Capital Credits are a valuable benefit for members of Lake Region Electric Cooperative. Over the years, LREC has returned millions of dollars in capital credit payments to both current and past cooperative member-owners.
It starts when you pay your bill:
LREC tracks how much electricity you use and pay for throughout the year. Each payment you make is your contribution to the day-to-day operating costs of your electric cooperative.
Recording and reporting:
Like all companies, at the end of each year, we calculate our annual margin (profit). But because we are a cooperative, we divide this margin proportionally by the amount of electric each member purchases throughout the year and allocate margins to each members account. This is called Capital Credit allocation.
Where’s the money?
The money, called Capital Credits, is invested in equipment and workforce needed to meet the current and growing demand for electricity. It is your equity in the cooperative.
Do I ever receive this money?
You do! This process is called retirement. Each year, LREC’s Board of Trustees reviews company finances, and when our financial condition permits, the Board decides to retire (pay) Capital Credits to our members based on their allocated share. Notices about retirement totals and years are printed in the December newsletter. Make sure to keep us updated on addresses so we can contact you about Capital Credit retirements.
- Q. What are Capital Credits?
Capital credits reflect each member’s ownership in the cooperative. Any margins related to the sale of electric service remaining after expenses have been paid are returned to the cooperative’s members in proportion to their electrical use.
Allocation of Capital Credits
An allocation is your share of the cooperative’s margin for a particular year. Allocations are based on your electric use for that year.
Retirement of Capital Credits
After capital credits are allocated, LREC retains them for several years as the most significant source of equity for the cooperative. Equity is used to help meet the infrastructure needs of the co-op, such as system improvements for reliability and expansion. Capital credits help keep rates affordable by reducing the amount of funds that must be borrowed to grow and maintain LREC’s existing electric system.
Annually, the board of directors reviews LREC's financial health and may declare a retirement, whereby a portion of your capital credits are returned to you.
- Q. What is the difference between an allocation and a retirement?
Allocations are proportional credits made to each member's account, while retirement is a payment of capital credits.
- Q. Can my Capital Credits allocation be applied to my current electric bill?
No. Your capital credit allocations for this year are new credits allocated to a capital credit account maintained in your name. Allocations are used as the operating capital of LREC. They are not available as cash-in-hand until they are retired and paid back to you.
- Q. What happens to my Capital Credits if I move and terminate service with LREC?
Your capital credits belong to you! Your existing capital credit balance will be maintained in a capital credit account in your name until it is retired (paid) in full. It is essential that you maintain a correct mailing address with LREC, so you receive future capital credit payments.
- Q. What if I pass away before my capital credits are paid out?
Your capital credits will transfer to your estate. If the capital credits were allocated to a joint account, and one spouse dies, the surviving member may receive payment of the retired capital credits after completing the necessary paperwork. If you are the sole member, the discounted capital credits will be paid to your estate after the necessary paperwork is received from your estate’s executor.
- Q. Why can't my Capital Credits allocations be refunded to me all at once?
Capital credit funds are used for long-term investments, like reliability improvements and grid maintenance projects. Capital Credit funds help LREC remain financially sound, ensuring stable, reliable electric service for all members.
- Q. When do you pay (or retire) Capital Credits?
LREC retires capital credits at 100% - 30 years after the initial allocation. Before declaring retirement, LREC’s management and Board of Directors review LREC’s financial health and retire money from past years and a percent of a current year. So all members will get a return back every December.
- Q. How can I update my mailing address so I receive any future Capital Credits refunds?
Members can update mailing information by calling 918-772-2526.
If you have any other questions about capital credits, call 918-772-2526.