op at 800-780-6486 to request a form.


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