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PAGE 2 | OCTOBER 2013


Patronage Capital Frequently Asked Questions BY ERIN MOORE, Member Solutions Coordinator W


HAT IS PATRONAGE CAPITAL?


An electric cooperative


operates on an at-cost basis by annually “allocating” to each member, based upon the member’s purchase of electricity, operating revenue remaining at the end of the year. Later, as financial condition permits, these allocated amounts— patronage capital—are retired. Patronage capital represents the most significant source of equity for Tri-County Electric. Since a cooperative’s members are also the people the co-op serves, patronage capital reflects each member’s ownership in, and contribution of capital to, the cooperative.


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 patronage capital based on their purchases from the cooperative.


IS PATRONAGE CAPITAL RETIRED EVERY YEAR? Each year, the Tri-County Electric’s Board of Trustees makes a decision on whether to retire patronage capital based on the financial health of the cooperative. During some years, the co-op may experience high growth, 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 patronage capital. For this reason, Tri-County Electric’s ability to retire patronage capital reflects the cooperative’s strength and


® 900 Sept. 13, 2013


Tri-County Electric Members Five million one hundred thousand


Capital Patronage Retirement 5,100,000


financial stability. The board alone decides whether to retire patronage capital.


DO I LOSE MY PATRONAGE CAPITAL IN THE YEARS THE CO-OP DECIDES NOT TO MAKE RETIREMENTS? No. All patronage capital allocated for every year members have been served by Tri-County Electric is maintained until such time as the board retires them. Prior to this year, Tri-County Electric retired all patronage capital from 1945 through 1992.


WHAT YEARS WILL BE RETIRED IN 2013? Tri-County Electric will be retiring all of the remaining patronage capital to members who purchased electricity from the cooperative in 1993 through 2001.


HOW MUCH WILL BE RETIRED IN TOTAL IN 2013?


More than $5,100,000 will be retired.


I DID NOT GET ELECTRIC SERVICE FROM TRI-COUNTY ELECTRIC IN 1993-2001. WILL I GET ANY RETIREMENT? No. This year, patronage capital retirements will only be made to members who purchased electricity from 1993-2001.


HOW OFTEN DO MEMBERS RECEIVE CAPITAL CREDIT RETIREMENTS? The Tri-County Electric Board of Trustees makes a decision each year after


a third party financial audit whether or not to retire patronage capital. When the cooperative is strong enough financially and member equity levels are stable, the board directs staff to retire some portion of past years’ patronage capital.


HOW WILL THE RETIREMENT WORK? A check will be issued to members who were members during 1993-2001. Inactive or former members who no longer purchase electricity from Tri-County Electric (but who purchased electricity during the years being retired) will receive a check in September 2013 as well.


WHAT IF I HAVE MOVED? If you move or no longer have electric service with Tri-County Electric, it is important that you inform the cooperative of your current address, so future retirements can be properly mailed to you. If you purchased electricity during the years being retired, then you are entitled to a patronage capital retirement, even if you move out of the Tri-County Electric service area. If your address is current address, then you will receive your retirement by mail.


WHAT IF MY CHECK IS FIVE DOLLARS OR LESS? If your check is five dollars or less, a check will not be mailed. Instead, that money will be added for the next retirement the cooperative performs. n


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