Electric cooperatives aren’t like other utilities. The members are not only customers, they own a portion of the business.
Great River Energy is owned by 28 distribution cooperatives. Cooperatives operate at cost, only collecting enough revenue to run the business. When there’s excess revenue collected, it’s returned to members through patronage capital payments.
That’s what occurred in March when Great River Energy issued $25 million in patronage capital payments to member-owners.
Cooperatives hold on to allocated capital credits to cover emergencies and to make necessary enhancements to their electric systems. It is an important financial mechanism that reduces the need to raise rates or borrow money to pay for infrastructure.
Great River Energy’s board of directors sets a target to maintain an equity to capitalization ratio of 20%. Anything above that is returned to members through cash payments.
Great River Energy began issuing these payments to member-owners in 2019, after spending over a decade slowly building its equity to capitalization ratio to 20%.
“This year’s payment is special,” said Vice President and Chief Financial Officer Michelle Strobel. “For many years, we targeted 2021 for our first patronage capital payments. Instead, we accomplished our financial plan early and this year will make our third — and largest — payment to member-owners.”
Returning patronage capital is a component of the cooperative principle known as “members’ economic participation.” Members contribute equitably to, and democratically control, the capital of their cooperative. Cooperatives allocate surpluses for a variety of reasons, including periodic cash returns.