Section 1. Maintaining Capital Credits Accounts
The business of the Corporation shall be so conducted that all of the members and non-member patrons will, through their purchases of power and materials, furnish capital to the Corporation. In order to induce such business and to assure that the Corporation will operate on a non-profit basis, the Corporation is obligated to account on a patronage basis to its members for all amounts received and receivable from the furnishing of electric energy, goods, and services in excess of operating costs and expenses properly chargeable against the furnishing of electric energy and conduct of the Corporation's business. All such amounts in excess of the operating costs and expenses at the moment of receipt by the Corporation are received with the understanding that they are furnished by the members and non-member patrons as capital. The Corporation is obligated to allocate by credit to a capital account for each member and non-member patron all such amounts in excess of operating costs and expenses not set aside by the board as reserves for the anticipated losses or expenses not yet realized. Within a reasonable time after the close of each fiscal year, the Board of Directors shall determine the amount and the method of allocation of Patronage Capital. The books and records of the Corporation shall be set up and kept in such a manner that, at the end of each fiscal year the amount of capital allocated to each member or non-member, if any, is clearly reflected. The Corporation shall within a reasonable time after the allocation of Patronage Capital notify each member or non-member patron of the amount of capital so credited to his or her or its account. All such amounts credited to the capital account of any member or non-member patron shall have the same status as though they had been paid to the member or non-member patron in cash in pursuance of the legal obligation to do so and the member or non-member patron had then furnished the Corporation corresponding amount for capital, but said credits or allocations shall not constitute debts of the Corporation.
In the sole discretion of the Board of Directors, the Corporation may establish formal rate categories based on the cost of service to a particular group of Members or, if appropriate, a single member. Such segregation of costs should be based on costs of service rate studies performed from time to time. Rates must be formulated so each Member group contributes their or its cost of service plus a reasonable margin to support the Corporation Capital requirements.
Section 2. General Conditions
(1) Patronage capital accruing after January 1, 1998 when allocated shall be the property of the member who has purchased the energy, goods, or services from which the capital was derived. Allocated patronage capital is not transferred with a membership unless the transferor and transferee agree in writing or unless the transfer occurs by operation of law. (2) Allocated patronage capital are not debts of the Corporation. They may not be sold, transferred or assigned without approval of the Directors of this Corporation. They shall not be subject to garnishment, execution or other civil process until the Board has authorized their retirement. Neither a member or non-member patron shall be entitled to claim a right of offset nor recoupment of allocated patronage savings against the member's or non-member patron's obligation to the Corporation. The Corporation shall be entitled to set off or recoup of any obligation of a member or nonmember patron to the Corporation against patronage capital or other capital credits of any kind at the time said equities or credits are to be distributed.
Section 3. Dissolution or Liquidation
In the event of dissolution or liquidation of the Corporation, after all outstanding indebtedness of the Corporation shall have been paid, the outstanding capital credits shall be retired without priority on a pro rata basis before any payments are made on account of property rights of members.
Section 4. Assignments
The patronage capital credited to the account of each member shall be assignable only on the books of the Corporation pursuant to written instructions from the assignor and only to successors in interest or successors in occupancy in all unless the Board, acting under the policies of general application shall determine otherwise.
Section 5. Retirement
If, at any time prior to dissolution or liquidation, the Board shall determine that the financial condition of the Corporation will not be impaired in whole or in part the board may authorize retirement of allocated capital credits. Retirement of capital credits may be made according to the year in which the capital was furnished and credited, either on a first-in, first-out or last-in, first-out method or any combination thereof at the board’s discretion. Notwithstanding any other provisions of these Bylaws, the Board in its discretion, shall have the power to retire the capital credit of a deceased patron who was a natural person at any time after the death of such patron and prior to the time such capital would otherwise be retired under the provision of these bylaws or the policies of the Board of Directors, upon such terms and conditions as the Board of Directors shall adopt, provided that the financial condition of the Cooperative will not be impaired thereby. No capital credit of a deceased patron shall be retired unless an heir or legal representative of the deceased patron has requested such retirement in writing to the Cooperative. If such written request is made to the Cooperative, the Cooperative shall retire the capital credit of a deceased patron to the estate or heirs of the deceased patron on a discounted and fair value basis as agreed to by the Board and the legal representative of the estate of the member or heirs(s) of the member. The Cooperative shall deduct and retain from such payment all monies owed by the deceased patron to the Cooperative at that time, together with accrued interest on such owed amount. The discounted portion of the capital credit of such deceased patron which is not paid by the cooperative, after the retirement of a portion thereof on a discounted and fair value basis, shall be deemed donated to, and retained by, the Cooperative and shall not thereafter be reassigned to any patron or member or person. Any policy of the Board to retire the capital credit of deceased patrons and implement the foregoing provisions of these Bylaws shall be uniform and applied in a nondiscriminatory fashion to the capital accounts of deceased patrons.
In addition, at the sole discretion of the Board and consent of the applicable Members or other patrons, the discounting policies described herein may be applied to all patrons.