Covington Electric Cooperative general manager Ed Short had some good news, and some bad news for cooperative members who attended yesterday’s annual meeting.

The good news is that the CEC board has approved $1.5 million in capital credits to be paid to members this year.

Capital credits result from any “profit” from the operation of the cooperative. Those funds are distributed back to members on a pro rata share, but they are first invested in the system. This year’s distribution will bring the total distribution for a six-year period to $8.5 million.

The better news is that for the sixth consecutive year, the board doesn’t expect to increase rates.

But the bad news – or potentially bad news – is that lawsuits challenging the way capital credits are disbursed threaten to increase the costs in ways that would disrupt distribution of capital credits in the future, and force the coop to raise rates.

“Two current CEC members and one previous member have filed lawsuits against CEC relative to the payment of capital credits,” Short told members. “If these suits are successful in their present form, it will force an increase in electricity rates for all members and for years to come.”

Both Short and CEC attorney Earl Johnson said other coops in Alabama are also being sued, and that the groups of attorneys filing the suits hope to recover large fees in class action suits.

“Covington Electric Cooperative has credited and paid capital credits to you, our members, in amounts and on a schedule as permitted under Alabama law, the CEC by-laws, the requirements of our lenders, and as approved by the CEC Board of Trustees.”

Short said if the claims are successful, the coop would likely have to borrow money to pay the claims, and rates would subsequently increase.

“In order to continue to provide the high level of service you expect from Covington Electric Cooperative, we must vigorously defend these claims and hope the vast majority of you our members support us in this effort.”

Short declined to speak at length about the suits. Johnson said one of the suits is in Coffee County Circuit Court, and that CEC has filed a motion to dismiss, upon which the judge has not ruled. He described it as a statutory construction case challenging state laws which govern the distribution of capital credits.