Patronage Capital and Member Equity
What is member equity?
Member equity is the value of your investment in Mitchell EMC; it is not dollars in a bank account. It is similar to the equity you build in your home – as you pay down your home mortgage over time, the amount of equity you have increases. In a similar way, the longer you are a member of Mitchell EMC, the more equity you build in your patronage capital (capital credit) account, in direct proportion to the amount of electricity you purchase.
Where does member equity come from?
Most years, Mitchell EMC takes in more money than it costs to provide electricity to its members. Those leftover funds are called margins. Because we’re a cooperative owned by the people we serve, those margins belong to the members who paid for electricity that year and are documented in a special record we call a patronage capital account.
Mitchell EMC maintains patronage capital (capital credits) records for every member that pays a bill. What we record in the patronage capital account is each member’s share of the margins allocated on the basis of how much electricity was used by the member. The longer you are a member, the more patronage capital we record in your name.
Your member equity in the patronage capital account serves a special purpose for a member-owned cooperative such as Mitchell EMC. It is what you, as a member, invest back into the cooperative. Member equity reduces the need to borrow money to run the business, and helps hold down rates. The dollar amount in your patronage capital account represents the value of your member equity in Mitchell EMC.
When do I get to withdraw my member equity?
We give it back to you (and all our other members) as we can afford to, through the patronage capital refund process. Every year, Mitchell EMC’s Board of Directors reviews the financial condition of the cooperative. If the cooperative is financially stable and the margins we’ve accumulated are more than we need to reserve, the Board may decide to refund some of the patronage capital, or member equity. To put it more simply, the Board might decide that we no longer need to hold on to a portion of those funds, so they can be given back to the members. When the patronage capital for the years you were a member are refunded, you will receive your share, whether or not you are still a member. That’s why it’s important for you to provide a forwarding address if you leave our service area so that you can still receive payment.
Why does Mitchell EMC need to hold member equity in reserve?
Mitchell EMC needs capital just like any other business. It costs a great deal of money to build the distribution system of substations, wires, poles and equipment that delivers the power to our members’ homes and businesses. This cost is so great it must be spread over a number of years and we cannot charge our members for the entire amount in one year. In order to spread that cost, we must borrow money, just as you would borrow money to buy a home.
When you buy a home, you must have a down payment to get approved for a loan. That down payment is your ownership in the home. In the same way, banks who lend to cooperative businesses such as Mitchell EMC require a certain amount of equity or ownership in the business before they will approve a loan. Member equity is Mitchell EMC’s equity or ownership of the cooperative for purposes of borrowing money, and is also a source of capital to reduce the amount of money we need to borrow. Our members essentially loan money to Mitchell EMC to use as capital, and the laws that govern cooperatives provide for the money to be used as long as it is needed to ensure the financial stability of the business.
What happens if Mitchell EMC no longer has my current address when they try to pay my patronage capital?
Mitchell EMC requests that former members keep us up to date with their current address. If we attempt to send you a patronage capital check and it is returned by the post office due to an outdated address, we must follow Georgia state laws for unclaimed property. We will publish the information on our web site in an attempt to find the rightful owner of the money. We continue to publish and carry unclaimed patronage capital
amounts on our books for 5 years. If, after 5 years, we still have not located you, the law requires us to either turn the money over to the state, or donate it to a charitable organization.