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Fair Value Measurements
 12 Months Ended
Dec. 31, 2020
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
ASC 820 established a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy categorizes the inputs into three levels with the highest priority given to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority given to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows:

Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Level 1 primarily consists of financial instruments such as exchange-traded derivatives and listed equities. Equity securities that are also classified as cash equivalents are considered Level 1 if there are unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 - Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. Instruments in this category include non-exchange-traded derivatives such as over-the-counter forwards and options.

Level 3 - Pricing inputs include significant inputs that have little or no observability as of the reporting date. These inputs may be used with internally developed methodologies that result in management's best estimate of fair value.

Financial assets and liabilities measured at fair value are classified in their entirety in the appropriate fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy. The Company primarily determines fair value measurements classified as Level 2 or Level 3 using a combination of the income and market valuation approaches. The process of determining the fair values is the responsibility of the derivative accounting department which reports to the Controller and Principal Accounting Officer. Inputs used to estimate the fair value of forwards, swaps and options include market-price curves, contract terms and prices, credit-risk adjustments, and discount factors. Additionally, for options, the Black-Scholes option valuation model and implied market volatility curves are used. Inputs used to estimate fair value in industry-standard models are categorized as Level 2 inputs as substantially all assumptions and inputs are observable in active
markets throughout the full term of the instruments. On a daily basis, the Company obtains quoted forward prices for the electric and natural gas markets from an independent external pricing service.
The Company considers its electric and natural gas contracts as Level 2 derivative instruments as such contracts are commonly traded as over-the-counter forwards with indirectly observable price quotes. However, certain energy derivative instruments with maturity dates falling outside the range of observable price quotes or that are transacted at illiquid delivery locations are classified as Level 3 in the fair value hierarchy. Management's assessment is based on the trading activity in real-time and forward electric and natural gas markets. Each quarter, the Company confirms the validity of pricing-service quoted prices used to value Level 2 commodity contracts with the actual prices of commodity contracts entered into during the most recent quarter.

Assets and Liabilities with Estimated Fair Value
The carrying values of cash and cash equivalents, restricted cash, and short-term debt as reported on the balance sheet are reasonable estimates of their fair value due to the short-term nature of these instruments and are classified as Level 1 in the fair value hierarchy. The carrying value of other investments of $55.0 million and $53.2 million at December 31, 2022, and 2021, respectively, are included in "Other property and investments" on the balance sheet. These values are also reasonable estimates of their fair value and classified as Level 2 in the fair value hierarchy as they are valued based on market rates for similar transactions.
The fair value of long-term notes were estimated using the discounted cash flow method with U.S. Treasury yields and 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 EnergyDecember 31, 2022December 31, 2021
(Dollars in Thousands)LevelCarrying ValueFair ValueCarrying ValueFair Value
Financial liabilities:
Long-term debt (fixed-rate), net of discount1
2$6,629,073 $6,149,797 $6,170,466 $7,769,896 
Long-term debt (variable-rate), net of discount234,300 34,300 33,300 33,300 
Total$6,663,373 $6,184,097 $6,203,766 $7,803,196 
Puget Sound EnergyDecember 31, 2022December 31, 2021
(Dollars in Thousands)LevelCarrying ValueFair ValueCarrying ValueFair Value
Financial liabilities:
Long-term debt (fixed-rate), net of discount2
2$4,786,765 $4,379,010 $4,784,719 $6,145,639 
Total$4,786,765 $4,379,010 $4,784,719 $6,145,639 
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1.The carrying value includes debt issuances costs of $21.5 million and $22.7 million for December 31, 2022, and 2021, respectively, which are not included in fair value.
2.The carrying value includes debt issuances costs of $21.4 million and $22.8 million for December 31, 2022, and 2021, respectively, which are not included in fair value.
Assets and Liabilities Measured at Fair Value on a 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 and the reconciliation of the changes in the fair value of Level 3     derivatives in the fair value hierarchy:
Puget Energy and
Puget Sound Energy		Fair ValueFair Value
December 31, 2022December 31, 2021
(Dollars in Thousands)Level 2Level 3TotalLevel 2Level 3Total
Assets:
Electric Derivative Instruments$218,610 $119,093 $337,703 $68,011 $6,818 $74,829 
Gas Derivative Instruments342,988 959 343,947 79,526 52 79,578 
Total derivative assets$561,598 $120,052 $681,650 $147,537 $6,870 $154,407 
Liabilities:
Electric Derivative Instruments$84,105 $3,015 $87,120 $35,854 $49,570 $85,424 
Gas Derivative Instruments55,136 1,086 56,222 16,678 2,172 18,850 
Total derivative liabilities$139,241 $4,101 $143,342 $52,532 $51,742 $104,274 
Puget Energy and
Puget Sound Energy		Year Ended December 31,
Level 3 Roll-Forward Net Asset (Liability)202220212020
(Dollars in Thousands)ElectricNatural GasTotalElectricNatural GasTotalElectricNatural GasTotal
Balance at beginning of period$(42,752)$(2,120)$(44,872)$(23,718)$(1,135)$(24,853)$(3,379)$1,282 $(2,097)
Changes during period:
Realized and unrealized energy derivatives
Included in earnings1
180,533 — 180,533 (15,839)— (15,839)(23,559)— (23,559)
Included in regulatory assets / liabilities— 301 301 — (1,749)(1,749)— (1,049)(1,049)
Settlements2
(21,972)1,369 (20,603)(3,195)764 (2,431)3,220 (1,368)1,852 
Transferred into Level 3— — — — — — — — — 
Transferred out Level 3269 323 592 — — $— — — $— 
Balance at end of period$116,078 $(127)$115,951 $(42,752)$(2,120)$(44,872)$(23,718)$(1,135)$(24,853)

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1.Income Statement classification: 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 $147.1 million, $(21.6) million and $(21.3) million for the years ended December 31, 2022, 2021, and 2020, respectively.
2.The Company had no purchases or sales of options during the reported periods.

Realized gains and losses on energy derivatives for Level 3 recurring items are included in energy costs in the Company's consolidated statements of income under purchased electricity, electric generation fuel or purchased natural gas when settled. Unrealized gains and losses on energy derivatives for Level 3 recurring items are included in net unrealized (gain) loss on derivative instruments in the Company's consolidated statements of income.
In order to determine which assets and liabilities are classified as Level 3, the Company receives market data from its independent external pricing service defining the tenor of observable market quotes. To the extent any of the Company's commodity contracts extend beyond what is considered observable as defined by its independent pricing service, the contracts are classified as Level 3. The actual tenor of what the independent pricing service defines as observable is subject to change depending on market conditions. Therefore, as the market changes, the same contract may be designated Level 3 one month and Level 2 the next, and vice versa. The changes of fair value classification into or out of Level 3 are recognized each month and reported in the Level 3 Roll-forward table above. The Company did not have any transfers between Level 2 and Level 1 during the years ended December 31, 2022, 2021, and 2020. The Company does transact at locations, or market price points, that are illiquid or for which no prices are available from the independent pricing service. In such circumstances the Company uses a more liquid price point and adjusts the price for transportation costs to the illiquid locations to serve as a proxy for market prices. Such transactions are classified as Level 3. The Company does not use internally developed models to make adjustments to significant unobservable pricing inputs.
The only significant unobservable input into the fair value measurement of the Company's Level 3 assets and liabilities is the forward price for electric and natural gas contracts.
Below are the forward price ranges for the Company's commodity contracts, as of December 31, 2022:
Puget Energy and
Puget Sound Energy		Fair ValueRange
(Dollars in Thousands)
Assets1
Liabilities1
Valuation TechniqueUnobservable InputLowHighWeighted
Electricity$119,093 $3,015 Discounted cash flowPower Prices (per MWh)$55.79 $291.03 $131.51 
Natural Gas$959 $1,086 Discounted cash flowNatural Gas Prices (per MMBtu)$3.84 $7.00 $4.87 
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1    The valuation techniques, unobservable inputs and ranges are the same for asset and liability positions.

The significant unobservable inputs listed above would have a direct impact on the fair values of the above instruments if they were adjusted. Consequently, significant increases or decreases in the forward prices of electricity or natural gas in isolation would result in a significantly higher or lower fair value for Level 3 assets and liabilities. Generally, interrelationships exist between market prices of natural gas and power. As such, an increase in natural gas pricing would potentially have a similar impact on forward power markets. At December 31, 2022, a hypothetical 10% increase or decrease in market prices of natural gas and electricity would change the fair value of the Company's derivative portfolio, classified as Level 3 within the fair value hierarchy, by $37.6 million.

Long-Lived Assets Measured at Fair Value on a Nonrecurring Basis
Puget Energy records the fair value of its intangible assets in accordance with ASC 360, “Property, Plant, and Equipment,” (ASC 360). The fair value assigned to the power contracts was determined using an income approach comparing the contract rate to the market rate for power over the remaining period of the contracts incorporating non-performance risk. Management also incorporated certain assumptions related to quantities and market presentation that it believes market participants would make in the valuation. The fair value of the power contracts is amortized as the contracts settle.
ASC 360 requires long-lived assets to be tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. One such triggering event is a significant decrease in the forward market prices of power.
Puget Energy evaluated the triggering event criteria in ASC 360 during 2022 and 2021 and determined there was no indication of impairment of its power purchase contracts.