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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2021

Fair Value Inputs, Liabilities, Quantitative Information

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


Puget Energy		March 31, 2021				December 31, 2020
(Dollars in Thousands)	Level	Carrying Value		Fair Value		Carrying Value		Fair Value
Liabilities:
Long-term debt (fixed-rate), net of discount1	2	$	5,670,834	$	7,063,347	$	5,667,740	$	7,755,946
Long-term debt (variable-rate)	2	233,500		233,500		224,700		224,700
Total liabilities		$	5,904,334	$	7,296,847	$	5,892,440	$	7,980,646


Puget Sound Energy		March 31, 2021				December 31, 2020
(Dollars in Thousands)	Level	Carrying Value		Fair Value		Carrying Value		Fair Value
Liabilities:
Long-term debt (fixed-rate), net of discount2	2	$	4,338,523	$	5,446,409	$	4,338,044	$	6,086,358
Total liabilities		$	4,338,523	$	5,446,409	$	4,338,044	$	6,086,358

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1 The carrying value includes debt issuances costs of $21.9 million and $22.7 million for March 31, 2021 and December 31, 2020, respectively, which are not included in fair value.

2 The carrying value includes debt issuances costs of $22.6 million and $22.9 million for March 31, 2021 and December 31, 2020, respectively, which are not included in fair value.

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

The following table presents 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 and Puget Sound Energy	Fair Value At March 31. 2021						Fair Value At December 31, 2020
(Dollars in Thousands)	Level 2		Level 3		Total		Level 2		Level 3		Total
Assets:
Electric derivative instruments	$	31,980	$	386	$	32,366	$	21,947	$	597	$	22,544
Natural gas derivative instruments	19,677		103		19,780		19,139		137		19,276
Total assets	$	51,657	$	489	$	52,146	$	41,086	$	734	$	41,820
Liabilities:
Electric derivative instruments	$	12,187	$	21,556	$	33,743	$	22,607	$	24,315	$	46,922
Natural gas derivative instruments	8,491		1,937		10,428		13,080		1,272		14,352
Total liabilities	$	20,678	$	23,493	$	44,171	$	35,687	$	25,587	$	61,274

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 March 31,
(Dollars in Thousands)	2021						2020
Level 3 Roll-Forward Net Asset/(Liability)	Electric		Natural Gas		Total		Electric		Natural Gas		Total
Balance at beginning of period	$	(23,718)	$	(1,135)	$	(24,853)	$	(3,379)	$	1,282	$	(2,097)
Changes during period:
Realized and unrealized energy derivatives:
Included in earnings1	820		—		820		(24,552)		—		(24,552)
Included in regulatory assets / liabilities	—		(888)		(888)		—		323		323
Settlements	1,728		189		1,917		1,626		(513)		1,113
Transferred into Level 3	—		—		—		—		—		—
Transferred out of Level 3	—		—		—		—		—		—
Balance at end of period	$	(21,170)	$	(1,834)	$	(23,004)	$	(26,305)	$	1,092	$	(25,213)

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1 Income Statement locations: Unrealized (gain) loss on derivative instruments, net. Amounts include unrealized gains (losses) on derivatives still held in position as of the reporting date for electric derivatives of $0.8 million and zero for three months ended March 31, 2021 and 2020, respectively.

Fair Value Inputs, Assets and Liabilities, Quantitative Information

The following table presents the forward price ranges for the Company's Level 3 commodity contracts as of March 31, 2021


Puget Energy and Puget Sound Energy	Fair Value						Range
(Dollars in Thousands)	Assets1		Liabilities1		Valuation Technique	Unobservable Input	Low		High		Weighted Average
Electric	$	386	$	21,556	Discounted cash flow	Power prices (per MWh)	$	22.87	$	44.21	$	32.56
Natural gas	$	103	$	1,937	Discounted cash flow	Natural gas prices (per MMBtu)	$	2.10	$	3.57	$	2.70

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

The following table presents the forward price ranges for the Company's Level 3 commodity contracts as of December 31, 2020:


Puget Energy and Puget Sound Energy	Fair Value						Range
(Dollars in Thousands)	Assets1		Liabilities1		Valuation Technique	Unobservable Input	Low		High		Weighted Average
Electric	$	597	$	24,315	Discounted cash flow	Power prices (per MWh)	$	22.82	$	41.66	$	31.54
Natural gas	$	137	$	1,272	Discounted cash flow	Natural gas prices (per MMBtu)	$	1.89	$	3.42	$	2.47

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

Schedule of Effect of Significant Unobservable Inputs, Changes in Plan Assets

The following table presents the significant unobservable inputs used in estimating the impaired long-term power purchase

contracts' fair value:


Puget Energy
Valuation Date	Unobservable Input	Low	High	Average


March 31, 2020	Power prices (per MWh)	$10.23	$29.05	$20.88
	Power contract costs per quarter (in thousands)	$6,308	$7,085	$6,468