Capital Credits

Unlike investor-owned utilities, Western Cooperative Electric belongs to the communities we serve. You automatically become a stakeholder in the cooperative when you take service from Western. One of the biggest benefits of being a Member is that any excess revenue gets shared with you over time.

At the end of each year, all revenue received over 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.

Western uses the allocated money as operating capital in this mutually beneficial system. After a determined amount of time, the Board votes to return your share of the revenues. Sending members checks or bill credits for their portion of profits is called a capital credit retirement. The capital credit process is an important component of the Cooperative Difference and why Western is deemed not-for-profit.

You need to know two things about capital credits to understand how they work for you:

1. Allocations: Each year, you are “allocated” your portion of the previous year’s profits based on the amount of electricity you bought from Western in proportion to the total amount of electricity purchased by Western during the year. This amount is put into a “holding account” for several years and used by Western as operating capital for powerline construction, transformers, trucks, inventory, and other equipment.

Capital credits are the underlying principle of the cooperative business model and are one way we keep your electric rates as low as possible. In addition to Co-op Allocations, there may also be Generation and Transmission (G&T) allocations. G&T Allocations are made to your account from our power supplier’s margins. Those “allocations” become your ownership stake in the cooperative, and Western maintains these records in a separate account assigned to you.

2. Retirements: When the Board votes on a capital credit retirement, any member who purchased power from Western in the year being retired will receive a check or bill credit for their allocated amount.

G&T retirements work in the same manner. When the Sunflower Board votes on a G&T capital credit retirement, that money is returned to Western’s members.

Your locally elected Board of Trustees determines the amount of retirement (cash back) each year, based on policies and the cooperative’s financial condition. Typically, these payments are made annually in December through checks or bill credits.

For individuals, capital credits are generally not taxable. We suggest you seek the advice of a tax professional for any specific questions.

It is a member’s responsibility to make sure Western has up-to-date address information at all times. The Member should inform our office of any changes in their mailing address. Hundreds of refund checks are returned to the cooperative with invalid addresses each year. These are called ‘Unclaimed Capital Credits’ and remain on Western’s books until claimed by the Member or a representative of their estate.

The Western Cooperative Electric Association, Inc., bylaws provide for the option of an early retirement of the capital credits of a deceased member to his or her estate (No early retirement of capital credits is allowed in the case of dissolution of a corporation or partnership). Representatives of a deceased member's estate can choose to receive the deceased member's capital credits in a lump sum payout.  To find the dollar amount of the estate retirement, the executor of the estate must contact the cooperative. When ready to make an election regarding the deceased member's estate, the executor of the estate must fill out and sign one of two forms:

• If payment is to be made to an estate, an administrator or executor is, or will be, appointed by the court; then a Request for payment form must be signed. This form, along with a copy of the Letters Testamentary or Letters of Administration for the estate of the descendent must be turned in.

• If payment is to be to a trust, a notarized Affidavit of Transferring Certain Personal Property must be completed by the trustee, along with a copy of the page from the trust that names the trustee.  A copy of the death certificate is also required.  The check is made payable to the trust.

• If a personal representative is not going to be appointed by the court, then a Affidavit of Death and Heirship form, which requires notarization, must be used along with a Request for payment form.  This allows a check to be made payable to the heirs. If the total value of the credits is less than $2500, a Bond of Indemnity form may be filled instead, allowing a single heir to claim responsibility of distribution to the other heirs.

If you wish to have WCE personnel notarize the affidavit (free), please call ahead to ensure that a notary public will be available. The completed Affidavit of Transferring Certain Personal Property and a copy of the death certificate are needed to complete the capital credit transfer or estate retirement.

Each member has a separate capital credit account, which represents the member's ownership in the cooperative. When capital credits are allocated at the end of a year, all members who received electric service during that year will receive an allocation notice showing their current year's allocation.

Upon the death of either spouse in a joint membership, the name of the deceased person is removed from the membership and the membership is then held solely by the surviving spouse.

Members with multiple accounts for different locations will receive a consolidated capital credit allocation statement and/or check whenever possible, grouped under a single membership number. Please note that at times, a separate capital credit allocation statement and/or check will be sent to you. The detail on each account will be displayed on these forms for ease of tracking.