As a not-for-profit electric cooperative, electricity is delivered to members at cost with no excess expenses built in. Rates are structured to provide funds to operate the cooperative, make payments on loans, and provide an emergency reserve. At the end of the year, operating expenses are subtracted from the operating revenue collected during the year and the balance is the operating margin. Margins are allocated to members as capital credits based on their purchases from the cooperative. To date, Salem Electric has paid over $30,000,000 in capital credits to members.
Each year the board decides whether the current financial condition of the cooperative allows for the distribution of capital credits. The board has adopted a policy of annually allocating 5% of the outstanding credits, typically a 20-year cycle.
When a member moves from Salem Electric’s service area they stop earning capital credits. However, credits earned prior to that time still belong to the member. If a member moves off Salem Electric’s service, they should provide Salem Electric with their forwarding address and continue to notify us of future address changes. Without current contact information it is difficult for us to notify members when capital credits become payable.
No, they are not dollars in the bank. Capital credits represent funds that have been invested in the electric utility plant. They pay for capital expenditures and debt repayment.