Chugach Consumers

CHUGACH ELECTRIC CAPITAL CREDITS BUY DOWN PROPOSAL (2003 ELECTION)

Chugach Electric has passed a proposal to allow holders of capital credits to obtain a discounted refund, when they leave the Chugach system.  Chugach would continue accruing capital credits on the fairer First In First Out (FIFO) basis.  Estates would be paid on a discounted basis.  The discount rate to be used is apparently the ten year debt rate plus 1%.      

PRELIMINARY CHUGACH CONSUMERS ANALYSIS:   This is a very fair solution to a long standing consumer complaint about holding capital credits for 15 years or more before refund.  Chugach is to be congratulated for avoiding the temptation to profiteer on the handling of these refunds as other cooperatives have elsewhere (example:  Setting a very high discount rate such as 11% and then going out and borrowing elsewhere at 3% and pocketing the difference).

DATE COMMENTS
9/18/02

PASSED UNANIMOUSLY BY CHUGACH BOARD

 Early Retirement of Discounted Capital Credits -- From the agenda item:  "Proposes guidelines for former members to receive their capital credits early in a discounted amount. The discounting process will also apply to estate payments. Allowing capital credits to be discounted and paid will provide several benefits to Chugach.  Financial benefits include reduced administrative costs, increased equity through the addition of �donated capital� and reduced funding requirements for future retirements. Members will benefit by having an option to receive their capital credits prior to normal retirements. It is essential that Chugach does not take any action that jeopardizes its tax-exempt status. Thus, a private letter ruling from the Internal Revenue Service should be obtained to ensure that this plan does not do so."
9/11/02 Survey of Alaska Electric Cooperatives� Capital Credit Practices -- Ron Vecera, Director of Member Services (presentation)
8/19/02 Capital Credits: Discounted Payments by Other Utilities -- Ron Vecera, Director of Member Services (presentation)
7/10/02 Capital Credits: Processes Alternatives & Recommendations -- Ron Vecera, Director of Member Services (presentation)

 

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