The LCEC Board of Trustees recently approved a $14.6 million 2018 equity allocation. In addition, an $11.9 million equity retirement was approved putting those funds back in the pockets of active and inactive electric cooperative members. This amount includes an $8.1 million return of equity to inactive customers with memberships that have been closed since 2011, and an additional return of $3.3 million to current and inactive members. Customers will see credits on their bill, or equity checks soon.
Over the years, LCEC has returned more than $280 million in equity to customers. Equity in LCEC is not equivalent to cash or liquid assets. Equity represents members’ investment in LCEC’s electrical system in the form of substations, poles, lines, transformers and other facilities. The amount of equity allocated to each member each year is calculated based on the amount of electricity used by the member in the period. Equity equates to financial strength for LCEC members. It allows for improvements in the delivery of power and service through capital projects without incurring costly loans, which helps keep rates low.
“LCEC is proud of the financial strength that has allowed us to return equity to our customers for many years,” stated Chief Financial Officer Denise Vidal. Equity ownership is one of the benefits of belonging to a financially stable electric cooperative. Many electric cooperatives in the United States are able to return equity to members.
Vidal explained, “Mortgage clauses from LCEC lenders require financial ratios to remain at minimum levels. Depending on operating costs and capital requirements, it is not always possible to return equity, and this year we are.” The LCEC Board of Trustees reviews the LCEC financial position each year to make a determination regarding equity management.