April 23, 1999

Mr. Joseph Falcone
ARCO Alaska, Inc.
P.O. box 100360
Anchorage, AK  99510-0360

Re:  ARCO Alaska Assignment of CEA Gas Contract

Dear Mr. Falcone:

You have explained that ARCO Alaska, Inc. ("AAI") desires the consent of Chugach
Electric  Association,   Inc.  ("Chugach")  to  a  contractual  assignment,   or
assignments,  as a result of which  AAI would  delegate  to a new  entity,  ARCO
Beluga Inc. ("ABI"), the obligation and right to perform for AAI, and to receive
performance  from Chugach under,  the April 21, 1989 "Agreement for the sale and
Purchase of Natural Gas" between AAI and Chugach, as amended ("Agreement')>

Chugach  hereby grants such consent,  subject to AAI's  acknowledgment  that AAI
shall not be  released  from the  Agreement,  and AAI shall  remain  secondarily
responsible  for ABI's  performance of the Agreement.  The  responsibility  will
include  making such  contractual or other  arrangements  to assure that Chugach
shall  continue  to  receive  actual  performance  under  the  Agreement,  i.e.,
deliveries  of  natural  gas,  including  in  the  event  of the  bankruptcy  or
insolvency of ABI.

Such  acknowledgement  represents  what we  understand to be the effect of AAI's
assignment/delegation  under  applicable law, and simply clarifies the intent of
AAI and Chugach  alike.  It is also  intended to assure that Chugach will not be
limited to damages for breach of contract but instead  will remain  assured of a
gas supply from AAI under the Agreement.

We are pleased to accommodate  AAI in this respect,  and we look forward to many
more years of cooperation between us.

Sincerely,                                       ACKNOWLEDGED AND AGREED:

/s/ Eugene N. Bjornstad
                                                ARCO ALASKA, INC.
Eugene N. Bjornstad
General Manager                                 By /s/ Joseph A. Leone
                                                  ---------------------------
                                                  Joseph A. Leone
                                                  Vice President



ENB/TAL/ds

cc  Joe Griffith
    Mike Wheatall, ARCO