Cooperatives are not-for-profit organizations that operate at cost, only collecting enough revenue to run the business and meet their financial obligations. When a cooperative enjoys financial success, it returns those dollars 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 don’t serve customers. We serve member-owners. All members contribute equitably to the costs of the cooperative and share in its success,” said Great River Energy President and Chief Executive Officer David Saggau.
Great River Energy has enjoyed a remarkable run of financial success in recent years. Strong 2021 margins allowed the cooperative to provide $57 million in bill credits over the past 12 months.
“We met our financials goals and sent millions to our membership—all while charting a course to stabilize wholesale electric rates and dramatically reduce our environmental impact,” Saggau added.
Great River Energy’s wholesale power rates are 10.9% below the weighted regional average cost of electricity, and they are projected to remain steady or decline over the next several years. A rapid evolution of its power supply resources has Great River Energy on track to reduce its carbon dioxide emissions by greater than 80% by 2032 from 2005 levels.
When co-ops thrive, members benefit
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%. Patronage returns are then made in the form of cash payments from equity levels above the set target.
“It is our mission to provide member-owners with affordable, reliable energy in harmony with a sustainable environment,” said Vice President and Chief Financial Officer Michelle Strobel. “That has guided our success and driven member benefits, such as patronage capital returns.”
Great River Energy began issuing these payments to member-owners in 2019, after spending over a decade building its equity to capitalization ratio to 20%.
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.