In my years with the rural electric program, capital credits have been one of the hardest things to explain when discussing how co-ops are different from for-profit utility businesses. Rural electrics are non-profit utilities, member owned, and organized according to seven broad “Cooperative Principles” tracing their roots back to 19th Century England.

Investor-owned corporations are controlled by stockholders. The largest stockholders exert the most influence on the operation of the business. Cooperatives are owned by consumers who use the product or service. Each member has one vote in the election of a board of directors or trustees which has fiduciary responsibility for the business.

Cooperatives do not issue stock. Ownership benefit accrues to individual members through what we call “patronage capital” or “capital credits.”

When you pay your electric bill, a portion of the revenue is treated like a loan to the cooperative. It’s your contribution to equity. Capital credit amounts accumulate when “margins” are achieved; that is, when a combination of rates, sales, and stewardship produce revenue in excess of the cost of service.

Buckeye Rural Electric Cooperative for a number of years has been unable to reimburse capital credits due the need for funds to pay for the repair and improvement of the distribution system. It has never been far from the minds of our Board of Trustees, management staff, and employees that our eventual goal was to achieve a high degree of financial stability and service reliability so once again general capital credit retirements could occur.

I am proud to announce that 2007 will be the year that general retirements resume. In addition, we are embarking on a first-time percentage retirement, based on the fiscal year of 2005. More co-op members than ever before will share in the return of patronage capital.

Here’s how it will work:

General retirements for the years 1974 and 1975 will occur. Capital credit accruals for these years will be paid at 100-percent of account value. We’ve booked over $200,000 for this purpose.

For the first time, BREC will also return a percentage of the capital credit total from a recent year. Every co-op member of record on the lines in 2005 might be eligible to share in this percentage retirement. Over $500,000 has been budgeted.

It is estimated that, under the two programs, potentially 18,000-plus BREC member-owners could receive capital credit retirement checks this year, ranging in size from $10 to over $100. No checks smaller than $10 will be written. These capital credit amounts will be carried forward.