UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 10-Q

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[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXHANGE
ACT OF 1934

For the quarterly period ended June 30, 2008

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

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Commission file number 33-42125

CHUGACH ELECTRIC ASSOCIATION, INC.
(Exact name of registrant as specifies in its charter)

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State of Alaska 92-0014224
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

5601 Electron Drive, Anchorage, AK 99518
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(Address of principal executive offices) (Zip Code)

(907) 563-7494
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(Registrant's telephone number including area code)

None
----
(Former name, former address, and former fiscal year if changed since
last report)

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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. [x] Yes [ ] No

Indicate by check mark whether the registrant is large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [x] Smaller reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
[ ] Yes [x] No

CHUGACH ELECTRIC ASSOCIATION, INC.
TABLE OF CONTENTS

Caution Regarding Forward-Looking Statements 2

Part I. Financial Information
- -----------------------------

Item 1. Financial Statements (unaudited) 2

Balance Sheets - as of June 30, 2008 and December 31, 2007 3

Statements of Operations - Three and six months ended June 30, 2008 and June 30, 2007 5

Statements of Cash Flows - Six Months Ended June 30, 2008 and June 30, 2007 6

Notes to Financial Statements 7

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 16

Item 3. Quantitative and Qualitative Disclosures About Market Risk 30

Item 4. Controls and Procedures 31

Part II. Other Information
- --------------------------

Item 1. Legal Proceedings 31

Item 1A. Risk Factors 31

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 31

Item 3. Defaults Upon Senior Securities 31

Item 4. Submission of Matters to a Vote of Security Holders 31

Item 5. Other Information 32

Item 6. Exhibits 32

Signatures 32

Exhibits 33

Caution Regarding Forward-Looking Statements
- --------------------------------------------

Statements in this report that do not relate to historical facts, including
statements relating to future plans, events or performance, are forward-looking
statements that involve risks and uncertainties. Actual results, events or
performance may differ materially. Readers are cautioned not to place undue
reliance on these forward-looking statements that speak only as of the date of
this report and the accuracy of which is subject to inherent uncertainty. It is
suggested these statements are read in conjunction with our audited financial
statements for the year ended December 31, 2007, filed as part of our annual
report on Form 10-K. Chugach Electric Association, Inc. (Chugach) undertakes no
obligation to publicly release any revisions to these forward-looking statements
to reflect events or circumstances that may occur after the date of this report
or the effect of those events or circumstances on any of the forward-looking
statements contained in this report, except as required by law.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The unaudited financial statements and notes to the financial statements of
Chugach as of and for the quarter ended June 30, 2008, follow.

Chugach Electric Association, Inc.
Balance Sheets
(Unaudited)

Assets June 30, 2008 December 31, 2007
- ------------------------------------------ --------------- -----------------

Utility Plant:
Electric Plant in service $ 812,645,982 $ 805,631,207
Construction work in progress 21,401,487 17,712,884
--------------- -----------------
Total utility plant 834,047,469 823,344,091
Less accumulated depreciation (381,442,755) (367,391,921)
--------------- -----------------
Net utility plant 452,604,714 455,952,170

Other property and investments, at cost:
Nonutility property 24,461 24,461
Investments in associated organizations 11,993,216 11,993,378
Special Funds 292,709 768,041
--------------- -----------------
Total other property and investments 12,310,386 12,785,880

Current assets:
Cash and cash equivalents 5,415,484 6,209,936
Special deposits 125,117 125,117
Fuel cost under-recovery 4,573,046 0
Accounts receivable, net 22,423,652 31,355,481
Materials and supplies 27,079,006 28,422,088
Prepayments 1,149,693 1,357,980
Other current assets 172,980 264,501
--------------- -----------------
Total current assets 60,938,978 67,735,103

Deferred charges, net 21,195,553 21,252,965
--------------- -----------------

Total assets $ 547,049,631 $ 557,726,118
=============== =================

See accompanying notes to financial statements.

Chugach Electric Association, Inc.
Balance Sheets (continued)
(Unaudited)

Liabilities, Equities and Margins June 30, 2008 December 31, 2007
- ------------------------------------------------------ ------------- -----------------

Equities and margins:
Memberships $ 1,365,648 $ 1,345,013
Patronage capital 142,199,069 138,713,338
Other 9,192,959 9,252,085
------------- -----------------
Total equities and margins 152,757,676 149,310,436

Long-term obligations, excluding current installments:
Bonds payable 270,000,000 299,600,000
National Bank for Cooperatives 42,899,657 45,823,500
------------- -----------------
Total long-term obligations 312,899,657 345,423,500

Current liabilities:
Current installments of long-term obligations 4,365,782 10,106,804
Short-term obligations 29,713,659 0
Accounts payable 7,015,319 7,935,566
Consumer deposits 2,417,082 2,403,051
Fuel cost over-recovery 0 1,596,010
Accrued interest 6,167,772 6,304,609
Salaries, wages and benefits 5,954,048 5,953,873
Fuel 22,282,151 22,337,653
Other liabilities 1,892,534 3,680,212
------------- -----------------
Total current liabilities 79,808,347 60,317,778

Deferred compensation 292,709 768,041
Deferred liabilities 1,291,242 1,906,363
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Total liabilities, equities and margins $ 547,049,631 $ 557,726,118
============= =================

See accompanying notes to financial statements.

Chugach Electric Association, Inc.
Statements of Operations
(Unaudited)

Three months ended June 30 Six months ended June 30

2008 2007 2008 2007
------------- ------------- ------------- -------------

Operating revenues $ 62,483,023 $ 59,127,575 $ 134,354,311 $ 130,580,699

Operating expenses:
Fuel 27,446,913 24,332,261 59,533,462 52,640,200
Production 4,677,243 3,984,174 8,446,566 7,458,898
Purchased power 8,016,659 7,901,817 15,617,983 18,643,184
Transmission 1,587,962 1,894,420 2,918,740 3,618,572
Distribution 3,171,829 3,417,793 5,939,732 6,757,986
Consumer accounts 1,339,072 1,246,700 2,692,190 2,460,049
Administrative, general and other 4,955,695 5,093,144 10,002,716 10,174,695
Depreciation and amortization 7,593,816 7,292,600 14,974,135 14,524,536
------------- ------------- ------------- -------------
Total operating expenses 58,789,189 55,162,909 120,124,524 116,278,120

Interest on long-term debt 5,205,540 6,063,922 10,880,750 12,155,773
Other 280,722 2,635 352,344 89,029
Charged to construction (101,738) (103,983) (217,832) (263,213)
------------- ------------- ------------- -------------
Net interest expenses 5,384,524 5,962,574 11,015,262 11,981,589
------------- ------------- ------------- -------------
Net operating margins (1,690,690) (1,997,908) 3,214,525 2,320,990

Nonoperating margins:
Interest income 94,727 173,868 212,315 377,126
Capital credits, patronage dividends and other 26,964 59,769 60,968 126,431
------------- ------------- ------------- -------------
Total nonoperating margins 121,691 233,637 273,283 503,557
------------- ------------- ------------- -------------

Assignable margins $ (1,568,999) $ (1,764,271) $ 3,487,808 $ 2,824,547
============= ============= ============= =============

See accompanying notes to financial statements.

Chugach Electric Association, Inc.
Statements of Cash Flows
(Unaudited)

Six months ended June 30
2008 2007
------------- -------------

Cash flows from operating activities:
Assignable margins $ 3,487,808 $ 2,824,547
------------- -------------
Adjustments to reconcile assignable margins to net cash provided activities:
Depreciation and amortization 17,478,854 15,956,201
Capitalized interest (278,959) (388,799)
Other 162 40

Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 8,931,829 5,689,639
Fuel cost under-recovery (4,573,046) 0
Materials and supplies 1,343,081 (2,071,843)
Prepayments 208,287 226,983
Other assets 91,521 163,379
Deferred charges (1,639,791) (534,653)

Increase (decrease) in liabilities:
Accounts payable (397,987) 153,592
Consumer deposits 14,031 (2,222)
Fuel cost over-recovery (1,596,010) 1,260,080
Accrued interest (136,837) 34,290
Salaries, wages and benefits 176 (9,215)
Fuel (55,502) 2,214,026
Other liabilities (453,750) 603,203
Deferred liabilities (7,572) 12,485
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Net cash provided by operating activities 22,416,295 26,131,733
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Investing activities:
- ---------------------
Extension and replacement of plant (12,677,497) (16,227,417)
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Net cash used for investing activities (12,677,497) (16,227,417)
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Cash flows from financing activities:
- -------------------------------------
Repayments of long-term obligations (38,264,865) (7,728,569)
Proceeds from short-term borrowing 29,713,659 0
Memberships and donations received (refunded) (38,491) 9,284
Retirement of patronage capital and estate payments (1,336,004) (555,506)
Net refunds on consumer advances for construction (607,549) (264,228)
------------- -------------
Net cash used for financing activities (10,533,250) (8,539,019)
------------- -------------
Net increase (decrease) in cash and cash equivalents (794,452) 1,365,297

Cash and cash equivalents at beginning of period $ 6,209,936 $ 9,844,914
- ------------------------------------------------ ------------- -------------

Cash and cash equivalents at end of period $ 5,415,484 $ 11,210,211
- ------------------------------------------ ============= =============
Supplemental disclosure of non-cash investing and financing activities
Retirement of plant $ 1,008,914 $ 647,159
Extension and replacement of plant included in accounts payable $ 1,293,360 $ 665,694
Supplemental disclosure of cash flow information - interest expense paid,
excluding amounts capitalized $ 11,152,099 $ 11,947,299
============= =============

See accompanying notes to financial statements.

Chugach Electric Association, Inc.
Notes to Financial Statements
June 30, 2008 and 2007

1. PRESENTATION OF FINANCIAL INFORMATION

The accompanying unaudited interim financial statements include the accounts of
Chugach Electric Association, Inc. (Chugach) and have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements. They should be read in
conjunction with our audited financial statements for the year ended December
31, 2007, filed as part of our annual report on Form 10-K. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. The results of operations
for interim periods are not necessarily indicative of the results that may be
expected for an entire year or any other period.

2. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

a. Description of Business

Chugach is the largest electric utility in Alaska. Chugach is engaged in the
generation, transmission and distribution of electricity to directly serve
retail customers in the Anchorage and upper Kenai Peninsula areas. Through an
interconnected regional electrical system, Chugach's power flows throughout
Alaska's Railbelt, a 400-mile-long area stretching from the coastline of the
southern Kenai Peninsula to the interior of the state, including Alaska's
largest cities, Anchorage and Fairbanks.

Chugach also supplies much of the power requirements for three of its wholesale
customers, Matanuska Electric Association, Inc. (MEA), Homer Electric
Association, Inc. (HEA), and the City of Seward (Seward).

Chugach operates on a not-for-profit basis and accordingly, seeks only to
generate revenues sufficient to pay operating and maintenance costs, the cost of
purchased power, capital expenditures, depreciation, and principal and interest
on all indebtedness and to provide for reserves. Chugach is subject to the
regulatory authority of the Regulatory Commission of Alaska (RCA).

b. Management Estimates

In preparing the financial statements, management of Chugach is required to make
estimates and assumptions relating to the reporting of assets and liabilities
and the disclosure of contingent assets and liabilities as of the date of the
balance sheet and revenues and expenses for the reporting period. Estimates
include allowance for doubtful accounts, unbilled revenue and the estimated
useful life of utility plant. Actual results could differ from those estimates.

Chugach Electric Association, Inc.
Notes to Financial Statements
June 30, 2008 and 2007

c. Regulation

The accounting records of Chugach conform to the Uniform System of Accounts as
prescribed by the Federal Energy Regulatory Commission (FERC). Chugach meets the
criteria, and accordingly, follows the accounting and reporting requirements of
Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the
Effects of Certain Types of Regulation" (SFAS No.71).

SFAS No. 71 provides for the recognition of regulatory assets and liabilities as
allowed by regulators for costs or credits that are reflected in current rates
or are considered probable of being included in future rates. The regulatory
assets or liabilities are then relieved as the cost or credit is reflected in
rates.

d. Income Taxes

Chugach is exempt from federal income taxes under the provisions of Section
501(c)(12) of the Internal Revenue Code, except for unrelated business income.
For the six months ended June 30, 2008, Chugach received no unrelated business
income. In addition, Chugach collects sales tax and is assessed gross receipts
and excise taxes which are presented on a net basis in accordance with Emerging
Issues Task Force (EITF) No. 06-3 "How Taxes Collected from Customers and
Remitted to Governmental Authorities Should Be Presented in the Income
Statement."

e. Presentation of Financial Information

Certain reclassifications have been made to the 2007 financial statements to
conform to the 2008 presentation. The reclassifications represent the non-cash
change in accounts payable associated with capital expenditures and capital
credit retirements.

Cash Flow reclassifications
- ---------------------------

Net cash provided by operating activities $ 3,668,917
Net cash used in investing activities $ (3,269,620)
Net cash used in financing activities $ (399,297)

3. REGULATORY MATTERS

Revision to Current Depreciation Rates (Docket No. U-04-102)

Chugach implemented new depreciation rates effective January 1, 2004, based on
an update of the 1999 Depreciation Study utilizing Electric Plant in Service
balances as of December 31, 2002. The 2002 Depreciation Study was submitted to
the RCA for approval on November 19, 2004. On March 9, 2005, the RCA ruled in
Order No. 2 that depreciation rates may not be implemented without prior
approval of the RCA.

Chugach Electric Association, Inc.
Notes to Financial Statements
June 30, 2008 and 2007

In Order No. 9 dated January 10, 2006, the RCA ruled substantially in Chugach's
favor approving the 2002 Depreciation Study with certain changes to the proposed
depreciation rates. The main effect of this decision was to allow Chugach to
revise its depreciation rates effective January 1, 2005. Because Chugach did not
request changes to the electric rates charged to our customers based on the
proposed new depreciation rates, there was no immediate electric rate impact.

Wholesale customers MEA and HEA were active in the proceeding. Subsequently, MEA
and HEA filed an appeal of the RCA's decision in Superior Court, see "Footnote
5, Legal Proceedings - Matanuska Electric Association, Inc. (MEA) v. State of
Alaska, Regulatory Commission of Alaska, Superior Court Case No. 3AN-06-8243
Civil." HEA later dismissed its appeal leaving MEA's claim focusing mainly on
the question of whether implementation of the new depreciation rates as of
January 1, 2005 constituted illegal retroactive rate making. Oral argument
before the Superior Court was held on July 15, 2008. On July 21, 2008, the Court
issued a decision affirming the RCA's January 10, 2006 decision.

2005 Test Year General Rate Case (Docket U-06-134)

On September 29, 2006, Chugach filed a general rate case based on a 2005 test
year with the RCA. Overall revenues were proposed to increase $2.8 million in
the initial filing.

A settlement agreement reached in July 2007 between several of the intervenors
and Chugach was accepted by the RCA in Order No. 15. On April 1, 2008, the RCA
issued Order No. 21 in Docket U-06-134. In this Order, the RCA approved the
rates from the Settlement Agreement among Chugach, HEA and Seward that it had
previously accepted. MEA did not join the Settlement Agreement and this Order
addressed the issues that it had raised. The effect of Order 21 is that overall
revenues will decrease by 0.8%, or $0.9 million, with retail revenue decreasing
by 4.8%, or $4.2 million and wholesale revenue increasing by 11.0%, or $3.3
million. Order No. 21 was effective June 1, 2008.

On April 21, 2008, Chugach filed a Petition for Reconsideration of Order 21.
Chugach asked the RCA to reconsider its decisions on the allocator for long-term
debt and interest expense and the requirement for specific scenarios in
Chugach's Financial Management Plan (FMP). Chugach also proposed corrections to
the RCA calculation of the debt allocator it ordered. No other parties filed for
reconsideration of the order. The RCA had until May 21, 2008, to render a
decision on Chugach's petition.

On May 21, 2008, the RCA issued Order No. 22. The RCA revised the long-term debt
allocator from 67.12% to 68.46%. This finding increased MEA's revenue
requirement to Chugach by $107,818. The RCA reaffirmed its requirement for FMP
scenarios.

On May 30, 2008, the RCA issued Order No. 23, accepting Chugach's compliance
filing and approving tariff sheets that incorporate the RCA's findings in Order
No. 22.

Chugach Electric Association, Inc.
Notes to Financial Statements
June 30, 2008 and 2007

On June 4, 2008, MEA filed a Petition for Reconsideration of Order No. 23,
expressing several concerns about Chugach's computation of depreciation
expenses. The RCA has set a deadline of September 4, 2008 for its decision.

4. LINES OF CREDIT

Chugach maintains a $7.5 million line of credit with CoBank, ACB (CoBank). The
CoBank line of credit will expire on October 31, 2008, subject to annual renewal
at the discretion of the parties. Chugach utilized this line of credit in the
first quarter of 2008 and had $5.5 million outstanding at March 31, 2008. In
April and May of 2008, Chugach had additional line of credit activity, however,
in June of 2008, Chugach paid off the outstanding balance on this line of
credit. At June 30, 2008 and 2007, there was no outstanding balance on this line
of credit. In August of 2008, Chugach borrowed an additional $3.5 million on
this line of credit. The borrowing rate is calculated using the CoBank BaseRate
on the first day of the week plus 3%. The borrowing rate at June 30, 2008 and
2007 was 3.76% and 7.00%, respectively.

In addition, Chugach has an annual line of credit of $50 million available with
the National Rural Utilities Cooperative Finance Corporation (NRUCFC). On March
20, 2008, Chugach borrowed $29.7 million on this line of credit to redeem the
outstanding principal amount and pay accrued interest on the 2002 Series B
Bonds. This single borrowing represented the outstanding balance on this line of
credit at June 30, 2008. The NRUCFC Revolving Line Of Credit Agreement requires
that Chugach, for each 12-month period, for a period of at least five
consecutive days, pay down the entire outstanding principal balance. Repayment
of this line of credit is required by March 15, 2009, and is therefore
classified as short-term. Management is currently evaluating long-term financing
options. Chugach did not utilize this line of credit during the second quarter
of 2007 and had no balance outstanding at June 30, 2007. The borrowing rate is
calculated using the total rate per annum as may be fixed by NRUCFC and will not
exceed the Prevailing Prime Rate, plus one percent per annum. The borrowing rate
at June 30, 2008 and 2007 was 3.31% and 6.90%, respectively. The NRUCFC line of
credit expires October 14, 2012.

The CoBank and NRUCFC lines of credit are immediately available for
unconditional borrowing.

5. LEGAL PROCEEDINGS

Matanuska Electric Association, Inc. (MEA) v. State of Alaska, Regulatory
Commission of Alaska, Superior Court Case No. 3AN-06-8243 Civil

On May 17, 2006, MEA appealed and on May 30, 2006, HEA cross appealed the RCA's
decision in Docket No. U-04-102, see "Footnote 2, Regulatory Matters - Revision
to Current Depreciation Rates (Docket No. U-04-102)." On appeal, MEA claims the
RCA's decision dated January 10, 2006, to authorize Chugach to implement new
depreciation rates as of January 1, 2005, constituted illegal retroactive rate
making. MEA further contends that the RCA's reliance on avoidance of regulatory
lag as a basis for its decision was improper. MEA also challenged

Chugach Electric Association, Inc.
Notes to Financial Statements
June 30, 2008 and 2007

certain of the RCA's discovery rulings. Chugach joined the State of Alaska in
defending the RCA's rulings. HEA stipulated with the other parties to dismiss
its cross appeal which the Court granted by order dated September 11, 2007. Oral
argument was held on July 15, 2008, and on July 21, 2008, the Court issued a
decision affirming the RCA's January 10, 2006 decision.

MEA could appeal the Superior Court's decision to the Alaska Supreme Court. In
the opinion of management, an adverse outcome is not likely to have a material
adverse effect on Chugach's results of operations, financial condition or
liquidity. No reserves have been established for this matter.

6. RECENT ACCOUNTING PRONOUNCEMENTS

SFAS 141R "Business Combinations"

In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS
No. 141R, "Business Combinations." SFAS No. 141R replaces FASB Statement No.
141, "Business Combinations." This statement retains the requirements in SFAS
No. 141 that the acquisition method of accounting be used and for an acquirer to
be identified for each business combination. This statement defines the acquirer
and establishes the acquisition date. This statement applies only to business
combinations in which control was obtained by transferring consideration. By
applying the same method, this statement improves the comparability of the
information about business combinations provided in financial reports. This
statement applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. An entity may not apply it
before that date. Chugach will begin application of SFAS No. 141R on January 1,
2009, and it does not expect to have a material affect on our results of
operations, financial position, and cash flows.

SFAS 161 "Disclosures about Derivative Instruments and Hedging Activities - an
amendment of FASB Statement No. 133"

In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities - an amendment of FASB Statement No. 133."
SFAS No. 161 changes the disclosure requirements for derivative instruments and
hedging activities. SFAS No. 161 is effective for financial statements issued
for fiscal years beginning after November 15, 2008. Chugach will begin
application of SFAS No. 161 on January 1, 2009, and does not expect it to have a
material effect on our results of operations, financial position, and cash
flows.

FSP FAS 157-1 "Application of FASB Statement No. 157 to FASB Statement No. 13
and Other Accounting Pronouncements That Address Fair Value Measurements for
Purposes of Lease Classification or Measurement under Statement 13"

In February 2008, the FASB issued FASB Staff Position (FSP) FAS 157-1,
"Application of FASB Statement No. 157 to FASB Statement No. 13 and Other
Accounting Pronouncements That Address Fair Value Measurements for Purposes of
Lease Classification or Measurement under Statement 13." FSP FAS 157-1 restricts
the application of SFAS No. 157 "Fair Value

Chugach Electric Association, Inc.
Notes to Financial Statements
June 30, 2008 and 2007

Measurements" to exclude SFAS No. 13 "Accounting for Leases," and other
accounting pronouncements that address fair value measurements for purposes of
lease classification or measurement. However, FSP FAS 157-1 stresses its
application to assets acquired and liabilities assumed in business combinations
required to be measured at fair value under SFAS No. 141 "Business Combinations"
regardless of their relation to leases. FSP FAS 157-1 is effective for financial
statements issued for fiscal years beginning after November 15, 2007. Chugach
began application of SFAS No. 157 on January 1, 2008, which did not have a
material effect on our results of operations, financial position, and cash
flows.

FSP FAS 157-2 "Effective Date of FASB Statement No. 157"

In February 2008, the FASB issued FSP FAS 157-2, "Effective Date of FASB
Statement No. 157." FSP FAS 157-2 deferred the effective date of applying SFAS
No. 157 to nonfinancial assets and nonfinancial liabilities, from financial
statements issued for fiscal years beginning after November 15, 2007, to fiscal
years beginning after November 15, 2008. FSP FAS 157-2 is effective upon
issuance. Chugach will begin application of SFAS No. 157 to nonfinancial assets
and nonfinancial liabilities on January 1, 2009, which is not expected to have a
material effect on our results of operations, financial position, and cash
flows.

FSP FAS 142-3 "Determination of the Useful Life of Intangible Assets"

In April 2008, the FASB issued FSP FAS 142-3, "Determination of the Useful Life
of Intangible Assets." FSP FAS 142-3 amends SFAS No. 142, "Goodwill and Other
Intangible Assets," to define the factors to be considered in developing the
renewal or extension assumptions used to determine the useful life of the
recognized intangible assets under SFAS No. 142. SFAS No. 142 is effective for
financial statements issued for fiscal years beginning after December 15, 2008,
and early adoption is prohibited. Chugach will begin application FSP FAS 142-3
to intangible assets on January 1, 2009, which is not expected to have a
material effect on our results of operations, financial position, and cash
flows.

EITF 08-5 "Issuer's Accounting for Liabilities Measured at Fair Value with a
Third-Party Credit Enhancement"

In June 2008, the FASB's Emerging Issues Task Force (EITF) issued EITF 08-5,
"Issuer's Accounting for Liabilities Measured at Fair Value with a Third-Party
Credit Enhancement."

EITF 08-5 establishes how to treat the debt issued with a third-party credit
enhancement that is inseparable from the debt instrument. EITF 08-5 is effective
for the first reporting period following the FASB's ratification on June 25,
2008. Chugach will begin application of EITF 08-5 on July 1, 2008, which is not
expected to have a material effect on our results of operations, financial
position, and cash flows.

Chugach Electric Association, Inc.
Notes to Financial Statements
June 30, 2008 and 2007

7. FAIR VALUES OF ASSETS AND LIABILITIES

On January 1, 2008, Chugach adopted the provisions of SFAS No. 157, Fair Value
Measurements. SFAS No. 157 defines fair value, establishes a consistent
framework for measuring fair value and expands disclosure requirements for fair
value measurements.

Fair Value Hierarchy

In accordance with SFAS No. 157 Chugach groups its financial assets and
liabilities measured at fair value in three levels, based on the markets in
which the assets and liabilities are traded and the reliability of the
assumptions used to determine fair value. These levels are:

Level 1 - Valuation is based upon quoted prices for identical instruments traded
in active exchange markets, such as the New York Stock Exchange. Level 1 also
includes U.S. Treasury and federal agency securities, which are traded by
dealers or brokers in active markets. Valuations are obtained from readily
available pricing sources for market transactions involving identical assets or
liabilities.

Level 2 - Valuation is based upon quoted prices for similar instruments in
active markets, quoted prices for identical or similar instruments in markets
that are not active, and model-based valuation techniques for which all
significant assumptions are observable in the market.

Level 3 - Valuation is generated from model-based techniques that use
significant assumptions not observable in the market. These unobservable
assumptions reflect Chugach's estimates of assumptions that market participants
would use in pricing the asset or liability. Valuation techniques include use of
option pricing models, discounted cash flow models and similar techniques.

The table below presents the balance of Chugach's non-qualified deferred
compensation plan measured at fair value on a recurring basis.

Total Level 1 Level 2 Level 3
---------- ---------- ------- -------
$ 292,709 $ 292,709 $ 0 $ 0

Chugach had no Level 2 or Level 3 assets or liabilities measured at fair value
on a recurring basis.

8. ENVIRONMENTAL MATTERS

The Clean Air Act and Environmental Protection Agency (EPA) regulations under
the act (the "Clean Air Act") establish ambient air quality standards and limit
the emission of many air pollutants. Some Clean Air Act programs that regulate
electric utilities, notably the Title IV "acid rain" requirements, do not apply
to facilities located in Alaska. The EPA's anticipated regulations to limit
mercury emissions from fossil-fired steam-electric generating facilities are not
expected to materially impact Chugach because our thermal power plants burn
exclusively natural gas.

Chugach Electric Association, Inc.
Notes to Financial Statements
June 30, 2008 and 2007

New Clean Air Act regulations impacting electric utilities may result from
future events or may result from new regulatory programs that may be established
to address problems such as global warming. While we cannot predict whether any
new regulation would occur or its limitation, it is possible that new laws or
regulations could increase our capital and operating costs. We have obtained or
applied for all Clean Air Act permits currently required for the operation of
our generating facilities.

In March 2007, Chugach conducted emissions testing at the Bernice Lake Power
Plant which indicated that two of the gas turbines at the facility were
exceeding the New Source Performance Standards (NSPS) emission limit for
nitrogen oxides (NOx). Chugach voluntarily limited the power output of these
turbines to ensure interim compliance with the NSPS regulations and is currently
in the final stages of commissioning a water injection system to control NOx
emissions from the turbines. With the water injection system, Chugach will again
be able to fully utilize the power output from these turbines while complying
with the NSPS regulations.

Chugach is also currently working with the Alaska Department of Environmental
Conservation (ADEC) to resolve the issue of past non-compliance with the Bernice
Lake turbines. On March 26, 2008, the ADEC issued a formal Notice of Violation
(NOV) to Chugach regarding the NSPS issues. Specifically, the NOV alleges that
Chugach violated its operating permit and air quality regulations by operating
two generating units at the Bernice Lake Power Plant in excess of the NOx
emission limit; failing to perform a source test to demonstrate compliance with
regulations; and failing to conduct reasonable inquiry regarding source test
compliance for the 2006 annual compliance certification. A meeting with ADEC to
discuss settlement of the identified alleged violations is scheduled for August
22, 2008. It is not possible at this time to reasonably anticipate the amount of
a potential penalty that may result from this NOV. In the opinion of management,
a potential penalty is not likely to have a material adverse effect on Chugach's
results of operations, financial condition or liquidity.

Chugach is subject to numerous other environmental statutes including the Clean
Water Act, the Resource Conservation and Recovery Act, the Toxic Substances
Control Act, the Endangered Species Act, and the Comprehensive Environmental
Response, Compensation and Liability Act and to the regulations implementing
these statutes. We do not believe that compliance with these statutes and
regulations to date has had a material impact on our financial condition or
results of operation. However, new laws or regulations, implementation of final
regulations or changes in or new interpretations of these laws or regulations
could result in significant additional capital or operating expenses.

9. SUBSEQUENT EVENTS

Chugach Electric Association, Inc.
Notes to Financial Statements
June 30, 2008 and 2007

and AML&P regarding joint development of the South Anchorage Power Project. In
June 2008, AEEC elected to withdraw from further participation discussions and
pursue their own generation project. On July 30, 2008, the Chugach Board of
Directors authorized the CEO to sign the Participation, Operation and
Maintenance (O&M) and Lease Agreements (Agreements) for the South Central
Project (Project) with AML&P. AML&P is expected to approve and sign the
Agreements on August 13, 2008 when Chugach's CEO will also sign them. MEA has
expressed an interest in participating in the Project and documents have been
prepared that contain the terms under which Chugach and AML&P would be willing
to negotiate with MEA.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Reference is made to the information contained under the caption "CAUTION
REGARDING FORWARD-LOOKING STATEMENTS" at the beginning of this report.

RESULTS OF OPERATIONS

Current Year Quarter Versus Prior Year Quarter

Assignable margins did not materially change during the second quarter of 2008
compared to the same quarter in 2007.

Operating revenues, which include sales of electric energy to retail, wholesale
and economy energy customers and other miscellaneous revenues, increased $3.4
million, or 5.7%, in the second quarter of 2008 compared to the same quarter in
2007. This increase was primarily due to higher economy energy sales and higher
fuel expense recovered through the fuel and purchased power surcharge mechanism.

Retail revenue increased in the second quarter of 2008 compared to the same
quarter in 2007 due primarily to an increase in fuel expense recovered through
the fuel and purchased power surcharge mechanism. Even though retail kWh sales
were higher in the second quarter of 2008 compared to the same quarter in 2007,
base rates charged to retail customers decreased effective June 1, 2008 as a
result of Chugach's 2005 Test Year Rate Case.

Wholesale revenue increased in the second quarter of 2008 compared to the same
quarter in 2007. Even though kWh sales decreased in the second quarter of 2008
compared to the same quarter in 2007, base rates charged to wholesale customers
increased effective June 1, 2008, as a result of Chugach's 2005 Test Year Rate
Case. Economy energy sales increased during the second quarter of 2008 compared
to the same quarter in 2007 due primarily to spot market sales to Golden Valley
Electric Association, Inc. (GVEA).

Based on the results of fixed and variable cost recovery established in
Chugach's last rate case, wholesale sales to HEA, MEA and Seward contributed
approximately $6.2 million to Chugach's fixed costs for the quarter ended June
30, 2008 and $5.8 million for the quarter ended June 30, 2007.

The following table shows the base rate sales revenue and fuel and purchased
power revenue by customer class that is included in revenue for the quarters
ended June 30, 2008 and 2007:

Base Rate Sales Revenue Fuel and Purchased Power Revenue Total Revenue
-------------------------------- -------------------------------- --------------------------------
2008 2007 % Variance 2008 2007 % Variance 2008 2007 % Variance
-------------------------------- -------------------------------- --------------------------------

Retail
Residential $ 10.2 $ 10.4 (1.9%) $ 6.7 $ 6.4 4.7% $ 16.9 $ 16.8 0.6%
Small Commercial $ 1.9 $ 1.9 0.0% $ 1.4 $ 1.4 0.0% $ 3.3 $ 3.3 0.0%
Large Commercial $ 6.9 $ 7.0 (1.4%) $ 6.9 $ 6.5 6.2% $ 13.8 $ 13.5 2.2%
Lighting $ 0.4 $ 0.3 33.3% $ 0.0 $ 0.0 0.0% $ 0.4 $ 0.3 33.3%
Total Retail $ 19.4 $ 19.6 (1.0%) $ 15.0 $ 14.3 4.9% $ 34.4 $ 33.9 1.5%

Wholesale
HEA $ 2.8 $ 2.7 3.7% $ 6.3 $ 6.7 (6.0%) $ 9.1 $ 9.4 (3.2%)
MEA $ 4.3 $ 3.8 13.2% $ 8.5 $ 8.2 3.7% $ 12.8 $ 12.0 6.7%
SES $ 0.3 $ 0.3 0.0% $ 0.8 $ 0.8 0.0% $ 1.1 $ 1.1 0.0%
Total Wholesale $ 7.4 $ 6.8 8.8% $ 15.6 $ 15.7 (0.6%) $ 23.0 $ 22.5 2.2%

Economy Sales $ 1.3 $ 0.5 160.0% $ 3.1 $ 1.4 121.4% $ 4.4 $ 1.9 131.6%
Miscellaneous $ 0.7 $ 0.8 (12.5%) $ 0.0 $ 0.0 0.0% $ 0.7 $ 0.8 (12.5%)

Total Revenue $ 28.8 $ 27.7 4.0% $ 33.7 $ 31.4 7.3% $ 62.5 $ 59.1 5.8%

The following table summarizes kWh sales for the quarter ended June 30:

2008 2007
Customer kWh kWh
------------- ----------- -----------

Retail 273,220,992 271,660,524
Wholesale 293,959,650 303,815,046
Economy Energy 62,262,380 32,288,960
----------- -----------

Total 629,443,022 607,764,530
=========== ===========

In June of 2008, base rates charged to retail customers decreased 4.8 percent
and base rates charged to wholesale customers HEA, MEA and SES increased 13.0
percent, 10.5 percent and 9.6 percent, respectively. The base rate changes were
the result of Chugach's 2005 Test Year Rate Case adjudicated under Docket
U-06-134, see "Footnote 3, Regulatory Matters - 2005 Test Year General Rate Case
(Docket No. U-06-134)."

Total operating expenses increased $3.6 million, or 6.6%, in the second quarter
of 2008 over the same quarter in 2007.

Fuel expense increased $3.1 million, or 12.8%, in the second quarter of 2008
compared to the same quarter in 2007, primarily due to transmission line work at
Dynamite Slough and other maintenance activities, which limited our generation
in 2007, as well as an increase in fuel price. In the second quarter of 2008,
Chugach used 6,648,669 MCF of fuel at an average effective price of $4.86 per
MCF, which does not include 997,594 MCF of fuel that is recorded as purchased
power expense. In the second quarter of 2007, Chugach used 6,313,840 MCF of fuel
at an average effective price of $4.58 per MCF, which does not include 1,002,650
MCF of fuel that is recorded as purchased power.

Production expense increased $693.1 thousand, or 17.4%, in the second quarter of
2008 compared to the same quarter in 2007 due primarily to expenses associated
with the Beluga Unit 7 inspection in 2008, which was greater in scope than the
Beluga Unit 3 inspection in 2007, as well as increased amortization associated
with the Beluga River Gas Compression project.

Purchased power expense did not materially change in the second quarter of 2008
compared to the same quarter in 2007. In the second quarter of 2008, Chugach
purchased 146,705 MWh of energy at an average effective price of 5.26 cents per
MWh. In the second quarter of 2007, Chugach purchased 140,855 MWh of energy at
an average effective price of 5.31 cents per MWh.

Transmission expense decreased $306.5 thousand, or 16.2%, in the second quarter
of 2008 compared to the same quarter in 2007. The decrease is primarily due to
lower substation labor caused by the timing of projects and vacancies in 2008,
as well as costs associated with the reinforcement of a transmission tower
foundation in 2007.

Distribution expense decreased $246.0 thousand, or 7.2%, in the second quarter
of 2008 compared to the same quarter in 2007. The decrease is due primarily to
substation maintenance performed in the second quarter of 2007, as well as less
right of way clearing in the second quarter of 2008 compared to the same quarter
in 2007.

Consumer accounts increased $92.4 thousand, or 7.4%, in the second quarter of
2008 compared to the same quarter in 2007. The increase is primarily related to
higher advertising and retention costs associated with capital credit
retirements.

Administrative, general and other expenses did not materially change in the
second quarter of 2008 compared to the same quarter in 2007.

Interest on long-term debt decreased $858.4 thousand, or 14.2%, in the second
quarter of 2008 compared to the same quarter of 2007. The decrease was primarily
related to the use of our NRUCFC line of credit to redeem the outstanding
principal amount and pay accrued interest on the 2002 Series B Bonds in March of
2008, resulting in a shift from long-term interest expense to short-term
interest expense. The decrease was also due to continued principal payments as
well as lower interest rates in the second quarter of 2008 compared to the same
period in 2007.

Other interest expense increased $278.1 thousand due to the use of the NRUCFC
line of credit described above and the increased use of our CoBank line of
credit in the second quarter of 2008 compared to the same quarter in 2007. This
increase was partially offset by a decrease in interest rates in the second
quarter of 2008 compared to the same period in 2007.

Interest charged to construction did not materially change during the second
quarter of 2008 compared to the same quarter in 2007.

Non-operating margins decreased $111.9 thousand, or 47.9%, in the second quarter
of 2008 compared to the same quarter in 2007. The decrease is primarily due to
lower interest income as a result of lower interest rates in the second quarter
of 2008 compared to the same period in 2007. This decrease was also due to lower
2007 margins which is used in the average equity balance calculation of
Allowance for Funds Used During Construction (AFUDC).

Current Year to Date Versus Prior Year to Date

Assignable margins increased $663.3 thousand, or 23.5%, during the first half of
2008 compared to the same period in 2007. Year to date 2008 margins were up
primarily due to lower interest expense which is being offset by a decrease in
Interest During Construction (IDC) and a decrease in non-operating margins.

Total operating revenues, which include sales of electric energy to retail,
wholesale and economy energy customers and other miscellaneous revenues,
increased $3.8 million, or 2.9%, in the first six months of 2008 compared to the
first six months of 2007. This increase was primarily due to an increase in kWh
sales and an increase in fuel expense recovered through the fuel and purchased
power surcharge mechanism.

Retail revenue decreased in the first six months of 2008 compared to the first
six months of 2007 due to lower kWh sales primarily due to a change in consumer
consumption patterns in response to significant increases in the price of
natural gas. The decrease was also due to a 4.8% decrease in base rates charged
to retail customers effective June 1, 2008, as a result of Chugach's 2005 Test
Year Rate Case. Even though fuel expense increased in the first six months of
2008 compared to the first six months of 2007, the increase in economy energy
sales reduced fuel and purchased power expense recovered through the fuel and
purchased power surcharge mechanism, which also attributed to the decrease in
revenue.

Wholesale revenue decreased in the first six months of 2008 compared to the
first six months of 2007. Even though kWh sales increased, the base rates
charged to wholesale customers increased effective June 1, 2008, and fuel
expense increased in the first six months of 2008 compared to the first six
months of 2007, total wholesale revenue decreased. The cause of the overall
decrease was due to higher economy energy sales which reduced fuel and purchased
power expense recovered through the fuel and purchased power surcharge
mechanism. As previously discussed, economy energy sales were higher in the
first six months of 2008 compared to the same period in 2007. This was due to
Dynamite Slough transmission line work, as well as other maintenance activities
in 2007, which limited our ability to make economy energy sales, as well as spot
market sales to GVEA in 2008.

Based on the results of fixed and variable cost recovery established in
Chugach's rate cases, wholesale sales to HEA, MEA and Seward contributed
approximately $13.4 million and $12.7 million to Chugach's fixed costs for the
six months ended June 30, 2008 and 2007, respectively.

The following table shows the base rate sales revenue and fuel and purchased
power revenue by customer class that is included in revenue for the six months
ended June 30, 2008 and 2007:

Base Rate Sales Revenue Fuel and Purchased Power Revenue Total Revenue
------------------------------ -------------------------------- ----------------------------------
2008 2007 % Variance 2008 2007 % Variance 2008 2007 % Variance
------------------------------ -------------------------------- ----------------------------------

Retail
Residential $ 23.5 $ 23.7 (0.8%) $ 15.1 $ 15.5 (2.6%) $ 38.6 $ 39.2 (1.5%)
Small Commercial $ 4.2 $ 4.3 (2.3%) $ 3.1 $ 3.3 (6.1%) $ 7.3 $ 7.6 (3.9%)
Large Commercial $ 14.2 $ 14.7 (3.4%) $ 14.0 $ 14.3 (2.1%) $ 28.2 $ 29.0 (2.8%)
Lighting $ 0.6 $ 0.6 0.0% $ 0.1 $ 0.0 0.0% $ 0.7 $ 0.6 16.7%
Total Retail $ 42.5 $ 43.3 (1.8%) $ 32.3 $ 33.1 (2.4%) $ 74.8 $ 76.4 (2.1%)

Wholesale
HEA $ 5.5 $ 5.3 3.8% $ 12.8 $ 13.3 (3.8%) $ 18.3 $ 18.6 (1.6%)
MEA $ 10.0 $ 9.5 5.3% $ 18.4 $ 19.2 (4.2%) $ 28.4 $ 28.7 (1.0%)
SES $ 0.5 $ 0.6 (16.7%) $ 1.7 $ 1.7 0.0% $ 2.2 $ 2.3 (4.3%)
Total Wholesale $ 16.0 $ 15.4 3.9% $ 32.9 $ 34.2 (3.8%) $ 48.9 $ 49.6 (1.4%)

Economy Sales $ 2.5 $ 0.8 212.5% $ 6.7 $ 2.2 204.5% $ 9.2 $ 3.0 206.7%
Miscellaneous $ 1.4 $ 1.6 (12.5%) $ 0.0 $ 0.0 0.0% $ 1.4 $ 1.6 (12.5%)

Total Revenue $ 62.4 $ 61.1 2.1% $ 71.9 $ 69.5 3.5% $ 134.3 $ 130.6 2.8%

The following table summarizes kWh sales for the six months ended June 30:

2008 2007
Customer kWh kWh
-------------- ------------- -------------
Retail 603,632,487 607,584,281
Wholesale 650,744,675 648,138,884
Economy Energy 134,859,080 49,265,910
------------- -------------
Total 1,389,236,242 1,304,989,075
============= =============

Total operating expenses increased $3.8 million, or 3.3%, in the first six
months of 2008 over the same period of 2007.

Fuel expense increased $6.9 million, or 13.1%, due to an increase in fuel being
used during the first six months of 2008 compared to the same time period of
2007 caused by the Dynamite Slough transmission line work and maintenance
activities, which limited generation in 2007. For the first six months of 2008,
Chugach used 14,678,809 MCF of fuel at an average effective price of $4.71 per
MCF, which does not include 2,036,762 MCF of fuel that is recorded in purchased
power. For the same period in 2007, Chugach used 12,964,814 MCF of fuel at an
average effective price of $4.81 per MCF, which does not include 2,025,254 MCF
of fuel that is recorded in purchased power.

Production expense increased $1.0 million, or 13.2%, in the first half of 2008
compared to the same period in 2007 due to expenses associated with the Beluga
Unit 7 inspection in 2008. The increase was also due to the amortization
associated with the Beluga River Gas Compression project, as well as the
accelerated amortization of the prior Beluga Unit 8 overhaul caused by a change
to the maintenance schedule.

Purchased power expense decreased $3.0 million, or 16.2%, in the first half of
2008 compared to the first half of 2007. The decrease was due to the
transmission line work at

Dynamite Slough and maintenance activities, which limited our generation,
resulting in higher purchased power costs in 2007. In the first six months of
2008, Chugach purchased 275,410 MWh of energy at an average effective price of
5.42 cents per kWh. For the same period in 2007, Chugach purchased 316,899 MWh
of energy at an average price of 5.65 cents per kWh.

Transmission expense decreased $699.8 thousand, or 19.3%, in the first half of
2008 compared to the same period in 2007. The decrease was primarily due to
lower substation labor and professional services related to transmission line
clearing as well as maintenance at the Point MacKenzie and University
substations in 2007.

Distribution expense decreased $818.3 thousand, or 12.1%, during the first six
months of 2008 compared to the same period in 2007. The decrease was primarily
due to professional services related to an outage in the first quarter of 2007
and decreased expenditures related to right-of-way clearing in the first six
months of 2008 compared to the first six months of 2007.

Consumer accounts expenses increased $231.1 thousand, or 9.4%, during the first
six months of 2008 compared to the same period in 2007. The increase was
primarily related to higher advertising and imaging costs associated with
capital credit retirements.

Administrative, general and other expenses did not materially change in the
first six months of 2008 compared to the same period in 2007.

Interest on long-term debt decreased $1.3 million, or 10.5%, for the first six
months of 2008 compared to the same period in 2007. The decrease was primarily
related to the use of our NRUCFC line of credit to redeem the outstanding
principal amount and pay accrued interest on the 2002 Series B Bonds in March of
2008. The decrease was also due to continued principal payments as well as lower
interest rates in 2008 compared to 2007.

Other interest expense increased $263.2 thousand due to the use of the NRUCFC
line of credit described above and the increased use of our CoBank line of
credit in the first six months of 2008 compared to the same period in 2007. This
increase was partially offset by a decrease in interest rates in 2008 compared
to 2007.

Interest charged to construction did not materially change during the first six
months of 2008 compared to the same period in 2007.

Non-operating margins decreased $230.3 thousand, or 45.7%, in the first six
months of 2008 compared to the same period in 2007. The decrease was primarily
due to lower interest income as a result of lower interest rates in the first
six months of 2008 compared to the same period in 2007. This decrease was also
due to lower 2007 margins which was used in the average equity balance
calculation of AFUDC.

Financial Condition

Assets
- ------

Total assets decreased $10.7 million, or 1.9%, from December 31, 2007 to June
30, 2008. Accounts receivable decreased $8.9 million, or 28.5%, primarily due to
lower energy usage as of June 30, 2008, compared to December 31, 2007. Net
utility plant decreased $3.3 million, or 0.7%, primarily due to depreciation
expense in excess of extension and replacement of plant. Special Funds decreased
$0.5 million, or 61.9% due to the decrease in the value of deferred compensation
accounts, as well as the disbursement of funds of a former employee. Materials
and supplies decreased $1.3 million, or 4.7%, primarily due to the use of
generation inventory for scheduled maintenance and capital projects. Cash and
cash equivalents also decreased $0.8 million, or 12.8%.

These decreases were offset by an increase in fuel cost recovery. Fuel cost
recovery increased $4.6 million, or 100%, due to the under-collection of the
prior quarter's fuel and purchased power costs recovered through the fuel
surcharge mechanism, which created a receivable at June 30, 2008.

Liabilities
- -----------

Total liabilities, equities and margins decreased $10.7 million, or 1.9%, from
December 31, 2007 to June 30, 2008. The decrease included a $38.3 million, or
10.8%, decrease in total long-term obligations and current installments of
long-term debt, due to principal payments made on CoBank 2, 3, 4 and 5 and the
2002 Series B Bonds, as well as the redemption of the 2002 Series B Bonds, which
was previously classified as a long-term obligation. The use of the NRUCFC line
of credit to redeem the 2002 Series B Bonds currently classifies the outstanding
balance as a short-term obligation. Management is currently evaluating long-term
financing options. Accounts payable decreased $0.9 million, or 11.6%, due
primarily to the timing of cash payments on invoices for goods and services.
Fuel cost over-recovery decreased $1.6 million, or 100%, due to the
under-collection of the prior quarter's fuel and purchased power costs recovered
through the fuel surcharge mechanism, which created a receivable instead of a
payable at June 30, 2008. Other liabilities decreased $1.8 million, or 48.6%,
from December 31, 2007, due primarily to the payment of the 2007 retirement of
patronage capital in the first quarter of 2008. Deferred compensation also
decreased $0.5 million, or 61.9%, due to the decrease in the value of deferred
compensation accounts, as well as the disbursement of funds of a former
employee. Deferred liabilities decreased $0.6 million, or 32.3%, due to a
decrease in customer advances for construction.

These decreases were offset by increases in short-term obligations and total
equities and margins. Short-term obligations increased $29.7 million, or 100%,
due to the use of the NRUCFC line of credit to redeem the 2002 Series B Bonds,
previously classified as a long-term obligation, to a short-term obligation.
Total equities and margins increased $3.4 million, or 2.3%, due to the margins
generated through June 30, 2008.

LIQUIDITY AND CAPITAL RESOURCES

Summary

We ended the first six months of 2008 with $5.4 million of cash and cash
equivalents, down from $6.2 million at December 31, 2007. We utilized $29.7
million of our $57.5 million in lines of credit that we maintain with CoBank and
NRUCFC in order to redeem our 2002 Series B Bonds. Thus, our available borrowing
capacity under these lines at June 30, 2008, was $27.8 million. In April and May
of 2008, Chugach had additional line of credit activity with CoBank, however, in
June of 2008, Chugach paid the outstanding balance on this line of credit.

Cash equivalents consist of all highly liquid debt instruments with a maturity
of three months or less when purchased and an Overnight Repurchase Agreement
with First National Bank Alaska (FNBA).

Cash Flows

The following table summarizes our cash flows from operating, investing and
financing activities for the six months ended June 30, 2008 and 2007.

2008 2007
----------- -----------
Total cash provided by (used in):

Operating activities 22,416,295 26,131,733
Investing activities (12,677,497) (16,227,417)
Financing activities (10,533,250) (8,539,019)

Decrease in cash and cash equivalents (794,452) (1,365,297)

Operating Activities
- --------------------

Cash provided by operating activities was $22.4 million for the six months ended
June 30, 2008, compared with $26.1 million for the six months ended June 30,
2007. Increased assignable margins and depreciation expense were offset by
changes in operating assets and liabilities. Assignable margins increased to
$3.5 million in the first six months of 2008, compared with $2.8 million in the
first six months of 2007. The changes in operating assets and liabilities were
due primarily to changes in accounts receivable, fuel cost under-recovery,
materials and supplies, deferred charges, accounts payable, fuel cost
over-recovery, fuel payable and other liabilities. The accounts receivable
change was primarily due to the timing of customer payments and higher invoices
in 2008 than in 2007 due to rising fuel expense while the change in fuel cost
under-recovery was due to the under collection of fuel and purchased power costs
recovered through the fuel surcharge mechanism. The change in materials and
supplies was due to the timing of purchases for future projects. More materials
and supplies were purchased in the first quarter of 2008 for 2008 projects than
in the second quarter of 2007 for 2007 projects. The change in deferred charges
was due to the Beluga Unit 8 major overhaul project, continued gas contract
negotiations and new generation

development. The change in accounts payable was primarily due to the timing of
cash payments on invoices for goods and services and a decrease in construction
activity while the change in fuel cost over-recovery was due to the payment of
the over collection of fuel and purchased power costs recovered through the fuel
surcharge mechanism. The fuel payable change was due to increased fuel expense
and the change in other liabilities was due to the payment of the 2007
retirement in 2008.

Investing Activities
- --------------------

Cash used in investing activities was $12.7 million for the six months ended
June 30, 2008, compared with $16.2 million for the six months ended June 30,
2007. The change in cash used in investing activities was due primarily to the
level of construction activity in the first six months of 2008 compared to the
same period in 2007. Chugach replaced a transmission tower in the first quarter
of 2007, as well as the 2008 construction season started later than in 2007 due
primarily to ground conditions and vacancies. Capital construction for 2008 is
estimated at $45.3 million. Capital improvement expenditures are expected to
increase in the third quarter of 2008 as the construction season extends into
October.

Financing Activities
- --------------------

Cash used in financing activities was $10.5 million for the six months ended
June 30, 2008, compared to $8.5 million for the six months ended June 30, 2007.
The change in cash used in financing activities was primarily due to an increase
in repayments of long-term obligations in the first six months of 2008 compared
to the same period in 2007, as well as the payment of the 2007 retirement of
patronage capital in the first quarter of 2008, which was higher than the
payment of the 2006 retirement of patronage capital in the first quarter of
2007.

Sources of Liquidity

Chugach has satisfied its operational and capital cash requirements primarily
through internally generated funds, an annual $7.5 million line of credit with
CoBank and a $50 million line of credit from NRUCFC. We utilized $29.7 million
of our $57.5 million in lines of credit that we maintain with CoBank and NRUCFC
in order to redeem our 2002 Series B Bonds. At June 30, 2008, there was no
outstanding balance on the CoBank line of credit and $29.7 million outstanding
on the NRUCFC line of credit. Thus, our available borrowing capacity under these
lines at June 30, 2008, was $27.8 million.

In April and May of 2008, Chugach had additional line of credit activity,
however, in June of 2008, Chugach paid the outstanding balance on this line of
credit. In August of 2008, Chugach borrowed an additional $3.5 million on this
line of credit.

Chugach also has a term loan facility with CoBank. Loans made under this
facility are evidenced by promissory notes governed by the Master Loan
Agreement, which became effective on January 22, 2003.

At June 30, 2008, Chugach had the following promissory notes outstanding with
this facility:

Promissory Principal Interest Rate at Maturity Principal
Note Balance June 30, 2008 Date Payment Dates
---------- ------------ ---------------- -------- -------------
CoBank 2 $ 4,500,000 5.50% 2010 2005 - 2010
CoBank 3 18,376,673 3.76% 2022 2003 - 2022
CoBank 4 20,086,132 3.76% 2022 2003 - 2022
CoBank 5 4,302,634 3.76% 2012 2007 - 2012
------------
Total $ 47,265,439
============

On January 22, 2003, Chugach and CoBank finalized a new Master Loan Agreement
pursuant to which the CoBank term loan facility was converted from secured to
unsecured debt and the obligations represented by the outstanding bonds then
held by CoBank were converted into promissory notes governed by the new Master
Loan Agreement. Chugach's mortgage indenture was replaced in its entirety by an
Amended and Restated Indenture dated April 1, 2001. All liens and security
interests imposed under the indenture were terminated and all outstanding
Chugach bonds (including new bonds of 2001 Series A, 2002 Series A and 2002
Series B) became unsecured obligations governed by the terms of the Amended and
Restated Indenture.

Over the next five years we anticipate incurring increasing amounts of capital
expenditures due to the construction of a gas fired generation unit, on-going
capital needs and refinancing of certain existing debt. These amounts are
currently being financed under existing lines of credit. In March of 2008 we
issued a Request For Proposal (RFP) for a three to five year interim finance
facility. The requested facility will act as a bridge until Chugach issues
long-term bonds expected in 2010, 2011 and 2012. A recommendation to adopt a
proposed financing plan was approved by the Board of Directors on June 25, 2008.
We are currently negotiating the establishment of a Commercial Paper backstop
facility in the amount of $250 - $300 million with NRUCFC and KeyBank. Closing
on the credit facility is anticipated for September of 2008.

Chugach management continues to expect that cash flows from operations and
external funding sources, including additional long-term and short-term
borrowings, will be sufficient to cover operational, financing and capital
funding requirements in 2008 and thereafter.

CRITICAL ACCOUNTING POLICIES

Chugach's accounting and reporting policies comply with U.S. generally accepted
accounting principles (GAAP). The preparation of financial statements in
conformity with GAAP requires that management apply accounting policies and make
estimates and assumptions that effect results of operations and reported amounts
of assets and liabilities in the financial statements. Critical accounting
policies are those policies that management believes are the most important to
the portrayal of Chugach's financial condition and results of its operations,
and require management's most difficult, subjective, or complex judgments, often
as a result of the need to make estimates about matters that are inherently
uncertain. Most accounting policies are not considered by management to be
critical accounting

policies. Several factors are considered in determining whether or not a policy
is critical in the preparation of financial statements. These factors include,
among other things, whether the estimates are significant to the financial
statements, the nature of the estimates, the ability to readily validate the
estimates with other information including third parties or available prices,
and sensitivity of the estimates to changes in economic conditions and whether
alternative accounting methods may be utilized under GAAP. For all of these
policies management cautions that future events rarely develop exactly as
forecast, and the best estimates routinely require adjustment. Management has
discussed the development and the selection of critical accounting policies with
Chugach's Audit Committee. The following policies are considered to be critical
accounting policies for the quarter ended June 30, 2008.

Electric Utility Regulation

Chugach is subject to regulation by the RCA. The RCA sets the rates Chugach is
permitted to charge customers based on allowable costs. As a result, Chugach
applies SFAS No. 71, "Accounting for the Effects of Certain Types of Regulation"
(SFAS No.71). Through the ratemaking process, the regulators may require the
inclusion of costs or revenues in periods different than when they would be
recognized by a non-regulated company. This treatment may result in the deferral
of expenses and the recording of related regulatory assets based on anticipated
future recovery through rates or the deferral of gains or creation of
liabilities and the recording of related regulatory liabilities. The application
of SFAS No. 71 has a further effect on Chugach's financial statements as a
result of the estimates of allowable costs used in the ratemaking process. These
estimates may differ from those actually incurred by the Company; therefore, the
accounting estimates inherent in specific costs such as depreciation and pension
and post-retirement benefits have less of a direct impact on Chugach's results
of operations than they would on a non-regulated company. Significant regulatory
assets and liabilities have been recorded. Management reviews the ultimate
recoverability of these regulatory assets and liabilities based on applicable
regulatory guidelines. However, adverse legislation and judicial or regulatory
actions could materially impact the amounts of such regulatory assets and
liabilities and could adversely impact Chugach's financial statements.

Unbilled revenue

Chugach calculates unbilled retail revenue at the end of each month to ensure
the recognition of a full month's revenue. Chugach estimates calendar-month
unbilled sales based on billing cycle sales, billing cycle read dates, weather
and hours of darkness to produce an estimate of calendar sales. This estimate of
calendar sales is then calibrated to deliveries measured at Chugach distribution
substations, net of losses. Furthermore, based on the number of unbilled days,
weather, and hours of darkness, an estimate of unbilled sales is produced. Prior
to March of 2008, the resulting unbilled estimate was multiplied by the average
rate produced from the billing cycle data. Beginning in March of 2008, the
unbilled estimate is now being multiplied by the respective billing class
determinants to produce an estimate of revenue, which includes the impact of
changes in rates to arrive at the monthly unbilled accrual. Chugach recognized
$6,121,614 and $6,218,932 of unbilled retail revenue at June 30, 2008 and 2007,
respectively.

Allowance for Doubtful Accounts

Chugach maintains an allowance for doubtful accounts for estimated losses
resulting from the inability of our customers to make required payments. We base
our estimates on the aging of our accounts receivable balances, historical bad
debt reserves, historical percent of retail revenue that has been deemed
uncollectible, our collections process and regulatory requirements. If the
financial condition of our customers were to deteriorate resulting in an
impairment of their ability to make payments, additional allowances may be
required. If their financial condition improves, allowances may be reduced. Such
allowance changes could have a material effect on our consolidated financial
condition and results of operations.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Information required by this Item is contained in Note 6 to the "Notes to
Financial Statements" within Part I of this Form 10-Q.

OUTLOOK

Chugach faces several challenges in 2008 as we move towards procuring new, more
efficient power generation facilities. Chugach continues to explore joint
development options with other entities and the development of a unified power
provider organization to provide future needs. In any event, this new generation
is needed to fulfill current as well as future needs. Our current generating
fleet is aging and less fuel-efficient than newer technology. Savings will be
realized in decreased maintenance of plant and increased fuel efficiency.

Procuring a new long-term natural gas supply continues to be at the forefront of
Chugach's efforts in 2008. Negotiations continue with potential suppliers. A
close eye will be kept on the potential for a North Slope natural gas line being
constructed to potentially meet the needs of all Southcentral Alaska consumers.

We received an order on the 2005 Test Year general rate case in 2008. The
decision will mean more equitable electric rates being charged to generation and
transmission (G&T) customers and distribution (D) customers. It will also mean a
more balanced return being realized by both areas of Chugach.

In May of 2007, the Board appointed a Blue Ribbon Panel to review basic
high-level performance measures and finances, review member and community
communications and make recommendations that it deems appropriate. The Blue
Ribbon Panel issued their report in November of 2007. Continued evaluation and
implementation of the Blue Ribbon Panel recommendations will be a focus in 2008
as Chugach continues to provide cost efficient electric service to all of its
consumers.

In recognizing the value to Chugach, and to the electric consumers of the
Railbelt as a whole, Chugach is willing to explore with other Railbelt utilities
the creation of a public corporation, organized for the purpose of providing for
the unified generation and transmission needs in the Alaska Railbelt. On
February 18, 2008, the Board approved authorizing the Interim

Chief Executive Office (CEO) to execute a Memorandum of Understanding with other
Railbelt utilities regarding organization of a Unified Power Provider.

Chugach's existing generation is aging and new generation is more efficient
using substantially less fuel. Jointly building a new generation unit offers
economies of scale that cannot be gained through individual utility efforts.
Chugach is in the process of developing a gas-fired generation plant near its
Anchorage headquarters and offered Alaska Electric and Energy Cooperative, Inc.
(AEEC) and Municipal Light & Power (ML&P or AML&P) the opportunity to
participate in the project in order to partially satisfy their power
requirements. On February 18, 2008, the Board approved authorizing the Interim
CEO to execute Memorandums of Understanding with AEEC and AML&P regarding joint
development of the South Anchorage Power Project. In June 2008, AEEC elected to
withdraw from further participation discussions and pursue their own generation
project. On July 30, 2008, the Chugach Board of Directors authorized the CEO to
sign the Participation, Operation and Maintenance (O&M) and Lease Agreements
(Agreements) for the South Central Project (Project) with AML&P. AML&P is
expected to approve and sign the Agreements on August 13, 2008 when Chugach's
CEO will also sign them. MEA has expressed an interest in participating in the
Project and documents have been prepared that contain the terms under which
Chugach and AML&P would be willing to negotiate with MEA.

Discussions between Chugach and AML&P regarding potential new organizational
structures will continue into the third and fourth quarters of 2008.

During 2008, Chugach will evaluate several options concerning refinancing the
2011 and 2012 long term debt maturities as well as establishing a potential
three to five year interim financing vehicle to finance capital expansion,
redeem variable rate debt and fund other operations. The current state of the
credit markets may effect the terms and conditions of future borrowings.
Approval to establish a Commercial Paper borrowing program was given by the
Chugach Board of Directors in June 2008. The program is anticipated to be
operational by the fourth quarter of 2008.

ENVIRONMENTAL MATTERS

Compliance with Environmental Standards

The Clean Air Act and EPA regulations under the act (the "Clean Air Act")
establish ambient air quality standards and limit the emission of many air
pollutants. Some Clean Air Act programs that regulate electric utilities,
notably the Title IV "acid rain" requirements, do not apply to facilities
located in Alaska. The EPA's anticipated regulations to limit mercury emissions
from fossil-fired steam-electric generating facilities are not expected to
materially impact Chugach because our thermal power plants burn exclusively
natural gas.

costs. We have obtained or applied for all Clean Air Act permits currently
required for the operation of our generating facilities.

In March 2007, Chugach conducted emissions testing at the Bernice Lake Power
Plant which indicated that two of the gas turbines at the facility were
exceeding the NSPS emission limit for NOx. Chugach voluntarily limited the power
output of these turbines to ensure interim compliance with the NSPS regulations
and is currently in the final stages of commissioning a water injection system
to control NOx emissions from the turbines. With the water injection system,
Chugach will again be able to fully utilize the power output from these turbines
while complying with the NSPS regulations.

Chugach is also currently working with the ADEC to resolve the issue of past
non-compliance with the Bernice Lake turbines. On March 26, 2008, the ADEC
issued a formal NOV to Chugach regarding the NSPS issues. Specifically, the NOV
alleges that Chugach violated its operating permit and air quality regulations
by operating two generating units at the Bernice Lake Power Plant in excess of
the NOx emission limit; failing to perform a source test to demonstrate
compliance with regulations; and failing to conduct reasonable inquiry regarding
source test compliance for the 2006 annual compliance certification. A meeting
with ADEC to discuss settlement of the identified alleged violations is
scheduled for August 22, 2008. It is not possible at this time to reasonably
anticipate the amount of a potential penalty that may result from this NOV. In
the opinion of management, a potential penalty is not likely to have a material
adverse effect on Chugach's results of operations, financial condition or
liquidity.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Chugach is exposed to a variety of risks, including changes in interest rates
and changes in commodity prices due to repricing mechanisms inherent in gas
supply contracts. In the normal course of our business, we manage our exposure
to these risks as described below. We do not engage in trading market
risk-sensitive instruments for speculative purposes.

Interest Rate Risk

The following table provides information regarding cash flows for principal
payments on total debt by maturity date (dollars in thousands) as of June 30,
2008.

Fair
Total Debt(1) 2008 2009 2010 2011 2012 Thereafter Total Value
- ------------- ---------- --------- --------- ---------- ----------- ------------ ---------- -----------

Fixed rate debt $ 1,000 $ 2,000 $ 1,500 $ 150,000 $ 120,000 $ 0 $ 274,500 $ 288,061

Average interest rate 5.50% 5.50% 5.50% 6.55% 6.20% 0.00% 6.38%

Annual interest
Expense $ 8,746 $ 17,405 $ 17,297 $ 9,487 $ 620 $ 0

Variable rate debt $ 442 $ 32,117 $ 2,618 $ 2,852 $ 2,694 $ 31,757 $ 72,479 $ 72,479

Average interest rate 3.70% 3.34% 3.70% 3.70% 3.70% 3.70% 3.54%

(1) Includes current portion

Chugach is exposed to market risk from changes in interest rates. A 100
basis-point change (up or down) would increase or decrease our interest expense
by approximately $724,791 based on $72,479,098 of variable rate debt outstanding
at June 30, 2008.

Commodity Price Risk

Chugach's gas contracts provide for adjustments to gas prices based on
fluctuations of certain commodity prices and indices. Because fuel and purchased
power costs are passed directly to our wholesale and retail customers through a
fuel surcharge mechanism, fluctuations in the price paid for gas pursuant to
long-term gas supply contracts does not normally impact margins.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Controls and Procedures

As of the end of the period covered by this report, Chugach evaluated the
effectiveness of the design and operation of its disclosure controls and
procedures. Chugach's CEO and Chief Financial Officer (CFO) supervised and
participated in this evaluation. Based on this evaluation, Chugach's CEO and CFO
each concluded that as of the end of the period covered by this report,
Chugach's disclosure controls and procedures are effective in timely alerting
them to material information required to be included in its periodic reports to
the SEC. In addition, there have been no significant changes in Chugach's
internal controls or in other factors known to management that could
significantly affect its internal controls subsequent to our most recent
evaluation.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Information required by this Item is contained in Note 5 to the "Notes to
Financial Statements" within Part I of this Form 10-Q.

ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors disclosed under "Risk
Factors" in Item 1.A. of our Form 10-K for the fiscal year ended December 31,
2007.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Chugach's annual membership meeting was held on April 24, 2008. One new board
member was elected, while two current board members were re-elected. Total
number of members of record was 65,146. Candidates Anthony Izzo, Uwe Kalenka,
Rebecca Logan, Janet Reiser, Elizabeth Vazquez and Mark Wiggin each received
6,987, 7,448, 7,623, 7,978, 7,945 and 7,364 votes, respectively. Janet Reiser,
Elizabeth Vazquez and Rebecca Logan were elected to three-year terms.

ITEM 5. OTHER INFORMATION

Effective July 1, 2008, the Board of Directors appointed Bradley W. Evans as
Chief Executive Officer. The contract terms are being finalized.

Bradley W. Evans, 54, was appointed Interim CEO on December 5, 2007. Prior to
that appointment, Mr. Evans had served as Sr. Vice President, Power Supply since
March 20, 2006, General Manager, G&T Division since January 31, 2005, Sr. Vice
President, Energy Supply since June 5, 2002 and Director, Energy Supply since
February 26, 2001. Prior to his current Chugach employment, Mr. Evans served as
Manager, System Dispatch for Golden Valley Electric Association.

ITEM 6. EXHIBITS

Certification of Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

Certification of Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

Certification of Principal Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

Certification of Principal Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

SIGNATURES

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

CHUGACH ELECTRIC ASSOCIATION, INC.

By: /s/ Bradley W. Evans
Bradley W. Evans
Chief Executive Officer

By: /s/ Michael R. Cunningham
Michael R. Cunningham
Chief Financial Officer

Date: August 12, 2008
---------------

EXHIBITS

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

Exhibit Number Description
-------------- -------------

31.1 Certification of Principal Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

31.2 Certification of Principal Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

32.1 Certification of Principal Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

32.2 Certification of Principal Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002