Summary of Consolidation Policy

6 Months Ended

Jun. 30, 2011

Notes to Financial Statements [Abstract]

(1)	Summary of Consolidation Policy

Basis of Presentation

Puget Energy, Inc. (Puget Energy) is an energy services holding company that owns Puget Sound Energy, Inc. (PSE). PSE is a public utility incorporated in the state of Washington that furnishes electric and natural gas services in a territory covering 6,000 square miles, primarily in the Puget Sound region. Following the merger with Puget Holdings LLC (Puget Holdings) on February 6, 2009, Puget Energy is an indirect wholly-owned subsidiary of Puget Holdings.

The consolidated financial statements of Puget Energy reflect the accounts of Puget Energy and its subsidiary, PSE. PSE's consolidated financial statements include the accounts of PSE and its subsidiaries. Puget Energy and PSE are collectively referred to herein as "the Company." The consolidated financial statements are presented after elimination of all significant intercompany items and transactions. PSE's consolidated financial statements continue to be accounted for on a historical basis and do not include any purchase accounting adjustments.

The consolidated financial statements contained in this Form 10-Q are unaudited. In the respective opinions of the management of Puget Energy and PSE, all adjustments necessary for a fair statement of the results for the interim periods have been reflected and were of a normal recurring nature. These consolidated financial statements should be read in conjunction with the audited financial statements (and the Combined Notes thereto) included in the combined Puget Energy and PSE Annual Report on Form 10-K for the year ended December 31, 2010.

The preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

PSE collected Washington State excise taxes (which are a component of general retail customer rates) and municipal taxes totaling $57.1 million and $137.3 million for the three and six months ended June 30, 2011, respectively, and $52.4 million and $119.6 million for the three and six months ended June 30, 2010, respectively. The Company reports such taxes on a gross basis in operating revenue and in taxes other than income taxes in the accompanying consolidated statements of income.

Accumulated Other Comprehensive Income (Loss)

The following tables present the components of the Company's accumulated other comprehensive income (OCI) at June 30, 2011 and December 31, 2010:

Puget Energy (Dollars in Thousands)	June 30, 2011			December 31, 2010
Net unrealized loss on energy derivative instruments	$	(2,294	)	$	(2,658	)
Net unrealized loss on interest rate swaps		(20,048	)		(40,041	)
Net unrealized gain and prior service cost on pension plans		39,105			39,630
Total Puget Energy, net of tax	$	16,763		$	(3,069	)

Puget Sound Energy (Dollars in Thousands)	June 30, 2011			December 31, 2010
Net unrealized loss on energy derivative instruments	$	(18,838	)	$	(34,612	)
Settlement of treasury rate cash flow hedge contracts		(7,097	)		(7,257	)
Net unrealized loss and prior service cost on pension plans		(112,651	)		(115,778	)
Total PSE, net of tax	$	(138,586	)	$	(157,647	)