Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2012

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Fair Value, by Balance Sheet Grouping

The following table presents the fair value hierarchy by level, the carrying value for cash, cash equivalents, restricted cash, notes receivable and short-term debt. The carrying values below are representative of fair values due to the short-term nature of these financial instruments.

Puget Energy	Carrying / Fair Value At June 30, 2012								Carrying / Fair Value At December 31, 2011
(Dollars in Thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Cash and Cash Equivalents	$	1,314	$	14,819	$	—	$	16,133	$	14,809	$	22,426	$	—	$	37,235
Restricted Cash	1,174		2,370		—		3,544		2,043		2,140		—		4,183
Notes Receivable and Other	—		65,883		—		65,883		—		73,031		—		73,031
Total assets	$	2,488	$	83,072	$	—	$	85,560	$	16,852	$	97,597	$	—	$	114,449
Liabilities:
Short Term Debt	$	—	$	38,000	$	—	$	38,000	$	—	$	25,000	$	—	$	25,000
Total liabilities	$	—	$	38,000	$	—	$	38,000	$	—	$	25,000	$	—	$	25,000

Puget Sound Energy	Carrying / Fair Value At June 30, 2012								Carrying / Fair Value At December 31, 2011
(Dollars in Thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Cash and Cash Equivalents	$	200	$	14,430	$	—	$	14,630	$	9,200	$	21,810	$	—	$	31,010
Restricted Cash	1,174		2,370		—		3,544		2,043		2,140		—		4,183
Notes Receivable and Other	—		65,883		—		65,883		—		73,031				73,031
Total assets	$	1,374	$	82,683	$	—	$	84,057	$	11,243	$	96,981	$	—	$	108,224
Liabilities:
Short Term Debt	$	—	$	38,000	$	—	$	38,000	$	—	$	25,000	$	—	$	25,000
Short Term Debt owed to parent	—		29,998		—		29,998		—		29,998		—		29,998
Total liabilities	$	—	$	67,998	$	—	$	67,998	$	—	$	54,998	$	—	$	54,998

Fair Value Inputs, Liabilities, Quantitative Information

The fair value of the junior subordinated and long-term notes were estimated using the discounted cash flow method with U.S. Treasury yields and Company credit spreads as inputs, interpolating to the maturity date of each issue. Carrying values and estimated fair values were as follows:

Puget Energy		June 30, 2012				December 31, 2011
(Dollars in Thousands)	Level	Carrying Value		Fair Value		Carrying Value		Fair Value
Liabilities:
Junior subordinated notes	2	$	250,000	$	252,313	$	250,000	$	248,583
Long-term debt (fixed-rate), net of discount	2	4,653,633		6,077,979		4,197,511		5,503,571
Long-term debt (variable-rate), net of discount	2	434,000		434,000		829,856		856,978
Total		$	5,337,633	$	6,764,292	$	5,277,367	$	6,609,132
Puget Sound Energy		June 30, 2012				December 31, 2011
(Dollars in Thousands)	Level	Carrying Value		Fair Value		Carrying Value		Fair Value
Liabilities:
Junior subordinated notes	2	$	250,000	$	252,313	$	250,000	$	248,583
Long-term debt (fixed-rate), net of discount	2	3,523,846		4,606,220		3,523,845		4,499,295
Total		$	3,773,846	$	4,858,533	$	3,773,845	$	4,747,878

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation

Puget Energy and Puget Sound Energy	Three Months Ended June 30,
Level 3 Roll-Forward Net (Liability)	2012									2011
(Dollars in Thousands)	Electric			Gas			Total			Electric			Gas			Total
Balance at beginning of period	$	(107,364	)	$	(3,167	)	$	(110,531	)	$	(89,758	)	$	(1,785	)	$	(91,543	)
Changes during period
Realized and unrealized energy derivatives:
Included in earnings 1	5,077			—			5,077			(4,244		)	—			(4,244		)
Included in regulatory assets / liabilities	—			(4		)	(4		)	—			1,860			1,860
Settlements 3	14,372			324			14,696			8,234			(1,127		)	7,107
Transferred into Level 3	(38,674		)	(297		)	(38,971		)	—			363			363
Transferred out of Level 3	46,136			325			46,461			4,475			445			4,920
Balance at end of period	$	(80,453	)	$	(2,819	)	$	(83,272	)	$	(81,293	)	$	(244	)	$	(81,537	)

Puget Energy and Puget Sound Energy	Six Months Ended June 30,
Level 3 Roll-Forward Net (Liability)	2012									2011
(Dollars in Thousands)	Electric			Gas			Total			Electric			Gas			Total
Balance at beginning of period	$	(90,311	)	$	(5,041	)	$	(95,352	)	$	(87,436	)	$	(3,859	)	$	(91,295	)
Changes during period:
Realized and unrealized energy derivatives:
Included in earnings 2	(16,870		)	—			(16,870		)	(19,951		)	—			(19,951		)
Included in regulatory assets / liabilities	—			(1,287		)	(1,287		)	—			2,979			2,979
Settlements 3	35,415			105			35,520			19,139			(1,592		)	17,547
Transferred into Level 3	(55,548		)	(297		)	(55,845		)	—			363			363
Transferred out of Level 3	46,861			3,701			50,562			6,955			1,865			8,820
Balance at end of period	$	(80,453	)	$	(2,819	)	$	(83,272	)	$	(81,293	)	$	(244	)	$	(81,537	)

__________

¹  Income Statement location: Unrealized (gain) loss on derivative instruments, net. Includes unrealized gains (losses) on derivatives still held in position as of the reporting date for electric derivatives of $6.2 million and $(5.0) million for the three months ended June 30, 2012 and 2011, respectively.

²  Income Statement location: Unrealized (gain) loss on derivative instruments, net. Includes unrealized gains (losses) on derivatives still held in position as of the reporting date for electric derivatives of $(12.8) million and $(17.5) million for the six months ended June 30, 2012 and 2011, respectively.

³  The Company had no purchases, sales or issuances during the reported periods.

Realized gains and losses on

Fair Value Inputs, Assets and Liabilities, Quantitative Information

Below are the forward price ranges for the Company's purchased commodity contracts, as of June 30, 2012:

(Dollars in Thousands)
	Fair Value				Range
Derivative Instrument	Assets 1	Liabilities 1	Valuation Technique	Unobservable Input	Low	High	Weighted Average
Electric	$9,438	$89,891	Discounted cash flow	Power Prices	$6.11 per MWh	$46.86 per MWh	$29.93 per MWh
Natural gas	$6,025	$8,844	Discounted cash flow	Natural Gas Prices	$1.77 per MMBtu	$4.79 per MMBtu	$3.88 per MMBtu

__________

¹  The valuation techniques, unobservable inputs and ranges are the same for asset and liability positions.

Fair Value, Measurements, Nonrecurring [Member]

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Fair Value Inputs, Assets and Liabilities, Quantitative Information

Below are the quarterly significant unobservable inputs used in estimating the long-term power purchase contracts' fair value of $513.6 million during the period ended March 31, 2012:

Valuation Technique	Unobservable Input	Low	High	Weighted Average
Discounted cash flow	Power prices	$10.36 per MWh	$49.78 per MWh	$34.98 per MWh
Discounted cash flow	Power contract costs (in thousands)	$3,185 per qtr	$5,030 per qtr	$4,663 per qtr

PUGET ENERGY [Member]

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The Company did not have any transfers between Level 2 and Level 1 during the three and six months ended June 30, 2012 and 2011.

Puget Energy	Fair Value								Fair Value
	At June 30, 2012								At December 31, 2011
(Dollars in Thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Electric derivative instruments	$	—	$	4,116	$	9,438	$	13,554	$	—	$	2,340	$	8,380	$	10,720
Natural gas derivative instruments	—		3,375		6,025		9,400		—		—		6,011		6,011
Total derivative assets	$	—	$	7,491	$	15,463	$	22,954	$	—	$	2,340	$	14,391	$	16,731
Liabilities:
Electric derivative instruments	$	—	$	120,190	$	89,891	$	210,081	$	—	$	165,643	$	98,691	$	264,334
Natural gas derivative instruments	—		151,383		8,844		160,227		—		195,852		11,052		206,904
Interest rate derivative instruments	—		20,147		—		20,147		—		52,409		—		52,409
Total derivative liabilities	$	—	$	291,720	$	98,735	$	390,455	$	—	$	413,904	$	109,743	$	523,647

PUGET SOUND ENERGY, INC. [Member]

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

Puget Sound Energy	Fair Value								Fair Value
	At June 30, 2012								At December 31, 2011
(Dollars in Thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Electric derivative instruments	$	—	$	4,116	$	9,438	$	13,554	$	—	$	2,340	$	8,380	$	10,720
Natural gas derivative instruments	—		3,375		6,025		9,400		—		—		6,011		6,011
Total assets	$	—	$	7,491	$	15,463	$	22,954	$	—	$	2,340	$	14,391	$	16,731
Liabilities:
Electric derivative instruments	$	—	$	120,190	$	89,891	$	210,081	$	—	$	165,643	$	98,691	$	264,334
Natural gas derivative instruments	—		151,383		8,844		160,227		—		195,852		11,052		206,904
Total liabilities	$	—	$	271,573	$	98,735	$	370,308	$	—	$	361,495	$	109,743	$	471,238