Oregon Trail Electric Cooperative’s Board of Directors has approved the retirement of $3.5 million in capital credits to its members, the second-highest amount OTEC has ever returned.
“I am extremely pleased that OTEC has financial strength to be able to retire capital credits for the 23rd consecutive year. Co-ops exist to make sure the needs of their members are being met, not to make a profit” says Anthony Bailey, OTEC’s Chief Financial Officer.
Capital credits retirements are one of the more visible benefits of membership in an electric cooperative. Returns of less than $15 are applied to the member’s account to reduce their December bill. Members with greater amounts receive a check in the mail.
Since OTEC first began retiring capital credits in 1996, the co-op has returned $43 million to our member-owners. The $3.5 million returned to member-owners beginning in December equates to more than 4 percent of all the capital credits balances on file.
What are capital credits?
Capital credits are each member-owner’s share of margins earned during the year. At the close of the year, after all operating expenses have been paid, remaining margins are allocated to each member’s capital credits account based on the amount of services purchased during the year.
These capital credits become each member’s “owners’ equity” and investment in OTEC.
Capital credits serve an important purpose. They reduce the cooperative’s need to borrow for plant upgrades or additions. OTEC uses the capital credits for a period of time before returning it back to the members. By maintaining an equity level recommended by our lenders, OTEC benefits from lower borrowing rates and ensures the cooperative remains financially stable into the future to serve its member’s needs.
Since the 1990’s, OTEC has returned capital credits when financially possible. Unlike an investor-owned utility, which returns a portion of profits back to their stockholders, non-profit cooperatives like OTEC allocate and periodically return those funds back to the member-owners of the cooperative who live in our communities.