The difference between a cooperative such as Edisto Electric Cooperative and an investor –owned utility (for profit) is that a cooperative is not for profit and is owned by the members it serves. As a member of any cooperative, you share in the profits of the cooperative. At the end of each fiscal year, all revenue received in excess of operating expenses is allocated back to the membership in the form of allocations called capital credits.
Once allocations are determined, they are put into a holding account where they are held for a number of years and used by Edisto Electric Cooperative to fund capital improvements for items such as power line construction, transformers, inventory and other equipment. Using the allocations or capital credits for a number of years is an underlying principle of the cooperative business model and is one more way to keep rates competitive by reducing the amount of funds that have to be borrowed from financial institutions by your cooperative.
Edisto Electric Cooperative uses the amount allocated for you for a time for capital improvements, but then returns this amount to members in the form of “retirements” or “disbursements” which are actual “cash back” dollars to you. Per cooperative bylaws, your locally elected Board of Trustees determines that the allocations or capital credits for a given year or years should be retired based on the financial condition of the cooperative. Once retirement is determined, payments are usually made in the Fall in the form of checks that are mailed out to the membership.
If a member should move, they need to let us know so that we can make changes to their mailing address. It is the responsibility of the member to notify us of any changes. Returned refund checks are sent back to the cooperative where they will be held for 1 year. After that year has passed, a monthly administrative fee will be assessed against the capital credits until either the funds are claimed by the member or the funds run out due to the monthly administrative fees.
You do not normally have to report your capital credits payment on your income tax. However, if you have questions concerning tax liability, please consult your tax preparer.
For more information about Capital Credits…
Contact our Capital Credit Accountant by calling (803) 245-5141.