Capital Credits

What are Capital Credits?

Capital Credits reflect each member’s ownership in the Cooperative. Mecklenburg Electric Cooperative does not earn profits in the sense that investor-owned utilities earn profits for their investors. Instead, any margins or revenues related to the sale of electric service remaining after all expenses have been paid are returned to the Cooperative’s members in proportion to their electrical usage.

How are Capital Credits returned to the member?

“Retiring,” i.e., paying back or returning capital credits, is a two-step process:

Step 1: Allocation — An allocation determines your share of the Cooperative’s margin in a particular year. Margins are “allocated” or assigned to members who belong to the Cooperative during the year in which a margin is generated. The allocation is based on the member’s proportion of electrical usage for that year. Each member’s portion is referred to as a “capital credit allocation.”

Step 2: Retirement — Once capital credits are allocated, they are retained by the Co-op until retirement of a given year. They are retained because capital credits are the most significant source of equity for the Cooperative. Equity is used to help meet the expenses of the Co-op, such as paying for new equipment to serve members and repaying debt. Capital credits help keep rates at an affordable level by reducing the amount of funds that must be borrowed to grow and maintain MEC’s existing electric system. The Board of Directors reviews the Cooperative’s financial health each year and may declare a retirement (your cash back payment), whereby a portion of your capital credits are returned to you.