Each year the board of directors, which is elected by our members, reviews our financial position and our debt covenants and determines the most financially prudent amount of capital credits to retire or pay out. Since our goal is to keep electric rates as low as possible, there is usually a very small margin or profit left after expenses are paid each year.
For example, if our margins for a year were $1 million and the total number of members was 105,000, the average amount that could have been paid would only have been $9.52 per member. But, since it is prudent to increase the owner investment in Dakota Electric as we continue to build our distribution system to serve the growing Dakota County area, this $1 million is not cash in the bank. Instead, it is invested in the utility plant, poles, transformers, wires, etc. needed to run the business.
Returning capital credits to our members is our goal and our commitment and is required by the Internal Revenue Service. However, Dakota Electric will only return capital credits when it is financially prudent for the long-term health of the cooperative. The majority of members, when asked if they prefer low rates or a capital credits check for a few dollars, choose low rates.
It is legal for Dakota Electric to keep capital credits until the board of directors declares a payout. As a cooperative, this complies with the laws of the State of Minnesota and the Internal Revenue Service and is also in accordance with Dakota Electric’s bylaws. A decision about whether or not to pay capital credits is made year by year based on the financial position of Dakota Electric at that time. Currently, the equity of Dakota Electric is made up of margins earned from 1995 forward.