Company Quick10K Filing
Chugach Electric Association
10-Q 2020-03-31 Filed 2020-05-14
10-K 2019-12-31 Filed 2020-03-20
10-Q 2019-09-30 Filed 2019-11-08
10-Q 2019-06-30 Filed 2019-08-09
10-Q 2019-03-31 Filed 2019-05-10
10-K 2018-12-31 Filed 2019-03-27
10-Q 2018-09-30 Filed 2018-11-09
10-Q 2018-06-30 Filed 2018-08-10
10-Q 2018-03-31 Filed 2018-05-15
10-K 2017-12-31 Filed 2018-03-21
10-Q 2017-09-30 Filed 2017-11-09
10-Q 2017-06-30 Filed 2017-08-11
10-Q 2017-03-31 Filed 2017-05-12
10-K 2016-12-31 Filed 2017-03-27
10-Q 2016-09-30 Filed 2016-11-14
10-Q 2016-06-30 Filed 2016-08-12
10-Q 2016-03-31 Filed 2016-05-13
10-K 2015-12-31 Filed 2016-03-24
10-Q 2015-09-30 Filed 2015-11-16
10-Q 2015-06-30 Filed 2015-08-14
10-Q 2015-03-31 Filed 2015-05-14
10-K 2014-12-31 Filed 2015-03-20
10-Q 2014-09-30 Filed 2014-11-14
10-Q 2014-06-30 Filed 2014-08-12
10-Q 2014-03-31 Filed 2014-05-14
10-K 2013-12-31 Filed 2014-03-20
10-Q 2013-09-30 Filed 2013-11-12
10-Q 2013-06-30 Filed 2013-08-12
10-Q 2013-03-31 Filed 2013-05-13
10-K 2012-12-31 Filed 2013-03-22
10-Q 2012-09-30 Filed 2012-11-09
10-Q 2012-06-30 Filed 2012-08-09
10-Q 2012-03-31 Filed 2012-05-11
10-K 2011-12-31 Filed 2012-03-20
10-Q 2011-09-30 Filed 2011-11-10
10-Q 2011-06-30 Filed 2011-08-12
10-Q 2011-03-31 Filed 2011-05-16
10-K 2010-12-31 Filed 2011-03-30
10-Q 2010-09-30 Filed 2010-11-12
10-Q 2010-06-30 Filed 2010-08-09
10-Q 2010-03-31 Filed 2010-05-14
10-K 2009-12-31 Filed 2010-03-05
8-K 2020-07-16 Enter Agreement, Exhibits
8-K 2020-07-14 Enter Agreement, Exhibits
8-K 2020-06-18
8-K 2020-03-06
8-K 2020-01-22
8-K 2019-11-27
8-K 2019-10-31
8-K 2019-10-01
8-K 2019-08-01
8-K 2019-05-23
8-K 2019-05-15
8-K 2019-04-26
8-K 2019-03-20
8-K 2018-12-28
8-K 2018-11-29
8-K 2018-10-25
8-K 2018-07-26
8-K 2018-06-21
8-K 2018-05-24
8-K 2018-04-26

C004 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Item 2. Management’S Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 5. Other Information
EX-31.1 c004-20200331xex31_1.htm
EX-31.2 c004-20200331xex31_2.htm
EX-32.1 c004-20200331xex32_1.htm
EX-32.2 c004-20200331xex32_2.htm

Chugach Electric Association Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
84067250433616802012201420172020
Assets, Equity
6047352210-12016201720182020
Rev, G Profit, Net Income
40224-14-32-502012201420172020
Ops, Inv, Fin

10-Q 1 c004-20200331x10q.htm 10-Q 20200331 10Q Q1



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q



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

For the quarterly period ended March 31, 2020

OR

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



Commission file number 33-42125

CHUGACH ELECTRIC ASSOCIATION, INC.

(Exact name of registrant as specifies in its charter)





 

 

 

 

 

 

 

 

 

   State of Alaska    

(State or other jurisdiction of

incorporation or organization)

92-0014224

(I.R.S. Employer

Identification No.)

   5601 Electron Drive, Anchorage, AK    

(Address of principal executive offices)

99518

(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)

 

Securities registered pursuant to Section 12(b) of the Act:  None

Title of each classTrading Symbol(s)Name of each exchange on which registered

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  No

(Note:  The registrant is a voluntary filer and not subject to the filing requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934. Although not subject to these filing requirements, the registrant has filed all reports that would have been required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months had the registrant been subject to such requirements.)

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes  No

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



 

 

 

 



 

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company



 

 

Emerging growth company



 

 

 

 



 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

NONE

 

 


 



CHUGACH ELECTRIC ASSOCIATION, INC.

TABLE OF CONTENTS





 

 

 



Caution Regarding Forward-Looking Statements

Part I. Financial Information

 



Item 1.

Financial Statements (unaudited)



 

Consolidated Balance Sheets - as of March 31, 2020, and December 31, 2019



 

Consolidated Statements of Operations – Three months ended March 31, 2020, and March 31, 2019



 

Consolidated Statements of Changes in Equities and Margins – Three months ended March 31, 2020, and March 31, 2019



 

Consolidated Statements of Cash Flows - Three months ended March 31, 2020, and March 31, 2019



 

Notes to Financial Statements



Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

31 



Item 3.

Quantitative and Qualitative Disclosures About Market Risk

40 



Item 4.

Controls and Procedures

41 



 

 

 

Part II. Other Information

 



Item 1.

Legal Proceedings

42 



Item 1A.

Risk Factors

42 



Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

43 



Item 3.

Defaults Upon Senior Securities

43 



Item 4.

Mine Safety Disclosures

43 



Item 5.

Other Information

43 



Item 6.

Exhibits

44 



 

Signatures

45 







 

 


 





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 that these statements be read in conjunction with the audited financial statements for Chugach Electric Association Inc. (Chugach) for the year ended December 31, 2019, filed as part of Chugach’s annual report on Form 10-K. 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 unaudited financial statements of Chugach as of and for the quarter ended March 31, 2020, follow.





 

2


 

Table Of Contents

 

Chugach Electric Association, Inc.

Consolidated Balance Sheets

 











 

 

 

 

 

 



 

 

 

 

 

 



 

(Unaudited)

 

 

 

Assets

 

March 31, 2020

 

December 31, 2019



 

 

 

 

 

 

Utility plant:

 

 

 

 

 

 

Electric plant in service

 

$

1,253,121,567 

 

$

1,242,523,092 

Construction work in progress

 

 

12,401,613 

 

 

16,966,608 

Total utility plant

 

 

1,265,523,180 

 

 

1,259,489,700 

Less accumulated depreciation

 

 

(563,140,061)

 

 

(556,209,740)

Net utility plant

 

 

702,383,119 

 

 

703,279,960 



 

 

 

 

 

 

Other property and investments, at cost:

 

 

 

 

 

 

Nonutility property

 

 

76,889 

 

 

76,889 

Operating lease right-of-use assets

 

 

915,237 

 

 

958,111 

Investments in associated organizations

 

 

7,791,125 

 

 

8,148,426 

Special funds

 

 

2,388,228 

 

 

2,603,505 

Restricted cash equivalents

 

 

64,310 

 

 

108,000 

Long-term prepayments

 

 

318,780 

 

 

Total other property and investments

 

 

11,554,569 

 

 

11,894,931 



 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

 

5,280,739 

 

 

7,271,820 

Special deposits

 

 

58,300 

 

 

54,300 

Restricted cash equivalents

 

 

500,376 

 

 

1,244,155 

Marketable securities

 

 

179,327 

 

 

194,183 

Fuel cost under-recovery

 

 

335,760 

 

 

1,445,753 

Accounts receivable, net

 

 

29,383,709 

 

 

30,120,230 

Materials and supplies

 

 

18,318,738 

 

 

18,014,480 

Fuel stock

 

 

8,673,038 

 

 

12,250,567 

Prepayments

 

 

4,000,115 

 

 

2,699,308 

Other current assets

 

 

352,462 

 

 

235,132 

Total current assets

 

 

67,082,564 

 

 

73,529,928 



 

 

 

 

 

 

Other non-current assets:

 

 

 

 

 

 

Deferred charges, net

 

 

48,664,595 

 

 

45,880,452 

Total other non-current assets

 

 

48,664,595 

 

 

45,880,452 



 

 

 

 

 

 

Total assets

 

$

829,684,847 

 

$

834,585,271 



(Continued)































 

3


 

Table Of Contents

 

Chugach Electric Association, Inc.

Consolidated Balance Sheets (continued)

 





 

 

 

 

 

 



 

 

 

 

 

 



 

(Unaudited)

 

 

 



Liabilities, Equities and Margins

 

March 31, 2020

 

December 31, 2019



 

 

 

 

 

 

Equities and margins:

 

 

 

 

 

 

Memberships

 

$

1,782,028 

 

$

1,776,592 

Patronage capital

 

 

182,281,350 

 

 

177,380,964 

Other

 

 

15,337,373 

 

 

15,309,357 

Total equities and margins

 

 

199,400,751 

 

 

194,466,913 



 

 

 

 

 

 

Long-term obligations, excluding current installments:

 

 

 

 

 

 

Bonds payable

 

 

433,583,330 

 

 

449,999,997 

Notes payable

 

 

29,640,000 

 

 

30,552,000 

Less unamortized debt issuance costs

 

 

(2,635,249)

 

 

(2,684,537)

Operating lease liabilities

 

 

698,668 

 

 

738,713 

Total long-term obligations

 

 

461,286,749 

 

 

478,606,173 



 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current installments of long-term obligations

 

 

20,167,236 

 

 

27,056,065 

Commercial paper

 

 

 

 

24,000,000 

Short-term obligations

 

 

41,000,000 

 

 

Accounts payable

 

 

8,845,852 

 

 

8,316,375 

Consumer deposits

 

 

3,697,817 

 

 

4,294,770 

Accrued interest

 

 

2,040,146 

 

 

5,717,759 

Salaries, wages and benefits

 

 

8,528,234 

 

 

7,387,746 

Fuel

 

 

5,103,648 

 

 

6,765,881 

Other current liabilities

 

 

13,344,912 

 

 

12,627,008 

Total current liabilities

 

 

102,727,845 

 

 

96,165,604 



 

 

 

 

 

 

Other non-current liabilities:

 

 

 

 

 

 

Deferred compensation

 

 

1,624,628 

 

 

1,775,759 

Other liabilities, non-current

 

 

470,888 

 

 

398,790 

Deferred liabilities

 

 

966,442 

 

 

903,870 

Cost of removal obligation / asset retirement obligation

 

 

63,207,544 

 

 

62,268,162 

Total other non-current liabilities

 

 

66,269,502 

 

 

65,346,581 



 

 

 

 

 

 

Total liabilities, equities and margins

 

$

829,684,847 

 

$

834,585,271 



See accompanying notes to financial statements.



 

4


 

Table Of Contents

 

Chugach Electric Association, Inc.

Consolidated Statements of Operations

(Unaudited)







 

 

 

 

 

 



 

Three months ended March 31,



 

2020

 

2019



 

 

 

 

 

 

Operating revenues

 

$

59,907,423 

 

$

55,827,238 



 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

Fuel

 

 

14,532,353 

 

 

14,738,549 

Production

 

 

5,893,994 

 

 

4,858,811 

Purchased power

 

 

7,373,398 

 

 

6,893,011 

Transmission

 

 

1,735,957 

 

 

2,388,069 

Distribution

 

 

3,530,433 

 

 

3,556,619 

Consumer accounts

 

 

1,789,045 

 

 

1,713,559 

Administrative, general and other

 

 

6,518,960 

 

 

6,325,858 

Depreciation and amortization

 

 

7,991,609 

 

 

7,826,369 

Total operating expenses

 

$

49,365,749 

 

$

48,300,845 



 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

Long-term debt and other

 

 

5,657,786 

 

 

5,556,614 

Charged to construction

 

 

(81,845)

 

 

(100,958)

Interest expense, net

 

$

5,575,941 

 

$

5,455,656 

Net operating margins

 

$

4,965,733 

 

$

2,070,737 



 

 

 

 

 

 

Nonoperating margins:

 

 

 

 

 

 

Interest income

 

 

106,411 

 

 

169,152 

Allowance for funds used during construction

 

 

32,738 

 

 

45,557 

Capital credits, patronage dividends and other

 

 

(118,548)

 

 

100,131 

Total nonoperating margins

 

$

20,601 

 

$

314,840 



 

 

 

 

 

 

Assignable margins

 

$

4,986,334 

 

$

2,385,577 



See accompanying notes to financial statements.

 



 

5


 

Table Of Contents

 

Chugach Electric Association, Inc.

Consolidated Statements of Changes in Equities and Margins

(Unaudited)

 





 

 

 

 

 



Three months ended March 31,



2020

 

2019

Memberships:

 

 

 

 

 

Balance at beginning of period

$

1,776,593 

 

$

1,748,172 

Memberships and donations received

 

5,435 

 

 

5,570 

Balance at end of period

$

1,782,028 

 

$

1,753,742 

Other equities and margins:

 

 

 

 

 

Balance at beginning of period

 

15,309,357 

 

 

14,952,925 

Unclaimed capital credits retired

 

(3,073)

 

 

(1,577)

Memberships and donations received

 

31,089 

 

 

84,435 

Balance at end of period

$

15,337,373 

 

$

15,035,783 

Patronage capital:

 

 

 

 

 

Balance at beginning of period

 

177,380,964 

 

 

177,823,597 

Assignable margins

 

4,986,334 

 

 

2,385,577 

Retirement/net transfer of capital credits

 

(85,948)

 

 

(5,011,082)

Balance at end of period

$

182,281,350 

 

$

175,198,092 

Total equities and margins

$

199,400,751 

 

$

191,987,617 



See accompanying notes to financial statements.







6


 

Table Of Contents

 

Chugach Electric Association, Inc.

Consolidated Statements of Cash Flow

(Unaudited)











 

 

 

 

 



 

 

 

 

 



Three months ended March 31,



2020

 

2019

Cash flows from operating activities:

 

 

 

 

 

Assignable margins

$

4,986,334 

 

$

2,385,577 

Adjustments to reconcile assignable margins to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

7,991,609 

 

 

7,826,369 

Amortization and depreciation cleared to operating expenses

 

1,823,649 

 

 

1,806,639 

Allowance for funds used during construction

 

(32,738)

 

 

(45,557)

Write off of inventory, deferred charges and projects

 

50,336 

 

 

395,724 

Other

 

119,745 

 

 

(96,544)

(Increase) decrease in assets:

 

 

 

 

 

Accounts receivable, net

 

711,348 

 

 

2,283,765 

Fuel cost under-recovery

 

1,109,993 

 

 

Materials and supplies

 

(304,258)

 

 

(103,950)

Fuel stock

 

3,577,529 

 

 

2,230,304 

Prepayments

 

(1,619,587)

 

 

(1,708,606)

Other assets

 

(121,330)

 

 

(108,250)

Deferred charges

 

(4,071,210)

 

 

(1,974,444)

Increase (decrease) in liabilities:

 

 

 

 

 

Accounts payable

 

197,916 

 

 

234,512 

Consumer deposits

 

(596,953)

 

 

(346,701)

Fuel cost over-recovery

 

 

 

(978,397)

Accrued interest

 

(3,677,613)

 

 

(4,697,750)

Salaries, wages and benefits

 

1,140,488 

 

 

236,701 

Fuel

 

(1,662,233)

 

 

(82,822)

Other current liabilities

 

(272,430)

 

 

(311,991)

Deferred liabilities

 

(33,203)

 

 

(15,271)

Net cash provided by operating activities

 

9,317,392 

 

 

6,929,308 

Cash flows from investing activities:

 

 

 

 

 

Return of capital from investment in associated organizations

 

357,301 

 

 

414,313 

Investment in special funds

 

(11,089)

 

 

(7,377)

Investment in marketable securities and investments-other

 

(1,664)

 

 

(14,004)

Proceeds from the sale of marketable securities

 

 

 

1,200,000 

Extension and replacement of plant

 

(6,408,084)

 

 

(10,891,794)

Net cash used in investing activities

 

(6,063,536)

 

 

(9,298,862)

Cash flows from financing activities:

 

 

 

 

 

Payments for debt issue costs

 

(21,033)

 

 

(31,609)

Net increase (decrease) in short-term obligations

 

17,000,000 

 

 

24,000,000 

Repayments of long-term obligations

 

(24,214,667)

 

 

(24,214,667)

Memberships and donations received

 

33,452 

 

 

88,428 

Retirement of patronage capital and estate payments

 

(85,948)

 

 

(111,082)

Proceeds from consumer advances for construction

 

1,255,790 

 

 

1,108,603 

Net cash (used in) provided by financing activities

 

(6,032,406)

 

 

839,673 

Net change in cash, cash equivalents, and restricted cash equivalents

 

(2,778,550)

 

 

(1,529,881)

Cash, cash equivalents, and restricted cash equivalents at beginning of period

$

8,623,975 

 

$

7,428,969 

Cash, cash equivalents, and restricted cash equivalents at end of period

$

5,845,425 

 

$

5,899,088 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

Cost of removal obligation

$

939,382 

 

$

(3,522,020)

Extension and replacement of plant included in accounts payable

$

1,667,020 

 

$

2,518,520 

Patronage capital retired/net transferred and included in other current liabilities

$

1,931,295 

 

$

8,361,958 

Supplemental disclosure of cash flow information - interest expense paid, net of amounts capitalized

$

8,981,474 

 

$

9,867,631 



See accompanying notes to financial statements.

 

7


 

Table of Contents

 

Chugach Electric Association, Inc.

Notes to Consolidated Financial Statements

March 31, 2020 and 2019

 

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 United States of America generally accepted accounting principles (U.S. GAAP) for complete financial statements. They should be read in conjunction with Chugach’s audited financial statements for the year ended December 31, 2019, filed as part of Chugach’s 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



Chugach is one of the largest electric utilities in Alaska. Chugach is engaged in the generation, transmission and distribution of electricity in the Anchorage and upper Kenai Peninsula areas. Chugach is on an interconnected regional electrical system referred to as the Alaska 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’s retail and wholesale members are the consumers of the electricity sold. Chugach supplies much of the power requirements of the City of Seward (Seward), as a wholesale customer. Occasionally, Chugach sells available generation, in excess of its own needs, to Matanuska Electric Association, Inc. (MEA), Homer Electric Association, Inc. (HEA), Golden Valley Electric Association, Inc. (GVEA) and Anchorage Municipal Light & Power (ML&P).



Chugach was organized as an Alaska electric cooperative in 1948 and 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).



The consolidated financial statements include the activity of Chugach and of Chugach’s interest in the Beluga River Unit (“BRU”). Chugach accounts for its share of BRU activity using proportional consolidation (see Note 11 – Beluga River Unit). Intercompany activity has been eliminated for presentation of the consolidated financial statements.



8


 

Table Of Contents

 

Chugach Electric Association, Inc.

Notes to Consolidated Financial Statements

March 31, 2020 and 2019

 

Chugach has three Collective Bargaining Agreements (CBA’s) with the International Brotherhood of Electrical Workers  (IBEW), representing approximately 70% of its workforce. Chugach also has an agreement with the Hotel Employees and Restaurant Employees (HERE). All three IBEW CBA’s are effective through June 30, 2021, provide for wage increases in all years and include health and welfare premium cost sharing provisions. The HERE contract is effective through June 30, 2021,  and provides for wage, pension contribution, and health and welfare contribution increases in all years.

 

3.      SIGNIFICANT ACCOUNTING POLICIES



a. Management Estimates



In preparing the financial statements in conformity with U.S. GAAP, the 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, workers’ compensation liability, deferred charges and liabilities, unbilled revenue, estimated useful life of utility plant, cost of removal and asset retirement obligation (“ARO”), and remaining proven BRU reserves. Actual results could differ from those estimates.



b. 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 Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 980, “Topic 980 - Regulated Operations.” FASB ASC 980 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. Chugach’s regulated rates are established to recover all of the specific costs of providing electric service. In each rate filing, rates are set at levels to recover all of the specific allowable costs and those rates are then collected from retail and wholesale customers. The regulatory assets or liabilities are then reduced as the cost or credit is reflected in earnings and our rates.



c. Income Taxes



Chugach is exempt from federal income taxes under the provisions of Section 501(c)(12) of the Internal Revenue Code and for the three month periods ended March 31, 2020, and 2019, was in compliance with that provision.



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Chugach Electric Association, Inc.

Notes to Consolidated Financial Statements

March 31, 2020 and 2019

 

Chugach applies a more-likely-than-not recognition threshold for all tax uncertainties. FASB ASC 740, “Topic 740 – Income Taxes,” only allows the recognition of those tax benefits that have a greater than 50% likelihood of being sustained upon examination by the taxing authorities. Chugach’s management reviewed Chugach’s tax positions and determined there were no outstanding or retroactive tax positions that were not highly certain of being sustained upon examination by the taxing authorities.



d. Cash, Cash Equivalents, and Restricted Cash Equivalents



The following table provides a reconciliation of cash, cash equivalents, and restricted cash equivalents reported within the Consolidated Balance Sheet that sum to the total of the same such amounts shown in the Consolidated Statements of Cash Flows.





 

 

 

 

 



 

 

 

 

 



March 31, 2020

 

December 31, 2019

Cash and cash equivalents

$

5,280,739 

 

$

7,271,820 

Restricted cash equivalents

 

500,376 

 

 

1,244,155 

Restricted cash equivalents included in other property and investments

 

64,310 

 

 

108,000 

Total cash, cash equivalents and restricted cash equivalents shown in the consolidated statements of cash flows

$

5,845,425 

 

$

8,623,975 



Restricted cash equivalents include funds on deposit for future workers’ compensation claims. Restricted assets, including cash equivalents, are recognized on Chugach’s Consolidated Balance Sheet when they are restricted as to withdrawal or usage.



e. Marketable Securities



Chugach’s marketable securities consist of bond mutual funds, corporate bonds, and certificates of deposit with a maturity less than 12 months, classified as trading securities, reported at fair value with gains and losses in earnings. Interest and dividend income from marketable securities is included in nonoperating margins – interest income, and was $12.8 thousand and $62.9 thousand at March 31, 2020, and 2019, respectively. Net gains and losses on marketable securities are included in nonoperating margins – capital credits, patronage dividends and other, and are summarized as follows:





 

 

 

 

 



 

 

 

 

 



Three months ended March 31, 2020

 

Three months ended March 31, 2019

Net gains and (losses) recognized during the period on trading securities

$

(16,520)

 

$

87,952 

Less: Net gains and (losses) recognized during the period on trading securities sold during the period

 

 

 

Unrealized gains and (losses) recognized during the reporting period on trading securities still held at the reporting date

$

(16,520)

 

$

87,952 



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Chugach Electric Association, Inc.

Notes to Consolidated Financial Statements

March 31, 2020 and 2019

 

f. Accounts Receivable



Included in accounts receivable are amounts invoiced to ML&P for their proportionate share of current Southcentral Power Project (“SPP”) costs, which amounted to $1.2 million and $1.0 million at March 31, 2020, and December 31, 2019, respectively.



g. Fuel Stock



Fuel stock is the weighted average cost of fuel injected into Cook Inlet Natural Gas Storage, LLC (“CINGSA”). Chugach’s fuel balance in storage amounted to $8.7 million and $12.3 million at March 31, 2020, and December 31, 2019, respectively.



h. Investments in Associated Organizations



Chugach’s investments in associated organizations are considered equity securities without readily determinable fair values, and as such are measured at cost minus impairment, if any. There were no impairments of these investments recognized during the three months ended March 31, 2020, or 2019.    







4.      REVENUE FROM CONTRACTS WITH CUSTOMERS



a. Nature of goods and services



The following is a description of the contracts and customer classes from which Chugach generates revenue.



i. Energy Sales



Energy sales revenues are Chugach’s primary source of revenue, representing approximately 97.5% of total operating revenue during the three months ended March 31, 2020, and 2019, respectively. Energy sales revenues are recognized upon delivery of electricity, based on billing rates authorized by the RCA, which are applied to customers’ usage of electricity. Chugach’s rates are established, in part, on test period sales levels that reflect actual operating results. Chugach's tariffs include provisions for the recovery of gas costs according to gas supply contracts and costs associated with the BRU operations, as well as purchased power costs.



Expenses associated with electric services include fuel purchased from others and produced from Chugach’s interest in the BRU, both of which are used to generate electricity, as well as power purchased from others. Chugach is authorized by the RCA to recover fuel and purchased power costs through the fuel and purchased power adjustment process, which is adjusted quarterly to reflect increases and decreases of such costs. The amount of fuel and purchased power revenue recognized is equal to actual fuel and purchased power costs. We recognize differences between projected recoverable fuel and purchased power costs and amounts actually recovered through rates. The fuel cost under/over recovery on our balance sheet represents the net accumulation of any under- or over-collection of fuel and purchased power costs. Fuel cost under-recovery will

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Chugach Electric Association, Inc.

Notes to Consolidated Financial Statements

March 31, 2020 and 2019

 

appear as an asset on our balance sheet and will be collected from our members in subsequent periods. Conversely, fuel cost over-recovery will appear as a liability on our balance sheet and will be refunded to our members in subsequent periods.





 

Customer Class

Nature, timing of satisfaction of performance obligations, and significant payment terms

Retail

Retail energy customers can have up to four components of monthly billing included in revenue – energy, fuel and purchased power, demand and customer charge. The energy rate and fuel and purchased power surcharge are applied by kilowatt hour (kWh) usage. The demand charge is applied by kilowatt (kW). The customer charge is a monthly amount applied by meter.

Wholesale

Classified as firm energy sales. Four components of monthly billing are included in revenue – energy, fuel and purchased power, demand and customer charge. The energy rate and fuel and purchased power surcharge are applied by kWh usage. The demand charge is applied by kW. The customer charge is a monthly amount applied by meter.

Economy

Classified as non-firm energy sales. Three components of monthly billing are included in revenue – fuel, operations and maintenance, and margin. The actual fuel costs are billed per thousand cubic feet (Mcf) used. The operations and maintenance and margin rates are applied by megawatt hour (MWh) usage.



Payment on energy sales invoices to all customer classes above are due within 15 to 30 days.



Chugach calculates unbilled revenue, for residential and commercial customers, at the end of each month to ensure the recognition of a full month of revenue. Chugach accrued $9,634,896 and $7,996,257 of unbilled retail revenue at March 31, 2020, and 2019, respectively, which is included in accounts receivable on the balance sheet. Revenue derived from wholesale and economy customers is recorded from metered locations on a calendar month basis, so no estimation is required.



The collectability of our energy sales is very high with typically 0.10% written off as bad debt expense, adjusted annually. As it relates to the collectability of our energy sales during COVID-19, see “Item 1 – Financial Statements – Note 5 – Regulatory Matters – Senate Bill 241.



There were no costs associated with obtaining any of these contracts, therefore no asset was recognized or recorded associated with obtaining any contract.



ii. Wheeling



Wheeling represented 1.7% and 1.4% of our revenue during the three months ended March 31,  2020, and 2019, respectively. Wheeling was recorded through the wheeling of energy across Chugach’s transmission lines at rates set by utility tariff and approved by the RCA. The rates are applied to MWh of energy wheeled. The collectability of wheeling is very high, with no adjustment required.



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Chugach Electric Association, Inc.

Notes to Consolidated Financial Statements

March 31, 2020 and 2019

 

iii. Other Miscellaneous Services



Other miscellaneous services consist of various agreements including dispatch service and gas transfer agreements, pole rentals and microwave bandwidth. Revenue from these agreements is billed monthly and represented 0.8% and 1.1% of our total operating revenue during the three months ended March 31, 2020, and 2019, respectively. The revenue recognized from these agreements is recorded as the service is provided over a period of time. The collectability of these agreements is very high, with no adjustment required.



b. Disaggregation of Revenue



The table below details the revenue recognized by customer class and disaggregates base revenue from fuel and purchased power revenue recognized in the Consolidated Statement of Operations for the first quarter of 2020 and 2019 (in millions).





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Base Rate Sales Revenue

Fuel and Purchased Power Revenue

Total Revenue



 

2020

 

2019

 

% Variance

 

2020

 

2019

 

% Variance

 

2020

 

2019

 

% Variance

Retail

 

$

37.1 

 

$

33.1 

 

12.1 

%

 

$

19.7 

 

$

19.9 

 

(1.0 

%)

 

$

56.8 

 

$

53.0 

 

7.2 

%

Wholesale

 

$

0.7 

 

$

0.5 

 

40.0 

%

 

$

0.9 

 

$

0.9 

 

0.0 

%

 

$

1.6 

 

$

1.4 

 

14.3 

%

Economy

 

$

0.0 

 

$

0.0 

 

0.0 

%

 

$

0.0 

 

$

0.0 

 

0.0 

%

 

$

0.0 

 

$

0.0 

 

0.0 

%

Total Energy Sales

 

$

37.8 

 

$

33.6 

 

12.5 

%

 

$

20.6 

 

$

20.8 

 

(1.0 

%)

 

$

58.4 

 

$

54.4 

 

7.4 

%

Wheeling

 

$

0.0 

 

$

0.0 

 

0.0 

%

 

$

1.1 

 

$

0.8 

 

37.5 

%

 

$

1.1 

 

$

0.8 

 

37.5 

%

Other

 

$

0.4 

 

$

0.6 

 

(33.3 

%)

 

$

0.0 

 

$

0.0 

 

0.0 

%

 

$

0.4 

 

$

0.6 

 

(33.3 

%)

Total Miscellaneous

 

$

0.4 

 

$

0.6 

 

(33.3 

%)

 

$

1.1 

 

$

0.8 

 

37.5 

%

 

$

1.5 

 

$

1.4 

 

7.1 

%

Total Revenue

 

$

38.2 

 

$

34.2 

 

11.7 

%

 

$

21.7 

 

$

21.6 

 

0.5 

%

 

$

59.9 

 

$

55.8 

 

7.3 

%



c. Contract Balances



The table below provides information about contract receivables and contract liabilities.





 

 

 

 

 



 

 

 

 

 



March 31, 2020

 

December 31, 2019

Contract receivables, included in accounts receivable

$

26,754,403 

 

$

26,383,976 

Contract asset

 

335,760 

 

 

1,445,753 

Contract liabilities

 

1,378,798 

 

 

1,839,514 



Contract receivables represent amounts receivable from retail, wholesale, economy and wheeling.



The contract asset consists of the fuel under-recovery and represents the under-collection of fuel and purchased power costs through the fuel and purchased power adjustment process, which will be collected from customers in the following quarter.



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Chugach Electric Association, Inc.

Notes to Consolidated Financial Statements

March 31, 2020 and 2019

 

Contract liabilities consist of credit balances and fuel cost over-recovery. Credit balances are reported as consumer deposits and represent the prepaid accounts of retail customers and are recognized in revenue as the customer uses electric service. Fuel cost over-recovery represents the over-collection of fuel and purchased power costs through the fuel and purchased power adjustment process, which will be refunded to customers through lower fuel and purchased power rates in the following quarter.



Significant changes in the contract asset balances are as follows:



 

 

 

 

 



 

 

 

 

 



March 31, 2020

 

December 31, 2019

Contract asset at beginning of period

$

1,445,753 

 

$

Cash received, excluding amounts recognized as revenue during the period

 

335,760 

 

 

1,445,753 

Revenue recognized and transferred from contract asset at the beginning of the period

 

(1,445,753)

 

 

Contract asset at end of period

$

335,760 

 

$

1,445,753 



Significant changes in contract liabilities balances are as follows:







 

 

 

 

 



 

 

 

 

 



March 31, 2020

 

December 31, 2019

Contract liabilities at beginning of period

$

1,839,514 

 

$

5,196,426 

Cash received, excluding amounts recognized as revenue during the period

 

918,670 

 

 

1,839,514 

Revenue recognized and transferred from contract liabilities at the beginning of the period

 

(1,379,386)

 

 

(5,196,426)

Contract liabilities at end of period

$

1,378,798 

 

$

1,839,514 



d. Transaction Price Allocated to Remaining Performance Obligations



The table below includes estimated revenue to be recognized during the remainder of 2020 related to performance obligations that are unsatisfied (or partially unsatisfied) at March 31, 2020.





 

 



 

 



2020

Credit balances

$

1,378,798 



Credit balances are primarily associated with Chugach’s LevelPay program. The program calculates the monthly amount to be collected from customers annually. It is anticipated the balance will be recognized in revenue within the following year as customers consume electricity.



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Chugach Electric Association, Inc.

Notes to Consolidated Financial Statements

March 31, 2020 and 2019

 

5.      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. 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 is required to submit filings to the RCA for approval before any rate changes can be implemented. While there is no limitation on decreases, base rate increases under SRF are limited to 8% in a 12-month period and 20% in a 36-month period. 



Chugach submitted quarterly SRF filings which resulted in a system demand and energy rate increase of 3.8% effective November 1, 2019; an increase of 0.4% effective February 1, 2020; and an increase of 1.1% effective May 1, 2020.



Operation and Regulation of the Alaska Railbelt Electric and Transmission System



In June 2016, the RCA opened a docket to “evaluate the reliability and security standards and practices of Alaska Electric Utilities.” In 2017, Chugach and several other Alaska Railbelt utilities entered into a contract with GDS Associates, Inc. (“GDS”). GDS’s role was to facilitate discussion between all six Alaska Railbelt utilities and various stakeholders with a goal of submitting to the RCA organizational plans for a Railbelt Reliability Council (“RRC”), including a governance structure, that will be responsible for adoption and enforcement of uniform reliability standards and integrated transmission resource planning. GDS presented to the RCA during two technical conferences in January and March of 2018. Chugach and the other utilities provided GDS’s final recommendation of the RRC to the RCA in May 2018. During the fourth quarter of 2018, the utilities reviewed and adapted the memorandum of understanding with GDS (“GDS MOU”).



On March 15, 2019, the RCA initiated an order requesting comments on proposed legislative language which would authorize the RCA to designate or develop an Electric Reliability Organization (“ERO”). Chugach submitted comments seeking to delay adoption until the RRC Governance Board could be formed but continued to work with the RCA, Railbelt utilities and stakeholders to draft acceptable legislation.



Chugach and the members of Alaska Railbelt Cooperative Transmission and Electric Company (“ARCTEC”) continue to work with the other utilities and stakeholders to arrive at legislation and an RRC organization acceptable to all Railbelt utilities and stakeholders.



In June 2016, in response to Docket I-16-002, Railbelt Utility Information Technology and Operations Technology leadership began meeting to discuss Railbelt Cybersecurity. The Railbelt Utilities Managers group designated the Cybersecurity Working Group to review industry standards and provide a statement of work to develop Railbelt Cybersecurity Standards. On June 21, 2018, Chugach posted a Request for Proposal to hire a consultant to write the standards. The

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Chugach Electric Association, Inc.

Notes to Consolidated Financial Statements

March 31, 2020 and 2019

 

final draft was presented to the Railbelt Utility Managers on February 15, 2019.  On July 10, 2019, a status update was provided to the RCA by the Railbelt Utility Managers announcing the completion of Alaska Critical Infrastructure Protection (“AKCIP”) Cybersecurity Standards and a collective agreement for adoption effective January 1, 2020. Implementation schedules are contained in the specific standards.



In December 2019, the Railbelt utilities signed a Memorandum of Understanding to form a RRC. Alaska Senate Bill 123 (“SB 123”) provides for the creation and regulation of an electric reliability organization. The electric reliability organization will provide integrated resource planning and require preapproval for interconnection for some large energy facilities.  On April 29, 2020, the Governor of Alaska signed the bill, with the section requiring the RCA to adopt regulations taking effect immediately while the section allowing the RCA to form and regulate electric reliability organizations taking effect July 1, 2021.



ML&P Acquisition



In December 2017, the Mayor of Anchorage, Alaska, announced plans to place a proposition on the April 3, 2018 municipal ballot allowing the voters to authorize the sale of ML&P to Chugach. The proposition was approved by Anchorage voters 65.08% to 34.92% per the certified election results. Chugach and the Municipality of Anchorage (“MOA”) negotiated final sales agreements and associated documents. The sale of ML&P was approved by the Anchorage Assembly on December 4, 2018 and the Chugach Board of Directors gave its final approval on December 19, 2018. The agreements and associated documents were executed on December 28, 2018. Pursuant to these agreements and associated documents, on April 1, 2019, Chugach submitted the Joint Request for Necessary Approvals for Acquisition of Anchorage Municipal Light and Power, and the Petition for Approvals Needed to Acquire Anchorage Municipal Light and Power and Application to Amend Certificate of Public Convenience and Necessity (“CPCN”) No. 8 to the RCA. The RCA accepted the filing as complete on April 18, 2019, and the procedural conference was held on April 22, 2019. On May 8, 2019, the RCA issued an order indicating that a final order in the case was expected by November 19, 2019. In addition, the RCA granted the petitions to intervene filed by MEA; Providence Health and Services (“Providence”); GVEA; the Federal Executive Agencies (“FEA”); and HEA / Alaska Electric and Energy Cooperative, Inc. Hearings on the acquisition were held in August and September 2019. On October 1, 2019, all parties agreed to an extension for the RCA’s final order in the case to February 17, 2020, which has subsequently been extended to May 28, 2020, as described below.



In June 2019, Chugach and GVEA entered into a Memorandum of Understanding (MOU) in which Chugach agreed to provide GVEA non-firm energy, wheeling and ancillary services for a 3-year period under terms and conditions consistent with its operating tariff, and will make available 5 MW of Bradley Lake capacity to GVEA for a 5-year period. Excluding fuel, the MOU is expected to provide over $10 million of additional revenue to the Chugach system over the term of the agreement. GVEA has withdrawn its petition to intervene regarding the ML&P acquisition.

 

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Chugach Electric Association, Inc.

Notes to Consolidated Financial Statements

March 31, 2020 and 2019

 

On September 27, 2019, Chugach entered into an Amendment No. 1 to Asset Purchase Agreement (“APA Amendment No. 1”), Amendment No. 1 to Payment in Lieu of Taxes Agreement (“PILT Amendment No.”), and Amendment No. 1 to Eklutna Power Purchase Agreement (“PPA Amendment No. 1”) with the MOA. The APA Amendment No. 1 provides that the purchase price shall reflect the net book value of Municipal Light & Power assets at closing and amends related definitions. The PILT Amendment No. 1 revises the calculation of PILT to make it consistent with the APA Amendment. The PPA Amendment No. 1 defines the Eklutna PPA as a wholesale power agreement.



On October 28, 2019, Chugach, ML&P, Providence, FEA, MEA, Alaska Energy Authority, and ENSTAR Natural Gas Company, a Division of SEMCO Energy, Inc., filed a stipulation with the RCA resolving all disputed issues in these consolidated dockets (“Stipulation”). The Office of the Attorney General, Regulatory Affairs & Public Advocacy Section is not a party to the Stipulation. The RCA has ordered an additional hearing to consider the Stipulation.



On October 28, 2019, Chugach entered into an Amendment No. 2 to Asset Purchase and Sale Agreement (“APA Amendment No. 2”), Amendment No. 2 to Eklutna Power Purchase Agreement (“PPA Amendment No. 2”), and Amendment No. 2 to Payment in Lieu of Taxes Agreement (“PILT Amendment No. 2”) with the MOA. The APA Amendment No. 2 extends the termination date of the APA from March 31, 2020, to September 30, 2020, and recognizes the Eklutna Transmission Assets as Acquired Assets in recognition of the fulfillment of a condition in the original APA. The PPA Amendment No. 2 recognizes changes to the dispute resolution procedures contained therein and the PILT Amendment No. 2 removes Chugach’s obligation in certain regulatory or bankruptcy proceedings to support and stipulate to the fact that the payment in lieu of taxes payments are a tax obligation and should be given appropriate priority status based on that fact. 



Amendment No. 3 to Asset Purchase Agreement (“APA Amendment No. 3”), Amendment No. 3 to Eklutna Power Purchase Agreement (“PPA Amendment No. 3”), and an Amended and Restated BRU Fuel Agreement, were approved by the Chugach Board on October 24, 2019, and by the MOA Assembly on October 30, 2019, and will become effective upon RCA approval. APA Amendment No. 3 reduces the upfront payment to the MOA by $10.0 million, eliminates upward price adjustments if ML&P’s net book value of the purchased assets is greater than $715.4 million at closing, and recognizes a $36.0 million rate reduction account to be funded by the MOA for the benefit of ML&P legacy customers. PPA Amendment No. 3 recognizes Chugach’s right to set-off payments to the extent the MOA does not fulfill its obligations required in the Stipulation. The amended BRU fuel agreement extends the period over which the costs and benefits of Chugach’s and ML&P’s legacy shares of BRU will be allocated to customers in each legacy service area, requires Chugach to utilize a market proxy value for legacy share BRU gas used for economy energy sales, and requires Chugach to utilize a market proxy value for any legacy share BRU gas used to serve Chugach legacy customers for transactions between the legacy service areas of Chugach and ML&P.



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Chugach Electric Association, Inc.

Notes to Consolidated Financial Statements

March 31, 2020 and 2019

 

On February 27, 2020, the RCA issued an order extending the statutory timeline and extended the time to consider the Stipulations to May 28, 2020. For more information, see “Note 10 – ML&P ACQUISITION.”



Senate Bill 241



The Alaska House and Senate approved a bill designed to address several impacts resulting from the COVID-19 pandemic in the State of Alaska. Three sections of Senate Bill 241 (“SB 241”) affect utility operations in Alaska. A section on “tolling” allows the RCA to exceed normal deadlines. Another section of SB 241 prohibits disconnection of utility service for residential customers agreeing to a payment plan who provide a sworn statement they are unable to pay because of COVID-19 issues. This section also makes it clear that customers are not relieved of their obligation to pay. The final utility section deals with the creation of “regulatory assets” for unpaid accounts and other COVID-19-related unusual expenses. A regulatory asset provides an accounting treatment and recovery over time for out-of-the-ordinary expenses. SB 241 includes an exemption intended to keep Chugach’s acquisition of ML&P on track for a RCA decision by May 28, 2020. SB 241 also extends the date of the coronavirus emergency to November 15, 2020, unless lifted earlier. Governor Dunleavy signed the bill into law on April 9, 2020.



6.      DEBT



Lines of Credit



Chugach maintains a $50.0 million line of credit with National Rural Utilities Cooperative Finance Corporation (NRUCFC). On March 16, 2020, Chugach drew $41.0 million on this line of credit to pay the balance of commercial paper. The balance on this line of credit was subsequently paid using the senior unsecured credit facility backstopping our commercial paper program; therefore, there was no outstanding balance on this line of credit at March 31, 2020. Chugach did not utilize this line of credit during 2019, and therefore had no outstanding balance at December 31, 2019.  The borrowing rate is calculated using the total rate per annum and may be fixed by NRUCFC, and was 3.25% at March 31, 2020, and December 31, 2019. 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. The NRUCFC line of credit was renewed September 29, 2017, and expires September 29, 2022. This line of credit is immediately available for unconditional borrowing.



Commercial Paper



On June 13, 2016, Chugach entered into a $150.0 million senior unsecured credit facility (“The Credit Agreement”) which is used to back Chugach’s commercial paper program. The pricing included an all-in drawn spread of one month London Interbank Offered Rate (LIBOR) plus 90.0 basis points, along with a 10.0 basis points facility fee (based on an A/A2/A unsecured debt rating). The commercial paper can be repriced between one day and 397 days. The participating banks included NRUCFC, KeyBank National Association, Bank of America, N.A.,  and CoBank, ACB. The Credit Agreement was due to expire on June 13, 2021.

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Chugach Electric Association, Inc.

Notes to Consolidated Financial Statements

March 31, 2020 and 2019

 

On July 30, 2019, Chugach entered into the First Amendment to the Credit Agreement (“Amendment”) with NRUCFC, Bank of America, N.A. KeyBank National Association, Wells Fargo Bank N.A., and CoBank, ACB. The Amendment increases the lenders’ aggregate commitments under the senior unsecured credit facility from $150 million to $300 million and extends the maturity date of the facility from June 13, 2021, to July 30, 2024.  The Amendment also includes provisions for calculating interest on loans in ways other than the LIBOR. In addition, the Amendment permits Chugach to enter into a bridge financing to fund its potential acquisition of ML&P, of not in excess of $800 million for a term of up to eighteen (18) months. This indebtedness is in addition to other indebtedness permitted to be incurred under the existing senior unsecured credit facility. Other terms of the Credit Agreement remain materially the same.



On March 16, 2020, Chugach attempted to reprice its outstanding commercial paper. Due to volatility in the markets caused by the pandemic, the demand for cash pushed treasuries into the negative, seizing up the commercial paper market. The lack of overall liquidity resulted in Chugach having to utilize other pre-existing credit facilities. The balance of commercial paper was initially paid using the NRUCFC line of credit, which was subsequently rolled over to the senior unsecured credit facility used to back the commercial paper program. The balance outstanding on our senior unsecured credit facility at March 31, 2020, was $41.0 million bearing interest at 1.85%.



Chugach had no commercial paper outstanding at March 31, 2020, and $24.0 million outstanding at December 31, 2019.



The following table provides information regarding average commercial paper balances outstanding for the quarter ended March 31, 2020, and 2019 (dollars in millions), as well as corresponding weighted average interest rates:



 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

2020

 

2019

Average Balance

 

Weighted Average Interest Rate

 

Average Balance

 

Weighted Average Interest Rate

$

15.5

 

1.79 

%

 

$

61.8

 

2.78 

%



Term Loans



Chugach has a term loan facility with CoBank. Loans made under this facility are evidenced by the 2016 CoBank Note, which is governed by the Amended and Restated Master Loan Agreement dated June 30, 2016 (“CoBank Loan Agreement”),  as amended November 26, 2019, and secured by the Second Amended and Restated Indenture of Trust (Indenture). At March 31, 2020, Chugach had $33.2 million outstanding with CoBank.



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Table Of Contents

 

Chugach Electric Association, Inc.

Notes to Consolidated Financial Statements

March 31, 2020 and 2019

 

Financing



On May 15, 2019, Chugach issued $75.0 million of First Mortgage Bonds, 2019 Series A, due May 15, 2049 (the “Bonds”). The Bonds were issued for the purpose of repaying outstanding commercial paper used to finance Chugach’s capital improvement program and for general corporate purposes. The Bonds bear interest at the rate of 3.86%. Interest on the Bonds is due each May 15 and November 15, commencing on November 15, 2019. Principal on the Bonds is due in varying installment amounts on an annual basis beginning May 15, 2021, resulting in an average life of approximately 12.0 years. The Bonds are secured, ranking equally with all other long-term obligations, by a first lien on substantially all of Chugach’s assets, pursuant to the Seventh Supplemental Indenture to the Indenture, which Indenture initially became effective on January 20, 2011, as previously amended and supplemented.



Debt Issuance Costs



The following table outlines debt issuance costs associated with long-term obligations, excluding current installments, at March 31, 2020.



 

 

 

 

 



 

 

 

 

 



Long-term Obligations

 

Unamortized
Debt Issuance Costs

2011 Series A Bonds

$

168,333,330 

 

$

953,940 

2012 Series A Bonds

 

158,250,000 

 

 

842,991 

2017 Series A Bonds

 

32,000,000 

 

 

175,786 

2019 Series A Bonds

 

75,000,000 

 

 

479,064 

2016 CoBank Note

 

29,640,000 

 

 

163,634 

2020 Financing

 

 

 

19,834 



$

463,223,330 

 

$

2,635,249 



The following table outlines debt issuance costs associated with long-term obligations, excluding current installments, at December 31, 2019.



 

 

 

 

 



 

 

 

 

 



Long-term Obligations

 

Unamortized
Debt Issuance Costs

2011 Series A Bonds

$

178,999,997 

 

$

981,692 

2012 Series A Bonds

 

162,000,000 

 

 

864,613 

2017 Series A Bonds

 

34,000,000 

 

 

178,410 

2019 Series A Bonds

 

75,000,000 

 

 

488,611 

2016 CoBank Note

 

30,552,000 

 

 

171,211 



$

480,551,997 

 

$

2,684,537 







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Table Of Contents

 

Chugach Electric Association, Inc.

Notes to Consolidated Financial Statements

March 31, 2020 and 2019

 

7.      RECENT ACCOUNTING PRONOUNCEMENTS



Issued and adopted at March 31, 2020:



ASC Update 2016-13 “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”  and Related Updates



In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 revised the criteria for the measurement, recognition, and reporting of credit losses on financial instruments to be recognized when expected. This update is effective for fiscal years beginning after December 15, 2019, including the interim periods within those years. Chugach began application of ASU 2016-13 on January 1, 2020. Adoption did not have a material effect on its results of operations, financial position, and cash flows.



ASC Update 2018-13 “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement”



In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 changes the fair value measurement disclosure requirements of ASC 820. This update is effective for all entities for fiscal years beginning after December 15, 2019, including interim periods therein. Early adoption is permitted for any eliminated or modified disclosures upon issuance of this ASU. Chugach began application of ASU 2018-13 on January 1, 2020. Adoption did not have a material effect on its results of operations, financial position, and cash flows.



ASC Update 2018-15 “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force)”



In August 2018, the FASB issued ASU 2018-15, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The ASU is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. Chugach began application of ASU 2018-15 on January 1, 2020. Adoption did not have a material effect on its results of operations, financial position, and cash flows.



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Table Of Contents

 

Chugach Electric Association, Inc.

Notes to Consolidated Financial Statements

March 31, 2020 and 2019

 

Issued, not yet adopted:



ASC Update 2018-14 “Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans”



In August 2018, the FASB issued ASU 2018-14, “Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans.” ASU 2018-14 Modifies ASC 715-20 to improve disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The ASU is effective for fiscal years ending after December 15, 2020, for public companies. Early adoption is permitted. Chugach will begin application of ASU 2018-14 on January 1, 2021. Adoption is not expected to have a material effect on its results of operations, financial position, and cash flows.



8.      LEASES



Chugach has no financing leases and several operating leases, most of which are various land easements. Chugach has five operating leases as right-of-use assets for a building, office equipment, and substation land lease, with remaining lease terms of one month to 23.5 years and a weighted average lease term of 6.54 years. Chugach’s operating lease assets are presented as operating lease right-of-use assets on the consolidated balance sheet. The current portion of operating lease liabilities is included in current installments of long-term obligations and the long-term portion is presented as operating lease liabilities on the consolidated balance sheet. A weighted average discount rate of 4.29% was used in calculating the right-to-use assets and lease liabilities. Chugach’s discount rate was calculated using our incremental borrowing rate based on the average borrowing rate of our long-term debt.



Recognition of the right-of-use asset and operating lease liability represents a non-cash investing and financing activity. Total operating lease expense for the three months ended March 31, 2020, was $66,391.



Supplemental cash flow information associated with leases:





 

 

 

 

 



 

 

 

 

 



Three months ended
March 31, 2020

 

Three months ended
March 31, 2019

Cash paid for amounts included in the measurement of liabilities:

 

 

 

 

 

Operating cash flows from operating leases

$

64,141 

 

$

54,000 

Right-of-use assets obtained in exchange for lease obligations:

 

 

 

 

 

Operating leases

$

10,473 

 

$

934,371 



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Chugach Electric Association, Inc.

Notes to Consolidated Financial Statements

March 31, 2020 and 2019

 

Supplemental balance sheet information associated with leases:





 

 

 

 

 



 

 

 

 

 



March 31, 2020

 

December 31, 2019

Operating lease right-of-use assets

$

915,237 

 

$

958,111 

Operating lease liabilities

 

698,668 

 

 

738,713 

Current installments of lease liabilities

 

216,569 

 

 

219,398 

Total operating lease liabilities

$

915,237 

 

$

958,111 



Maturities associated with lease liabilities:





 

 



 

 



March 31, 2020

2020

$

199,744 

2021

 

227,429 

2022

 

227,429 

2023

 

227,429 

2024

 

11,429 

Thereafter

 

165,036 

Total lease payments

 

1,058,496 

Less imputed interest

 

143,259 

Present value of lease liabilities

$

915,237 



Chugach entered into a Power Purchase Agreement with Fire Island Wind, LLC, (“FIW”) on June 21, 2011. The Fire Island Wind contract contains a lease because the agreement identifies an asset (the wind farm is explicitly specified in the agreement and FIW does not have substantive substitution rights) and Chugach controls the use of the asset (it takes 100% of the output and, to the extent there is wind, can control how and when the wind farm produces power directly through its supervisory control and data acquisition (“SCADA”) system). However, due to the exclusively variable nature of the payments related to Fire Island Wind, no new assets or liabilities have been added to the Consolidated Balance Sheet, no changes were made to the Consolidated Statements of Cash Flow, and the variable payments are still classified as purchased power expense on the Consolidated Statements of Operations. The amount of the variable payments included in purchased power for the three months ended March 31,  2020, and 2019, was $1,243,198 and $1,242,432, respectively.



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Table Of Contents

 

Chugach Electric Association, Inc.

Notes to Consolidated Financial Statements

March 31, 2020 and 2019

 

9.      FAIR VALUES OF ASSETS AND LIABILITIES



Fair Value Hierarchy



In accordance with FASB ASC 820, 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 United States 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.



Chugach sold all marketable securities in the second quarter of 2019, using the funds for patronage capital payments to HEA and MEA. During the third quarter of 2019,  Chugach made a small investment in marketable securities. The table below presents the balance of Chugach’s marketable securities measured at fair value on a recurring basis at March 31, 2020, and December 31, 2019. Chugach’s bond mutual funds were measured using quoted prices in active markets. Chugach had no other assets or liabilities measured at fair value on a recurring basis at March 31, 2020, or at December 31, 2019.  









 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2020

 

Total

 

Level 1

 

Level 2

 

Level 3

Bond mutual funds

 

$

179,327 

 

$

179,327 

 

$

 

$



 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

Total

 

Level 1

 

Level 2

 

Level 3

Bond mutual funds

 

$

194,183 

 

$

194,183 

 

$

 

$



Fair Value of Financial Instruments



Fair value estimates are dependent upon subjective assumptions and involve significant uncertainties resulting in variability in estimates with changes in assumptions. The fair value of cash and cash equivalents, accounts receivable and payable, and other short-term monetary assets and liabilities approximate carrying value due to their short-term nature.



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Table Of Contents

 

Chugach Electric Association, Inc.

Notes to Consolidated Financial Statements

March 31, 2020 and 2019

 

The estimated fair values (in thousands) of long-term debt included in long-term obligations at March 31, 2020, are as follows: