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Capital Credits Policy

The objective is to establish a policy for the allocation and retirement/payment of Capital Credits.
A. On an annual basis, patronage capital shall be allocated on the books of the cooperative to each member based upon and in proportion to: (1) the revenue from each member or group of similar members; (2) the contribution of each member or group of similar members to the cooperative's overall patronage capital; or (3) any combination of items (1) and (2) as determined by the board of trustees. Nothing in this policy shall prevent the Cooperative from allocating differently to member rate classes so long as the methodology is fair and equitable to all members.
B. General Retirement: Capital Credits when retired or paid shall be retired and paid on a first in/first out basis or hybrid basis consisting of first in/first out and last in/first out adjusted to present value.
C. Special Retirement: If the board of trustees, in its discretion, utilizes its business judgment to retire patronage capital to members either upon their death, termination of electric service, or bankruptcy, then the retirement may be discounted from the board's approved retirement cycle to present value when and if deemed appropriate by the board of trustees in the exercise of its business judgment. These payments will be made only after all provisions of the Cooperative's Bylaws have been met. These payments will be discounted through a present value calculation described below in Section E as authorized in the Bylaws.
D. A prior member shall have any debts owed to the Cooperative offset against their retired Capital Credits. Active member accounts with receivables greater than sixty days past due will be offset at the ordinary time of Capital Credit retirement and distribution. Prior member accounts will be offset at the time of the bad debt write off to the extent of their capital credit account adjusted to present value.
E. The discounted present value calculation will be based on Generally Accepted Accounting Principles (GAAP), including but not limited to a competitor's rate of return. The amount to be discounted and paid will be based on all the Capital Credits allocated to the Member as of the latest year allocated on the Cooperative's books at the time of retirement/payment. Any Capital Credits later allocated to a deceased Member will be recorded as retired capital.
F. Upon payment of Capital Credits discounted for present value, the difference between the discounted value paid and the value stated in the Member's account shall be credited to an equity account in the name of that Member to be held by the Cooperative as retired capital.
G. All payments of retired Capital Credits made will be in compliance with the Cooperative's mortgage requirements.
The Board of Trustees and the CEO shall be responsible for the administration of this Policy.
Effective Date: 02/25/2016

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