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LPEA members to receive $2.5 million in capital credits refunds

By Indiana Reed
Special to The SUN

Archuleta County businesses and residents who have paid their electric bills to La Plata Electric Association (LPEA) since at least 2011, will receive capital credits refunds totaling $2.5 million during the August billing cycle.

The LPEA board of directors at their regular monthly board meeting on July 17 approved the refund, with the majority of the capital credits (also known as patronage capital) to be credited to electricity bills, though any refund amounts larger than $100 will be mailed as checks.

“Capital credits represent our member’s investment in La Plata Electric Association,” 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 stockholders as is done in investor-owned utilities.”

Capital credits are essentially the margins or revenues remaining after all expenses have been paid, according to LPEA CFO Dennis Svanes. Annually, the electricity payments made by members in excess of the cost to provide their electric service 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 Svanes. “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 LPEA board of directors “retires,” or gives back, a percentage of the funds. For 2013, LPEA is retiring $1.25 million of capital credits (on a first-in, first-out FIFO basis) earned in 1992 and 1993, as well as $1.25 million on a percentage basis (approximately 2.3 percent) for remaining amounts from years 1993 through 2011. Thus, anyone with an established LPEA account in 2011 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 $35 million.

Annually, LPEA endeavors to find those members who have moved out of the service territory, as they are still eligible to receive retired capital credits from previous years. Members are asked to change or report new addresses to ensure receipt of capital credits.

This story was posted on July 23, 2013.