Capital Credit Information

So What is a Capital Credit?

You may often hear the term “capital credits” at Central New Mexico Electric Cooperative (CNMEC), but what are they? 

While all utilities must collect revenue to cover expenses and plan for future investments, investor-owned utilities design rates to maximize profits, allowing them to pay dividends to stockholders. 

Capital credits are a feature that makes rural cooperatives different from investor-owned utilities. As a member-owned not for profit entity, CNMEC does not earn profits or have shareholders.

CNMEC sets rates to cover costs, plan for growth, maintain good financial parameters and provide stability. When revenues exceed the cost of doing business, the co-op earns net margins, which are allocated to active members in a ratio proportionate to the amount of electricity the member purchased during the year the net margins were earned. Those are called capital credits.

Capital Credit Process-an overview 

When you or your business establish service with CNMEC, you become a member. 

CNMEC tracks how much energy you purchase (i.e. service) throughout the year. In years that CNMEC earns a net profit, you are allocated your portion of the previous year’s margins based on the amount of service you used in the prior year. 

CNMEC tracks the allocation in your account and provides you with a statement of your allocated balance once per year, generally in July. 

Undistributed Capital Credit allocations are used by CNMEC to manage capital needs and investments to meet the electric service needs of our members.

Yearly, the CNMEC Board of Directors evaluates the financial conditions of the co-op to determine if unretired capital credits can be retired or refunded. 

If the financial position allows, the Board of Directors will authorize the distribution of Capital Credits to all eligible members that have allocations in the year(s) retired. Capital Credits are retired from the earliest unretired years of service going forward (i.e. first in, first out). This generally happens in December of each year.