A member-owned cooperative does not technically earn profits. 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 FreeState to finance operations and — to a certain extent — construction, with the intent that this capital will be repaid to you in later years.
Allocated capital credits appear as an entry on the permanent financial records of the association and reflect your equity or ownership in FreeState. When capital credits are retired for a certain year, a bill credit is issued to you if you had an allocation in that year. Retirements are generally 18-20 years after the year in which the margins were earned.
You should see an allocation notice printed on your bill annually after the finances for the previous year have been audited.
Capital credits are calculated by FreeState for everyone who purchased electricity during a year in which the utility earned margins. Your membership activates your capital credits account.
The amount of capital credits you earn 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 service you buy, the greater your capital credits account. The sum of your monthly bills for a year is multiplied by a percentage to determine your capital credits.
The percentage of your total payment that is allocated as capital credits varies from year to year. Capital credits are only allocated for a year in which FreeState earns margins. Since capital credits are a member’s share of the margins, no credits are allocated for a year with no margins.
No. Your electric bill is due now, whereas you may not be entitled to be paid your capital credits for many years.
Not necessarily. The Board of Directors must authorize a retirement before you receive a bill credit. When considering a retirement, the Board analyzes the financial health of the association and will not authorize a retirement if FreeState Electric Co-op cannot afford it.
If you move off the FreeState system, any capital credit retirements will be mailed to you if the board approves a general retirement of a year for which you have a capital credit allocation. It is important to provide the cooperative with a forwarding address.
If you had an unpaid balance on your account the capital credits will be applied to that balance first.
If you have moved or changed names please call the cooperative to find out if your capital credits are among those unclaimed.
It is always a good idea to make the cooperative aware of any address or name changes, even if you have moved off the system. You may still be entitled to a payment.
The capital credits of a deceased member may be refunded without waiting for a general retirement. However, these estate payments are not automatic. A representative of the estate must request the credits. Call FreeState and we will provide you with the necessary paperwork.
Capital credits will be paid at a discounted rate for a living spouse. If both owners of the account are deceased, their heirs may be eligible for a discounted refund of any unpaid capital credits after the account is finalized. If retirement is approved by the Board, a check will be issued to the estate and the account closed.