A Benefit of Co-op Membership
When you signed up to receive electric service from Beltrami Electric, you became a member of an electric cooperative. While investor-owned utilities return profits to investors and stockholders, Beltrami Electric Cooperative is a member-owned, not-for-profit cooperative, and we allocate excess revenue to members as "capital credits", and retire - or pay - them when the co-op's financial condition permits.
It PAYS to be a member-owner of Beltrami Electric! Earning and receiving capital credits is just one of the benefits of membership in Beltrami Electric Cooperative, Inc.
Common Capital Credits Questions:
WHAT ARE CAPITAL CREDITS?
Capital Credits are retained margins at the end of a year at a not-for-profit electric cooperative. They represent a significant source of equity for Beltrami Electric. Since a cooperative’s owners are also the people the co-op serves, capital credits reflect each member’s ownership in the cooperative. This differs from dividends investor-owned utilities pay shareholders, who may or may not be customers of the utility.
WHERE DOES THE MONEY COME FROM?
Member-owned, not-for-profit electric utilities like Beltrami Electric set rates to generate enough money to pay operating costs, make payments on any loans and pay for wholesale power. At the end of each year, we subtract expenses from the total amount of money collected during the year. The balance is called a “margin.”
HOW ARE MARGINS ALLOCATED?
Margins are allocated to members as capital credits based on their purchases from the cooperative—how much power the member used. Member purchases may also be called patronage. Once a year you may receive notification of an allocation. The notification is an informational notice to let you know about your share of the capital credits that will eventually be paid to you when a general retirement is issued by the board of directors. An allocation represents your share of ownership in a nonprofit, member-owned cooperative.
WHY DOES MY COOPERATIVE REFUND CAPITAL CREDITS?
Doing so follows one of our seven cooperative principles—Members’ Economic Participation. This principle states: “Members are allocated surpluses for any or all of the following purposes: developing the cooperative, possibly by setting up reserves and benefiting members in proportion to their transactions with the cooperative; and supporting other activities approved by the membership.”
DOES OTTERTAIL POWER OR MINNESOTA ENERGY RESOURCES REFUND CAPITAL CREDITS?
No. Capital credits only exist at not-for-profit electric cooperatives owned by their members.
ARE CAPITAL CREDITS TAX FREE?
Capital credits are tax free if the property served by Beltrami Electric was used strictly as a residence. If the residence was used for business purposes, members should contact their tax advisors.
ARE CAPITAL CREDITS REFUNDED EVERY YEAR?
Each year, the Beltrami Electric Board of Directors makes a decision on whether to refund capital credits based on the financial health of the cooperative. During some years the co-op may experience high growth in the number of new accounts added or severe storms may result in the need to spend additional funds to repair lines. Both events might cause the board to defer any capital credit refunds. For this reason, BEC’s ability to return margins to members in the form of capital credits reflects the cooperative’s strength and financial stability.
HOW OFTEN DO MEMBERS RECEIVE CAPITAL CREDITS?
Beltrami Electric members usually receive capital credits once a year each December. In addition, estates requesting early retirement at net-present value are processed throughout the year.
WHAT IF I HAVE MOVED?
If you move or no longer have electric service with Beltrami Electric, it is important that you keep your address current, so that future disbursements can be properly mailed. Capital credits are reserved for members even if they move out of the BEC service area. We will make a diligent effort to send a check by mail.
BESIDES THE GENERAL RETIREMENT OF CAPITAL CREDITS, ARE THERE ANY OTHER TIMES THAT THEY ARE PAID OUT?
The other time capital credits are paid out is to settle estates. Capital credits on an estate account may continue to retire during the scheduled general retirement until fully retired. However, the estate representative may elect to take an accelerated retirement of the capital credits. The calculation for the accelerated retirement is based on the net-present value of money. The Cooperative has determined this procedure to be fair for our membership as a whole, since the rest of our members must keep their capital credits invested in the Cooperative until retired during the general retirement each year.