Capital Credits Explained

Capital Credits Explained

Capital Credits

What are capital credits?
Mt. Wheeler Power is a cooperative, owned by its members, so it does not technically earn profits. Instead, any revenues over and above the cost of doing business are considered “margins.” These margins represent an interest-free loan of operating capital by the membership to the cooperative. This capital allows Mt. Wheeler Power to finance operations and to a certain extent construction, with the intent that this capital will be repaid to you in later years.

What’s the difference between allocated and retired capital credits?
Allocated capital credits appear as an entry on the permanent financial records of Mt. Wheeler Power and reflect your equity or ownership. When capital credits are retired, a check is issued to you and your equity in the association is reduced. Checks are generally issued 18-20 years after the year in which the margins were earned.

What do I have to do to start accumulating capital credits?
Capital credits are calculated by Mt. Wheeler Power for everyone who purchased electricity during a year in which the utility earned margins. No special action is required to start a capital credits account. Your Mt. Wheeler Power membership activates your capital credits account.

How are capital credits calculated? 
The amount of capital credits earned in a given year is based upon the amount of capital you contribute to the association through payment of your monthly bills. The more electric services you buy, the greater your capital credits account – although the percentage will remain the same. The sum of your monthly bills for a year is multiplied by a percentage to determine your capital credits.

What percent of my bill is returned as capital credits?
The percentage of your total payment that is allocated as capital credits varies from year to year, depending upon the success of the cooperative. Capital credits are only allocated for a year in which Mt. Wheeler Power earns margins. Since capital credits are a member’s share of the margins, no credits are allocated for a year with no margins. For years in which MWP earned margins, the allocation generally ranged from 4 to 12 percent of annual bills.

Do I have to be a customer for an entire year to earn capital credits?
No. Capital credits are calculated based upon a member’s monthly bills. If you are billed for service for even one month, you will accumulate some capital credits, if MWP earned margins in that year.

Will I receive a capital credits check every year?
Not necessarily. The Board of Directors must authorize a retirement before you receive a check. When considering a retirement, the Board analyzes the financial health of the association and will not authorize a retirement if Mt. Wheeler Power cannot afford it.

What happens to my capital credits when I leave the MWP service area?
Your capital credits remain on the books in your name and member number until they are retired. Because payments are made approximately 18-20 years after credits are earned, you should ensure that Mt. Wheeler Power always has your current mailing address.