Capital Credits FAQ
This page contains the most frequently asked questions about capital credits and may answer questions you have regarding the program. If you have additional questions, please contact South River EMC at 910-892-8071.
What are capital credits?
Because South River EMC is a cooperative, owned by its members, it does not technically earn profits. Instead, any revenues over and above the cost of doing business are considered “margins.” These margins represent an interest-free loan of operating capital by the membership to the cooperative. This capital allows South River EMC to finance operations and — to a certain extent — construction, with the intent that this capital will be repaid to you in later years.
What’s the difference between allocated and retired capital credits?
Allocated capital credits appear as an entry on the permanent financial records of the cooperative and reflect your equity or ownership in South River EMC. When capital credits are retired, a check is issued to you and your equity in the cooperative is reduced. Checks are currently issued 19 years after the year in which the margins are earned.
How often will I receive an allocation notice?
South River EMC prints an allocation notice in the cooperative newsletter, the Communicator, annually after the finances for the previous year have been audited.
What do I have to do to start accumulating capital credits?
Capital credits are calculated by South River EMC for everyone who purchases electricity during a year in which the utility earned margins. No special action is required to start a capital credits account. Your membership with South River EMC activates your capital credits account.
How are capital credits calculated?
The amount of capital credits you earn in a given year is based upon the amount of capital you contribute to the association through payment of your monthly bills. The more electricity you buy, the greater your capital credits account — although the percentage will remain the same. The sum of your monthly bills for a year is multiplied by a percentage to determine your capital credits.
What percent of my bill is returned as capital credits?
The percentage of your total payment that is allocated as capital credits varies from year to year, depending upon the success of the cooperative. Capital credits are only allocated for a year in which South River EMC earns margins. Since capital credits are a member’s share of the margins, no credits are allocated for a year with no margins.
Do I have to be a member for an entire year to earn capital credits?
No. Capital credits are calculated based upon a member’s monthly bills. If you are billed for electricity for even one month, you will accumulate some capital credits, if South River EMC earned margins in that year.
Can I use the capital credits I have allocated to pay my electric bill?
No. Allocated capital credits may not be used to pay current bills. Your electric bill is due now, whereas you may not be entitled to be paid your capital credits for many years.
What happens to the capital credits of a member who dies?
The capital credits of a deceased member may be paid without waiting for a general retirement. However, these estate payments are not automatic. A representative of the estate must request the credits by submitting an official Certificate of Death and some legal document from the Clerk or Court’s office identifying them as the legal representative of the estate. In order to maintain financial stability and to be fair to all members, the Cooperative reduces the amount of estate capital credits withdrawn early to reflect the time value of money. Administrators can choose to receive capital credits at the scheduled retirement date with no reduction. The reason for discounting the capital credits is that they are being pulled from the cooperative’s operating capital and if this were performed routinely, the cooperative would need to borrow additional money or raise member rates to secure the necessary operating capital.
Will I receive a capital credits check every year?
Not necessarily. The Board of Directors must authorize a retirement before you receive a check. When considering a retirement, the Board analyzes the financial health of the cooperative and will not authorize a retirement if South River EMC cannot afford it.
What happens to my capital credits when I leave the South River EMC service area?
Your capital credits remain on the books in your name and member number until they are retired. Because payments are made 19 years after credits are earned, you should ensure that South River EMC always has your current mailing address.