The retirement of capital credits is the tangible demonstration of your ownership in Magic Valley Electric Cooperative. As member-owned, MVEC operates as a not-for-profit utility. This is accomplished through the retirement of capital credits. In fact, we will mail capital credit checks to more than 100,000 qualifying members, totaling $5.5 million, in October of 2018.
What Are Capital Credits?
Any profits made by the cooperative are referred to as margins. At the end of each year, the margins (profits) are allocated to each member in proportion to the amount of electricity they purchased. The more electricity purchased, the greater the share of the margin allocation that will be made to the member’s capital credit account. We have been allocating capital credits since 1945 and have returned more than $62 million in capital credits to our members. When the allocated funds are returned as capital credits to the cooperative’s members, we say that those capital credits have been retired.
Assets of the cooperative are owned collectively and held in common by all the member owners. From the time the margins are generated until they are returned, this money is put to work within the cooperative, minimizing debt financing and strengthening our financial position.
What Is the Method of Calculating Capital Credits?
The retirement is based on a percentage of the member’s total accumulated capital credit balance. The amount retired this year is subtracted from the total amount that was allocated in previous years, with the earliest year being retired first. The retirement will be made from the funds that have been held by the cooperative for the longest period.
Before distributing the capital credits, your board of directors at MVEC must first consider the financial condition of the cooperative and the needs for capital funds for the coming years. The percentage figure used to calculate the annual retirement of capital credits determined by your board of directors is set at a level that maintains the financial integrity of the cooperative.
This year your board of directors has approved to retire capital credits from 1996 and a portion of capital credits for 2016. To receive a capital credit check from Magic Valley, you must have been a member in 1996 or in 2016.
Members with 1996 allocations on record will receive a 100 percent distribution of their remaining capital credits for that year. The total distribution is $4,500,000.
Members with 2016 allocations on record will receive a partial distribution this year, totaling $1,000,000. Approximately $5,800,000 that will remain on record for 2016 will be distributed in future year(s).
Keep Your Current Address on File
Even if you no longer receive electric service from Magic Valley Electric Cooperative, you may still be entitled to receive checks from your capital credit allocation account. Please keep us updated with your current mailing address so we can mail your capital credit retirement checks if you are no longer an active member.
Want to learn more about capital credits? You can find more information about capital credits online at www.magicvalley.coop, or you can call us at 866-225-5683 and speak directly with a customer service representative.