Accounting for Derivative Instruments and Hedging Activities (Tables)

3 Months Ended

Mar. 31, 2013

Derivative [Line Items]

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value

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^*  Electric portfolio derivatives consist of electric generation fuel of 124,156,282 MMBtus and purchased electricity of 9,328,965 MWhs at March 31, 2013, and 129,693,200 MMBtus and 10,722,415 MWhs at December 31, 2012.

¹  Balance sheet location: Current and Long-term Unrealized gain on derivative instruments.

²  Balance sheet location: Current and Long-term Unrealized loss on derivative instruments.

³  Interest rate swap contracts are only held at Puget Energy.

⁴  PSE had a net derivative liability and an offsetting regulatory asset of $32.2 million at March 31, 2013 and $96.0 million at December 31, 2012 related to contracts used to economically hedge the cost of physical gas purchased to serve natural gas customers. All fair value adjustments on derivatives relating to the natural gas business have been reclassified to a deferred account in accordance with ASC 980, “Regulated Operations” (ASC 980) due to the Purchased Gas Adjustment (PGA) mechanism.

Offsetting Assets and Liabilities [Table Text Block]

The following tables present the potential effect of netting arrangements, including rights of set-off associated with the Company's derivative assets and liabilities:

Puget Energy and Puget Sound Energy
At March 31, 2013 (Dollars in Thousands)	Gross Amount Recognized in the Statement of Financial Position 1		Gross Amounts Offset in the Statement of Financial Position		Net of Amounts Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position
							Commodity Contracts			Cash Collateral Received/Posted		Net Amount
Assets
Energy Derivative Contracts	$	34,862	$	—	$	34,862	$	(26,785	)	$	—	$	8,077
Liabilities
Energy Derivative Contracts	$	113,219	$	—	$	113,219	$	(26,785	)	$	—	$	86,434
Interest Rate Swaps 2	$	19,966	$	—	$	19,966	$	—		$	—	$	19,966
At December 31, 2012(Dollars in Thousands)	Gross Amount Recognized in the Statement of Financial Position 1		Gross Amounts Offset in the Statement of Financial Position		Net of Amounts Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position
							Commodity Contracts			Cash Collateral Received/Posted		Net Amount
Assets
Energy Derivative Contracts	$	21,683	$	—	$	21,683	$	(14,126	)	$	—	$	7,557
Liabilities
Energy Derivative Contracts	$	239,271	$	—	$	239,271	$	(14,126	)	$	—	$	225,145
Interest Rate Swaps 2	$	21,524	$	—	$	21,524	$	—		$	—	$	21,524

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¹  All Derivative Contract deals are executed under ISDA, NAESB and WSPP Master Netting Agreements with Right of Offset.

²  Interest Rate Swap Contracts are only held at Puget Energy.

Schedule of Notional Amounts of Outstanding Derivative Positions

Schedule of Credit Risk Related Contingent Features

The table below presents the fair value of the overall contractual contingent liability positions for the Company's derivative activity at March 31, 2013:

Puget Energy and Puget Sound Energy Contingent Feature (Dollars in Thousands)	Fair Value 1 Liability			Posted Collateral		Contingent Collateral
Credit rating 2	$	(23,515	)	$	—	$	23,515
Requested credit for adequate assurance	(15,771		)	—		—
Forward value of contract 3	(625		)	—		—
Total	$	(39,911	)	$	—	$	23,515

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¹  Represents the derivative fair value of contracts with contingent features for counterparties in net derivative liability positions. Excludes NPNS, accounts payable and accounts receivable.

²  Failure by PSE to maintain an investment grade credit rating from each of the major credit rating agencies provides counterparties a contractual right to demand collateral.

³  Collateral requirements may vary, based on changes in the forward value of underlying transactions relative to contractually defined collateral thresholds.

PUGET ENERGY [Member]

Derivative [Line Items]

Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance

Puget Energy		Three Months Ended March 31,
(Dollars in Thousands)	Location	2013			2012
Interest rate contracts:	Other deductions	$	1,028		$	527
	Interest expense	(2,578		)	(6,641		)
Commodity contracts:
Electric derivatives	Unrealized gain (loss) on derivative instruments, net 1	75,692			(6,876		)
	Electric generation fuel	(12,638		)	(22,993		)
	Purchased electricity	(31,485		)	(45,413		)
Total gain (loss) recognized in income on derivatives		$	30,019		$	(81,396	)

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¹  For the three months ended March 31, 2012, differs from the amounts stated in the statements of income as it does not include amortization related to contracts that were recorded at fair value at the time of the February 2009 merger and subsequently designated as NPNS of $2.2 million .

The following tables present the net unrealized (gain) loss and locations of the Company's derivative instruments recorded on the statements of income:

Schedule of Other Derivatives Not Designated as Hedging Instruments, Statements of Financial Performance and Financial Position, Location

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¹  For the three months ended March 31, 2012, differs from the amounts stated in the statements of income as it does not include amortization related to contracts that were recorded at fair value at the time of the February 2009 merger and subsequently designated as NPNS of $2.2 million .

Puget Sound Energy		Three Months Ended March 31,
(Dollars in Thousands)	Location	2013			2012
Commodity contracts:
Electric derivatives	Unrealized gain (loss) on derivative instruments, net	$	72,740		$	(10,135	)
	Electric generation fuel	(12,638		)	(22,993		)
	Purchased electricity	(31,485		)	(45,413		)
Total gain (loss) recognized in income on derivatives		$	28,617		$	(78,541	)

For derivative instruments previously designated as cash flow hedges (including both commodity contracts and interest rate swaps), the effective portion of the gain or loss on the derivative was recorded as a component of OCI, and then is reclassified into earnings in the same period(s) during which the hedged transaction affects earnings. Puget Energy and PSE expect $4.1 million and $2.2 million of losses in accumulated OCI will be reclassified into earnings within the next twelve months, respectively. As the Company has discontinued cash flow hedging and currently records all mark-to-market adjustments through earnings, there were no additional amounts deferred into OCI during 2013 or 2012. The unrealized gain or loss on derivative contracts is reported in the statement of cash flows under the operating section. However, at the time of the merger, all derivative contracts at Puget Energy were assessed to identify contracts that have a “more than an insignificant” fair value. If the fair value was greater than 10% of the notional value, the contract was deemed as having a financing element. For those contracts, the cash inflows (outflows) are presented in the financing activities section of the statement of cash flows. For the three months ending March 31, cash outflows related to financing activities of $26.0 million and $36.6 million were reported on the Puget Energy statement of cash flows for 2013 and 2012, respectively.

The following tables present the Company's pre-tax gain (loss) of derivatives that were in a previous cash flow hedge relationship, reclassified out of accumulated OCI into income:

Puget Energy		Three Months Ended March 31,
(Dollars in Thousands)	Location	2013			2012
Interest rate contracts:	Interest expense	$	(1,314	)	$	(3,859	)
Commodity contracts:
Electric derivatives	Electric generation fuel	—			100
	Purchased electricity	164			200
Total		$	(1,150	)	$	(3,559	)

Puget Sound Energy		Three Months Ended March 31,
(Dollars in Thousands)	Location	2013			2012
Interest rate contracts:	Interest expense	$	(122	)	$	(122	)
Commodity contracts:
Electric derivatives	Electric generation fuel	—			97
	Purchased electricity	(2,786		)	(3,055		)
Total		$	(2,908	)	$	(3,080	)

PUGET SOUND ENERGY, INC. [Member]

Derivative [Line Items]

Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance

Puget Sound Energy		Three Months Ended March 31,
(Dollars in Thousands)	Location	2013			2012
Commodity contracts:
Electric derivatives	Unrealized gain (loss) on derivative instruments, net	$	72,740		$	(10,135	)
	Electric generation fuel	(12,638		)	(22,993		)
	Purchased electricity	(31,485		)	(45,413		)
Total gain (loss) recognized in income on derivatives		$	28,617		$	(78,541	)

Schedule of Derivative Instruments, Effect on Other Comprehensive Income (Loss)

Puget Sound Energy		Three Months Ended March 31,
(Dollars in Thousands)	Location	2013			2012
Interest rate contracts:	Interest expense	$	(122	)	$	(122	)
Commodity contracts:
Electric derivatives	Electric generation fuel	—			97
	Purchased electricity	(2,786		)	(3,055		)
Total		$	(2,908	)	$	(3,080	)

Schedule of Other Derivatives Not Designated as Hedging Instruments, Statements of Financial Performance and Financial Position, Location

Parent [Member]

Derivative [Line Items]

Schedule of Derivative Instruments, Effect on Other Comprehensive Income (Loss)

The following tables present the Company's pre-tax gain (loss) of derivatives that were in a previous cash flow hedge relationship, reclassified out of accumulated OCI into income:

Puget Energy		Three Months Ended March 31,
(Dollars in Thousands)	Location	2013			2012
Interest rate contracts:	Interest expense	$	(1,314	)	$	(3,859	)
Commodity contracts:
Electric derivatives	Electric generation fuel	—			100
	Purchased electricity	164			200
Total		$	(1,150	)	$	(3,559	)