Capital Credits

Capital Credits

As a non-profit electric cooperative, SEMO Electric allocates our annual operating margins, or profits, to members receiving service during the year. These margins (revenue in excess of expenses) are allocated using a proportional ratio (using the dollar amount of electric service that each member purchases in a year compared to the total electric service purchased by all members) and are called capital credits. They are used by SEMO Electric for operating funds and paid back to our members as the financial condition of the cooperative permits and as bylaw provisions are met.

Member-owners should watch their mailbox in mid-October as checks will be 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.

Frequently Asked Questions:

What are capital credits?

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.

How do capital credits work?

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.

When are capital credits returned to members?

Per cooperative bylaws, your locally elected Board of Directors determines the amount of retirement (cash back) each year, based on the financial condition of the cooperative and other considerations. These payments are usually made in October in the form of checks, which are mailed to the member’s address on file with SEMO Electric.  

What should a member do if he or she moves from our service area?

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.