MEA will release capital credits

MAT-SU -- The Matanuska Electric Association board of directors unanimously agreed Monday to release $1.5 million in capital credits, a move that will allow MEA to stay within an acceptable equity range, according to board treasurer Wes Pollock.

Pollock explained that the company generally holds between 40- and 50-percent equity as a part of their agreement with their lending institution and in accordance with the Regulatory Commission of Alaska.

"We have agreements with our lending institution and the RCA to hold our equity levels within a certain range," Pollock explained. "We've never been over the limit allowed, but there are some [ramifications] that kick in."

"There are trade-offs in the use of debt and equity," said MEA spokesman Mike Pauley.

Pauley explained that, according to the board's Equity Management Plan, most recently revised in December 1999, the higher the equity level the more member assets are invested rather than in member hands.

Equity, he explained, is money contributed by members through fees and margins.

"All the equity that we have actually belongs to members," Pauley said.

MEA keeps a percentage of that money in order to lower its financial risk and fund projects internally, rather than taking on debt.

"By having [a higher equity percentage], we can use it for things like expanding the utilities grid," Pauley said. "Otherwise we'd have to take out loans."

Pollock said the MEA finance committee expected the cooperative's equity level would reach more than 49 percent by March 1.

"The committee believes that this is closer to our ceiling than we should be," Pollock said. "We expect December to be a very strong month, and if margins are above forecast, we may even go over the 50-percent level by the end of the first quarter. The finance committee recommends that the board authorize a supplemental capital-credit retirement … prior to the end of the first quarter."

The capital-credits checks and bill credits will be released to MEA consumers by the end of March, according to information from MEA board president Bill Folsom.

"This caps five years of success based on good management and putting our members first," Folsom said in a press release that was prepared prior to the meeting. "Once again, a strong and productive effort by MEA management and employees during 2001 contributed to outstanding financial performance by our electric cooperative."

The release, Folsom explained, was prepared in advance because Folsom, after learning about the committee's suggestion, had met separately with a few board members and believed he had the support needed to pass the motion.

This capital-credit retirement, according to information from MEA's press release, is the cooperative's 20th consecutive annual distribution, and is in addition to $1.4 million paid out last August. Up to and including 2001's capital-credit retirement, the cooperative has paid out a total of $24.8 million.

"In the years spanning 1996-2001, we retired $10,109,440 in capital credits," Folsom said in the press release. "We are now entering the 61st year of our co-op's history, and during the past six years, we have retired more than 40 percent of all capital credits ever retired."