Morgan County REA Sends $4.5 Million to Members in Capital Credits: Largest Retirement in Co-op History

There are many benefits to being a rural electric association. One of the best perks comes each December in the form of capital credits checks.

MCREA is pleased to announce that this year the MCREA Board of Directors has approved $4.5 million in capital credits to be returned to MCREA members. This is the largest patronage capital retirement in MCREA history.

Capital credits are a pillar of the cooperative model. While investor-owned utilities send profits to shareholders, MCREA—a not-for-profit electric co-op—returns remaining funds to our members. When the MCREA Board elects to retire patronage capital from a given year, those who were members during that time are sent a capital credits check based on how much power they purchased in the year being retired.

In October, the MCREA Board elected to fully retire 2017 MCREA patronage, partially retire 2018 MCREA patronage, and partially retire 2004 Tri-State G&T patronage. Those who were members of the cooperative in those years receive checks this December, reflecting their contribution to, and ownership of, the cooperative. Those funds helped MCREA manage rates, cover emergency expenses, and reduce the amount of money needed to borrow from outside lenders to build, maintain and expand a reliable electric distribution system.

MCREA is proud to deliver this record-setting amount of capital credits to our members, for it is the goal of our board and employees to operate this electric cooperative as efficiently as possible.

Here are a few commonly asked questions about capital credits:

What are capital credits (patronage capital)?

MCREA annually “allocates” capital credits to each member based on the member’s purchase of electricity and operating revenue remaining at the end of the year. Later, as financial condition permits, these allocated amounts—capital credits—are retired. Since the cooperative’s members are also the people the co-op serves, capital credits reflect 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 capital credits based on their purchases from the cooperative — how much power the member used. These purchases may also be called patronage.

I didn’t receive electric service from MCREA in those years. Will I get any retirement?

No. Capital credits checks were only sent to members who purchased electricity from MCREA in the years mentioned earlier.