FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________________to ________________________
Commission file number 33-42125
Chugach Electric Association, Inc.
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(Exact name of registrant as specified in its charter)
Alaska 92-0014224
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5601 Minnesota Drive Anchorage, Alaska 99518
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(Address of principal executive offices) (Zip Code)
(907)563-7494
(Registrant's telephone number, including area code)
None
(Former name,former address and former fiscal year,if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT AUGUST 1, 2000
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NONE NONE
CHUGACH ELECTRIC ASSOCIATION, INC.
INDEX
Page Number
CAUTION REGARDING FORWARD-LOOKING STATEMENTS 3
PART I FINANCIAL INFORMATION
Item 1. Financial Statements 3
Balance Sheets, June 30, 2000 (Unaudited) and December 31, 1999 4
Statements of Revenues,Expenses and Patronage Capital,Three Months Ended
June 30, 2000 and 1999 (Unaudited) 6
Statements of Cash Flows, Three Months Ended June 30, 2000 and 1999
(Unaudited) 7
Notes to Financial Statements (Unaudited) 8
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition (Unaudited) 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14
PART II OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities and Use of Proceeds 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 17
Item 6. Exhibits and reports on Form 8-K 17
Signatures 18
Exhibits 19
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.
Chugach Electric Association, Inc. (Chugach or the Association) 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 affect of those events or circumstances on any of the forward-looking
statements contained in this report.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
The unaudited financial statements of Chugach for the quarter ended June 30,
2000 follow:
<PAGE>
CHUGACH ELECTRIC ASSOCIATION, INC.
Balance Sheets
Assets
<TABLE>
June 30, 2000 December 31, 1999
------------- -----------------
(Unaudited)
<S> <C> <C>
Utility plant:
Electric plant in service $ 645,971,570 $ 641,627,328
Construction work in progress 62,008,071 47,257,296
------------ ------------
707,979,641 688,884,624
Less accumulated depreciation 254,860,769 243,082,832
------------ ------------
Net utility plant 453,118,872 445,801,792
------------ ------------
Other property and investments, at cost:
Nonutility property 492,239 413,515
Investments in associated organizations 8,985,568 8,946,861
------------ ------------
9,477,807 9,360,376
------------ ------------
Current assets:
Cash and cash equivalents 2,816,607 4,110,030
Cash - restricted construction funds 507,774 538,404
Special deposits 182,164 182,164
Accounts receivable, net 12,679,020 17,911,749
Materials and supplies, at average cost 17,065,728 17,180,136
Prepayments 1,045,157 861,947
Other current assets 235,599 341,702
------------- -------------
Total current assets 34,532,049 41,126,132
------------ ------------
Deferred charges 21,803,421 22,067,237
------------ ------------
$518,932,149 $518,355,537
============ ============
</TABLE>
See accompanying notes to unaudited financial statements.
CHUGACH ELECTRIC ASSOCIATION, INC.
Balance Sheets
Liabilities and Equities
<TABLE>
June 30, 2000 December 31, 1999
------------- -----------------
(Unaudited)
<S> <C> <C>
Equities and margins:
Memberships $ 981,978 $ 960,808
Patronage capital 123,726,878 117,335,481
Other 4,245,740 4,228,356
------------ ------------
128,954,596 122,524,645
------------ ------------
Long-term obligations, excluding current Installments:
First mortgage bonds payable 169,542,000 194,139,000
National Bank for Cooperatives bonds
Payable 142,848,267 143,011,295
------------ ------------
312,390,267 337,150,295
------------ ------------
Current liabilities:
Notes payable 26,000,000 -
Current installments of long-term debt 6,416,071 6,372,405
Accounts payable 5,329,512 9,508,851
Consumer deposits 1,106,987 1,059,677
Accrued interest 5,628,356 6,066,114
Salaries, wages and benefits 4,469,446 4,053,228
Fuel 4,539,593 4,381,304
Other 2,212,315 2,527,798
------------ ------------
Total current liabilities 55,702,280 33,969,377
------------ ------------
Deferred credits 21,885,006 24,711,220
------------ ------------
$518,932,149 $518,355,537
============ ============
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
CHUGACH ELECTRIC ASSOCIATION, INC.
Statements of Revenues, Expenses and Patronage Capital
<TABLE>
Three months ended June 30 Six months ended June 30
-------------------------- ------------------------
2000 1999 2000 1999
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Operating Revenue $ 36,185,683 $ 32,307,980 $ 77,056,757 $ 71,732,217
------------ ------------ ------------ ------------
Operating Expenses:
Production 11,752,363 9,236,413 23,366,379 19,999,540
Purchased power 2,188,159 1,888,126 4,615,439 3,756,648
Transmission 571,900 989,950 1,541,635 1,662,444
Distribution 2,088,968 2,218,302 4,946,410 4,232,671
Consumer Accounts 1,461,881 1,177,678 2,748,636 2,206,424
Sales Expense 252,090 371,758 527,850 718,995
Administrative, general and other 5,188,626 5,577,579 9,707,742 10,333,073
Depreciation and amortization 5,679,268 5,574,140 11,432,620 10,746,024
--------- --------- ---------- ----------
Total operating expenses 29,183,255 27,033,946 58,886,711 53,655,819
---------- ---------- ---------- ----------
Interest:
On long-term debt 6,201,277 5,977,506 12,710,982 11,903,449
Other 472,679 147,425 533,539 357,495
Charged to construction-credit (559,485) (175,925) (989,189) (180,530)
--------- --------- --------- ---------
Net interest expense 6,114,471 5,949,006 12,255,332 12,080,414
--------- --------- ---------- ----------
Net operating margins 887,957 (674,972) 5,914,714 5,995,984
------- --------- --------- ---------
Nonoperating margins:
Interest income 198,181 153,403 390,018 299,753
Other 68,993 16,974 226,492 25,959
------ ------ ------- ------
Total nonoperating margins 267,174 170,377 616,510 325,712
------- ------- ------- -------
Assignable margins 1,155,131 (504,595) 6,531,224 6,321,696
Patronage capital at beginning of 122,653,143 116,435,644 117,335,481 109,622,996
period
Retirement of capital credits and (81,396) (60,354) (139,827) (73,997)
estate payments -------- -------- --------- --------
Patronage capital at end of period $ 123,726,878 $ 115,870,695 $ 123,726,878 $ 115,870,695
============= ============= ============= =============
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
CHUGACH ELECTRIC ASSOCIATION, INC.
Statements of Cash Flows
<TABLE>
Six months ended June 30
------------------------
2000 1999
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Assignable margins $ 6,531,224 $ 6,321,696
------------ ------------
Adjustments to reconcile assignable margins to net cash
provided (used) by operating activities:
Depreciation and amortization 11,432,620 10,746,024
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 5,232,729 6,795,909
Prepayments (183,210) (365,965)
Materials and supplies 114,407 (1,621,920)
Deferred charges 263,816 (11,661,607)
Other 58,009 (114,060)
Increase (decrease) in liabilities:
Accounts payable (4,179,339) (1,435,328)
Consumer deposits 47,310 59,428
Accrued interest (437,758) (833,417)
Deferred credits (2,826,214) (3,901,030)
Other 259,024 (1,885,143)
---------- -----------
Net cash provided (used) by operating activities 16,312,618 2,104,587
Cash flows from investing activities:
Extension and replacement of plant (18,749,700) (7,559,242)
Investments in associated organizations (38,707) (917)
---------------- -------------
Net cash used in investing activities (18,788,407) (7,560,159)
-------------- -------------
Cash flows from financing activities:
Short-term borrowings, net 26,000,000 10,000,000
Net proceeds and repayments of long-term debt (24,716,361) 1,659,162
Retirement of patronage capital (139,827) (73,997)
Other 38,554 306,213
----------- ------------
Net cash provided by financing activities 1,182,366 11,891,378
--------- ----------
Net increase in cash and cash equivalents (1,293,423) 6,435,806
Cash and cash equivalents at beginning of period 4,110,030 2,312,574
----------- -----------
Cash and cash equivalents at end of period $2,816,607 $8,748,380
========== ==========
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
CHUGACH ELECTRIC ASSOCIATION, INC.
Notes to Financial Statements
JUNE 30, 2000
(Unaudited)
1. Presentation of Financial Information
During interim periods, Chugach follows the accounting policies set forth
in its audited financial statements included in Form 10-K filed with the
Securities and Exchange Commission. Users of interim financial information
are encouraged to refer to the footnotes contained in Chugach's Form 10-K
when reviewing interim financial results. The accompanying unaudited
interim financial statements reflect all adjustments which are, in the
opinion of management, necessary to a fair statement of the results for the
interim period presented.
Certain reclassifications have been made to the 1999 financial statements
to conform to the 2000 presentation.
2. Lines of Credit
Chugach maintains a line of credit of $35 million with National Bank for
Cooperatives (CoBank). The CoBank line of credit expires September 1, 2000,
but carries an annual automatic renewal clause. At June 30, 2000, $26
million was outstanding on this line of credit at an interest rate of
7.80%. In addition, the Association has an annual line of credit of $50
million available at the National Rural Utilities Cooperative Finance
Corporation (NRUCFC). At June 30, 2000, there was no outstanding balance on
this line of credit. The NRUCFC line of credit expires October 14, 2002.
3. Segment Reporting
During 1998, Chugach adopted the Financial Accounting Standards Board
Statement No. 131, Disclosures About Segments of an Enterprise and
Related Information, which establishes standards for reporting
information about a company's operating segments. The Association had
divided its operations into two reportable segments: Energy and Internet
service. The energy segment derives its revenues from sales of
electricity to residential, commercial and wholesale customers, while the
Internet segment derives its revenues from provision of residential and
commercial internet services and products. The reporting segments follow
the same accounting policies used for the Association's financial
statements and is described in the summary of significant accounting
policies. Management evaluates a segment's performance based upon profit
or loss from operations. Jointly used assets are allocated by percentage
of reportable segment usage and centrally incurred costs are allocated
using factors developed by the Association that are patterned upon usage.
The Internet segment began operations during 1998, the results of which
are immaterial to the financial statements. The following is a tabulation
of business segment information year to date June 30, 2000:
<TABLE>
Operating Revenues
<S> <C>
Internet $623,172
Energy $76,433,585
-----------
Total operating revenues $77,056,757
===========
Assignable Margins
Internet $ -550,437
Energy $7,081,661
----------
Total assignable margins $6,531,224
==========
Assets
Internet $634,368
Energy $518,297,781
------------
Total assets $518,932,149
============
Capital Expenditures
Internet $3,188
Energy $19,350,208
-----------
Total capital expenditures $19,353,396
===========
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
(Unaudited)
Reference is made to the information contained under the caption "CAUTION
REGARDING FORWARD-LOOKING STATEMENTS" at the beginning of this Report.
For certain information concerning a Treasury rate-lock transaction entered into
by Chugach in March 1999, reference is made to information appearing under the
caption "Additional Information Regarding Treasury Rate-Lock" in Item 5 of Part
II of this report.
RESULTS OF OPERATIONS
Current Year Quarter Versus Prior Year Quarter
Operating revenues, which include sales of electric energy to retail, wholesale
and economy energy customers and other miscellaneous revenues, increased by 12%
for the quarter ended June 30, 2000, over the same quarter in 1999. The increase
in revenues is primarily attributable to higher economy energy sales to Golden
Valley Electric Association, Inc. (GVEA) because of the shutdown of the Healy
Clean Coal Plant (HCCP) that commenced in late 1999 and has continued into 2000.
This event has reduced the transmission line congestion north of Healy
permitting GVEA to purchase much of their energy requirements from Chugach.
Retail demand and energy rates did not change from the second quarter of 2000
compared to the second quarter of 1999. Wholesale demand and energy rates
charged to Homer Electric Association (HEA), and Matanuska Electric Association
(MEA), declined 0.30 percent and 3.8 percent, respectively, from second quarter
1999 to second quarter 2000.
In June of 2000, the Regulatory Commission of Alaska issued a final order on the
1996 test year revenue requirement filing. As a result of this order, and
pursuant to the Settlement Agreement with Alaska Electric Generation &
Transmission Cooperative (AEG&T), Chugach issued refunds to AEG&T members HEA
and MEA in the amount of $332,157 and $503,272, respectively, on July 25, 2000.
Consistent with the Settlement Agreement, these refunds were based on demand and
energy purchases retroactive to January 1, 1997. In addition to the above
refunds, earlier this year Chugach issued refunds of $86,132 to HEA and
$1,809,801 to MEA that represented uncontested amounts owed consistent with the
1996 test year filing. As a result of the final order on the 1996 test year,
wholesale demand and energy rates charged to HEA and MEA decreased 0.70 percent
and 0.80 percent, respectively, effective on the August 2000 wholesale power
bills.
A provision for wholesale rate refunds were recorded in 1997, 1998, 1999 and
2000, which totaled $2,651,361, to accommodate the refunds to AEG&T members HEA
and MEA discussed above.
Production and purchased power expense increased from the second quarter 1999 to
the second quarter 2000 due to an increase in fuel prices. Chugach experienced
non-routine maintenance costs related to storm damage during the first half of
2000 that were offset by a reimbursement from the Federal Emergency Management
Agency (FEMA). This reimbursement was recorded as a reduction of the associated
expenses. Consequently, overall transmission and distribution expense was
consistent with 1999. Distribution and consumer accounts expense increased from
the second quarter 1999 to second quarter 2000 due to an update to the clearing
process for information services and garage expenses. This update shifted costs
from the administrative and general expense financial category to more
appropriate functional areas of the company. This contributed to the decrease
from the second quarter 1999 to the second quarter 2000 in administrative and
general expense.
Interest on long-term debt increased in the second quarter 2000 over the same
period last year as a result of the issuance of CoBank 7 in December 1999. This
increase was offset by the acquisition on the open market of $10 million of
Chugach's Series A 2022 bonds in April 2000. Interest charged to construction
and Allowance for Funds Used During Construction (AFUDC) was higher in the
second quarter 2000 due to significantly higher Construction Work in Progress
(CWIP) balances compared to the second quarter 1999. Other interest expense
increased in the second quarter 2000, as compared to the same period in 1999,
due to increased activity in the line of credit as a result of a contract
payment made on the Beluga Unit 6 upgrade project.
Financial Condition
Total assets increased by 0.1% from December 31, 1999, to June 30, 2000. The
increase was due to an increase in electric plant in service and CWIP, related
to the re-powering of Beluga Units 6 & 7, the Cooper Lake overhaul and the
International Generating Terminal (IGT) auxiliary system upgrade. This, however,
was offset by a decrease in cash and cash equivalents caused by the same
contract payment discussed above and the decrease of accounts receivable. The
decrease in accounts receivable was caused by the payment of wholesale power
bills that were accrued but not paid by December 31, 1999 and the
over-collection of the fuel surcharge in the past quarter. Notable changes to
total liabilities include the increase in notes payable due to borrowing
activity in the first and second quarter. This was offset by a decrease in
accounts payable. There was also an increase in accrued salaries, wages and
benefits due to overall increases in company-wide benefits, as well as increases
associated with new contracts with the International Brotherhood of Electrical
Workers (IBEW).
Liquidity and Capital Resources
Chugach has satisfied its operational and capital cash requirements primarily
through internally- generated funds, an annual $50 million line of credit from
NRUCFC and a $35 million line of credit with CoBank. At June 30, 2000, there was
no balance outstanding with NRUCFC. As of the same date, $26 million was
outstanding with CoBank at an interest rate of 7.80%.
Capital construction in 2000 is estimated at $30.8 million. At June 30, 2000,
approximately $19.35 million has been expended. Capital improvement expenditures
are expected to increase in the third quarter. Chugach currently has no limit on
supplemental indentures that facilitate borrowing from CoBank. At June 30, 2000,
Chugach had bonds in the amount of $143.1 million outstanding under this
financing arrangement. The balance is comprised of a $667 thousand bond (CoBank
1) which carries an interest rate of 8.95% maturing in 2002, a $10 million bond
(CoBank 2) priced at 7.76% due in 2005, a $21.5 million bond (CoBank 3), priced
at 5.60%, a $23.5 million bond (CoBank 4) priced at 5.60%, a $15 million bond
(CoBank 5) priced at 5.60% due in 2002, 2007 and 2012, a $42.5 million bond
(CoBank 6) carrying a variable interest rate currently priced at 7.85% (as of
August 2000) and a $30 million bond (CoBank 7) carrying a variable interest rate
currently priced at 7.85% (as of August 2000) both due in March, 2002. Principal
payments on the CoBank 3 and 4 bonds commence in 2003 and continue through 2022.
Additionally, Chugach has negotiated a similar supplemental indenture (Fifth
Supplemental Indenture of Trust) with NRUCFC for $80 million. At June 30, 2000,
there were no amounts outstanding under this financing arrangement.
As previously reported, Chugach has acquired and retired $97.7 million of its
Series A 2022 bonds on the open market.
Chugach management continues to expect that cash flows from operations and
external funding sources will be sufficient to cover operational and capital
funding requirements in 2000 and thereafter.
Changes in Accounting Principles
Chugach is required to implement Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and Hedging Activities
(SFAS No. 133), effective January 1, 2001. Due to the interest rate risk
inherent in the existing treasury rate lock, Chugach cannot currently determine
the impact of implementation of SFAS No. 133 on its financial condition or its
results of operations.
<PAGE>
OUTLOOK
Nationwide, the electric utility industry is entering a period of competition.
Chugach believes that electric utilities in Alaska will not be immune from
competitive forces. Chugach has taken several steps to more effectively position
the organization to meet the challenge of a competitive market for electricity.
Chugach has been active at the Alaska Legislature in support of the customer's
right to choose their electric power supplier. Virtually all Alaskan utilities
are opposing Chugach's efforts to develop competition.
Chugach operates with three divisions: Finance and Energy Supply, Transmission
and Distribution Network Services, and Retail Services. Chugach operates a key
account program for larger customers and has developed new services to enhance
existing customers' satisfaction.
Chugach commenced operation as an internet service provider in February 1999.
Also in 1999, Chugach began selling microwave bandwidth to industrial customers.
Chugach's labor negotiations under its three collective bargaining agreements
with the International Brotherhood of Electrical Workers Local 1547 (IBEW) have
concluded. The interest arbitrator issued her final decision, and the new
agreements are now in effect through June 30, 2003.
ENVIRONMENTAL MATTERS
Compliance with Environmental Standards
Chugach's operations are subject to certain federal, state and local
environmental laws that Chugach monitors to ensure compliance. The costs
associated with environmental compliance are included as a component of both the
operating and capital budget processes. Chugach accrues for costs associated
with environmental remediation obligations when such costs are probable and
reasonably estimable.
Environmental Matters
Chugach discovered polychlorinated biphenyls (PCB's) in paint and greases at the
Cooper Lake Hydroelectric plant during initial phases of a turbine overhaul.
Chugach is working with the Federal Energy Regulatory Agency (FERC) and the
Environmental Protection Agency (EPA) to devise a method of dealing with the
contamination. Meanwhile, the overhaul is continuing.
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 its business, Chugach manages its
exposure to these risks as described below. Chugach does not engage in trading
market risk sensitive instruments for speculative purposes.
Interest rate risk - As of June 30, 2000, except for CoBank 6 and 7 which carry
variable interest rates that are periodically repriced, Chugach's outstanding
borrowings were at fixed interest rates. The following table provides
information regarding cash flows (dollars in thousands):
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fair
2000 2001 2002 2003 2004 Thereafter Total Value
---- ---- ---- ---- ---- ---------- ----- -----
Long-term debt, including
current portion $ 156 $6,430 $82,910 $5,907 $6,447 $216,956 $318,806 $327,041
</TABLE>
Commodity price risk - Chugach's gas contracts provide for adjustments to gas
prices based on fluctuations of certain commodity prices and indices. Purchased
power costs are passed directly to Chugach's wholesale and retail customers
through a fuel surcharge, therefore, fluctuations in the price paid for gas
pursuant to long-term gas supply contracts does not normally impact margins. The
fuel surcharge mechanism mitigates the commodity price risk related to market
fluctuations in the price of natural gas.
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Chugach Electric Association, Inc., v. Matanuska Electric Association, Inc.,
3AN-99-10830 CI
--------------------------------------------------------------------------------
For additional information, refer to the discussion of this matter in Part I,
Item 3 - Legal Proceedings - LITIGATION - 3AN-99-10830 CI, of the Form 10-K
filed by Chugach with respect to the annual report for the period ending
December 31, 1999.
On June 22, 2000, the Superior Court held oral argument on the summary judgement
motions. The motions were taken under advisement and a decision is pending.
Chugach Electric Association, Inc., v. Alaska Public Utilities Commission,
3AN-98-11548 CI
--------------------------------------------------------------------------------
For additional information, refer to the discussion of this matter in Part I,
Item 1 - Business - GENERAL - Competition, of the Form 10-K filed by Chugach
with respect to the annual report for the period ending December 31, 1999. On
April 15, 2000, the Superior Court ruled in favor of the State in the appeal
Chugach had undertaken of the agency decision requiring that Chugach obtain
prior permission from the Regulatory Commission via a request to expand its
service territory authorized under its Certificate of Public Convenience and
Necessity before seeking to serve customers in the Anchorage Municipal Light &
Power ("ML&P") service territory. Chugach has appealed the decision to the
Alaska Supreme Court, which will review the agency decision on a de novo basis.
Matanuska Electric Association, Inc., v. Chugach Electric Association, Inc.,
3AN-99-8152 CI
--------------------------------------------------------------------------------
For additional information, refer to the discussion of this matter in Part I,
Item 3 - Legal Proceedings - LITIGATION - 3AN-99-8152CI, of the Form 10-K filed
by Chugach with respect to the annual report for the period ending December 31,
1999. No material changes have occurred since the last report on this matter.
Matanuska Electric Association, Inc., v. Chugach Electric Association, Inc.,
U-98-180
--------------------------------------------------------------------------------
For additional information, refer to the discussion of this matter in Part I,
Item 3 - Legal Proceedings - LITIGATION - U-98-180, of the Form 10-K filed by
Chugach with respect to the annual report for the period ending December 31,
1999. In this action, MEA alleged that Chugach engaged in "unreasonable
management practices" in the management of the Series A Bonds. On June 6, 2000,
the Commission issued an order finding that good cause does not exist to
institute investigation, dismissing the complaint and closing the docket on the
ground that MEA had failed to show good cause for an investigation of their
allegations. The time allowed for an appeal of that decision has passed without
an appeal being filed.
In the Matter of the Investigation into the Rates Changes Implemented by Chugach
Electric Association, Inc., under TA 1718 (U-96-37) and In the Matter of the
Tariff Revision, Designated as TA 195-8 by Chugach Electric Association, Inc.,
To Decrease the Wholesale Demand and Energy Rates of Homer Electric Association,
Inc., and Matanuska Electric Association, Inc., (U-99-78) For additional
information, refer to the discussion of this matter in Item 2 - Management's
Discussion and Analysis of Financial Condition and Results of Operations -
RESULTS OF OPERATIONS - Current Year Quarter Versus Prior Year Quarter. In an
order issued in these matters dated June 26, 2000, the Regulatory Commission of
Alaska (RCA) approved rate adjustments which resulted in refunds to wholesale
customers in the amount of $835,429. The result was anticipated by Chugach and
refunds were within the amounts reserved for this purpose. No appeal of this
decision was filed by any party within the period allowed for appeal. The
parties and the RCA are in the process of developing a schedule for regulatory
review of the 1997 and 1998 Test Years to determine any refund amounts which may
result from review of the revenue requirements for each of these Test Years.
Chugach does not anticipate refunds to be material for these Test Years.
Chugach Electric Association, Inc., v. Alaska Public Utilities Commission ,
Case No. 3AN 98-9775 CI
--------------------------------------------------------------------------------
For additional information, refer to the discussion of this matter in Part I,
Item 1 - Business - GENERAL - Rate Regulation and Rates, of the Form 10-K filed
by Chugach with respect to the annual report for the period ending December 31,
1999. In an order dated July 27, 2000, the Superior Court found in Chugach's
favor concluding that the line loss factor used by Chugach was correct and that
the Commission's order requiring a refund of past fuel surcharges would
constitute impermissible retroactive ratemaking. The matter was remanded to the
Regulatory Commission of Alaska for further action in light of the court's
ruling. The matter may be appealed to the Alaska Supreme Court by the either
appellee (the Commission or Matanuska Electric Association, Inc.).
Item 2. Changes in 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
Not applicable
Item 5. Other Information
Additional Information Regarding Treasury Rate-Lock
On March 17, 1999, Chugach entered into a Treasury rate-lock transaction with
Lehman Brothers Financial Products Inc. (Lehman Brothers) for the purpose of
taking advantage of favorable market interest rates in anticipation of
refinancing Chugach's Series A Bonds due 2022 on their first call date (March
15, 2002). As of June 30, 2000, the aggregate principal amount of Series A Bonds
due 2022 was $164,310,000. Under the Treasury rate-lock contract, Chugach will
receive a lump-sum payment from Lehman Brothers on March 15, 2002, if the yield
on 10- or 30-year Treasury bonds as of mid-February, 2002, exceeds a specified
target level (5.653% and 5.838%, respectively). Conversely, on the same date,
Chugach will be required to make a payment to Lehman Brothers if the yield on
the 10- or 30-year Treasury bonds falls below its stated target yield. The fair
value of the treasury rate lock agreement on July 17, 2000, approximated
$4,949,000.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed for the quarter ended June 30, 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CHUGACH ELECTRIC ASSOCIATION, INC.
By: /s/ Eugene N. Bjornstad
Eugene N. Bjornstad, General Manager
Date: August 9, 2000
By: /s/ Evan J. Griffith
Evan J. Griffith
Executive Manager, Finance & Energy Supply
Date: August 9, 2000
<PAGE>
EXHIBITS
Listed below are the exhibits which are filed as part of this Report:
Exhibit
Number Description Page
27 Financial Data Schedule **
