Capital credit power bill credits and checks totaling $1.3 million were recently issued to our current and former members’ purchasing power from Nodak Electric Cooperative in the year 2000.
The capital credit check or power bill credit that is delivered to you has a long history behind it. It is easier to understand the entire concept of capital credits if you look at the early beginnings of the electric distribution industry in our state. Back in the 1930s and 40s, the Rural Electrification Administration provided the funding necessary to build the power lines into the sparsely populated regions of this country. The challenge was, after the lines were built and electricity was flowing, how do we keep this fledgling electric company afloat and the lights kept on? The concept of capital credits provided that much-needed funding mechanism to keep the cooperative growing.
The early members contributed “capital” to the cooperative by purchasing electricity at a rate that was slightly above the cost to deliver energy to them. That small amount of profit or margin was then retained by the cooperative to help finance the operations for the following year. In a sense, the original members of the cooperative were looking out for the needs of future members by allowing the co-op to retain those margins to build new lines in the years that followed. In return for the usage of those member funds, the cooperative set up a separate account to keep track of how much each member proportionately contributed to the entire margin picture with the intent of someday reimbursing that member, thus the term “credit” was joined with capital.
Time passes by quickly and here we are nearly 80 years after the first power lines were strung. Everything around us has changed, but some things remain consistent. We are still delivering energy to our members at a rate that is just above the cost to deliver it. We still live in a part of the country that is sparsely populated. With continually increasing costs associated with running an electric distribution system, it becomes more of a challenge to pass those costs along to a relatively small membership and still carve out a slight margin.
Still, another unchanged fact is the concept of paying back past members for usage of their working capital, or “capital credits,” in a timely manner. Our Board of Directors has consistently followed the principles of retiring capital credits that were founded back in the 1930s. Due to those spiraling costs and a small growth of new customers, the amount of time from when the capital is contributed by the member to the time he/she is repaid has stretched out to 17 years. In comparison, there are many cooperatives in the United States that are on a 20-25 year cycle and still others that have never retired capital credits.
So, as you can see, the capital credit retirement from Nodak Electric Cooperative that you recently received has historical roots that run deep. It’s just one of the many benefits of doing business with us, and we hope to keep those types of things unchanged.
Tom Edwards, Accounting & Finance Manager