Capital Credits

Unlike investor-owned utility companies that strive to generate profits for shareholders, electric cooperatives like SEMO Electric Cooperative operate on an at-cost basis. Any profits made by SEMO Electric --referred to as margins -- are returned to the consumer-members. Capital credits represent these dividends.

Capital credits are calculated each year in which SEMO Electric makes a profit and assigned to each member in proportion to his/her electrical usage for that year. SEMO Electric retains and uses capital credits for operating capital until the financial condition of the cooperative, determined by its banker, National Rural Utilities Cooperative Finance Corporation (CFC), and SEMO Electric’s board of trustees, permits the co-op to issue a refund.

Member-owners should watch their mailbox in mid-October as checks are mailed to member-owners’ most current address listed on the Cooperative’s records. If the amount of the retirement is $10 or less, the amount will be carried over to the following year. If you cease to purchase energy from SEMO Electric Cooperative, please keep us informed of your address in future years. This will enable us to forward payment when the capital credits are refunded for the year or years of your membership.

Call 800-813-5230 to update your information. 

Frequently Asked Questions:

The difference between a cooperative such as SEMO Electric and an investor-owned utility is that a cooperative is owned by the member-customers it serves. As a member-owner, you share in the profits of the co-op. At the close of each fiscal year, all revenue received in excess of expenses (i.e. profits) is allocated back to the membership in the form of capital credits. This allocation is based on the dollar amount of electricity purchased during the same year.

You need to know two things about capital credits in order to understand how they work for you:

1. Allocations: Each year, you are "allocated" your portion of the previous year's profit based on the amount of electricity you purchased from SEMO Electric in relation to the total amount of electricity purchased by all members during the year. This amount is put into a "holding account" for a number of years and used by SEMO Electric to fund capital needs for items such as power line construction, transformers, trucks, inventory and other equipment. This is an underlying principle of the cooperative business model and is one more way we keep your electric rates as low as possible.

2. Retirement: This is what you will get in cash at a later date. SEMO 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.

Step One: Allocation
First, an allocation determines each member’s share of the cooperative’s margin for a given year. Margins are allocated—or assigned—to members who purchased electricity from the cooperative during the year in which the margin was generated in proportion to the electrical sales for that year. Each member’s allocation is determined by his/her kilowatt-hour consumption for that year. The co-op keeps a permanent record of each member’s capital credit account, which is where the allocated amount remains until it is paid—or “retired.”

Step Two: Retirement
After reviewing the financial health of the cooperative, the Board of Directors may declare a retirement, at which time all or part of each member’s allocated amount is paid. SEMO Electric uses a first-in, first-out method (FIFO), meaning earlier years are paid before later years. SEMO Electric has retired capital credits for all years through part of 1984.

 

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. 

A rightful heir can complete a Certification of Entitlement form, which must be notarized, and provide the appropriate documentation to transfer the capital credits into his/her name.

Capital Credits 2017 Diagram
Linemen in Buckets