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Capital Credits


What are capital credits?

Capital credits are one of the many benefits of cooperative membership and represents each member's share of the H-D Electric's margins and ownership.  Since H-D Electric is a not-for-profit cooperative, it does not earn profits in the sense that other businesses do.  Instead, any margins, or revenue remaining after all the expenses have been paid, are allocated to the members in proportion to their electricity purchases.  These margins represent an interest-free loan of operating capital by the membership to the cooperative. From these margins the cooperative builds equity with the intention of repaying the member's investment, which is done through the retirement of capital credits.

What is the difference between allocated and retired capital credits?

In a capital credit allocation, the margins for the year are spread proportionally among the members. The amount of funds allocated to each member’s account is based on the amount of electricity the member purchased during that year. These funds are kept on H-D Electric’s books until they are retired. Capital credit retirement is the process of returning the allocated credits back to the members in cash. 

Can I apply my capital credit allocation to my bill?

No, allocated capital credits cannot be paid until those allocated years are retired.

When will I be paid for my capital credits?

Each year the Board of Directors determine if the cooperative's financial condition will allow for a retirement and if so what amount.  Currently, H-D Electric has an approximate twenty year rotation between the time that capital credits are allocated until they are retired (paid as cash).

What happens to my capital credits if I leave the service area?

The capital credits belong to you whether your membership has an active or inactive electric service.  You have two options if your membership no longer has an active electric service with H-D Electric.  Contact the office to find out more detailed information.

1) You can receive a General Retirement check at 100% of the value once the Board of Directors approves payment of the allocated revenue year.  Please remember to keep your contact information (phone number and mailing address) updated so we can communicate with you.

2)  You may apply for an Early capital credit Retirement, where the capital credit amounts are discounted appropriately for the time value of money.  Any Early Retirement requires Board of Director approval to verify the Early Retirement would not negatively affect the cooperative's financial conditions.

How can I find out if I have any unclaimed capital credits?

We have a link on the website of the unclaimed listing.  Unclaimed Capital Credits

Members are welcome to contact the office to request this information during normal business hours (Monday - Friday 8 am to 4:30 pm) at (605) 874-2171

What happens to the capital credits of a member who dies?

For individual memberships, capital credits are payable to the member’s estate upon notification of the member’s death. If the capital credits belong to a joint membership, and one of the account holder dies, the accumulated capital credits will transfer in their entirety to the surviving person’s name, and their membership will be converted from a joint to an individual membership.  Please contact the office to discuss the membership change and request the needed paperwork.

Do I report capital credit refunds as income?

H-D Electric issues the required 1099 form for all retirements over $600.  Please consult your tax advisor on your individual circumstances.


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