Capital Credits are very important to the operation of the Cooperative. The Capital Credits earned by the Member in any one given year is used by the Cooperative as operating Capital until it is paid back to the Members who have earned it. The monies are invested in plant, such as trucks and equipment, used to fund new construction and system improvements, to retire principal on debt and also used to pay back Capital Credits earned by Members in prior years. The Cooperative is mandated to earn certain margins (Capital Credits) each year in order to be eligible to borrow money from Rural Utilities Service (RUS) at low or beneficial interest rates. Requirements are set by RUS to insure that the Cooperative earns enough money to pay back the indebtedness to RUS.

Each member receives a "Statement of Capital Credits" earned by him/her after the end of the year and after the Cooperative's books for that year have been audited and closed. The "Statement of Capital Credits" serves as an accounting of the Members total Capital Credits earned and reflects any changes such as payment or earnings that may have been made during the most current year.

Capital Credits may only be retired, or paid to the Members, upon approval of the Board of Directors of the Cooperative. The Board of Directors will determine whether, or not, repayment of Capital Credits will impair the financial stability of the Cooperative. If the Cooperative's financial stability is not impaired; the Board of Directors may then authorize a total amount of Capital Credits to be retired. Each Member will receive a prorated Capital Credit refund based on their total allocated Capital Credits.

Until 1996, the Board of Directors had authorized repayment of Capital Credits on a rotational basis, first earned first to be repaid. The Members first started earning Capital Credits in 1959. Prior to 1959 the Cooperative had no margins and therefore could not allocate Capital Credits to its Members. All Capital Credits earned by Members from 1959 through 1976 and half of 1977, have been repaid to these Members.

In January 1996, the Board of Directors approved a policy change for the repayment of Capital Credits. Capital Credits are now paid to all Members who paid for power in at least the previous year. With this method of repayment, the current Member does not have to wait 18 years for repayment of Capital Credits.

Heirs of deceased Members will have two options for repayment of Capital Credits. With the first option, the heirs may choose to have the allocated Capital Credits remain in the system with the current Members. The second option for the heirs of the deceased Members is an offer from the Cooperative to buy back the decendents Capital Credits at a discounted rate. The amount of the offer to by back Capital Credits will be 10% of the face value of all allocated and accrued Capital Credits as of the date of the Member's death.

Members who leave the Cooperative system will be given a similar one-time buy back offer. The offer will be 5% of the face value of all allocated and accrued Capital Credits as of the date the Member leaves the system. As an alternative, the Member leaving the system may choose to remain in the system and take payment of Capital Credits in the same manner as active Members.

The total repayment of Capital Credits to Members as of December 31, 1995 is $1,521,123.77.

It is important that you keep us informed of any address change so that you will receive your Capital Credits when they are repaid. Please call our office at 530/233-3511 if you have a change of address, or would like a copy of the General Policy No.309, which pertains to the allocation and retirement of Patronage Capital.