NIKISKI COGENERATION PLANT SYSTEM USE AND DISPATCH AGREEMENT
                                                  Page 1












                    NIKISKI COGENERATION PLANT SYSTEM USE
                                   AND
                           DISPATCH AGREEMENT











Parties:          Alaska Electric Generation and Transmission Cooperative, Inc.
                  Chugach Electric Association, Inc.


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NIKISKI COGENERATION PLANT SYSTEM USE AND DISPATCH AGREEMENT
08/11/99                                                                  Page 7

                                       NIKISKI COGENERATION PLANT SYSTEM USE
                                              AND DISPATCH AGREEMENT

Article I.    Purpose

1.1               The  Nikiski Cogeneration Plant System Use and Dispatch
                  Agreement has three broad purposes; first, to ensure that
                  Nikiski Cogeneration Plant electrical power is dispatched to
                  meet the essential purpose of providing additional capacity
                  for the HEA system when needed, second, provide for the
                  economic operation of the Unit by placing it in continuous,
                  full load operation and to make the power available for
                  Chugach system use and third to grant to Chugach the right
                  to provide dispatch service for disposition of the Unit.

Article Il.   Parties

2.1               The Parties to this Agreement are Chugach Electric
                  Association, Inc. (Chugach), an Alaska non-profit electric
                  cooperative membership corporation with offices at 5601
                  Minnesota Drive, P.O. Box 196300, Anchorage, Alaska
                  99519-6300, and Alaska Electric Generation and Transmission,
                  Inc. (AEG&T), the mailing address of which is 3977 Lake
                  Street, Homer, Alaska 99603.

Article Ill.  Recitals

3.1               Chugach owns and operates electric generation, transmission
                  and distribution facilities;

3.2               Chugach owns and operates a remote control system to control
                  its facilities known as a supervisory control and data
                  acquisition system (SCADA);

3.3               AEG&T, whose members include Homer Electric Association, Inc.
                  (HEA), is a Generation and Transmission Cooperative which both
                  owns and operates generation facilities and purchases power
                  from Chugach in order to supply the power requirements of
                  of AEG&Ts members:

3.4               AEG&T supplies power to HEA which AEG&T purchases from Chugach
                   through a take-or-pay Agreement for Sale of Electric Power
                  and Energy which currently provides for the sale and purchase
                  of 73 MW of capacity with the minimum associated energy of not
                  less than 350,000 MWH per year;

3.5               AEG&T currently owns and operates a General Electric Frame 6
                  gas turbine power plant known as the Soldotna No. 1 Plant,
                  equipped with its own remote terminal unit (RTU) which is
                  compatible with Chugach's SCADA equipment;

3.6               AEG&T will move the generator and turbine from the Soldotna
                  No. 1 Plant, to the agricultural products plant owned by Kenai
                  Fertilizer Company LLC (KFC), which is located near Nikiski,
                  Alaska all in general accordance with agreements between AEG&T
                  and KFC to develop the "Nikiski Cogeneration Plant"(the Unit);

3.7               Economic operation of the Unit will be enhanced by base load
                  operation;

3.8               The parties have determined that Chugach can operate the Unit
                  as a Chugach system resource (subject to conditions specified
                  in this agreement), and that such operation is of benefit to
                  Chugach, AEG&T and HEA, and Chugach is willing to do so;

3.9                Base load operation of the Unit as a Chugach system resource,
                  as provided for in this
                  agreement, will allow AEG&T/HEA to economically purchase
                  energy requirements from Chugach in excess of the current HEA
                  obligations;

3.10               Base load operation of the Unit will also eliminate the need
                  for Chugach to operate its Bernice Lake facility to provide
                  reliability under normal operating conditions, thereby
                  maintaining the current level of electric service reliability
                  to the Kenai Peninsula at a reduced cost to Chugach and its
                  wholesale customers;

3.11               AEG&T desires to maximize the economic benefits to AEG&T of
                   owning the Unit by entering into this Agreement to secure
                   necessary dispatch services to reliably dispatch the Unit,
                   and make available the Unit for operation as an integral part
                   of the Interconnected System;

3.12               Chugach desires to supply the dispatch services, and AEG&T
                   desires to obtain those services from Chugach under the terms
                   and conditions of this Agreement;

3.13               AEG&T and Chugach desire to have the Unit available for the
                   Interconnected System use as outlined in this Agreement;

3.14               All Parties intend that AEG&T shall remain the owner of the
                   Unit and that AEG&T shall remain responsible for the Unit in
                   all respects consistent with that ownership, including but
                   not limited to responsibility for all operations,
                   maintenance, debt, and repairs.

Article IV.   Definitions

AEG&T Fuel:  The quantity of fuel consumed by the Unit to provide for  AEG&T
             Use.

AEG&T Use:  Operation of the Unit whether initiated by Chugach or requested by
            HEA or AEG&T, to provide capacity and energy to HEA in excess of the
            capacity required to be purchased and sold under the Chugach
            Wholesale Power Agreement, or in lieu of any portion of such
            capacity as Chugach may be unable or unwilling to supply.

Agreement:  This Nikiski Cogeneration Plant System Use and Dispatch Agreement.


Banked Fuel:  A quantity of natural gas fuel equal to the difference between (a)
              the quantities of HEA Fuel and AEG&T Fuel estimated for the
              preceding year in accordance with Section 7.9(b), and (b) the
              actual quantities of AEG&T Fuel and HEA Fuel which AEG&T had the
              right under this Agreement to supply for such year.

Base Load:  Operation of the Unit at a steady level as close to the maximum
            capacity (MW) of the Unit as possible without violating any Unit
            operating restrictions.

Chugach Unit Fuel Price:  The price paid by Chugach under the terms of the
                          Marathon Contract for natural gas delivered to its
                          Bernice Lake facility, until the supply available
                          under the Marathon Contract is exhausted, and
                          then, the highest of (a) the average price then paid
                          for natural gas by Chugach, less transportation
                          charges, (b) the average price of natural gas
                          delivered to the Chugach Beluga facility, or (c) the
                          current price charged by Chugach to AEG&T for natural
                          gas supplied pursuant to Section 9.2(b)(2).

Chugach Use:  Dispatch of the Unit initiated by Chugach for any and all Chugach
              power commitments to retail and wholesale consumers including
              AEG&T and HEA.  Chugach Use includes operation for resale to
              Homer Electric Association under the terms of the Chugach
              Wholesale Power Agreement.

Chugach Wholesale Power Agreement:  The Agreement for Sale of Electric Power
                                    and Energy between Chugach, AEG&T and HEA,
                                    bearing signatures dated September 1985.

Date of Commercial Operation:  The date when HEA in the exercise of reasonable
                               professional judgment declares the Unit to be
                               commercially operable.

Effective Date:  The date on which this Agreement is last executed by all
                 parties, subject to Chugach obtaining gas contract amendments
                 acceptable to Chugach from Marathon, ARCO, Chevron and
                 (if necessary) ML&P and any required Jurisdictional Reviews.

HEA Fuel:  HEA Fuel as the term is defined in section 7.9(b)(ii) of this
            Agreement, but in no event less than zero.

Interconnected System:  The entire interconnected generation, transmission, and
                        distribution system in the Railbelt Region of Alaska.

Jurisdictional Reviews:  The approval in writing of any governmental entity,
                         regulatory body, or lender, the approval of which is
                         required at the time in order for this Agreement or any
                         amendment or modification thereof to become effective.

KFC:  The Kenai Fertilizer Company LLC, an Alaska Limited Liability Company, or
      any successor entity.

KFC Agreement:  An agreement entered into between KFC and AEG&T in connection
                with the construction or operation and maintenance of the Unit.

KFC Plant: The agricultural products plant near Nikiski, Alaska operated by KFC
            and formerly known as the Unocal Plant.

Marathon Contract:  The Agreement for the Sale and Purchase of Natural Gas
                    between Chugach and Marathon Oil Company dated September
                    26, 1988.

Operation and Maintenance (or O&M) Services:  Those activities, whether
                                                performed on-site or off-site of
                                                a generating unit, including,
                                                but not limited to, routine
                                                acquisition of consumables,
                                                facility upkeep, inspections,
                                                overhauls, replacements, and
                                                record keeping associated with
                                                retention of continuous
                                                operating availability,
                                                timely completion of repairs,
                                                and prudent oversight of
                                                generating assets.

Output of the Unit:  The total electrical energy produced by the Unit at any
                     given time.

Point of Interconnection:  The 115 kV side of the Units step-up transformer.

Regular Working Hours:  The hours between 8:00 a.m. and 5:00 p.m., Monday
                        through Friday, except State legal holidays.

SCADA System:  A computerized control and telecommunications system which
               includes computer hardware and software, sensing equipment,
               telecommunications equipment, and all associated equipment and
               facilities.  SCADA is an acronym for Supervisory Control and Data
               Acquisition.

Spin:  The portion of generation capacity related to base load capability, when
       the Unit is in operation and synchronized with the transmission network
       that is in excess of the Output of the Unit.

Unit:  That portion of the Nikiski cogeneration plant which consists of a
       General Electric Frame 6 simple cycle combustion turbine, generator and
       switchyard including step-up transformer.

All other terms not specifically defined herein shall have those definitions as
listed in the Alaska Intertie Agreement dated December 23, 1985, among The
Alaska Power Authority (now known as Alaska Energy Authority), ML&P, Chugach,
GVEA, AEG&T, and others, as amended from time to time.

Article V.     Term

5.1               This Agreement shall become effective on the Effective Date
                  and shall terminate concurrently with the Chugach Wholesale
                  Power Agreement; provided, that this Agreement may be extended
                  at any time by the written consent of the parties.

Article VI.    Scope of Services

6.1               Chugach shall provide the dispatching services under this
                  Agreement in the following order of priority:

                  a)       AEG&T Use;

                  b)       Chugach Use;

                  c)       The reserves which AEG&T may be obligated to provide,
                            if any.

6.2                During the term of this agreement, Chugach will Base Load the
                   Unit when it is made available by AEG&T.  The only exceptions
                   are

                  a)   When the Unit is operated for an AEG&T Use
                      (priority 6.1.a);.

                  b)   When the Kenai Peninsula is islanded due to the loss of
                       all interconnected transmission lines, the Unit load may
                       be reduced to 30 MW or other mutually agreed upon value,
                       until such time as the Kenai Peninsula is again
                       interconnected with the  Interconnected System;

                  c)   When Bradley Lake is experiencing spill and transmission
                       constraints cannot handle full output of both Bradley
                       Lake and the Unit, Unit output will be reduced or AEG&T
                       will direct the HEA/AEG&T share of Bradley Lake be
                       reduced accordingly;

                  d)   During system emergencies such as gas supply emergencies,
                       volcanic activity, or Kenai Peninsula transmission system
                       outages, Unit output will be reduced at the reasonable
                      discretion of the dispatcher until a mutually acceptable
                      operating level can be determined;
                      and

                  e)   As the parties may establish by written agreement.

                  It is expected that Chugach will operate the Unit
                  approximately 8000 hours per year at the declared capability
                  of the Unit, as defined in the Alaska Intertie Agreement.

6.3                Unit availability for any use will be limited by scheduled
                   and unscheduled maintenance, only. AEG&T will use its best
                   efforts to minimize scheduled and unscheduled downtime in a
                   manner consistent with continuous duty of the Unit.

6.4                When the Unit operates for AEG&T Use exclusively, Chugach
                   will be allocated all spin in excess of that required by
                   AEG&T.  In the event Chugach does not choose to acquire the
                   spin, AEG&T is free to market the spin to others.

6.5               Operating Restrictions for the Unit are:

                  a)       Normal Use:
                                    Unit minimum load         6 MW
                                    Unit minimum up time               none
                                    Start up restrictions              none

                  b)       Emergency Use:
                                    Unit minimum load                  minimum
                                                                    controllable
                                    Unit minimum up time               none
                                    Start up restrictions              none

                  c)       At any time, AEG&T reserves the right to restrict
                           Unit operations and/or generated output levels to
                           less than rated for reasons of safety or operational
                           status.  AEG&T will exert best efforts to take timely
                           actions required to correct the cause of the
                           restriction.

                  d)       If AEG&T adopts operating restrictions less
                           restrictive than those listed in Section 6.5(a) for
                           any unit disposition covered by AEG&T Use other than
                           serving HEA load, then the same operating
                           restrictions shall replace those in Section 6.5(a).

6.6               This Agreement does not obligate Chugach to provide any sales
                  of electrical power and energy to AEG&T for service to HEA in
                  excess of Chugach's obligation under the Chugach Wholesale
                  Power Agreement.

Article VII.  Other Rights and Obligations

7.1               The parties agree to interface their telecommunications
                  systems at the Bernice Lake PoweR Plant; specifically, at the
                  Chugach Main Distribution Frame terminal strip in the Chugach
                  telecommunications building.  AEG&T shall maintain a suitable
                  telecommunications link between Bernice Lake Power Plant and
                  the Unit.  AEG&T shall maintain a communication system with
                  the necessary interfaces to interconnect with the Chugach
                  microwave system and shall be solely responsible for the costs
                  associated with the maintenance of the equipment owned by
                  AEG&T.  The use of both parties' communication systems will be
                  as a single system.  However, no payment shall be due either
                  party for use of its communication system by the other
                  provided the use is part of the services contemplated by this
                  Agreement.

7.2               Chugach shall allow AEG&T to maintain an existing eight (8)
                  foot diameter antenna at the 135-foot elevation of Chugach's
                  telecommunications tower at Bernice Lake Power Plant.  Chugach
                  shall supply 120 Volt A-C power to a circuit breaker in a
                  panel in Chugach's telecommunication building for use by AEG&T
                  as a power supply for AEG&T's telecommunications equipment.
                  Chugach shall allow AEG&T to maintain an existing
                  telecommunications building within the vicinity of the base of
                  the tower and utilize the existing telecommunications
                  electrical ground.

7.3               AEG&T shall maintain at its own expense all of the remote
                  terminal units (RTU's), telemetering equipment, or any other
                  equipment on its system that is necessary for Chugach to
                  operate and control the Unit using Chugach's existing
                  equipment.  Such equipment shall be compatible and
                  suitable for interfacing with the Chugach SCADA system.

7.4               AEG&T shall classify all of the alarms on its SCADA system
                  under one (1) of the following four(4) classifications

                  1.       Alarm Priority 1--Unit Trip

                  2.       Alarm Priority 2--Trip Possible

                  3.       Alarm Priority 3--Alarm-No Trip

                  4.       Alarm Priority 4--Start Inhibit

                  Chugach shall display these alarms at the Chugach Power
                  Control Center through the Chugach SCADA system.

7.5               Chugach shall follow the Notification Procedures set forth in
                  Exhibit C.

7.6               AEG&T shall install and maintain any additional metering as
                  described in Exhibit B. Such metering shall be of the type and
                  quality needed to provide Chugach with the information
                  necessary to accomplish the monitoring, controlling,
                  recording, and reporting functions as outlined in Exhibit A.
                  Chugach shall not be required to add facilities on AEG&Ts
                  side of the Point of Interconnection.  No new facilities
                  related to the provision of services under this Agreement will
                  be added by either party to its generation and transmission
                  system without proper metering.  Upon the construction or
                  addition of any such new facilities the parties will
                  negotiate and prepare appropriate modifications to Exhibit B.

7.7               AEG&T is solely responsible for providing adequate system
                  protection for the Unit, including all protection required for
                  remote operations.

7.8               Operations and Maintenance:

                  a)   The Parties agree to jointly plan annual maintenance
                       activities and schedules for generation facilities
                       located on the Kenai Peninsula, and involve each other
                       immediately when a need to change schedules is
                       identified.

                  b)   AEG&T/HEA agrees to call on Chugach support when in-house
                      resources are insufficient to perform O&M work, and
                      utilize Chugach's expertise to provide technical and
                      management O&M Services when needed.  Such support shall
                      be requested in advance of undertaking such O&M Services,
                      and scheduled and coordinated to the maximum extent
                      possible.  Upon receipt by Chugach of a request for O&M
                      Services from AEG&T/HEA, Chugach will provide a cost
                      estimate for the requested services and Chugach will not
                      provide the services until AEG&T/HEA has considered the
                      cost estimate and authorized Chugach to proceed.  This
                      Section 7.8(b) does not preclude AEG&T/HEA from enlisting
                      specified technical support and assistance from
                      suppliers of equipment associated with the Unit, such as
                      General Electric field engineers.

                  c)   Should AEG&T elect to contract for the O&M Services for
                       the Unit other than with HEA, Chugach shall be given the
                       first right of refusal to provide such O&M Services. If
                       AEG&T requests an estimate, Chugach shall have 30 days to
                       provide an estimate for provision of such services.
                       Chugach shall have 30 days to match any bid or contract
                       offer being considered by the AEG&T board.  If the
                       Chugach estimate is accepted, or if Chugach offers
                       to match any bid or contract, then Chugach shall be
                       awarded the O&M Services contract.

                  d)   Any rights of Chugach or obligations of HEA under this
                       section 7.8 of this agreement are subject to AEG&Ts
                       agreement with KFC for performance of the operation and
                       maintenance of the Unit. Any such agreement will be
                       appended to this Agreement as Exhibit D.

     7.9           Fuel Supply:

                  a)   Except as herein provided Chugach will use its reasonabl
                       best efforts, to the extent tha natural gas is available
                       under Chugachs existing and replacement natural gas
                       contracts, to provide all natural gas fuel required to
                       operate the Unit. If Chugach at any time determines that
                       for whatever reason it may not be able to deliver fuel to
                       the Unit, it will immediately so advise AEG&T.  For
                       Chugach gas delivered to the KFC Plant at meter no.106
                       connecting the KFC Plant to the Cook Inlet Gas Gathering
                       System or meter no. 414 connecting the KFC Plant to the
                       Kenai Pipeline System, AEG&T will provide transportation
                       of the fuel to the Unit at no additional cost.

                  b)   Notwithstanding the foregoing, AEG&T shall have the
                       option to supply a portion of the fuel for the Unit in an
                       amount up to (i) the AEG&T Fuel plus (ii) the quantity of
                       fuel calculated on an annual basis as follows
                       (the HEA Fuel)

                           HEA Fuel (in mcf/year) =   E (A-B) + F, where as to
                                                      the year D
                                            A =      Total MWh purchased by
                                                     AEG&T under the Chugach
                                                     Wholesale Power Agreement
                                            B =      350,000 MWh
                                            D =      Total MWh generated by the
                                                     Unit for Chugach Use
                                                     (measured at the Units
                                                     13.8 kV bus)
                                            E =      Total fuel (in mcf) used in
                                                     the Unit for Chugach Use.
                                            F =      Banked Fuel.

                      Prior to the beginning of each calendar year AEG&T will
                      provide Chugach with an operating plan, including an
                      estimate of the quantity of HEA Fuel and the AEG&T Fuel
                      for that year. Chugach will cooperate in providing AEG&T
                      with information necessary to make such estimate.  In
                      calculating the estimate, the values for A, D and E
                      will be based upon the operating plan for the year.

                      Except where this formula is used for projections, actual
                      data will be used based on the most recent calendar year.

                  c)   During each hour that the Unit is operated for AEG&T Use,
                       AEG&T shall have the right to provide all fuel
                       requirements associated with that use.

                  d)   During each hour that the Unit is operated for Chugach
                       Use, AEG&T shall have the right to provide a portion of
                       the fuel to the Unit in an amount up to the estimated HEA
                       Fuel for the year divided by the expected hours of Unit
                       operation during the year for Chugach Use, and Chugach
                       will utilize such amount, or any lesser amount as AEG&T
                       may direct in accordance with this Agreement.  Prior to
                       the first day of each month AEG&T will notify Chugach as
                       to the percentage of the HEA Fuel and AEG&T Fuel that
                       AEG&T will provide to the Unit and Chugach will schedule
                       the fuel deliveries to the Unit accordingly.  AEG&T will
                       be entitled to utilize any such lesser notification
                       period the Cook Inlet gas industry may afford for gas
                       balancing.

7.10              Purchase of Power:   In addition to its 350,000 MWh purchase
                  obligation under the Chugach Wholesale Power Agreement, AEG&T
                  will purchase from Chugach in each calendar year after the
                  Date of Commercial Operation a quantity of energy (MWh) equal
                  to HEAs residual energy (MWh) requirements less the quantity
                  of energy (MWh) received by AEG&T as HEAs allocated share
                  under the Bradley Lake Hydroelectric Project Agreement for the
                  Sale and Purchase of Electric Power
                  and less the quantity of energy (MWh) generated for AEG&T Use;
                  provided, that the quantity of energy which AEG&T shall be
                  committed to purchase  pursuant to this provision for its
                  residual energy requirements shall not exceed 320,000 MWh per
                  year.  AEG&Ts purchase obligation under this provision shall
                  commence on the Date of Commercial Operation.  Residual energ
                  is that energy used by HEA which is above the 350,000 MWh
                  purchase obligation under the Chugach wholesale power
                  agreement but does not include any energy supplied from
                  capacity used to supply demand in excess of 73 MW on the
                  Chugach system.



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Article VIII.     Energy Accounting and Power Factor

8.1                The Chugach Dispatcher shall maintain records of the Unit
                   output between Chugach Use and AEG&T Use and keep running
                   accounts of the energy use for the Unit.

8.2                Chugach shall dispatch the Unit within the limitations
                  established by AEG&T from time to time.

Article IX.       Compensation, Billing and Payment

9.1               All rights and costs of ownership of the Unit will remain with
                  AEG&T except as explicitly stated in this Agreement.

9.2               Chugach will pay compensation to AEG&T for use of the Unit
                  monthly as follows:

                  a)       Chugach Use: For Chugach Use, Chugach shall pay AEG&T
                           monthly compensation ("C") equal to the cost of
                           operation and maintenance expense ("O") plus the
                           value of HEA Fuel actually delivered and consumed on
                           site ("V") which is expressed in the following
                           formula:

                           C = O + V

                           Where:

                           "C" is the compensation in dollars paid to AEG&T.

                           "O" shall be $5.00/MWh multiplied by the monthly MWh
                            electrical Output of the Unit for Chugach Use, as
                            measured at the 13.8 kV meter, multiplied by "A",
                            below.

                           A shall be an adjustment for inflation, to be
                            applied for each calendar year beginning on January
                            1, 1999.  "A" shall be calculated as follows

                           A = .2(1+ppi) + .8(1+cpi)

                           Where

                           ppi is the percentage change, expressed as a
                           decimal, in the Producer Price Index of Metals
                           Commodities as published by the Bureau of Labor
                           Statistics of the United States Department of Labor,
                           for the month ending on January 31 of the year in
                           which the adjustment is made, as compared with such
                           index for the month ending January 31 of the
                           year preceding the date of the adjustment; and

                           cpi is the percentage change, expressed as a
                           decimal, in the U.S. Consumer Price Index for Urban
                           Wage Earners and Clerical Workers published by the
                           Bureau of Labor Statistics of the United States
                           Department of Labor, for the month ending on January
                           31 of the year in which the adjustment is made, as
                           compared with such index for the month ending Januar
                           31 of the year preceding the date of the adjustment.

                           "V" is the value of the quantity of HEA Fuel provided
                            by AEG&T and consumed by the Unit during the month.
                            The value will be based upon the Chugach Unit Fuel
                            Price in effect during the month, provided, however,
                            that if AEG&T provides HEA Fuel in addition to that
                            quantity initially committed under the terms of the
                            KFC Agreement and the price (including
                            transportation costs) paid by HEA to the supplier is
                           less than the Chugach Unit Fuel Price, then the value
                           of the additional volume supplied shall be the
                           Chugach Unit Fuel Price less one-half of the
                           difference between the price paid by
                           AEG&T and the Chugach Unit Fuel Price.

                  b)       AEG&T Use: For AEG&T Use, AEG&T shall pay Chugach:

                           1.       for dispatch services a daily dispatch rate
                                    of $350 for each day or part of a day during
                                    which the Unit is dispatched for AEG&T Use
                                    except that the payment is waived if Chugach
                                    either uses the spin of the Unit or jointly
                                    utilizes the  energy Output of the Unit
                                    during any part of that day; and

                           2.       for all fuel and transportation costs
                                     incurred by Chugach in the AEG&T Use.

                           Chugach shall invoice these as separately itemized
                           charges to AEG&T.

                  c)       Allocation of fuel costs between simultaneous Uses:

                           For AEG&T Use where Chugach utilizes the spin but
                           does not generate any energy, 100% of the fuel costs
                           are allocated to AEG&T.

                           When energy as measured at the Units 13.8 kV bus is
                           being produced simultaneously for AEG&T Use and
                           Chugach Use then the fuel costs will be divided in
                           proportion to the energy being produced for each use.

9.3               Within ten days after the end of each month, Chugach shall
                  provide AEG&T with an accounting of the use of the Unit for
                  the previous month showing the total energy and fuel use by
                  the type of operation. In such accounting, Chugach may
                  designate certain items as being estimated due to the
                  unavailability of final underlying data, in which event
                  adjustments to the correct amounts, when amounts are
                  determined, shall be included in an accounting for a
                  subsequent month.  This accounting shall be the basis for the
                  Unit billing by AEG&T.

9.4               Payment by Chugach shall be due in AEG&T's office by the 15th
                  day after mailing of the bill. Payment shall be mailed or
                  direct deposit to AEG&T.  Amounts not received on or before
                  the due date shall be payable with interest accrued at the
                  rate of 1 percent per month compounded monthly from the due
                  date to the date of payment.

9.5               In the event any portion of any bill is disputed, the disputed
                  amount may be paid or may be withheld.  In either event,
                  Chugach shall provide AEG&T a detailed written explanation of
                  why the amount is in dispute.  If the disputed portion is paid
                  and later found to be not owed, AEG&T shall refund to Chugach
                  the disputed portion plus interest on a monthly basis at the
                  statutory interest rate to the date the refund check is mailed
                  by AEG&T.  If the disputed portion is withheld and later found
                  to be owed, Chugach shall pay the disputed portion to AEG&T
                  plus interest on a monthly basis at the statutory interest
                  rate from the due date of payment to the date the refund check
                  is mailed by Chugach.

Article X.        Emergencies and Problems

10.1              Chugach shall make best efforts to continue to provide
                  dispatch services in accordance with this Agreement during
                  SCADA, communication or other outages.

10.2              AEG&T shall maintain and supply Chugach an up-to-date list of
                  personnel authorized to receive any information which Chugach
                  is obligated to supply to AEG&T under this Agreement such that
                  the Chugach dispatcher at all times will be able to reach
                  personnel designated by AEG&T to receive the information.

Article XI.       Liability and Indemnity

11.1               Regardless of fault or causation, each party shall assume all
                   responsibility and hold the other party harmless from and
                   defend the other party against all claims for injury or
                   damage of any sort arising out of the operation of this
                   Agreement to persons or property on its respective side of
                   the Point of Interconnection.  Chugach shall not be liable
                   for any lost revenue or other damages suffered by AEG&T or
                   any other entity or person as a result of any act, or failure
                   to act, on the part of Chugach under this Agreement, except
                   that Chugach agrees that it will be responsible for injury to
                   AEG&T caused intentionally by Chugach or through Chugach's
                   gross negligence, and except that Chugach shall indemnify
                   AEG&T against any premium or penalty charges for which HEA
                   may become liable pursuant to the terms of Paragraph 5.4 of
                   the Chugach Wholesale Power Agreement if Chugach dispatched
                   the excess power through inadvertence or willful disregard of
                   the dispatch instructions received from AEG&T for AEG&T Use.
                   This indemnity provision shall not apply to a willful breach
                   of this Agreement by either party.



<PAGE>
Article XII.      Uncontrollable Forces

12.1              An uncontrollable force shall mean an act of God, act or
                  omission of government, failure of or threat of failure of
                  facility, unscheduled maintenance and repair, labor or
                  material shortage, strike, lockout, or other industrial
                  disturbances, act of the public enemy, war, blockade,
                  insurrection, riot, epidemic, landslide, avalanche,
                  earthquake, fire, storm, lightning, flood, washout, civil
                  disturbance, restraint by court order or public authority,
                  action or non-action by or inability to obtain necessary
                  authorization or approval from any governmental agency or
                  authority, and any other act or omission similar to the kind
                  herein enumerated. Strikes, lockouts, and other labor
                  disturbances shall be considered uncontrollable forces and
                  nothing in this Agreement shall require either party to settle
                  a labor dispute against its best judgement.

                  Each of these matters enumerated constitutes an uncontrollable
                  force to the extent that it is not within the reasonable
                  control of affected party, and to the extent that such party
                  by the exercise of due diligence is unable to overcome it.
                  In the event either party, by reason of an uncontrollable
                  force, is rendered unable, wholly or in part, to perform its
                  obligations under this Agreement, then upon such party giving
                  notice and particulars of such uncontrollable force, its
                  obligation to perform (other than the obligation to pay money
                  shall be suspended during the continuance of any inability so
                  caused, but for no longer period, and the effects of such
                  cause shall, so far as possible, be remedied with all
                  reasonable speed.  The affected party shall not be responsible
                  for its delay in performance under this Agreement during
                  delays caused by an uncontrollable force, nor shall such
                  uncontrollable force give rise to claims for damages or
                  constitute default.

                  However, should an Uncontrollable Force continuously prevent
                  performance by either party of substantially all of its
                  obligations under this Agreement for a period of more than one
                  year, the Agreement is voidable at the option of either party
                  upon 30 days written notice to the other party.

Article XIII.  Severability

                  If any provision of this Agreement shall be finally
                  adjudicated by a court of competent jurisdiction to be invalid
                  or unenforceable, the remainder of the Agreement shall be
                  invalid or unenforceable as to future obligations but shall
                  not operate to extinguish obligations (such as payment
                  obligations) already accrued.

Article XIV.  Termination

14.1               In the event of a material breach of this Agreement,
                   either party may give written notice to the other.  If a
                   material breach is not cured within thirty (30) days after
                   the breaching party receives notice of the breach, the
                   non-breaching party may, at its option, terminate the
                   Agreement without incurring liability therefor, bring an
                   action for specific performance, or exercise any other
                   contract remedy.  All liabilities arising under this
                   Agreement prior to termination shall be and are hereby
                   preserved.

14.2              This Agreement shall terminate twenty-four months from the
                  Effective Date, unless prior to said date AEG&T shall have
                  commenced relocating the generator and turbine from the
                  Soldotna No. 1 Plant to the KFC Plant near Nikiski, Alaska

Article XV.  Miscellaneous Provisions

15.1              Right of First Refusal: Chugach shall have a right of first
                  refusal to purchase, lease, rent or in any other way acquire
                  AEG&Ts rights in the Unit or any portion of the electrical
                  output or capacity of the Unit.  The Right of First Refusal
                  will be retained by Chugach over the life of the Agreement.
                  The Right of First Refusal shall not apply to a disposition by
                  AEG&T to HEA.

                  The Parties intend that this Right of First Refusal not impede
                  future efforts by AEG&T to dispose of the Unit or its output
                  while offering Chugach a genuine and full first right of
                  refusal to purchase the Unit or its electrical output.
                  Accordingly, Chugach shall promptly respond (no later than 90
                  days) after notification by AEG&T of a proposed disposition of
                  the Unit or its output regardless of whether the proposal
                  resulted from negotiations with a third party, a competitive
                  bid process or otherwise.  Notification by AEG&T of the
                  proposed disposition of the Unit or its output shall include
                  disclosure of all information reasonably necessary to allow
                  Chugach to fully evaluate the proposal and to prepare a
                  responsive proposal.  If Chugach's proposal is substantially
                  similar to and of equal or greater value to AEG&T as that
                  described by AEG&T, Chugach's proposal shall be accepted by
                  AEG&T.

15.2               Grant of Option:  AEG&T grants to Chugach an option to
                   purchase the electricity generated by steam produced by or in
                   conjunction with the operation of the Unit.  The terms of the
                   option are as follows.

                  a)   Notice.  AEG&T will notify Chugach in writing of the
                       availability of the electricity not less than six months
                       nor more than thirty-six months before the date of
                       commercial production of electricity using the steam
                       produced by the heat recovery steam generator installed
                       in conjunction with construction of the Unit.  The notice
                       will describe the amount of electricity to be produced
                       and the process for its production.

                  b)   Right to Option.  Chugach shall have six months from the
                       date of the notice within which to exercise the option.

                  c)   Exercise.  The option will be exercised by delivery to
                       AEG&T of a written notice by Chugach within the foregoing
                       period specifying the amount of electric output for which
                       it intended to take or pay.

                  d)   Terms.  The purchase price for the electricity shall be
                       an amount equal to the average thermal generation cost
                       for the Chugach system, adjusted quarterly in accordance
                       with the most recently filed fuel surcharge applications,
                       or computed in similar fashion as that last submitted,
                       plus an operation and maintenance component computed on
                       the same basis as the "O" component of compensation
                       defined under the terms of Section 9.2 a) of this
                      Agreement.

                  e)   Delivery.  AEG&T will deliver the electricity to Chugach
                       at the Point of Interconnection. Chugach will be
                       obligated to pay only for electricity delivered.

                  f)   Expiration.  If not exercised within the time period set
                       forth above the option will expire and be of no further
                       force and effect with respect to the electricity produced
                       in accordance with the notice, but not with respect to
                       any subsequent additional production. If exercised, the
                       rights acquired and obligations assumed under the option
                       shall terminate upon the termination of this Agreement.

15.3              Assignment:  No party shall assign this Agreement, or any part
                  thereof, without notice to, and consent in writing by, the
                  other party; provided that such consent shall not be
                  unreasonably withheld.

15.4              No Third Party Beneficiaries:  The provisions of this
                  Agreement shall not create any rights in favor of any person,
                  corporation, or association not a participant in this
                  Agreement, and the obligations herein assumed are solely for
                  the use and benefit of the participants to this Agreement.

15.5              Notice:  Except as otherwise provided herein whenever notice
                  or communication is provided or required to be given by either
                  party to the other, such notice or communication shall be in
                  writing and transmitted by certified United States Mail,
                  return receipt requested, or by personal delivery, or by
                  telegraph.  All such written communication directed at Chugach
                  shall be sent to:


                           Executive Manager Finance & Energy Supply or
                           Manager of Dispatch
                           Chugach Electric Association, Inc.
                           P.O. Box 196300
                           Anchorage, Alaska 99519-6300
                  or by personal delivery to:
                           Executive Manager Finance & Energy Supply or
                           Manager of Dispatch
                           Chugach Electric Association, Inc.
                           5601 Minnesota Drive
                           Anchorage, Alaska 99518-1074

                  All such written communication directed to AEG&T shall be sent
                  to

                           General Manager
                           HEA
                           P. O. Box 169
                           Homer, Alaska 99603

15.6              Entire Agreement:  The terms of this Agreement and any
                  provisions adopted by reference or otherwise incorporated into
                  this Agreement, including Exhibits A, B, and C, set forth the
                  full intent of the parties regarding the matters covered by
                  this Agreement.  Neither party is relying on or may rely on
                  any written or oral collateral, prior, or contemporaneous
                  agreements, assurances, representations, or warranties not set
                  forth in this Agreement.  No modifications of this Agreement
                  shall be implied in law or equity, nor may any part hereof be
                  terminated, amended, supplemented, waived or modified except
                  by instrument in writing signed by both parties.

15.7              Future Agreements:  This Agreement shall not preclude future
                  agreements on leasing, capacity sale or other ownership or
                  operating agreements by and among Chugach, AEG&T and HEA.

15.8              Dispatch Agreement:  The Soldotna One System Use and Dispatch
                  Agreement is terminated as of the date AEG&T reasonably
                  declares that the Soldotna No. 1 Plant has been decommissioned
                  incident to the construction of the Unit.

15.9              Waiver:  Any waiver at any time by a party of its rights with
                  respect to a default under this Agreement or with respect to
                  any other matter arising in connection with the Agreement
                  shall not be deemed a waiver with respect to any other default
                  or matter.

                  Any delay short of the statutory period of limitations in
                  asserting or enforcing a right shall not be deemed a waiver of
                  such right.

Date:                2-12-99

                                                 ALASKA ELECTRIC GENERATION
                                              AND TRANSMISSION COOPERATIVE, INC.



                                                     By:   /s/ N L Story

                                                              N.L. Story
                                                              General Manager

Date:               Feb 9, 1999

                                              CHUGACH ELECTRIC ASSOCIATION, INC.



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




<PAGE>
                                                      EXHIBIT A

                                           DISPATCH FUNCTIONS AND REPORTS


1.       Chugach shall provide the services required to accomplish the remote
         starting, loading, monitoring, unloading and stopping of the Unit over
         the SCADA system.  The Unit shall be base loaded in accordance
         with Section 6.2, except during emergencies when unit operation shall
         be coordinated through the Chugach Dispatch Center.  As outlined in
         Exhibit A, Chugach shall record the operations of the Unit and transmit
         such information to AEG&T on a monthly basis.

2.       Whenever the Chugach SCADA system indicates that the HEA load exceeds
         the Contract Capacity in the Chugach Wholesale Power Agreement plus
         HEAs share of Bradley Lake capacity or when directed by HEA,
         Chugach will allocate a portion of the Unit output to AEG&T Use.  The
         portion allocated to AEG&T Use shall equal the amount of MWs required
         to meet HEAs load plus reserves, if any, that is not being
         purchased under the Chugach Wholesale Power Agreement or from Bradley
         Lake.  Any output not allocated to AEG&T Use shall be Chugach Use.

                  If Bradley Lake capacity is not available as defined in the
                  Bradley Lake Scheduling Agreement, then unless directed
                  otherwise by HEA, AEG&T Use shall equal the amount of MWs
                  required to meet HEAs load plus reserves, if any, that are
                  not being purchased under the Chugach Wholesale Power
                  Agreement.

                  If neither Bradley Lake capacity as defined in the Bradley
                  Lake Scheduling Agreement nor Unit capacity are available and
                  the HEA load exceeds the Contract Capacity in the Chugach
                  Wholesale Power Agreement, then unless HEA schedules some
                  other resource to meet HEAs load, the additional HEA load
                  will be supplied by Chugach under the Excess Capacity
                  provisions of the Chugach Wholesale Power Agreement.

3.       Chugach shall remotely operate the Unit over the SCADA and
         telecommunications systems.  This operation shall include:

         (a)      Issuing start commands;

         (b)      Synchronizing the Unit;

         (c)      Monitoring alarms;

         (d)      Limiting Unit operations in response to SCADA alarms;

         (e)      Adhering to Unit loading limits established by AEG&T;

         (g)      Adhering to rate of change limitations for generation as
                  established by AEG&T;

         (i)      Shutdown and opening generator breaker;

         (j)      Stopping the unit;

         (k)      Tripping the Unit in the event SCADA information dictates this
                  action;

         (1)     Observing the Notification Procedures set forth in Exhibit "C".

4.       Chugach shall record and maintain logs and records of the Unit
         operation and shall provide upon request such logs and records to AEG&T
         within one (1) week.

         These logs and records shall include the following:

         (a)      Scheduled hours of operation, scheduled loading by use
                  category, and average load on an hourly basis;

         (b)      Actual hours of operation, type of and average load on an
                  hourly basis;

         (c)      Available operating data, such as: voltage, amperes, VARS,
                  frequency, watts, power factor, gas flow, temperatures,
                  breaker positions, and accumulated MWH, MVARH, and MMCF/DAY as
                  provided by the SCADA system or similar data recorded manually
                  when the SCADA system is inoperative; and

         (d)      Alarms and observed or reported deviations from normal Unit
                  operating parameters.



<PAGE>

                                                      EXHIBIT B

                                                 METERING LOCATIONS


Consistent with provisions of the "Agreement for Sale of Electric Power and
Energy and Lease of Facilities," Addendum 1, metering shall be provided at the
following locations:

I.       At the Soldotna Substation:
         115-kV Line from Soldotna Substation to Quartz Creek Substation.
         115-kV Line from Soldotna Substation to Bernice Lake Substation.
         69-kV Line from Soldotna Substation to Quartz Creek Substation.
         69-kV Line from Soldotna Substation to Bernice Lake Substation.
II.      At the  Unit:
         Unit Generator Output at the 13.8 kV bus.
         Unit Generator Gas Usage at the intake manifold.
         Unit Station Service at the 480 Volt bus.






<PAGE>

                                                      EXHIBIT C

                                               NOTIFICATION PROCEDURES


Chugach will perform the respective notification procedures for each alarm
category set forth below:

A.       Alarm Priority 1--Unit Trip

         Chugach shall contact the Unit Power Plant Specialist (PPS)
         immediately.  All control systems will be reset to allow restart of the
         Unit if conditions causing the trip are known by the Unit PPS and have
         been rectified.  If the alarm occurs outside Regular Working Hours,
         Chugach shall contact the PPS in the manner and order of preference as
         designated by AEG&T.  If the PPS cannot be contacted, Chugach shall
         contact the person designated as AEG&T's standby contact and advise him
         of the situation.  Chugach shall attempt to restart the Unit after the
         control has been reset and clearance has been received from the
         Unit PPS.

B.       Alarm Priority 2--Trip Possible

         Chugach shall contact the Unit PPS immediately.  If the alarm occurs
         outside Regular Working Hours,
         Chugach shall contact the Unit PPS in the manner and order of
         preference as designated by AEG&T.  If the PPS cannot be contacted,
         Chugach shall contact the person designated as the AEG&T standby
         contact and advise him of the situation.  After investigation, the Unit
         PPS may impose operational restrictions on the unit until the situation
         can be rectified.

C.       Alarm Priority 3--Alarm-No Trip:

         If the Unit is in operation, Chugach shall contact the Unit PPS
         immediately. If the Unit is shut down, Chugach shall contact the Unit
         PPS within 24 hours.  If the alarm occurs outside Regular Working
         Hours, Chugach shall contact the PPS in the manner and order of
         preference as designated by AEG&T. If the PPS cannot be contacted,
         Chugach shall contact the person designated as AEG&T's standby contact
         and advise him of the situation.  After investigation, the Unit PPS may
         impose operational restrictions on the unit until the situation can be
         rectified.

D.       Alarm Priority 4--Start Inhibit

         If the unit is in operation, Chugach shall contact the PPS immediately.
         If the unit is shut down, Chugach shall contact the Unit PPS within 24
         hours, or since these alarms are start inhibits, when first aware of a
         need to start up the Unit, whichever comes first.  If the alarm occurs
         outside Regular Working Hours, Chugach shall contact the PPS in the
         manner and order of preference as designated by
         AEG&T.  If the PPS cannot be contacted, Chugach shall contact the
         person designated as AEG&T's standby contact and advise him of the
         situation.

<PAGE>