My Account

Capital Credits and Member Equity

What is member equity?

Member equity is the value of your investment in Baldwin EMC; it is not dollars in a bank account. It is similar to the equity you build in your home – as you pay down your home mortgage over time, the amount of equity you have increases. In a similar way, the longer you are a member of Baldwin EMC, the more equity you build in your capital credits account, in direct proportion to the amount of electricity you purchase.

Where does member equity come from?

Most years, Baldwin EMC takes in more money than it costs to provide electricity to its members. Those leftover funds are called margins. Because we’re a cooperative owned by the people we serve, those margins belong to the members who paid for electricity that year and are documented in a special record we call a capital credits account.

Baldwin EMC maintains capital credit records for every member that pays a bill. What we record in the capital credit account is each member’s share of the margins allocated on the basis of how much electricity was used by the member.   The longer you are a member, the more capital credits we record in your name.

Your member equity in the capital credit account serves a special purpose for a member-owned cooperative such as Baldwin EMC. It is what you, as a member, invest back into the cooperative. Member equity reduces the need to borrow money to run the business, and helps hold down rates. The dollar amount in your capital credits account represents the value of your member equity in Baldwin EMC.

When do I get to withdraw my member equity?

We give it back to you (and all our other members) as we can afford to, through the capital credit refund process. Every year, Baldwin EMC’s Board of Trustees reviews the financial condition of the cooperative. If the cooperative is financially stable and the margins we’ve accumulated are more than we need to reserve, the Board may decide to refund some of the capital credits, or member equity. To put it more simply, the Board might decide that we no longer need to hold on to a portion of those funds, so they can be given back to the members. When the capital credits for the years you were a member are refunded, you will receive your share, whether or not you are still a member. That’s why it’s important for you to provide a forwarding address if you leave our service area so that you can still receive payment.

Why does Baldwin EMC need to hold member equity in reserve?

Baldwin EMC needs capital just like any other business. It costs a great deal of money to build the distribution system of substations, wires, poles and equipment that delivers the power to our members’ homes and businesses. This cost is so great it must be spread over a number of years and we cannot charge our members for the entire amount in one year. In order to spread that cost, we must borrow money, just as you would borrow money to buy a home.

When you buy a home, you must have a down payment to get approved for a loan. That down payment is your ownership in the home. In the same way, banks who lend to cooperative businesses such as Baldwin EMC require a certain amount of equity or ownership in the business before they will approve a loan. Member equity is Baldwin EMC’s equity or ownership of the cooperative for purposes of borrowing money, and is also a source of capital to reduce the amount of money we need to borrow. Our members essentially loan money to Baldwin EMC to use as capital, and the laws that govern cooperatives provide for the money to be used as long as it is needed to ensure the financial stability of the business.

Why does Baldwin EMC hold so much member equity in reserve?

Baldwin EMC is the largest electric cooperative in the State of Alabama and one of the largest businesses in Baldwin County. The amount of member equity we need is based on the size and value of the cooperative. It is also based on the amount of equity banking institutions require us to hold in reserve in order to qualify for loans. Our member equity level is consistent with other co-ops our size, and the amount we have set aside is very comparable to other utilities across the country.

How much member equity has Baldwin EMC refunded?

More than $15.9 million has been paid out to our members in capital credits in just the past ten years. In fact, according to comparisons of cooperatives across the country, Baldwin EMC has returned a larger percentage of member equity dollars (capital credits) to our members than most other cooperatives.

What happens to capital credits when a member dies?

Baldwin EMC will continue to pay capital credits to the estate. Upon written request, the Board of Trustees may authorize the refund of all remaining capital credits to the legal representatives of the estate in one payment, as long as the refund does not affect the financial stability of the cooperative. The documents needed to request a refund of capital credits from a deceased member’s account can be obtained by contacting Baldwin EMC at (251) 989-6247 or (800) 837-3374.

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