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       September 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 NOVEMBER 1, 1998

     NONE                                                 NONE



<PAGE>



                       CHUGACH ELECTRIC ASSOCIATION, INC.

                                      INDEX



Part I. Financial Information                                       Page Number


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

Statements of Revenues, Expenses and Patronage Capital, Three-Months Ended
   September 30, 1998 and 1997 and Nine-Months Ended September 30, 1998 and
   1997 (Unaudited)                                                           5


Statements of Cash Flows, Nine-Months Ended September 30, 1998 and 1997
   (Unaudited)                                                                6

Notes to Financial Statements (Unaudited)                                     7

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


Part II.  Other Information

Item 1. Legal Proceedings                                                    13

Item 6. Exhibits and Reports on Form 8-K                                     13

Signatures                                                                   14

Exhibits - Index                                                             15

Exhibits                                                                     16


                                        2

<PAGE>



                       CHUGACH ELECTRIC ASSOCIATION, INC.
                                 Balance Sheets

                                     Assets

<TABLE>

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

     Electric plant in service ................ $617,967,293   $625,365,803

     Construction work in progress ............   24,368,237     24,664,395
                                                ------------   ------------

                                                 642,335,530    650,030,198

     Less accumulated depreciation ............  229,533,708    232,136,950
                                                ------------   ------------

                      Net utility plant .......  412,801,822    417,893,248
                                                ------------   ------------

Other property and investments, at cost:

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

     Investments in associated organizations ..    8,004,271      7,864,271
                                                ------------   ------------

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

Current assets:

     Cash and cash equivalents ................    5,872,319      5,224,529

     Cash - restricted construction funds .....      248,403        364,778

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

     Accounts receivable, net .................   14,396,003     23,999,138

     Materials and supplies, at average cost ..   16,709,778     15,619,085

     Prepayments ..............................    1,512,457        558,371

     Other current assets .....................      333,067        305,415
                                                ------------   ------------

                    Total current assets ......   39,163,191     46,223,019
                                                ------------   ------------

Deferred charges ..............................   17,855,977     13,583,211
                                                ------------   ------------

                                                $477,828,811   $485,567,299
                                                ------------   ------------


</TABLE>


See accompanying notes to unaudited financial statements.




                                        3

<PAGE>



                       CHUGACH ELECTRIC ASSOCIATION, INC.
                                 Balance Sheets

                            Liabilities and Equities
<TABLE>

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

     Memberships .........................................   $    897,963   $    861,543

     Patronage capital ...................................    111,069,106    104,800,092

     Other ...............................................      3,385,678      3,458,062
                                                             ------------   ------------

                                                              115,352,747    109,119,697
                                                             ------------   ------------

Long-term obligations, excluding current installments:

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

     CoBank bonds payable ................................     70,816,699     71,096,501
                                                             ------------   ------------

                                                              305,917,699    312,006,501
                                                             ------------   ------------

Current liabilities:

     Notes Payable .......................................      5,000,000           --

     Current installments of long-term debt and
        capital leases ...................................      6,088,802      5,913,512

     Accounts payable ....................................      5,513,024      7,038,234

     Consumer deposits ...................................        946,892      1,038,241

     Accrued interest ....................................      1,327,795      6,904,335

     Salaries, wages and benefits ........................      3,960,020      3,655,101

     Fuel ................................................      4,229,422      6,611,415

     Other ...............................................        810,542      3,300,310
                                                             ------------   ------------

                   Total current liabilities .............     27,876,497     34,461,148
                                                             ------------   ------------

Deferred credits .........................................     28,681,868     29,979,953
                                                             ------------   ------------

                                                             $477,828,811   $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                       Nine-months
                                                 ended September 30                ended September 30

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

                                                    (Unaudited)                       (Unaudited)

<S>                                       <C>              <C>              <C>              <C> 
Operating revenues .......................$  31,831,077    $  34,108,328    $ 104,436,580    $ 103,730,273
                                          -------------    -------------    -------------    -------------

Operating expenses:

     Production ..........................   10,243,578       12,393,918       32,923,370       33,442,580

     Purchased power .....................    2,368,196        3,189,539        6,629,062       10,506,279

     Transmission ........................      785,280          739,453        2,061,900        2,493,633

     Distribution ........................    2,145,969        2,140,995        6,637,862        6,289,128

     Consumer accounts ...................    1,299,098        1,218,388        3,497,845        3,666,551

     Administrative, general and other ...    3,889,817        3,206,901       11,836,249        9,831,506

     Depreciation and amortization .......    5,774,401        5,174,526       17,247,681       15,724,970
                                          -------------    -------------    -------------    -------------

             Total operating expenses ....   26,506,339       28,063,720       80,833,969       81,954,647
                                          -------------    -------------    -------------    -------------

Interest:

   On long-term debt .....................    6,304,386        6,170,693       18,985,155       18,671,360

   Other .................................       14,778          292,655           85,042          615,493

   Charged to construction - credit ......     (206,054)        (150,914)        (560,963)        (433,389)
                                          -------------    -------------    -------------    -------------

             Net interest expense ........    6,113,110        6,312,434       18,509,234       18,853,464
                                          -------------    -------------    -------------    -------------

             Net operating margins .......     (788,372)        (267,826)       5,093,377        2,922,162
                                          -------------    -------------    -------------    -------------

Nonoperating margins:

     Interest income .....................      194,594          124,820          561,399          462,648

     Other ...............................      373,238           39,492          724,866          134,228
                                          -------------    -------------    -------------    -------------

             Total non-operating margins .      567,832          164,312        1,286,265          596,876
                                          -------------    -------------    -------------    -------------

             Assignable margins ..........     (220,540)        (103,514)       6,379,642        3,519,038

Patronage capital at beginning of period .  111,325,582      104,205,721      104,800,092      100,685,517

Retirement of capital credits and
   estate payments .......................      (35,936)        (129,568)        (110,628)        (231,916)
                                          -------------    -------------    -------------    -------------

Patronage capital at end of period .......$ 111,069,106    $ 103,972,639    $ 111,069,106    $ 103,972,639
                                          -------------    -------------    -------------    -------------


</TABLE>




See accompanying notes to unaudited financial statements.





                                        5

<PAGE>



                       CHUGACH ELECTRIC ASSOCIATION, INC.
                            Statements of Cash Flows

<TABLE>
                                                                                Nine-months ended September 30

                                                                                      1998            1997

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

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

   Assignable margins ............................................................$  6,379,642    $  3,519,038
                                                                                  ------------    ------------

   Adjustments to reconcile assignable margins to net cash provided by operating
     activities:

       Depreciation and amortization .............................................  17,247,681      15,724,970

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

         Accounts receivable, net ................................................   9,603,135       1,441,622

         Materials and supplies ..................................................  (1,090,693)        460,899

         Deferred charges ........................................................  (4,272,766)       (983,898)

         Prepayments .............................................................    (954,085)       (253,117)

         Other ...................................................................     149,263       1,891,493

     Increase (decrease) in liabilities:
         Accounts payable ........................................................  (1,525,210)       (861,842)

         Accrued interest ........................................................  (5,576,540)     (5,768,607)

         Deferred credits ........................................................  (1,298,088)     (2,283,200)

         Consumer deposits, net ..................................................     (91,349)        (56,052)

         Other ...................................................................  (4,566,841)     (3,534,366)
                                                                                  ------------    ------------

                    Total adjustments ............................................   7,624,507       5,777,902
                                                                                  ------------    ------------



                    Net cash provided by operating activities ....................  14,004,149       9,296,940
                                                                                  ------------    ------------

Cash flows from investing activities:

   Extension and replacement of plant ............................................ (12,156,256)    (11,708,241)

   Investments in associated organizations .......................................    (140,000)         17,177
                                                                                  ------------    ------------

                    Net cash used in investing activities ........................ (12,296,256)    (11,691,064)
                                                                                  ------------    ------------

Cash flows from financing activities:

   Repayments of long-term debt ..................................................  (5,913,512)    (10,954,338)

   Retirement of patronage capital ...............................................    (110,628)       (231,916)

   Short-term borrowings, net ....................................................   5,000,000      12,364,578

   Other .........................................................................     (35,963)        (44,669)
                                                                                  ------------    ------------

                    Net cash provided by (used) in financing activities ..........  (1,060,103)      1,133,655
                                                                                  ------------    ------------

                    Net increase (decrease) in cash and cash
                      equivalents ................................................     647,790      (1,260,469)

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

Cash and cash equivalents at end of period .......................................$  5,872,319    $  4,159,350
                                                                                  ------------    ------------

</TABLE>


See accompanying notes to unaudited financial statements.


                                        6

<PAGE>



                       CHUGACH ELECTRIC ASSOCIATION, INC.

                          Notes to Financial Statements

                               September 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 September 30, 1998, there
     was a balance of $5 million  outstanding  at an interest rate of 6.65%.  In
     addition,  the  Association  has an annual  line of  credit of $50  million
     available at the National Rural Utilities  Cooperative  Finance Corporation
     (NRUCFC).  At  September  30, 1998 there were no amounts  outstanding.  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, decreased by 6.7%
for the quarter  ended  September  30, 1998 from the same  quarter in 1997.  The
decrease in revenues is largely  attributable  to lower fuel costs that resulted
in a lower level of revenue recorded through the fuel surcharge mechanism. Lower
retail kWh sales also  contributed  to the  decrease.  These  impacts  more than
offset higher wholesale kWh sales in the third quarter of 1998.

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 not collected and the fuel
surcharge rate was not adjusted to reflect the higher costs.  Effective  January
1998,  routine  quarterly  adjustments  to the  fuel  surcharge  mechanism  have
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 September 30, 1998,  fuel prices have stabilized and are
expected to continue to decline.

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

A decline in revenue from economy energy sales also  contributed to the decrease
in total operating 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 was still recorded at September 30, 1998 to accommodate
certain  rate  adjustment   clauses  contained  in  the  Settlement   Agreement.
Additional wholesale refunds are expected for 1998 purchases, estimates of which
have been  accrued at September  30,  1998.  The APUC has issued Order No. 18 in
Docket U-96-37 which resolved  methodological  issues in the calculation of base
rates.  Chugach has made a compliance  filing with revised base rates. With this
order, the provisions of the Settlement  Agreement can be implemented and refund
amounts for 1997 and 1998 will be  determined.  Final  resolution is expected in
the first quarter of 1999.

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

                                        8

<PAGE>



retroactive  ratemaking.  In Order No. 18 of Docket  U-96-37,  the APUC  ordered
retroactive refunds for fuel surcharge rates charged in 1995 - 1997. Chugach has
appealed  this  decision  to the  Superior  Court for the State of  Alaska.  MEA
opposed  Chugach's  request to stay this APUC action.  The Superior Court denied
Chugach's  request  for stay at this time  pending  a ruling on MEA's  motion to
amend to add MEA as a party to the  appeal.  Chugach  will renew its request for
stay.  In addition,  MEA has  separately  filed suit to force Chugach to pay the
refund  ordered by the APUC and expanded the requested  refund period to include
1990 - 1994.  It is not possible at this time to  determine  the outcome of this
suit.

Lower fuel  prices were the major  cause for the  decrease  in power  production
expense for the quarter ended  September 30, 1998.  Purchased  power expense was
also lower for the quarter ended  September 30, 1998 compared to the same period
in 1997. This variance was  substantially due to the  system-operating  scenario
that existed  during the third  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 third  quarter  of 1998,  which  explains  the  decrease.
Administrative,  general and other  expenses  increased  for the  quarter  ended
September  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.

Other  non-operating  margins increased for the quarter ended September 30, 1998
due to a gain recorded on the sale of equipment.

Current Year to Date Versus Prior Year to Date

Operating  revenues for the nine-month period ended September 30, 1998 increased
slightly relative to the same period in 1997. Higher kWh sales to retail and two
of the three wholesale  customers were the major causes for this increase.  This
more than offset a decline in fuel surcharge  revenue caused by lower fuel costs
and lower revenues from economy energy sales.

Purchased  power  decreased  and  administrative,  general  and  other  expenses
increased for the nine-month period ended September 30, 1998 for essentially the
same reasons  outlined in the quarter-to-date comparison  section.  Transmission
expense  was lower for the period due  mostly to station  equipment  maintenance
activities being focused on distribution substations in 1998 versus transmission
substations in 1997. Additionally, transmission line clearing expense was higher
in 1997 than the  current  period,  which  further  contributed  to the  overall
decrease.

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

Other non-operating  margins  were  higher in 1998  than  in  1997  due  to  the
aforementioned  gain on the sale of  equipment  and  patronage  capital  credits
received from CoBank.


                                        9

<PAGE>



Financial Condition

Total assets  declined by 1.6% from December 31, 1997 to September 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
seasonal   decline  in  accounts   receivable  and  paydowns   received  on  the
undercollected  fuel  surcharge  balance  were the  primary  causes of the lower
accounts  receivable  balance at September 30, 1998. These decreases were offset
somewhat  by a higher  deferred  debit  balance  caused in large part by project
costs related to the Year 2000 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  decrease  in accrued
interest  resulting from the September  bond payment.  These changes were offset
somewhat by the draw on the CoBank line of credit in the third quarter.

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  September  30, 1998,
Chugach had $5 million  outstanding with CoBank that carried an interest rate of
6.65%.  There were no amounts  outstanding  on the NRUCFC line at September  30,
1998.

Capital  construction in 1998 is estimated at $28 million. At September 30, 1998
approximately $12.2 million has been expended.

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  September  30,
1998,  Chugach had bonds in the amount of $71.1 million  outstanding  under this
financing  arrangement.  The balance is comprised of a $1.1 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), a $23.5
million bond (CoBank 4) and a $15 million bond (CoBank 5) due in 2002,  2007 and
2012.  The  rates on  CoBank  3, 4 and 5 were  recently  fixed at 5.60% for five
years.  Prior  to this,  the  bonds  had been  subject  to  periodic  repricing.
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 September  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.

                                       10

<PAGE>



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 also  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 August  1999.
Chugach  expects  that  completion  of the  project  will  result in  additional
expenditures of approximately $1.0 million.

Outlook, Update

As previously  reported,  Chugach has been extensively involved in the effort to
introduce  retail  customer  choice for  electric  service in  Anchorage.  After
several customers in a neighboring utility's service area formally 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.
The APUC  recently  denied  Chugach's  request on the grounds  that Chugach must
first request an expansion of the geographic  area described in its  Certificate
of Public  Convenience  and Necessity in order to become  authorized to serve in
the  neighboring  utility's  service  territory  and gain  access over the other
utility's  system.  This  ruling has the  effect of  reinforcing  the  exclusive
service territory  concept.  The APUC is currently  considering  whether it will
assess costs,  damages or other  sanctions  for Chugach's  activities to promote
retail customer choice. Chugach is currently reviewing its options including the
possibility  of an appeal and filing to expand its service  territory to include
other  areas  contiguous  to  its  existing  geographically   described  service
territory. However, a final determination has not been made.

Chugach  has also been active at the State  legislative  level in support of the
customer's  right to choose  their  retail  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.
The Joint Committee, with cooperation of the APUC has undertaken to commission a
study of retail competition.  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.


                                       11

<PAGE>




Other Matters

The Association has received an unsolicited  proposal from its largest wholesale
customer,  Matanuska  Electric  Association,  Inc. (MEA),  under which MEA would
acquire  substantially  all of the assets of the Association in exchange for the
assumption   of   substantially   all   of   the   Association's    liabilities.
Representatives  of  MEA  presented  a  basic  outline  of the  proposal  to the
Association  without prior notice to the Association,  at a joint meeting of the
board of directors of both companies  held on October 12, 1998. The  Association
has not been provided certain additional  information it has requested from MEA,
so the Association's  understanding of MEA's proposal is necessarily  limited to
the information  presented at that joint board meeting and in statements made by
MEA to its  members,  the  public  and the  media.  Under  the  proposal  as the
Association  currently understands it, the generation and transmission assets of
the  Association  would  be  transferred  to a  subsidiary  of MEA,  the  assets
comprising  the  Association's  distribution  system would be transferred to MEA
itself, and the Association's  members would become members of MEA. MEA has also
stated that,  at the time of the  acquisition,  it would borrow  enough money to
defease the  Association's  outstanding  1991 First  Mortgage  Bonds  (i.e.,  to
purchase a pool of U.S.  government or U.S.  government-backed  securities  that
would generate  sufficient  cash flow to make  scheduled  debt service  payments
during the remaining  life of those bonds) and to repay its  outstanding  CoBank
bonds,  plus an additional  $42.5 million that would be  distributed in cash (at
the rate of $500 per member) to all of the members of the combined organization.
On November 2, citing uncertainty over whether MEA will be successful in its bid
to acquire the Association's assets, Standard & Poor's rating service placed its
single-"A" rating on the Association's  1991 Series A Bonds on "CreditWatch with
developing implications," meaning the rating may be raised, lowered or affirmed.
The Association has engaged  independent  financial advisers to assist the board
in its evaluation of the MEA proposal. The board of directors of the Association
discussed the MEA proposal at executive  sessions on October 21,  November 4 and
November 12. After  evaluating  information  provided by MEA and analyses of the
MEA proposal  presented by the  Association's  staff and  independent  financial
advisers,  the board  rejected the MEA  proposal in an open meeting  immediately
following  the  conclusion of its November 12 executive  session.  The board has
expressed its continuing intention to consider other opportunities  available to
the  Association  and its  continuing  willingness  to consider  any  additional
information that may be supplied by MEA. However, in a letter to the Association
dated  November  4,  1998,  MEA's  general  manager  stated  that  MEA's  future
communications on this matter would be directed to the Association's  membership
rather  than the board of  directors  or staff,  and that MEA would  pursue  the
matter through a petition process,  presumably to gather  sufficient  signatures
from the Association's members to force a special meeting of the members for the
purpose of considering  the MEA proposal.  Alaska law prohibits the  Association
from disposing of a substantial  portion of its assets unless the disposition is
approved  by a  majority  of the  members  of the  Association  and by at  least
two-thirds of those actually  voting on the proposal,  except that the board may
authorize  the  Association  to sell its  assets to another  cooperative  if the
transaction  is approved by a majority of those voting in an election in which a
much smaller  percentage of the  membership  votes and the  purchaser  expressly
agrees  to  assume  the  Association's  obligations  under  existing  collective
bargaining  agreements.  MEA has taken the position  that the board of directors
would be  compelled  to approve the sale if  two-thirds  of the  members  voting
approve the transaction and those voting in favor of the transaction  constitute
a majority of all of the Association's members. The

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Association  believes that,  although member approval is a legal prerequisite to
the  proposed   sale  to  MEA,  the  sale  can  not  legally  occur  unless  the
Association's  board of directors  also approves the sale in the exercise of its
independent judgment.

                           PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Standard Steel Salvage Yard Site

The history of the cost recovery  action,  settlement,  site  investigation  and
cleanup activities relating to this Site is set forth in the 10-Q for the period
ending June 30, 1998. The full  investigation  and cleanup  (remedial action) of
the Site was  substantially  completed  as of  September  30, 1998. A relatively
minor amount of additional Site work and additional  reporting will be performed
in 1999 to complete the remedial action.  Although the costs of the 1999 work as
well as the total oversight costs of EPA and other federal  agencies are not yet
known,  Chugach has pre-funded  these costs and, based on estimates for 1999, it
is not  anticipated  that Chugach will be required to make any further  payments
relating to the remedial action at the Site.

Four of Chugach's  insurance  carriers have been paying,  under a reservation of
rights,  Chugach's  costs of defense for the Site.  By  agreement  dated May 15,
1998,  these four  insurance  carriers  agreed to pay the  majority of Chugach's
costs relating to the Site,  including  investigation and remedial action costs,
EPA oversight costs, and attorneys'  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:

               Settlement  Agreement  dated  the  15th  day of May  1998  by and
               between  Nationwide  Mutual  Insurance  Company,  Alaska National
               Insurance Company,  Providence  Washington  Insurance Company and
               Admiral Insurance Company and Chugach Electric Association, Inc.

               Financial Data Schedule.

     (b) Reports on Form 8-K:

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

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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:     November 16, 1998



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


                           Date:     November 16, 1998


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EXHIBITS

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


Exhibit
number                              Description                            Page


19.5              Settlement Agreement dated the 15th day of May 1998 by and
                  between Nationwide Mutual Insurance Company, Alaska National
                  Insurance Company, Providence Washington Insurance Company
                  and Admiral Insurance Company and Chugach Electric
                  Association, Inc.                                         16


27                Financial Data Schedule.                                  **




**  Filed Electronically



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