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Capital credits retirement

Chugach will be mailing checks and assigning credits in mid-December for a $4 million retail capital credits retirement. The retirement was authorized by a pair of board actions approving the return to retail members of record from 1989 and 1990.

Capital credits are a feature of purchasing service from a not-for-profit electric cooperative like Chugach. They are a member’s share of the margins in a year in which revenues exceed expenses. Capital credits are allocated as a percentage of the total amount of service billed to a member in a given year.

The $4,006,160 retail retirement will return the remainder of margins earned in 1989 and a portion of those earned in 1990. The total is on top of capital credits already paid to estates of deceased members, and to former members who elected to take early discounted payments.

In addition to the retail retirement, Matanuska Electric Association, Homer Electric Association and the City of Seward will share in a $3.5 million wholesale capital credits retirement.

Electric cooperatives use retained margins to offset the need for borrowing. They are generally invested in assets of the cooperative. Members are notified annually of their individual allocation of the prior year’s margins, but retirements must be specifically authorized by the board of directors after considering the impact on the finances of the cooperative.

Retained margins become equity on the books of the cooperative. Chugach has specific debt-to-equity targets set by its lenders. When Chugach took on new debt to finance its share of the Southcentral Power Project it was necessary to suspend retirements for several years to grow equity.