The return of patronage capital credits is just one of the many ways that electric cooperatives are set apart from other utility providers. One of the seven cooperative principles is the operate on a not-for-profit basis by returning any net savings to members on the basis of patronage.
Refunding of patronage capital credits is usually reviewed and authorized by the Lorain-Medina Rural Electric Board of Trustees at their November meeting. If a refund is authorized, refunds will then be issued to current and former eligible members in December.
What are patronage capital credits?
The revenue being generated throughout the year is used to cover the cooperative's cost of power, construction loans, building new services, maintaining existing lines and other cost associated with the distribution of power and maintenance service. Any money left over at the end of the year is considered margins. These margins are allocated and credited to each member as patronage capital credits and based upon their purchases, or patronage, with the cooperative.
How are patronage capital credits returned?
The cooperative retains margins to provide working capital for new construction, equipment and system improvements. For each year the cooperative retains margins, money is allocated to the member. After considering the cooperatives financial condition, the nine member board of trustees sets the amount of the refund. Typically, the amount of the members patronage capital credit allocation will gradually increase each year based on how long the member has been with Lorain-Medina Rural Electric and how much electricity they consume.
Any patronage capital credit refund to a current member of $99.99 or less will appear as a credit on the member's December electric bill. Members receiving refunds of $100 or greater will continue to receive a check in the mail in December.
Since 1983, Lorain-Medina Rural Electric has refunded $21.5 million in patronage capital credits.
Patronage Capital Credit Refunds