We hope you noticed the credit issued on your August electric bill. That credit represented your share of the $2,000,000 patronage capital credit refund authorized by your Board of Directors for 2021.
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.
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.
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:
Q. If I move out of Southeastern’s service area, can I receive a check for my capital credits balance?
A. 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.
Q. Do I earn interest on the capital credits in my account?
A. 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.
Q. What about businesses and capital credits?
A. 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.
Q. What’s the difference between buying stock in an Investor Owned Utility (IOU) and having capital credits with Southeastern?
A. 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.