January/February 2002Number 196

THECHUGACHOUTLET

Chugach received an “A” rating orbetter from three national rating firmsin conjunction with its $180 millionbond issue. Chugach’s “A” rating isconsidered “investment grade” andallows Chugach ready access to capitaland at favorable interest rates.

Fitch Investors Service in New YorkCity is one of three national ratingagencies that has regularly issued cred-it ratings on Chugach bonds since thecompany entered the bond market in1991. Since that time Chugach hasmaintained an investment grade bondrating. Fitch not only assigned an “A+”rating on the outstanding bonds, butalso assigned an “A+” rating to the2002 Series A and B bonds due in 2012.

Moody’s Investors Service ratedChugach “A2” based on Chugach’s sus-tained financial performance.

Standard and Poor’s recognizedChugach’s credit strengths and affirmedan “A” rating with a stable outlook.

Chugach intends to insure the 2002series issue bonds which will result in a“AAA” rating, the highest achievable.

News notes

How to reach usOur service center at 5601 Minnesota Drive is

open from 8 a.m. - 6 p.m., Monday-Friday,Saturday 9 a.m. - 5 p.m.

Switchboard hours are 8 a.m. - 11 p.m.,Monday - Friday.

563-7494Toll Free (800) 478-7494

The Chugach OutletA Publication of

Chugach Electric Association, Inc.5601 Minnesota Drive

P.O. Box 196300 Anchorage, Alaska 99519-6300

• Chugach uses easements and rights of way to access its lines and other facili-ties for maintenance, repairs and outagerestoration. Please remember that crewsmay need to use the right of way at anytime to get to and work on equipment. Ifyou have a question about right of wayaccess, call 762-4355.

• AutoPay is a convenient way to pay your Chugach bill each month. Chugachwill automatically charge your credit card orchecking account for your monthly payment.You’ll continue to receive a monthly bill soyou can track energy usage and cost. Formore information about AutoPay call 563-7366 or find it under Account Services atwww.chugachelectric.com.

• Chugach’s 2002 annual meeting will be held at the Hotel Captain Cook at 7p.m. on Thursday, April 25. Registrationwill start at 6 p.m.

• Chugach will set a record date in mid-March for the 2002 election. Therecords in place at the close business on therecord date will determine who is eligible tovote in the election or at the annual meeting.

• In February Chugach will send letters and signature cards to non-natural enti-ties, such as corporations and associations.Signature cards showing the authorizedsigners should be returned to Chugachprior to the record date as these cards willdetermine who is eligible to vote for theseentities in the election or to participate infloor voting at the annual meeting.

Chugach bonds rated “A+”,“A2” and “A”

Board approves 2002 budget

(continued on page 4)

The board of directors approvedChugach's 2002 operating and capitalbudgets at its Dec. 19 meeting.

The operating budget projects rev-enues of $180.6 million, a total cost of

electric service or operating expenses of$174.7 million and margins of $7 million.

Total revenues for 2002 are projectedto be about 4 percent higher than thosefor 2001 because of increased sales. Thetotal cost of electric service is about 3.3percent higher than that of 2001 becauseof increased depreciation expense.Margins for 2002 increased 21.5 percentfrom the $5.8 million for 2001.

In addition, the board also approved a$32.8 million capital budget that includessystem improvements and overhauls onBeluga unit Nos. 3, 5 and 8. The capitalbudget also includes the design of pro-jects to improve system reliability inSouth Anchorage through expansion ofChugach's International Substation,building the South Anchorage BulkSubstation and new 138-kilovolt trans-mission lines connecting the new substa-tion to the existing grid.

Beluga Power Plant

General Manager’s messageby Gene Bjornsted

Board approves $180 million bondThe Chugach Board took the followingactions at the December andJanuary meetings:

• Approved the call and refinancingof the 1991 Series A Bonds.

• Approved the 2002 operating andcapital budgets.

• Approved Chugach’s 2002Business Plan.

• Approved KPMG as Chugach’sauditor.

• Re-appointed Elizabeth Carewand R.H. “Red” Kinney andappointed Larry Dinneen, BillGates and Karen Stradford-Wrightto three-year terms on Chugach’s2002 Election Committee.

• Appointed Doretha Abrams andre-appointed Warren Reynoldsto three-year terms on the 2002Nominating Committee.

• Approved directors’ expenses.

• Heard a report on financesthrough November.

For a complete board report log onto www.chugachelectric.com.

Bruce Davison, President . .(907) 563-6555Sand Lake . . . . . . . . . . . .davison@gci.net

H.A. “Red” BoucherVice President . . . . . . . . .(907) 349-2192Midtown . . . . . . . . . . .redbou@alaska.net

Chris Birch, Secretary . . . .(907) 346-3265Valli Vue . . . . . . . . . . .chrisbirch@gci.net

Jeff Lipscomb, Treasurer . .(907) 346-5500Hillside . . . . . . . . . . .ceajeff@chugach.net

Dave Cottrell, Director . . .(907) 278-8878Rabbit Creek/Alyeskaboardofdirectors@chugachelectric.com

Patricia Jasper, Director . . .(907) 243-5678Jewel Lake . . . . . . . . .jasper@chugach.net

Pat Kennedy, Director . . . .(907) 333-1217Satellite Park . .pkennedy@customcpu.com

Gene Bjornstad, General Manager

During the December boardmeeting, the board approved a planto issue $180 million in bonds.These bonds were issued to redeemoutstanding debt and also to obtainadditional financing at very favor-able interest rates. I’d like to tellyou why this bond sale is a signifi-cant accomplishment for Chugach.

In 1991 Chugach refinanced$360 million and paid off its out-standing Rural Electrification (REA)Administration loans. The 1991refinancing left Chugach with $262million in 30-year bonds at an inter-est rate of 9.14 percent and $52million in 10-year bonds at 8.08percent. Although these interestrates seem high compared to theinterest rates we see today, theywere significantly lower than theprevious REA loans and helpedreduce Chugach’s interest expense.Interest expense is a major compo-nent of Chugach’s budget, soreplacing high interest debt withlower interest debt improvesChugach’s financial health.

After the 1991 refinancing,interest rates continued to declineso Chugach worked diligently to

reduce interest expense even more.Even though the bonds were notcallable until 2002, over the next 10years, {1022793 HE} Chugachbought back more than $100 millionof the 30-year high cost bonds andreplaced them with less costly debt.

In January Chugach put in placea transaction to refinance all of theremaining 1991 high cost debt andreplace it with lower cost debt. Wealso obtained some additionalmoney for working capital. I’mhappy to inform you that Chugachobtained this $180 million in bondsat very favorable interest rates —$120 million at a fixed 6.20 percentand $60 million at a variable rate of1.97 percent. These interest ratesare substantially less than the pre-vious 9.14 percent interest rate andwill result in a savings of millionseach year in interest expense on therefinanced debt.

Joe Griffith, Chugach’s CFO, head-ed up the team who completed thisgreat refinancing accomplishment.

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Check your capital credits balance online

Capital credits are a benefit of being a member of Chugach. If you haveaccess to a computer, you can even find out the balance in your capitalcredits account and what has been retired, or paid to you over the years.

Go to the Chugach home page at www.chugachelectric.com. From there,click on the Customer Service menu. On the menu bar click on the capitalcredits area and enter either the “for your {1094106 TI} home” or “for yourbusiness” section. You will be asked to submit your account number.

Once the account number has been submitted, the capital credits his-tory page will appear. The page will indicate the amount of capital creditsearned each year, and if you have received either a credit against youraccount or a check from a retirement or payment.

Board report

The Chugach board

President’s reportby Bruce Davison

Increased fees for directorsAs many of you may be aware, your

Board of Directors consists of Chugachmembers who are elected based ontheir experience and qualifications. Ofthe seven director seats, two or threeare filled each year by election. In pastelections, there have been situationswhere the number of candidates didnot exceed the number of vacant Boardseats, thereby ensuring that every can-didate would be elected as a directorwithout any competition or choiceavailable for the membership. In myview, this ultimately hurts the cooper-ative and you, the members, becausethe quality, business experience, anddedication of directors ultimatelydiminishes in the absence of choiceand competition. As of the writing ofthis column, there are only two candi-dates for three open director seats inthe upcoming April election.

I think one of the main reasonsthere is not a lot of interest in running

for the Board is the minimal amountestablished for the director fee.Chugach is a large, complex businesswith annual operating revenues inexcess of $180 million and assets of$500 million. Your Board should con-sist of qualified, experienced peoplewho are community leaders and whoare knowledgeable about some aspectof governmental or business opera-tions. Unfortunately, the people whomake the best directors are often per-sons who have very little free timeavailable due to their own businessand employment commitments.

Out of necessity, we conduct manyof our committee and special Boardmeetings during the day; our regularmonthly Board meetings begin at 4 p.m.Each director is therefore required tospend a great deal of time at Chugachduring the normal working hours ofhis or her “day job.” Many meetingstake two to three hours to accomplish

the work required of the Board.Occasionally, meetings last all day.One way to attract more highly quali-fied candidates is for the membershipto {107779 SC} amend the currentbylaw to increase director fees so thatpersons serving as directors would notbe required to make as great a finan-cial sacrifice to serve on the Board.

Currently Board members are paida fee of $100 per meeting. The currentfee has not been changed since atleast 1984. In my opinion directorcompensation should be increasedwhich will help ensure a dedicated,experienced and knowledgeableBoard. In my next column I will pro-vide additional details and justificationfor increasing the director fee.

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As a member of the Chugach board,I also reflected on how our business haschanged, and realized that the eventsof Sept. 11 have forever changed theenvironment in which we operate. Inaddition to providing safe, reliableenergy, we must also pay greater atten-tion to the security of our facilities.

The Chugach electrical systemcovers a lot of ground, often followinga desolate and unyielding route.Chugach has taken precautions toensure that our facilities are protectedand that the electricity keeps flowingto homes and businesses throughoutthe Railbelt.

While the electrical system is thefirst thought that comes to mind when

talking about security, there are otherareas of concern.

Chugach has an extensive andcomplex computer network thatincludes our administrative, accountingand generation systems. WhileChugach has always had protection forits computer network, we haveincreased the security for our systems.

There have also been some otherchanges internally to help protectChugach’s employees and facilities.Procedures for handling mail havebeen changed, and there is a plan inplace for the isolation and contact ofthe proper authorities in the eventsuspicious mail is received.

While I obviously cannot disclose the

details of Chugach’s security plans andprocedures, I can tell you that we havetaken and will continue to take steps toensure that our members have a supplyof electrical energy that will keep flowingto their homes and businesses.

I also believe that you, as a Chugachmember, must also be vigilant in youreveryday life, be aware of things thatare unusual and call the proper agencyor authority if you observe suspiciousactivities. We are all charged with thisresponsibility, not only in our businesslives, but in our personal lives. Takingan active part in what’s happeningaround us will make our communitysafer for ourselves and our families,and others whose lives touch ours.

As 2001 came to a close, many of us reflected on the past year, and the changes in our lives.

Main number . . . . . . . . . . . .563-7494Toll free . . . . . . . . . . . . . . . .(800) 478-7494Customer service . . . . . . . . . . . . .563-7366Customer service fax . . . . . . . . . .762-4678Business and commercial . . . . . . .762-7876Credit . . . . . . . . . . . . . . . . . . . . . .563-5060Power theft hotline . . . . . . . . . . . .762-4731Danger tree hotline . . . . . . . . . . .762-7227Regulatory Commission of Alaska (800) 390-2782 or 276-6222

Online . . . . . .www.chugachelectric.com

Payment optionsYou may pay your bill by mail, NetPay, automaticdebit from your checking account, in-personat our service center or by using our curbsidedrop box or Speed!Pay terminal. You may beable to pay by phone if your bank or creditunion offers this service. Current paymentsmay also be made at any Anchorage branch ofthe First National Bank of Anchorage. Youmay pay your bill by using Chugach’s onlineNetPay at www.chugachelectric.com.

To report a power outageIn Anchorage . . . . . . . . . . . . . . . .762-7888Outside Anchorage . . . . . . .(800) 478-7494

Frequently called numbers

News notes

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• Your member number is worth $50 if you spot it in the Outlet. Each month membernumbers are inserted into the copy. Thesenumbers are in brackets like this {} alongwith the first two letters of the member’snames. If you find a number like this thatmatches the member number on your bill,call our service center at 563-7366 to claimyour prize. You may win for the current orprevious month’s issue.

Residential Service CostsCustomer Service charge . . . . .$6.25/monthKilowatt-hour charges:Energy charge . . . . . . . . . . . . . . . . .8.0340¢Fuel adjustment . . . . . . . . . . . . . . .2.2900¢State tax . . . . . . . . . . . . . . . . . . . . .0.0360¢Total kwh . . . . . . . . . . . . . . . . . . .10.3600¢

(continued from page 1)NetPay equals convenience

Chugach offers its members aservice called NetPay that allowsthem to receive e-mail notificationand view and pay their bills online.Members have their choice of sever-al NetPay options.

Members can con-tinue receiving a paperbill and use NetPay topay their bill usingeither a credit card or abank transfer (electronic check).

Another NetPay option allows mem-bers to provide Chugach with their e-mail address and receive notificationvia their computer that their bill isready for viewing. They may pay elec-tronically with a credit card or by banktransfer using an electronic check.

Chugach members who havemade the choice to receive e-mailnotification may choose to have theirpaper bill discontinued.

Members may access NetPayusing either their member number or

the e-mail addressthat they have givenChugach, plus a four-digit PIN.

The NetPay conve-nience allows members to save time,and Chugach may save on the costs ofpaper bills, envelopes, postage andhandling costs.

Chugach members can accessNetPay online at www.chugachelec-tric.com or call the Service Center at563-7366 for more information.

Chugach lowers retail and wholesale fuel surcharge

Chugach lowered the fuel sur-charge rates paid by its retail cus-tomers and two of its wholesalecustomers. The decreases wereprimarily due to a reduction in theamount of funds needed to be col-lected for prior fuel and purchasedpower expenses.

The Regulatory Commission ofAlaska approved Chugach’s filing tolower the retail fuel surcharge from2.5430 cents per kilowatt-hour to2.290 cents. Retail customers sawthe change effective with the billsrendered after Jan. 1. The decreasetranslates into a savings on amonthly bill of 2.2 percent or $1.77for the average Chugach residentialcustomer using 700 kwh of serviceeach month.

The RCA also approvedChugach’s request to lower the fuelsurcharge rates for two of the utili-ty’s wholesale customers — HomerElectric Association and MatanuskaElectric Association. The approvedfirst quarter 2002 surcharge ratesare 2.172 cents per kwh for HomerElectric and 2.099 cents per kwhfor Matanuska Electric, comparedto the previous per kilowatt-hourrates of 2.397 cents and 2.412cents per kwh respectively.Wholesale customers saw thechange effective with their Jan. 1purchases from Chugach.