UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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                                    FORM 10-Q

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|X|   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
      SECURITIES EXHANGE ACT OF 1934

                For the quarterly period ended September 30, 2007

                                       OR

|_|   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
      SECURITIES EXCHANGE ACT OF 1934

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                         Commission file number 33-42125

                       CHUGACH ELECTRIC ASSOCIATION, INC.
             (Exact name of registrant as specifies in its charter)

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              State of Alaska                          92-0014224
      (State or other jurisdiction of               (I.R.S. Employer
      incorporation or organization)             Identification Number)

    5601 Electron Drive, Anchorage, AK                   99518
 (Address of principal executive offices)              (Zip Code)

                                 (907) 563-7494
              (Registrant's telephone number including area code)

                                      None
        (Former name, former address, and former fiscal year if changed
                               since last report)

--------------------------------------------------------------------------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.                              |X|  Yes  |_| No

Indicate by check mark whether the registrant is large accelerated filer, and
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.

Large accelerated filer |_|    Accelerated filer |_|   Non-accelerated filer |X|

Indicate by check mark whether the registrant is a shell company, as defined in
Rule 12b-2 of the Act.                                            |_| Yes |X| No

<PAGE>

                       CHUGACH ELECTRIC ASSOICATION, INC.
                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                                             <C>
Caution Regarding Forward-Looking Statements                                                                     2

Part I. Financial Information

     Item 1.   Financial Statements (unaudited)                                                                  2

               Balance Sheets - as of September 30, 2007 and December 31, 2006                                   3

               Statements of Operations - Three and nine months ended September 30, 2007                         5
               and September 30, 2006

               Statements of Changes in Equities and Margins - Nine months                                       6
               Ended September 30, 2007 and September 30, 2006

               Statements of Cash Flows - Nine Months Ended September 30, 2007                                   7
               and September 30, 2006

               Notes to Financial Statements                                                                     8

     Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations            15

     Item 3.   Quantitative and Qualitative Disclosures About Market Risk                                       25

     Item 4.   Controls and Procedures                                                                          26

Part II. Other Information

     Item 1.   Legal Proceedings                                                                                28

     Item 1A.  Risk Factors                                                                                     28

     Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds                                      28

     Item 3.   Defaults Upon Senior Securities                                                                  28

     Item 4.   Submission of Matters to a Vote of Security Holders                                              28

     Item 5.   Other Information                                                                                28

     Item 6.   Exhibits                                                                                         29

               Signatures                                                                                       30

               Exhibits                                                                                         31
</TABLE>


                                       1
<PAGE>

Caution Regarding Forward-Looking Statements

Statements  in this report  that do not relate to  historical  facts,  including
statements relating to future plans, events or performance,  are forward-looking
statements  that involve  risks and  uncertainties.  Actual  results,  events or
performance  may differ  materially.  Readers are  cautioned  not to place undue
reliance on these  forward-looking  statements that speak only as of the date of
this  report  and the  accuracy  of which is subject  to  inherent  uncertainty.
Chugach  Electric  Association,  Inc.  (Chugach)  undertakes  no  obligation  to
publicly  release any revisions to these  forward-looking  statements to reflect
events  or  circumstances  that may occur  after the date of this  report or the
effect of those events or circumstances on any of the forward-looking statements
contained in this report, except as required by law.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The unaudited  financial  statements  and notes to the  financial  statements of
Chugach as of and for the quarter  ended  September  30, 2007,  follow.


                                       2
<PAGE>

                       Chugach Electric Association, Inc.
                           Balance Sheets (continued)
                                   (Unaudited)

<TABLE>
<CAPTION>
                    Assets                         September 30, 2007   December 31, 2006
----------------------------------------------     ------------------   -----------------
<S>                                                   <C>                 <C>
Utility Plant:
      Electric Plant in service                       $ 800,524,964       $ 787,005,028
      Construction work in progress                      22,357,378          20,254,298
                                                      -------------       -------------
            Total utility plant                         822,882,342         807,259,326
      Less accumulated depreciation                    (365,357,280)       (347,736,514)
                                                      -------------       -------------
            Net utility plant                           457,525,062         459,522,812

 Other property and investments, at cost:
      Nonutility property                                    24,461              24,461
      Investments in associated organizations            11,888,490          11,888,530
      Special Funds                                         645,582                   0
                                                      -------------       -------------
            Total other property and investments         12,558,533          11,912,991

Current assets:
      Cash and cash equivalents                           3,363,263           9,844,914
      Special deposits                                      126,312             206,191
      Accounts receivable, net                           28,800,260          32,899,571
      Materials and supplies                             28,278,556          25,424,493
      Prepayments                                         1,360,767           1,487,966
      Other current assets                                  346,807             280,562
                                                      -------------       -------------
            Total current assets                         62,275,965          70,143,697

Deferred charges, net                                    22,581,697          21,460,648
                                                      -------------       -------------

Total assets                                          $ 554,941,257       $ 563,040,148
                                                      =============       =============
</TABLE>

See accompanying notes to financial statements.


                                       3
<PAGE>

                       Chugach Electric Association, Inc.
                           Balance Sheets (continued)
                                   (Unaudited)

<TABLE>
<CAPTION>
            Liabilities, Equities and Margins                September 30, 2007      December 31, 2006
---------------------------------------------------------    ------------------      -----------------
<S>                                                             <C>                    <C>
Equities and margins:
      Memberships                                               $    1,332,933         $    1,297,633
      Patronage capital                                            141,571,979            141,117,620
      Other                                                          8,293,970              8,300,847
                                                                --------------         --------------
            Total equities and margins                             151,198,882            150,716,100

 Long-term obligations, excluding current installments:
      Bonds payable                                                299,600,000            305,500,000
      National Bank for Cooperatives                                46,546,740             45,303,530
                                                                --------------         --------------
            Total long-term obligations                            346,146,740            350,803,530

Current liabilities:
      Current installments of long-term obligations                 10,089,184             13,728,569
      Accounts payable                                              10,881,240             10,308,668
      Consumer deposits                                              2,324,045              2,217,613
      Fuel cost over-recovery                                        3,539,731                300,567
      Accrued interest                                               2,201,265              6,364,100
      Salaries, wages and benefits                                   5,336,463              6,021,473
      Fuel                                                          18,383,650             16,158,783
      Other liabilities                                              2,150,985              4,112,020
                                                                --------------         --------------
            Total current liabilities                               54,906,563             59,211,793

Deferred liabilities                                                 2,043,490              2,308,725
Other liabilities                                                      645,582                      0
                                                                --------------         --------------

Total liabilities, equities and margins                         $  554,941,257         $  563,040,148
                                                                ==============         ==============
</TABLE>

See accompanying notes to financial statements.


                                       4
<PAGE>

                       Chugach Electric Association, Inc.
                            Statements of Operations
                                   (Unaudited)

<TABLE>
<CAPTION>
                                            Three months ended September 30         Nine months ended September 30
                                                2007               2006               2007                 2006
                                            ------------       ------------       -------------       -------------
<S>                                         <C>                <C>                <C>                 <C>
Operating revenues                          $ 57,053,772       $ 63,243,634       $ 187,634,471       $ 190,377,774

Operating expenses:
     Fuel                                     22,930,887         27,721,572          75,571,087          82,870,065
     Production                                4,395,166          4,331,051          11,854,064          11,002,135
     Purchased power                           7,333,164          8,164,009          25,976,348          21,620,093
     Transmission                              1,568,826          2,019,552           5,187,398           4,553,234
     Distribution                              3,306,766          2,372,131          10,064,752           8,096,796
     Consumer accounts                         1,322,706          1,187,437           3,782,755           3,722,437
     Administrative, general and other         5,201,484          4,498,643          15,376,179          13,993,330
     Depreciation and amortization             7,221,745          7,070,812          21,746,281          21,280,580
                                            ------------       ------------       -------------       -------------
           Total operating expenses           53,280,744         57,365,207         169,558,864         167,138,670

Interest on long-term debt                     6,153,277          6,218,457          18,309,050          18,348,879
     Other                                             0                  0              89,029                   0
     Charged to construction                    (192,972)          (145,112)           (456,185)           (344,096)
                                            ------------       ------------       -------------       -------------
         Net interest expenses                 5,960,305          6,073,345          17,941,894          18,004,783
                                            ------------       ------------       -------------       -------------
Net operating margins                         (2,187,277)          (194,918)            133,713           5,234,321

Nonoperating margins:
Interest income                                  169,752            261,131             546,878             673,365
Other                                             81,128             51,844             207,559             113,471
                                            ------------       ------------       -------------       -------------
Total nonoperating margins                       250,880            312,975             754,437             786,836
                                            ------------       ------------       -------------       -------------

Assignable margins                          $ (1,936,397)      $    118,057       $     888,150       $   6,021,157
                                            ============       ============       =============       =============
</TABLE>

See accompanying notes to financial statements.


                                       5
<PAGE>

                       Chugach Electric Association, Inc.
                  Statements of Changes in Equities and Margins
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                            Other Equities         Patronage
                                          Memberships         and Margins           Capital              Total
                                          -----------         -----------           -------              -----
<S>                                       <C>                <C>                 <C>                 <C>
Balance, January 1, 2007                  $   1,297,633      $   8,300,847       $ 141,117,620       $ 150,716,100
Assignable margins                                    0                  0             888,150             888,150
Retirement of capital credits                         0                  0            (433,791)           (433,791)
Unclaimed capital credit retirements                  0            208,894                   0             208,894
Memberships and donations received               35,300           (215,771)                  0            (180,471)
                                          ------------------------------------------------------------------------
Balance, September 30, 2007               $   1,332,933      $   8,293,970       $ 141,571,979       $ 151,198,882
                                          ========================================================================

Balance, January 1, 2006                  $   1,250,398      $   7,603,376       $ 136,185,378       $ 145,039,152

Assignable margins                                    0                  0           6,021,157           6,021,157
Retirement of capital credits                         0                  0            (765,544)           (765,544)
Unclaimed capital credit retirements                  0            323,551                   0             323,551
Memberships and donations received               36,360           (469,298)                  0            (432,938)
                                          ------------------------------------------------------------------------
Balance, September 30, 2006               $   1,286,758      $   7,457,629       $ 141,440,991       $ 150,185,378
                                          ========================================================================
</TABLE>

See accompanying notes to financial statements.


                                       6
<PAGE>

                       Chugach Electric Association, Inc.
                            Statements of Cash Flows
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                     Nine months ended September 30
                                                                                       2007                 2006
                                                                                  --------------       --------------
<S>                                                                               <C>                  <C>
Cash flows from operating activities:
       Assignable margins                                                         $      888,150       $    6,021,157
                                                                                  --------------       --------------
Adjustments to reconcile assignable margins to net cash provided activities:
       Depreciation and amortization                                                  23,552,609           23,503,261
       Capitalized interest                                                             (689,462)            (470,081)
       Write off of deferred charges                                                           0              345,899
       Other                                                                                  40              (10,013)

Changes in assets and liabilities:
  (Increase) decrease in assets:
       Accounts receivable                                                             4,099,311             (320,159)
       Fuel cost under-recovery                                                                0              (85,275)
       Materials and supplies                                                         (2,854,063)          (3,209,504)
       Prepayments                                                                       127,199               (9,343)
       Other assets                                                                       13,634              (23,417)
       Deferred charges                                                               (2,927,377)          (4,549,202)

Increase (decrease) in liabilities:
       Accounts payable                                                                2,087,456             (725,693)
       Consumer deposits                                                                 106,432              102,788
       Fuel cost over-recovery                                                         3,239,164                    0
       Accrued interest                                                               (4,162,835)          (4,143,766)
       Salaries, wages and benefits                                                     (685,010)            (249,180)
       Fuel                                                                            2,224,867              994,398
       Other liabilities                                                              (1,961,035)             974,292
       Deferred liabilities                                                               93,495              148,920
                                                                                  --------------       --------------
             Net cash provided by operating activities                                23,152,575           18,295,082
                                                                                  --------------       --------------

Investing activities:
       Extension and replacement of plant                                            (20,573,953)         (14,842,602)
                                                                                  --------------       --------------
             Net cash used for investing activities                                  (20,573,953)         (14,842,602)
                                                                                  --------------       --------------
Cash flows from financing activities:
       Repayments of long-term obiligations                                           (8,296,175)          (7,825,687)
       Memberships and donations received (refunded)                                      28,423             (109,387)
       Retirement of patronage capital and estate payments                              (433,791)            (765,544)
       Net refunds on consumer advances for construction                                (358,730)            (201,283)
                                                                                  --------------       --------------
             Net cash used for financing activities                                   (9,060,273)          (8,901,901)
                                                                                  --------------       --------------

Net decrease in cash and cash equivalents                                             (6,481,651)          (5,449,421)

Cash and cash equivalents at beginning of period                                  $    9,844,914       $   10,650,594
                                                                                  --------------       --------------

Cash and cash equivalents at end of period                                        $    3,363,263       $    5,201,173
                                                                                  ==============       ==============

Supplemental disclosure of non-cash investing and financing activities
  Retirement of plant                                                             $    3,869,816       $    5,566,466
  Extension and replacement of plant                                              $    2,565,783       $    1,199,510
Supplemental disclosure of cash flow information - interest expense paid,
  excluding amounts capitalized                                                   $   17,869,213       $   22,148,549
                                                                                  ==============       ==============
</TABLE>

See accompanying notes to financial statements.


                                       7
<PAGE>

                       Chugach Electric Association, Inc.
                          Notes to Financial Statements
                                   (Unaudited)

1.    PRESENTATION OF FINANCIAL INFORMATION

      The  accompanying  unaudited  interim  financial  statements  include  the
      accounts of Chugach  Electric  Association,  Inc.  (Chugach) and have been
      prepared in accordance with generally accepted  accounting  principles for
      interim financial information. Accordingly, they do not include all of the
      information  and  footnotes  required by accounting  principles  generally
      accepted  in  the  United   States  of  America  for  complete   financial
      statements.  They should be read in conjunction with our audited financial
      statements  for the year ended  December  31,  2006,  filed as part of our
      annual report on Form 10-K. In the opinion of management,  all adjustments
      (consisting of normal recurring accruals)  considered necessary for a fair
      presentation  have been  included.  The results of operations  for interim
      periods are not necessarily indicative of the results that may be expected
      for an entire year or any other period.

2.    DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

      a. Description of Business

      Chugach is the largest electric  utility in Alaska.  Chugach is engaged in
      the generation,  transmission  and distribution of electricity to directly
      serve retail  customers in the Anchorage and upper Kenai Peninsula  areas.
      Through an  interconnected  regional  electrical  system,  Chugach's power
      flows throughout  Alaska's Railbelt,  a 400-mile-long area stretching from
      the  coastline  of the  southern  Kenai  Peninsula  to the interior of the
      state, including Alaska's largest cities, Anchorage and Fairbanks.

      Chugach  also  supplies  much of the power  requirements  for three of its
      wholesale  customers,  Matanuska Electric  Association,  Inc. (MEA), Homer
      Electric Association, Inc. (HEA), and the City of Seward (Seward).

      Chugach operates on a not-for-profit basis, and accordingly, seeks only to
      generate revenues  sufficient to pay operating and maintenance  costs, the
      cost of purchased power, capital expenditures, depreciation, and principal
      and interest on all indebtedness  and to provide for reserves.  Chugach is
      subject to the regulatory authority of the Regulatory Commission of Alaska
      (RCA).

      In June 2007,  Chugach and the  Municipality of Anchorage  issued a mutual
      press  release  announcing  plans to  explore a  possible  merger or joint
      operations  between Chugach and Municipal Light & Power (ML&P). On July 6,
      2007, a seven-member oversight panel was announced. The panel is comprised
      of  Anchorage  government  and  business  leaders  that will  oversee  the
      analysis of whether a merger or other joint operations between Chugach and
      ML&P is feasible.


                                       8
<PAGE>

                       Chugach Electric Association, Inc.
                          Notes to Financial Statements
                                   (Unaudited)

      b. Management Estimates

      In preparing the financial  statements,  management of Chugach is required
      to make estimates and assumptions  relating to the reporting of assets and
      liabilities and the disclosure of contingent  assets and liabilities as of
      the date of the balance  sheet and revenues and expenses for the reporting
      period. Critical estimates include allowance for doubtful accounts and the
      estimated  useful life of utility plant.  Actual results could differ from
      those estimates.

      c. Regulation

      The  accounting  records  of  Chugach  conform  to the  Uniform  System of
      Accounts as prescribed by the Federal Energy Regulatory Commission (FERC).
      Chugach meets the criteria,  and  accordingly,  follows the accounting and
      reporting  requirements  of Statement of  Financial  Accounting  Standards
      (SFAS) No. 71,  Accounting  for the Effects of Certain Types of Regulation
      (SFAS 71).

      SFAS  No.  71  provides  for the  recognition  of  regulatory  assets  and
      liabilities  as  allowed  by  regulators  for  costs or  credits  that are
      reflected in current rates or are considered probable of being included in
      future rates.  The regulatory  assets or liabilities  are then relieved as
      the cost or credit is reflected in rates.

      d. Income Taxes

      Chugach is exempt  from  federal  income  taxes  under the  provisions  of
      Section  501(c)(12)  of the Internal  Revenue  Code,  except for unrelated
      business  income.  For the nine months ended  September 30, 2007,  Chugach
      received no unrelated business income.

      e. Reclassifications and Immaterial Error Corrections

      Reclassifications  have been made to the 2006 financial statements to make
      them comparable with the 2007 presentation. We corrected immaterial errors
      from the timing of the cash  settlement  of  additions  to  extension  and
      replacement of plant as follows:

<TABLE>
<CAPTION>
                                             Three          Six             Nine          Twelve         Three            Six
                                            Months         Months          Months         Months         Months          Months
                                             ended         ended           ended          ended          ended           ended
                                           03/31/06       06/30/06       09/30/06       12/31/06        03/31/07        06/30/07
                                           --------       --------       --------       --------        --------        --------
<S>                                        <C>           <C>             <C>              <C>          <C>             <C>
Increase (decrease) in net cash flows
provided by operating activities            969,887       1,760,443       1,665,813      (432,873)      2,541,889       2,867,057
(Increase) decrease in net cash flows
used for investing activities              (969,887)     (1,760,443)     (1,665,813)      432,873      (2,541,889)     (2,867,057)
Supplemental disclosure of non-cash
investing activities, Extension and
replacement of plant                        884,240         649,420       1,199,510     3,503,009         944,351         665,694
</TABLE>


                                       9
<PAGE>

                       Chugach Electric Association, Inc.
                          Notes to Financial Statements
                                   (Unaudited)

3. LINES OF CREDIT

Chugach  maintains a $7.5 million line of credit with CoBank,  ACB (CoBank).  On
October 17,  2007,  the Board of Directors  approved a resolution  to renew this
line of credit.  The CoBank  line of credit  will  expire on October  31,  2008,
subject to annual  renewal at the  discretion of the parties.  Chugach  borrowed
$1.0 million on this line of credit on September 19, 2007 and repaid the balance
on September 28, 2007. Interest on the borrowings is calculated using the CoBank
Base Rate on the first  business day of the week plus 3%. The borrowing  rate at
September  30, 2007 was 6.35% and at December  31, 2006 the  borrowing  rate was
6.66%.  In addition to the CoBank line of credit,  Chugach has an annual line of
credit of $50 million  available with the National Rural  Utilities  Cooperative
Finance Corporation (NRUCFC). Chugach did not utilize this line of credit during
the third quarter of 2007 and had no balance  outstanding at September 30, 2007.
The borrowing rate is calculated  using the total rate per annum as may be fixed
by CFC and will not exceed the  Prevailing  Prime  Rate,  plus one  percent  per
annum.  The  borrowing  rate at September 30, 2007 was 6.65% and at December 31,
2006 the borrowing  rate was 7.15%.  On October 17, 2007, the Board of Directors
approved a  resolution  to renew  NRUCFC  line of credit.  NRUCFC line of credit
expires October 31, 2012.

4. LEGAL PROCEEDINGS

Matanuska  Electric  Association,  Inc.  (MEA) v.  State of  Alaska,  Regulatory
Commission of Alaska, Superior Court Case No. 3AN-06-8243 Civil

On May 17, 2006, MEA appealed and on May 30, 2006,  Homer Electric  Association,
Inc., (HEA) cross appealed the RCA's decision in Commission Docket No. U-04-102,
see "Footnote 5,  Regulatory  Matters - Revision to Current  Depreciation  Rates
(Docket No.  U-04-102)." On appeal,  MEA claims the Commission's  decision dated
January 10, 2006 to authorize Chugach to implement new depreciation  rates as of
January 1, 2005 constituted  illegal retroactive  ratemaking.  MEA also contends
that the Commission's reliance on avoidance of regulatory lag as a basis for its
decision  was  improper.  MEA  also  challenged  the  discovery  rulings  of the
Commission.  Chugach will join the State of Alaska in defending the Commission's
rulings.  On April 25, 2007 the Court issued a briefing schedule.  MEA has filed
its appellant's brief and Chugach's responsive brief is due November 14, 2007.

The ultimate  resolution  of this matter is not currently  determinable.  In the
opinion  of  management,  an  adverse  outcome  is not likely to have a material
adverse  effect on  Chugach's  results of  operations,  financial  condition  or
liquidity. No reserves have been established for this matter.


                                       10
<PAGE>

                       Chugach Electric Association, Inc.
                          Notes to Financial Statements
                                   (Unaudited)

5. REGULATORY MATTERS

Revision to Current Depreciation Rates (Docket No. U-04-102)

In 2004,  Chugach  implemented new depreciation  rates based on an update of the
1999  Depreciation  Study  utilizing  Electric  Plant in Service  balances as of
December 31, 2002. The 2002  Depreciation  Study resulted in an increase to 2004
depreciation expense,  which was not material to the financial  statements.  The
2002  Depreciation  Study was  submitted to the RCA for approval on November 19,
2004,  resulting  in the RCA opening a docket to review the  proposed new rates.
Chugach,  however,  implemented the new rates effective January 1, 2004. Chugach
did not request a change in electric  rates  charged to  customers  based on the
proposed revisions to depreciation rates.

On March 9, 2005, the RCA ruled in Order No. 2 that  depreciation  rates may not
be implemented without prior approval of the RCA.

On September  21, 2005,  the RCA issued Order No. 8 requiring  Chugach to adjust
its underlying  2004 financial  records to reflect the results as if Chugach had
not implemented unapproved rates. In November of 2005, Chugach reversed the 2004
depreciation  expense and  depreciation  reserves that were previously  recorded
using the 2002 Depreciation Study rates and calculated 2004 depreciation expense
for all categories of plant using the 1999 Depreciation  Study rates as approved
by the RCA in Docket  U-01-108.  The  adjustment  was not  material to Chugach's
financial statements.

In Order No. 9 dated January 10, 2006, the RCA ruled  substantially in Chugach's
favor approving the 2002 Depreciation Study with certain changes to the proposed
depreciation  rates.  The main effect of this  decision  is to allow  Chugach to
revise its depreciation rates effective as of January 1, 2005.

Because  Chugach did not request  changes to the electric  rates  charged to its
customers based on the proposed new depreciation  rates,  there was no immediate
electric rate impact.

Wholesale customers MEA and HEA were active in the proceeding. Subsequently, MEA
filed an appeal of the RCA's decision in Superior Court,  see "Footnote 4, Legal
Proceedings  -  Matanuska  Electric  Association,   Inc.  v.  State  of  Alaska,
Regulatory Commission of Alaska, Superior Court Case No. 3AN-06-8243 Civil." HEA
has  withdrawn  from the  appeal.  MEA has filed its  initial  appellate  brief.
Chugach anticipates filing an appellee's brief on November 14, 2007.


                                       11
<PAGE>

                       Chugach Electric Association, Inc.
                          Notes to Financial Statements
                                   (Unaudited)

2005 Test Year General Rate Case (Docket No. U-06-134)

On September 27, 2006, the Chugach Board of Directors  authorized and instructed
management  to file a general  rate case with the RCA. On  September  29,  2006,
Chugach  filed a general  rate case  based on a 2005 test year and  requested  a
revenue  increase of $10.6 million for the  Generation  and  Transmission  (G&T)
function and a revenue decrease of $7.8 million for the  Distribution  function.
Overall revenues were proposed to increase $2.8 million in the initial filing.

Chugach expects full  adjudication to be completed from January 1, 2008 to March
31,  2008,  assuming no appeals or other delay in the  regulatory  process.  The
Commission  permitted  intervention from Chugach's  wholesale  customers and the
Regulatory  Affairs  and Public  Advocacy  (RAPA)  section  within the  Attorney
General's  office of the State of Alaska.  It also permitted  intervention  of a
single Chugach retail member.

A  scheduling  order was  issued on January  23,  2007,  establishing  a hearing
schedule to adjudicate the case.  Discovery from the  intervenors in the case on
Chugach's filing and pre-filed initial testimony has been completed.  Intervenor
testimony has been submitted.  Chugach completed reviewing and discovery on this
testimony.  Chugach's  reply  testimony was submitted May 29, 2007.  Chugach has
been responding to discovery from intervenors.  The last day to submit discovery
on Chugach's reply testimony was July 16, 2007. A settlement  agreement  between
several  of the  intervenors  and  Chugach,  reached  in August  2007,  has been
accepted by the RCA. The settlement agreement results in an estimated 3% overall
decrease for retail members and an estimated 2 to 3 percent overall increase for
HEA and Seward. The hearing scheduled to occur in August 2007 with the remaining
intervenors  was canceled.  The remaining  active  intervener,  MEA, and Chugach
entered into a stipulation to resolve  outstanding  procedural issues on October
16, 2007.  This  stipulation  agrees to a procedure  whereby the Commission will
decide the matter based on the written  record with  provisions  for  Commission
written  questions and optional oral  questioning  by the Commission of selected
witnesses.  Chugach has submitted  permanent  rates to implement the  settlement
agreement  and  interim  rates  for the  party  that did not  settle,  which are
expected to be approved  during the fourth  quarter.  If the RCA approves  these
rates as filed, Chugach's total annual revenues would be reduced by $1.2 million
from  current  rate  levels.  Chugach  expects  a  decision  from the RCA on the
outstanding issues with MEA by March 31, 2008, which could have an impact on the
change in annual revenues noted above.

6. ENVIRONMENTAL MATTERS

During first quarter 2007, the Alaska  Department of Environmental  Conservation
notified  Chugach  that two of the  Beluga  River  turbines  may be subject to a
federal Clean Air Act requirement to install Best Available Retrofit  Technology
(BART) to reduce visibility impairment in national parks and wilderness areas.


                                       12
<PAGE>

                       Chugach Electric Association, Inc.
                          Notes to Financial Statements
                                   (Unaudited)

On May 7, 2007,  Chugach  was  notified  by the State of Alaska,  Department  of
Environmental  Conservation that the Beluga Power Plant turbines are not subject
to the BART  requirements,  and Chugach will not need to participate in the BART
process, which includes new emission limits.

7. RECENT ACCOUNTING PRONOUNCEMENTS

In February,  2007, the Financial  Accounting  Standards  Board ("FASB")  issued
Statement of Accounting  Standards  ("SFAS") No. 159, "The Fair Value Option for
Financial  Assets and  Financial  Liabilities  - Including  an amendment of FASB
Statement  No.  115."  SFAS No.  159 allows  for  certain  financial  assets and
liabilities  to be measured at fair value on an  instrument-by-instrument  basis
subject  to  certain  restrictions.  SFAS No.  159 is  effective  for  financial
statements  issued for fiscal years beginning  after November 15, 2007.  Chugach
will begin  application  of SFAS No. 159 on January 1, 2008, and does not expect
it to have a material affect on our results of operations,  financial  position,
and cash flows.

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements." SFAS
No.  157  provides   guidance  for  using  fair  value  to  measure  assets  and
liabilities.  In addition,  this  statement  defines fair value,  establishes  a
framework for measuring  fair value,  and expands  disclosures  about fair value
measurements.  This  statement  applies  when  other  accounting  pronouncements
require fair value measurement; it does not require new fair value measurements.
This  statement is effective  for financial  statements  issued for fiscal years
beginning  after  November 15,  2007,  and interim  periods  within those fiscal
years.  Chugach will begin  application  of SFAS No. 157 on January 1, 2008, and
does not  expect it to have a  material  affect on our  results  of  operations,
financial position, and cash flows.

In March  2006,  the FASB  issued SFAS No. 156,  "Accounting  for  Servicing  of
Financial  Assets -- an  amendment  of FASB  Statement  No.  140."  SFAS No. 156
requires an entity to recognize a servicing  asset or servicing  liability  each
time it undertakes an obligation to service a financial asset by entering into a
servicing contract in specific situations.  Additionally, the servicing asset or
servicing liability is initially measured at fair value;  however, an entity may
elect the  "amortization  method" or "fair value method" for subsequent  balance
sheet reporting periods. Application of SFAS No. 156 on January 1, 2007, did not
have a material  affect on our results of operations,  financial  position,  and
cash flows.

In February  2006, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial Standard "(SFAS") No. 155, "Accounting for Certain Hybrid
Instruments",  which is an amendment of SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", and SFAS No. 140, "Accounting for Transfers
and  Servicing of  Financial  Assets and  Extinguishments  of  Liabilities  -- a
replacement  of  FASB  Statement  No.  125."  SFAS  No.  155  allows   financial
instruments that have embedded derivatives to


                                       13
<PAGE>

                       Chugach Electric Association, Inc.
                          Notes to Financial Statements
                                   (Unaudited)

be accounted for as a whole  (eliminating  the need to bifurcate the  derivative
from its host) if the holder  elects to account  for the whole  instrument  on a
fair value basis.  The Statement  also  establishes  a  requirement  to evaluate
interests  in  securitized  financial  assets  to  identify  interests  that are
freestanding  derivatives or that are hybrid financial  instruments that contain
an embedded derivative  requiring  bifurcation and clarifies that concentrations
of  credit  risk in the  form of  subordination  are not  embedded  derivatives.
Application of SFAS No. 155 on January 1, 2007,  did not have a material  affect
on our results of operations, financial position, and cash flows.

In  September  2006,  the FASB  issued  FASB Staff  Position  ("FSP") AUG AIR-1,
"Accounting for Planned Major  Maintenance  Activities." FSP AUG AIR-1 prohibits
the  use of  the  accrue-in-advance  method  of  accounting  for  planned  major
maintenance  activities  in annual  and  interim  financial  reporting  periods.
Chugach  implemented  this Staff  Position  effective  January 1, 2007.  Because
Chugach does not accrue in advance for planned major maintenance activities, the
implementation  of FSP AUG  AIR-1  did not  have an  impact  on our  results  of
operations or financial condition.


                                       14
<PAGE>

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

Reference  is made to the  information  contained  under  the  caption  "CAUTION
REGARDING FORWARD-LOOKING STATEMENTS" at the beginning of this report.

RESULTS OF OPERATIONS

Current Year Quarter versus Prior Year Quarter

Assignable margins decreased $2.1 million, or 1,740.2%, during the third quarter
of 2007  compared to the same  quarter of 2006.  Third  quarter 2007 margins are
down due to  decreased  sales,  lower  fuel  surcharge  revenue,  and  increased
operating expenses.

Operating  revenues which include sales of electric energy to retail,  wholesale
and economy energy customers and other  miscellaneous  revenues,  decreased 9.8%
from $63.2 million in the third quarter of 2006 compared to $57.1 million in the
third quarter of 2007.  This decrease was primarily due to lower economy  energy
kWh sales  during  the third  quarter  of 2007 as well as lower  fuel  surcharge
revenue.  The reduction in the fuel  surcharge  revenue is the result of reduced
Cook Inlet  production  taxes and receipt of credits during the third quarter of
2007 for previously paid production  taxes.  Chugach is authorized by the RCA to
recover fuel and related costs through the fuel  surcharge  mechanism,  which is
adjusted  quarterly  to  reflect  increases  and  decreases  of such  costs.  In
addition,  retail sales  decreased in the third  quarter of 2007 compared to the
same quarter of 2006 due  primarily to a change in gas fields  operations of one
of Chugach's  large  commercial  customers and a change in consumer  consumption
patterns  in response to  significant  increases  in the price of natural gas as
reflected in both natural gas and electric  utility  bills.  Wholesale kWh sales
were higher  during the third  quarter of 2007  compared to the same  quarter of
2006 due  primarily to increased  kWh sales to Homer  Electric.  Economy  energy
sales were lower during the third  quarter of 2007  compared to the same quarter
of 2006 primarily due to maintenance  activities that limited generation and the
ability to sell kWh to Golden  Valley  Electric  Association  (GVEA)  during the
third quarter of 2007.

Based  on the  results  of fixed  and  variable  cost  recovery  established  in
Chugach's  last rate case,  wholesale  sales to HEA, MEA and Seward  contributed
approximately  $5.8  million to  Chugach's  fixed  costs for the  quarter  ended
September 30, 2007 and $5.8 million for the quarter ended September 30, 2006.


                                       15
<PAGE>

The  following  table shows the base rate sales  revenue and fuel and  purchased
power  revenue by customer  class that is  included in revenue for the  quarters
ended September 30, 2007 and 2006:

                                 (in millions)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
                             Base Rate Sales Revenue      Fuel and Purchased Power Revenue         Total Revenue
--------------------------------------------------------------------------------------------------------------------------
                          2007      2006      % Variance      2007     2006    % Variance     2007    2006     % Variance
--------------------------------------------------------------------------------------------------------------------------
<S>                      <C>        <C>         <C>          <C>       <C>       <C>         <C>      <C>        <C>
 Retail
Residential              $10.2      $10.3       (1.0%)        $5.9      $6.9     (14.5%)     $16.1    $17.2      (6.4%)
Small Commercial          $1.9       $1.9        0.0%         $1.3      $1.5     (13.3%)      $3.2    $3.4       (5.9%)
Large Commercial          $7.3       $7.5       (2.7%)        $6.4      $7.7     (16.9%)     $13.7    $15.2      (9.9%)
Lighting                  $0.3       $0.3        0.0%         $0.0      $0.0       0.0%       $0.3    $0.3        0.0%
Total Retail             $19.7      $20.0       (1.5%)       $13.6     $16.1     (15.5%)     $33.3    $36.1      (7.8%)

 Wholesale
HEA                       $2.6       $2.6        0.0%         $6.7      $6.7       0.0%       $9.3    $9.3        0.0%
MEA                       $4.1       $4.1        0.0%         $7.6      $8.8     (13.6%)     $11.7    $12.9      (9.3%)
SES                       $0.3       $0.3        0.0%         $0.8      $0.9     (11.1%)      $1.1    $1.2       (8.3%)
Total Wholesale           $7.0       $7.0        0.0%        $15.1     $16.4      (7.9%)     $22.1    $23.4      (5.6%)

 Economy Sales            $0.3       $0.7      (57.1%)        $0.7      $2.2       n/a        $1.0    $2.9      (65.5%)
 Miscellaneous            $0.7       $0.8      (12.5%)        $0.0      $0.0       n/a        $0.7    $0.8      (12.5%)

Total Revenue            $27.7      $28.5       (2.8%)       $29.4     $34.7     (15.3%)     $57.1    $63.2      (9.7%)
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

The following table summarizes kWh sales for the quarter ended September 30:

                                               2007                 2006
               Customer                        kWh                   kWh
               --------                        ---                   ---
           Retail                         273,827,417           279,445,748
           Wholesale                      317,625,932           295,729,561
           Economy Energy                  18,248,140            41,836,320
                                          -----------           -----------
                    Total                 609,701,489           617,011,629
                                          ===========           ===========

There  were no changes to demand  rates and energy  rates  charged to retail and
wholesale  customers  during  the third  quarter of 2007  compared  to the third
quarter of 2006.

Total operating expenses  decreased $4.1 million,  or 7.1%, in the third quarter
of 2007 over the same period of 2006.  Fuel expense  decreased $4.8 million,  or
17.3%,  due to lower economy energy sales,  lower base contract  prices for fuel
and a reduction in related production taxes recorded during the third quarter of
2007.

Purchased power  decreased  $830.8  thousand,  or 10.2%, in the third quarter of
2007 compared to the second  quarter of 2006.  The decrease is a result of prior
quarter scheduling and contract  restrictions,  limiting the ability to purchase
power during third quarter of 2007.  Chugach  purchased  more power in the first
and second quarter of 2007 while  maintenance  work was being done. In the third
quarter of 2007, Chugach purchased 115,106 MWh of energy compared to 140,151 MWh
for the same quarter of 2006.

Transmission  expense decreased $450.7 thousand,  or 22.3%, in the third quarter
of 2007 compared to the same quarter of 2006.  During the third quarter of 2006,
significant  riverbank  erosion occurred due to flooding  resulting in emergency
transmission  tower  repairs.  In  2007,  major  transmission  repairs  were not
necessary.


                                       16
<PAGE>

Distribution expense increased $934.6 thousand,  or 39.4%, for the quarter ended
September  30, 2007  compared to the same  period of 2006.  The  increase is due
primarily to increased  expenditures  related to utility locates and underground
maintenance during the third quarter of 2007.

Consumer accounts  increased $135.3 thousand,  or 11.4%, in the third quarter of
2007 compared to the same time period of 2006. The increase in the third quarter
of 2007 is related to filling  personnel  positions  that were vacant during the
third  quarter of 2006 as well as an increase  in  expenses  related to consumer
information and advertising.

Administrative,  general and other expenses increased $702.8 thousand, or 15.6%,
for the third quarter of 2007 compared to the same quarter of 2006. The increase
is primarily due to increased  professional  services  costs related to the 2005
test year rate case, Sarbanes Oxley compliance,  and other Board related studies
during the third quarter of 2007.  Professional  services  expenses for Sarbanes
Oxley compliance during third quarter 2007 totaled $360.2 thousand.

Interest on long-term  debt did not  materially  change in the third  quarter of
2007  compared to the same  quarter of 2006.  Interest  charged to  construction
increased  $47.9  thousand,  or  33.0%,  due  to a  higher  average  balance  in
construction  work-in-progress  (CWIP) as well as the  impact of higher  overall
interest  rates during the third quarter of 2007 compared to the same quarter in
2006.

Non-operating  margins decreased $62.1 thousand,  or 19.8%, in the third quarter
of 2007 compared to the same quarter of 2006. The decrease is primarily due to a
lower  average cash balance  during the third  quarter of 2007  compared to 2006
resulting in lower interest income.

Current Year to Date versus Prior Year to Date

Assignable  margins  decreased  $5.1  million,  or 85.3%,  during the first nine
months of 2007  compared to the same nine months of 2006.  2007 margins are down
due to decreased sales,  lower fuel surcharge revenue,  and increased  operating
expenses.

Operating revenues,  which include sales of electric energy to retail, wholesale
and economy energy customers and other  miscellaneous  revenues,  decreased 1.4%
from $190.4  million in the first nine months of 2006 compared to $187.6 million
in the first nine  months of 2007.  This  decrease  was  primarily  due to lower
economy energy kWh sales as reduced fuel surcharge revenue. The reduction in the
fuel surcharge  revenue is the result of reduced Cook Inlet production taxes and
receipt of credits for previously  paid  production  taxes during the first nine
months of 2007 compared to the same nine months of 2006.

Total  energy sales  decreased in the first nine months of 2007  compared to the
same time period of 2006. Retail and economy energy sales decreased in the first
nine months of 2007 while wholesale energy sales increased.  Retail energy sales
decreased primarily


                                       17
<PAGE>

due to a change in gas fields  operations of one of Chugach's  large  commercial
customers  as well as a change in consumer  consumption  patterns in response to
significant  increases  in the price of natural gas as reflected in both natural
gas and electric utility bills.

Wholesale  energy sales increased  primarily due to large  commercial  growth in
HEA's  territory.  Economy  energy  sales were lower in the first nine months of
2007  compared  to the same  period  in 2006.  This was due to  Dynamite  Slough
transmission  line work as well as other  maintenance  activities,  limiting the
ability to make economy energy sales.

Based  on the  results  of fixed  and  variable  cost  recovery  established  in
Chugach's  last rate case,  wholesale  sales to HEA, MEA and Seward  contributed
approximately  $18.9 million and $18.5 million to Chugach's  fixed costs for the
nine months ended September 30, 2007 and 2006, respectively.

The  following  table shows the base rate sales  revenue and fuel and  purchased
power revenue by customer  class that is included in revenue for the nine months
ended September 30, 2007 and 2006:

                                 (in millions)

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
                            Base Rate Sales Revenue          Fuel and Purchased Power Revenue              Total Revenue
---------------------------------------------------------------------------------------------------------------------------------
                         2007      2006     % Variance        2007         2006     % Variance     2007      2006     % Variance
---------------------------------------------------------------------------------------------------------------------------------
<S>                     <C>       <C>          <C>           <C>          <C>           <C>       <C>       <C>           <C>
 Retail
Residential             $33.9     $34.2        (0.9%)        $21.4        $21.1         1.4%       $55.3     $55.3       (0.0%)
Small Commercial         $6.2      $6.1         1.6%          $4.6         $4.4         4.5%       $10.8     $10.5        2.9%
Large Commercial        $22.0     $21.7         1.4%         $20.6        $20.9        (1.4%)      $42.6     $42.6        0.0%
Lighting                 $0.9      $1.0       (10.0%)         $0.0         $0.1         0.0%        $0.9     $ 1.1      (18.2%)
Total Retail            $63.0     $63.0        (0.0%)        $46.6        $46.5         0.2%      $109.6    $109.5        0.1%

 Wholesale
HEA                      $7.9      $7.6         3.9%         $20.0        $17.9        11.7%       $27.9     $25.5        9.4%
MEA                     $13.6     $13.6         0.0%         $26.8        $25.6         4.7%       $40.4     $39.2        3.1%
SES                      $0.9      $0.8        12.5%          $2.5         $2.1        19.0%        $3.4     $ 2.9        17.2%
Total Wholesale         $22.4     $22.0         1.8%         $49.3        $45.6         8.1%       $71.7     $67.6        6.1%

 Economy Sales           $1.1      $2.9       (62.1%)         $2.9         $8.2         n/a         $4.0     $11.1      (64.0%)
 Miscellaneous           $2.3      $2.2         4.5%          $0.0         $0.0         n/a         $2.3     $ 2.2        4.5%

Total Revenue           $88.8     $90.1        (1.4%)        $98.8       $100.3        (1.5%)     $187.6    $190.4       (1.5%)
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

The following table summarizes kWh sales for the nine months ended September 30:

                                           2007                   2006
                Customer                    kWh                   kWh
                --------                    ---                   ---
        Retail                          881,411,698            888,399,387
        Wholesale                       965,764,816            914,797,999
        Economy Energy                   67,514,050            187,746,390
                                      -------------          -------------
                 Total                1,914,690,564          1,990,943,776
                                      =============          =============

Total  operating  expenses  increased  $2.4 million,  or 1.5%, in the first nine
months  of 2007  over the same  period  of 2006.  Fuel  expense  decreased  $7.3
million,  or 8.8%, due to lower economy energy sales, lower base contract prices
for fuel and a  reduction  in  related  production  taxes  during the first nine
months of 2007.


                                       18
<PAGE>

Production  expense  increased $851.9  thousand,  or 7.7%, in the nine months of
2007  compared to the same period in 2006 due to  expenses  associated  with the
Beluga  Unit 3  inspection  in 2007,  which was greater in scope than the Beluga
Unit 5 inspection  in 2006.  The  increase was also due expenses  related to the
Beluga Unit 1 and 2 controls  upgrade and the Beluga Unit 8 inspection  in 2007.
Also, the Cooper Lake annual inspection was done during the first nine months of
2007  compared to the same  inspection  that  occurred in the fourth  quarter of
2006.

Purchased power increased $4.4 million,  or 20.2%,  during the first nine months
of 2007 compared to the same period of 2006. The increase is due to transmission
line  work  at  Dynamite  Slough  and  other  maintenance  activities,  limiting
generation,  which  resulted in the need for Chugach to purchase more power from
providers.

Transmission expense increased $634.2 thousand,  or 13.9%, during the first nine
months of 2007  compared to the same period of 2006.  The  increase is primarily
due to increased labor and professional  services  related to transmission  line
clearing as well as contract services for maintenance at the Point MacKenzie and
University substations.

Distribution  expense  increased $2.0 million,  or 24.3%,  during the first nine
months of 2007  compared to the same period of 2006.  The  increase is primarily
due to labor and  professional  services  related to an outage that  occurred in
December 2006 and extended into the first quarter of 2007.  The increase is also
due to  increased  expenditures  related to  utility  locates  and  right-of-way
clearing as well as increased  labor due to contract  increases in 2007 compared
to 2006.

Administrative,  general and other expenses increased $1.4 million, or 9.9%, for
the first nine months of 2007 compared to the same period of 2006.  The increase
is primarily  due to increased  professional  service  costs related to the 2005
test year rate case,  Sarbanes Oxley  compliance and other Board related studies
in 2007.  As of  September  30,  2007,  $584.1  thousand  had been  expensed for
professional services related to Sarbanes Oxley compliance.

Interest on long-term debt did not materially change in the first nine months of
2007  compared  to the same  period  of time in  2006.  Other  interest  expense
increased  $89.0  thousand,  or 100.0%,  primarily  due to  interest  paid on an
adjustment to an electric  account.  Interest charged to construction  increased
$112.1 thousand,  or 32.3%, due to a higher average balance in CWIP as well as a
higher  average  interest  rate during the first nine months of 2007 compared to
the same nine months of 2006.

Non-operating  margins  increased  $32.4  thousand,  or 4.1%,  in the first nine
months of 2007 compared to the same period of time in 2006. The increase was due
to an  increase in AFUDC  during the first nine  months of 2007  compared to the
first  nine  months of 2006 due to a higher  average  balance  in CWIP as well a
higher rate being charged to the average CWIP balance.


                                       19
<PAGE>

Financial Condition

Assets

Total assets  decreased  $8.1  million,  or 1.4%,  from  December  31, 2006,  to
September 30, 2007. Net utility plant decreased $2.0 million,  or 0.4% primarily
due to  depreciation  expense in excess of extension and  replacement  of plant.
Cash and cash equivalents  decreased $6.5 million,  or 65.8%, due in part to the
semi-annual  interest  payments on the 2001 and 2002 Series A bonds in the third
quarter of 2007 as well as increased  professional  services related to Sarbanes
Oxley compliance, rate case expenditures and gas contract negotiations.  Special
deposits  decreased  $80.0  thousand,   or  38.7%,  due  to  the  redemption  of
certificates of deposits that were being held as performance guarantees with the
State of Alaska.  Accounts  receivable  decreased $4.1 million, or 12.5%, due to
lower demand and energy usage as of September  30, 2007 compared to December 31,
2006.  Prepayments  decreased  $127.2  thousand,  or 8.5%,  due to the timing of
payment of annual insurance premiums.

These  decreases  were  offset by  increases  in special  funds,  materials  and
supplies,  other current assets and deferred  charges.  Special funds  increased
$645.5  thousand,  or 100.0%,  due to the value of employee  contributions  to a
deferred  compensation  plan being  recorded  in 2007.  Materials  and  supplies
increased $2.9 million, or 11.2%, due mainly to the cost of wire and purchase of
materials committed to planned distribution  projects,  and additional spare and
refurbished  turbine  parts  for  generation  inventory.  Other  current  assets
increased $66.2 thousand,  or 23.6%, due primarily to the timing of receipt of a
semi-annual  interest  payment  from NRUCFC.  Deferred  charges  increased  $1.2
million,  or 5.2%, due primarily to additional  charges for the Beluga River gas
compression project.

Liabilities

Total  liabilities  decreased $8.1 million,  or 1.4%,  from December 31, 2006 to
September 30, 2007. The decrease includes an $8.3 million,  or 2.3%, decrease in
total  long-term  obligations,  which  includes  current  installments,  due  to
principal  payments  made on CoBank  2, 3, 4 and 4 and the 2002  Series B Bonds.
Accrued  interest  decreased  $4.2  million,  or  65.4%,  due to the  timing  of
semi-annual  interest  payments.  Salaries,  wages and benefits decreased $685.0
thousand,  or 11.4%,  due to the  ratification of labor contracts and payment of
related  labor and  benefits  that were  accrued at  December  31,  2006.  Other
liabilities  decreased  $2.0 million,  or 47.7%,  as a result of completing  and
funding  state  and  municipal  undergrounding  compliance  projects.   Deferred
liabilities  decreased  $265.2  thousand,  or  11.5%,  due  to  a  reduction  in
refundable advances for construction.

Other  notable   changes  in   liabilities   include   increases  in  fuel  cost
over-recovery and fuel payable.  The fuel surcharge  mechanism allows Chugach to
recover  fuel and  related  costs on a  quarterly  basis.  Due to the  timing of
receiving  credits from fuel suppliers for previously paid Cook Inlet production
taxes, fuel cost over-recovery increased $3.5


                                       20
<PAGE>

million, or 1,077.7%.  Fuel payable increased $2.2 million, or 13.8%, due to the
timing of fuel payments at September 30, 2007.

LIQUIDITY AND CAPITAL RESOURCES

Chugach has satisfied its  operational and capital cash  requirements  primarily
through  internally  generated funds, an annual $7.5 million line of credit with
CoBank and a $50 million line of credit from NRUCFC. At September 30, 2007 there
was no outstanding balance on either line of credit.

Chugach  also has a term loan  facility  with  CoBank.  Loans  made  under  this
facility  are  evidenced  by  promissory  notes  governed  by  the  Master  Loan
Agreement, which became effective on January 22, 2003.

At September 30, 2007,  Chugach had the following  promissory notes  outstanding
with this facility:


<TABLE>
<CAPTION>
Promissory            Principal     Interest Rate at        Maturity           Principal
  Note                Balance       Sept. 30, 2007            Date           Payment Dates
  ----                -------       --------------            ----           -------------
<S>                <C>                    <C>                 <C>             <C>    <C>
CoBank 2           $   6,000,000          5.50%               2010            2005 - 2010
CoBank 3              19,017,242          6.35%               2022            2003 - 2022
CoBank 4              20,786,288          6.35%               2022            2003 - 2022
CoBank 5               4,932,394          6.35%               2012            2007 - 2012
                   -------------
      Total        $  50,735,924
</TABLE>

On June 5, 2007,  Chugach refinanced its $5 million promissory note with CoBank.
The new $5 million,  variable rate promissory note will mature July 20, 2012 and
contains monthly principal payments commencing September 20, 2007.

On January 22, 2003,  Chugach and CoBank  finalized a new Master Loan  Agreement
pursuant to which the CoBank term loan  facility was  converted  from secured to
unsecured debt and the  obligations  represented by the  outstanding  bonds then
held by CoBank were converted into  promissory  notes governed by the new Master
Loan Agreement.  Chugach's mortgage indenture was replaced in its entirety by an
Amended  and  Restated  Indenture  dated April 1, 2001.  All liens and  security
interests  imposed  under the  indenture  were  terminated  and all  outstanding
Chugach  bonds  (including  new bonds of 2001  Series A, 2002  Series A and 2002
Series B) became unsecured  obligations governed by the terms of the Amended and
Restated Indenture.


                                       21
<PAGE>

Chugach had the following bonds outstanding at September 30, 2007:

<TABLE>
<CAPTION>
                       Principal             Interest Rate at     Maturity             Principal
    Bond               Balance             September 30, 2007       Date             Payment Dates
    ----               -------             ------------------       ----             -------------
<S>                  <C>                           <C>              <C>                   <C>
2001 Series A        $150,000,000                  6.55%            2011                  2011
2002 Series A        $120,000,000                  6.20%            2012                  2012
2002 Series B        $ 35,500,000                  5.25%            2012               2008 - 2012
                     ------------
       Total         $305,500,000
</TABLE>

Capital  construction  for 2007 is estimated at $29.0 million.  At September 30,
2007,  approximately  $18.9  million  had  been  expended.  Capital  improvement
expenditures  are  expected  to  decrease  during  the  fourth  quarter  as  the
construction season ends.

Chugach  management  continues  to expect  that cash flows from  operations  and
external  funding  sources will be sufficient to cover  operational  and capital
funding requirements in 2007 and thereafter.

CRITICAL ACCOUNTING POLICIES

Our  accounting  and  reporting  policies  comply with U.S.  generally  accepted
accounting  principles  (GAAP).  The  preparation  of  financial  statements  in
conformity with GAAP requires that management apply accounting policies and make
estimates and assumptions that affect results of operations and reported amounts
of assets and liabilities in the financial  statements.  Significant  accounting
policies  are  described  in  Note  1  of  Item  8  "Financial   Statements  and
Supplementary  Data" of our Form 10-K for the  fiscal  year ended  December  31,
2006.  Critical  accounting policies are those policies that management believes
are the most  important to the  portrayal of Chugach's  financial  condition and
results of its operations, and require management's most difficult,  subjective,
or  complex  judgments,  often as a result of the need to make  estimates  about
matters  that  are  inherently  uncertain.  Most  accounting  policies  are  not
considered by management to be critical accounting policies. Several factors are
considered in determining whether or not a policy is critical in the preparation
of financial statements.  These factors include, among other things, whether the
estimates  are  significant  to the  financial  statements,  the  nature  of the
estimates,  the ability to readily validate the estimates with other information
including third parties or available prices, and sensitivity of the estimates to
changes in economic conditions and whether alternative accounting methods may be
utilized under GAAP. For all of these policies  management  cautions that future
events rarely  develop  exactly as forecast,  and the best  estimates  routinely
require  adjustment.  Management has discussed the development and the selection
of critical  accounting  policies with Chugach's Audit Committee.  The following
policies are considered to be critical  accounting  policies for the nine months
ended September 30, 2007.


                                       22
<PAGE>

Electric Utility Regulation

Chugach is subject to  regulation  by the RCA. The RCA sets the rates Chugach is
permitted to charge  customers based on allowable  costs.  As a result,  Chugach
applies  Statement of Financial  Accounting  Standards (SFAS) No. 71, Accounting
for the Effects of Certain Types of Regulation (SFAS 71). Through the ratemaking
process,  the  regulators  may  require  the  inclusion  of costs or revenues in
periods different than when they would be recognized by a non-regulated company.
This  treatment  may result in the  deferral of expenses  and the  recording  of
related  regulatory assets based on anticipated future recovery through rates or
the deferral of gains or creation of  liabilities  and the  recording of related
regulatory liabilities. The application of Statement No. 71 has a further effect
on  Chugach's  financial  statements  as a result of the  estimates of allowable
costs used in the  ratemaking  process.  These  estimates  may differ from those
actually incurred by the Company;  therefore,  the accounting estimates inherent
in specific costs such as depreciation and pension and post-retirement  benefits
have less of a direct impact on Chugach's  results of operations than they would
on a  non-regulated  company.  As  reflected  in  Note 1 of  Item  8  "Financial
Statements and  Supplementary  Data" under "Deferred Charges and Credits" of our
Form 10-K for the fiscal year ended  December 31, 2006,  significant  regulatory
assets and  liabilities  have been  recorded.  Management  reviews the  ultimate
recoverability  of these regulatory  assets and liabilities  based on applicable
regulatory guidelines.  However,  adverse legislation and judicial or regulatory
actions  could  materially  impact  the  amounts of such  regulatory  assets and
liabilities and could adversely impact Chugach's financial statements.

Allowance for Doubtful Accounts

We maintain an allowance for doubtful  accounts for estimated  losses  resulting
from the  inability of our  customers  to make  required  payments.  We base our
estimates on the aging of our accounts receivable balances,  historical bad debt
reserves,   historical   percent  of  retail   revenue   that  has  been  deemed
uncollectible,  changes in our collections process and regulatory  requirements.
If the financial condition of our customers were to deteriorate  resulting in an
impairment  of their  ability to make  payments,  additional  allowances  may be
required. If their financial condition improves, allowances may be reduced. Such
allowance  changes could have a material  effect on our  consolidated  financial
condition and results of operations.

Estimated Useful Life of Utility Plant

We determine the estimated  useful life of utility plant based on a depreciation
study that is updated  every  three years and  approved  by the RCA.  The annual
depreciation  rates were  calculated by the  straight-line  average service life
method using the remaining life basis.  The calculated  accrual rates were based
on attained  ages of plant in service  and the  estimated  service  life and net
salvage  characteristics  of each  depreciable  group.  The service life and net
salvage  estimates  were  based  on  statistical  analyses  of  historical  data
assembled  from  utility  records,  management's  current  plans  and  operating
policies,  a field


                                       23
<PAGE>

survey of the property in service,  consideration of current developments in the
electric   industry,   and  a  general   knowledge   of  the  life  and  salvage
characteristics  of other electric  properties.  For major  facilities,  such as
generating  units,  probable  retirement  years were estimated and the life span
procedure of calculating  depreciation  was used to provide for the simultaneous
retirement  of  all  associated  property,   surviving  from  various  years  of
installation,  at the time of the  retirement of the major  investment.  Certain
general plant accounts are amortized as a cost effective  means of recording the
cost of such  assets to the cost of  operations.  The last  update  was the 2002
depreciation  study  update  and  those  rates  were  approved  and  implemented
effective January 1, 2005.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Information  required  by this  Item is  contained  in Note 7 to the  "Notes  to
Financial Statements" within Part I of this Form 10-Q.

OUTLOOK

On August 24,  2007,  FERC issued  Chugach a new 50-year  license for the Cooper
Lake Hydroelectric  Project.  The license allows Chugach to continue  operations
and maintenance of the Cooper Lake power plant.

Effective  October 8, 2007,  Chugach  reorganized  its operations to add two new
divisions,  Division of  Administration  and Corporate  Planning and  Regulatory
Affairs.

The  Division  of  Administration   is  comprised  of  Administrative   Services
(Contracting,   Security  and  Purchasing),   Information  Services  and  Member
Services.  This division  reports to the Vice  President  Administration,  David
Smith.

Corporate  Planning and Regulatory  Affairs division includes Corporate Planning
Analysis,  Regulatory Affairs and Energy Asset.  Suzanne Gibson,  Vice President
Corporate Planning and Regulatory Affairs leads this division.

On  October  24,  2007,  Brian  Hickey was  promoted  to Vice  President,  Power
Delivery. This division is comprised of Technical Services and Operations.

ENVIRONMENTAL MATTERS

Compliance with Environmental Standards

Chugach's   operations  are  subject  to  certain   federal,   state  and  local
environmental  laws.  The costs  associated  with  environmental  compliance are
included as a component  of both the  operating  and capital  budget  processes.
Chugach accrues for costs associated with environmental  remediation obligations
when such costs are probable and reasonably estimable.


                                       24
<PAGE>

During first quarter 2007, the Alaska  Department of Environmental  Conservation
notified  Chugach  that two of the  Beluga  River  turbines  may be subject to a
federal Clean Air Act requirement to install Best Available Retrofit  Technology
(BART) to reduce visibility impairment in national parks and wilderness areas.

On May 7, 2007,  Chugach  was  notified  by the State of Alaska,  Department  of
Environmental  Conservation that the Beluga Power Plant turbines are not subject
to the Best Available Retrofit Technology (BART) requirements,  and Chugach will
not need to participate in the BART process, which includes new emission limits.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Chugach is exposed to a variety of risks,  including  changes in interest  rates
and changes in  commodity  prices due to  repricing  mechanisms  inherent in gas
supply contracts.  In the normal course of our business,  we manage our exposure
to  these  risks  as  described  below.  We do  not  engage  in  trading  market
risk-sensitive instruments for speculative purposes. Interest Rate Risk

The following table provides  information  regarding  auction dates and rates in
2007 on the 2002 Series B Bonds.  The maximum  rate on the 2002 Series B bond is
15%.

         Auction Date                Interest Rate
         ------------                -------------

          January 24                     5.29%
         February 21                     5.29%
           March 22                      5.30%
           April 18                      5.25%
            May 16                       5.32%
           June 13                       5.30%
           July 11                       5.29%
           August 8                      5.33%
         September 5                     6.15%
          October 3                      5.25%
          October 31                     5.00%

Chugach  is  exposed  to market  risk from  changes  in  interest  rates.  A 100
basis-point  change (up or down) would increase or decrease our interest expense
by approximately $802,359 based on $80,235,923 of variable rate debt outstanding
at September 30, 2007.


                                       25
<PAGE>

The following  table  provides  information  regarding  cash flows for principal
payments on total debt by maturity  date  (dollars in thousands) as of September
30, 2007.

<TABLE>
<CAPTION>
                                                                                                                               Fair
      Total Debt(1)             2007         2008        2009        2010         2011        Thereafter       Total           Value
      -------------             ----         ----        ----        ----         ----        ----------       -----           -----
<S>                           <C>          <C>          <C>          <C>          <C>           <C>           <C>           <C>
Fixed rate debt               $   500      $ 2,000      $ 2,000      $ 1,500      $150,000      $120,000      $276,000      $281,573

Average interest rate            5.50%        5.50%        5.50%        5.50%         6.55%         6.20%         6.37%

Annual interest
Expense                       $17,628      $17,518      $17,405      $17,297      $  9,487      $    620      $ 79,955

Variable rate debt            $   206      $ 8,107      $ 8,704      $ 9,318      $  9,951      $ 43,950      $ 80,236      $ 80,236

Average interest rate            6.64%        5.51%        5.51%        5.51%         5.51%         6.33%
</TABLE>

(1)   Includes current portion

Commodity Price Risk

Chugach's  gas  contracts  provide  for  adjustments  to  gas  prices  based  on
fluctuations of certain  commodity prices and indices.  Because  purchased power
costs are passed directly to our wholesale and retail  customers  through a fuel
surcharge  mechanism,  fluctuations  in the  price  paid  for  gas  pursuant  to
long-term gas supply contracts does not normally impact margins.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Controls and Procedures

As of the end of the  period  covered  by this  report,  Chugach  evaluated  the
effectiveness  of the  design  and  operation  of its  disclosure  controls  and
procedures.  Chugach's chief executive officer (CEO) and chief financial officer
(CFO) supervised and participated in this evaluation.  Based on this evaluation,
Chugach's CEO and CFO each  concluded  that  Chugach's  disclosure  controls and
procedures  are  effective  in  timely  alerting  them to  material  information
required to be included in its  periodic  reports to the SEC.  The design of any
system  of  controls  is  based  in part  upon  various  assumptions  about  the
likelihood of future events, and there can be no assurance that any of Chugach's
plans, products, services or procedures will succeed in achieving their intended
goals under  future  conditions.  In  addition,  there have been no  significant
changes in Chugach's  internal  controls or in other factors known to management
that could  significantly  affect its internal  controls  subsequent to our most
recent evaluation.

Internal Control Over Financial Reporting

Chugach is in the process of implementing the requirements of Section 404 of the
Sarbanes-Oxley  Act of  2002,  which  requires  its  management  to  assess  the
effectiveness of its internal  controls over financial  reporting and include an
assertion  in its annual


                                       26
<PAGE>

report  as  to  the  effectiveness  of  our  controls.  In  addition,  Chugach's
independent  registered  public  accounting  firm, KPMG LLP, will be required to
attest to whether  Chugach's  assessment  of the  effectiveness  of our internal
controls over financial  reporting is fairly stated in all material respects and
separately  report on whether it believes  Chugach  maintained,  in all material
respects,  effective  internal controls over financial  reporting as of December
31,  2008.  Chugach is in the  process  of  performing  the  system and  process
documentation,  evaluation  and testing  required  for  management  to make this
assessment and for KPMG LLP to provide its attestation report. This process will
continue to require significant amounts of management time and resources. In the
course of evaluation and testing, management may identify deficiencies that will
need to be addressed and remediated.


                                       27
<PAGE>

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Information  required  by this  Item is  contained  in Note 4 to the  "Notes  to
Financial Statements" within Part I of this Form 10-Q.

ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors  disclosed under "Risk
Factors" in Item 1.A. of our Form 10-K for the fiscal  year ended  December  31,
2006.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

ITEM 5. OTHER INFORMATION

On September 7, 2007, Director Alan Christopherson tendered his resignation from
the Board of Directors effective immediately.  On October 17, 2007, the Board of
Directors voted to fill the vacancy with Rebecca Logan.


                                       28
<PAGE>

ITEM 6. EXHIBITS

      Certification  of Principal  Executive  Officer pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002

      Certification  of Principal  Financial  Officer pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002

      Certification  of Principal  Executive  Officer pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002

      Certification  of Principal  Financial  Officer pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002

      Ameneded  and  Restated  Promissory  Note and  Multiple  Advance Term Loan
      Supplement between the Registrant and CoBank, ACB dated June 5, 2007

      Amended  and  Restated  Promissory  Note and  Committed  Revolving  Credit
      Supplement between the Registrant and CoBank, ACB dated October 10, 2007

      Line of Credit  Agreement  between the  Registrant  and the National Rural
      Utilities Cooperative Finance Corporation dated October 17, 2007


                                       29
<PAGE>

                                   SIGNATURES

Pursuant to the  requirements  of the  Securities  and Exchange Act of 1934, the
registrant has duly caused this  quarterly  report to be signed on its behalf by
the undersigned thereunto duly authorized.

                                    CHUGACH ELECTRIC ASSOCIATION, INC.


                                    By:         /s/ William R. Stewart
                                        ----------------------------------------
                                                  William R. Stewart
                                               Chief Executive Officer


                                    By:       /s/ Michael R. Cunningham
                                        ----------------------------------------
                                                Michael R. Cunningham
                                                Chief Financial Officer

                                    Date: November 19, 2007
                                          -----------------


                                       30
<PAGE>

                                    EXHIBITS

Listed below are the exhibits, which are filed as part of this Report:

      Exhibit Number                       Description
      --------------                       -----------

          31.1          Certification of Principal Executive Officer pursuant to
                        Section 302 of the Sarbanes-Oxley Act of 2002

          31.2          Certification of Principal Financial Officer pursuant to
                        Section 302 of the Sarbanes-Oxley Act of 2002

          32.1          Certification of Principal Executive Officer pursuant to
                        Section 906 of the Sarbanes-Oxley Act of 2002

          32.2          Certification of Principal Financial Officer pursuant to
                        Section 906 of the Sarbanes-Oxley Act of 2002

        10.45.6         Ameneded  and  Restated  Promissory  Note  and  Multiple
                        Advance Term Loan Supplement  between the Registrant and
                        CoBank, ACB dated June 5, 2007

        10.45.7         Amended  and  Restated  Promissory  Note  and  Committed
                        Revolving Credit  Supplement  between the Registrant and
                        CoBank, ACB dated October 10, 2007

        10.47.1         Line of Credit Agreement  between the Registrant and the
                        National Rural Utilities Cooperative Finance Corporation
                        dated October 17, 2007


                                       31