I am often asked why capital credits are not paid to Oregon Trail Electric Cooperative members as they are earned. Most of these inquiries follow directly after OTEC has mailed allocation notices informing members of their new capital credit balance.
Capital credits are excess revenues — also called margins — earned during a business year. Because OTEC is a nonprofit electric cooperative, margins belong to its members who bought electricity during that specific year, and are allocated and stored in the member’s capital credit account.
When OTEC’s financial condition allows — and upon board approval — capital credits are returned members on an annual basis. Capital credits are routinely distributed in December each year. This year, $2.95 million will be returned to members. This is the largest amount to be retired in OTEC’s history.
You may receive a capital credit check if the amount is more than $15. If the amount is less than $15, it is applied as a credit on your energy account. Each time the board approves a retirement, your capital credit account balance is reduced by the amount paid.
You may wonder why your capital credits are not paid in their entirety every year, as opposed to a little each year. This is because margins are accumulated and reinvested in capital improvement projects for up to 30 years, which keeps the OTEC system in good working order so electric service is available when you need it.
Power lines, poles and a myriad of other electrical equipment and devices are essential to sustain reliable, affordable service and are a few examples of items OTEC buys for capital improvement projects. Most electric cooperatives acquire capital this way. What is important to know is that OTEC reinvests margins to minimize borrowing, which ultimately helps keep rates competitive.
One special condition allows a capital credit balance to be “cashed out” or returned before the 30-year maturity date. When notified of a member’s death, OTEC’s bylaws allow the surviving spouse or executor of the estate to apply for early retirement of all balances. Please note, joint memberships are not eligible for early retirement unless both members are deceased.
There are three options for the spouse, executor or heirs to consider:
• Wait for the capital credits to be processed through the normal retirement schedule, which may take up to 30 years.
• Apply for early retirement of the deceased member’s capital credit account.
• Donate the capital credit balance to the OTEC scholarship fund. Each year, OTEC awards more than twenty $5,000 scholarships to local students who want to advance their education or training beyond high school.
Please contact our office and for more information on early retirement of a deceased member’s capital credits. You may also find more information, including examples, at otecc.com/members/capital-credits.
During the past 25 years, OTEC has returned more than $33 million in capital credits to its members — a sign your electric cooperative is financially healthy, stable and working for your best interest. Capital credits are just one of the many benefits of being a member-owner of Oregon Trail Electric Cooperative.
Thanks for asking, and keep those questions coming!
Sandra Ghormley is the director of member and program services for Oregon Trail Electric Cooperative. She can be contacted at 541-524-2822.