The retirement of capital credits is a tangible demonstration of your ownership in Eastern Illini – your electric cooperative.
To date, Eastern Illini Electric has retired over $13 million in capital credits. In 2016 alone, we retired well over $1 million.
Since we couldn’t find all those past member/owners to pay them their money, we’ve created a database of unclaimed capital credits. If you, or anyone you know, received electricity from Eastern Illini in the 1970 and/or 1980s, please visit the unclaimed capital credit database page.
What are capital credits?
Any profits made by Eastern Illini are referred to as margins. Margins result when our revenue is more than our expenses. At the end of each year, any available margins are allocated back to you – into your capital credit account – in proportion to the amount of electricity you purchased that year. The more electricity you purchased, the greater the share of the margin allocation that will be made to your capital credit account. When the allocated funds are returned to you as capital credits, we say that those capital credits have been retired.
Assets of the cooperative
Eastern Illini, like all electric co-ops, operate at cost – collecting enough revenue to run and expand the business but with no need to raise rates to generate profits for distant shareholders, like investor-owned utilities sometimes do. When Eastern Illini has money left over, it’s allocated back to you and other members as capital credits. When the co-op’s financial position permits, the co-op retires, or pays, the capital credits to you.
What do we do with the allocations?
The retirement of capital credits—so-called because members provide capital to the cooperative for it to operate and expand—depends on the co-op’s financial status. Eastern Illini holds onto allocated capital credits to cover emergencies, such as a natural disaster, and other unexpected events, and to expand our electric system, all of which may require large-scale construction of poles and wires. By holding on to the capital credit allocations, we can lessen or eliminate the need to raise rates or borrow money (which could also lead to higher rates) to pay for the infrastructure. Each year, Eastern Illini’s Board of Directors carefully looks at the financial condition of our cooperative to determine how much, if any, capital credits can be retired.
Eastern Illini’s President/CEO Bob Hunzinger noted, “The cooperative business model is special for many reasons, but one of the main ones is capital credits. The financial stake that you, and all of our previous member/owners, have, really makes this your cooperative. We are fortunate that our financial condition allows us to return this portion of our members’ equity investment.”
Since 1988, co-ops have retired over $12 billion, based on data from the federal Rural Utilities Service and the National Rural Utilities Cooperative Finance Corporation (CFC), the premier private market lender to electric cooperatives.
“Margins earned from electric revenues are the only real source of equity for not-for-profit electric cooperatives,” says Rich Larochelle, CFC senior vice president, corporate relations. “Investors in CFC look to the underlying financial strength of our member electric co-ops—and strong and consistent equity levels are one key aspect of financial strength. So it’s essential for a co-op to maintain the right balance between retiring capital credits to members and retaining sufficient equity on its balance sheet.”
He adds, “Co-ops do a good job of striking that balance. That contributes to CFC’s ability to offer attractive rates on loans to co-ops, which in turn helps to keep their costs low.”
“Retiring capital credits is just one more way Eastern Illini is looking out for you,” emphasizes Hunzinger.
For more information, please contact us at 800-824-5102 or email us using the EI Help Desk.