SMPA consumer-members wait 28 years for annual refunds

. . .


Purchasing power decreased by nearly half since January 1994


by Allyn Svoboda


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Change in the average price of goods and services purchased in the U.S., January 1994 - December 2021. Purchases costing $100 in January 1994 now cost approximately $190.

Ore Cart chart

  • $1,001,332.95 paid-out in January 2022 for electricity purchased in 1993
  • refund consists of SMPA "margins" in 1993
  • margins are SMPA annual revenues which exceed annual expenses
  • SMPA Board of Directors decides when to issue refunds
  • SMPA used the unrefunded margins as "equity capital" to fund operations, and reduce borrowing which would have otherwise been needed to pay for electric system improvements


Equity capital is money the cooperative obtains from its members without assuming a legal obligation to pay it back at a stated time..


San Miguel Power Association (SMPA), a cooperative, mailed annual patronage capital "member dividend" checks this month to present and former members who were consumers in 1993. SMPA announced this distribution January 3, 2022.

The U.S. Bureau of Labor Statistics Consumer Price Index Calculator result for the 28 year-period shows purchasing power of SMPA Member Dividends declined by nearly half from January 1994 to January 2022. A prompt refund in January 1994 by SMPA to members who were consumers in 1993 would have had 100% of its purchasing value. The recent actual refund has 52.43% of the purchasing compared to 28 years earlier due to inflation of the costs of U.S. goods and services.

- (see chart above) -

The previous SMPA annual member dividend refund in January 2021 totaled approximately $500,000 for allocations from the years 1989, 1991, 1992 and 1993. (see SMPA Energywise newsletter - January 2021 - page 2). The current refund, also for 1993 allocations, extended the number of years past and present consumers must wait for annual refunds from 27 to 28 years.

. . .

This "retirement" of "allocated patronage capital" consists of two "allocated credits" sources:


SMPA 1993 . . $ 385,095.95

TSGT 1993. . . $ 616,237.00

total. . . . . . . $ 1,001,332.95


source: SMPA Board of Directors
Equity Management presentation
November 11, 2021


The SMPA portion is patronage capital from 1993 SMPA revenues allocated to SMPA consumer-members.

The TSGT portion is annual margins allocated to SMPA by its wholesale electric energy supplier, Tri-State Generation & Transmission Association. TSGT is also a cooperative, and is electric energy supplier to retail electric cooperatives in Colorado, Wyoming, Nebraska and New Mexico. Tri-State G&T announced a $10 million patronage capital refund to member cooperatives December 17, 2021.


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Compariison of SMPA "member dividends" purchasing value: returned to 1993 consumer-members in January 1994 vs. held by SMPA for 28 years. Chart depicts percentages, not dollar amounts.

Ore Cart chart


SMPA refund announcement

January 3, 2022

At its November 2021 meeting, the Board of Directors of San Miguel Power Association (SMPA) approved the return of $1 million in Member Dividends to the consumer-members. This move completes the process by which excess revenues get shared back with consumers over time.

In a typical year, SMPA has money left over after paying its expenses. The excess revenue, called “margins” is allocated to each consumer in proportion to their contributions for that year. For a period of time, these margins are used by the cooperative as capital to finance operations and construction. This helps keep rates at an affordable level by reducing the need to turn to lenders for funds to maintain and enhance SMPA’s existing electric system.

When the Board determines the time is right, allocations for a given year or combination of years are repaid to members as “Member Dividends.” 

This month, many SMPA members are receiving checks in the mail. The dividends represent allocations from the year, 1993. The majority of members received dividend checks between $20 and $250. Some large power users, including towns, counties, and schools received checks over $5,000. “Giving member dividends back to you is one of the ways we distinguish ourselves from investor-owned, for-profit utilities,” said Board President, Rube Felicelli. “It’s a commitment that is absolutely foundational for an electric cooperative like SMPA.”

. . .

Number of SMPA
refund checks
grouped by amount

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Ore Cart chart



Check your recent SMPA Member Dividend allocations - here's how


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November 30, 2021 SMPA power bill showing Member Dividend Allocation for 2020. Arrows added, personal information removed.

SMPA annual Member Dividend allocations are printed on monthly billing statements. These statements are available in PDF format at or via the Smarthub mobile device app. Ore Cart located three recent-year Member Dividend allocations on monthly power bills:

November 31, 2021

November 30, 2020

August 29, 2019


Where to find SMPA bills history

MENU is at top of page. Select MY ACCOUNT. Paperless Billing option may appear if one or more consumer-member accounts are by postal mail - select an option.

Account page opens. QUICK LINKS menu is at upper left. Select VIEW BILLING HISTORY. Page opens listing dates and total monthly charge for the most recent 12 months. A navigation option to view earlier monthly statements is at bottom of list. Consumer-members with more than one account may select which to view at upper right of page.

LOG OUT is at upper-right

. . .

Smarthub app

These instructions apply to Android OS.
Apple IOS has not been tested


Log-in. MENU bars are at upper left. Select BILL & PAY > BILLING HISTORY. If more than one account, tap one account to select. Tap to select statement date, select VIEW BILL.

open MENU, tap SETTINGS,
scroll to bottom of options list.



Background info

The following sections include excerpts of San Miguel Power Association, U.S. Department of Agriculture, and Oklahoma State University - Extension publications which explain how and why cooperative members provide financing for cooperatives. SMPA is a cooperative.



  1. SMPA defines "member dividends"
  2. Rules for annual margins and refunds described in SMPA Bylaws
  3. SMPA Equity Management Policy defines goals for annual margins "equity capital"
  4. How cooperatives use member's patronage for self-financing
  5. Retained patronage refunds: a "systematic revolving financing fund" for cooperatives
  6. Balancing Act: scheduling revolving equity fund payouts to meet co-op members' expectations

. . .


1. SMPA defines "member dividends"

As a cooperative, San Miguel Power Association (SMPA) is owned by its members, and member dividends, also known as "capital credits", reflect each member’s ownership in the cooperative.

In a typical year, SMPA tries to collect slightly more than enough revenue to cover its expenses. The excess revenue, called “margins” is allocated to each consumer in proportion to their contributions for that year. For a period of time, this capital can be used by the cooperative to finance operations and construction. This helps keep rates at an affordable level by reducing the amount of funds that must be borrowed to maintain and enhance SMPA’s existing electric system. When the Board determines the time is right, allocations for a given year or combination of years are cashed out as “Member Dividends” and returned to the members.

More "member dividends" info at SMPA website.



2. Rules for annual margins and refunds described in SMPA Bylaws

Note: red numerals in Key Points list
refer to related portions in
SMPA Bylaw excerpts below


Key Points

  • SMPA members are required to furnish capital to SMPA.(1)
  • SMPA is required to allocate annual margins to members.(2)
  • SMPA is required to notify each member annually of the amount added to member's capital credit account to be refunded later.(3)
  • When margins are allocated to consumer-members at year-end, SMPA members invest their allocated refunds in SMPA.(4)
  • Patronage refunds ("member dividends") which are not claimed after 6 months are forfeited by members.(5)



  • the Cooperative: SMPA
  • patron: consumer-member
  • patronage: total of each consumer member's purchases

. . .

SMPA Bylaw excerpts (below):
underlines & red numerals
added by Ore Cart





Section 1. Interest or Dividends on Capital Prohibited:

The Cooperative shall at all times be operated on a Cooperative non-profit basis for the mutual benefit of its Patrons. No interest or dividends shall be paid or payable by the Cooperative on any capital furnished by its Patrons.

Section 2. Patronage Capital in Connection with the Sale of Electricity:

In the sale of energy from various sources, the Cooperative’s operations shall be so conducted that all (1)Patrons will, through their patronage, furnish capital for the Cooperative. In order to induce patronage and to assure that the Cooperative will operate on a non-profit basis, the (2)Cooperative is obligated to account on a patronage basis to all its Patrons for all amounts received and receivable from the sale of energy from various sources in excess of the sum of: (a) operating costs and expenses properly chargeable against the furnishing of energy from various sources, and (b) amounts required to offset any losses incurred during the current or any prior fiscal year.

All such amounts in excess of operating costs and expenses at the moment of receipt by the Cooperative are received with the understanding that they are (1)furnished by the Patrons as capital. The Cooperative is (2)obligated to allocate, by credits to a capital account for each Patron, all such amounts in excess of operating costs and expenses. The books and records of the Cooperative shall be set up and kept in such a manner that at the end of each fiscal year the amount of the capital, if any, so furnished by each Patron is clearly reflected and credited in an appropriate record to the capital account of each Patron and the Cooperative shall, within a reasonable time after the close of the fiscal year, (3)notify each Patron of the amount of capital so credited to his or her account. All such amounts credited to the capital account of any Patron shall have the same status (4)as though they had been paid to the Patron in pursuance of a legal obligation to do so and the Patron had then furnished the Cooperative corresponding amounts of capital.

All other amounts received by the Cooperative from its operations in excess of costs and expenses shall, insofar as permitted by law, be: (a) used to offset any losses incurred during the current or any prior fiscal year, and (b) to the extent not needed for that purpose, (2)allocated to its Patrons on a patronage basis, and any amounts so allocated shall be included as part of the capital credited to the accounts of Patrons as herein provided. . . .

Section 3. Unclaimed Capital Credits:

(5)In all cases where a Patron fails to claim any deposits, stocks, dividends, capital credits, patronage refunds, or any other property held for him by the Cooperative within six (6) months after the same have been declared payable to him, the Cooperative may recover and use such unclaimed property or funds for expenditures associated with the provision of electric service as directed by the Board of Directors of the Cooperative. Before using said funds, the Cooperative shall first have notice by mail addressed to such Member or consumer at his or her last known address as shown by the records of the Cooperative, unless the Cooperative has knowledge that such address is no longer accurate. Further, the Cooperative shall have caused to be published a notice in a newspaper of general circulation and posted on the Cooperative’s website that unless such payment is claimed, the Patron’s claim thereto shall be extinguished and forever barred.

source: Bylaws
San Miguel Power Association



3. SMPA Equity Management Policy defines goals for annual margins "equity capital"

Key Points

  • Equity capital from members is acquired from consumer-members through rates (charges) for electric service.(6)
  • Desired equity to asset ratio is 35%. (7)
  • Board of Directors approves total annual refund amount.(8)
  • Desired annual allocated patronage capital retirement (refund) is approximately $1 million.(9)



  • FIFO: first-in, first-out. Oldest-year patronage capital allocations are top priority annual refunds.(10)
  • LIFO: last-in, first-out. Latest-year patronage capital allocations are top priority for annual refunds.(11)
  • Operating TIER: Operating Times Interest Earned Ratio = (Operating Margins + Long Term Debt Interest) ÷ Long Term Debt Interest

. . .

excerpts from
San Miguel Power Association
Equity Management Policy


Equity Management Policy

I. OBJECTIVE: To establish the Cooperative’s policy for the acquisition, allocation, use and retirement of debt and equity capital by balancing the requirements and expectations of the Members, Cooperative, Lenders and Government Bodies. In so doing, the Cooperative will ensure compliance with:

A. IRS Code Section 501 (c) (12).

B. Colorado Statutes

C. Mortgage requirements set forth by the Rural Utilities Service (RUS) and National Rural Utilities Cooperative Finance Corporation (CFC)

D. Accounting rules and regulations

E. Article VIII of the Cooperative’s Bylaws 

It is the responsibility of the Board of Directors and CEO to remain cognizant of and devote appropriate consideration to the various issues and developments that may affect the Cooperative’s acquisition, use and retirement of debt and equity capital, whether the sources of those issues and developments are internal or external to the Cooperative.

II. POLICY: Acquisition of Debt and Equity Capital

A. The acquisition of debt and equity capital is necessary in order to finance the cooperatives investment in plants, meet lender requirements, manage risk, support the achievement of the Cooperative’s business philosophies and ensure the long-term financial soundness of the Cooperative. To meet these objectives, the Cooperative shall:

1. (6)Acquire equity capital through margins included in its rates to electric members, interest income from invested funds, capital credit allocations from affiliated cooperatives, and other non-operating margins.

2. Acquire needed amounts of debt capital in a manner that manages risk by taking advantage of secure sources of industry debt (i.e., RUS, FFB, Co-Bank and CFC), loan maturity options and interest rate options.

3. Achieve a targeted modified or distribution (7)equity to asset ratio of approximately 35%.

4. Plan, report and monitor equity both on a total equity to assets and on a modified equity to assets basis.

5. To support the achievement of a targeted 35% modified or distribution equity ratio, and generally budget for an annual Operating TIER of 1.60. When the targeted modified or distribution equity has been achieved, considerations for Operating TIER of less than 1.60 may be accommodated via a revenue deferral plan or associated measures which will allow the cooperative to address future margin needs.

6. Ensure that minimum lender Times Interest Earned Ratios (TIER) and Debt Service Coverage (DSC) ratios are met. . . .


E. General Retirements of Patronage Capital

1. To adhere to applicable tax laws and cooperative principles, the following guidelines have been established for the general retirement of capital credits.

a. (8)The Board of Directors shall approve the amount, method, basis, priority, and order of retirement on an annual basis per this policy. This decision will be based on or reflect:

i. The financial condition of the Cooperative

ii. Current and forecasted equity levels

iii. The rate impact of the retirement

iv. The economic impact on the patrons receiving a retirement

v. Previous amounts of general retirements

vi. Mortgage requirements

b. (9)The Cooperative shall retire approximately between 3.5% and 4.5% of outstanding Type #1 patronage annually (approximately $1,000,000) on a FIFO basis. OR The Cooperative shall retire approximately between 3.5% and 4.5% of outstanding Type #1 patronage annually (approximately $1,000,000), with approximately half of any general retirement being devoted to the retirement of the (10)oldest patronage outstanding (FIFO) and the remaining amount being used to retire outstanding allocations from more recent years (LIFO).(11)

c. General retirements shall be made after audited financials have been completed and targeted within 6 months of completion of the audited results. . . . .

Equity Management Policy
Policy No: 203
February 25, 2020


4. How cooperatives use member's patronage for self-financing

U.S. Department of Agriculture (USDA) Financing Cooperatives publication explains the financing role of co-op members' excess margins allocations:

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Equity Capital

Equity capital is money the cooperative obtains from its members without assuming a legal obligation to pay it back at a stated time. This is the opposite of debt capital, which always has a due date. Equity capital is the “risk” capital in an organization. All or part of it can be lost if operations are not profitable.

The way equity capital is obtained from the membership is important in measuring the cooperative’s adherence to cooperative principles. For example, authority over the cooperative’s activities should reside with the membership through voting control represented by equity ownership. Also, ownership and control should be held by the membership who are current users of the cooperative. . . .

Other types of direct investment are membership fees, membership certificates, and capital certificates. These represent forms of direct investments by members in nonstock types of cooperatives. Retained Net Income represents proceeds from net earnings (net margins) retained in the business to provide equity capital. Part of a cooperative’s net income, usually at least 20 percent, is customarily paid to members in cash, with the remainder held as retained patronage refunds. These refunds are accumulated until sufficient capital is available to finance facilities and operations. When that level is reached, the cooperative’s board of directors may decide to redeem or repay a portion of equity capital to members.

Financing Cooperatives
Cooperative Information Report 45
Section 7
pages 1-2
United States Department of Agriculture
Rural Development
Rural Business & Cooperative Service
October 1994



USDA Co-ops 101: An Introduction to Cooperatives publication describes how patronage refunds are calculated, and why some cooperatives do not pay interest on retained net income:


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After the fiscal year is over, a cooperative computes its earnings on business conducted on a cooperative basis. Those earnings are returned to the patrons — as cash and/or equity allocations — on the basis of how much business each patron did with the cooperative during the year. These distributions are called patronage refunds.

For example, if a cooperative has earnings from business conducted on a cooperative basis of $20,000 for the year, and Ms. Jones does 2 percent of the business with the cooperative, she receives a patronage refund of $400 ($20,000 x .02).

This allows the cooperative to return margins to members on an annual basis, consistent with standard accounting conventions and without regard to how much was earned on each transaction. . . .

Members form a cooperative to get a service—source of supplies, market for products or performance of specialized functions—not a monetary return on capital investment. Many cooperatives don’t pay any dividends on capital. Others pay a modest return, in line with state and federal statutes that bar substantial payments.

Limiting returns on equity supports the principle of distributing benefits proportional to use. It also discourages outsiders from trying to wrest control of a cooperative from its members and operate it as a profit-generating concern for the benefit of stockholders.

Co-ops 101 - An Introduction to Cooperatives
Cooperative Information Report 55
pages 12-13
United States Department of Agriculture
Rural Development



5. Retained patronage refunds: "a systematic revolving financing fund" for cooperatives

  • How to borrow from current customers to repay equity invested by past customers
  • A warning against lengthening the "revolving cycle."
  • Redeems = "repay" or "refund."

. . .


“Revolving fund financing” refers to systems in which patrons make annual capital contributions, typically through retained patronage refunds or per-unit retain allocations. The cooperative, in turn, redeems earlier capital contributions on a regular basis. Redemption is usually on a first-in, first-out basis. The cooperative determines what its total capital requirements are and the excess is redeemed each year, the earliest or “oldest” equity being revolved out first.

A revolving fund plan is frequently described as “systematic” if older equities are retired on a regular basis, usually a given number of years after they were issued. In a systematic plan, member investment is related to recent and current use. Newer members usually add equity to their account during their early years in the cooperative.

The accounts of established members are adjusted each year to better reflect current patronage. They make new investments based on current year’s patronage and have their earliest year’s equity redeemed. The accounts of former members are commonly paid off during the life of the revolving cycle, usually beginning the year after they cease patronizing the cooperative.

Redemption is normally dependent on a board of directors determination that funds for revolvement are available. This ensures that there is room for flexibility if the situation warrants it. For instance, if there is a shortfall in new equity or a need to increase the cooperative’s total equity, equity requirements can be met by lengthening the revolving cycle (the cooperative keeps equity for a longer period of time).

This tactic should be used sparingly, as it deviates from the objective of having current users finance the cooperative. Also, it can create member relations problems if the members have the expectation that their oldest equities will be redeemed on a fixed schedule, sometimes without regard for the cooperative’s financial condition.

Co-ops 101
pages 69-70



6. Balancing Act: scheduling revolving equity fund payouts to meet co-op members' expectations

Oklahoma State University Understanding Cooperative Equity publication reviews advantages and disadvantages of retaining members' equity.

Retained patronage refunds are portions of the net income allocated to members but paid in the form of equity rather than cash. Retained patronage refunds create allocated equity since it is held in specific patron accounts. Retained patronage refunds are typically revolving equity, meaning that it is eventually redeemed for cash by the cooperative at its original face value. Traditionally, open membership cooperatives have raised the majority of their equity through retained patronage refunds.

The advantage of retained patronage from the member’s perspective is that it is created from the profit stream and members do not have to make a cash investment. Members essentially earn their way into ownership. Retained patronage is a systematic method for the cooperative to build equity and one that it is relatively painless for the member. 

The disadvantage of retained patronage from the cooperative’s standpoint is that it is dependent upon the profitability of the cooperative. If the cooperative has a loss year, the equity value of the cooperative is reduced. 

Revolving equity creates a complex balancing act for the board of directors. Another disadvantage of retained patronage and revolving equity is that members may expect the cooperative to revolve equity regardless of its financial condition. Members only realize value for the share of profits distributed in the form of equity when that equity is redeemed for cash. That causes members to want the cooperative to revolve equity as rapidly as possible and to keep the revolving cycle constant or increasing.

Understanding Cooperative Equity
Oklahoma State University - Extension
January 2020



Related info:
Types of Co-ops - University of Wisconsin Center for Cooperatives