Capital Credits

In May, more than twice as much as last year will circle back to members through either a credit on your bill or check thanks to a benefit called capital credits.

Capital credits are a unique benefit of belonging to a cooperative. You, and every member who receives electric service from us, owns part of Blue Ridge Electric. Your capital credits returns are a reminder of this benefit of being a member and an owner.

Blue Ridge Electric’s operations are being efficiently run, enabling us to return a record amount to member-owners in the form of capital credits. This is a testament to the commitment of Blue Ridge Electric, our management, and our members to balance the financial health of the cooperative with outstanding service and reliable electricity.

What are capital credits?

What are capital credits?
Capital credits represent each member’s ownership of the cooperative. They are the margins credited (or allocated) to the members of the cooperative based on their purchases from the cooperative the previous year. These margins are used by the cooperative as capital to operate the business for a period of time. You may also see capital credits referred to as “patronage capital” or “equity capital.”

What’s the difference between an allocation and a retirement?

What’s the difference between an allocation and a retirement?
Capital credits allocations are pooled together and used as operating capital so that we can serve our members with reliable power. These funds pay for expensive power reliability improvements and maintenance such as replacing power lines or building substations. If we refunded the total amount of allocations, we would have to borrow that amount of money in order to continue operating. Having operating capital helps the cooperative minimize the amount of high-interest money it must borrow, which in turn helps lower member’s costs by stabilizing rates.

How are my capital credits allocations used until I receive them?

How are my capital credits allocations used until I receive them?
Allocations are made annually for each member, based upon the amount of electricity purchased the previous year. An allocation is the amount set aside into a separate account to be used as operating capital for reliability improvements and maintenance over a period of years. Your allocation amount will be printed on your electric service bill, usually in July. A retirement is the amount you receive back as a capital credits refund. It is a percentage of your total capital credits balance. The percentage to retire is decided upon annually, based upon the financial needs of the cooperative.

Why can’t my capital credits allocations be refunded to me all at once?

Why can’t my capital credits allocations be refunded to me all at once?
Remember that capital credit funds are used for expensive reliability improvements and maintenance—and these are long term investments. Capital credits cannot be refunded all at once because they help the cooperative remain financially sound, thereby ensuring a stable, reliable electric provider for the benefit of the members we serve.

Can I use my capital credits allocation to pay on my bill?

Can I use my capital credits allocation to pay on my bill?
No. Allocations are used as the operating capital of the cooperative. They are not available until a percentage is retired and refunded back to you as the Cooperative’s financial condition warrants and the Board approves.

Capital credits are used in three specific ways:

Working capital:
These funds are invested in substations, power lines, poles and other infrastructure critical to the operation of an electric utility. Working capital is used to keep the cooperative financially sound and to provide highly reliable electric service.

Balancing equity and debt:
These funds balance equity and debt requirements as investments are made in the electric system. The longer you are a member, the more equity you build in the cooperative. Since returns continue to be made over time, it’s important you let us know your new address if you move from our service area.

Capital credit refunds:
Each year, your Board decides on a capital credits retirement based on the financial health of the cooperative and may distribute a portion of the capital credits balance back to members. These funds are based on the total amount of capital credits available and takes into consideration necessary working capital. Since its inception, your cooperative has returned more than $36.6 million to its members in capital credits retirements.

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