Being a customer of Southeastern Electric Cooperative also makes you a voting member. As a member of a cooperative, you get to enjoy the benefits of membership:
- Reliable, Cost-Based Electric Service; We Do Not Seek to Make a Profit
- Access to Energy-Related Information, Products & Services
- Capital Credits, a Share In the Cooperative’s Margins (Surplus Revenues)
- Attending & Voting at the Southeastern Annual Meeting
- Representation by a Ten-Member Board of Directors
- Member Bus Tours to Electric Generation & Transmission Facilities
- Youth Scholarships & Tours To Washington, D.C.
Southeastern provides retail electricity and energy-related products and services to over 15,000 members, serving rural and urban areas in southeastern South Dakota. This membership includes approximately 3,200 members in southeastern and southwestern Sioux Falls. Our members range in size from residences and family farms to hospitals and ethanol plants.
In theory, patronage capital credit refunds return to our members the little extra (margin) they paid in prior years to ensure that Southeastern had adequate reserves to fund the day-to-day operations of the cooperative. By returning those dollars after the fact, we have (in essence) provided electric service in prior years to our members at cost. As a non-profit electric cooperative, Southeastern strives to demonstrate the benefits of cooperative philosophy and the principles that have made, and continue to make, cooperatives such a successful business model.
- Owned and democratically controlled by the members – the people who use the cooperative’s services or buy its goods – not by outside investors; cooperative members elect their board of directors from within the membership.
- Return surplus revenues (income over expenses or margins) to members proportionate to their use of the cooperative, not proportionate to their investment or ownership share. This is the patronage capital credits program.
- Motivated by service, not profit – to meet the members’ needs for affordable and high-quality goods or services.
- Exist solely to serve the members.
Capital Credit Allocations
At the end of each year, once the “bottom line” has been verified and the books audited by our CPA auditors, we allocate those capital credits to all of the members that received electric service during the year. That allocation is based on your cooperative’s total electric revenue. Each member is allocated the same percentage on your total electric bill and those dollars are accumulated in your capital credit account. Theoretically, your capital credit account is the amount you, as a member, agreed to invest in your electric cooperative. That investment in Southeastern by all members, through their capital credit allocations, represents member ownership and will appear as equity on our Balance Sheet.
Capital Credit Refunds
Refunds of capital credits are only made under certain conditions. It is the Board of Directors responsibility to determine that a refund will not adversely impact the financial condition of your cooperative and will comply with the bylaws and loan covenants before they grant approval. The Board of Directors also establishes the method of refunding capital credits by adopting policies of general application.
If a member dies before the balance of their capital credit account has been refunded, the estate has these options:
- Wait until the balance of the account is returned through future general membership funds.
- Request an early refund of the capital credit account. Under current policy, the value of an early refund is based on the discounted present value of anticipated future membership refunds from the capital credit account. A request from an estate for an early refund must be approved by the Board of Directors.
Frequently Asked Questions
This is a common misconception about capital credits. Unfortunately, you have no vested interest in your capital credits until a refund is authorized by the Board of Directors. In other words, as a member, you agreed that your capital credit allocation is a permanent investment in Southeastern unless the Board of Directors authorizes a refund at some point in time. Your best bet is to make sure Southeastern has your current address on file to ensure that you will receive any future membership refunds.
The answer is no, and the reason is similar to the previous question – you have no vested interest in your capital credits until a refund is authorized by the Board of Directors.
Under Southeastern’s current bylaws, businesses are treated the same as any other member. They receive capital credit allocations, capital credit refunds and are even eligible for estate refunds if they provide proof that the business has ceased to exist in the eyes of the law.
When you invest in an IOU, your stock may increase in value and even pay dividends because the goal of an IOU is to maximize the profits for their stockholders. Stock ownership also gives you voting rights.
Similarly, as a member of an electric cooperative, you have a say in the business through your voting rights and ability to serve on the Board of Directors. However, the big difference is the fact that electric cooperatives are non-profit and strive to keep electric rates as low as possible rather than maximize profits for their stockholders. In essence, as your capital credits are refunded to you in the future, you will have received your electric service at cost.