Archuleta and La Plata County businesses and residents who have paid their electric bills to La Plata Electric Association (LPEA) for at least one year will receive patronage capital refunds totaling $2.5 million during the August billing cycle.
At its regular July meeting, the LPEA Board of Directors approved the refund with the majority of the patronage capital (also known as capital credits) to be credited to electricity bills, though any refund amounts larger than $100 will be mailed as checks.
“Capital credits can in some ways be thought of as dividends for our member-consumers, but these refunds do differentiate us from other types of utilities,” said Greg Munro, LPEA CEO, noting that LPEA is a not-for-profit corporation with a 501 (c)(12) tax designation. “As part of that tax designation, which establishes us as a cooperative, we are required to refund capital credits to our members as we can afford to do so. We give the money back to our members instead of giving it to investors as is done in for-profit companies.”
Annually, the electricity payments made by members in excess of the cost of providing their electric service (called the “margin”) is placed into a patronage capital account in each member’s name. This capital, along with borrowed funds, is used to finance needed improvements to LPEA’s system infrastructure.
“In other words,” said Munro. “LPEA invests the margins earned by each owner back into our system. It helps build members’ equity and reduces the amount of money LPEA has to borrow – so it reduces interest charges we’d have to otherwise pay. The margins allow LPEA to maintain system reliability at its highest level and help keep rates lower.”
Annually, should the patronage capital account reach a level in excess of the amount LPEA needs to maintain the system, the cooperative “retires,” or gives back, a percentage of the funds. For 2011, LPEA is retiring $1.25 million of capital credits (on a first-in, first-out basis) earned in 1991 and 1992, as well as $1.25 million on a percentage basis (approximately 2.1 percent) for remaining amounts from years 1991 through 2010. Thus, anyone with an established LPEA account in 2010 or prior will receive funds in proportion to that member’s contribution to LPEA’s margins. Since incorporation in 1939, LPEA has refunded more than $32 million.