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Capital Credits

Northern Neck Electric Cooperative (NNEC) is a member-owned, not-for-profit electric utility. As such NNEC’s electricity rates (which are approved by the Virginia Corporation Commission) are set to cover operating expenses, make payments on existing loans and provide an emergency reserve. At the end of each calendar year, the cooperative subtracts operating expenses from the total amount of money collected during the year and this balance is called “margins.” These margins are allocated back to each member that year in proportion to their patronage (how much electricity they paid for during the year).

Annually, NNEC’s Board of Directors make an independent decision on the financial condition of the cooperative. When the cooperative is strong enough financially and the member equity level is high enough, the Board determines the amount and percentage of the years to be refunded. Prior to refunding capital credits, NNEC uses member equity in place of commercial loans to help construct and maintain the Cooperative’s physical plant (poles, wires, transformers, etc.).

Capital credits are somewhat similar to the dividends paid to shareholders of investor-owned utilities except the cooperative’s “shareholders” are also the members that it serves and the “dividends” (capital credits) are distributed to NNEC’s member-owners. The process of member capital credits fulfills the third cooperative principle, Member Economic Participation.

NOTE: Capital credits are reserved for each member even if they move out of NNEC’s service area or deceased. NNEC will make a diligent effort to send a check by mail. Members are asked to keep NNEC informed of forwarding addresses.

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