By Rick Lemonds, President & CEO
South Central Power Company is a not-for-profit cooperative. It doesn’t have customers; it has members, like you, who actually own the electric company that serves them and share in both the obligations and benefits of that ownership. This difference is a central part of the cooperative business model and is vital to South Central Power’s goal of providing its members with dependable service at the lowest possible cost.
It begins with revenue
To operate the cooperative in a financially responsible way, we set rates that allow us to collect enough revenue to ensure that we have the capital reserves to meet obligations. Any amount above the cost of providing service is an investment you as a member-owner make in the cooperative, according to how much of South Central Power’s services you use.
It is accounted for by member-owners
In most years, South Central Power takes in more money than it costs to provide electricity to its members, although weather, inflation, and other factors can drive this number up or down considerably. Funds above the cost of doing business are called net margins. Those net margins are allocated to member-owners, like you, who paid for electric service in a given year and are documented in records called capital credits accounts, based on the amount of their bills. For instance, if you purchased .0001 percent of the electricity South Central Power sold in that year, then .0001 percent of the margin is booked to your account. Your equity in the capital credits account represents the investment you hold in the cooperative.
South Central publishes a statement of capital credits typically on your bill during the second quarter of each year. In 2024, it appeared on your April bill. That statement details both your annual capital credit allocation, as well as your capital credit current balance. These are not liquid funds that are immediately available to you, but rather a representation of your investment in South Central Power, and they are the reason you are a “member” or owner of the cooperative, rather than just a “customer.”
It funds the cooperative’s operations
Since your cooperative doesn’t exist to make a profit, and since it doesn’t have external stockholders to provide investment capital, the responsibility to finance South Central Power’s operations falls on its member-owners. While the cooperative’s purpose is to provide you with electric and other services at the lowest possible cost, like any company, it must have working capital. Net margins provide that working capital, a reserve for insurance, taxes, maintenance, improvements, new construction, depreciation, and contingencies, such as the cost of storm damage repair.
It comes back to you
Earlier this year, as it has done every year since 1978, the Board of Trustees determined that the cooperative’s financial position supported a retirement of capital credits, which this year totaled $9.7 million. For 2024, the retirement of capital credits is based on how much electricity you and other members purchased during 2003. For most members, these capital credit retirements” were issued as credits on your June bills. For many members, the credit represents a substantial portion of what you owe your cooperative for that billing cycle. Capital credits for inactive or deceased members are paid to them or their estates at the time a general retirement is made. If you move away from the co-op, be sure to keep your address current with the billing department so that refunds can be made on the normal 20-year rotation. If not claimed within four years after the retirement notification, capital credits held for members are reallocated and are no longer payable to the former member.
Annual meeting and the business of your cooperative
In 2023, South Central Power Trustees returned $12.7 million in capital through general and estate retirements to our members (and former members) who were part of the cooperative in 2002. That’s just one way that we are different from other utility providers.
If you are interested in learning more about how we’re different, I encourage you to consider playing an active role in your cooperative by attending the annual meeting on August 15 at 11 a.m. on the campus of Ohio University – Lancaster. Advance registration is preferred, so please RSVP with your election ballot to let us know you plan to attend. An election ballot was mailed to you on July 7, and must be returned by August 7.
As CEO, I look forward to having the opportunity to update members in attendance, and continuing to serve you.
From the August 2024 issue of Ohio Cooperative Living.