Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2013

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

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 March 31, 2013						Carrying / Fair Value At December 31, 2012
(Dollars in Thousands)	Level 1		Level 2		Total		Level 1		Level 2		Total
Assets:
Cash and Cash Equivalents	$	—	$	113,988	$	113,988	$	105,000	$	30,542	$	135,542
Restricted Cash	896		2,205		3,101		914		2,786		3,700
Notes Receivable and Other	—		55,397		55,397		—		63,802		63,802
Total assets	$	896	$	171,590	$	172,486	$	105,914	$	97,130	$	203,044
Liabilities:
Short Term Debt	$	25,000	$	—	$	25,000	$	181,000	$	—	$	181,000
Long Term Debt (variable rate) net of discount	—		—		—		—		—		—
Total liabilities	$	25,000	$	—	$	25,000	$	181,000	$	—	$	181,000



Puget Sound Energy	Carrying / Fair Value At March 31, 2013						Carrying / Fair Value At December 31, 2012
(Dollars in Thousands)	Level 1		Level 2		Total		Level 1		Level 2		Total
Assets:
Cash and Cash Equivalents	$	—	$	113,947	$	113,947	$	105,000	$	30,530	$	135,530
Restricted Cash	896		2,205		3,101		914		2,786		3,700
Notes Receivable and Other	—		55,397		55,397		—		63,802		63,802
Total assets	$	896	$	171,549	$	172,445	$	105,914	$	97,118	$	203,032
Liabilities:
Short Term Debt	$	25,000	$	—	$	25,000	$	181,000	$	—	$	181,000
Short Term Debt owed to parent	—		29,598		29,598		—		29,598		29,598
Total liabilities	$	25,000	$	29,598	$	54,598	$	181,000	$	29,598	$	210,598

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		March 31, 2013				December 31, 2012
(Dollars in Thousands)	Level	Carrying Value		Fair Value		Carrying Value		Fair Value
Liabilities:
Junior subordinated notes	2	$	250,000	$	266,968	$	250,000	$	264,842
Long-term debt (fixed-rate), net of discount	2	4,665,278		6,117,038		4,662,200		6,197,179
Long-term debt (variable-rate), net of discount	2	405,000		405,000		434,000		434,000
Total		$	5,320,278	$	6,789,006	$	5,346,200	$	6,896,021

Puget Sound Energy		March 31, 2013				December 31, 2012
(Dollars in Thousands)	Level	Carrying Value		Fair Value		Carrying Value		Fair Value
Liabilities:
Junior subordinated notes	2	$	250,000	$	266,968	$	250,000	$	264,842
Long-term debt (fixed-rate), net of discount	2	3,526,258		4,522,526		3,526,258		4,628,509
Total		$	3,776,258	$	4,789,494	$	3,776,258	$	4,893,351

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



Puget Energy and Puget Sound Energy	Three Months Ended March 31,
Level 3 Roll-Forward Net (Liability)	2013									2012
(Dollars in Thousands)	Electric			Gas			Total			Electric			Gas			Total
Balance at beginning of period	$	(33,924	)	$	(1,602	)	$	(35,526	)	$	(90,311	)	$	(5,041	)	$	(95,352	)
Changes during period
Realized and unrealized energy derivatives:
Included in earnings ¹	1,598			—			1,598			(21,947		)	—			(21,947		)
Included in regulatory assets / liabilities	—			674			674			—			(1,283		)	(1,283		)
Settlements ²	6,384			(733		)	5,651			21,042			(218		)	20,824
Transferred into Level 3	(7,700		)	—			(7,700		)	(16,874		)	—			(16,874		)
Transferred out of Level 3	7,200			127			7,327			726			3,375			4,101
Balance at end of period	$	(26,442	)	$	(1,534	)	$	(27,976	)	$	(107,364	)	$	(3,167	)	$	(110,531	)

_________


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 $1.4 million and $(19.0) million for the three months ended March 31, 2013 and 2012, respectively.

²The 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 March 31, 2013:



(Dollars in Thousands)
	Fair Value						Range
Derivative Instrument	Assets ¹		Liabilities ¹		Valuation Technique	Unobservable Input	Low	High	Weighted Average
Electric	$	8,632	$	35,074	Discounted cash flow	Power Prices	$8.48 per MWh	$47.07 per MWh	$33.57 per MWh
Natural gas	$	4,893	$	6,427	Discounted cash flow	Natural Gas Prices	$3.44 per MMBtu	$4.91 per MMBtu	$4.25 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

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 months ended March 31, 2013 and 2012.



Puget Energy	Fair Value						Fair Value
Puget Energy	At March 31, 2013						At December 31, 2012
(Dollars in Thousands)	Level 2		Level 3		Total		Level 2		Level 3		Total
Interest rate derivative instruments	$	19,966	$	—	$	19,966	$	21,524	$	—	$	21,524
Total derivative liabilities	$	19,966	$	—	$	19,966	$	21,524	$	—	$	21,524

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 Energy and Puget Sound Energy	Fair Value						Fair Value
Puget Energy and Puget Sound Energy	At March 31, 2013						At December 31, 2012
(Dollars in Thousands)	Level 2		Level 3		Total		Level 2		Level 3		Total
Assets:
Electric derivative instruments	$	7,500	$	8,632	$	16,132	$	1,259	$	8,298	$	9,557
Natural gas derivative instruments	13,837		4,893		18,730		6,769		5,357		12,126
Total assets	$	21,337	$	13,525	$	34,862	$	8,028	$	13,655	$	21,683
Liabilities:
Electric derivative instruments	$	27,166	$	35,074	$	62,240	$	88,971	$	42,221	$	131,192
Natural gas derivative instruments	44,552		6,427		50,979		101,119		6,960		108,079
Total liabilities	$	71,718	$	41,501	$	113,219	$	190,090	$	49,181	$	239,271

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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- Definition

Tabular disclosure of the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments, assets, and liabilities. Such certain disclosures about the financial instruments, assets, and liabilities include: (1) the fair value of the required items together with their carrying amounts (as appropriate) and (2) the methodology and assumptions used in developing such estimates of fair value.

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