HEA pays capital credits, votes down credit-as-coronavirus-aid proposal
by Ben Boettger
Homer Electric Association's board of directors voted at their April 14 meeting to return $1.952 million in capital credits to those who belonged to the cooperative in 1989, and declined the option of returning the credits instead to the membership of 2018. The pay-out to more recent members was proposed as financial aid for those suffering from coronavirus-related workplace shutdowns.
For a business, yearly revenue beyond expenses is profit. But for a member-owned cooperative such as HEA, those earnings are called margins, and are credited back to members according to how much they spent on electricity. To allow HEA to retain capital for improvements or for coping with unexpected problems, the credits are only paid when the board of directors votes to do so.
HEA has usually returned credits on a "first in, first out" basis, paying the credits allocated earliest before more recent ones. In February, the HEA directors voted to pay out $1.95 million to HEA's 1989 members— who hold the earliest unpaid capital credits — on that basis. The vote was unanimous, with director Dave Carey absent.
When the HEA directors met by teleconference in April, much of the state's economy was shut down and many Alaskans were confined to their homes to slow the spread of coronavirus. The board reconsidered the capital credit payment they'd approved in February, and voted on an alternative: a "last-in, first out" payment of the capital credits allocated in 2018. According to the resolution text, HEA reconsidered its February allocation "due to a negative economic impact from a current nationwide virus pandemic, called COVID 19" with the intent "to create a more positive economic impact for a larger assemblage of the HEA membership."
The HEA board declined to switch to the "last-in, first-out" option, voting 7-2 against payments to the 2018 membership, with Directors Jim Levine and Erin McKittrick voting in favor.
A payout to the 2018 membership would have resulted in about 25,000 members receiving an average check of $40, wrote HEA director of Member Relations Bruce Shelley. According to an HEA press release, approximately 8,700 people who were members in 1989 will be receiving an average $70 in the first-in, first-out distribution.
Levine moved to adopt the last-in, first-out option, an idea he that he later wrote "came from brain storming on what could be done to help members during this crisis." He said it would benefit a larger segment of Kenai Peninsula residents, since many of HEA's 1989 members are no longer alive or no longer living in the area. Levine added that the extra funds would be especially helpful to members after HEA increased its per-kilowatt-hour rates by three percent on April 1. That increase combined with an increase to HEA's cost of power adjustment adds a total of $11.17 ($2.50 from the per-kilowatt-hour rate and $8.60 from the cost of power adjustment) to the monthly bill of an average residential member consuming 550 kilowatt-hours a month, according to HEA press releases (here and here).
Several directors who opposed a departure from HEA's usual payment method said that capital credits aren't meant to be social support or charity. Director Dan Furlong said a precedent for using them as such could make the board more inclined to do so for lesser economic troubles. McKittrick, the other vote for last-in, first-out, disagreed. She said the coronavirus pandemic is of a much larger scale than year to year downturns and justified the unusual change.
Carey, who had been absent for the February vote that originally paid out the capital credits, said he was against distributing them by either method and favored retaining the funds for the unknown needs of the future.
