Victory Electric is a not-for-profit electric cooperative with members who share in the ownership, maintenance, construction and prosperity of the cooperative. A benefit of cooperative membership and ownership is the share in the earnings/margins Victory Electric earns each year. As a member, you are assigned - or allocated - a portion of the margins (revenues in excess of expenses) accumulated by the cooperative during the year.
Victory Electric’s rates are set to bring in enough money to pay operating costs, make payments on loans, and provide an emergency reserve. A cooperative does not earn profits; instead, when revenues exceed the expense of providing electric service it is considered “margins” and returned to you in the form of “capital credits.” Capital credits are the difference in operating costs and revenues and denote each member’s ownership of the cooperative. The margins represent a contribution of operating capital by the membership to the cooperative with the intent the capital will be retired (repaid) to you in later years.
The amount of capital credits you earn in a given year is based upon the yearly margins in relation to the amount of capital you contribute through payment of your electric bills. The more electricity you use, the greater your capital credit allocation.
The allocation of 2018 margins to members doing business with Victory Electric has been calculated and assigned. Typically, a capital credit allocation notice is mailed to you. This year, your allocation will appear as a line item on your September or October electric bill statement to inform you of your accrued 2018 equity amount. The allocation amount will appear on the bill for those who were members in 2018, and will only appear on the bill of your primary account. For those who are no longer members, you will receive a separate allocation notice in the mail. This amount is only an accounting credit, and is not a refund. It cannot be claimed at the present time nor can it be applied against your current electric bill.
Allocated vs retired capital credits
Allocated capital credits are the member’s share of net margins and reflect your equity and ownership in Victory Electric. Members are allocated capital credits, and will receive an allocation notice, each year the cooperative earns positive margins. This money is set aside to be used as operating capital for improvements and maintenance over a period of years.
A retirement is the amount a member receives as a refund. It is a portion of your total allocation. When capital credits are retired, a check is issued and your equity in the cooperative is reduced. Retirements can be years after the year in which the margins were earned/allocated. Until retirement, an allocation has no cash value. The decision to refund (retire) capital credits rests with the Victory Electric board of trustees and is dependent on the financial situation of the cooperative, bylaw provisions, and the requirements of our lenders.
Remember, you must be a member and have service in your name to have capital credits allocated to you. If you are receiving electric service in someone else’s membership or the service is in the name of a deceased person, you will not receive capital credits. Any future capital credit retirements will be issued in the name of the person on the membership or the estate of a deceased member. Should you discontinue service with Victory Electric and/or change current mailing address, please notify us of the new address, as there may be future correspondence relative to the final disposition of these capital credits.
Capital credits should not be confused with profits, which are a return on capital. Retirement of capital credits is a return of member-furnished capital. Electric cooperatives exist not to make a profit, but to provide low-cost electricity.
For more information to help you better understand capital credits and explain how your investment in Victory Electric works, visit our Capital Credits page here.