Frequently Asked Questions About Capital Credits
Yes! DSO has sent millions of dollars in capital credit retirements to its members.
DSO Electric Cooperative, Inc. is a non-profit electric utility, which means the co-op is owned by those it serves and not by private investors.
As a non-profit electric utility, DSO needs only to cover the cost of yearly operations and keep sufficient cash on hand for capital needs. After meeting DSO's financial obligations, any money left over (margins) are allocated to the members in the form of capital credits.
As a co-op member, you share in the margins of DSO. The longer you use the service and the more service you use, the more capital credits you accumulate. The actual cash amount (retirement) you receive annually is determined by DSO's board of directors and is usually a percentage of your total usage amount.
If you receive service from DSO, then you are eligible to receive capital credits, as part of your membership agreement.
Each year DSO's board of directors approves the portion of capital credits to be retired. Because all members and former members are eligible to receive capital credit retirements, it is necessary to properly budget for this expense. By retiring a portion at a time, DSO is able to maintain financial stability while demonstrating a key benefit of cooperative ownership to its members.
The cooperative uses the money for the following:
- To maintain adequate cash flow to meet current expenses.
- To preserve enough equity in the company to meet lenders' debt-to-equity requirements and lower DSO's cost of borrowing money.
- To reinvest millions of dollars in system improvements, new services and capital budget.
DSO has retired more than $7,350,000 to its members since its formation in 1936.
Each year the DSO board of directors determines whether the cooperative's financial condition permits the return on capital credits. If so, the board will authorize to refund capital credits to its membership and determine the manner, method and timing of the refund.
DSO notifies its members of the annual capital credit allocations through a letter sent to the address on file.
A member who terminates service with DSO will no longer receive capital credit allocations, but the balance in the member's capital credit account is maintained until it is retired in full. If the member has been on the system for less than five years, then the member has the option to maintain their capital credit allocations until normal retirement or receive an immediate retirement at net present value.
It is the member's responsibility to notify DSO of any changes in address so that the member can be located when it is time to retire capital credits allocated to the member's account.
Capital credits in the member's account belong to the member's estate. Please contact the DSO office to apply for the estate capital credit retirement of the outstanding balance of the deceased member's capital credits account. The estate retirement will be paid at the net present or discounted value.
In the interest of fairness to all members, DSO discounts early retirements of capital credits to reflect the net present value of making a capital credit retirement now that would otherwise be made at a later date. The smaller amount today, if invested until the normal retirement date, would be equal to the normal retirement amount.
Capital credits are a return of money paid for electricity in a previous year and are generally not taxable income for residential customers. Please consult your tax advisor to determine the tax liability associated with your individual situation.
Unfortunately, many members leave DSO without leaving a forwarding address. As a result, DSO is unable to contact them when their retirement checks have been processed, leaving thousands of dollars in unclaimed capital credit retirements each year.
If you suspect you may have unclaimed capital credits with DSO or you are making a claim on behalf of a deceased individual, then please call the DSO office at 800-376-3533.