What are capital credits?

Southern Indiana Power is an electric cooperative that operates on an at-cost basis by annually allocating any excess operating revenue to each member at the end of the year based upon the member's purchase of electricity. These allocated amounts called capital credits are retired in the future based upon the financial condition of the cooperative. Southern Indiana Power retires or pays capital credits on a 25 year cycle, which means that margins allocated this year will be retired in approximately 25 years in the future. Capital credits represent a significant source of equity for the cooperative. Since a cooperative's members are also the people it serves, capital credits reflect each member's ownership in, and contribution of capital to, the cooperative. This differs from dividends investor-owned utilities pay shareholders, who may or may not be customers of the utility.