One of the benefits in belonging to a cooperative is member ownership.  You, our member-consumers, actually own French Broad Electric Membership Corporation.  A primary benefit of ownership is sharing in the “profits” generated by the business.  Investor-owned utilities, on the other hand, maximize their profits from their customers with the purpose of paying dividends to their stockholders.  In a co-op, any excess of revenues over expenses belongs to the members as their investment in the business and are returned to them in the form of capital credit checks.

Your electric cooperative works hard to keep rates as low as possible without affecting the quality of service you receive.  When French Broad EMC goes through the budgeting process, we are ever mindful to keep costs in line and not have huge margins remaining at the end of the year.  However, our lenders require us to retain a minimal cushion to make sure the business remains financially solvent.  After all the cooperative’s bills have been paid for the year, we calculate the amount of money left over and assign the “profit” as capital credits. 
Capital credits are calculated based on the amount of money each member has paid into the business through their electricity bills.  The more power you have purchased, the larger your portion will be. This amount is credited to each member’s individual capital credit account annually.

However, French Broad Electric does not return this money to members immediately.  The money is used to help finance maintenance and improvements to the cooperative’s electric system without having to borrow money from outside sources at high interest rates.  By using these margins for reinvestment in our electrical system, French Broad Electric has been able to provide high quality electrical service to its entire territory and minimize loan payments.  Minimizing the amount of money the cooperative borrows from financial institutions keeps rates competitive with other utilities.

Each year the Board of Directors carefully considers the financial condition of the cooperative and decides whether or not to authorize a capital credit retirement.  In 2008 French Broad Electric returned approximately $850,000 in capital credit refunds to our members who received service in 1984.  This was only half of the total margins allocated for 1984.  Your Board of Directors recently determined the cooperative is in sound financial condition and approved the refund of the remaining $850,000.  Members whose capital credits were $50 or more should have received their “refund” check in mid-December.

Capital credits represent one of the primary differences between co-ops and other electric utilities. Until the general retirements are made, the money is used for system improvements,  operating funds and debt repayment rather than paying dividends to stockholders.  Capital credits cannot be refunded all at once because they help the cooperative remain financially sound, thereby ensuring a stable, reliable electric provider for the members it serves.

Thank You,

Jeff Loven
Email: jeff.loven@frenchbroademc.com


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