Capital Credits: Checks are in the mail
Here’s some exciting news: Capital credits checks are on the way! Checks were mailed on Friday, November 19, to members who received electric service from Pioneer Electric Cooperative from 1998-2005. These capital credits are a benefit of your cooperative membership.
What are capital credits? Each year, Pioneer Electric Cooperative returns funds not used for operating costs to members in the form of capital credit allocations. This year, the cooperative is returning $897,722.85 in capital credits to our members. Since 2015, Pioneer Electric Cooperative has returned approximately $7.3 million to its members.
As we safely provide you with reliable and affordable power, you pay your monthly electric bills. We set aside some of those funds to improve and maintain our system, as well as to cover unexpected costs such as storm recovery. The balance is returned to members. A for-profit utility returns these profits to shareholders instead of its customers.
Pioneer Electric Cooperative has reduced our capital credit cycle to 16 years — which is among the shortest cycles in Alabama. It also means that we have sliced our cycle in half since we reinstated credit returns in 2015.
How do I claim my capital credits? Pioneer Electric Cooperative mailed capital credit checks directly to members. If you were a member from 1998 to 2005 and do not receive a check by December 1, contact us at (334) 382-6636 to verify your information.
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Do you or someone you know have unclaimed Capital Credits?
Capital Credits are one of the most unique and rewarding benefits you have as a member of an electric cooperative. The cooperative will notify you yearly of your capital credit allocations.
One of the cooperative advantages is that we provide our members with “at cost” service, which means we do not exist to earn a profit. Investor-owned utilities, on the other hand, maximize their profits from their customers with purpose of paying dividends to their stockholders. At a cooperative, there is not stock to be purchased or sold; our members own our business.
Because Pioneer Electric is a cooperative, owned by its members, it does not technically earn profits. 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 cooperative. This loan allows Pioneer Electric to finance capital needs of the cooperative, with the intent that this capital be repaid to you in later years.
You need to know two things about capital credits to understand how they work for you:
Allocations: Each year, you are “allocated” your portion of the previous year’s margins based on the amount of electricity you purchased from Pioneer Electric in relation to the total amount of electricity purchased by all the members during the year. This amount recorded in the cooperative records and the money is used by Pioneer Electric to fund capital needs for items such as power line construction, transformers, trucks, inventory and other operational needs. This is an underlying principle of the cooperative business model and is one more way we keep your electric rates as low as possible. This “allocation” becomes your equity in the cooperative and is maintained in a separate account assigned to you.
Retirement: This is what you will get in cash at a later date. Pioneer Electric uses the amount “allocated” to you for a time, but then returns this amount to members in the form of “retirements,” which are actual “cash back” dollars to you. When capital credits are retired, your equity in the cooperative is reduced.
Capital credits are calculated by Pioneer Electric for everyone who purchased electricity during a year in which the utility earned margins. No special action is required to start a capital credits account. Your membership with Pioneer Electric activates your capital credits account.
Each member receives an allocation notice annually after the finances for the previous year have been audited.
No. Allocated capital credits may not be used to pay current electric bills. Your electric bill is due now, whereas you may not be entitled to be paid your capital credits for many years.
For individuals, capital credits are generally not taxable. We suggest you seek the advice of a tax professional for any specific questions.
Pioneer's bylaws require, your locally elected Board of Trustees to determines the amount of retirement (cash back) each year based on the financial condition of the cooperative and other considerations and requirements of our lenders.
In the case of a deceased member, the heirs need to make sure that their addresses are left with the cooperative so that the rightful heirs get the capital credits when they are paid.
Upon the death of either spouse in a joint membership, the name of the deceased person is removed from the membership and the membership is held solely by the surviving spouse.
Members with multiple accounts for different locations will receive a consolidated capital credit allocation statement and/or check whenever possible, grouped under a single membership number. Please note that at times, a separate capital credit allocation statement and/or check will be sent to you. The detail on each account will be displayed on these forms for ease in tracking.
The member should inform our office of any changes in his or her mailing address. It is a member’s responsibility to make sure the cooperative has up-to-date address information at all times. Each year, hundreds of refund checks are returned to the cooperative with invalid addresses. PEC can be contacted by phone, fax, email or directly through our website to update an address and contact information.
Each member has a separate capital credit account, which represents the member’s ownership in the cooperative. When the capital credits are allocated at the end of the year, all members who received electric service during that year will receive an allocation notice showing their current year’s allocation. CSR’s can access the account to tell them their total allocation.
Not necessarily. The Board of Directors must authorize a retirement before you receive a check. When considering a retirement, the Board analyzes the financial health of the cooperative and will not authorize a retirement if Pioneer Electric cannot afford it.