Holiday bonus: Returning money to co-op members

Roger Rhonemus, an Adams Rural Electric Cooperative member, receives capital credits annually from his co-op.

To Roger Rhonemus, it’s almost like a Christmas bonus.

Every year for about 20 years now, Rhonemus, who farms 800 acres of corn, soybeans, and hay in Adams County, looks forward to receiving his capital credits check from Adams Rural Electric Cooperative.

Two decades ago, Rhonemus, 60, used those annual checks, which typically go out to Adams REC members each November, to buy Christmas presents for his three children. Now that the kids are grown with families of their own, he uses it to buy presents for his eight grandchildren. And he couldn’t be happier.

“That check comes in very handy at Christmastime, and I am always very thankful to receive it,” he says. “Receiving a capital credits check tells me my electric cooperative is running a tight ship.”

A resident of West Union, about 60 miles southeast of Cincinnati, Rhonemus has been a member of Adams REC for nearly 40 years. While the checks certainly don’t cover all of his holiday shopping, every bit of it helps. “Any time you get a check in the mail, it’s a good thing. It’s the icing on the cake for being a member of a great co-op,” he says.

Ohio’s electric cooperative network, which comprises of the 24 not-for-profit, consumer-owned cooperatives throughout the state, collectively returned nearly $32 million in capital credits to member-consumers in 2016, the latest year for which full data is available.

“Electric cooperatives are not here to make a profit, and so a capital credits check is our way to return cash to members after we pay our operating expenses,” says Bill Swango, general manager of Adams REC. “A lot of members don’t understand what capital credits are, but once they receive their first check, that’s when they start to get it.”

Capital credits represent each member’s share of the co-op’s operating margins, which is the money left over after bills are paid. Every cooperative, including electric co-ops, handle capital credits differently. While Adams REC is returning money from the early 1990s, other co-ops, such as Butler Rural Electric Cooperative, based in Oxford, have chosen a model that allows them to return capital credits to longstanding members and new ones alike.

In general, the co-op’s margins are allocated to members’ capital credits accounts and then returned to the member in a general retirement on a rotating basis.

Each year, a co-op’s board of directors evaluates whether the co-op’s finances will allow for a return of capital credits to members, so that means not every co-op retires those credits every year. Of those that do, not all issue checks — some simply issue bill credits — and the time of year they are issued also varies from cooperative to cooperative.

There are more than 900 electric co-ops across the country. Across the nation, those co-ops have returned almost $14 billion to their owner-members since 1988, according to the National Rural Electric Cooperative Association (NRECA).

Though Adams REC returns capital to its members nearly every year, there have been years when it could not. “In 2009, we had a major ice storm, and in 2010 we had the derecho that tore up our distribution system,” says Alice Baird, who handles communications duties at the co-op. “The costs of repairing the system in those years drove up our operating costs and reduced our margins.”

Although Adams REC couldn’t make capital credits payments in those two years, the members didn’t lose their credits. They were deferred until the co-op was able to fund them again in 2011.

“As a nonprofit cooperative owned by its members, we always think it’s a good thing to return their cash back to them,” Baird says. “Co-ops are a family, and you always want to take good care of your family.”

John Egan is president of Egan Energy Communications, a national energy communications firm.