Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2014

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.



	Carrying / Fair Value						Carrying / Fair Value
Puget Energy	At September 30, 2014						At December 31, 2013
(Dollars in Thousands)	Level 1		Level 2		Total		Level 1		Level 2		Total
Assets:
Cash and Cash Equivalents	$	26,470	$	—	$	26,470	$	44,302	$	—	$	44,302
Restricted Cash	54,251		—		54,251		7,171		—		7,171
Notes Receivable and Other	—		52,795		52,795		—		53,449		53,449
Total assets	$	80,721	$	52,795	$	133,516	$	51,473	$	53,449	$	104,922
Liabilities:
Short-term debt	$	—	$	25,000	$	25,000	$	162,000	$	—	$	162,000
Total liabilities	$	—	$	25,000	$	25,000	$	162,000	$	—	$	162,000



	Carrying / Fair Value						Carrying / Fair Value
Puget Sound Energy	At September 30, 2014						At December 31, 2013
(Dollars in Thousands)	Level 1		Level 2		Total		Level 1		Level 2		Total
Assets:
Cash and Cash Equivalents	$	26,412	$	—	$	26,412	$	44,111	$	—	$	44,111
Restricted Cash	54,251		—		54,251		7,171		—		7,171
Notes Receivable and Other	—		52,795		52,795		—		53,449		53,449
Total assets	$	80,663	$	52,795	$	133,458	$	51,282	$	53,449	$	104,731
Liabilities:
Short-term debt	$	—	$	25,000	$	25,000	$	162,000	$	—	$	162,000
Short-term debt owed to parent	—		28,933		28,933		—		29,598		29,598
Total liabilities	$	—	$	53,933	$	53,933	$	162,000	$	29,598	$	191,598

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		September 30, 2014				December 31, 2013
(Dollars in Thousands)	Level	Carrying Value		Fair Value		Carrying Value		Fair Value
Liabilities:
Junior subordinated notes	2	$	250,000	$	324,414	$	250,000	$	269,366
Long-term debt (fixed-rate), net of discount	2	4,691,825		5,977,877		4,683,476		5,594,314
Long-term debt (variable-rate)	2	299,000		299,000		299,000		299,000
Total		$	5,240,825	$	6,601,291	$	5,232,476	$	6,162,680

Puget Sound Energy		September 30, 2014				December 31, 2013
(Dollars in Thousands)	Level	Carrying Value		Fair Value		Carrying Value		Fair Value
Liabilities:
Junior subordinated notes	2	$	250,000	$	324,414	$	250,000	$	269,366
Long-term debt (fixed-rate), net of discount	2	3,513,259		4,341,809		3,513,258		4,038,455
Total		$	3,763,259	$	4,666,223	$	3,763,258	$	4,307,821

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

The following table presents the Company's reconciliation of the changes in the fair value of Level 3 derivatives in the fair value hierarchy:



Puget Energy and Puget Sound Energy	Three Months Ended September 30,
Level 3 Roll-Forward Net Asset/(Liability)	2014									2013
(Dollars in Thousands)	Electric			Gas			Total			Electric			Gas			Total
Balance at beginning of period	$	(4,693	)	$	(273	)	$	(4,966	)	$	(36,899	)	$	(2,873	)	$	(39,772	)
Changes during period:
Realized and unrealized energy derivatives:
Included in earnings ¹	(3,116		)	—			(3,116		)	(392		)	—			(392		)
Included in regulatory assets / liabilities	—			(725		)	(725		)	—			(957		)	(957		)
Settlements³	(965		)	(680		)	(1,645		)	(1,270		)	466			(804		)
Transferred into Level 3	2,055			—			2,055			730			—			730
Transferred out of Level 3	(6,488		)	(60		)	(6,548		)	8,712			565			9,277
Balance at end of period	$	(13,207	)	$	(1,738	)	$	(14,945	)	$	(29,119	)	$	(2,799	)	$	(31,918	)



Puget Energy and Puget Sound Energy	Nine Months Ended September 30,
Level 3 Roll-Forward Net Asset/(Liability)	2014									2013
(Dollars in Thousands)	Electric			Gas			Total			Electric			Gas			Total
Balance at beginning of period	$	(15,421	)	$	(361	)	$	(15,782	)	$	(33,924	)	$	(1,602	)	$	(35,526	)
Changes during period:
Realized and unrealized energy derivatives:
Included in earnings ²	1,939			—			1,939			(11,593		)	—			(11,593		)
Included in regulatory assets / liabilities	—			1,654			1,654			—			(967		)	(967		)
Settlements³	1,114			(1,256		)	(142		)	7,792			(762		)	7,030
Transferred into Level 3	5,155			(585		)	4,570			(7,799		)	—			(7,799		)
Transferred out of Level 3	(5,994		)	(1,190		)	(7,184		)	16,405			532			16,937
Balance at end of period	$	(13,207	)	$	(1,738	)	$	(14,945	)	$	(29,119	)	$	(2,799	)	$	(31,918	)

__________


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 $(3.3) million and $(0.8) million for the three months ended September 30, 2014 and 2013, 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 $(3.3) million and $(15.0) million for the nine months ended September 30, 2014 and 2013, respectively.


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

Fair Value Inputs, Assets and Liabilities, Quantitative Information

Below are the forward price ranges for the Company's purchased commodity contracts as of September 30, 2014:



	Fair Value						Range
(Dollars in Thousands)	Assets ¹		Liabilities ¹		Valuation Technique	Unobservable Input	Low	High	Weighted Average
Electric	$	4,254	$	17,461	Discounted cash flow	Power Prices	$17.64 per MWh	$44.50 per MWh	$35.21 per MWh
Natural gas	$	1,999	$	3,737	Discounted cash flow	Natural Gas Prices	$3.60 per MMBtu	$3.83 per MMBtu	$3.70 per MMBtu

__________


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

Below are the forward price ranges for the Company's purchased commodity contracts, as of December 31, 2013:



	Fair Value						Range
(Dollars in Thousands)	Assets ¹		Liabilities ¹		Valuation Technique	Unobservable Input	Low	High	Weighted Average
Electric	$	3,818	$	19,239	Discounted cash flow	Power Prices	$17.06 per MWh	$47.09 per MWh	$38.74 per MWh
Natural gas	$	2,673	$	3,034	Discounted cash flow	Natural Gas Prices	$3.62 per MMBtu	$4.19 per MMBtu	$3.78 per MMBtu

_______________


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

Parent Company [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 following tables present the Company's financial assets and liabilities by level, within the fair value hierarchy, that were accounted for at fair value on a recurring basis:



Puget Energy	Fair Value						Fair Value
Puget Energy	At September 30, 2014						At December 31, 2013
(Dollars in Thousands)	Level 2		Level 3		Total		Level 2		Level 3		Total
Interest rate derivative instruments	$	9,560	$	—	$	9,560	$	13,223	$	—	$	13,223
Total derivative liabilities	$	9,560	$	—	$	9,560	$	13,223	$	—	$	13,223

Subsidiaries [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	Fair Value						Fair Value
Puget Sound Energy	At September 30, 2014						At December 31, 2013
(Dollars in Thousands)	Level 2		Level 3		Total		Level 2		Level 3		Total
Assets:
Electric derivative instruments	$	2,906	$	4,254	$	7,160	$	14,661	$	3,818	$	18,479
Natural gas derivative instruments	10,391		1,999		12,390		5,448		2,673		8,121
Total assets	$	13,297	$	6,253	$	19,550	$	20,109	$	6,491	$	26,600
Liabilities:
Electric derivative instruments	$	15,711	$	17,461	$	33,172	$	18,073	$	19,239	$	37,312
Natural gas derivative instruments	15,398		3,737		19,135		32,642		3,034		35,676
Total liabilities	$	31,109	$	21,198	$	52,307	$	50,715	$	22,273	$	72,988

- 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, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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