Article VII
Non-Profit Operation
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 Furnishing Electric Energy.
In the furnishing of electrical energy the Cooperative’s operation shall be so conducted that all electric members alike will, through their patronage, furnish capital for the Cooperative. In order to induce patronage and to insure that the Cooperative will operate on non-profit basis, the Cooperative is obligated to account on a patronage basis to all its members for all amounts received and receivable from the furnishing of electric energy in excess of the following:
- operating costs and expenses properly chargeable against the furnishing of electrical energy;
- amounts required to offset any losses incurred during the current fiscal year; and
- amounts, which required, in the judgment of the Board of Directors, as reserves, for the payment of the essential cost of electrical power and energy purchased by the Cooperative for resale to its patrons; said reserve amounts shall be set aside pursuant to a margin stabilization plan, revenue or expense deferral plan or other plan, or plans, that provide for the retention of revenues and receipts in excess of those needed to meet current losses and expenses.
All such amounts in excess of operating costs, expenses, losses, and reserves, as set forth in (a), (b) and (c) above, at the moment of receipt by the Cooperative are received with the understanding that they are furnished by the patrons as capital. The Cooperative is obligated to pay credits to a capital account for each patron all such amounts in excess of operating costs, expenses, losses, and reserves, as set forth in (a), (b) and (c) above.
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 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 notify each patron of the amount of capital credited to the member’s account, provided, that individual notices of such amounts furnished by each patron shall not be required if the Cooperative notifies all patrons of the aggregate amount of such excess and provides a clear explanation of how each patron may compute and determine for the member the specific amount of capital so credited to the member. All such amounts credited to the capital account of any patron shall have the same status as though they had been paid to the patron in cash pursuant of a legal obligation to do so and the patron had then furnished the Cooperative corresponding amounts for capital. In the event of dissolution or liquidation of the Cooperative, after all outstanding indebtedness of the Cooperative shall have been paid, outstanding capital credits shall be retired without priority, on a prorated basis before any payments are made on account of property rights of members. If, at any time prior to dissolution or liquidation, the Board of Directors shall determine that the financial condition of the Cooperative will not be impaired thereby, the capital then credited to patrons’ accounts may be retired in full or in part. Notwithstanding any other provision of these by-laws, the Board of Directors shall determine the method of allocation, basis, priority and order of retirement, if any, for amounts furnished as patronage capital.
The Board of Directors shall have the power to adopt any individual patron rules providing for the separate retirement of that portion (‘power supply portion’) of capital credited to the accounts of patrons which corresponds to capital credited to the account of the Cooperative by an organization furnishing electric service to the Cooperative. Such rules shall (a) establish a method for determining the power supply portion of capital credited to each patron for each applicable fiscal year, (b) provide for separate identification on the Cooperative’s books of the power supply portion of capital credited to the Cooperative’s patrons, (c) provide for appropriate notifications to patrons with respect to the power supply portion of capital credited to their accounts and (d) allow a general retirement of the power supply portion of capital credited to patrons for any fiscal year prior to the general retirement of other capital credited to patrons in any fiscal year.
Notwithstanding any other provisions of these by-laws, the Board of Directors, at its discretion, shall have the power at all times upon the death of any patron, if the legal representatives of the member’s estate shall request in writing that the capital credited to any such patron be retired prior to the time such capital would otherwise be retired under the provisions of these by-laws, to retire capital credited to any such patron immediately upon such terms and conditions as the Board of Directors, acting under policies of general application, and the legal representatives of such patron’s estate shall agree upon; provided, however, that the financial condition of the Cooperative will not be impaired thereby.
The Patrons of the Cooperative, by dealing with the Cooperative, acknowledge that the terms and provisions of the articles of conversion and by-laws shall constitute and be a contract between the Cooperative and each patron, and both the Cooperative and the patrons are bound by such contract, as fully as though each patron had individually signed a separate instrument containing such terms and provisions. The provisions of this article of the by-laws shall be called to the attention of each patron of the Cooperative by posting in a conspicuous place in the Cooperative’s office.
Section 3. Patronage Refunds in Connection with Furnishing Other Services and Other Non-operating revenues.
In the event that the Cooperative engages in the business of furnishing goods or services other than electrical energy, all amounts received and receivable therefrom which are in excess of the costs and expenses properly chargeable against the furnishing of such goods or services shall, insofar as permitted by law, be prorated annually on a patronage basis and returned to the electric members, at such time and in such order of priority as the Board of Directors shall determine, except, certain amounts may be retained pursuant to a revenue retention plan, or other plan, or plans, as authorized by ARTICLE VII, SECTION 2, of these by-laws. The Cooperative, before retiring any capital credited to any patron’s account, shall deduct therefrom any amount owing by such patron to the Cooperative, together with interest thereon at a reasonable rate set by the policy implemented by the Board of Directors in effect when such amount became overdue, compounded annually.