SMPA requires customers to invest in the monopoly corporation, and retains earnings for 30 years

Former customers must also wait 30 years while their investment is trapped in an account which does not earn interest or dividends.

Monopoly electric utility San Miguel Power Association, Inc. (SMPA) retains profits (margins, earnings) customers. At year-end 2025, the “retained earnings” retention period was 30 years.

The amount of each customer’s “share” of the annual profit per customer is determined by customer’s “patronage” - the amount of electric power sales revenue during the year. This practice causes the customers to become shareholders in the corporation. “Patrons” is the term electric cooperatives use a substitute for “customers.”

These patron investments provide an annual 0% interest loan to SMPA. Each annual loan has no repayment schedule.

SMPA Bylaws grant the elected Board of Directors authority to decide when and amount to pay retained earnings to customers. At year-end 2025, SMPA paid members who loaned money to SMPA 30 years earlier.

SMPA skipped these payments for 10 consecutive years, according to statements by a president of the SMPA board of directors at board meetings in recent years.

SMPA did not pay retained earnings to patrons for the first 20 years of its existence, according to the record of a Colorado Public Utility Commission hearing in 1958. The hearing purpose was consider awarding SMPA a Certificate of Public Convenience and Necessity to provide service in its region in southwest Colorado. PUC commissioners approved the certificate. confirm this

SMPA is a “cooperative corporation.” Cooperatives term for retained earnings is “capital credits.”

Cooperative business are “not-for-profit” and exempt from income taxes. Cooperatives term for profit is “margin.”

Skipping or reducing annual retained earnings payments to customer-shareholders avoids monthly electric bill rate increases. Instead of raising rates for electric service, SMPA directors extend the number of years members must wait for their refunds. In other words, directors chose to borrow more money from members.

Past decisions to skip annual refund pay-outs were political. Avoiding rate increases improves incumbent directors re-election prospects, and indirectly, job security for the SMPA general manager/chief executive officer.

At year-end 2026, the wait time for customer-shareholders to receive retained earnings payments was 30 years. This is among the worst of 22 Colorado electric cooperatives. The shortest delay is 6 years at Morgan County Rural Electric Association.

If a customer-shareholder discontinues purchasing electric service from SMPA, the former customer does not receive an immediate payment of all previous unpaid retained earnings. Former member must wait the same number of years as active members. During this delay, former member’s money invested in SMPA does not earn interest or pay dividends, and loses purchasing value due to the rising cost of goods and services - “inflation” or “Consumer Price Index.”

Goal

Eliminate patronage capital credit policies which require members to invest annually in San Miguel Power Association (SMPA).

These earn no interest for members and pay no dividends.

PROPOSALS

  1. eliminate member patronage capital annual contribution requirement for future years, OR;

  2. continue member patronage capital annual contribution requirement, but distribute (refund) member allocated patronage capital no later June 30 of the following year.

  3. refund 100% of retained patronage capital to inactive members.

  4. refund all previous years allocated patronage capital to active members, discounted by year according to loss or purchasing value.

The Seven Cooperative Principles include:

1. Open and Voluntary Membership
3. Members’ Economic Participation

Economic Participation

means cooperative members must invest in their cooperative by providing “capital.” This annual investment is defined in SMPA Bylaws as each member’s share of SMPA’s annual “margin” (profit). It is a ratio of member purchases (patronage) compared to total annual SMPA revenue,

The amount of each member share of an annual margin is “allocated patronage capital” in co-op lingo.

Bylaws allow SMPA Board of Directors to retain member’s shares of SMPA annual “margin” (profit) for as long as the Board of Directors desires. The allocated patronage capital is held in an account for each member until SMPA BOD authorizes “distributions” (pay-outs or refunds) by check delivered by U.S Postal Service.

Member allocated patronage capital accounts do not earn interest and do not pay dividends. This is prohibited by United States Internal Revenue Code regulations regarding income-tax-exempt not-for profit cooperatives.

Open and Voluntary Membership

Membership in SMPA is not voluntary, it is a requirement of accepting electric service. Since membership is required, so is, Members Economic Participation.

SMPA is monoply, the only utility which distributes electricity in its service area.

Rochdale Cooperative

The seven cooperative principles are based the Rochdale Society of Equitable Pioneers and the Rochdale Principles. Founded in Great Britain in 1844 by tradesmen who’s skills were replaced by industrial mechanization, Rochdale cooperative opened a store to sell food items to members at a lower cost purchase elsewhere.

LINKS

Historical citations do not suggest that the Rochdale Cooperative was a retail grocery monopoly in Rochdale, nor that membership and economic participation of all Roachdale residents was required. Monopoly electric cooperative utilities in the United States, such as San Miguel Power Association, nevertheless use the economic participation of the Rochdale Cooperative as an excuse to require customers to invest in the cooperative.

SOLUTIONS

1) FINANCING

A. After refinancing all outstanding LTD from U.S. Department of Agriculture - Rural Utilities Service (RUS) to National Rural Utilities Cooperative Finance Corporation (CFC), request CFC to eliminate Operating Times Interest Earnings ratio (O-TIER) annual minimum requirement to Debt Service Coverage Ratio (DSCR) = annual net operating income (profit or margin) divided by total debt service

B. Borrow to return discounted amounts of all retained patronage capital. Use the future annual patronage capital distributions savings to pay the loan. Debt service (loan payments) are operating expenses.

2) BYLAWS

A. Amend Bylaws to eliminate Board discretion of amount and timing of patronage capital distributions. Annual amount will be “all of previous year margin, not discounted..” Timing will be “no later than November 30.”

B. Amend Bylaws to distribute all retained patronage capital to departed member upon receipt of proof that member has established to residence outside of service area. [If member relocates in service area but does not establish an electric service account . . . need solution. ]

3) BUSINESS STRUCTURE

A. Convert to distribution public power authority or public power district.