Frequently Asked Questions (FAQs)

A number of members have expressed interest in learning more about capital credits. Here are the answers to some of the most frequently asked questions.

Q: What are capital credits?

A: Capital Credits are one of the many benefits of cooperative membership. Because Southwestern Electric is a not-for-profit cooperative, it does not technically earn profits. Instead, any revenues over and above the cost of doing business are considered margins. These margins represent an interest-free loan of operating capital by the membership to the cooperative. From these margins the cooperative builds equity with the intention of repaying the member's investment, which is done through the retirement of capital credits.

Q: Why does the cooperative need to accumulate equity?

A: Accumulated equity decreases the need for Southwestern Electric to raise electric rates or borrow money for infrastructure improvements. It also makes it easier for the coop to absorb costs associated with recovery from devastating events like widespread tornadoes and severe ice storms.

Q: How are capital credits accumulated?

A: Capital credits are allocated to every member who purchases electricity during a year in which the cooperative earned margins. For that year, capital credits are allocated proportionally according to the amount of energy purchased. No special action is required on the member's part in order for capital credits to accumulate.

Q: What happens to the capital credits when a member moves off of the co-op’s lines?

A: Regardless of whether you are an active or inactive member, the capital credits you’ve earned belong to you. However, capital credits do not become payable upon disconnection of service, they remain on the books in the member’s name until the credits are retired or the member dies.

Q: Does someone have to be a member for an entire year to earn capital credits?

A: No. Capital credits are calculated based upon a member’s monthly bills. If a member is billed for electricity for even one month, they will accumulate some capital credits, provided Southwestern Electric earns margins in that year.

Q: What is the difference between allocation and retirement of capital credits?

A: In a capital credit allocation, the margins for a particular fiscal year are spread proportionally among the members. The amount of funds allocated to each member’s account is based on the amount of electricity the member purchased during that year. These funds are kept on Southwestern Electric’s books until they can be retired. Capital credit retirement is the process of returning the accumulated credits back to the members.

Q: Is a general retirement issued every year?

A: Not necessarily. General retirements are issued at the discretion of Southwestern Electric’s board of directors. Each year, based on the cooperative’s present financial condition and other considerations, the board of directors determines whether to issue a retirement, and if so, in what amount. Between 2006 and 2011, the cooperative retired capital credits annually, each autumn, on a 30-year cycle (i.e., capital credits accrued in 1979 were eligible for retirement in 2010; credits from 1980 were eligible in 2011, and so on). Due to the cooperative’s financial condition, the board has decided not to issue a general retirement in 2012.

Q: How do I find out how many capital credits I’ve earned?

A: Annually, in August or September, the co-op will print a capital credit summary on each member's electric bill. This summary includes the amount of capital credits accumulated in the past fiscal year and the total amount accumulated since the account's inception. Members are also welcome to request this information by calling the co-op at (800) 637-8667 during regular business hours.

Q: Are payouts to estates handled differently from general retirements?

A: Yes. Southwestern Electric Cooperative pays out accumulated capital credits to estates throughout the year, regardless of whether a general retirement has been issued. Any debt owed by the deceased member to the cooperative must be paid in full, and a representative of the estates must complete the claim process in its entirety, before the disbursement may be made.

Q: In the event of a member’s death, does the type of membership affect how the capital credits are paid?

A: Yes. For individual memberships, capital credits are payable to the member’s estate upon said member’s death. If the capital credits belong to a joint membership, and one of the accountholders dies, the accumulated capital credits will transfer in their entirety to the surviving person’s account, and their membership will be converted from joint to individual status.

Q: What happens when joint owners of a membership divorce or separate?

A: Capital credits are not disbursed upon divorce or separation, but credits may be reallocated in several different ways, according to circumstances. If the capital credits are included as a marital asset in a divorce agreement, either the court or the cooperative’s bylaws will determine how the credits are handled.

Q: Do I have the right to change the type of membership?

A: Membership status may be changed—from joint to individual or from individual to joint—at the member’s discretion. It should be noted, however, that such status changes have important ramifications on a member’s voting rights. For joint memberships, either accountholder (but not both) may vote on behalf of the membership in the co-op’s annual election. For individual memberships, only the individual listed on the account may vote.

Q: What happens when capital credits go unclaimed?

A: The co-op makes all efforts of due diligence, in compliance with state statutes and mandated guidelines, to locate the member, and/or the member’s heirs, when capital credits go unclaimed. If, after such due diligence is performed, the member cannot be located, the capital credits are declared permanent equity and remain on the cooperative’s records until the member and/or heirs can be identified and found.

Q: How do I find out if there are any unclaimed capital credits owed to me?

A: Southwestern Electric Cooperative publishes a list of members with unclaimed capital credits on its website, You can also call the co-op’s office at (800) 637-8667, during regular business hours to see if any unclaimed credits may be owed to you.