Board of Trustees Approve Capital Credits Retirement

It isn’t often that money gets put back into your pocket these days.

FreeState is doing just that in July for members who purchased electricity in the years 1994 and 2024.

In May, the board of trustees has approved a capital credits retirement to be paid in July. We hope the timing will help alleviate summer bills.

One of the advantages of your cooperative membership is earning capital credits each time you pay a bill.

So, what are capital credits?

Capital credits are a member’s equity or ownership in the cooperative. As a member-owner of the cooperative, you invest in your service with every bill you pay. At the end of each year, any operating capital that is left over is allocated (or divided) out amongst members who purchased electricity in that year. The allocation is the share of margins (what’s leftover) each member is entitled to, and it is proportional to the amount of electricity purchased.

Capital credits are allocated to members and then temporarily invested back into the cooperative to avoid borrowing money to fund operations. These dollars also help us operate each day to provide you electric service at your home or business 24-hours a day, seven days a week, 365 days per year. This also means making improvements to infrastructure for safety and reliability.

Your allocations work hard for the cooperative until they are retired and returned to the members. Each year, the board of trustees looks at the financial health of the cooperative. They vote to determine how much money can be retired and from which years of operation. Any member who purchased electricity during any of the retirement years will get money back, typically in the form of a bill credit.

Here are a few of the most frequently asked questions about capital credits. For more information, visit www.freestate.pub/capitalcredits.

HOW DOES A MEMBER GET CAPITAL CREDITS?

When a member begins purchasing electricity, they get two accounts — a billing account and a capital credits account. Regardless of how many times you move or how many billing accounts you may have, you always have one capital credits account that stays with you.

Whatever margins FreeState has at the end of the year are allocated (or assigned) to each member’s capital credits account.

WHEN DO I GET MY CAPITAL CREDITS?

Even though the cooperative allocates capital credits to members each year, the money is not paid out right away. The money is used for several years for the following purposes:

To increase equity, giving the cooperative more borrowing power;

To avoid borrowing money as much as possible; and

To have reserves in case of an emergency.

The board of directors looks at FreeState’s financial condition each year and then decides if it is favorable to retire capital credits. FreeState uses a LIFO/FIFO hybrid method for retiring capital credits that combines aspects of both Last-In, First-Out (LIFO) and First-In, First-Out (FIFO) approaches. This method ensures more members experience capital credits returns.

HOW DO I GET MY CAPITAL CREDITS?

To make this as convenient as possible, the funds will be returned to members as a bill credit directly on July’s electric bills. The amount received during any capital credits retirement is based on the allocation for the year targeted for retirement. The allocation was based on the amount of electricity the member purchased during that same year.

Active accounts will receive a bill credit. If you move off the system and have an inactive account, you will be mailed a check. This is why it is important that you keep your address current so that future retirement checks can be mailed to you. Capital credits are reserved for members even if they move out of the FreeState service area. FreeState will make a diligent effort to send a check by mail.