2025 Capital Credit Allocation
Understanding the impact of recent storms
As a member of Missoula Electric Cooperative (MEC), you will often hear the terms capital credit allocation and capital credit retirement. While they are closely related, they represent two different parts of the cooperative financial process.
A capital credit allocation occurs when the cooperative assigns a portion of its annual operating margins to members based on how much electricity each member used during that year. An allocation is not a return of dollars; it is a notice to members that a share of the cooperative’s operating margins has been assigned to them as owners. This notice typically appears on members’ billing statements in April or May following the close of the financial year. The allocated amount represents the members’ ownership interest for that year and remains invested in MEC for a period of time to help support ongoing operations and infrastructure investments.
A capital credit retirement, on the other hand, is the point in the future when those previously allocated amounts are returned to members in the form of bill credits or cash. Because electric cooperatives must maintain strong financial stability to operate the electric system and invest in long-term infrastructure, allocated capital credits are typically held and reinvested in the cooperative for a period of years before they are retired and paid back to members. This process allows the cooperative to operate on a cost basis while still returning operating margins to the member-owners over time.
This distinction is important as members review their 2025 capital credit allocation, which will appear on billing statements in April or May of this year. Operating margins for 2025 were already expected to be much lower than normal as we continue to navigate the dramatic increase in wholesale power costs. The severe storms that struck the system in late December added nearly $1.5 million in unexpected restoration expenses, a sizeable portion of which reduced operating margin for the year. As a result, the capital credit allocation for 2025 will be significantly lower than in prior years.
To put this into perspective, average allocations for the past five years have been nearly $1.8 million annually, while the 2025 allocation will be less than $10,000. It is important to note, however, that this situation does not affect the capital credit retirement scheduled for 2026. As of today, the cash or bill credits returned to members in June through the retirement of older capital credits is expected to continue at normal levels as previously budgeted.
It is also important to note that MEC is pursuing federal disaster assistance for the December 2025 storm event. The governor has issued a disaster declaration, and the
