Capital Credits

Returning capital credits shows what being a cooperative means. Because of the cooperative nature of rural electric systems, every dollar that a member pays beyond the cost of providing electric service becomes a part of the cooperative’s working capital.

The term for this payment in excess of costs is “margin”.

Cooperatives must produce a minimal margin at the end of the year in order to stay in business and continue to provide service to their consumers.

Margins constitute a member’s investment in the system and is not a profit to either the cooperative or its members. Margins are show on the cooperative’s balance sheet as “equity”, but are more commonly referred to as “capital” or “patronage credits.”

As early as 1949, Farmers Board of Directors formulated a policy outlining the assigning of and timely disbursement of capital credits to its members whenever financially possible and economically feasible.

Farmers first general retirement of capital or patronage credits was made in November 1987, when almost $160,000 was returned to consumers who were members during the years of 1950 thru 1956. Under the terms and conditions of loans secured by the cooperative from the Rural Electrification Administration and the National Rural Utilities Cooperative Finance Cooperation, margins made by the utility cannot be distributed until member equity reaches 40 percent. The milestone was reached in 1986.

As a point of interest, currently Farmers RECC has refunded patronage credits to members through the year of 1990.