Other

6 Months Ended

Jun. 30, 2011

Notes to Financial Statements [Abstract]

(10)

Other

Bond Issuances. On June 3, 2011, Puget Energy issued $500.0 million of senior secured notes. The notes are secured by an interest in substantially all of Puget Energy's assets, which consists mainly of all the issued and outstanding stock of PSE and the stock of Puget Energy held by Puget Equico LLC (Puget Equico). The notes mature on September 1, 2021 and have an interest rate of 6.0%. Net proceeds from the note offering were used by Puget Energy to repay $484.0 million of its five-year term-loans and $9.9 million to unwind three outstanding interest rate swaps.

On March 25, 2011, PSE issued $300.0 million of senior secured notes secured by first mortgage bonds. The notes have a term of 30-years and an interest rate of 5.638%. Net proceeds from the note offering were used by PSE to repay short-term debt outstanding under its capital expenditures credit facility, which debt was incurred to fund utility capital expenditures and replenish cash used to repay the February 2011 maturity of $260.0 million of medium-term notes with a 7.69% interest rate.

Capital Contribution. On February 3, 2011, and on May 23, 2011, Puget Energy drew $175.0 million and $112.0 million from its capital expenditures credit facility to make capital contributions to PSE. Proceeds were used by PSE to fund capital expenditures.

Allowance for Funds Used During Construction (AFUDC). AFUDC represents the cost of both debt and equity funds used to finance utility plant additions during the construction period. The amount of AFUDC recorded in each accounting period varies depending principally upon the level of construction work in progress and the AFUDC rate used. AFUDC is capitalized as a part of the cost of utility plant and is credited to interest expense and as a non-cash item to other income. Cash inflow related to AFUDC does not occur until these charges are reflected in rates.

The AFUDC rates authorized by the Washington Commission for natural gas and electric utility plant additions based on the effective dates are as follows:

Effective Date	Washington Commission AFUDC Rates
April 8, 2010 - present	8.10%
November 1, 2008 - April 7, 2010	8.25

The Washington Commission authorized the Company to calculate AFUDC using its allowed rate of return. To the extent amounts calculated using this rate exceed the AFUDC calculated rate using the FERC formula, PSE capitalizes the excess as a deferred asset, crediting other income. The deferred asset is amortized over the average useful life of PSE's non-project electric utility plant, which is approximately 30 years.

The following table presents the Company's AFUDC amounts for the three and six months ended June 30, 2011 and 2010:

	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in Thousands)	2011		2010		2011		2010
Equity AFUDC	$	8,299	$	2,432	$	12,033	$	4,351
Washington Commission AFUDC		365		1,047		4,271		2,319
Total in other income		8,664		3,479		16,304		6,670
Debt AFUDC		7,597		3,157		12,001		5,907
Total AFUDC	$	16,261	$	6,636	$	28,305	$	12,577