2023 New York Laws › REL - Rural Electric Cooperative › Article 6 - General Provisions Governing Property and Affairs › 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.