FORM 10-Q
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

(Mark One)

   X     QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
                           SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended          June 30, 1998
                               ---------------------------------

                                       OR

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

For the transition period from                                       to

Commission file number             33-42125

                       Chugach Electric Association, Inc.
            (Exact name of registrant as specified in its charter)

     Alaska                                                   92-0014224
(State or other jurisdiction of                            (I.R.S. Employer
 incorporation or organization)                           Identification No.)

5601 Minnesota Drive         Anchorage, Alaska                  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. Yes X . No .

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

                  CLASS                          OUTSTANDING AT AUGUST 1, 1998

                  NONE                                      NONE



<PAGE>



                       CHUGACH ELECTRIC ASSOCIATION, INC.

                                      INDEX



Part I. Financial Information                                        Page Number


Balance Sheets, June 30, 1998 (Unaudited) and December 31, 1997               3

Statements of Revenues, Expenses and Patronage Capital, Three Months
    Ended June 30, 1998 and 1997 and Six Months Ended June 30, 1998
    and 1997 (Unaudited)                                                      5

Statements of Cash Flows, Six Months Ended June 30, 1998 and 1997
    (Unaudited)                                                               6

Notes to Financial Statements (Unaudited)                                     7

Management's Discussion and Analysis of Results of Operations and
    Financial Condition (Unaudited)                                           8


Part II.  Other Information
Item 1. Legal Proceedings                                                    11

Item 6. Exhibits and Reports on Form 8-K                                     12

Signatures                                                                   14





                                        2

<PAGE>



                       CHUGACH ELECTRIC ASSOCIATION, INC.
                                 Balance Sheets

                                     Assets

<TABLE>

                                                    June 30, 1998   December 31, 1997
                                                     ------------   ------------
                                                     (Unaudited)
<S>                                                  <C>            <C> 
Utility plant:

     Electric plant in service ...................   $613,943,672   $625,365,803

     Construction work in progress ...............     22,846,167     24,664,395
                                                     ------------   ------------

                                                      636,789,839    650,030,198

     Less accumulated depreciation ...............    223,976,595    232,136,950
                                                     ------------   ------------

                      Net utility plant ..........    412,813,244    417,893,248
                                                     ------------   ------------

Other property and investments, at cost:

     Nonutility property .........................          3,550          3,550

     Investments in associated organizations .....      8,003,723      7,864,271
                                                     ------------   ------------

                                                        8,007,273      7,867,821
                                                     ------------   ------------

Current assets:

     Cash and cash equivalents ...................     10,892,353      5,224,529

     Cash - restricted construction funds ........        415,846        364,778

     Special deposits ............................         91,164        151,703

     Accounts receivable, net ....................     14,138,055     23,999,138

     Materials and supplies, at average cost .....     16,034,693     15,619,085

     Prepayments .................................      1,221,629        558,371

     Other current assets ........................        197,372        305,415
                                                     ------------   ------------

                    Total current assets .........     42,991,112     46,223,019
                                                     ------------   ------------

Deferred charges .................................     16,890,584     13,583,211
                                                     ------------   ------------

                                                     $480,702,213   $485,567,299
                                                     ------------   ------------


</TABLE>



See accompanying notes to unaudited financial statements.


                                        3

<PAGE>



                       CHUGACH ELECTRIC ASSOCIATION, INC.
                                 Balance Sheets

                            Liabilities and Equities

<TABLE>

                                                           June 30, 1998  December 31, 1997
                                                           ------------   ------------
                                                            (Unaudited)
<S>                                                         <C>            <C> 
Equities and margins:

     Memberships ........................................   $    883,428   $    861,543

     Patronage capital ..................................    111,325,582    104,800,092

     Other ..............................................      3,410,323      3,458,062
                                                            ------------   ------------

                                                             115,619,333    109,119,697
                                                            ------------   ------------

Long-term obligations, excluding current installments:

     First mortgage bonds payable .......................    235,101,000    240,910,000

     CoBank bonds payable ...............................     70,959,662     71,096,501
                                                            ------------   ------------

                                                             306,060,662    312,006,501
                                                            ------------   ------------

Current liabilities:

     Current installments of long-term debt and
        capital leases ..................................      6,076,817      5,913,512

     Accounts payable ...................................      5,068,655      7,038,234

     Consumer deposits ..................................        953,229      1,038,241

     Accrued interest ...................................      6,759,609      6,904,335

     Salaries, wages and benefits .......................      3,954,857      3,655,101

     Fuel ...............................................      4,896,417      6,611,415

     Other ..............................................      2,037,153      3,300,310
                                                            ------------   ------------

                   Total current liabilities ............     29,746,737     34,461,148
                                                            ------------   ------------

Deferred credits ........................................     29,275,481     29,979,953
                                                            ------------   ------------

                                                            $480,702,213   $485,567,299
                                                            ------------   ------------


</TABLE>


See accompanying notes to unaudited financial statements.


                                        4

<PAGE>



                       CHUGACH ELECTRIC ASSOCIATION, INC.

             Statements of Revenues, Expenses and Patronage Capital

<TABLE>


                                                Three months ended June 30        Six months ended June 30
                                             ------------------------------    -----------------------------

                                                  1998             1997             1998             1997
                                             -------------    -------------    -------------    -------------

                                                       (Unaudited)                      (Unaudited)
<S>                                          <C>              <C>              <C>              <C> 
Operating revenues .......................   $  33,581,288    $  31,111,608    $  72,605,503    $  69,621,947
                                             -------------    -------------    -------------    -------------

Operating expenses:

     Production ..........................      10,834,413       11,205,134       22,679,791       21,048,662

     Purchased power .....................       2,023,671        3,359,048        4,260,866        7,316,740

     Transmission ........................         655,767          824,501        1,276,620        1,754,180

     Distribution ........................       2,329,226        2,184,632        4,491,893        4,148,133

     Consumer accounts ...................       1,110,510        1,177,788        2,198,748        2,448,163

     Administrative, general and other ...       4,101,796        3,526,867        7,946,433        6,624,607

     Depreciation and amortization .......       5,751,095        5,278,641       11,473,281       10,550,444
                                             -------------    -------------    -------------    -------------

             Total operating expenses ....      26,806,478       27,556,611       54,327,632       53,890,929
                                             -------------    -------------    -------------    -------------

Interest:

     On long-term debt ...................       6,301,510        6,164,506       12,680,768       12,500,667

     Other ...............................          43,817          261,849           70,264          322,838

     Charged to construction - credit ....        (175,145)        (110,436)        (354,909)        (282,475)
                                             -------------    -------------    -------------    -------------

             Net interest expense ........       6,170,182        6,315,919       12,396,123       12,541,030
                                             -------------    -------------    -------------    -------------

             Net operating margins .......         604,628       (2,760,922)       5,881,748        3,189,988
                                             -------------    -------------    -------------    -------------


Nonoperating margins:

     Interest income .....................         181,461          189,201          366,806          337,828

     Other ...............................          52,624           16,137          351,628           94,736
                                             -------------    -------------    -------------    -------------

             Total nonoperating margins ..         234,085          205,338          718,434          432,564
                                             -------------    -------------    -------------    -------------

             Assignable margins ..........         838,713       (2,555,584)       6,600,182        3,622,552

Patronage capital at beginning of
   period ................................     110,529,644      106,786,331      104,800,092      100,685,517

Retirement of capital credits and
   estate payments .......................         (42,775)         (25,026)         (74,692)        (102,348)
                                             -------------    -------------    -------------    -------------

Patronage capital at end of period .......   $ 111,325,582    $ 104,205,721    $ 111,325,582    $ 104,205,721
                                             -------------    -------------    -------------    -------------



</TABLE>


See accompanying notes to unaudited financial statements.


                                        5

<PAGE>



                       CHUGACH ELECTRIC ASSOCIATION, INC.
                             Statement of Cash Flows
<TABLE>

                                                                                      Six months ended June 30

                                                                                         1998            1997
                                                                                     ------------    ------------

                                                                                             (Unaudited)
<S>                                                                                  <C>             <C>  
Cash flows from operating activities:

   Assignable margins .............................................................  $  6,600,182    $  3,622,552
                                                                                     ------------    ------------

   Adjustments to  reconcile  assignable  margins to net cash used in  operating
       activities:

       Depreciation and amortization ..............................................    11,473,281      10,550,444

       Changes in assets and liabilities:
       (Increase) decrease in assets:

         Accounts receivable ......................................................     9,861,083       2,595,783

         Prepayments ..............................................................      (663,258)       (529,275)

         Materials and supplies ...................................................      (415,608)        150,915

         Deferred charges .........................................................    (3,307,373)       (376,008)

         Other ....................................................................       117,515       1,839,486

     Increase (decrease) in liabilities:
         Accounts payable .........................................................    (1,969,579)     (2,114,066)

         Consumer deposits ........................................................       (85,012)        (18,307)

         Accrued interest .........................................................      (144,726)       (197,846)

         Deferred credits .........................................................      (704,476)     (1,702,283)

         Other ....................................................................    (2,678,398)     (3,601,441)
                                                                                     ------------    ------------

               Total adjustments ..................................................    11,483,449       6,597,402
                                                                                     ------------    ------------

               Net cash provided by operating
                activities ........................................................    18,083,631      10,219,954

Cash flows from investing activities:
   Extension and replacement of plant .............................................    (6,393,276)     (6,982,248)

   Investments in associated organizations ........................................      (139,452)         20,913
                                                                                     ------------    ------------

               Net cash used in investing activities ..............................    (6,532,728)     (6,961,335)
                                                                                     ------------    ------------

Cash flows from financing activities:

   Short-term borrowings, net .....................................................          --         5,250,000

   Repayments of long-term debt ...................................................    (5,782,534)    (10,829,721)

   Retirement of patronage capital ................................................       (74,692)       (102,348)

   Other ..........................................................................       (25,853)        (60,512)
                                                                                     ------------    ------------


               Net cash used by financing activities ..............................    (5,883,079)     (5,742,581)
                                                                                     ------------    ------------

               Net increase (decrease) in cash and
                 cash equivalents .................................................     5,667,824      (2,483,962)

Cash and cash equivalents at beginning of period ..................................     5,224,529       5,419,819
                                                                                     ------------    ------------

Cash and cash equivalents at end of period ........................................  $ 10,892,353    $  2,935,857
                                                                                     ------------    ------------

</TABLE>


See accompanying notes to unaudited financial statements.

                                        6

<PAGE>




                       CHUGACH ELECTRIC ASSOCIATION, INC.

                          Notes to Financial Statements

                                  June 30, 1998

                                   (Unaudited)


1.   Presentation of Financial Information
     During  interim  periods,  Chugach  Electric  Association,  Inc.  (Chugach)
     follows  the  accounting  policies  set  forth  in  its  audited  financial
     statements  included in Form 10-K filed with the  Securities  and  Exchange
     Commission.  Users of interim financial information are encouraged to refer
     to  footnotes  contained  in Form 10-K  when  reviewing  interim  financial
     results.  Management  believes  that  the  accompanying  interim  financial
     statements reflect all adjustments which are necessary for a fair statement
     of the results of the interim period presented. All adjustments made in the
     accompanying interim financial statements are of a normal recurring nature.

2.   Lines of Credit
     Chugach  maintains a line of credit of $35 million with  National  Bank for
     Cooperatives (CoBank). The CoBank line of credit expires August 1, 1999 but
     carries an annual automatic renewal clause. At June 30, 1998, there were no
     amounts  outstanding.  In addition,  the  Association has an annual line of
     credit of $50 million available at the National Rural Utilities Cooperative
     Finance  Corporation  (NRUCFC).  At June 30, 1998, there was no outstanding
     balance on this line of credit.  The NRUCFC line of credit expires  October
     14, 2002.

3.   Change in Accounting Policy
     Effective   January  1998,   Chugach  changed  its  accounting  policy  for
     depreciation of general plant (excluding buildings,  leasehold improvements
     and vehicles).  Under the new vintage group method the assets are amortized
     over  their  service  lives  and  retired  as a  group  at  the  end of the
     amortization period. The amortization periods were developed as part of the
     recent  depreciation  study update.  At January 1, 1998, the affected asset
     group  made up 2.8% of  Electric  Plant in  Service.  In  conjunction  with
     adoption  of  the  new   depreciation   methodology,   Chugach   wrote  off
     approximately  $19  million of plant  considered  to be fully  depreciated.
     Depreciation  expense for the  affected  asset  groups is  estimated  to be
     $700,000 lower annually.  Buildings,  leasehold  improvements  and vehicles
     will continue to be depreciated  over their estimated useful lives based on
     rates developed in periodic depreciation studies.





                                        7

<PAGE>



                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                  (Unaudited)


Results of Operations

Current Year Quarter Versus Prior Year Quarter

Operating revenues,  which include sales of electric energy to retail, wholesale
and economy energy customers and other miscellaneous revenues, increased by 7.9%
for the quarter ended June 30, 1998 over the same quarter in 1997.  The increase
in revenues is largely attributable to higher kWh sales to retail and two of the
three wholesales  customer  classes.  A higher level of revenue recorded through
the fuel  surcharge  mechanism  in 1998  also  contributed  to the  increase  in
operating revenue. The reason for this variance is further explained below.

As previously reported, in 1997 Chugach experienced higher than anticipated fuel
and purchased power costs. As a result,  in an effort to maintain  overall price
stability,  some fuel and purchased  power costs were  written-off  and the fuel
surcharge rate was not adjusted to reflect the higher costs.  Effective  January
1998,  routine quarterly  adjustments to the fuel surcharge  mechanism  resumed.
Additionally, the remaining undercollected amounts from 1997 are being recovered
throughout 1998 under a plan approved by the Alaska Public Utilities  Commission
(APUC).  At June 30,  1998,  fuel prices  have  stabilized  and are  expected to
decline for the remainder of 1998.

Retail and  wholesale  demand and  energy  rates did not change  from the second
quarter of 1997 to the same period in 1998.

The factors  mentioned  above more than offset a decline in revenue from economy
energy  sales.  This decrease was due to Golden  Valley  Electric  Association's
(GVEA)  Healy coal plant  coming  on-line  in the second  quarter of 1998.  This
resulted  in a  reduction  of  non-firm  purchases  by GVEA which  explains  the
decrease in revenues.

Pursuant to a Settlement Agreement with AEG&T/MEA/Homer, Chugach may be required
to grant a refund to  AEG&T/MEA/Homer  retroactive  to January 1, 1997 (based on
the  1996  test  year  filing).   A  provision  for  wholesale  rate  refund  of
approximately  $1 million (for the 12 months of 1997) was still recorded at June
30,  1998 to  accommodate  certain  rate  adjustment  clauses  contained  in the
Settlement  Agreement.  Additional  wholesale  refunds  are  expected  for  1998
purchases.  Determination  of the wholesale  refund amounts still awaits a final
APUC order in Docket  U-96-37.  It is not possible to predict when the APUC will
issue this order.

Chugach's fuel and purchased power cost adjustment  factors,  which are adjusted
on a quarterly  basis,  may be adjusted  retroactively  by the APUC resulting in
refunds on a retroactive  basis,  due to concerns  expressed by one of Chugach's
wholesale  customers.  It is  Chugach's  position  that  retroactive  refunds of
quarterly   surcharge  revenues  would  violate  the  rule  against  retroactive
ratemaking.  The amount of any additional  refunds associated with this issue is
also dependent upon a final APUC order in Docket U-96-37.

                                        8

<PAGE>




Purchased  power  expense was lower for the quarter ended June 30, 1998 compared
to the same period in 1997.  This variance was  substantially  due to the system
operating  scenario  that  existed  during the second  quarter of 1997.  Chugach
purchased power from AEG&T's Soldotna 1 plant to ensure reliability on the Kenai
Peninsula.  Additionally,  all  hydroelectric  plant outputs were  significantly
lower than the  forecasted  levels  due to  reduced  lake  levels.  This  system
operating  scenario  did not exist  during  the  second  quarter  of 1998  which
explains the decrease. Transmission expense was also lower for the quarter ended
June 30, 1998 from the same period in 1997.  The  majority of this  decrease was
caused by station equipment maintenance activities being focused on transmission
substations in 1997 versus distribution  substations in 1998.  Transmission line
clearing  expense  was  higher in 1997 than the  current  period  which  further
contributed to the overall decrease. Administrative,  general and other expenses
increased for the quarter ended June 30, 1998. The majority of this increase was
due to a higher level of common  information  services costs being  allocated to
this function.

Other  interest  expense  decreased in the current period due to a lower average
outstanding balance on the short-term lines of credit.

Current Year to Date Versus Prior Year to Date

Operating  revenues  for the  six-month  period  ended June 30,  1998  increased
relative to the same period in 1997.  These higher revenues were essentially due
to the same reasons outlined in the quarter-to-date comparison section.

Purchased power and transmission  expense decreased and administrative,  general
and other  expenses  increased for the six-month  period ended June 30, 1998 for
essentially the same reasons outlined in the quarter-to-date comparison section.
Consumer  accounts  expense  decreased  during  the period due mostly to a lower
level of common  information  services  costs being  allocated to this function.
This  decrease  was offset  somewhat  by the  addition  of sales  expense to the
consumer  accounts  expense  category  partially   reflecting  the  addition  of
Chugach's newly formed Marketing Department.

Other interest expense  decreased for the six-months ended June 30, 1998 for the
same reason outlined above in the analysis of the quarter-to-quarter variance.

Financial Condition

Total  assets  declined by 1.0% from  December  31, 1997 to June 30,  1998.  The
decrease is due primarily to lower  balances in the electric plant  accounts.  A
decrease in accounts  receivable also contributed to the overall  decrease.  The
lower  balances in the electric  plant accounts were caused by the adoption of a
new method of accounting for the general plant asset class. Beginning in January
of 1998, general plant assets were amortized by account  classification  instead
of being  depreciated  on an  individual  asset  basis.  Adoption of this method
resulted in the write-off (to accumulated  depreciation) of general plant assets
that were  acquired  prior to the  beginning of the  amortization  periods.  The
decline in accounts  receivable was primarily caused by paydowns received on the
undercollected fuel surcharge balance and reimbursements received related to the
Standard Steel matter. These decreases were offset somewhat by a higher deferred
debit balance caused in large part by project costs related to the Year 2000

                                        9

<PAGE>



information  systems  conversion  project.  Notable changes to total liabilities
include the decrease in first  mortgage  bonds payable  resulting from the March
bond payment and the lower balance in accounts payable due largely to the timing
of payments to contractors.

Liquidity and Capital Resources

Chugach has satisfied its  operational and capital cash  requirements  primarily
through  internally  generated  funds, an annual $50 million line of credit from
NRUCFC and a $35 million line of credit with CoBank.  At June 30, 1998,  Chugach
had no amounts  outstanding  with  CoBank.  Additionally,  there were no amounts
outstanding on the NRUCFC line at June 30, 1998.

Capital  construction  in 1998 is  estimated  at $28  million.  At June 30, 1998
approximately $6.4 million has been expended.  Capital improvement  expenditures
are expected to increase in the third quarter as the  construction  season began
in April and extends into October.

Chugach has negotiated a supplemental indenture (Third Supplemental Indenture of
Trust)  with  CoBank  that  previously  allowed up to $80 million in future bond
financing.  Chugach amended the Third Supplemental  Indenture of Trust (with the
Seventh  Supplemental  Indenture of Trust) that eliminated the maximum aggregate
amount of bonds the  company may issue under the  agreement.  At June 30,  1998,
Chugach  had  bonds  in the  amount  of $71.2  million  outstanding  under  this
financing  arrangement.  The balance is comprised of a $1.2 million bond (CoBank
1) which carries an interest rate of 8.95%  maturing in 2002, a $10 million bond
(CoBank  2)  priced at 7.76%  due in 2005,  a $21.5  million  bond  (CoBank  3),
currently priced at 6.65% (repriced periodically),  a $23.5 million bond (CoBank
4) currently priced at 6.65% (also repriced periodically) and a $15 million bond
(CoBank 5) currently priced at 6.65% (also repriced  periodically)  due in 2002,
2007 and 2012.  Principal  payments on the CoBank 3 and 4 bonds commence in 2003
and  continue  through  2022.  Additionally,  Chugach has  negotiated  a similar
supplemental  indenture (Fifth Supplemental  Indenture of Trust) with NRUCFC for
$80  million.  At June 30,  1998 there were no  amounts  outstanding  under this
financing arrangement.

As previously  reported,  Chugach has  reacquired  $44.3 million of its Series A
2022  bonds.  This  strategy  has been in response  to the  favorable  long-term
interest   rate   environment.   Chugach  will   continue  to  explore   similar
reacquisition  transactions if market conditions warrant such action. Except for
any further  reacquisitions of its bonds (and any similar future  refinancings),
Chugach does not anticipate issuance of additional long-term debt in 1998.

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 1998 and thereafter.

Year 2000

Chugach has  considered  the impact of Year 2000 issues on its computer  systems
and  applications  and developed a  remediation  plan.  Chugach's  consideration
included not only financial  information systems but applications in operational
areas and the impact of interaction with suppliers,  customers and vendors where
appropriate.  Conversion  activities are in process and the Association  expects
conversion  and testing to be  completed  by April 1999.  Chugach  expects  that
completion   of  the  project  will  result  in   additional   expenditures   of
approximately $2.0 million.

Outlook Update

As previously  reported,  Chugach has been extensively involved in the effort to
introduce  customer  choice for electric  service in  Anchorage.  After  several
customers in a neighboring utility's service area asked Chugach to provide their
power,  Chugach  requested  access  over the other  utility's  distribution  and
transmission system and asked the APUC to enforce this request.

                                       10

<PAGE>



The APUC  recently  denied  Chugach's  request  to gain  access  over the  other
utility's  system.  Chugach is currently  reviewing  its options  including  the
possibility of an appeal.

Chugach  has also been active at the State  legislative  level in support of the
customer's  right to choose their electric power supplier.  While no legislation
was passed during this year's legislative  session, a joint committee was formed
to study the issue and report  when the new session  convenes  in early  January
1999.  The public  hearing and testimony  process is currently  underway.  It is
still not possible, however, to predict the outcome of this process.

Environmental Matters

Refer to Part II,  Item 1 for an update  on the  status  of the  Standard  Steel
Salvage Yard Site litigation.

PART II.  OTHER INFORMATION

Item 1. Legal Proceedings

Standard Steel Salvage Yard Site

A cost recovery action was filed in Federal  District Court on December 27, 1991
by the United  States  against  Chugach  and six other  Potentially  Responsible
Parties (PRPs) seeking  reimbursement of removal and response action costs (Past
Response Costs) incurred by US EPA at the Standard Steel and Metals Salvage Yard
Superfund  Site in  Anchorage,  Alaska  (Site).  The six other PRPs named in the
action  are the  Alaska  Railroad,  Westinghouse  Electric  Corporation,  Sears,
Roebuck  and  Co.,  Montgomery  Ward  &  Co.,  J.C.  Penney  Company,  Inc.  and
Bridgestone/Firestone, Inc. In December, 1996, Chugach, the other named PRPs and
certain  federal  agency PRPs  (Federal  PRPs)  entered  into a Partial  Consent
Decree. Under the Partial Consent Decree,  Chugach and the other parties settled
claims for Past Response Costs as well as investigation and other costs incurred
with respect to the Site through  December  1996.  The Partial  Consent  Decree,
however,  did not settle  Chugach's  liability for future costs of designing and
performing the cleanup at the Site (Future Costs).

Although  the  Partial  Consent  Decree  did not settle  Chugach's  or the other
private PRPs'  liability for Future Costs,  the Partial Consent Decree binds the
Federal PRPs and the Alaska  Railroad to pay an aggregate share of 64% of Future
Costs.  Chugach  and the  five  other  private  PRPs  have  reached  a  separate
settlement to divide the remaining 36% of Future Costs among  themselves.  Under
that settlement,  Chugach's  percentage share of liability for Future Costs will
equal  14.89%.  The  private  PRPs'  agreement  to perform  remedial  design and
remedial  action  (RD/RA) at the Site is  memorialized  in a new Consent  Decree
(RD/RA  Decree) that was entered by the Federal  District Court in January 1998.
The RD/RA Decree  contains the scope of work for the RD/RA as well as settlement
terms,  including  EPA's  covenant not to sue Chugach and the other private PRPs
for Future Costs once the RD/RA is completed.

The estimate of Future Costs of RD/RA at the Site,  as  determined  by Chugach's
consultants  based on cost  estimates  contained  in the FS report,  ranges from
$5,231,200  to  $6,619,800.  The  RD/RA  Decree  contains  a cost  estimate,  as
determined by EPA and including a 50% cost

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overrun  contingency,  of $8,400,000.  Chugach's  share of these estimated RD/RA
expenses would range from approximately $778,926 to $1,250,760.  Based on recent
bid documents  for the remedial  action,  it seems  unlikely that the RD/RA will
cost as much as EPA's  high-end  estimate.  These  amounts  are only  estimates,
however,  and cannot be  definitively  known until the RD/RA work at the Site is
completed in late 1998 or 1999.

Under the RD/RA Decree, Chugach and the other PRPs are required to reimburse the
United States for EPA oversight costs and DOJ enforcement  costs relating to the
RD/RA.   Those  costs  have  been  estimated  by  the  United  States  to  equal
approximately  $676,000.  Chugach's  share  of  these  estimated  oversight  and
enforcement  costs would equal $100,656.  In addition,  one of the private PRPs,
Montgomery  Ward,  recently filed for bankruptcy  protection and did not execute
the RD/RA Consent Decree. As a result,  Chugach will be paying an additional sum
equal to Chugach's  percentage share of Montgomery Ward's share of Future Costs.
This  additional  sum is estimated to be  approximately  $12,600  given  current
estimates of Future Costs, EPA oversight costs and DOJ enforcement costs.

Based on the above estimates, the total amount that may be owed by Chugach under
the RD/RA  Decree  ranges  from  approximately  $892,182  to  $1,364,016.  These
amounts,  particularly the projected EPA oversight costs, are only estimates and
are subject to change, although, in light of recent bid documents,  Chugach does
not anticipate that the costs will reach the high-end estimate. In addition, the
RD/RA  Decree  contains  reservation  of  rights  allowing  EPA to seek  further
response  actions  and  payments  from the  PRPs  under  certain  circumstances,
including for costs  associated with alleged natural resource  damages.  At this
time, no claims have been made  pertaining to alleged natural  resource  damages
and no prediction  can be made whether EPA will request  activities  through its
reservation of rights under the RD/RA Decree.

Four of Chugach's  insurance  carriers have been paying,  under a reservation of
rights,  Chugach's  costs of defense for the Site.  The carriers  reserved their
rights  regarding  indemnification  of Chugach for response  costs.  In February
1998,  Chugach  reached an  agreement  in  principle  with these four  insurance
carriers pursuant to which the carriers will pay the majority of Chugach's costs
relating to the Site,  including Past Costs,  Future Costs, and attorney's fees.
This settlement preserves Chugach's potential claim for natural resource damages
and is  anticipated  to result in Chugach  paying no more than  $500,000 for all
Site  costs.   Management  believes  that  the  latter  amount  would  be  fully
recoverable in rates and therefore  would have no impact on Chugach's  financial
condition or results of operations.

Items 2, 3, 4 and 5

Not Applicable

Item 6. Exhibits and Reports on Form 8-K

     (a)  Exhibits:

          Articles of  Incorporation  of the  Registrant  (as amended  April 30,
          1998).

          Bylaws of the Registrant (as amended April 30, 1998).

                                       12

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          Financial Data Schedule.

     (b) Reports on Form 8-K:

          No reports on Form 8-K were filed for the quarter ended June 30, 1998.


                                       13

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                                   SIGNATURES



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



                       CHUGACH ELECTRIC ASSOCIATION, INC.



                                By:/s/ Eugene N. Bjornstad
                                   Eugene N. Bjornstad, General Manager


                                Date:   August 13, 1998



                                By:/s/ Evan J. Griffith, Jr.
                                   Evan J. Griffith, Jr.
                                   Executive Manager, Finance & Energy Supply


                                Date:   August 13, 1998




                                       14

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EXHIBITS

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


Exhibit
number                              Description                            Page 

3.1       Articles of Incorporation of the Registrant (as amended April 30,
          1998).                                                             16

3.2       Bylaws of the Registrant (as amended April 30, 1998).              21

27        Financial Data Schedule                                            **




**  Filed Electronically



<PAGE>