Capital Credit FAQ

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.

Where does the money come from?

Member-owned, not-for-profit electric cooperatives set rates to generate enough money to pay operating costs, make payments on any loans, and provide an emergency reserve. At the end of each year, we subtract operating expenses from the operating revenue collected during the year. The balance is called an operating margin.

How are margins allocated?

Margins are allocated to members as capital credits based on their purchases from the cooperative, or how much power the member used. Member purchases may also be called patronage.

Are capital credits retired every year?

Each year, the Southern Indiana Board of Directors makes a decision on whether to retire capital credits based on the financial health of the cooperative. During some years, the co-op may experience high growth in the number of new accounts, or severe storms which may result in the need to spend additional funds to repair lines. These and other events might increase costs and decrease member equity, causing the board not to retire capital credits. For this reason, Southern Indiana Power's ability to retire capital credits reflects the cooperative's strength and financial stability. The board alone decides whether to retire capital credits.

How often do members receive capital credit retirements?

The Southern Indiana Power Board of Directors makes a decision each year whether or not to retire capital credits. When the cooperative is strong enough financially and member equity levels high enough, the board directs staff to retire some portion of past years' capital credits.

How will the retirement work?

Once the board approves the retirement of capital credits, members having electric service during those retirement years will receive notification for the amount of the approved retirement.

What if I have moved?

If you have moved or no longer have electric service with Southern Indiana Power, it is important that you inform the cooperative of your current address, so that future retirements can be properly mailed to you. If you purchased electricity during the years being retired, then you are entitled to a capital credit retirement, even if you move out of the service territory. Before a new year is retired Southern Indiana Power will mail retirement notices to members for the purpose of updating our records with current address and contact information. Retirement checks are only mailed to those members who return the retirement notice. Members who return their notice will continue to receive future retirements. Please update us with any future address changes.

How are capital credits handled upon dissolution of marriage or death of a member?

Capital credits will remain in the name(s) of the original member(s) until Southern Indiana Power is notified by a spouse, relative, or other legal representative that the account may be re-assigned to another person or transferred to an estate. Documentation will be required for Southern Indiana Power to complete a request for capital credits to be re-assigned from the original member(s):

In the case of a member who is deceased:

  • A death certificate or other sufficient proof of death will be required
  • A Will or a Letter of Administration that designates a legal representative of the estate
  • An Affidavit for payment of capital credits (provided by the cooperative)
  • Photo ID of the representative (to include driver’s license, passport, or other government-issued ID)

For a member who is not deceased but needs personal appointment or representative:

  • Guardianship papers
  • Certified Power of Attorney papers
  • Photo ID of the representative (to include driver’s license, passport, or other government-issued ID)

In the case of dissolution of marriage, the Cooperative must receive appropriate legal documentation as proof of the dissolution of marriage between spouses in order to make any changes in the ownership of the capital credits. Otherwise, if the capital credits were associated with a joint membership, they will remain in both members’ names. If the capital credits were associated with a single membership, the capital credits will remain in the original member’s name.