Capital Credits
What are Capital Credits?
Capital credits are each member's share of Pioneer's margins in proportion to the amount paid for electricity. This benefit represents member equity or ownership in the cooperative. For investor-owned utilities, equity is owned by shareholders, who may or may not be customers. For municipal utilities, equity is entirely owned by the municipality. The cooperative's equity is owned by the members---the ones receiving our service. Capital credits are a benefit you receive as a member of Pioneer Electric Cooperative.
What are margins?
Margins are left over after all Pioneer's bills are paid. In other business organizations, this would be called profit. Since Pioneer is a not-for-profit business, the proper term is margins. This margin is then allocated to the members who paid for electric service during the year according to their respective rate class. The margins allocated to each rate class are then divided and assigned to all members in the rate class according to the amount of electricity they purchased. You are notified of the amount assigned for the prior year in the spring. Generally this notice will appear on electric bills in May of each year. This allocation cannot be used as a credit against your electric bill; it is for information purposes only. Your total capital credit balance for all years is customarily reflected as well. In addition, at any time you may contact our Member Service Center for a summary of your capital credits.
Why can't I have my capital credits now?
The capital credits are not cash in the bank. Your balance of capital credits is used to meet Pioneer’s capital improvement and expansion needs before seeking additional loan funds and paying interest on those borrowed funds. They are invested in the poles, wires, transformers, substations, plant and equipment that provides your service. Your capital credits are used wisely to keep the cost of electricity as low as possible, and the quality of service as high as possible, before they are refunded.
Who makes the decision to refund?
The decision to make a refund is reviewed by the Board of
Trustees on an annual basis. The decision is based upon the financial condition of the cooperative. If a refund is approved, Pioneer's code of regulations mandates the oldest assigned capital credits be retired or refunded first. It further permits the refund to estates of deceased members all capital credits accumulated through the dates of death.
What happens to my capital credit if I move off the lines?
The capital credits assigned to you will remain in your name whether you are a current member or not. If you are no longer a Pioneer member, you should keep us informed of your current mailing address. This will enable us to send you a check when a refund is declared for the years in which you have capital credits assigned. If you fail to maintain a current address and appropriate attempts to refund are returned as undeliverable, the capital credits associated with that refund are forfeited.
What happens to my capital credit if a member dies?
If a member or former member dies, any remaining capital credits accumulation is a part of the estate and can be assigned to the heirs or beneficiaries. Upon written request of the legal representative or trustee, Pioneer will provide a listing of the documentation required to retire the account. Once the documentation is received, the estate will have the option to assign the capital credits to the beneficiaries or heirs who will then receive payment on the same retirement cycle as the remaining membership, or the estate may elect to receive the discounted present value of the account. If the account of the deceased member was a joint account, one-half of the account balance will be eligible for the above election.
Generally, refunded capital credits are not taxable if they were assigned as a result of service to your residence. However, as we cannot give tax advice and each individual’s situation is different, we encourage you to contact your tax advisor if you have a specific question.
If you would like more information about Pioneer's policy regarding capital credits you may contact us with specific questions at anytime.
