What are Capital Credit Payments?
One of the major benefits of being a cooperative member is the receipt of capital credits, which is like money back from your power company. In 2021 we payed out $2.3 MILLION to our members (see drop-down section below).
Here’s how it works: money remaining after Paulding Putnam’s bills are paid each year is known as margins (it is the margin between income and expenses). This money is used for capital expenditures, such as building or replacing lines, and is not paid back immediately. This becomes your investment or equity in the company. In a for-profit company, this money would be called profit. To be a true nonprofit cooperative, we believe this money should be returned to you – we call it capital credits.
We keep track of your capital credits in a special account. You receive a notice each year telling how much money from the previous calendar year’s margins was allocated to your account. This is money we will eventually refund to you or your estate. The amount of patronage capital allocated to your account is in proportion to the dollar amount of electricity you used. In other words, if you paid for 1 percent of the power we sold, you would receive a 1 percent share of the margins left over at the end of the year. If a member passes away, we pay all capital credits at its net present value.
NEWS RELEASE, December 2021: Paulding Putnam Electric (PPEC) members will see a lower electric bill around the holidays. That’s because PPEC’s Board of Trustees recently approved to return $2.3 million to the cooperative’s current and former members. Eligible members will see a credit on their December electric bill. The money is being returned to members in the form of capital credits, also known as profits or margins.
PPEC is a not-for-profit, community-focused organization. One of PPEC’s 7 Cooperative Principles is “Members’ Economic Participation,” which means members contribute equitably to the capital of the co-op in which they are part-owners. The unique part of the co-op model means members also receive a financial return on their capital.
“Simply put, this means that PPEC members contribute a portion of the capital necessary to grow the co-op and upgrade electric reliability,” stated PPEC President and CEO George Carter. “Eventually, as the co-op is financially able to do so, the board approves the capital be returned, or ‘retired’ back to those members who contributed it originally.”
Including this year’s capital credits return, PPEC has returned more than $29 million to its members. According to Carter, this process is what sets PPEC apart from other utilities.
“We’re not in business to make a profit for shareholders – we don’t have any because of our co-op model,” Carter said. “If there is leftover money, we give it back to members. We return the money to members around the holidays because that’s when many people need it the most – especially this year with many members struggling due to COVID-19.”
Anyone with questions about their capital credits refund should call PPEC at 1-800-686-2357.
Capital Credits usually are issued or returned to you in December, because we know many members need the extra cash during the holiday season. If you are a current member, you will see this as a credit on your energy bill. If you are a past member who is owed a capital credit, you also will receive this refund. This is why it’s important to keep your address with us updated, even after you move, so we can always mail you your due money.
CAPITAL CREDIT POLICY #A012
PAULDING PUTNAM ELECTRIC COOPERATIVE, INC.
PAULDING PUTNAM ELECTRIC COOPERATIVE, INC. GENERAL POLICY ON THE RETIREMENT OF CAPITAL CREDITS
I. OVERVIEW: 1. This policy shall support the intentions of the Code of Regulations and shall in no way supersede or change the Code of Regulations. In all cases, the Code of Regulations shall be the final determination in regard to capital credit retirements. See Article VIII of PPEC’s Code of Regulations.
2. It is the desire of the Board of Trustees to retire capital credits annually to the membership, this includes both general and estate retirements. PPEC’s management shall plan and budget for the annual retirement and such amount shall be approved by the Board of Trustees as part of the annual operating & capital budget of the PPEC.
3. All funds collected in excess of total expenses (operating & non-operating margins) on an annual basis shall be allocated to member patronage capital credit accounts on a pro-rata basis.
4. The Board of Trustees shall approve, as part of the annual budget, the amount of capital credits to be retired during the budget year – both estate and general retirements. Management shall recommend a level of retirement consistent with PPEC’s Budget, Equity Management Plan, Cash Flow Analysis, and the Financial Forecast.
5. The general retirement of patronage capital shall be paid annually to all members of record (for the years being retired) during the month of January. The Board of Trustees approved general retirement amount shall be divided equally between the oldest year on record and the most recent year on record.
6. The Board of Trustees limits estate retirements during the year to a maximum of 25% of the budgeted capital credit retirement amount for that year. Any estate retirements submitted that exceed the 25% will be retired in the following year on a first in first out basis.
7. Surviving Spouse – Estate retirements will NOT be processed to a surviving spouse and that the account simply changes to the spouse and capital credits continue under the spouse’s name.
8. Discounted Estate Retirements – All estate retirements will be discounted to present value based on the established rotation cycle. The discount rate shall be set each year based on PPEC’s average cost of debt for the previous year.
9. Business Retirements – Retirements to a business shall be treated in the same fashion as any other member leaving the system. Businesses that close or transfer ownership must provide legal documentation as to the status of the capital credits. Lacking any legal documents PPEC shall consider the capital credits as assets sold or transferred to the new business or owners. It shall be the responsibility of the business owners to provide legal documents establishing the status of the capital credits.
PPEC needs your help to locate former members
Paulding Putnam is requesting your assistance in locating these members so they may receive the refunds due to them. These former members’ refunds were returned as “undeliverable” by the U.S. Postal Service. Their names are listed below. If you recognize a name on the list, notify the person. If the person is deceased, let one of their relatives know about the unclaimed check. Each year active members receive a statement showing the amount of their individual capital credit accrual. The money is refunded as designated by the board of trustees. There is a check re-issue minimum of $15.00. For questions, please call PPEC office at 1-800-686-2357.