Capital Credits

Capital credits are the profits - called margins by cooperatives - that are left over from revenues after all operating expenses are deducted. Margins, along with borrowed funds, are used to finance capital improvements, such as electrical lines, poles, transformers, substations, etc. Each year, these margins are allocated, or credited, to members receiving electrical service and are paid back to the members at a future date.

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Frequently Asked Questions

As a member of Black Hills Electric Cooperative, Inc., the concept of capital credits may be new to you. Here are answers to the questions our members most frequently ask us.

Electric cooperatives are non-profit, but must produce margins in order to cover interest on loans and to develop equity, which assures financial strength. Black Hills Electric Cooperative's electric rates are designed to produce an operating margin based upon the Cooperative's financial needs. Presently, our lenders (mortgage holders) - the Rural Utilities Service and the National Rural Utilities Cooperative Finance Corporation - encourage us to maintain at least $1.50 of margin for every $1 of interest.

Capital credits are allocated annually to each member. To determine your individual capital credit allocation, the margin percentage is applied to the amount you paid for electric service for the year. Black Hills Electric will send you a notice informing you of the amount allocated to you in capital credits. Your allocation amount will be displayed on your May billing statement as an active member. Inactive members receive an allocation notice the year after disconnecting, and the remaining capital credit allocations will be displayed on future disbursement checks. The capital credit allocation notices are not bills. It is a statement of your equity, or ownership, in your Cooperative.

Yes, however, whether or not capital credits are refunded, how, when and to whom depends on the approval of your Board of Directors and on the finances of the Cooperative. BHEC's lenders will only allow capital credit "retirements," or refunds, based on the financial condition of your cooperative. The Board of Directors also determines the method of retirement to be used. Usually, the board retires a percentage of the previous year's capital credits and a percentage of the oldest capital credits.

If you move from Black Hills Electric's service area, the capital credits accumulated in your account will remain in your name. It is important to keep the Cooperative informed of your current address so that we can send your refund when a general retirement is made. The last year you receive service from the Cooperative is the last year you will earn capital credits.

When a human member (versus a corporation or partnership member) dies, the estate has three options regarding capital credit refunds:

Continue to receive the capital credits under the deceased's name.
Assign the capital credits to an heir and continue to receive.
Take a discounted refund of the total amount immediately. The discount rate is based on the present value table.

Capital credits are allocated to businesses in the same manner as they are to human members. Businesses receive refunds when the Board of Directors makes a general retirement. When a corporation, partnership or sole proprietorship dissolves, capital credits may be assigned to the owner or owners. However, they are not eligible for a discounted refund. Discounted refunds are only paid to estates of deceased human members.

When the Board of Directors approves a capital credit refund, members will be notified by mail and through the monthly newsletter. Capital credit refunds will be credited to active accounts or mailed to the last known address. Names of members with unclaimed checks are published in the newsletter.

Unclaimed Capital Credits

12/19/2025 (15:26) Outage Restoration Update:

Capital Credits

Frequently Asked Questions

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12/19/2025 (15:26) Outage Restoration Update:

Frequently Asked Questions

What are capital credits?

Why do we have capital credits?

How are capital credits allocated?

Can capital credit allocations be applied to my bill?

Do I earn interest on my capital credits?

Are capital credits refundable?

What if I move?

What if I die?

How about businesses?

Will I be notified?