A primary difference between an investor-owned company and a cooperative, such as ourselves, is that we operate with a not-for-profit business model, owned by the member-consumers we serve. An investor-owned (for-profit) company gives excess revenue (dividends) back to its investors, or to those that own stock in the company. When you pay your Egyptian Electric bill each month, you are accumulating equity in your cooperative through capital credit allocation. Margins in excess of the cost to serve members are utilized as operating capital. When the cooperative has a positive margin (excess of income over expenses), the margin is allocated through a capital credits system according to each member’s usage. You will receive an allocation notice each year, usually mid-year, that you have service with us.
Members are assigned an individual capital credit account, separate from their billing account. Capital credits are refunded when the board determines that it will not jeopardize the financial condition of the Cooperative, and refunded in accordance of the Cooperative by-laws. When capital credits are issued, we will mail a check to you at the address we have on file. It is important that you keep your address up-to-date with us even if you move off our lines so that we can find you when a retirement is made.
Our board of directors established a policy that allows discounted capital credit payouts for deceased members. If a former or current cooperative member has passed away, Egyptian Electric should be contacted by a relative or other legal representative, so that the remaining funds in their capital credit account can be properly dispersed. Contact our Capital Credits Coordinator to learn more or if you have any questions.
Unclaimed Capital Credits
Sometimes when a distribution of Capital Credits is made, past members of the cooperative cannot be found. When this happens, these Capital Credits are placed in an Unclaimed Capital Credits account. If you know of or are related to anyone that may have distributed Capital Credits due them, please call us at 800-606-1505 or email us at firstname.lastname@example.org.
Capital Credits Frequently Asked Questions (FAQs)
How are capital credits allocated and retired?
Allocation: Each year, members are allocated the previous year’s margins, based on the amount of electricity purchased (by each member) in relation to the total amount of electricity purchased from all members. An allocation is issued by the board of directors. An allocation represents the member’s share of ownership in a not-for-profit, member-owned cooperative. The current year allocation will be noted on the member’s bill; however, the member does not receive the money or bill credit until the retirement is completed for the applicable year.
Retirement: The margin allocations accumulate over time in the member’s name. They are periodically retired (refunded) when directed by the board of directors based on the financial condition of Egyptian Electric Cooperative Association (EECA).
What do cooperatives do with capital credits?
Every business needs to maintain a suitable balance between debt and equity to ensure its financial health and stability. Capital credits are the most significant source of equity for most electric cooperatives. Equity is used to help meet the expenses of the coop, such as paying for new equipment to serve members and repaying debt. Capital credits help keep rates at a competitive level by reducing the amount of funds that must be borrowed.
What happens to a member’s capital credit if the member no longer has an account with EECA?
A member who terminated service will no longer receive additional capital credit allocations. The balance in the member’s capital credit account is maintained until it is retired in full. It is the member’s responsibility to notify EECA of any address changes so that the member can be located when it is time to retire capital credits allocated to the member’s account. Even if you are no longer on the EECA system, please keep you contact information current. Remember, a member’s capital credits are their ownership in EECA. Thus, this ownership is an asset that belongs to the member.
What happens to a member’s capital credits when they pass away?
Capital credits earned by a deceased member are paid to the member’s estate. To assist the member’s heirs in closing the estate, EECA offers a special capital credit retirement of the outstanding balance of the deceased member’s capital credit account, at a discounted rate. If an estate retirement of the deceased member’s account is not elected, we do encourage the next of kin to complete an affidavit so that the refunded capital credits will be issued to the heir.
Why are some capital credits retirements discounted?
In the interest of fairness to all members, EECA discounts special retirements to estates to reflect the net present value of making a capital credit retirement now, that would otherwise would be paid later. The smaller amount received today, if invested until the normal retirement date, would be equal to the normal retirement amount.
I have an account that is in my deceased parent’s names. Should I obtain membership in my name?
Yes. A membership is required by the person who is receiving electric service. Also, when you obtain a membership in your name, you can request an estate retirement payout for the deceased parent’s capital credit account, where eligible.
Does the member have to report capital credits on tax returns?
Capital credits are a return of money paid for electricity in a previous year and are generally not taxable income for residential consumers, although is always good to discuss first with your accountant. Commercial and industrial consumers should always discuss capital credit returns with their tax advisers.