Episode Transcript
[00:00:00] Speaker A: Foreign.
Welcome to the Buzz, a podcast by Boone Electra Cooperative. The Buzz is a monthly message to our community celebrating what it means to be a member owner of your local electric cooperative, Boone Electric Cooperative, your co op, our community.
[00:00:27] Speaker B: Welcome back to the Buzz.
[00:00:28] Speaker C: I'm Zach Smith, communications specialist at Boone Electric Cooperative. And if you are a member of Boone Electric Cooperative listening to the show, well, you might have noticed some communication from us over the past few weeks about something called your allocation. So joining the show today to help answer some questions about allocations, mainly what they are and what they do for you, is Boone Electric's own Turner Adams. Turner, welcome to the program.
[00:00:52] Speaker B: Yeah, thanks for having me on. I've been with Boone Electric Cooperative for, I guess, total of about six years now, and I'm an accountant in the finance department.
[00:01:01] Speaker C: Hence the reason that you're here to tell us all about allocations.
[00:01:04] Speaker B: I guess. So anything with a dollar sign in front of it pretty much shows up on my desk.
[00:01:08] Speaker C: I think the first couple questions out of the gate are probably the obvious ones. What is an allocation? Why am I getting one?
[00:01:14] Speaker B: Yeah, sure. So I think it might be easier to answer the second question first. You're getting an allocation notice because as I roll electric cooperative, we're a not for profit utility. And what that means is anytime we have operating revenue that we bring in in excess over the actual cost of providing service to our members, we record those margins and allocate them to our members. Hence the term allocation.
[00:01:38] Speaker C: Okay, so allocation is related to the capital credits that we typically retire at the end of the calendar year. But they're not the same thing as capital credits, right?
[00:01:49] Speaker B: Yeah, that's correct. So your allocation is part of your like unretired capital credit balance.
The patronage capital balance is retired members on a like 20 year schedule. So allocations occur every year. But when we're able to retire, capital credits and the board authorize Boone Electric to do that, is typically a mixture of retirements from different years. As I mentioned, your allocation statement shows the allocation that was deposited in your unretired capital credits balance for 2025. And at the bottom of that notice, you'll see the starting unretired capital credits balance, which is your allocation for this year, and then the new total of the unretired capital credits. That total balance is what your capital credit retirement comes from and when it's retired at the end of the year.
[00:02:33] Speaker C: So it's like a. It's basically like a balance sheet for what's in there, not necessarily what is coming out in December if the board says we're going to retire capital credits again this year.
[00:02:45] Speaker B: Yeah, that's correct. And as I mentioned, it comes over a 20 year schedule and as a combination of FIFO and LIFO. So first in, first out and last in, first out. Say that a member joins in 2025 or let's just say 2024, and they're getting the first allocation notice in 2025, expecting a distribution at the end of 2025.
But they won't get one if we just do first in, first out. Right. So then they wouldn't even see any level of distribution from their margins or Boon electric margins for 20 years. So I think that's why we do a combination.
[00:03:16] Speaker C: Okay, so I'm looking at this sample allocation notice and I see some other names on here besides just Boon Electric. I see bec and then next to that I see cepc, cfc. And I know that CEPC is Central Electric Power, but I thought I was a member of Boone Electric. What's, why are all these other names involved with my allocation?
[00:03:38] Speaker B: So the amounts listed on that portion of the capital credits for the year are the other cooperatives that BEC or Boon Electric are a member owner of, similar to a member of Boon Electric, but in this case.
So the CEPC is Central Electric Power Cooperative and the CFC is a cooperative finance corporation.
CEPC is who brings the electricity from the power plants to the substations.
CEPC owns the substations and the high voltage transmissions lines that carry the power from the power plants to the substations. And then CFC is a member owned financial services provider that typically loans to rural electric cooperatives. They are who Boone Electric gets their loans from so we can make system improvements.
[00:04:25] Speaker C: And just like members are members of Boone Electric, you pay your electric bill and then we determine that we made some profits over what the actual cost of service was. It's kind of the same thing. We pay Central Electric Power for wholesale power costs. And then at the end of the year whenever they determine that they made a margin, then we get some of that back. And then similar to, I would assume the way it works with CFC is probably the interest that we pay on loans and things like servicing our loans.
[00:04:55] Speaker B: Yeah, that's exactly right. So Central Electric, that's how I like to go about it.
If they have any extra margins, then the portion that we contributed to those margins is then what goes into our allocation balance, similar to what the members are going to see on their statement.
[00:05:09] Speaker C: Okay, so we've got the total allocation and we kind of see the breakdown of where all of those different pieces of that amount are coming from. How do we come up with that amount that's being allocated?
[00:05:22] Speaker B: Yeah, so each member's share of the allocation is based proportionally on the revenue that Boon Electric received from that member's account. So as a quick example, if Boon Electric sold a million kilowatt hours of energy and you, the member, used 100,000 kilowatt hours, then effectively you'd get 10% of the allocated margins for the year because that's.
[00:05:46] Speaker C: The revenue is based on usage.
[00:05:47] Speaker B: That's correct.
[00:05:48] Speaker C: Well, thank you for explaining that, Turner. I know that the allocation notice, people are probably familiar with it, or they're probably at least used to seeing it once a year, but maybe don't always know what that means or don't investigate it too closely. So thanks for breaking that down for us and giving us an explanation of what that is and where it comes from and how it plays into the capital credits.
[00:06:08] Speaker B: Yeah, of course. Anytime.
[00:06:11] Speaker C: And thank you for joining us on this month's program. Be sure to come back next month. And until then, we'll see you somewhere down the line.
[00:06:18] Speaker A: Thank you for tuning in to the Buzz, a podcast by Boone Electric Cooperative. To subscribe or for more information, you can find us on Instagram X and LinkedIn. And of course, you can always visit us 247 at Boonelectric Co op Boone Electric Cooperative, your co op, our community.
