Discover NCE Capital Credits - Member Benefits Explained

Nobles Cooperative Electric Member Benefit

Capital Credits

NCE is a nonprofit electric co-op that is owned by the members we serve. Since we operate on a not-for-profit basis, all margins are allocated to each member’s capital credit account based on the member’s year-to-date revenue (patronage). Each year the board of directors decides if and when a portion of the capital credits will be distributed, while ensuring the financial health of the co-op. In addition to our general retirement policy, capital credits can be paid to heirs of deceased members in the settlement of estates.

Any revenues over and above the cost of doing business are considered “margins”. These margins contribute to the operation of your co-op and are distributed in the form of capital credits. They also reflect each member’s ownership in the co-op.

Please keep your information current. If you move off our co-op lines, notify our office of your address change. Each year we attempt to find former members but some capital credits go unclaimed.

When you are settling an estate, we ask that the heirs of a NCE member contact our office to arrange for settlement of any outstanding accrual of capital credits.

Capital Credit Retirement - How it works

1 The board of directors approves the distribution of Capital Credit retirements to members, according to our cooperative principles.
2 Your Capital Credit distribution is based on how much electricity you purchased during the years noted on front of this card.
3 Active members with Capital Credit amounts of $600 or more are mailed a check. If under $600, members receive a bill credit.
4 Former members are mailed a check of $25 or more; lesser amounts are left to accrue for future payments.

About your cooperative

Board information

Since 2000, Nobles Cooperative Electric has returned nearly $17,000,000 to members!

Because electric co-ops operate at cost, any excess revenues (called margins) are allocated and retired to members in the form of capital credits.

What are Capital Credits and How the Cooperative System Works:

What they are:

Margins returned to members: When a cooperative has revenue exceeding its expenses (called "margins," not profits), those margins are allocated to members based on their participation in the cooperative (usually based on how much they purchased or used the co-op's services).
Representing ownership: Capital credits demonstrate ownership in the cooperative. Members aren't just customers; they have a stake in the co-op's success.
Not dividends: Unlike dividends paid to shareholders in investor-owned businesses, capital credits are not guaranteed and are not the primary reason people join cooperatives.

Why cooperatives use them:

Keeping costs down: Reinvesting capital credits allows cooperatives to reduce their reliance on debt financing, keeping rates lower for all members.
Improving services: Capital credits can be used to fund infrastructure improvements, expand services, and enhance the long-term sustainability of the cooperative.
Upholding cooperative principles: Capital credits embody the cooperative principles of member ownership and democratic control. They ensure that the co-op operates for the benefit of its members, not outside investors.

How they work:

Allocation: Capital credits are allocated to members annually based on their use of the co-op's services.
Revolving funds: Co-ops typically don't return all capital credits immediately. They retain a portion to fund operations and future investments.
Retirement: The co-op's board of directors determines when and how much in capital credits to retire (pay back) to members, considering the co-op's financial health and long-term needs.

Capital Credit FAQ

What are capital credits?

How does NCE use allocated capital credits?

Between the time capital credits are allocated and the time they are refunded to you, the money is used to maintain, improve and ensure dependable service. If NCE could not use the members’ equity or capital credits, we would need to borrow the funds resulting in additional interest expense and increased rates. In short, members get a lot of value in exchange for allowing the cooperative to use their share of the margins.

When does NCE pay allocated capital credits back to a member?

Are capital credits taxable?

Each year, members receive a notice of the patronage capital credits earned during the previous year. These credits have the effect of reducing the cost of the service provided. Under current tax law, no part of the capital credits allocated is subject to taxation until actually paid in cash.

When a member receives cash or a credit for his allocated credits, the member is only subject to taxation to the extent that the payment for the service was deducted on the income tax return for the year. For example, an individual claiming 75 percent business use of his utility cost would have to include 75 percent of the cash for the capital credits received.

Under current IRS regulation, a 1099 form will be issued only if the capital credit payment is $600 or greater in any calendar year.

What happens to my capital credits when I leave the NCE service area?

What happens to capital credits of a member (or former member) who dies?

I moved from your service area. Can I collect my capital credits?

This is a common misconception about capital credits. Unfortunately, you have no vested interest in your capital credits until a refund is authorized by the board of directors. In other words, as a member, you agreed that your capital credit allocation is a permanent investment in NCE unless the board of directors authorizes a refund at some point in time. Your best bet is to make sure NCE has your current address on file to ensure that you will receive any future membership refunds.

I no longer own property in the NCE service territory, does this check belong to me?

Have questions?

Your Cooperative team is here to assist with your membership and service questions.