By receiving electric service from MEC you become a member/owner of a non-profit electric membership cooperative. MEC is owned by those it serves.
What is Different About a Cooperative?
MEC policies and procedures are determined by a seven-member Board of Trustees which is elected for three-year terms. They are members of the Cooperative and are the voice of the members in establishing the policies and procedures of the Cooperative. They are also the regulatory authority for the Cooperative.
MEC is a non-profit corporation. Any funds collected above the cost of operation (called margins) are annually assigned to our members in the form of Capital Credits. We periodically refund to our member’s Capital Credits when the financial condition of the Cooperative permits. Each year a statement will be mailed to you concerning your Capital Credits. If you have any questions about your equity in your business, call us.
As a new member of the Missoula Electric Cooperative, the concept of Capital Credits may be new to you – even its name may be confusing to you. We hope that this explanation will answer some of your questions.
Electric cooperatives were first organized as a way to borrow money to build electrical systems into rural areas. The lender, a federal agency, formerly called the Rural Electrification Administration (REA) and now called Rural Utilities Services (RUS), supplied loan funds and covered the investment by taking a first mortgage on the Cooperative’s property. As the first mortgage holder on the property, RUS sets conditions on the Co-op’s operations to ensure that the mortgage and interest payments are met.
When the REA set up the loan program, it stipulated that the equity ownership gained by the Cooperative should be transferred back to the members in the form of Capital Credits. Thus, all money paid by members on their electric bills, in excess of the actual cost of providing them with power, should be allocated back to them in the form of Capital Credits.
Just as RUS sets requirements for the allocation of Capital Credits to members, it also sets equity levels so that there are sufficient funds to pay back the loans with interest first. It is only after that level is reached that Capital Credits can be paid back. If we did not follow the terms of the loans, it could be revoked and we would have to look elsewhere for funds, usually at higher interest rates.
Capital Credits are YOUR ownership in the Cooperative.
Frequently Asked Questions About Capital Credits –
How are Capital Credits allocated?
Capital Credits are allocated annually to each member. The margin percentage amount is applied to the amount you paid for electric service during the year. If margins are 10%, the amount left after all expenses are paid, then 10% of the amount you paid for electric power that year will be credited to your Capital Credit account.
This allocation is done only once a year. You will be sent an allocation statement each year which lists the balance in your Capital Credit account and the amount allocated that year. This statement is NOT A BILL. It is a statement of your equity, or ownership, in the Cooperative.
Can you apply my Capital Credits to my bill?
No. Your Capital Credit account is a separate account and is not interchangeable with your normal consumer account. Retirements from Capital Credits must be done fairly and equitably for all members of the Cooperative.
Is there interest on my Capital Credits?
No. Since the Cooperative is a non-profit, member-owned company, you do not receive interest or dividends on your Capital Credits. To pay interest we would have to raise your present electric rates to cover the cost of the interest.
When are Capital Credits paid back?
Upon approval of the Board of Trustees and if the conditions of the lenders are met, then Capital Credits will be paid back to the members.
Capital Credits are also paid to the estates of deceased members when a copy of the death certificate is on file. The name(s) on the membership application/card are the only ones for which Capital Credits can be earned and thus paid to.
What if I move?
If you move from our service area, the Capital Credits accumulated in your account will remain in your name. It is important that you keep the Cooperative informed of your current address so that we can send you a refund when a general retirement is made.
The last year you receive service from the Cooperative is the last year you will receive an allocation and a Capital Credit statement