The Board of Directors approved a retirement method, which uses the “Time Value of Money” to calculate the retirement amount. This method speeds up the retirement of Capital Credits to the membership.

Member-owners of Northwestern REC provide equity for the Cooperative.    When members pay their electric bills, any amount paid in excess of the cost and expense of furnishing power creates patronage-sourced margins. These margin amounts are not profits like a regular corporation. For a member-owned cooperative, these margin amounts represent each member’s capital contributions (i.e. capital credits), which are used by the cooperative to build utility plant, make improvements and fund capital spending projects. 

Member equity (in the form of capital credits) is used to leverage long-term loans that finance line construction costs. You can compare it to the down payment required when buying a home. The Cooperative’s members must provide the equity or “down payment” for these loans.

Annually, the Board of Directors determines if the finances of the Cooperative permit a retirement, of previously allocated capital credits and then determines the method and priority of payment. This year, the Board approved a method that takes into consideration the “time value of money” and uses a retirement cycle that is closely tied to the life of the utility plant. The Cooperative is retiring certain Capital Credits in advance of maturity for the allocation vintage year of 1996 and the Generation and Transmission Capital Credits from Allegheny Electric Cooperative, Inc. for the years of 1983 and about 75% of 1984. We are also retiring about half of the Co-op allocated patronage for 2008 using the same “time value of money” formula so that we can speed up the retirements to the current membership. 

 

The return of the members’ capital contributions is an important aspect of our co-op way-of-life. The local control by the Board allows them to analyze the financial situation of our cooperative and make the decision to return a significant amount of money to the member-owners. That’s part of what being a cooperative is all about.

Northwestern REC provides distribution electric service to 20,000 members in Crawford, Erie, Venango, Mercer and Warren counties in Pennsylvania and Ashtabula County in Ohio.