Mail Stop 3561
July 7, 2005
By Facsimile and U.S. Mail
Mr. Evan J. Griffith
Chief Executive Officer
Chugach Electric Association, Inc
5601 Electron Dr.
Anchorage, Alaska 99518
Re: Chugach Electric Association, Inc
Form 10-K for the year ended December 31, 2004
Filed March 31, 2005
File No. 3-42125
Dear Mr. Griffith:
We have reviewed your filing and have the following
comments.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
Please be as detailed as necessary in your explanation. After
reviewing this information, we may or may not raise additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2004
Item 7. Management`s Discussion and Analysis of Financial
Condition
and Results of Operations
Results of Operations
1. You indicate that the $17.2 million increase in revenues from
fiscal year 2004 compared to fiscal year 2003 was due to increased
sales and higher fuel costs. Please discuss the business
reason(s)
for the increase in sales and quantify changes resulting from
increase sales and higher fuel surcharge pass through. To the
extent
you have different tariffs by class of customer, you could provide
a
discussion of changes in revenue by class of customer and include
your residential and commercial customers that comprise your
retail
sales. Similarly, it would be informative to the user to see the
extent to which the margin fromWholesale and Economy Energy sales
contributed to covering your fixed costs. Please provide some
type
of table that contrasts revenues from such bulk sales with the
related direct variable costs. Please refer to Item 303(a)(3) of
Regulation S-K, Financial Reporting Codification 501.04, and SEC
Release No. 33-8350.
2. Please tell us how you recognize fuel expense in your
Statements
of Revenues and Expenses. If you do not recognize actual fuel
expense but instead recognize the approved amount with the
difference
from actual reflected as a fuel over/under recovery in the balance
sheet, please expand your fuel discussion to indicate fluctuation
fuel prices affect fuel expense. Further, you should quantify the
price versus volume variances you mention in your fuel expense
discussion.
3. You indicate that the increase in power production expense in
2004
was due, in part, to the update of the method in which you record
maintenance costs. Please tell us why you believe it is
appropriate
to reclassify only the current period and not the prior periods to
conform to current period presentation. In this regard, you
should
explain to us how you changed your method by which maintenance
costs
are recorded. To the extent you were previously capitalizing
maintenance costs, please explain your basis in GAAP.
4. When you discuss the increase in purchased power costs, you
should
provide a price volume analysis to illustrate the effect of higher
fuel costs and increased demand.
5. It appears that you record the retirement of capital credits
and
estate payments in your balance sheets based on the amounts paid
rather than the amounts authorized. Please tell us why you
believe
that such treatment is appropriate or revise your accounting
treatment accordingly in future filings.
Item 7A. Quantitative and Qualitative Disclosure about Market Risk
6. We note that your sensitivity analysis with respect to market
risk
from changes in interest rates is limited to the variable rate
debt
of $5.9 million which matures in 2005. Please revise your
sensitivity analysis for changes in interest rates to include all
of
your variable rate debt or tell us why you believe your current
disclosure is appropriate.
Notes to Financial Statements
Note 1. Description of Business and Significant Accounting
Policies
7. You indicate you performed an impairment analysis of certain
generation assets and determined that impairment existed. You
wrote
the asset down to its estimated salvage value. We are unable to
determine whether the impairment was based on held and used or
based
on disposing such assets. Your write-down to net realizable value
suggests the latter. If so, please provide the disclosure
required
by paragraph 47.a of SFAS 144. If otherwise, please provide the
disclosure required by paragraph 26.a of SFAS 144.
8. Please disclose your accounting policy for pass through taxes
or
excise taxes. Your disclosure should indicate whether you are
presenting your collections and payments of these taxes on a gross
or
net basis. If they are presented on a gross basis, also disclose
the
amounts of excise taxes included in each revenue and expense
caption.
See rule 5-03.1 of Regulation S-X.
9. We assume you do not accrue for unbilled revenue because the
RCA
has set rates based on a test period that excludes unbilled
revenues.
If otherwise, please explain. Please tell us how you ensure
generation based expenses, such as fuel, are properly matched
against
the related revenues. We may have further comment.
Note 5. Deferred Charges
10. It appears this caption contains regulatory assets as defined
by
SFAS 71. Further it is not clear whether Note 10 contains
regulatory
liabilities. The staff has historically requested a summarization
of
regulatory assets and liabilities in one footnote to allow the
reader
to gauge the effects of regulation on the utility. Your
presentation
of the detail of deferred charges and credits supporting the
related
balance sheet captions is useful information. Please make it
clear
which items in the notes and over/under recovered fuel costs are
regulatory assets or liabilities in future disclosures. We
presume
your rates are set such that the cost of capital is included in
determining such rates. If otherwise, please advise. If any
portion
of your regulatory asset balance includes amounts on which you do
not
earn a current return, please tell us and disclose in future
filings
the nature and amounts of each of these assets and the remaining
recovery period associated with each of them. This also includes
over/under recovery of fuel. Refer to the requirements of
paragraph
20 of SFAS 71.
11. We note that you have unclaimed capital credit retirement of
$6.8
million as of December 31, 2004 and $6.5 million as of December
31,
2003. If, as we believe, that such amounts have not been paid
because proper account identification cannot be made, please tell
us
whether such unclaimed amounts are subject to abandoned property
laws. If so, please tell us how you determined it is appropriate
to
record such unclaimed amounts as a component of equity rather than
a
liability.
Note 8. Debt
12. We note that your auction rate bond is subject to optional and
mandatory redemption under certain circumstances. Please tell us
why
you believe that classification of your auction rate bond as a
long-
term liability is appropriate with due regard to EITF Topic D-61.
In
doing so, please tell us the following;
* under what circumstances the debt holder may redeem your auction
rate bond, irrespective of the likelihood;
* The timeframe in which the debt holder may give notice to redeem
the bonds;
* Whether the bond is subject to a best-efforts remarketing
agreement
such that you might be obligated to pay off the debt if the agent
is
unable to remarket the debt, irrespective of the likelihood; or
* If you have given any support that provides protection to the
debt
holder in the event that the redeemed debt cannot be remarketed.
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respond to these comments within 10 business days or tell us when
you
will provide us with a response. Please furnish a letter with
your
responses to our comments and provide any requested supplemental
information. Please understand that we may have additional
comments
after reviewing your responses to our comments. Please file your
response letter on EDGAR as a correspondence file.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
In connection with responding to our comments, please provide, in
writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement has access to all information you provide to the staff
of
the Division of Corporation Finance in our review of your filing
or
in response to our comments on your filing.
If you have any questions regarding these comments,
please
direct them to John Cannarella, Staff Accountant, at (202) 551-
3337
or, in his absence, to the undersigned at (202) 551-3849. Any
other
questions regarding disclosure issues may be directed to H.
Christopher Owings, Assistant Director, at (202) 551-3725.
Sincerely,
Jim Allegretto
Sr. Assistant Chief Accountant
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Mr. Evan J. Griffith
Chugach Electric Association, Inc.
July 7, 2005
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