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 June 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)

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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

Caution Regarding Forward-Looking Statements                                  2

Part I. Financial Information

  Item 1.  Financial Statements (unaudited)                                   2

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

           Statements of Operations - Three and six months ended June 30,
           2007 and June 30, 2006                                             5

           Statements of Changes in Equities and Margins - Six months
           Ended June 30, 2007 and June 30, 2006                              6

           Statements of Cash Flows - Six Months Ended June 30, 2007
           and June 30, 2006                                                  7

           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        24

  Item 4.  Controls and Procedures                                           25

Part II. Other Information

  Item 1.  Legal Proceedings                                                 26

  Item 1A. Risk Factors                                                      26

  Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds       26

  Item 3.  Defaults Upon Senior Securities                                   26

  Item 4.  Submission of Matters to a Vote of Security Holders               26

  Item 5.  Other Information                                                 26

  Item 6.  Exhibits                                                          26

           Signatures                                                        27

           Exhibits                                                          28

                                        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 June 30, 2007, follow.

                                        2

<PAGE>

                       Chugach Electric Association, Inc.
                                 Balance Sheets
                                  (Unaudited)

<TABLE>
<CAPTION>
                    Assets                       June 30, 2007   December 31, 2006
----------------------------------------------   -------------   -----------------
<S>                                              <C>             <C>
Utility Plant:
   Electric Plant in service                     $ 795,764,232     $ 787,005,028
   Construction work in progress                    24,244,312        20,254,298
                                                 -------------     -------------
      Total utility plant                          820,008,544       807,259,326
   Less accumulated depreciation                  (361,663,672)     (347,736,514)
                                                 -------------     -------------
      Net utility plant                            458,344,872       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                        11,210,211         9,844,914
   Special deposits                                    126,312           206,191
   Accounts receivable, net                         27,209,932        32,899,571
   Materials and supplies                           27,496,336        25,424,493
   Prepayments                                       1,260,983         1,487,966
   Other current assets                                197,062           280,562
                                                 -------------     -------------
      Total current assets                          67,500,836        70,143,697

Deferred charges, net                               20,966,199        21,460,648
                                                 -------------     -------------

Total assets                                     $ 559,370,440     $ 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               June 30, 2007   December 31, 2006
---------------------------------------------------------   -------------   -----------------
<S>                                                         <C>             <C>
Equities and margins:
   Memberships                                              $   1,318,953     $   1,297,633
   Patronage capital                                          143,785,958       141,117,620
   Other                                                        8,288,811         8,300,847
                                                            -------------     -------------
      Total equities and margins                              153,393,722       150,716,100

Long-term obligations, excluding current installments:
   Bonds payable                                              299,600,000       305,500,000
   National Bank for Cooperatives                              42,962,805        45,303,530
                                                            -------------     -------------
      Total long-term obligations                             342,562,805       350,803,530

Current liabilities:
   Current installments of long-term obligations               14,240,725        13,728,569
   Accounts payable                                             7,595,203        10,308,668
   Consumer deposits                                            2,215,391         2,217,613
   Fuel cost over-recovery                                      1,560,647           300,567
   Accrued interest                                             6,398,390         6,364,100
   Salaries, wages and benefits                                 6,012,258         6,021,473
   Fuel                                                        18,372,809        16,158,783
   Other liabilities                                            4,315,926         4,112,020
                                                            -------------     -------------
      Total current liabilities                                60,711,349        59,211,793

Deferred liabilities                                            2,056,982         2,308,725
Other liabilities                                                 645,582                 0
                                                            -------------     -------------

Total liabilities, equities and margins                     $ 559,370,440     $ 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 June 30      Six months ended June 30
                                              2007           2006           2007             2006
                                          ------------   ------------   -------------   -------------
<S>                                       <C>            <C>            <C>             <C>
Operating revenues                        $ 59,127,575   $ 60,248,547   $ 130,580,699   $ 127,134,140

Operating expenses:
   Fuel                                     24,332,261     27,162,313      52,640,200      55,148,493
   Production                                3,984,174      3,478,172       7,458,898       6,671,084
   Purchased power                           7,901,817      6,245,351      18,643,184      13,456,084
   Transmission                              1,894,420      1,141,723       3,618,572       2,533,682
   Distribution                              3,417,793      2,687,572       6,757,986       5,724,665
   Consumer accounts                         1,246,700      1,232,997       2,460,049       2,535,000
   Administrative, general and other         5,093,144      4,694,058      10,174,695       9,494,686
   Depreciation and amortization             7,292,600      7,160,384      14,524,536      14,209,768
                                          ------------   ------------   -------------   -------------
      Total operating expenses              55,162,909     53,802,570     116,278,120     109,773,462

Interest on long-term debt                   6,063,922      6,094,713      12,155,773      12,130,422
   Other                                         2,635              0          89,029               0
   Charged to construction                    (103,983)       (83,566)       (263,213)       (198,983)
                                          ------------   ------------   -------------   -------------
      Net interest expenses                  5,962,574      6,011,147      11,981,589      11,931,439
                                          ------------   ------------   -------------   -------------
Net operating margins                       (1,997,908)       434,830       2,320,990       5,429,239

Nonoperating margins:
Interest income                                173,868        248,796         377,126         412,234
Other                                           59,769         30,801         126,431          61,627
                                          ------------   ------------   -------------   -------------
Total nonoperating margins                     233,637        279,597         503,557         473,861
                                          ------------   ------------   -------------   -------------

Assignable margins                        $ (1,764,271)  $    714,427   $   2,824,547   $   5,903,100
                                          ============   ============   =============   =============
</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         2,824,547       2,824,547
Retirement of capital credits                       0              0          (156,209)       (156,209)
Unclaimed capital credit retirements                0                                0              --
Memberships and donations received             21,320        (86,259)                0         (64,939)

                                          -------------------------------------------------------------
Balance, June 30, 2007                    $ 1,318,953    $ 8,214,588     $ 143,785,958   $ 153,319,499
                                          =============================================================

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

Assignable margins                                  0              0         5,903,100       5,903,100
Retirement of capital credits                       0              0          (504,352)       (504,352)
Unclaimed capital credit retirements                0        213,545                 0         213,545
Memberships and donations received             22,480       (339,490)                0        (317,010)

                                          -------------------------------------------------------------
Balance, June 30, 2006                    $ 1,272,878    $ 7,477,431     $ 141,584,126   $ 150,334,435
                                          =============================================================
</TABLE>

See accompanying notes to financial statements.

                                        6

<PAGE>

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

<TABLE>
<CAPTION>
                                                                  Six months ended June 30
                                                                    2007            2006
                                                                -------------   ------------
<S>                                                             <C>             <C>
Cash flows from operating activities:
      Assignable margins                                        $   2,824,547   $  5,903,100
                                                                -------------   ------------

Adjustments to reconcile assignable margins to net cash
   provided activities:

      Depreciation and amortization                                15,553,638     15,686,468
      Capitalized interest                                           (388,799)      (273,422)
      Write off of deferred charges                                         0        345,899
      Other                                                                40        (11,745)

Changes in assets and liabilities:
   (Increase) decrease in assets:
      Accounts receivable                                           5,689,639      5,383,424
      Fuel cost under-recovery                                              0      1,123,987
      Materials and supplies                                       (2,071,843)    (4,041,852)
      Prepayments                                                     226,983        754,065
      Other assets                                                    163,379         87,705
      Deferred charges                                               (534,653)      (669,281)

Increase (decrease) in liabilities:
      Accounts payable                                             (2,713,465)    (3,639,990)
      Consumer deposits                                                (2,222)        78,461
      Fuel cost over-recovery                                       1,260,080              0
      Accrued interest                                                 34,290         73,400
      Salaries, wages and benefits                                     (9,215)      (163,311)
      Fuel                                                          2,214,026      1,272,643
      Other liabilities                                               203,906        879,792
      Deferred liabilities                                             12,485        100,575
                                                                -------------   ------------
         Net cash provided by operating activities                 22,462,816     22,889,918
                                                                -------------   ------------

Investing activities:
      Extension and replacement of plant                          (12,957,797)    (6,136,812)
                                                                -------------   ------------
         Net cash used for investing activities                   (12,957,797)    (6,136,812)
                                                                -------------   ------------

Cash flows from financing activities:
      Repayments of long-term obiligations                         (7,728,569)    (7,325,687)
      Memberships and donations received (refunded)                     9,284       (103,465)
      Retirement of patronage capital and estate payments            (156,209)      (504,352)
      Net refunds on consumer advances for construction              (264,228)      (268,173)
                                                                -------------   ------------
         Net cash used for financing activities                    (8,139,722)    (8,201,677)
                                                                -------------   ------------

Net decrease in cash and cash equivalents                           1,365,297      8,551,429

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

Cash and cash equivalents at end of period                      $  11,210,211   $ 19,202,023
                                                                =============   ============

Supplemental disclosure of non-cash investing and financing
   activities Retirement of plant                               $     681,766   $    349,000

Supplemental disclosure of cash flow information - interest
   expense paid, excluding amounts capitalized                  $   7,711,783   $ 11,785,886
                                                                =============   ============
</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  of three  wholesale
      customers,  Matanuska  Electric  Association,  Inc. (MEA),  Homer Electric
      Association,  Inc.  (HEA),  and the  City of  Seward  (Seward).  Chugach's
      members are the consumers of the electricity sold.

      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 six months ended June 30, 2007, Chugach received
      no unrelated business income.

3.    LINES OF CREDIT

Chugach maintains a $7.5 million line of credit with CoBank, ACB (CoBank), which
will expire on October 31, 2007,  subject to annual renewal at the discretion of
the parties.  Chugach  borrowed $3.5 million on this line of credit on March 29,
2007 and repaid the  balance on April 4, 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 June 30, 2007 was 7.00% 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  second  quarter  of 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 June 30,  2007 was 6.90% and at  December  31,  2006 the  borrowing  rate was
7.15%. The NRUCFC line of credit expires October 15, 2007.

                                        9

<PAGE>

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

4.    LEGAL PROCEEDINGS

Matanuska Electric Association, Inc. 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. HEA's points on appeal challenge several decisions by the
Commission  on estimated  lives of General Plant on the ground that there is not
substantial evidence in the record to support such a decision.  HEA and MEA both
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 and HEA have sought  extensions  to file their
opening  briefs.  The most recent one, if granted,  would make their  respective
briefs due August 27, 2007 and Chugach's responses due September 26, 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.

Matanuska  Electric  Association,  Inc. v. Chugach Electric  Association,  Inc.,
Superior Court Case No. 3PA-06-1295 Civil

On May 17,  2006,  MEA filed suit against  Chugach in Superior  Court in Palmer,
Alaska,  asserting  three  claims.  MEA contends  that by  publishing  unbundled
financial  statements Chugach has in effect stated that MEA owes Chugach a debt.
Chugach  denied  having made  statements  to this  effect.  Unbundled  financial
statements are an analytic tool developed by Chugach that separate the financial
statements into two business units consisting of the Generation and Transmission
(G&T) and the  Distribution  functions of the company.  The unbundled  financial
statements reflect the operating results of each separate entity.  Statements of
Revenues,  Expenses and Patronage Capital, Balance Sheets and Statements of Cash
Flows are prepared  monthly for each business unit. MEA's action is based on the
result of Chugach's financial analysis showing  intracompany  receivable/payable
entries on the unbundled balance sheets.

The first of MEA's claims is that it is entitled to declaratory  judgment to the
effect  that MEA does not owe a debt to  Chugach  or to  Chugach's  Distribution
function.  Second,  MEA claimed that  Chugach  breached its Bylaws and the Power
Sales Agreement under

                                       10

<PAGE>

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

which  Chugach  is  obligated  to sell MEA  power by  publishing  its  unbundled
financial  analysis.  On this basis,  MEA sought a  declaration  that  Chugach's
actions violate the

Bylaws and the Power Sales Agreement.  MEA also asked for an injunction  against
further  assertions,  which Chugach denied having made, that MEA owed Chugach or
Chugach's  Distribution function a debt. Finally, MEA sought damages,  including
punitive damages,  to punish Chugach and deter it from continuing to publish the
analysis.

Chugach  moved  to  dismiss  MEA's  first   (declaratory   judgment)  and  third
(defamation) claims in their complaint.  Following oral argument, on February 7,
2007 the court denied Chugach's motion to dismiss the declaratory judgment claim
and granted Chugach's motion to dismiss the defamation claim.

With respect to the  declaratory  judgment  claim,  the court  indicated that it
needed to look beyond the pleadings to determine whether Chugach's  publications
suggest that MEA owes a substantial  debt to Chugach.  On April 20, 2007 Chugach
filed a motion for summary judgment on MEA's first and second claims.  The judge
denied  Chugach's  Motion  on May 31,  2007  and  stated  he would  explain  his
reasoning in open court on June 4, the date the trial was scheduled to begin. On
June 1,  2007 MEA and  Chugach  agreed  to a  settlement  dismissing  the  case,
including the remaining two counts. Under the terms of the settlement:

      o  Chugach agreed to use the phrase  "Temporary  Intracompany Non Interest
         Bearing  Balance"  instead of "Due to  Distribution  from G&T" and "Due
         from G&T to Distribution" to refer to offsetting intra-company accounts
         reflected  on any future  publication  of Chugach's  unbundled  balance
         sheet.

      o  Chugach  also agreed to include  the  following  explanatory  note when
         using the term "Temporary Intracompany Non Interest Bearing Balance":

            "Temporary  Intracompany  Non  Interest  Bearing  Balance"  does not
            represent a debt or payable owed by any Chugach customer.

      o  Each  party  gave up the right to appeal  any of the  decisions  of the
         court.

      o  Each party agreed to pay its own costs and attorney fees.

The parties also agreed that the  settlement  shall not be cited by either party
as support for or against a disputed issue  regarding the accuracy,  validity or
use of Chugach's unbundled financial schedules in any other action.

                                       11

<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 our
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."

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

                                       12

<PAGE>

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

decrease of $7.8 million for the  Distribution  function.  Overall  revenues are
proposed to increase $2.8 million.

Chugach expects the case to be fully adjudicated by January 1, 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,  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. Chugach has been responding to
discovery from intervenors.  The last day to submit discovery on Chugach's reply
testimony was July 16. A settlement agreement between several of the intervenors
and Chugach 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 is being rescheduled with the remaining intervenors.

6.    ENVIRONMENTAL MATTERS

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.

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

                                       13

<PAGE>

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

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 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

Total  operating  revenues,  which include  sales of electric  energy to retail,
wholesale  and  economy  energy  customers  and  other  miscellaneous  revenues,
decreased  1.8% from $60.2  million in the second  quarter of 2006  compared  to
$59.1 million in the second quarter of 2007.  This decrease was primarily due to
decreased retail and economy energy kWh sales during the second quarter of 2007.
Retail  sales  decreased  in the  second  quarter of 2007  compared  to the same
quarter of 2006 due to 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 as well as a change in gas fields  operations of
one of Chugach's large commercial customers. Economy energy kWh sales were lower
in the second quarter of 2007 compared to the same quarter of 2006 due primarily
to  maintenance  activities  that limited  generation and ability to sell kWh to
Golden Valley Electric Association during the second 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 and $5.7  million to  Chugach's  fixed costs for the
quarter ended June 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  quarters
ended June 30, 2007 and 2006:

<TABLE>
<CAPTION>
                                                 (in millions)

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

                    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        $10.4   $10.5      (1.0%)       $ 6.4   $ 6.6     (3.0%)         $16.8   $17.1     (1.8%)
Small Commercial   $ 1.9   $ 1.9       0.0%        $ 1.4   $ 1.4      0.0%          $ 3.3   $ 3.3      0.0%
Large Commercial   $ 7.0   $ 7.0       0.0%        $ 6.5   $ 6.8     (4.4%)         $13.5   $13.8     (2.2%)
Lighting           $ 0.3   $ 0.4     (25.0%)       $ 0.0   $ 0.0      0.0%          $ 0.3   $ 0.4    (25.0%)
Total Retail       $19.6   $19.8      (1.0%)       $14.3   $14.8     (3.4%)         $33.9   $34.6     (2.0%)

   Wholesale
HEA                $ 2.7   $ 2.5       8.0%        $ 6.7   $ 6.0     11.7%          $ 9.4   $ 8.5     10.6%
MEA                $ 3.8   $ 4.0      (5.0%)       $ 8.2   $ 8.1      1.2%          $12.0   $12.1     (0.8%)
SES                $ 0.3   $ 0.3       0.0%        $ 0.8   $ 0.7     14.3%          $ 1.1   $ 1.0     10.0%
Total Wholesale    $ 6.8   $ 6.8       0.0%        $15.7   $14.8      6.1%          $22.5   $21.6      4.2%

   Economy Sales   $ 0.5   $ 0.9     (44.4%)       $ 1.4   $ 2.4      n/a           $ 1.9   $ 3.3    (42.4%)
   Miscellaneous   $ 0.8   $ 0.7      14.3%        $ 0.0   $ 0.0      n/a           $ 0.8   $ 0.7     14.3%

Total Revenue      $27.7   $28.2      (1.8%)       $31.4   $32.0     (1.9%)         $59.1   $60.2     (1.8%)
--------------------------------------------------------------------------------------------------------------
</TABLE>

                                       15

<PAGE>

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

                                        2007          2006
                     Customer            kWh           kWh
                  --------------     -----------   -----------
                  Retail             271,660,524   277,082,143
                  Wholesale          303,815,046   288,466,023
                  Economy Energy      32,288,960    56,972,030
                                     -----------   -----------
                     Total           607,764,530   622,520,196
                                     ===========   ===========

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

Total operating expenses increased $1.4 million,  or 2.5%, in the second quarter
of 2007 over the same period of 2006.  Fuel expense  decreased $2.8 million,  or
10.4%,  due to lower  quantity and lower average price during the second quarter
of 2007  compared to the same  quarter of 2006.  For the quarter  ended June 30,
2007,  Chugach used 5,311,190 MCF of fuel at an average effective price of $4.58
per MCF,  which  does not  include  1,002,650  MCF of fuel that is  recorded  in
purchased power. For the same period in 2006, Chugach used 5,821,333 MCF of fuel
at an average  effective  price of $4.66 per MCF, which does not include 382,306
MCF of fuel that is recorded in purchased power.

Production expense increased $506.0 thousand, or 14.6%, in the second quarter of
2007  compared to the same period in 2006 due  primarily  to  maintenance  costs
associated  with  Beluga  Unit 1 and Unit 3 during  the  second  quarter of 2007
compared to maintenance  costs  associated  with Beluga Unit 5 and Unit 8 in the
second quarter of 2006.

Purchased power increased $1.7 million,  or 26.5%, in the second quarter of 2007
compared  to the  second  quarter  of  2006.  The  increase  is due in  part  to
maintenance on Beluga Units 1 and 3, which limited  generation output during the
second quarter of 2007.

In the second  quarter of 2007,  Chugach  purchased  140,855 MWh of energy at an
average  effective  price of 5.31  cents per kWh.  For the same  period in 2006,
Chugach  purchased  106,715 MWh of energy at an average  effective price of 5.60
cents per kWh.

Transmission expense increased $752.7 thousand,  or 65.9%, in the second quarter
of 2007  compared to the same quarter of 2006.  The increase is primarily due to
increased  maintenance of overhead transmission lines as well as increased labor
cost due to contract increases.

Distribution expense increased $730.2 thousand,  or 27.2%, for the quarter ended
June 30, 2007 compared to the same period of 2006. The increase is primarily due
to increased  expenditures related to utility locates and right-of-way  clearing
during the second quarter of 2007 compared to the same quarter of 2006.

Consumer  accounts  did not  materially  change in the  second  quarter  of 2007
compared to the same time period of 2006.

                                       16

<PAGE>

Administrative,  general and other expenses increased $399.1 thousand,  or 8.5%,
for the  second  quarter  of 2007  compared  to the same  quarter  of 2006.  The
increase is primarily due to increased professional service costs related to the
2005 test year rate case,  fuel supply  planning  and  process and gap  analysis
associated with Sarbanes Oxley compliance.

Interest on long-term  debt did not  materially  change in the second quarter of
2007  compared to the same  quarter of 2006.  Interest  charged to  construction
increased  $20.4  thousand,  or  24.4%,  due  to a  higher  average  balance  in
construction  work-in-progress (CWIP) during the second quarter of 2007 compared
to the same quarter in 2006.

Non-operating  margins decreased $46.0 thousand, or 16.4%, in the second quarter
of 2007 compared to the same quarter of 2006. The decrease is primarily due to a
lower average cash balance  during the second  quarter of 2007 compared to 2006.
The  decrease  was offset by an  increase  in  allowance  for funds used  during
construction  (AFUDC) due to a higher average  balance in CWIP during the second
quarter of 2007 compared to 2006

Current Year to Date Versus Prior Year to Date

Total  operating  revenues,  which include  sales of electric  energy to retail,
wholesale  and  economy  energy  customers  and  other  miscellaneous  revenues,
increased  2.8% from $127.1  million in the first six months of 2006 compared to
$130.6 million in the first six months of 2007.

Total  energy sales  decreased  in the first six months of 2007  compared to the
same time period of 2006. Retail and economy energy sales decreased in the first
six months of 2007 while wholesale energy sales  increased.  Retail energy sales
decreased primarily 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 and MEA's territory as well as
uninterrupted  energy  sales to Seward  during the first half of 2007.  In 2006,
energy  sales to  Seward  were  reduced  due to an  avalanche  that cut the 69kV
transmission  line  requiring  Seward to rely on its own  generation  during the
first quarter of 2006.  Economy  energy sales were lower in the first six months
of 2007  compared  to the same period in 2006.  This was due to Dynamite  Slough
transmission  line  work in the  first  quarter,  as well as  other  maintenance
activities in the second  quarter,  limiting our 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  $13.1 million and $12.7 million to Chugach's  fixed costs for the
six months ended June 30, 2007 and 2006, respectively.

                                       17

<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 six months
ended June 30, 2007 and 2006:

<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        $23.7   $23.8      (0.4%)       $15.5   $14.2      9.2%          $ 39.2   $ 38.0       3.2%
Small Commercial   $ 4.3   $ 4.2       2.4%        $ 3.3   $ 2.9     13.8%          $  7.6   $  7.1       7.0%
Large Commercial   $14.7   $14.2       3.5%        $14.3   $13.2      8.3%          $ 29.0   $ 27.4       5.8%
Lighting           $ 0.6   $ 0.7     (14.3%)       $ 0.0   $ 0.0      0.0%          $  0.6   $  0.7     (14.3%)
Total Retail       $43.3   $42.9       0.9%        $33.1   $30.3      9.2%          $ 76.4   $ 73.2       4.4%

   Wholesale
HEA                $ 5.3   $ 5.1       3.9%        $13.3   $11.2     18.8%          $ 18.6   $ 16.3      14.1%
MEA                $ 9.5   $ 9.5       0.0%        $19.2   $16.9     13.6%          $ 28.7   $ 26.4       8.7%
SES                $ 0.6   $ 0.5      20.0%        $ 1.7   $ 1.2     41.7%          $  2.3   $  1.7      35.3%
Total Wholesale    $15.4   $15.1       2.0%        $34.2   $29.3     16.7%          $ 49.6   $ 44.4      11.7%

   Economy Sales   $ 0.8   $ 2.2     (63.6%)       $ 2.2   $ 6.0      n/a           $  3.0   $  8.2     (63.4%)
   Miscellaneous   $ 1.6   $ 1.3      23.1%        $ 0.0   $ 0.0      n/a           $  1.6   $  1.3      23.1%

Total Revenue      $61.1   $61.5      (0.7%)       $69.5   $65.6      5.9%          $130.6   $127.1       2.8%
----------------------------------------------------------------------------------------------------------------
</TABLE>

The following table summarizes kWh sales for the six months ended June 30:

                                         2007            2006
                      Customer            kWh             kWh
                  --------------     -------------   -------------
                  Retail               607,584,281     608,953,639
                  Wholesale            648,138,884     619,068,438
                  Economy Energy        49,265,910     145,910,070
                                     -------------   -------------
                     Total           1,304,989,075   1,373,932,147
                                     =============   =============

Total  operating  expenses  increased  $6.5  million,  or 5.9%, in the first six
months  of 2007  over the same  period  of 2006.  Fuel  expense  decreased  $2.5
million,  or 4.6%,  due to less fuel being  used  during the first six months of
2007  compared  to the same time period of 2006  caused by the  Dynamite  Slough
transmission line work and maintenance activities, which limited generation. For
the first six months of 2007,  Chugach used 10,939,560 MCF of fuel at an average
effective  price of $4.81 per MCF, which does not include  2,025,254 MCF of fuel
that is recorded in purchased power.  For the same period in 2006,  Chugach used
12,482,504  MCF of fuel at an average  effective  price of $4.41 per MCF,  which
does not include 829,162 MCF of fuel that is recorded in purchased power.

Production  expense  increased $787.8  thousand,  or 11.8%, in the first half 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 to the Beluga Unit 1 and 2
controls upgrade in 2007, which did not occur in 2006 and the Cooper Lake annual
inspection,  which occurred  during the first six months of 2007 compared to the
same inspection that occurred in the fourth quarter of 2006.

Purchased  power  increased  $5.2 million,  or 38.6%,  in the first half of 2007
compared to the first half of 2006.  The  increase is due to  transmission  line
work at Dynamite Slough and maintenance activities,  limiting generation,  which
resulted  in higher  purchased  power  costs.  In the first six  months of 2007,
Chugach purchased 316,899 MWh of energy at an

                                       18

<PAGE>

average  effective  price of 5.65  cents per kWh.  For the same  period in 2006,
Chugach  purchased  234,755 MWh of energy at an average  price of 5.47 cents per
kWh.

Transmission expense increased $1.1 million, or 42.8%, in the first half 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  $1.0 million,  or 18.1%,  during the first six
months of 2007  compared to the same period of 2006.  The  increase is primarily
due to labor and  professional  services  in January,  which were  related to an
outage that  occurred in December  2006 and extended  into January of 2007.  The
increase is also due to increased  expenditures  related to utility  locates and
right-of-way  clearing in the first six months of 2007 compared to the first six
months of 2006.

Consumer  accounts  expenses did not materially change in the first half of 2007
compared to the same period of time in 2006.

Administrative,  general and other expenses increased $680.0 thousand,  or 7.2%,
for the first half 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,  fuel supply  planning and process and gap  analysis  associated
with Sarbanes Oxley compliance.

Interest on long-term debt did not  materially  change in the first half 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 $64.2 thousand, or
32.3%,  due to higher  average  balance  in CWIP in the first six months of 2007
compared to the same six months of 2006.

Non-operating margins increased $29.7 thousand, or 6.3%, in the first six months
of 2007 compared to the same period of time in 2006.  The increase was due to an
increase  in AFUDC  during the first half of 2007  compared to the first half of
2006 due to a higher average balance in CWIP as well a higher rate being charged
to the average CWIP balance.

Financial Condition

Total assets  decreased $3.7 million,  or 0.7%,  from December 31, 2006, to June
30, 2007.  Net utility plant  decreased  $1.2 million,  or 0.3% primarily due to
depreciation  expense in excess of extension  and  replacement  of plant.  Total
other property and investments  increased $645.5 thousand,  or 100%, due to the
value of employee  contributions to a deferred  compensation plan being recorded
in 2007.  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.  Cash and cash  equivalents  increased $1.4
million, or 13.9%, due to the collection of accounts receivable outstanding at

                                       19

<PAGE>

December  31,  2006,  which  was  slightly  offset  by an  increase  in  capital
expenditures in the first six months of 2007. Accounts receivable decreased $5.7
million,  or 17.3%,  due to less energy being sold at June 30, 2007  compared to
December 31, 2006.  Materials and supplies increased $2.1 million,  or 8.1%, due
mainly to the  purchase  of  materials  for the  continued  construction  of the
Postmark  Substation  and the Beluga  Unit 3 Hot Gas Path  project.  Prepayments
decreased $227.0 thousand,  or 15.3% due primarily to six months of amortization
of existing  charges.  Other current assets decreased $83.5 thousand,  or 29.8%,
due  primarily to the receipt of a semi-annual  interest  payment from NRUCFC as
well as the receipt of payment for annual pole rental.

Total  liabilities,  equities and margins decreased $3.7 million,  or 0.7%, from
December 31, 2006 to June 30, 2007.  The decrease  includes a $2.3  million,  or
5.2%,  decrease  in  long-term  obligations  due  the  reclassification  of  and
installment payments on the 2002 Series B Bond, as well as CoBank 3 and 4 bonds.
Accounts payable decreased $2.7 million, or 26.3%, as a result of payments being
made on invoices that were accrued but not paid at December 31, 2006.  Fuel cost
over-recovery  increased $1.3 million,  or 419.2%, due to the over collection of
fuel and purchased  power costs through the fuel and purchased  power  surcharge
mechanism.  Fuel payable increased $2.2 million, or 13.7%,  primarily due to the
timing of fuel payments at June 30, 2007. Deferred liabilities  decreased $251.7
thousand, or 10.9%, due to reduced refundable deposits.

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 June 30, 2007 there was
no outstanding balance with CoBank or NRUCFC.

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

   Promissory    Principal    Interest Rate at   Maturity     Principal
      Note        Balance       June 30, 2007      Date     Payment Dates
   ----------   -----------   ----------------   --------   -------------
   CoBank 2     $ 6,500,000        5.50%           2010      2005 - 2010
   CoBank 3      19,017,242        6.64%           2022      2003 - 2022
   CoBank 4      20,786,288        6.64%           2022      2003 - 2022
   CoBank 5       5,000,000        6.64%           2007          2007
                -----------
      Total     $51,303,530

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

                                       20

<PAGE>

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.

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

                    Principal     Interest Rate at   Maturity     Principal
       Bond          Balance       June 30, 2007       Date     Payment Dates
   -------------   ------------   ----------------   --------   -------------
   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        5.30%           2012       2008 - 2012
                   ------------
       Total       $305,500,000

Capital  construction  in 2007 is estimated at $45.0 million.  At June 30, 2007,
approximately $12.9 million had been expended.  Capital improvement expenditures
are  expected  to  increase  in the second  quarter as the  construction  season
accelerates.

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 six months
ended June 30, 2007.

                                       21

<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 survey of the property in service,  consideration  of current
developments in the electric

                                       22

<PAGE>

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 6 to the  "Notes  to
Financial Statements" within Part I of this Form 10-Q.

OUTLOOK

At the June 20, 2007 board meeting,  the Chugach  Electric Board  appointed five
community  executives  to a Blue  Ribbon  Panel.  The  panel  will be  reviewing
Chugach's  organization and operations in order to make  recommendations for the
future.

In June, 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.

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.

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.

                                       23

<PAGE>

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, 2007        5.29%
                          February 21, 2007       5.29%
                          March 22, 2007          5.30%
                          April 18, 2007          5.25%
                          May 16, 2007            5.32%
                          June 13, 2007           5.30%
                          July 11, 2007           5.29%
                          August 8, 2007          5.33%

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 $803,035 based on $80,303,530 of variable rate debt outstanding
at June 30, 2007.

The following  table  provides  information  regarding  cash flows for principal
payments on total debt by maturity  date  (dollars in  thousands) as of June 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           $ 1,000   $ 2,000   $ 2,000   $ 1,500   $150,000    $120,000    $276,500   $284,625

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        $ 5,000   $ 7,241   $ 7,763   $ 8,297   $  8,843     $43,159    $ 80,303   $ 80,303

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

(1) Includes current portion

                                       24

<PAGE>

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  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.

                                       25

<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

No other information to be reported.

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

      Order accepting settlement  agreements,  amending procedural schedule, and
      permitting  supplemental  testimony  and  statement of  commissioner  Dave
      Harbour dissenting in part and concurring in part.

                                       26

<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: August 13, 2007

                                       27

<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

        10.55        Order accepting settlement agreements, amending procedural
                     schedule, and permitting supplemental testimony and
                     statement of commissioner Dave Harbour dissenting in part
                     and concurring in part.

                                       28