Sep. 1, 2023
Members who had electric service with North Arkansas Electric Cooperative in 2022 will receive their capital credit certificates for that service in the mail in early September.
These certificates are notices only and cannot be cashed or used as credit against electric bills. They are the co-op’s way of informing each member of the amount assigned to his or her account in capital credits for the year.
The cooperative business structure is different from most. NAEC does not return the money earned to an unknown investor or stockholder. Cooperative profits, called margins, are assigned to members, the owners, who are also users of the co-op’s services.
These margins are assigned on a prorated basis according to the amount of electricity for which each member was billed during the year in question. When and how much of capital credits are refunded depends on the co-op’s financial condition. The decision to refund capital credits is a complex one because margins represent system equity. This equity is essential to the co-op’s financial strength. If NAEC returns too much of the system’s equity as capital credits, then it could jeopardize the co-op’s standing with lending agencies. It also would mean the co-op is refunding capital used as funds for construction. Without these internally generated funds, the co-op would have to increase borrowing, increasing interest costs and the cost of providing service. On the other hand, if NAEC kept all margins year after year and built up a high equity level, we rightfully could gain the reputation of acting like a private utility rather than a cooperative owned by members. The balance in a properly maintained equity/capital credit program lies somewhere between those two extremes. The NAEC Board of Directors and staff strive to maintain that proper balance.
More information is posted on the capital credits webpage.
