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 March 31, 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 March 31, 2007 and December 31, 2006                              3

         Statements of Operations - Three months ended March 31, 2007
         and March 31, 2006                                                                       5

         Statements of Changes in Equities and Margins - Three months
         Ended March 31, 2007 and March 31, 2006                                                  6

         Statements of Cash Flows, Three Months Ended March 31, 2007
         and March 31, 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                              21

 Item 4. Controls and Procedures                                                                 23

Part II. Other Information
--------------------------

 Item 1. Legal Proceedings                                                                       23

 Item 1A. Risk Factors                                                                           24

 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                             24

 Item 3. Defaults Upon Senior Securities                                                         24

 Item 4. Submission of Matters to a Vote of Security Holders                                     24

 Item 5. Other Information                                                                       24

 Item 6. Exhibits                                                                                24

         Signatures                                                                              25

         Exhibits                                                                                26
</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 March 31, 2007, follow.


                                       2
<PAGE>

                       Chugach Electric Association, Inc.
                                 Balance Sheets
                                   (Unaudited)



<TABLE>
<CAPTION>

                       Assets                             March 31, 2007     December 31, 2006
-----------------------------------------------------   -----------------    -----------------
<S>                                                      <C>                  <C>
Utility Plant:
     Electric Plant in service                          $     793,357,751    $     787,005,028
     Construction work in progress                             22,828,930           20,254,298
                                                        -----------------    -----------------
          Total utility plant                                 816,186,681          807,259,326
     Less accumulated depreciation                           (354,978,088)        (347,736,514)
                                                        -----------------    -----------------
          Net utility plant                                   461,208,593          459,522,812

Other property and investments, at cost:
     Nonutility property                                           24,461               24,461
     Investments in associated organizations                   11,888,530           11,888,530
     Special Funds                                                645,582                    0
                                                        -----------------    -----------------
          Total other property and investments                 12,558,573           11,912,991

Current assets:
     Cash and cash equivalents                                  3,095,661            9,844,914
     Special deposits                                             206,191              206,191
     Accounts receivable, net                                  35,598,936           32,899,571
     Materials and supplies                                    28,121,695           25,424,493
     Prepayments                                                1,746,903            1,487,966
     Other current assets                                         397,147              280,562
                                                        -----------------    -----------------
          Total current assets                                 69,166,533           70,143,697

Deferred charges, net                                          21,001,283           21,460,648
                                                        -----------------    -----------------

Total assets                                            $     563,934,982    $     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               March 31, 2007      December 31, 2006
----------------------------------------------------   -----------------    -----------------
<S>                                                      <C>                  <C>
Equities and margins:
    Memberships                                        $       1,307,528    $       1,297,633
    Patronage capital                                        145,661,003          141,117,620
    Other                                                      8,293,332            8,300,847
                                                       -----------------    -----------------
         Total equities and margins                          155,261,863          150,716,100

Long-term obligations, excluding current installments:
    Bonds Payable                                            299,600,000          305,500,000
    National Bank for Cooperatives                            44,162,961           45,303,530
                                                       -----------------    -----------------
         Total long-term obligations                         343,762,961          350,803,530

Current liabilities:
    Current installments of long-term obligations             14,182,155           13,728,569
    Short-term obligations                                     3,500,000                    0
    Accounts payable                                          10,277,975           10,308,668
    Consumer deposits                                          2,381,910            2,217,613
    Fuel cost over-recovery                                      857,446              300,567
    Accrued interest                                           2,069,705            6,364,100
    Salaries, wages and benefits                               5,872,240            6,021,473
    Fuel                                                      18,846,216           16,158,783
    Other                                                      4,026,782            4,112,020
                                                       -----------------    -----------------
         Total current liabilities                            62,014,429           59,211,793

Deferred Credits                                               2,250,147            2,308,725
Other Liabilities                                                645,582                    0
                                                       -----------------    -----------------

Total liabilities, equities and margins                $     563,934,982    $     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 March 31

                                                           2007            2006
                                                       ------------    ------------
<S>                                                    <C>             <C>
Operating revenues                                     $ 71,453,124    $ 66,885,593

Operating expenses:
    Fuel                                                 28,307,939      27,986,180
    Production                                            3,474,724       3,192,912
    Purchased power                                      10,741,367       7,210,732
    Transmission                                          1,724,152       1,391,959
    Distribution                                          3,340,193       3,037,093
    Consumer accounts                                     1,213,349       1,302,003
    Administrative, general and other                     5,081,551       4,800,629
    Depreciation and amortization                         7,231,936       7,049,384
                                                       ------------    ------------
        Total operating expenses                         61,115,211      55,970,892

Interest on long-term debt                                6,091,851       6,035,709
     Other                                                   86,394               0
     Charged to construction                               (159,230)       (115,418)
                                                       ------------    ------------
         Net interest expenses                            6,019,015       5,920,291

                                                       ------------    ------------
Net operating margins                                     4,318,898       4,994,410

Nonoperating margins:
Interest income                                             203,258         163,438
Other                                                        66,662          43,581
Property gain (loss)                                              0         (12,756)
                                                       ------------    ------------
Total nonoperating margins                                  269,920         194,263
                                                       ------------    ------------

Assignable margins                                     $  4,588,818    $  5,188,673
                                                       ============    ============
</TABLE>

Please 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         4,588,818        4,588,818
Retirement of capital credits                    0              0           (45,435)         (45,435)
Unclaimed capital credit retirements             0         19,740                 0           19,740
Memberships and donations received           9,895        (27,255)                0          (17,360)

                                       -------------------------------------------------------------
Balance, March 31, 2007                $ 1,307,528    $ 8,293,332     $ 145,661,003    $ 155,261,863
                                       =============================================================


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

Assignable margins                               0              0         5,188,673        5,188,673
Nonoperating margins                             0        (23,625)           23,625                0
Retirement of capital credits                    0              0          (157,455)        (157,455)
Unclaimed capital credit retirements             0         56,014                 0           56,014
Memberships and donations received          10,355       (165,019)                0         (154,664)

                                       -------------------------------------------------------------
Balance, March 31, 2006                $ 1,260,753    $ 7,470,746     $ 141,240,221    $ 149,971,720
                                       =============================================================
</TABLE>


See accompanying notes to financial statements.


                                       6
<PAGE>

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


<TABLE>
<CAPTION>
                                                                             Three months ended March 31
                                                                                2007            2006
                                                                            ------------    ------------
<S>                                                                         <C>             <C>
Cash flows from operating activities:
-------------------------------------

        Assignable margins                                                  $  4,588,818    $  5,188,673
                                                                            ------------    ------------

Adjustments to reconcile assignable margins to net cash provided
activities:

        Depreciation and amortization                                          7,574,970       7,787,269
        Capitalized interest                                                    (226,491)       (159,056)
        Write off of deferred charges                                                  0         345,899
        Other                                                                          0         (12,683)

Changes in assets and liabilities:
 (Increase) decrease in assets:
        Accounts receivable                                                   (2,699,365)      1,812,450
        Fuel cost under-recovery                                                       0       1,781,833
        Materials and supplies                                                (2,697,202)       (429,367)
        Prepayments                                                             (258,937)        262,473
        Other assets                                                            (116,585)       (124,535)
        Deferred charges                                                         116,331        (348,782)

Increase (decrease) in liabilities:
        Accounts payable                                                         (30,693)     (3,678,251)
        Consumer deposits                                                        164,297          31,034
        Fuel cost over-recovery                                                  556,879         763,637
        Accrued interest                                                      (4,294,395)     (4,272,972)
        Salaries, wages and benefits                                            (149,233)       (122,405)
        Fuel                                                                   2,687,433      (1,109,223)
        Other liabilities                                                        (85,238)        220,562
        Deferred credits                                                               0        (774,665)
                                                                            ------------    ------------
            Net cash provided by operating activities                          5,130,589       7,161,891
                                                                            ------------    ------------

Investing activities:
---------------------
        Extension and replacement of plant                                    (8,691,226)     (1,926,136)
                                                                            ------------    ------------
            Net cash used for investing activities                            (8,691,226)     (1,926,136)
                                                                            ------------    ------------

Cash flows from financing activities:
-------------------------------------
        Repayments of long-term obiligations                                  (6,586,983)     (6,237,828)
        Proceeds from short-term borrowing                                     3,500,000               0
        Memberships and donations received (refunded)                              2,380        (122,275)
        Retirement of patronage capital and estate payments                      (45,435)       (133,830)
        Net receipts (refunds) on consumer advances for construction             (58,578)        430,145
                                                                            ------------    ------------
            Net cash used for financing activities                            (3,188,616)     (6,063,788)
                                                                            ------------    ------------

Net decrease in cash and cash equivalents                                     (6,749,253)       (828,033)

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

Cash and cash equivalents at end of period                                  $  3,095,661    $  9,822,561
------------------------------------------                                  ============    ============

Supplemental disclosure of non-cash investing and financing activities
    Retirement of plant                                                     $      8,398    $    479,798

Supplemental disclosure of cash flow information - interest expense paid,
    excluding amounts capitalized                                           $  6,080,529    $  5,750,359
                                                                            ============    ============
</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).

      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


                                       8
<PAGE>

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

      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 three  months  ended  March 31,  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.  On March 29, 2007, Chugach borrowed $3.5 million.  The balance was
paid back 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 March 31, 2007 was 6.79% 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 first 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 March 31, 2007 was 6.9% 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
challenge 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's opening brief is due June 4, 2007. RCA's and
Chugach's briefs are due July 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.

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  asserting
three claims.  MEA contends that by publishing  unbundled  financial  statements
Chugach has in effect stated that MEA owes Chugach a debt. Chugach denies 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 intercompany  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 claims that Chugach has breached its Bylaws and the Power
Sales Agreement under which Chugach is obligated to sell MEA power by publishing
its unbundled  financial  analysis.  On this basis, MEA seeks a declaration that
Chugach's  actions  violate the Bylaws and the Power Sales  Agreement.  MEA also
asks for an injunction against


                                       10
<PAGE>

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

further  assertions,  which Chugach denies having made, that MEA owes Chugach or
Chugach's  Distribution  function a debt. Finally, MEA seeks 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.  Trial is
currently  scheduled  for June 2007. On May 7 MEA filed a motion to postpone the
trial  date  until the fall and to extend  time to answer  Chugach's  motion for
summary judgment. Chugach has opposed MEA's motion.

The ultimate  resolution of this matter is not  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.

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


                                       11
<PAGE>

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

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 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.  Intervener testimony
has been submitted.  Chugach is currently  reviewing and doing discovery on this
testimony.  Chugach's reply testimony is due by May 29. The hearing is currently
scheduled to occur in August 2007.

6. 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


                                       12
<PAGE>

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

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 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.


                                       13
<PAGE>

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

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,
increased 6.8% from $66.9 million in the first quarter of 2006 compared to $71.5
million  in the first  quarter  of 2007.  This  increase  was  primarily  due to
increased  retail and  wholesale  energy sales and increased  revenue  recovered
through the fuel and  purchased  power  surcharge  mechanism  due to higher fuel
prices. Retail and wholesale energy sales increased in the first quarter of 2007
compared to the same quarter of 2006 primarily due to colder weather in February
and March of the current  year.  Wholesale  energy sales also  increased  due to
higher sales to industrial and residential  class sales as well as uninterrupted
energy sales to Seward during the first  quarter 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  quarter of 2007  compared to the
same quarter of 2006 due to reduced sales to Golden Valley Electric  Association
due to Dynamite Slough  transmission line work and maintenance on Beluga Units 6
and 8 which limited our Beluga generation.

Based  on the  results  of fixed  and  variable  cost  recovery  established  in
Chugach's last rate case, wholesale rates contributed approximately $7.3 million
and $7.0 million to Chugach's  fixed costs for the quarter  ended March 31, 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 March 31, 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        $  13.3   $  13.3       0.0%       $   9.1   $   7.6      19.7%      $  22.4   $  20.9       7.2%
Small Commercial   $   2.4   $   2.3       4.3%       $   1.9   $   1.5      26.7%      $   4.3   $   3.8      13.2%
Large Commercial   $   7.7   $   7.2       6.9%       $   7.8   $   6.3      23.8%      $  15.5   $  13.5      14.8%
Lighting           $   0.3   $   0.3       0.0%       $   0.0   $   0.0        n/a      $   0.3   $   0.3       0.0%
Total Retail       $  23.7   $  23.1       2.6%       $  18.8   $  15.4      22.1%      $  42.5   $  38.5      10.4%
 Wholesale
HEA                $   2.6   $   2.6       0.0%       $   6.6   $   5.2      26.9%      $   9.2   $   7.8      17.9%
MEA                $   5.7   $   5.5       3.6%       $  11.0   $   8.8      25.0%      $  16.7   $  14.3      16.8%
SES                $   0.3   $   0.2      50.0%       $   0.9   $   0.5      80.0%      $   1.2   $   0.7      71.4%
Total Wholesale    $   8.6   $   8.3       3.6%       $  18.5   $  14.5      27.6%      $  27.1   $  22.8      18.9%
 Economy Sales     $   0.3   $   1.4     (78.6%)      $   0.8   $   3.6        n/a      $   1.1   $   5.0     (78.0%)
 Miscellaneous     $   0.8   $   0.6      33.3%       $   0.0   $   0.0        n/a      $   0.8   $   0.6      33.3%
Total Revenue      $  33.4   $  33.4       0.0%       $  38.1   $  33.5      13.7%      $  71.5   $  66.9       6.9%
---------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       15
<PAGE>

The following table summarizes kWh sales for the quarters ended March 31:

                               2007          2006
              Customer         kWh           kWh
              --------         ---           ---

          Retail           335,923,757   331,871,496
          Wholesale        344,323,838   330,602,415
          Economy Energy    16,976,950    88,938,040
                           -----------   -----------
               Total       697,224,545   751,411,951
                           ===========   ===========

Retail demand and energy and  wholesale  demand and energy rates charged to HEA,
MEA and Seward did not change in the first quarter of 2007 compared to the first
quarter of 2006.

Total operating expenses  increased $5.1 million,  or 9.2%, in the first quarter
of 2007 over the same period of 2006. Fuel expense increased $321.8 thousand, or
1.1%, due primarily to higher fuel prices. For the quarter ended March 31, 2007,
Chugach used  6,650,974 MCF of fuel at an average  effective  price of $5.03 per
MCF, which does not include  1,022,604 MCF of fuel that is recorded in purchased
power.  For the same period in 2006,  Chugach used  7,108,027  MCF of fuel at an
average  effective price of $4.20 per MCF, which does not include 446,856 MCF of
fuel that is recorded in purchased power.

Production  expense increased $281.8 thousand,  or 8.8%, in the first quarter of
2007  compared to the same period in 2006 due  primarily to an increase in labor
and materials associated with maintenance projects related to Beluga Units 3 and
5.

Purchased power  increased $3.5 million,  or 49.0%, in the first quarter of 2007
compared  to the first  quarter of 2006.  The  increase is due in part to higher
fuel prices as well as continued  transmission  line work at Dynamite Slough and
maintenance on Beluga Units 6 and 8, limiting output from Beluga, which resulted
in higher purchased power costs. In the first quarter of 2007, Chugach purchased
176,044 MWh of energy at an average  effective  price of 5.91 cents per kWh. For
the same period in 2006,  Chugach  purchased 128,040 MWh of energy at an average
price of 5.37 cents per kWh.

Transmission  expense increased $332.2 thousand,  or 23.9%, in the first quarter
of 2007  compared to the same quarter of 2006.  The increase is primarily due to
increased  labor related to maintenance of overhead lines and  substations.  The
increase is also due to professional  service costs related to transmission line
clearing as well as contract services for maintenance at the Point MacKenzie and
University substations.

Distribution expense increased $303.0 thousand,  or 10.0%, for the quarter ended
March 31, 2007 compared to the same period of 2006. The increase is due to labor
and  professional  services  in  January,  which were  related to an outage that
occurred in December 2006 and extended into the first quarter of 2007.


                                       16
<PAGE>

Consumer  accounts expenses  decreased $88.7 thousand,  or 6.8%, for the quarter
ended  March 31,  2007  compared  to the same  period of 2006.  The  decrease is
primarily due to lower labor expense due to unfilled  positions as well as lower
temporary labor expense.

Administrative,  general and other expenses increased $280.9 thousand,  or 5.9%,
for the quarter  ended March 31, 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  quarter of
2007  compared to the same quarter of 2006.  Other  interest  expense  increased
$86.4 thousand, or 100.0%, primarily due to interest paid on an adjustment to an
electric account.  Interest charged to construction increased $43.8 thousand, or
38.0%, due to a higher rate being charged to the average balance in construction
work-in-progress  (CWIP)  during the first  quarter of 2007 compared to the same
quarter in 2006.

Nonoperating margins increased $75.6 thousand, or 38.9%, in the first quarter of
2007  compared to the same quarter of 2006.  The  increase is  primarily  due to
higher  interest  rates on our invested  cash  balance for the first  quarter of
2007.  The  increase  was also due to an  increase in  allowance  for funds used
during  construction  (AFUDC)  during the first  quarter of 2007 compared to the
first  quarter of 2006 due to a higher rate being  charged to the  average  CWIP
balance.

Financial Condition

Total assets  increased  $894.3  thousand,  or 0.2%,  from December 31, 2006, to
March 31, 2007. Net utility plant  increased  $1.7 million,  or 0.4%, due to the
completion  of  the  Dynamite  Slough  tower  and  line  rebuild  and  continued
construction  of the Postmark  substation.  The increase was offset by increased
accumulated  depreciation.  Special funds increased $645.6 thousand,  or 100.0%,
due to the value of employee contributions to a deferred compensation plan being
recorded  in the first  quarter  of 2007.  Accounts  receivable  increased  $2.7
million,  or 8.2% due primarily to the timing of a monthly billing to one of our
wholesale  customers.  Materials and supplies increased $2.7 million,  or 10.6%,
due to the increase in  distribution  and  generation  inventory  for  scheduled
maintenance and the upcoming  construction season.  Prepayments increased $258.9
thousand,  or 17.4%, due in part to corporate  insurance  premiums being paid in
the first  quarter of 2007.  The  increases  were offset by a $6.7  million,  or
68.6%,  decrease in cash and cash  equivalents  due, in part, to the semi-annual
interest payments on the 2001 and 2002 Series A Bonds, and the principal payment
on the 2002  Series B Bond in the first  quarter  of 2007.  The  increases  were
offset by a $459.4 thousand, or 2.1%, decrease in deferred charges primarily due
to three months of amortization charges.

Total  liabilities  decreased $3.6 million,  or 0.9%,  from December 31, 2006 to
March 31, 2007. The decrease in total  liabilities  includes a $7.0 million,  or
2.0%,  decrease in long-term  obligations due the  reclassification  of the 2002
Series B Bond and the CoBank 3


                                       17
<PAGE>

Bond to current installments  combined with a $453.6 thousand, or 3.3%, increase
in current  installments of long-term  obligations and a $3.5 million,  or 100%,
increase in short-term  obligations  due to the use of the CoBank line of credit
during the first quarter of 2007. In addition,  accrued interest  decreased $4.3
million,  or 67.5%, as a result of the semi-annual  interest payment on the 2001
and 2002 Series A Bonds in the first quarter of 2007.  The decreases were offset
by increases  in fuel cost  over-recovery,  fuel payable and other  liabilities.
Fuel cost  over-recovery  increased $556.8 thousand,  or 185.3%, due to the over
collection of the previous  quarter's fuel and purchased power costs through the
fuel an  purchased  power  surcharge  mechanism.  Fuel  payable  increased  $2.7
million,  or 16.6%,  primarily  due to higher  fuel  prices.  Other  liabilities
increased $645.6 thousand, or 100.0%, due to the value of employee contributions
to a deferred compensation plan being recorded in the first quarter of 2007.

Total equities and margins increased $4.5 million, or 3.0%, in the first quarter
of 2007 compared to year-end 2006 due primarily to margins  generated during the
first quarter of 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 March 31, 2007,  there
was a $3.5 million  outstanding  balance with CoBank and no outstanding  balance
with NRUCFC. The outstanding balance with CoBank was repaid on April 4, 2007.

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 March 31,  2007,
Chugach had the following promissory notes outstanding with this facility:

       Promissory    Principal    Interest Rate at    Maturity     Principal
          Note        Balance      March 31, 2007       Date     Payment Dates
          ----        -------      --------------       ----     -------------
       CoBank 2     $ 7,000,000         5.50%           2010      2005 - 2010
       CoBank 3      19,017,242         6.79%           2022      2003 - 2022
       CoBank 4      21,427,874         6.79%           2022      2003 - 2022
       CoBank 5       5,000,000         6.79%           2007          2007
                    -----------
         Total      $52,445,116

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


                                       18
<PAGE>

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 March 31, 2007:

                       Principal     Interest Rate at    Maturity    Principal
        Bond            Balance       March 31, 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 March 31, 2007,
approximately $8.7 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 quarter ended
March 31, 2007.


                                       19
<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


                                       20
<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

In a letter dated January 9, 2007, HEA notified  Chugach that HEA would not seek
to renew,  extend or modify the current Agreement for Sale of Electric Power and
Energy (the Agreement) when the Agreement expires on December 31, 2013.

On April 18, 2007, the Board of Directors  voted to amend the 2007 Operating and
Capital Budgets to include $7.5 million in capital spending for a new generation
facility.

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.

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.


                                       21
<PAGE>

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%

Chugach  is  exposed  to market  risk from  changes  in  interest  rates.  A 100
basis-point  change (up or down) would increase or decrease or interest  expense
by approximately $844,500 based on $84,445,116 of variable rate debt outstanding
at March 31, 2007.

The following  table  provides  information  regarding  cash flows for principal
payments on total debt by maturity  date  (dollars in thousands) as of March 31,
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         $ 1,500    $ 2,000    $ 2,000    $ 1,500    $150,000    $  120,000    $277,000    $288,079

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      $ 5,642    $ 7,241    $ 7,763    $ 8,297    $  8,843    $   43,159    $ 84,445    $ 84,445

Average interest rate      6.79%      5.54%      5.54%      5.54%       5.55%         6.45%
</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.


                                       22
<PAGE>

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.

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.


                                       23
<PAGE>

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

Chugach's  annual  membership  meeting was held on April 26,  2007,  and two new
board members were elected.  Out of 28,797 votes, P.J. Hill received 9,535 votes
and Alex Gimarc received 8,800 votes and were elected to three-year terms.

The members approved the following amendments to the Bylaws:

      o     The  deadlines  for  appointing  members to member  committees  were
            standardized.

      o     Clarified   that  the  Board  is  able  to  engage  the  service  of
            consultants to advise it on various Association matters.

ITEM 5. OTHER INFORMATION

No other information to be reported.

ITEM 6. EXHIBITS

      Bylaws of the Registrant (as amended April 26, 2007)

      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


                                       24
<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:  May 14, 2007


                                       25
<PAGE>

                                    EXHIBITS

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

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

           3.2          Bylaws of the Registrant (as amended April 26, 2007)

           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


                                       26