What is capital credit equity?

Capital credits are your share of the ownership of the cooperative.

How are capital credits equity determined?

At the end of each calendar year, Steele-Waseca calculates its gross profit margins by subtracting total expenses from income earned through kilowatt-hour sales. These margins are used to repay debt and invest in system improvements. They are also allocated (assigned) to Steele-Waseca member-consumers based on each member’s kilowatt-hour usage for that year. This process reduces the lender’s ownership share and increases your ownership interest in Steele-Waseca Cooperative Electric.

Capital credit equity is allocated to members roughly six months after the year ends. When your allocation is processed, it will appear as a notice on your bill. Former members who no longer have active service will receive their allocation notice by mail.

When are capital credits equity retired (paid)?

When gross profit margins exceed the amount needed for debt payments—after accounting for necessary system improvements—the remaining funds may be used to retire capital credit, provided the cooperative’s financial condition will not be negatively affected.

Steele-Waseca is currently operating on a 20-year rotation for retiring capital credits. Normal refund occurs each December. Each year, our Board of Directors determines which year(s) of allocated capital credit equity are eligible for retirement. If you have capital credit assigned in a year that is being retired, your refund will be applied as credit on your bill. Former members without an active account will receive their retirement by check.

Over the years, we have received requests from former members asking for a lump-sum payout for their remaining capital credit equity. While we have been able to increase annual retirement amounts for many consecutive years—and hope to continue doing so—paying an individual’s account early is considered “early retirement.” Early retirement is prohibited by IRS regulations governing non-profit cooperatives like ours. The only current exception at Steele-Waseca is for estates. When a member passes away, we can retire the remaining balance to the member’s heirs at a discounted rate based on the Federal Reserve Prime Rate at the beginning of that year. Dissolved corporations remain eligible only for normal retirement.