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Capital Credits
Lincoln Electric
Cooperative (LEC) is a
non-profit corporation. Any funds collected above the cost of
operation (called margins) are annually assigned to our members
in the form of Capital Credits. We periodically refund Capital
Credits to our members when the financial condition of LEC permits. Each year a statement will be mailed to you
concerning your Capital Credits. If you have any questions about
your equity, contact us.
As a new member of
LEC, the concept of Capital Credits may
be new to you - even its name may be confusing. We hope
that the following explanation will answer some of your questions.
Electric cooperatives were
first organized as a way to borrow money to build electrical
systems in rural areas. The lender, a federal agency formerly
called the Rural Electrification Administration (REA) and now
called Rural Utilities Services (RUS), supplied loan funds and
covered the investment by taking a first mortgage on the
cooperative's property. As the first mortgage holder on the
property, RUS sets conditions on the co-op's operations to
ensure that the mortgage and interest payments are met.
When the REA set up the loan
program, it stipulated that the equity ownership gained by the
cooperative should be transferred back to the members in the
form of Capital Credits. Thus, all money paid by members on
their electric bills, in excess of the actual cost of providing
them with power, should be allocated back to them in the form of
Capital Credits.
Just as RUS sets
requirements for the allocation of Capital Credits to members,
it also sets equity levels so that there are sufficient funds to
pay back the loans with interest first. It is only after that
level is reached that Capital Credits can be paid back. If we
did not follow the terms of the loans, the benefits could be revoked and
we would have to look elsewhere for funds, usually at higher
interest rates.
Capital Credits represent
YOUR ownership in the Cooperative.
Some Commonly Asked
Questions About Capital Credits
Capital Credits are
allocated annually to each member. The margin percentage
amount is applied to the amount you paid for electric service
during the year. If margins are 10%, the amount left after all
expenses are paid, then 10% of the amount you paid for
electric power that year will be credited to your Capital
Credit account.
This allocation is done
only once a year. You will be sent an allocation statement
each year, which lists the balance in your Capital Credit
account, and the amount allocated that year. This statement is
NOT A BILL. It is a statement of your equity, or ownership, in
LEC.
No. Your Capital Credit
account is a separate account and is not interchangeable with
your normal consumer account. Retirements from Capital Credits
must be done fairly and equitably for all members of the
cooperative.
No.
Because LEC is a non-profit, member-owned company, you do not receive
interest or dividends on your Capital Credits. To pay interest,
we would have to raise your present electric rates to cover
the cost of the interest.
Upon approval of the Board
of Trustees and if the conditions of the lenders are met, then
Capital Credits will be paid back to the members.
Capital Credits are also
paid to the estates of deceased members when a copy of the
death certificate is on file. The name(s) on the membership
application/card are the only ones for which Capital Credits
can be earned and thus paid to.
If you move from our
service area, the Capital Credits accumulated in your account
will remain in your name. It is important that you keep LEC informed of your current address so that we can
send you a refund when a general retirement is made. Click here
to send us a change of address.
The last year you receive
service from LEC is the last year you will receive
an allocation and a Capital Credit statement.
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