Basin Electric directors vote to return money to members to help mitigate COVID-19 effects
Basin Electric directors authorized the retirement of nearly $18.6 million in patronage capital credits during their April board meeting. This will help mitigate the financial effects some cooperative members may face during the COVID-19 pandemic.
“One of the benefits of being a member of a cooperative is that members own their cooperative, and therefore are entitled to the retirement of previously allocated margins that are undistributed," said Paul Sukut, Basin Electric CEO and general manager. "We assign all operating and non-operating before-tax margins to our members on a patronage basis, and the board at its discretion may decide when to retire those margins that were allocated in prior years.” The $18.6 million retirement encompasses the remaining undistributed margin from the year 2003.
Steve Johnson, Basin Electric chief financial officer and senior vice president, said each year Basin Electric strives to retire about 1/30th of the cooperative’s total undistributed margins of approximately $1.06 billion. This month’s board action retires about half of the credits earlier than usual. The remainder of the total, $32.5 million, could be returned to members later this year, pending board authorization.
“Within our membership, some distribution members are mandated that they cannot disconnect for lack of payment, and others have decided they will not disconnect. We have heard some concern about liquidity and cash position, with some sectors affected more than others, and this is a step Basin Electric can take to help out,” Johnson said. “It’s important to note, however, that our membership overall appears to be quite strong. In March, our Member Investment Program set another record for investment. While that was early on in the effects of this pandemic, that our members feel comfortable continuing to invest is a promising sign.”
After this patronage retirement, since the year 2000, Basin Electric will have returned $738.7 million to the membership via patronage capital retirements, bill credits, and power cost adjustments.
Johnson said cooperatives will be receiving an official notice of their share of the patronage capital credit retirement, which is determined based on their power purchases during the year the patronage was originally allocated. The capital credits will be distributed May 6, 2020.