Sondrea Hamilton
Capital credits are a unique feature of electric cooperatives. Essentially, capital credits are a return of the portion of money that you paid for electricity in a previous year.

Laura Seney
Hello and welcome back to another episode of Live Wire. Joining us in studio today is our CFO, Sandra Hamilton. She is here to explain capital credits, including why Kosciusko REMC pays out capital credits to its membership, how the amount is decided and how the process works.
Hello, Sandra. How are you?

Sondrea Hamilton
I'm doing well. How are you, Laura?

Laura Seney
I'm good. Thank you. You recently joined Kosciusko REMC as our new CFO. What brought you to our organization?

Sondrea Hamilton
Kosciusko REMC was very appealing to me because our principles and values are aligned. I really like that our REMC has integrity and accountability in their core values.

Laura Seney
Yes, I think everyone who works here would agree with that, that they work here because the core values of this company align with their core values.

Sondrea Hamilton
Yes.

Laura Seney
How has your first couple of months at KREMC been so far?

Sondrea Hamilton
It has been very, very full of learning and absorbing knowledge from everybody around me. Really honestly, it's just that can sum it up. I'm still learning. I will continue to be learning for a long time, but, I have learned a lot
in these last few months.

Laura Seney
Yes, that's part of any new job, especially, if you're switching industries as well. There's always a lot to learn. What are you most excited about in your new role as CFO?

Sondrea Hamilton
I am excited about being able to contribute to such a wonderful company that it's very evident that they care about our community, and they're very involved in our community.

Laura Seney
Yes, I agree. Again, I think everyone who works here would agree with that statement, that we're very involved in our community. And we care about our members.

Sondrea Hamilton
Yeah.

Laura Seney
What are capital credits and why does KREMC pay out capital credits?

Sondrea Hamilton
So capital credits are the members ownership in the company. They are paid, usually annually. And we'll get to that later, why they haven't been paid, but they represent the members owners share and the cooperative.

Laura Seney
Okay, that makes sense. How much did KREMC make pay out in capital credits this year and how are capital credits calculated?

Sondrea Hamilton
So KREMC paid about 1.1 million in capital credits this year, and capital credits are calculated based on patronage or the amount of electricity purchased by the member. So the more electricity the member purchases, the larger their capital credits going to be.

Laura Seney
That makes sense. Why has it been so long since KREMC last paid out capital credits, since you mentioned it's normally done annually?

Sondrea Hamilton
Yes. The last 4 to 5 years KREMC has been very busy forming Kosciusko Connect and building the infrastructure. For to provide fiber services for every KREMC member as well as they expanded outside the member area as well. So they've used that money, to build that infrastructure and expand to fiber services.

Laura Seney
Yes, that makes sense. And it's definitely, been awesome watching Kosciusko Connect develop, and just grow in leaps and bounds over these last few years. And just to see the way it's benefit in our membership and people outside our membership in the community, because having high speed fiber internet opens a lot of doors, and opportunities for a lot of people.

Sondrea Hamilton
Yes.

Laura Seney
How does this model differ from the traditional utility company?

Sondrea Hamilton
Traditional utility companies are investor owned, and so they focus on profit in returning profit to the stockholders. KMC is a cooperative that's member owned and democratically controlled by the members, which are also the customers.

Laura Seney
That makes sense. And that sums up what makes electric cooperatives so unique. How does this process work? How did members receive these credits?

Sondrea Hamilton
Capital credits are issued either as a bill credit on the bill, most of them are given through bill credit, and in some situations, an actual check is issued to pay that capital credit.

Laura Seney
How do you decide? Like who gets a check? Who gets bill credit?

Sondrea Hamilton
The system is rather complex behind the scenes, but essentially we retire a certain year. So this year we retired 1989. So everybody that was a member in 1989 either gets a portion of their patronage return for that year or the sum of the future years if they were not a member in 1989. It's, the larger amount of 1989 or the year they were a member. After 1989, the computer, thankfully, our software system calculates all of that. But, it is a rather complex calculation and it's an either or situation.

Laura Seney
Okay, that makes sense. And I'm glad that we have accounting professionals like yourself and the other people on our accounting team to do the math on that, because it does sound very complicated.

Sondrea Hamilton
It is. I'm thankful for our software.

Laura Seney
What else do you think it's important for our membership to know about capital credits?

Sondrea Hamilton
Capital credits are a unique feature of electric cooperatives. Essentially, capital credits are a return of the portion of money that you paid for electricity in a previous year. As I explained how it's calculated and paid out. So essentially it's returning a portion of that money to you, of what you paid for electricity in a previous year.

Laura Seney
That makes sense. How does KREMC keep its utility bills so much lower than investor owned companies?

Sondrea Hamilton
KREMC operates on a cost of service not for profit basis, which focuses on member needs over profit. It sounds, pretty simple, but honestly, we just focus on our members and what's important to our members, and we don't focus on that bottom line or that dollar, because essentially we are going to return that and capital or plant or to the members through capital credits.

Laura Seney
That's awesome because it shows just how much our cooperative is invested in our members and in our community.

Sondrea Hamilton
Yes, they are the reason that we are here.

Laura Seney
Yes, exactly. KREMC is ranked in the top 8% of over 900 electric cooperatives in the nation for operating expenses. How does KREMC achieve this?

Sondrea Hamilton
Simply put, KMC has the lowest rates in the state of Indiana, but it's all because they're so efficient with their resources. We utilize a diverse mix of resources that leverage economies of scale to operate efficiently and keep operating expenses as low as possible. And it is worthy noteworthy to mention that it also helps that we are in a more dense area than some cooperatives, and we have a lot of commercial members.

Laura Seney
That's awesome. What other ways is KREMC financially contributing to our local community here in Kosciusko?

Sondrea Hamilton
KREMC contributes financially to, many, many, sponsorships and scholarships in our community, to name a few. We have college scholarship. We have 4-H scholarships. We have Operation Roundups which helps people in need. We have an EnviroWatts grant program for environmentally friendly companies. And we have sponsorships for community events such as the fair that we just had.

Laura Seney
Yes. And that really highlights how one of our core values is care for the community. And I would definitely, encourage members a lot of these programs, members have the option to opt-in to like Operation Roundup or EnviroWatts. I would encourage members to opt in for those things, because they can be a part of the positive things that we're doing in the community.

Sondrea Hamilton
Yeah. Operation roundup is something simple that you give cents on the dollar and just round up your bill, essentially, and then it helps people, each month. The amount equals about $7,000 or so that's given to the local community.

Laura Seney
Yeah. It's amazing what just rounding up your electric bill can do.

Sondrea Hamilton
Yes.

Laura Seney
Is there anything else you would like to share about your position as CFO and your experience so far? Working at KREMC or about KREMC's finances in general?

Sondrea Hamilton
I would just say I'm very proud to be here, and I'm very proud to be a part of such a wonderful company that does contribute to the community and care about the community so much, and I'm just excited. I've only been here a few months, and I know that I have not even hit the tip of the iceberg and learning, so I'm just excited to continue to learn and grow in my role and help the cooperative and the community as well.

Laura Seney
Awesome. Well, thank you for joining us today, Sondrea, and sharing about capital credits. I hope that you have a good rest of your day.

Sondrea Hamilton
Thank you. I hope you do as well.

Laura Seney
Thank you.

Laura Seney
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