Capital Credits

NHEC is a nonprofit electric cooperative, which means that we operate at cost and we are owned by our members. Many utilities are owned by shareholders and are in business to generate a profit, while providing electricity service to their customers. Cooperatives like NHEC are different. As a nonprofit, when we “earn a profit” every NHEC member is allocated a share of that money. Those allocations are called capital credits, and they will eventually be returned to NHEC’s members. Capital credits represent our members’ ownership in NHEC.   Every April NHEC members can see their own capital credit allocations for the previous year on their monthly electric bill.

What are capital credits?

Members are allocated capital credits when NHEC collects more money through our distribution rates than we spend in a given year to provide electricity service. This difference would be considered profit in a traditional, for-profit business and is also referred to as “margins.” These margins are used to fund needed upgrades to NHEC’s distribution system, but will eventually be returned to the members who paid the rates.

When will NHEC begin returning capital credits?

Nonprofit electric cooperatives, like NHEC, return capital credits when doing so does not harm the organization financially. Each year NHEC’s Board of Directors reviews the cooperative’s finances to determine if NHEC is in a good position to return capital credits. The Board will vote to return capital credits if it can be done without causing harm to the business, or resulting in a large increase in rates.

Why would there be a difference between NHEC’s expenses and how much was collected through rates?

There can be a variety of reasons why we take in more revenue than we spend. NHEC budgets to have a positive margin each year. This gives us financial flexibility in case of unexpected expenses, and provides NHEC with the money we need to fund needed investments to our system.

In addition, our distribution rates are set each year based upon projections of how much electricity our members will use. Weather can impact electricity usage, which can result in NHEC collecting more or less revenue than budgeted. 

How do members receive capital credits?

When new members sign up for service with NHEC, two accounts are created in their name: a billing account and a capital credit account. The capital credit account is specific to you and your spouse, if married and both names are on the account. Regardless of how many times you move, or how many billing accounts with NHEC you may have, you have one capital credit account that stays with you. At the end of each year, NHEC’s margins are allocated back to the members. Your share is tracked in your capital credit account for that year.

Has NHEC returned capital credits before?

No. NHEC has not yet been able to return capital credits to our members.

When NHEC was established in 1939, it was not the type of nonprofit, tax-exempt cooperative that required capital credit accounting. So, in the early years there were no capital credits to return. It took many years for NHEC to build a strong financial base for the organization. Any margins the new cooperative accrued were used to build the new distribution system. It was not until 1969 that NHEC became a tax-exempt cooperative that generates capital credits. However, at that time NHEC had no margins to allocate until 1971, and for many years after NHEC had very small margins. In 1991, NHEC filed for bankruptcy as a result of its investment in the Seabrook Nuclear Power Plant. After emerging from bankruptcy in 1993, it has taken many years for NHEC to improve our financial standing and build up equity.

How are capital credits allocated?

After the end of each year, the positive margin is allocated to members based upon the distribution revenue they paid. The more a member pays in a particular year, the larger their capital credit allocation is for that year.

Are members’ capital credit allocations paid out all at one time?

No. Capital credits cannot be returned to members all at once because doing so would negatively impact the Co-op’s finances and cause sharp increases in electric rates. NHEC uses positive margins to provide a stable, reliable electric service that benefits all our members. When NHEC’s finances permit, capital credits will be returned to the members who paid the rates that created them.

Can I get paid the capital credits I was allocated for last year now? 

Capital credits are not cash accounts held by NHEC. They are bookkeeping accounts which track each member’s share of the equity NHEC has accumulated. NHEC needs access to the capital created by positive margins in order to maintain and upgrade our distribution system. When we have positive margins at the end of the year, that money helps pay for these improvements to our system. When NHEC’s finances allow, we will return capital credits to the members who paid the rates that created them.

What if I am past due on my NHEC bill when capital credits are returned to members?

If you are past due on your NHEC bill when capital credits are returned to members, your capital credit refund would first be applied to your past due balance with the Co-op. If any money is left over after your past due amount is paid in full, it would be returned to you.

Why doesn’t NHEC lower rates instead of returning capital credits?

NHEC is required by law to return capital credits to the members who paid the rates that created them. If capital credits were instead used to decrease rates, past members would not receive the capital credits they were owed, which would not be equitable and against the law. 

Will I still receive capital credits if I move away and I am not an NHEC member anymore?

Yes. Your allocation of capital credits will remain in your name, even if you leave NHEC’s service territory. It is important that you let NHEC know your current address so we can notify you when NHEC returns capital credits in the future.