> See the FAQ section for more information on Capital Credits. 

What are Capital Credits? In order to explain Capital Credits properly we must go back to the 1930's and look at the early days of electric companies. The first electric companies in the US were all investor-owned utilities. Every electric company was owned by private investors who bought stock in a new venture with the hope of making a profit. For obvious reasons those investors started with the big cities like New York and Chicago, then worked their way down to the smaller cities like Missoula, Hamilton and Stevensville. They had an opportunity to electrify the rural areas, but they declined because the investment was too high for so few consumers; so rural America had to wait.

The Rural Electrification Administration - the "REA" - was created during the Roosevelt administration in 1935 to loan out money to farmers and ranchers so they could develop "cooperatives." Co-ops installed the poles and wire to deliver electricity to rural areas. Today there are 1,000 Rural Electric Co-ops in the US. There are 26 electric Co-ops in the state of Montana. Ravalli Electric Co-op serves rural Ravalli County.  (Not downtown Hamilton, Stevensville, Victor, and so on.) You cannot buy stock in an Electric Co-op. Every single Electric Cooperative in the country is a locally owned business. And every single not-for-profit Electric Cooperative uses an accounting system that includes Capital Credits.

In a perfect world a not-for-profit business could write a budget on January 1st to cover all expenses and end the year with a profit of exactly zero. In the real world we must always budget a bit more than projected costs, because we can't predict the weather or big, expensive storms. So every year leftover profits may amount to as little as $10,000 or as much as $400,000 or more. And all those profits are gradually returned to consumers in the form of Capital Credit payments.

Every year the Co-op's Directors look at the Co-op's financial health and decide how and when to return Capital Credits. Some years the profits are too small to warrant payments. Other years when the profits are greater, the board has a few options. The board may decide to retain some of the profits to be used as working capital or to upgrade a portion of the electric system. And some Credits are returned to members in cash.

Historically, Ravalli County Electric Cooperative has paid Capital Credits in order of "first in, first out." So the 1930's were paid, then the '40's, the '50's, the '60's, 1970, 1971, 1972, 1973 and so on. Ravalli Electric has paid off all Credits due for all years up to and including 1982. (Most Co-ops around the country are similarly still paying Credits from approximately 20 years ago.) A few years ago the board of directors elected to change the formula for payments so the Co-op paid a portion of the oldest year on file and a portion of the new year. This change resulted in thousands of newer consumers getting a Capital Credit check for the first time. Please check our Uncashed Check List for members that we are unable to locate.

Capital Credits may also be paid by the authorization of the Board of Directors to the heirs of deceased members (some restrictions apply). Capital Credit Refund Form

Some consumers assume that Capital Credits are like a savings account with cash set aside for each member. Actually, Capital Credits are in the form of hard assets - poles, wire, trucks and buildings. It would make no sense for the Co-op to pay back large Capital Credit payments and then borrow money from the bank to replenish working capital. Interest payments for borrowed money would be passed on to the consumer. Returning Capital Credits is a balancing act. No one wants to raise electric rates in order to raise revenue available to pay back Credits. It's better to keep rates as low as possible and pay back Credits slowly but surely.

Ravalli Electric Co-op was incorporated in 1936 as the first electric Co-op in the state of Montana. Capital Credits are part of the Co-op heritage. If you have further questions about Capital Credits, call us at (406) 961-3001.