N.Y. Rural Electric Cooperative Law § 60: Patronage capital contributions, allocations, and retirements

§ 60. Patronage capital contributions, allocations, and retirements.

(a) Each cooperative's by-laws shall, unless otherwise determined by

agreement of the members, provide for patronage capital allocations and

retirements in the manner provided by this section. Agreement by the

members for purposes of this section shall mean member approval of

by-law provisions or by a majority vote of the members voting at a duly

called meeting. Any matter set forth in this section which is subject to

determination of the board of directors shall be determined in the

exercise of such board of director's business judgment.

(b) Patronage capital shall be determined by a cooperative on an

annual basis and shall be the excess, if any, of amounts received or

receivable by such cooperative from furnishing electricity over such

cooperative's operating costs and expenses properly chargeable against

furnishing electricity, as determined using such accounting method or

methods as agreed upon by the members. Costs and expenses chargeable

against furnishing electricity shall include:

(1) expenses of the operation and maintenance of its facilities during

such fiscal year;

(2) interest obligations of the cooperative coming due in such fiscal

year;

(3) depreciation and other expenses to finance or to provide a reserve

for the financing of the construction or acquisition by the cooperative

of additional facilities to the extent determined by the board of

directors;

(4) expenses to provide a reasonable reserve for working capital as

determined by the board of directors;

(5) expenses to provide a reserve for the payment of indebtedness of

the cooperative maturing more than one year after the date of the

incurrence of such indebtedness in an amount not less than the total of

the interest and principal payments in respect thereof required to be

made during the next following fiscal year;

(6) expenses to provide a fund for education in cooperation and for

the dissemination of information concerning the effective use of

electric energy and other services made available by the cooperative;

and

(7) all other costs and expenses from and directly related to the

furnishing of electric energy to the patrons.

(c) "Patron", as referred to in subdivisions (b) through (h) of this

section, shall be defined as (1) a member and (2) a nonmember to whom

the cooperative furnishes electric energy or other services on a

patronage basis pursuant to bylaws or as agreed upon by the members.

(d) On an annual basis, patronage capital determined under subdivision

(b) of this section shall be allocated on the books of the cooperative

to each patron having furnished such capital and shall be based upon and

in proportion to:

(1) the revenue from each patron or group of similar patrons to the

cooperative's total revenue;

(2) the contribution of each patron or group of similar patrons to the

cooperative's overall patronage capital;

(3) the kilowatt-hour usage of each patron or group of similar patrons

to the total kilowatt-hour usage of all patrons;

(4) any other method which is agreed upon by the members; or

(5) any combination of paragraphs one, two, three and/or four of this

subdivision as agreed upon by the members.

(e) "Retirement" in reference to patronage capital shall mean the

redemption and payment in cash or other property, as provided by

subdivision (f) of this section, of patronage capital to the cooperative

patrons or former patrons to whom it has previously been allocated. The

allocation of patronage capital to a patron's patronage capital account

shall in no event create a vested right to the retirement of the amount

so allocated. The board of directors of a cooperative may, in its

discretion, retire patronage capital allocated on the books of the

cooperative when it determines such retirement is consistent with sound

business and management practices and the long-term financial stability

of the cooperative. Patronage capital shall be retired according to the

method chosen by the members and at the time the board of directors

shall determine as a matter of its discretion. However, patronage

capital may be retired in advance of the date when it would otherwise be

retired under the previous sentence in such circumstances and upon such

conditions as are agreed upon by the members, including, but not limited

to, upon a patron's or former patron's death, the termination of a

patron or former patron's electric service, or a patron or former

patron's filing for bankruptcy. In the event of such early retirement of

patronage capital, the amount of patronage capital allocated to the

patron or former patron on the cooperative's books may be discounted for

purposes of its retirement in accordance with such method as is agreed

upon by the members. The difference between the discounted amount and

the patron's or former patron's patronage capital may be retained by the

cooperative as part of its net savings in a manner determined by the

board of directors.

(f) When the board of directors of the cooperative has determined,

pursuant to subdivision (e) of this section, that patronage capital

shall be retired, the retirement may be accomplished by a bill credit,

by the mailing of payment or notice of payment to the patron's or former

patron's last known address of record on file with the cooperative, or

by such other method as the board of directors shall determine to be

appropriate. No interest shall be paid or payable by the cooperative on

any patronage capital. The amount of patronage capital being retired may

be reduced by any amount owed to the cooperative by the patron or former

patron.

(g) A cooperative may adopt such procedures for the assignment and

contribution of unclaimed patronage capital to the cooperative as are

agreed upon by its members. Such procedures may include providing that

patronage capital which has not been claimed by a patron or former

patron, after reasonable efforts to locate said patron or former patron,

shall be added to the net savings of the cooperative. Mailing of a check

or notice of the availability of a check to the last known address of a

patron or former patron by first class mail and publication of the list

of patrons or former patrons having unclaimed patronage capital on the

website and/or newsletter of the cooperative for a period of three years

shall be deemed reasonable effort to locate said patron or former

patron.

(h) In the event that the cooperative should engage in the business of

furnishing goods and services other than electric energy, all amounts

received and receivable therefrom which are in excess of costs and

expenses properly chargeable against the furnishing of such goods or

services shall, insofar as permitted by law, bylaws, or by approval of

the members, be prorated annually on a patronage basis and allocated to

each member and shall be retired to said member according to the method

chosen by the members and at the time that the board of directors shall

determine as a matter of its discretion. Nothing in this section,

however, prevents a cooperative from furnishing goods and services other

than electric energy on a non-patronage basis to non-members; the net

earnings of which may be retained as part of its net savings.

(i) With respect to any cooperative formed under this chapter that is

exempt from federal income taxation under paragraph twelve of subsection

(c) of section five hundred one of the internal revenue code of nineteen

eighty-six, as amended, or any corresponding provision of future federal

tax law, or any cooperative which would otherwise qualify for said

exemption but for having less than eighty-five percent (or whatever

threshold may be specified in the future for said purpose by the

internal revenue code) of income from members, this section shall in all

events be limited to and interpreted in a manner which is compliant with

the requirements of exemption under such internal revenue code section,

and any agreement by the members or determination by the board of

directors under this section with respect to the subject matter hereof

shall also be limited to and interpreted in a manner which is compliant

with such internal revenue code section.