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Joining
Together |
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In
1935, when the Rural Electrification Administration
(REA) was established,the
federal government took a hand and the rural people
joined together in rural electric cooperatives,
borrowed the money the government made available
and built their own lines to bring light and power
right to where it was needed — to their own
homes and farm buildings.
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Buying
on "time"
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- You know
how it is when you borrow to buy something —
when you buy something "on time." Almost everyone
has done this in one way or another. A home mortgage
is one example that pretty closely fits the situation.
You agree
to repay the full amount to the lenders in definite
payments, at regular intervals, until the entire loan
is paid back. In addition, you pay interest to the
lender — the "rental" they charge for letting
you use their money.
Each time
you send a payment to your mortgage holder —
your banker, perhaps — part of what you send
pays this rent bill for the money, and the balance
is actually a part of the original loan that is repaid.
And, of course, each time you pay off some of the
loan, the bank's share of ownership in your home gets
less and your share of ownership increases. Now, at
any given moment, just how much of your home do you
own?
Let's suppose
that after each payment your banker would send you
a slip of paper, listing the total amount you have
paid back and adding a note something like this: "This
figure represents the amount of capital investment
in your home with which you are now credited." So,
that figure would be your Capital Credit.
And that's
precisely what "capital credits" means when used in
connection with your electric cooperative. For example,
suppose your electric system's total assets today
add up to an even twenty million dollars, and further
suppose that your cooperative's balance remaining
to be paid back stands at 1.3 million dollars. This
leaves your co-op owning outright 18.7 million dollars
worth of poles, lines, buildings, equipment, and so
on, with no strings attached. Your capital credits
represent your share of this 18.3 million dollars
of ownership, and the amount of your share is determined
by the amount of capital you have invested.
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| Your
electric bill |
- Not all
members are credited with the same amount of capital
investment, since not all members invest the same
amount of capital.
The electric
rate on which your monthly bill is based includes
the actual cost of the electricity itself; it includes
smaller amounts to pay for maintaining poles and lines,
to provide needed equipment, to staff your business-managed
cooperative headquarters. It also includes a small
amount to be saved up and held in reserve for future
expansion or to meet emergencies.
In addition
to these is the "capital credit" portion of your co-op's
income — the portion it receives from members
above and beyond these costs of delivering electric
service to you and your neighbors, to your farms,
homes, and businesses.
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| Invest
more — own more |
- The capital
credit portion of your co-op's income is the money
that is available each year to pay back on the government
loan. It includes the amount you paid for electricity
above the actual cost of service. The more electricity
you used and paid for, the more you contributed to
this capital investment. So, if your electric bills
totaled, say, $800 for last year, you contributed
twice as much as did a neighbor whose bills added
up to only $400. It follows, then, that your capital
credits will total twice as much as your neighbor's
for that year.
Your capital
credits are your share of outright ownership in your
electric cooperative's assets. They represent the
actual capital you have invested.
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| Getting
your share |
- When your
cooperative's loan — or a sizable portion of
it — has been repaid, the funds that now are
used to pay off the loan will be used to repay you
for the capital you have invested. Many electric cooperatives'
capital credits are being paid on a revolving basis.
Your capital credits will paid to you even though
you may have moved from the co-op's lines before repayment
of these capital contributions was started, unless
such capital credits have been assign pursuant to
your cooperative's bylaws.
Your capital
credits notices tell you, from year to year, how much
you will have coming. In telling you of your share
of ownership they emphasize the finest thing about
the cooperative — it's yours.
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| Every
member-owner will be a part owner |
- Always.
You are a part owner now. How much do you own? You
can find out by adding up your capital credits. That's
the answer, exactly.
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Any
questions? Please feel free to send an e-mail
if you have any further questions about Capital Credits. |
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