REGULATORY MATTERS

Simplified Rate Filing

Chugach is a participant in the Simplified Rate Filing (SRF) process for adjustments to base demand and energy rates for Chugach retail customers and wholesale customer, Seward Electric System. SRF is an expedited base rate adjustment process available to electric cooperatives in the State of Alaska, with filings made either on a quarterly or semi-annual basis. Chugach is a participant on a quarterly filing schedule basis. Chugach submitted its December 2016 test year SRF with the RCA on March 1, 2017, as an informational filing with no changes to the demand and energy rates of Chugach retail customers or Seward. On May 30, 2017, Chugach filed its SRF based on the test year ending March 2017, requesting approval to reduce the demand and energy rates charged to Chugach retail customers and Seward Electric System by 3.0% and 4.9%, respectively. The RCA approved the filing for rates effective July 1, 2017. On August 29, 2017, Chugach filed its SRF based on the June 2017 test year requesting approval to increase system base demand and energy rates by 1.9%. The RCA approved the filing for rates effective November 1, 2017.

Beluga River Unit Gas Transfer Price

Docket U-16-062 / U-16-074 was established to address the creation of a regulatory asset for the recovery of costs associated with Chugach’s acquisition of a portion of ConocoPhillips Alaska, Inc.’s interest in the BRU and to determine the methodology to establish permanent rates for the gas transfer price (GTP) associated with Chugach’s ownership interest in the BRU. On September 7, 2017, the RCA issued U-16-062(7) / U-16-074(7) accepting a stipulation between Chugach and the Office of the Attorney General Regulatory Affairs and Public Advocacy Section and vacating the procedural hearing. On October 7, 2017, Chugach submitted the BRU GTP calculations to the RCA as part of a compliance filing to the settlement. On October 26, 2017, the RCA issued a final order accepting Chugach’s compliance filing and closing the docket.

Depreciation Study Update

In compliance with a previous order from the RCA (U-12-009(8)), Chugach submitted a 2015 Depreciation Study Update to the RCA, requesting approval of the depreciation rates resulting from the study for use in Chugach’s financial record keeping and for establishing electric rates. The filing was submitted to the RCA on September 30, 2016. Chugach proposed changes to depreciation rates that would result in a $5.9 million reduction in annual depreciation expense. On a demand and energy rate basis, the impact is a 4.7% reduction to retail customers and a 4.6% reduction to Seward. The reductions on a total customer bill basis, which includes fuel and purchased power costs, were 3.2% and 1.9%, respectively. Chugach requested that the updated depreciation rates be implemented on July 1, 2017, for both accounting and ratemaking purposes.

On March 23, 2017, the RCA issued Order U-16-081(2) approving Chugach’s proposed changes to its depreciation rates. The depreciation rates were approved as filed. The RCA required Chugach to file a new depreciation study by July 1, 2022, based on plant activity as of December 31, 2021. The RCA closed the docket.

Furie Agreement

On March 16, 2017, Chugach submitted a request to the RCA for approval of the agreement entitled, “Firm and Interruptible Gas Sale and Purchase Agreement between Furie Operating Alaska, LLC and Chugach Electric Association, Inc.” (Furie Agreement) dated March 3, 2017. As part of the filing, Chugach also requested RCA approval to recover both firm and interruptible purchases under the agreement and all attendant transportation and storage costs through its quarterly fuel and purchased power cost adjustment process.

The Furie Agreement provides Chugach with both firm and non-firm gas supplies over a 16-year period, with firm purchases beginning on April 1, 2023, and ending March 31, 2033, and interruptible gas purchases available to Chugach immediately and ending on March 31, 2033. With respect to firm purchases beginning on April 1, 2023, and ending on March 31, 2033, the Furie Agreement provides an annual gas commitment by Furie to sell and Chugach to purchase approximately 1.8 Bcf of gas each year, which represents approximately 20% to 25% of Chugach’s projected gas requirements during this period. The Furie Agreement also provides Chugach with additional purchase options, on a firm and interruptible basis. The initial price for firm gas is $7.16 per Mcf beginning April 1, 2023 and escalates annually rising to $7.98 per Mcf on April 1, 2032, the last year of the Furie Agreement.

On May 1, 2017, the RCA approved the Furie Agreement. The RCA also approved recovery of costs associated with the Furie Agreement through its fuel and purchased power cost adjustment process.

MEA Gas Dispatch Agreement

On June 8, 2016, the RCA approved the “Gas Dispatch Agreement” in which Chugach provides gas scheduling and dispatch services to MEA. The term of this agreement was April 1, 2016, through March 31, 2017, however, it was extended through March 31, 2018, in a letter agreement dated July 29, 2016 and extended through March 31, 2019, in an agreement dated July 25, 2017.

Beluga Parts Filing

On November 18, 2016, Chugach submitted a petition to the RCA for approval to create a regulatory asset that would allow Chugach to amortize and recover in rates the value of certain plant needed to support power production equipment located at Beluga Power Plant. Specifically, Chugach requested RCA approval to recover approximately $11.4 million in equipment that supports Beluga generation units. Chugach requested that it be permitted to amortize the value of this plant over a period of 30 months for plant associated with Units 1 and 2 (approximately $0.3 million), and 108 months for all other parts (approximately $11.1 million). The amortization periods are consistent with the proposed depreciation rates for the Beluga units contained in Chugach's depreciation study that was submitted to the RCA on September 30, 2016. On May 17, 2017, the RCA issued Order U-16-092(2) approving Chugach's request.

Cook Inlet Natural Gas Alaska: Found Gas

On August 17, 2017, the Superior Court issued its order affirming the decisions by the RCA that it has authority in this case, that the RCA’s decision was not arbitrary, and that the RCA’s basis for assignment was reasonable. The RCA’s assignment allocation remains unchanged. There is no impact on Chugach’s margin levels as a result of a sale of found gas and any funds Chugach receives will be returned to members as a reduction to fuel expense. It is not known if or when CINGSA will sell any of the found gas.