Message From the CEO

Because ECI REC is a nonprofit organization, our members pay for electricity at cost. Margins left over at the end of the year after all expenses are covered are often allocated to our members in the form of patronage dividends.

Usually, these dividends are distributed as a credit on our members’ June electric bills. However, this year patronage retirement will either be delayed until later in 2023 or postponed until next year. In this message, we’ll give you a full picture of why this change is occurring by delving more deeply into where patronage dividends come from and the limitations on their retirement.

What are patronage dividends?

Patronage dividends represent any margins left over at the end of the year after your Cooperative has covered all its expenses. This includes:

• Operating margins generated by the sale of electricity to you.
• Non-operating margins from interest on our investment of spare cash.
• Non-operating margins from our patronage dividend allocations, which ECI REC receives through memberships with other cooperatives from which we purchase goods and services.

As owners of the Cooperative, you provide equity by allowing ECI REC to hold on to these margins for a certain length of time. They are used to finance operations and system improvements, cover the cost of maintaining the electric distribution system, and more.

How does ECI REC decide whether to retire patronage dividends?

Subject to law, ECI REC’s Articles of Incorporation, and our bylaws, the Board of Directors has sole discretion over the allocation and retirement of patronage dividends.

At the May meeting, your Board reviews the feasibility of retiring patronage. The Board has a set policy to return a target amount of $500,000 back to the membership each fiscal year, if it believes ECI REC to be in good balance financially and strategically. In the past five years, the Board has returned over $2.7 million in patronage to our membership.

While the retirement of patronage is a fundamental principle of cooperatives, there are instances where this practice may be restricted or limited. For instance, ECI REC’s poles and wires sustained approximately $10 million in damage from a winter ice storm in 2007. That year, the Board decided to use all available funds to help pay for repairs to the distribution system, rather than retire patronage.

Regulatory requirements, the need for financial stability, debt obligations, and strategic reinvestment can all influence the allocation of patronage dividends. Cooperatives must strike a balance between distributing benefits to their members and ensuring the long-term viability and growth of the organization. Understanding the reasons behind these limitations can help members appreciate the complex financial dynamics at play within their organization.

What is changing this year?

Your Cooperative’s financial position is strong. Our equity is adequate, and margins have been improving since the March 1 rate increase. We are also meeting all our obligations for debt, the cost of purchased power, and day-to-day expenses. But because we delayed the increase in rates as long as possible, our cash position has significantly lowered. The cost of maintaining and improving a reliable electric grid has also risen greatly over the past three years.

After working diligently to assess all these variables, your Board of Directors has decided to use our cash to fund operations, maintenance, and system improvements, rather than retire patronage dividends this June. This decision ensures that we are not limited as we work to provide reliable, quality service.

Please be assured, this is just a postponement until our cash position has improved. Any new debt will be for capital improvements only. If you have questions, please call us toll-free at 877-850-4343 or email ecirec@ecirec.coop.