REGULATORY MATTERS

Fire Island Wind Project

On October 10, 2011, the RCA issued an order approving Chugach’s request for assurance of cost recovery associated with a new power purchase agreement (PPA) between Chugach and Fire Island Wind, LLC (FIW), a special purpose entity wholly-owned by Cook Inlet Region, Inc.

Associated with the approval of the PPA, Chugach submitted project status reports on March 31, 2012, June 29, 2012, October 31, 2012, and January 16, 2013. On January 30, 2014, Chugach submitted a status report regarding FIW integration and a cost reimbursement agreement related to possible impacts to an interconnected utility as a result of the project. Chugach also requested that the RCA accept further updates beginning no later than July 31, 2014. On April 21, 2014, the RCA issued an order approving Chugach’s request to file its next status report by July 31, 2014. On July 18, 2014, Chugach submitted a request to postpone its next update to September 30, 2014, to allow for additional time to work with another utility in the evaluation of possible impacts associated with the project. On July 25, 2014, the RCA issued Order No. 4 approving Chugach’s request. This is not expected to have a material effect on Chugach’s results of operations, financial position and cash flows.

2013 General Rate Case

To reflect revenue and cost changes resulting from the expiration of HEA’s wholesale contract, Chugach submitted its 2013 Test Year General Rate Case to the RCA on November 19, 2013, to increase system base rate revenues by $16.0 million, or approximately 12.5 percent on total retail, MEA, and Seward base rate revenues of $127.4 million. On January 2, 2014, the RCA approved the submitted rates on an interim and refundable basis. Retail rates were effective January 2, 2014, and wholesale rate changes were effective February 1, 2014, for purchases beginning January 1, 2014. The increase, net of both base rate increases and fuel savings, to Chugach retail end-users is approximately 6 percent, while the net increase to retail end-users of MEA and Seward is approximately 8 percent and 5 percent, respectively.

On April 18, 2014, Chugach submitted an update to its 2013 general rate case to reflect the final results contained in Chugach’s compliance filing in the 2012 general rate case that was submitted to the RCA on April 14, 2014. The update reflects final rate design changes contained in the 2012 rate case. On May 30, 2014, the RCA issued Order No. 3 approving Chugach’s motion and update to retail and wholesale base rates effective with the first billing cycle in June 2014. There was no impact to the system revenue requirement contained in the 2013 Test Year General Rate Case filing.

Evidentiary hearings are currently scheduled for October 2014 to address any outstanding issues in the case. The RCA indicated that a final order in this case will be issued by February 12, 2015.

2012 General Rate Case

To reflect cost changes resulting from commercial operation of SPP, Chugach submitted a general rate case to the RCA on December 21, 2012, to increase system base rate revenues by $30.0 million, or approximately 26 percent, on total base rate revenues of $115.0 million. The proposed rates became effective on an interim and refundable basis beginning in February of 2013. In a separate filing, Chugach adjusted fuel rates to reflect efficiency improvements associated with the commercial operation of SPP and made these reduced fuel rates effective at the same time as the requested general rate case increases. This allowed the interim base rate increases to be synchronized with expected reductions in fuel cost recovery rates.

The filing also requested approval of a major expansion of Chugach’s operating tariff to include both firm and non-firm transmission wheeling service and attendant ancillary services in support of third-party transactions on the Chugach system. The main purpose of the expansion is to accommodate anticipated wheeling services after expiration of the HEA and MEA wholesale customer contracts.

Chugach engaged in discussions with the intervening parties to resolve the outstanding issues in the case. The RCA accepted stipulations that resolved the majority of the issues in the case. Chugach filed reply testimony on October 23, 2013, which proposed changes to its rate increase request, including a downward adjustment to its system revenue requirement by $0.2 million, which represented a 0.1 percent reduction to its system base rate revenue requirement of $143.0 million.

On March 14, 2014, the RCA issued Order No. 16 affirming the acceptance of the stipulations entered among the parties in the case. In the order, the RCA approved Chugach’s requested ratemaking treatment of select transmission facilities on its system. On April 14, 2014, Chugach submitted its compliance filing to Order No. 16, including updated rate calculations and tariffs reflecting the results of the stipulations and the RCA order, and its retail refund plan for energy sales between February and December of 2013.

On May 30, 2014, the RCA issued Order No. 17 approving Chugach’s final rates and refund plan. As a result of the RCA order, Chugach began issuing refunds of approximately $165,000, with the first billing cycle of July 2014. The average residential customer refund was approximately $1.10. Chugach will submit a final rate refund report to the RCA in August 2014, pursuant to Order No. 17.

Interruptible Storage Service Agreement: CINGSA

On October 11, 2013, Chugach executed a standardized Interruptible Storage Service Agreement (“ISS Agreement”) under which Chugach agreed to take non-firm service under the CINGSA tariff from October 14, 2013, through March 31, 2016. This signed agreement was submitted to the RCA by CINGSA on October 18, 2013.

On January 7, 2014, Chugach submitted a filing to the RCA requesting approval to recover costs associated with the ISS Agreement from CINGSA. Chugach estimates the recurring costs associated with the CINGSA ISS Agreement to amount to approximately $0.4 million or less, annually. The RCA issued a letter order on March 21, 2014, approving Chugach’s request to recover these costs through its fuel and purchased power rate adjustment process.