Capital Credit FAQs
What are Capital Credits?
Capital credits represent members' ownership equity in Cuivre River. Credits are allocated after the close of the fiscal year, if funds remain after all expenses for providing electric services have been met. The value of each member's equity is based on the quantity and cost of kilowatt-hours (kwhs) purchased.
Prior to refunding member capital, Cuivre River uses it in place of commercial loans to construct the Cooperative's physical plant (poles, wires, transformers, etc.). This holds down interest expenses that would otherwise be borne by members.
Cuivre River's tradition to refund capital credits began in 1976 when refunds were authorized for the first time. Cuivre River has since established one of the most aggressive equity refund programs among Missouri's 40 electric cooperatives, and has returned more than $74 million to members and former members.
Is the money in the bank until it's refunded?
When capital credits are refunded, member capital — money which is essentially borrowed from members — is replaced with money borrowed from other sources. It's not in the bank; it's invested in the infrastructure that provides your service.
When your Directors authorize capital refunds, they underscore a key difference between cooperatives and other types of businesses. As a member you own the cooperative; the equity belongs to you. Your economic participation is a core cooperative principle.
Will there always be refunds?
No refunds were made during the early years of our history, when no capital remained at the end of the year. Some years the Cooperative may not be in the financial position to refund capital.
Why give refunds instead of reducing rates?
Although there was no rate increase in 2015, future increases will be unavoidable, regardless of capital credit refunds.
We focus on maintaining stable rates that are adequate to meet expenses. Wholesale costs account for nearly 70% of those expenses, and the lion's share of your electric bill.
As each year begins we anticipate as best we can what wholesale costs may be, based on projected energy demand and use. Both can fluctuate widely with the economy and the weather.
Our member equity level, interest rates and cash flow are key criteria in determining if issuing refunds is a financially responsible decision.