Capital Credits by jfk37776


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									About Capital Credits

Nueces Electric Cooperative is organized as a cooperative, owned by its
members. As a cooperative, Nueces Electric Cooperative does not earn profits.
Instead, any revenues and other income over and above the cost of doing
business during a given year are considered "margins."

Margins are treated as capital contributed by the membership to the cooperative
to help reduce the cost of borrowing and hold down rates. Margins are used for a
variety of operating and capital costs and are typically repaid in the future to the
members of record for the year in which they were earned.

The Nueces Electric Cooperative Board of Directors decides each year how
much of these margins need to be retained by the cooperative to keep it
financially strong, and how much should be allocated back to the members. A
percentage of the margins (determined by the Board of Directors) are allocated
to each member of the cooperative who bought services from Nueces Electric
Cooperative during the year these margins were earned. Allocations are placed
in a member’s capital credit account held by the cooperative and are called
“capital credits.” The actual dollar amount so "credited" will vary from member to
member because it is based upon total individual annual purchases. Each
member's capital credit account may reflect accumulated allocations over the
period of years that the member continues to receive service.

Your annual “Capital Credits Allocation Notice,” issued to co-op members, shows
the individual member's capital credits allocation for a given year. This represents
your individual share of the margins and it is represented by an accounting entry
in Nueces Electric Cooperative records. An allocation is not the same as stock or
cash. Nueces Electric Cooperative’s financial statements reflect “current member
equity” refers to the dollar value of a member's allocated — but not yet retired —
capital credits.

Allocated credits are typically paid to the members in cash over time through a
process called “capital credits retirement.” The Nueces Electric Cooperative
Board of Directors usually considers a retirement of capital credits annually.
When a capital credits retirement is authorized by the Board, both the dollar
amount and year(s) to which the allocations relate are specified when refunded -
in the form of a bill credit or, if no longer a member of the co-op, a check. If you
are no longer a member, no checks are issued if your refund amount is less than
$5. In that case, your refund will be issued during a future retirement when the
total of your retired capital credits exceeds $5.

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