Capital Credits

Capital Credit FAQ

• WHAT ARE CAPITAL CREDITS?

  Capital credits represent the value of a member’s investment in Baldwin EMC; it is not dollars in a bank account. It is similar to the equity you build in your home. The amount of capital credits a member has is in direct proportion to the amount of electricity he or she purchases.

• WHERE DO CAPITAL CREDITS COME FROM?

  Capital credits result when a cooperative collects more money than is necessary to run the business and pay its debts. Accurate records are maintained for each member based on the amount of electricity they used during the year. Capital credits represent the investment that our members hold in the cooperative and reduce the need to borrow money. This helps to keep electric rates affordable.

• WHEN ARE CAPITAL CREDITS RETIRED?

  Capital credits are retired and paid in cash to the members as the cooperative can afford to do so. When capital credits are retired, members will receive their share whether or not they are still a member. If the member is deceased, then the amount of their capital credits that are retired are paid to their estate. 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.

• HOW OFTEN DOES BALDWIN EMC RETIRE CAPITAL CREDITS?

  Each year, the board decides whether the financial condition of the cooperative allows for the retiring of capital credits. More than $18.8 million in capital credits have been retired and paid out to our members in the past ten years. In comparison to electric cooperatives across the country, Baldwin EMC has retired a larger percentage of our members’ capital credits than most other cooperatives.

• WHY DOES BALDWIN EMC NEED TO HOLD CAPITAL CREDITS IN RESERVE?

  Baldwin EMC must constantly build, repair and maintain power lines to keep the electricity running safely and smoothly to our members’ homes, and this takes a lot of money. Just like buying a home, financial institutions require us to have equity in the business to qualify for business loans. Capital credits represent our members’ equity in the business, reduce the amount of money we have to borrow and help to lower rates.

• WHAT ALLOWS BALDWIN EMC TO HOLD CAPITAL CREDITS IN RESERVE?

  Baldwin EMC was organized as a not-for-profit cooperative under Alabama law. The law states we can retain or retire capital credits in accordance with our bylaws. Our bylaws allow us to retain or retire capital credits based on the financial needs of the cooperative.

  Baldwin EMC retires as large a percentage of capital credits as possible while continuing to operate the cooperative on sound financial principles. This allows the cooperative to keep its rates lower than they would be if capital credits were retired in larger amounts.

• WHAT HAPPENS TO CAPITAL CREDITS WHEN A MEMBER DIES?

  If we do not have a Member Capital Credit Beneficiary Designation form on file, Baldwin EMC will continue to pay amounts of capital credits that are retired to the estate. Upon written request, the Board of Trustees may authorize the retirement of all remaining capital credits to the legal representatives of the estate in one payment, as long as the retirement of those capital credits does not affect the financial stability of the cooperative. The documents needed to request a retirement and corresponding cash payment of capital credits from a deceased member’s account can be obtained by contacting Baldwin EMC at (251) 989-6247 or (800) 837-3374.