#### EXHIBIT 99.1

#### SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to
Section 14 (a) of

The Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant / /

Filed  by a party other than
the Registrant /X/.

Check the appropriate box:

/ / Preliminary Proxy Statement

/ /  Confidential,  for Use of the Commission Only (as permitted by Rule
14a-6(e) (2))

/X/   Definitive Proxy Statement

/  /  Definitive Additional Materials

/ / Soliciting  Material  Pursuant to Section  240.14a-11 (c) or Section
240.14a-12

Puget Energy, Inc.

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(Name of Registrant as Specified In Its Charter)

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(Name of Person(s) Filing proxy Statement, if other than
the Registrant)

Payment of Filing Fee (Check the appropriate box):

/X/   No fee required

/ / Fee computed on table below per Exchange Act Rules  14a-6(i) (1) and
0-11

(1)   Title of each class of securities to which transaction apples:

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(2)   Aggregate number of securities to which transaction apples:

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(3) Per unit price or other
underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set
forth the amount on which the filing fee is calculated and state how it was
determined):

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/ / Fee paid previously with preliminary materials.

/ / Check box if any part of the
fee is offset as provided by Exchange Act Rule 0-11 (a) (2) and identify the
filing for which the offsetting fee was paid previously. Identify the previous
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(4)   Date Filed:

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### Puget Energy, Inc.

Notice of Annual Meeting

May 15, 2001

Meydenbauer Center

11100 N.E. 6th Street

Bellevue, Washington

To Puget Energy Shareholders:

On   May  15,  2001,  Puget
Energy,  Inc. will hold its Annual Meeting of  Shareholders  at the  Meydenbauer
Center, located at 11100 N.E. 6th Street, Bellevue, Washington. The meeting will
begin at 10:00 a.m. At the annual meeting, the shareholders will

1.    Elect three directors.

2.   Consider other matters properly presented at the meeting.

You  are entitled to vote if
you were a shareholder at the close of business on March 15, 2001.

To  make it easier for you to
vote your proxy, we have made Internet and telephone voting available.  You will
find  instructions  on the  enclosed  proxy  card.  If you choose not to use the
Internet or telephone voting,  please sign and date the proxy card and return it
in the envelope provided.

If your shares are registered
in the name of a brokerage firm or trustee and you plan to attend the meeting in
person,  please  bring a letter,  account  statement  or other  evidence of your
beneficial ownership to the meeting.

March 13, 2001

Bellevue, Washington

By Order of the Board of Directors

_________________

James W. Eldredge

Corporate Secretary

`CONTENTS
ANNUAL MEETING INFORMATION................................................
         WHEN DID THE COMPANY BECOME PUGET ENERGY?........................
         WHO IS ENTITLED TO VOTE?.........................................
         WHAT AM I VOTING ON?.............................................
         WHAT IS A QUORUM?................................................
         HOW MANY VOTES DO I HAVE?........................................
         HOW MANY VOTES ARE REQUIRED TO ELECT A DIRECTOR?.................
         CAN BROKERS VOTE ON THE ELECTION OF DIRECTORS?...................
         HOW WILL MY PROXY BE VOTED?......................................
         WHO COUNTS THE VOTES?............................................
ELECTION OF DIRECTORS.....................................................
         HOW MANY DIRECTORS DOES PUGET ENERGY HAVE?.......................
         HOW MANY DIRECTORS ARE ELECTED EACH YEAR?........................
         WHO ARE THE NOMINEES?............................................
         WHO ARE THE OTHER DIRECTORS?.....................................
STRUCTURE AND COMPENSATION OF BOARD OF DIRECTORS..........................
         BOARD OF DIRECTORS MEETINGS......................................
         AUDIT COMMITTEE..................................................
         DIRECTOR AFFAIRS COMMITTEE.......................................
         COMPENSATION AND RETIREMENT COMMITTEE............................
         STRATEGIC OPPORTUNITIES COMMITTEE................................
         DIRECTOR COMPENSATION............................................
AUDIT COMMITTEE REPORT....................................................
INDEPENDENT ACCOUNTANTS' FEES.............................................
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS....................
         BENEFICIAL OWNERSHIP TABLE.......................................
         SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE..........
EXECUTIVE COMPENSATION....................................................
         JOINT COMPENSATION AND RETIREMENT COMMITTEE REPORT...............
         STOCK PRICE PERFORMANCE GRAPH....................................
         SUMMARY COMPENSATION TABLE.......................................
         OPTION/SAR EXERCISES AND YEAR-END OPTION/SAR VALUES..............
         LONG-TERM INCENTIVE PLAN AWARDS IN 2000..........................
         RETIREMENT BENEFITS STATEMENT....................................
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
         ARRANGEMENTS.....................................................
         AGREEMENTS.......................................................
         1995 LONG-TERM INCENTIVE COMPENSATION PLAN.......................
         STOCK APPRECIATION RIGHTS........................................
ADDITIONAL INFORMATION ABOUT THE MEETING AND SHAREHOLDER
         PROPOSALS........................................................
         INDEPENDENT PUBLIC ACCOUNTANTS...................................
         SHAREHOLDER PROPOSALS............................................
         SOLICITATION OF PROXIES..........................................
APPENDIX A................................................................`

##### YOUR VOTE IS IMPORTANT

Puget      Energy     has
approximately 51,000 shareholders of record.  Regardless of the number of shares
you own, please complete and promptly return the enclosed proxy form,  using the
envelope we have provided.

#### PROXY STATEMENT

Annual Meeting Information

This  proxy statement relates
to the  Annual  Meeting  of  Shareholders  of Puget  Energy,  Inc.  (Puget
Energy)  to be held at 10:00 a.m. on May 15,  2001 at the Meydenbauer
Center,  which  is  located  at  11100  N.E.  6th  Street,  Bellevue,
Washington.  We will mail this proxy statement and our Annual Report for 2000 to
shareholders on March 28, 2001.

When did the Company become Puget
   Energy?

Effective  January  1, 2001,
Puget Sound Energy,  Inc.  (Puget Sound  Energy)  reorganized into a
public utility holding company structure pursuant to a plan of exchange that was
approved  by  Puget  Sound  Energy   shareholders   on  June  23,   1999.   This
reorganization  resulted in the creation of a new holding company, Puget Energy.
Pursuant to the reorganization, Puget Energy became the owner of all Puget Sound
Energys  outstanding  common stock.  Holders of Puget Sound  Energys
existing  common stock  exchanged  their stock on a one-for-one  basis for Puget
Energy common stock. All of Puget Energys operations are conducted through
its  subsidiaries.  In addition to its  ownership of Puget Sound  Energy,  Puget
Energy  also  owns  InfrastruX  Group,  Inc.  (InfrastruX).   Unless
otherwise  specified,   all  historical  information  in  this  proxy  statement
concerning  dates prior to January 1, 2001 refers to Puget Sound  Energy  rather
than Puget Energy.

Who is entitled to vote?

Only  holders of common stock
may vote at the Annual Meeting. We had approximately 86 million shares of common
stock  outstanding  on  March 15,  2001,  the  record  date for the  Annual
Meeting.

What am I voting on?

You  are being asked to elect
three  directors.  We are not aware of any matter to be presented  for action at
the Annual Meeting other than the election of directors.

What is a quorum?

The  holders of a majority of
the  shares of the  common  stock,  present  in person or by proxy at the Annual
Meeting,  constitute a quorum for the  transaction of business.  There must be a
quorum for the meeting to be held.

How many votes do I have?

You  are entitled to one vote
for each share of common stock you held on the record date. You are not entitled
to cumulate votes in the election of directors.

How   many   votes   are
required to elect a director?

If a quorum is present at the
Annual Meeting, the three nominees for election as directors who receive the
greatest number of votes cast by the shares present in person or represented by
proxy at the Annual Meeting will be elected directors.

Can brokers vote on the
election of directors?

Because    brokers    have
discretion  to vote  shares  they  hold on behalf  of  beneficial  owners in the
election of directors,  if they do not receive  instructions,  they may vote the
shares as they see fit.

How will my proxy be voted?

If we receive a proper proxy,
your shares will be voted as you direct.  If you do not provide any direction on
your proxy card, your shares will be voted for all management proposals. You may
revoke a proxy  card at any time  before  it is voted by  delivering  a  written
notice to the  Corporate  Secretary or by signing and  delivering  another proxy
card that is dated later.  If you attend the Annual  Meeting in person,  you may
revoke the proxy by giving  notice of  revocation to an inspector of election at
the Annual Meeting or by voting at the Annual Meeting.

Who counts the votes?

Mellon Investor Services, LLC
will  tabulate  the votes and will act as  inspector  of  election.  No one will
disclose the identity and vote of any shareholder  unless legally required to do
so.

Election of Directors

How  many  directors does
Puget Energy have?

The number of directors is
determined by the Board of Directors, but may be changed by the shareholders.
The Board of Directors has fixed the current number of directors at nine. The
members of Puget Energys Board of Directors and Board Committees are the
same as the members of Puget Sound Energys Board of Directors and Board
Committees.

How  many  directors  are
elected each year?

The  directors  are  divided
into three  classes so that each year  approximately  one-third of the directors
are elected for a three-year  term.  Directors  are elected to hold office until
their successors are elected and qualified,  or until  resignation or removal in
the manner provided in our Bylaws. At the Annual Meeting,  the shareholders will
elect three  Class I  directors to serve for a term of three years expiring
on the date of the 2004 Annual Meeting.

Who are the nominees?

Proxies will be voted on the
following nominees. If any nominee becomes unavailable to serve as a director,
the persons named in the enclosed proxy can vote for or against any other
nominee in accordance with their judgment.

Class I Nominees Standing for Election

Terms Expire 2004

Phyllis J. Campbell

Ms. Campbell has been
President of U.S. Bank, Washington (financial institution) since 1993. She also
served as Area President of U.S. Bank, Washington for Seattle-King County from
1992 to 1993, Executive Vice President and Manager from 1989 to 1992, and in
various banking capacities since 1973. Ms. Campbell, age 49, has been a
Director of Puget Energy since its incorporation in 1999 and of Puget Sound
Energy since 1993. Ms. Campbell also serves as a director of SAFECO Corporation,
and is a Regent of Washington State University.

John D. Durbin

Mr. Durbin   has  been
President and Chief  Executive  Officer and a Director of InfrastruX  since June
2000. Prior to that, he was Executive Director of Emerge Corporation (investment
banking),  and was a principal in Olympic  Capital  Partners,  Inc.  (investment
banking),  Seattle,  Washington,  from 1996 to 1999.  He served as President and
Chief  Executive  Officer  of Hostar  International,  Inc.  from 1988  until his
retirement in June 1995, and he has been a General  Partner of  John Durbin
&  Associates since 1969. His prior positions include Chairman and President
of CEC Equipment  Company from 1982 to 1987 and Chairman of Spokane Truck Sales,
Inc.  from 1983 to 1987.  Mr. Durbin,  age 65, has been a Director of Puget
Energy since its incorporation in 1999 and of Puget Sound Energy since 1984. Mr.
Durbin also serves as a director of ConneXt,  Inc. (a  subsidiary of Puget Sound
Energy) (ConneXt).

William S. Weaver

Mr. Weaver   has  been
President  and Chief  Executive  Officer of Puget Energy since 2000 and of Puget
Sound  Energy  since  January  1998.  He also served as President of Puget Sound
Energy from May 1997 to January 1998,  Vice Chairman and Chairman of Unregulated
Subsidiaries  from February 1997 to May 1997 and  Executive  Vice  President and
Chief Financial Officer from 1991 to 1997. Before joining Puget Sound Energy, he
was a partner in the law firm of Perkins Coie LLP. Mr. Weaver,  age 57, has
been a Director of Puget  Energy  since its  incorporation  in 1999 and of Puget
Sound Energy since 1991.

Who are the other directors?

The  directors  who  are not
standing for reelection at this time are:

Douglas P. Beighle

Mr. Beighle  served  as
Senior Vice President of The Boeing Company (aerospace  manufacturing and sales)
from 1986 until his retirement on May 1,  1997.  Mr. Beighle,  age 68,
has been a Director of Puget Energy since its incorporation in 1999 and of Puget
Sound  Energy  since 1981.  He also serves as a director of  Washington  Mutual,
Inc., Active Voice Corporation,  Simpson Investment Company (privately held) and
InfrastruX. Mr. Beighles term expires in 2003.

Charles W. Bingham

Mr. Bingham served as
Executive Vice President of Weyerhaeuser Company (forest products industry) from
1981 until his retirement in July 1995. Mr. Bingham, age 67, has been a
Director of Puget Energy since its incorporation in 1999 and of Puget Sound
Energy since 1978. Mr. Binghams term expires in 2002.

Craig W. Cole

Robert L. Dryden

Tomio Moriguchi

Sally G. Narodick

Ms. Narodick     is
President of Narodick  Consulting,  which specializes in strategic  planning for
the educational  technology industry. She retired as Chief Executive Officer and
President of Apex Learning,  Inc., a venture-backed  internet  distance learning
company,  in October 2000.  Previously,  she served as a Consultant on Strategic
Planning  for  Educational  Technology  software  for  IBM  Corporation  and was
Chairman and Chief Executive Officer of Edmark  Corporation from October 1989 to
September  1996.  She  also  serves  as  a  director  of  Penford   Corporation,
Click2Learn.com and Solutia,  Inc. Ms. Narodick,  age 55, has been a Director of
Puget  Energy  since its  incorporation  in 1999 and of Puget Sound Energy since
1989. Ms. Narodicks term expires in 2002.

Structure and Compensation of Board of Directors

The  Puget  Energy and Puget
Sound Energy Boards of Directors have four identical standing committees,  which
meet in  addition to regular  Board of  Directors  meetings.  The names of these
committees,  their current  membership and a brief  statement of their principal
responsibilities are presented below.

Board of Directors Meetings

The Puget Energy Board of
Directors met one time during 2000. Each director attended this meeting.

The  Puget Sound Energy Board
of Directors  met eight times during 2000.  Each  director has attended at least
85% of these  meetings and the meetings of committees on which he or she served.
Directors on average  attended 96% of all board and  committee  meetings  during
2000.

Audit Committee

Douglas P. Beighle
(Chairperson), Charles W. Bingham, Donald J. Covey, and Tomio
Moriguchi serve on the Puget Energy and Puget Sound Energy Audit Committees. The
Audit Committees meet with management, the internal auditors and the independent
auditors to review and evaluate the companies audited Financial
Statements, the internal audit function and external audit matters. The
Committees recommend to the full Boards the retention of independent auditors.
The Puget Sound Energy Audit Committee, which in 2000 was comprised of the same
directors, met four times during 2000.

Director Affairs Committee

The  Puget  Energy and Puget
Sound  Energy  Director  Affairs  Committees  currently  include  John D. Durbin
(Chairperson),  Phyllis J.  Campbell  and  Donald J.  Covey.  The  Director
Affairs  Committees  acts  and  makes  recommendations  regarding  selection  of
director  candidates,   director  tenure,  committee  assignments  and  director
compensation.  Shareholders  may nominate  candidates  for election to the Puget
Energy Board of Directors by notifying  the  Corporate  Secretary  prior to each
annual  meeting.   The  committees  seek  director  candidates  with  recognized
achievements  and  skills  and  experience  that  will  enhance  the  Boards  of
Directors. The Puget Energy Director Affairs Committee, which until May 2000 was
comprised of Ms.  Campbell,  Mr. Covey and former director Daniel J. Evans,  met
once during 2000.

Compensation and Retirement Committee

Strategic Opportunities Committee

Director Compensation

Puget Energy and Puget Sound
Energy pay all directors other than the Companys Chief Executive Officer a
quarterly retainer of $7,500 plus $1,100 for each board and committee meeting
the director attends. At least 40% of retainer payments are made in common
stock. No director who serves on both the Puget Energy and Puget Sound Energy
Boards and the corresponding committees is paid additional compensation for
concurrent service. Directors can elect to receive 100% of their retainer
payments in Puget Energy common stock, or to defer receipt of shares under the
Puget Energy Directors Stock Plan. Chairpersons of the Audit, Director
Affairs, Compensation, Retirement and Strategic Opportunities Committees are
also paid additional quarterly retainers of $500 each.

Audit Committee Report

The  Audit  Committee of the
Puget  Energy  Board  of  Directors  is  composed  of  four  directors  who  are
independent directors as defined under the rules of the New York Stock Exchange.
The Audit  Committee  operates under a written  charter  adopted by the Board of
Directors  in 2000,  a copy of which is  included  as  Appendix  A to this proxy
statement.

The     Audit    Committee
recommends  to the  Puget  Energy  Board of  Directors  the  appointment  of the
independent auditors,  reviews the scope of audits,  reviews significant changes
to Puget Energys accounting principles and practices,  reviews significant
issues  encountered  in the course of audit  work  related  to the  adequacy  of
internal  controls  and  reviews  the scope and  results of Puget  Energys
procedures for internal auditing.

The  Audit Committee reviewed
and discussed the audited  financial  statements with management of Puget Energy
and  representatives  of   PricewaterhouseCoopers   LLP.  The  discussions  with
PricewaterhouseCoopers  LLP  included  the matters  required to be  discussed by
Statement  on  Auditing  Standards  No.  61. In  addition,  the Audit  Committee
received the written  disclosures  and the letter  regarding  independence  from
PricewaterhouseCoopers  LLP as required by Independence Standards Board Standard
No. 1 and discussed with PricewaterhouseCoopers LLP their independence.

Based on the review and
discussions referred to above, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in the Annual Report
on Form 10-K for the fiscal year ended December 31, 2000 for filing with the
Securities and Exchange Commission.

The Audit Committee of the Board of Directors of Puget Energy, Inc.

Douglas P. Beighle, Chairman

Charles W. Bingham

Donald J. Covey

Tomio Moriguchi

Independent Accountants Fees

Fees billed by
PricewaterhouseCoopers LLP, Puget Energys independent accountants, in 2000
were as follows:

Audit   Fees  
Audit  fees of  PricewaterhouseCoopers  LLP  during  2000 for the audit of Puget
Sound  Energys  annual  financial  statements  and  the  review  of  those
financial statements included in Puget Sound Energys  quarterly reports on
Forms  10-Q  are  estimated  to be  $534,000  of which an  aggregate  amount  of
$306,000has been billed to Puget Sound Energy through December 31, 2000.

Financial    Information
Systems Design and Implementation Fees  Aggregate fees billed to Puget
Sound Energy by PricewaterhouseCoopers LLP during 2000 for financial information
systems design and implementation services totaled $15,649,000.

All Other Fees 
Aggregate fees billed to the companies by PricewaterhouseCoopers LLP during 2000
for all other services totaled $1,616,000.

The fees paid for financial
information systems design and implementation relate to Puget Sound
Energys successful implementation of its ConsumerLinX customer information
systemin 2000, on which PricewaterhouseCoopers
management consulting services group provided system integration services to the
companies. Other fees relate to:

o   consulting   services   relating  to   consideration   of  strategic
alternatives  for a  subsidiary  of Puget  Energy and for  regulatory  matters -
$590,000;

o     due diligence reviews of InfrastruX acquisition targets - $364,000;

o     tax planning, consulting and tax return reviews - $248,000; and

o employee benefit plan audits, fees relating to registration statements
and other - $414,000.

The Audit Committee of Puget
Energy has considered the compatibility of these non-audit services with
maintaining PricewaterhouseCoopers LLPs independence.

#### Security Ownership of Directors and Executive Officers

Beneficial Ownership Table

The following table shows the
number of shares of common stock beneficially owned on January 31, 2001 by each
director and nominee, by each executive officer named in the Summary
Compensation Table and by the directors and executive officers of Puget Energy
and Puget Sound Energy as a group. No director or executive officer owns more
than 1% of the outstanding shares of common stock. We are not aware of any
person who beneficially owns five percent or more of the common stock.

`Number of Beneficially     Number of Share
                        Name            Owned Shares         Interests Held
                        ----            -------------        --------------
Douglas P. Beighle.............             4,256                1,403(1)
Charles W. Bingham.............             4,754                  435(1)
Phyllis J. Campbell............             1,000                1,754(1)
Craig W. Cole..................               200                1,239(1)
Donald J. Covey................             6,231                3,687(1)
Robert L. Dryden...............             4,698                2,692(1)
John D. Durbin.................             3,115                3,419(1)(3)
John W. Ellis..................            34,918(2)             1,403(1)
Tomio Moriguchi................               805                5,341(1)(3)
Sally G. Narodick..............               258                3,332(1)
William S. Weaver..............            31,328(2)            22,632(3)
Richard L. Hawley..............            12,198(2)             7,622(3)
Timothy J. Hogan...............             7,733(2)            21,165(3)(4)
Stephen A. McKeon..............            14,747(2)             9,554(3)
Gary B. Swofford...............            10,077(2)            12,233(3)
All Directors and Executive Officers      170,833              110,933
_________`

(1) Shares represent stock units under the Puget Energy Directors' Stock
Plan.

(2)  Includes  shares  credited under the Puget Sound Energy  Investment
Plan for Employees through December 31, 2000.

(3)  Includes  vested and  non-vested  stock units under the Puget Sound
Energy Deferred Compensation Plan.

(4)   Includes 14,376 shares subject to unexercised stock options granted by Washington Energy Company prior to the Merger,
      which were converted into options to purchase common stock at the merger exchange ratio of .86 to 1.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires the directors and officers of Puget Energy and Puget
Sound Energy to file reports of ownership and changes in ownership with respect to the equity securities of the companies
with the Securities and Exchange Commission.  To our knowledge, based on our review of the reports furnished to Puget Sound
Energy in 2000 and written representations that no other reports were required, all directors and officers of Puget Energy
and Puget Sound Energy who are subject to the Section 16 reporting requirements filed the required reports on a timely
basis in 2000.

#### Executive Compensation

Joint Compensation and Retirement Committee Report

The Boards of Directors of Puget Energy and Puget Sound Energy delegate responsibility for executive compensation to
their respective Compensation and Retirement Committees. The Committees' members are Phyllis J. Campbell (Chairperson),
Douglas P. Beighle, Donald J. Covey and Sally G. Narodick, none of whom is an employee of Puget Energy or Puget Sound
Energy or participates in the compensation programs described here for executives.  The Committees establish compensation
for the President and Chief Executive Officer and review and approve the President and Chief Executive Officer's
recommendations regarding compensation of the other executive officers.

In determining executive compensation, the Committees consider the pay practices in comparable companies in the
electric and combination gas and electric utility industries. The Committees believe that executive compensation packages
should do the following:

o     attract and retain outstanding executives by providing compensation opportunities consistent with those offered by the
          electric and combination gas and electric utility industries for similar positions;

o     place a significant portion of each executive's total pay at risk to motivate executives to achieve company and
          individual performance goals;

o     be aligned with annual operating goals that support continued emphasis on low cost, reliable service to customers; and

o     tie long-term incentive compensation to increasing value to the shareholders.

In making compensation decisions, the Committees reviews appropriate market compensation indices. The principal source
of this data is a selection of comparable companies from a comprehensive, industry-wide annual survey of management pay
prepared by a national compensation consulting firm.  All are part of the Edison Electric Institute (EEI) Investor-Owned
Utilities Index and most are gas and electric combination companies which comprise the EEI Combination Gas & Electric
Investor-Owned Utilities Index presented in the Stock Price Performance Graph on page 12.

The Committees' compensation policies encompass a mix of base salary and annual and long-term incentive compensation
programs.  The Committees design the total package to provide participants with appropriate incentives to achieve current
performance goals as well as the long-term objective of enhancing shareholder value. Long-term incentives are designed to
comprise the largest portion of each executive's incentive pay. Total Cash Compensation is targeted at the 50th percentile
of total compensation for the comparator group if annual performance goals are achieved. If performance goals are achieved
at the highest level, total cash compensation will be leveraged to reach the 60th percentile or higher.

Base Salary

Generally,  base salaries for
executives are administered on a subjective,  individual basis by the Committees
using as a  guideline,  median  salary  levels of a select group of electric and
combination gas and electric  companies from the industry survey described above
that are most similar in scope and size to Puget Energy.

Annual Incentive Compensation

All    executive   officers
participate  in the annual Pay at Risk Plan.  This plan is  designed  to provide
financial  incentives  to  executives  for achieving  desired  annual  operating
results while meeting the companies'  service  quality  commitment to customers.
For 2000, the targeted opportunity for awards from this plan varied by executive
officer:  Mr.  Weaver's  target was 45% of base  salary;  the target for Messrs.
Hawley, McKeon and Swofford was 35%; and the target for Mr. Hogan was 30%.

The  primary measure for the
named executive officers was earnings per share. For Messrs.  Weaver, Hawley and
McKeon, 100% of the award was based on EPS performance. For Mr. Swofford, 50% of
the award was  based on EPS and 50% was based on the  weather-adjusted  earnings
contribution of the business units in his area of responsibility. For Mr. Hogan,
50% of the award was based on EPS with the  remaining  50%  divided  among  five
additional  goals  related  to his  area of  responsibility.  EPS  results  were
achieved  at the  outstanding  level.  For Mr.  Swofford,  the  weather-adjusted
earnings  contribution  of the business unit was achieved at the minimum funding
level. For Mr. Hogan, two of the additional goals that comprise 50% of his award
achieved funding status.

Long-Term Incentive Compensation

The  1995 Long-Term Incentive
Compensation  Plan,  approved by shareholders in 1995, links compensation to the
relative total  shareholder  return.  Under this plan, the committee has awarded
contingent grants of common stock to executives and key employees that generally
pay in  stock  at  the  end of a  four-year  period,  based  on  Puget  Energy's
cumulative  four-year total  shareholder  return relative to the EEI Combination
Gas & Electric Investor-Owned Utilities Index during that period. The number
of shares  delivered at the end of the  four-year  cycle will range from zero to
175% of the  contingent  grant.  Dividend  equivalents  are  accrued  during the
performance  period  and paid out in cash  when and to the  extent  the  related
performance  shares are paid. The Long-Term  Incentive Plan Awards in 2000 table
shown on page 16 lists the awards made in 2000 to the named  executive  officers
for the  four-year  performance  cycle ending  December  31,  2003.  The Summary
Compensation Table on page 13 shows the payout of awards for the four-year cycle
ended December 31, 2000.

As  part  of  its  Long-Term
Incentive Program, the committee has also established stock ownership guidelines
to be achieved over a five-year  period  commencing in 1998 for officers and key
managers  that  range from 50% of base  salary to two times base  salary for the
named executive officers.

Chief Executive Officer Compensation

In   February,   2000,  Mr.
Weaver's  base  salary as Chief  Executive  Officer was  determined  to be below
median for CEOs in  comparable  companies in the EEI survey,  and was  increased
from $575,000 per year to the market median salary of $600,000.

During  2000,  Mr.  Weaver's
leadership and focus on  company-wide  strategic and operating goals resulted in
continued,  significant  improvement in financial results with a net increase in
EPS of 4.9% over the prior  year.  This  level of  achievement  resulted  in Mr.
Weaver's 2000 target annual incentive  payment being paid at twice the target of
45% of base salary. As a result,  Mr. Weaver's total cash compensation for 2000,
was  above the 50th  percentile  for CEO's of  comparable  companies  in the EEI
survey,  which is in  keeping  with the  committee's  philosophy  for total cash
compensation  at the 60th percentile or higher when results are achieved at this
outstanding level.

Additional Information

Section   162(m)   of   the
Internal  Revenue  Code of 1986  generally  disallows a tax  deduction to public
companies for  compensation  over $1 million paid to a company's chief executive
officer and four other most highly compensated  executive officers,  unless that
compensation is deferred or is considered performance-based. Our policies are to
structure executive officer compensation to achieve maximum  deductibility under
Section   162(m)  with  minimal   sacrifices   in   flexibility   and  corporate
objectives.

Puget Energy, Inc. and Puget Sound Energy, Inc.

Phyllis J. Campbell, Chair

Douglas P. Beighle

Donald J. Covey

Sally G. Narodick

Stock Price Performance Graph

The  chart below compares the
five-year  cumulative total  shareholder  return (share price  appreciation plus
reinvested  dividends) on our common stock to the cumulative total return of the
Standard  & Poor's  500  Stock  Index  and the EEI  Combination  Gas &  Electric
Investor-Owned Utilities Index.

`Year          Puget Energy     EEI G&E         S&P 500
----          ------------     -------         -------
1995          100.0            100.0           100.0
1996          111.4            99.4            123.0
1997          149.9            128.5           164.0
1998          147.3            149.3           210.9
1999          111.6            121.3           255.2
2000          172.3            180.6           232.0`

Five-Year Cumulative Total Return

This  comparison assumes $100
was  invested on December  31, 1995,  in (a) our common  stock,  (b) the S&P 500
Stock Index, and (c) the EEI Combination Gas & Electric Investor-Owned Utilities
Index.  The graph then observes,  in each case, stock price growth and dividends
paid (assuming dividends were reinvested) over five years.

The  Board of Directors  and
its Compensation and Retirement  Committee recognize that many factors influence
the market  price of stock,  one of which is company  performance.  The  returns
shown on the graph do not necessarily predict future performance.

Summary Compensation Table

The  following information is
furnished for the years ended  December 31, 2000,  1999 and 1998 with respect to
Puget Energy's and Puget Sound Energy's Chief Executive Officer, and each of the
four other most highly compensated  executive officers of Puget Energy and Puget
Sound Energy  during 2000,  each of whose  salary and bonus  exceeded  $100,000.
Annual compensation includes amounts deferred at the officer's election.  Unless
otherwise  indicated,  all  positions  and offices are at Puget Energy and Puget
Sound Energy.

`Long-Term
                                                                        Compensation
                                                                        ------------    All Other
            Name and Principal                Annual Compensation         LTIP          Compensation
           Position in 2000 (1)     Year     Salary ($)   Bonus ($)     Payouts ($)(5)         ($)
           --------------------    -------------------------------------------------------------------

W. Weaver                           2000     594,841       540,000      211,598 (2)     63,852 (6)
President and                       1999     570,208       517,500       38,933 (3)     44,198
Chief Executive Officer             1998     532,971       0            109,933 (4)     35,456

R. Hawley                           2000     335,079       237,300      123,807 (2)     36,188 (7)
Vice President and                  1999     316,167       224,000       20,964 (3)     53,462
Chief Financial Officer             1998     225,000       0             21,987 (4)     81,985

T. Hogan                            2000     210,460        90,300       77,380 (2)     17,241 (8)
Vice President External             1999     191,888        57,900       14,488 (3)     14,546
Affairs of Puget Sound Energy       1998     184,309       0             26,384 (4)     13,458

S. McKeon                           2000     335,079       237,300      147,443 (2)     34,802 (9)
Vice President and                  1999     316,167       224,000       25,142 (3)     22,588
General Counsel                     1998     283,941        25,800       43,516 (4)     21,038

G. Swofford                         2000     261,905       115,937       77,380 (2)     22,061 (10)
Vice President and Chief            1999     238,960        87,500       19,841 (3)     17,300
Operating Officer-Delivery          1998     189,429       0             54,967 (4)     13,337
of Puget Sound Energy`

(1)   Mr. Weaver became President and Chief Executive Officer of Puget Energy in October 2000 and of Puget Sound Energy in
      January 1998.  Mr. Hawley became an executive officer of Puget Energy in October 2000 and of Puget Sound Energy in
      March 1998. Mr. McKeon became an executive officer of Puget Energy in October 2000.

(2) The amounts for 2000 represent
payment of LTIP awards for the four-year performance cycle ended December 31,
2000, which consist of (a) unrestricted shares valued as of the December 31,
2000 closing price of $27.8125, plus (b) a total dividend amount of $7.36 per
share during the four-year performance period multiplied by the total number of
unrestricted shares. The number and value of unrestricted shares for each of the
named executive officers are as follows:

`Unrestricted Shares
                                         -------------------
           Name                        Number      Value
           ----                        ------      -----
           W. Weaver.............      6,016    $167,320
           R. Hawley.............      3,520      97,900 (a)
           T. Hogan..............      2,200      61,188
           S. McKeon.............      4,192     116,590
           G. Swofford...........      2,200      61,188`

(a)   Mr.  Hawley  received
$50,000 of his share award in the form of cash and the  remainder in the form of
1,530 Puget Energy shares.

(3) The amounts for 1999 represent
payment of LTIP awards for the four-year performance cycle ended December 31,
1999, which consist of (a) unrestricted shares and restricted shares, valued as
of the December 31, 1999 closing price of $19.38, plus (b) a total dividend
amount of $7.36 per share during the four-year performance period multiplied by
the total number of restricted and unrestricted shares. The number and value of
restricted and unrestricted shares for each of the named executive officers is
as follows:

`Unrestricted Shares         Restricted Shares
                     -------------------         -----------------
 Name                Number         Value       Number        Value
 ----                ------         -----       ------        -----
 W. Weaver........   728          $14,109       728         $14,109
 R. Hawley........   392            7,597       392           7,597
 T. Hogan.......     271            5,250       271           5,250
 S. McKeon........   470            9,111       470           9,111
 G. Swofford......   371            7,190       371           7,190`

(4) The amounts for 1998 represent
payment of LTIP awards for the four-year performance cycle ended December 31,
1998, which consist of (a) unrestricted shares and restricted shares, valued as
of the December 31, 1998 closing price of $27.875, plus (b) a total dividend
amount of $7.36 per share during the four-year performance period multiplied by
the total number of restricted and unrestricted shares. The number and value of
restricted and unrestricted shares for each of the named executive officers are
as follows:

`Unrestricted Shares    Restricted Shares
                     -------------------    -----------------
  Name               Number     Value       Number     Value
  ----               ------     -----       ------     -----
  W. Weaver.......    1,560    $43,485       1,560    $43,485
  R. Hawley.......      312      8,697         312      8,697
  T. Hogan........      374     10,425         374     10,425
  S. McKeon.......      617     17,199         617     17,199
  G. Swofford.....      780     21,743         780     21,743`

(5) The aggregate number and value of all outstanding restricted stock held
by each of the named  executive  officers as of December 31, 2000,  based on the
closing  price of Puget  Sound  Energy  stock on that date of  $27.8125,  are as
follows:  W. Weaver, 728 shares,  $20,248;  R. Hawley, 392 shares,  $10,903;  T.
Hogan, 271 shares,  $7,534; S. McKeon,  470 shares,  $13,075;  G. Swofford,  371
shares, $10,318.

(6)   Represents $8,500 match under Investment Plan for Employees; $47,117 match under the Investment Plan make-up; and
      $8,235 imputed income on life insurance.

(7)   Represents $9,967 match under Investment Plan for Employees; $23,578 match under the Investment Plan make-up; and
      $2,643 imputed income on life insurance.

(8)   Represents $4,316 match under Investment Plan for Employees; $11,872 match under the Investment Plan make-up; and
      $1,053 imputed income on life insurance.

(9)   Represents $8,650 match under Investment Plan for Employees; $24,895 match under the Investment Plan make-up; and
      $1,257 imputed income on life insurance.

(10) Represents $6,220 match under Investment Plan for Employees; $14,744 match under the Investment Plan make-up; and
      $1,097 imputed income on life insurance.

The following table shows the number of stock options or stock appreciation rights ("SARs") exercised in 2000 and the
number and value of outstanding unexercised options and SARs held by the participating named executive officers at the end
of 2000.

`Number of Shares                           Number of Shares Underlying      Value of Unexercised
                       Underlying              Value of        Unexercised Options/SARs at   In-the-Money Options/ SARs
                 Options/SARs Exercised      Options/SARs         Fiscal Year-End (#)          at Fiscal Year-End ($)
                        ----------                                    -------------                            ---
      Name               in 2000          Exercised in 2000            Exercisable                 Exercisable (3)
      ----               -------          -----------------            -----------                 ---------------

W. Weaver                11,400                $44,047 (1)                7,300                           -
R. Hawley                   -                     -                        -                              -
T. Hogan                  1,290                   $935 (2)               14,376                       $119,672
S. McKeon                   -                     -                        -                              -
G. Swofford                 -                     -                       5,600                        $16,950`

Before 1995, participants in Puget Energys Long-Term
Incentive Program for Senior Management could receive stock appreciation rights,
which are payable only in cash. No options have been granted since 1996 and no
SARs have been granted since 1994.

(1) Amount represents exercise on
November 30, 2000 from two SAR grants when the market value of the common stock
was $26.4375 per share: 6,000 SARs from a February 4, 1992 grant with a base
price of $24.875 per share, and 5,400 SARs from an April 26, 1994 grant with a
base price of $20.750 per share.

(2) Amount represents options exercises of September 18, 2000
and October 10, 2000 totaling 1,290 options.

(3) Amounts are the number of
options or SARs multiplied by the difference between the closing price of the
common stock on December 31, 2000 of $27.8125 per share, minus the base price
for that option or SAR. There is no guarantee that these options or SARs will
have this value when and if they are exercised.

Long-Term Incentive Plan Awards in 2000

The following table presents
grants made to the named executive officers under our 1995 Long-Term Incentive
Compensation Plan during 2000.

`Number of   Period Until       Estimated Future Share Payouts
                                                   ------------------------------
                      Shares    Maturation or   Threshold     Target       Maximum
            Name      (#)(1)       Payout          (#)          (#)          (#)
            ----      ------       ------          ---          ---          ---

W. Weaver........   48,387       4 years          0         48,387        84,677

R. Hawley........   19,883       4 years          0         19,883        34,795

T. Hogan.........    7,093       4 years          0          7,093        12,413

S. McKeon........   19,883       4 years          0         19,883        34,795

G. Swofford......   12,240       4 years          0         12,240        21,420`

(1) Awards are contingent  grants of common stock.  The number of shares
delivered at the end of the four-year  cycle will range from zero to 175% of the
contingent  grant.  The actual payout depends on Puget Energy's  four-year total
shareholder  return  compared  to the returns  reported  in the Edison  Electric
Institute's  Combination  Gas and Electric  Investor-Owned  Utilities  Index. To
receive  100% of the grant,  Puget  Energy must  perform at the 55th  percentile
among Edison Electric Institute's companies. To receive 175% of the grant, Puget
Energy  must  perform  at  or  above  the  85th  percentile  ranking.   Dividend
equivalents are accrued during the performance  period and paid out in cash when
and to the extent the performance shares are paid.

Retirement Benefits Statement

The   table  below  presents
estimated  retirement  benefits  for  the  named  executive  officers,  assuming
retirement on January 1, 2001 at age 62 after selected  periods of service.  The
table lists the estimated  aggregate  values under the Puget Sound Energy,  Inc.
funded pension plan,  Supplemental Executive Retirement Plan, Washington Natural
Gas  Nonqualified  Retirement  Plan  benefits,  the SERP  pension-type  rollover
accounts in the  Deferred  Compensation  Plan and the Cash  Balance  Restoration
Matching Account within the Deferred Compensation Plan. Social Security benefits
will not be deducted from the amounts shown in the table.

`Estimated Annual Benefit Upon Retirement At Age 62

  Final Average                   Years of Credited Service
                      ---------------------------------------------------
  Compensation           5               10                 15+
  ------------           -               --                 ---
  $200,000.......      $ 33,333        $ 66,667         $100,000
   300,000.......        50,000         100,000          150,000
   400,000.......        66,667         133,333          200,000
   500,000.......        83,333         166,667          250,000
   600,000.......       100,000         200,000          300,000
   700,000.......       116,667         233,333          350,000
   800,000.......       133,333         266,667          400,000
   900,000.......       150,000         300,000          450,000`

The named executive officers have
the following years of credited service as of December 31, 2000:
W. Weaver, 32.5; R. Hawley, 2.75; T. Hogan, 24.33; S. McKeon, 3.58; and G.
Swofford, 33.42. Under their employment agreements, if Messrs. Hawley and McKeon
complete five years of service they will be treated as if they have completed 15
years of credited service.

Estimated aggregate benefits are
based on the following formula: 3-1/3% times years of credited service times
average annual compensation (salary plus bonus) for the highest three calendar
years in the last five complete calendar years prior to retirement, except that
Mr. Weavers benefits are based on the average of his highest 24
consecutive months of compensation and Messrs. Hawleys and McKeons
benefits are based on the annual average of their highest 36 consecutive months
of salary paid or payable plus the average of their highest three annual bonuses
paid or payable. Also, $50,000 of Mr. Hawleys LTIP-related payouts are
treated as salary. See the section called Employment Contracts,
Termination of Employment and Change-in-Control Arrangements below.

The three-year averages  (24-consecutive-month average for Mr. Weaver; 33 -
consecutive-month  average for Mr. Hawley as of December 31, 2000) for the named
executive  officers  were:  $841,275 for Mr.  Weaver;  $436,453 for Mr.  Hawley;
$219,353 for Mr. Hogan; $402,579 for Mr. McKeon; and $263,889 for Mr. Swofford.

Employment Contracts, Termination of Employment and
Change-In-Control Arrangements

Agreements

In October 1996 Puget Sound Energy
entered into an agreement with Mr. Weaver under which he will receive the
following payments and benefits if his employment terminates for any reason
sooner than his normal retirement date, which, in accordance with Puget Sound
Energys policy, is when Mr. Weaver reaches the age of 62.

a. annual base salary and accrued
benefits earned through termination, plus a pro rata share of any incentive
compensation accrued through the date of termination, regardless of whether such
amounts are vested or payable on that date;

b.    an amount equal to three times annual base salary and bonus;

c.    continued participation for three years in employee benefit plans or provision for substantially similar benefits;

d.    a cash payment at normal retirement date of the actuarial equivalent of the additional retirement compensation he
          would have earned had employment continued for three more years;

e. a payment equal to the difference between the exercise prices of any
outstanding  options or rights under similar  equity plans  (whether or not then
fully  exercisable)  and the higher of  (i) the  market price of the common
stock on the date of  termination  and  (ii) the  highest  price  per share
actually paid in connection with any change-in-control;

f.    a payment equal to the value of the number of shares payable upon full vesting of all outstanding performance awards,
          whether or not such awards were then fully vested or payable; and

g.    a cash payment equal to any excise taxes payable by him due to excess parachute payments, plus the tax expense to him
          resulting from this payment.

In addition, Mr. Weavers
agreement provides that his benefits under the SERP will be based on his average
compensation for his highest consecutive 24 months of service. Pursuant to a
November 2000 supplement to his October 1996 agreement, Mr. Weaver has agreed
not to voluntarily terminate his employment with Puget Sound Energy as its Chief
Executive Officer any earlier than December 31, 2001, and Puget Sound Energy has
agreed that the various payments due Mr. Weaver under the October 1996 agreement
will be calculated based on the actual termination date or an assumed
termination date of December 31, 2000, whichever produces the higher payment
under each payment provision.

Effective March 16, 1998,
Puget Sound Energy entered into an employment agreement with Mr. Hawley to
secure his services as Vice President and Chief Financial Officer. The agreement
has a term of five years. Mr. Hawley will receive a minimum annual base salary
of $300,000. He also will participate in Puget Sound Energys Pay at Risk
Plan, with a target award of at least 35% of base salary, and in Puget
Energys 1995 Long-Term Incentive Compensation Plan, with a target of at
least 40% of base salary and grants of 1,200 performance units for the 1995-1998
cycle, 2,800 performance units for the 1996-1999 cycle, 4,400 performance units
for the 1997-2000 cycle and 6,400 performance units for the 1998-2001 cycle, and
a cash payment equal to the difference between $50,000 and any lesser settlement
value for such awards.

In addition, Mr. Hawleys
agreement provides that if he completes five years of service to Puget Sound
Energy, then his benefits under the SERP will be calculated as if he had
completed 15 years of service to Puget Sound Energy. His agreement also
provides that his benefits under the SERP will be based on the sum of
(a) the annual average of his highest 36 consecutive months of salary paid
or payable and (b) the average of his highest three annual bonuses paid or
payable. Under his agreement, the $50,000 minimum annual award to which Mr.
Hawley is entitled with respect to the 1995 Long-Term Incentive Compensation
Plan will be treated as salary for purposes of calculating his SERP benefits.

If Puget Sound Energy terminates Mr. Hawley's employment without cause prior to the end of the term of the agreement,
Mr. Hawley will receive:

a. annual base salary and accrued
benefits earned through termination, plus a pro rata share of any incentive
compensation accrued through the date of termination, regardless of whether such
amounts are vested or payable on that date and;

b.    continuation of his base salary for two years, plus $50,000 per year.

If Mr. Hawley's employment terminates for any reason within three years after a change-in-control, Mr. Hawley will
receive, in lieu of the benefits described above, substantially the same type of payments and benefits as described above
for Mr. Weaver.

Mr. Hogan entered into an
agreement effective as of August 17, 1995 with the Washington Energy Company
that Puget Sound Energy has assumed. Under that agreement, as amended on June
30, 1999, if prior to the earlier of June 30, 2002 or a change-in-control of
Puget Sound Energy, Mr. Hogan terminates his employment for good reason or Puget
Sound Energy terminates his employment without cause, he will receive the same
type of payments and benefits as described above for Mr. Weaver.

In October 1996, Puget Sound
Energy entered into an agreement with Mr. Swofford under which he will be paid a
retention incentive benefit based on continued employment following the merger
of Puget Sound Energy and the Washington Energy Company in February 1997, equal
to three times his annual base salary in 1996, plus the bonus paid in 1996. The
incentive benefit vests in three equal installments after one year, three years
and five years of continued employment after the merger. The vested portion of
the incentive benefit will be paid in equal monthly installments over a
three-year period beginning on the date his employment terminates.

In 1999 Puget Sound Energy entered
into change-in-control agreements with Mr. Swofford and Mr. Hogan that provided
for the same type of payments and benefits described above for Mr. Weaver in the
event that their employment is terminated by Puget Sound Energy without cause or
by the employee for good reason within two years following a change-in-control
of Puget Sound Energy, except that the payments in sections (c) and (d) are
based on two rather than three years.

Effective June 2, 1997, Puget
Sound Energy entered into an employment agreement with Mr. McKeon to secure his
services as Vice President and General Counsel. The agreement has an initial
term of three years and will be extended for two more one-year periods unless
Mr. McKeon or Puget Sound Energy gives written notice of termination not less
than six months before the applicable anniversary date. No such notice has been
given. Mr. McKeon will receive a minimum annual base salary of $260,000. He also
will participate in Puget Sound Energys Pay at Risk Plan, with a target
award of at least 35% of base salary, and in Puget Energys 1995 Long-Term
Incentive Compensation Plan, with a target of at least 35% of base salary and
grants of 2,375 performance units for the 1995-1998 cycle, 3,358 performance
units for the 1996-1999 cycle and 5,240 performance units for the 1997-2000
cycle.

Mr. McKeons agreement
provides that if he completes five years of service to Puget Sound Energy, then
his benefits under the SERP will be calculated as if he had completed 15 years
of service to Puget Sound Energy. His agreement also provides that his benefits
under the SERP will be based on the sum of (a) the annual average of his
highest 36 consecutive months of salary paid or payable and (b) the average
of his highest three annual bonuses paid or payable. If Puget Sound Energy
terminates his employment without cause prior to the end of the term of the
agreement, Mr. McKeon will receive his annual base salary and accrued benefits
earned through termination, plus a pro rata share of any incentive compensation
accrued through the date of termination, regardless of whether such amounts are
vested or payable on that date, and continuation of his base salary for two
years. If Mr. McKeons employment terminates for any reason within three
years after a change-in-control, he would receive substantially the same type of
payments and benefits as described above for Mr. Weaver.

1995 Long-Term Incentive Compensation Plan

Under the Puget Energy 1995
Long-Term Incentive Compensation Plan, in the event of a change-in-control of
Puget Energy, each stock award that is at the time outstanding will
automatically accelerate and become 100% vested. The plan administrator may, at
any time before a corporate transaction, take further action to ensure fair and
equitable treatment of awards.

Stock Appreciation Rights

Upon a change-in-control of Puget
Energy, all SARs will terminate. Each holder may exercise his or her SARs
immediately prior to the transaction, whether or not the SARs have vested.

Certain Transactions

Mr. Dryden, a Director of Puget
Energy and Puget Sound Energy, has served as President and Chief Executive
Officer of ConneXt since 1999. His aggregate compensation for such service in
2000 was $583,000.

Mr. Durbin, a Director of Puget
Energy and Puget Sound Energy, has served as President and Chief Executive
Officer of InfrastruX since 2000. His aggregate compensation for such service in
2000 was $254,545.

#### ADDITIONAL INFORMATION ABOUT THE MEETING AND SHAREHOLDER
PROPOSALS

Independent Public Accountants

The firm of PricewaterhouseCoopers
LLP has audited our financial statements since 1933. Representatives of the firm
will attend the Annual Meeting, with the opportunity to make a statement and
answer appropriate shareholder questions.

Shareholder Proposals

Shareholders who intend to have a
proposal considered for inclusion in our proxy materials for the 2002 Annual
Meeting of Shareholders must submit the proposal at our principal executive
office no later than November 30, 2001. In accordance with Puget Energys
Bylaws, shareholders who intend to present a proposal at the 2002 Annual Meeting
without inclusion of the proposal in our proxy materials must provide written
notice of such proposal, in the manner required by Puget Energys Bylaws,
no earlier than January 15, 2002 and no later than February 14, 2002.

Solicitation of Proxies

The Puget Energy Board of
Directors is soliciting the proxies in the form enclosed. William S. Weaver and
James W. Eldredge, and each or either of them, are named as proxies. We may
solicit your proxy by mail, personal interview, telephone and fax. We will
request that banks, brokerage houses and other custodians, nominees or
fiduciaries forward soliciting materials to their principals and obtain
authorization for the execution of proxies. We will reimburse them for their
expenses in forwarding and collecting proxies. Our officers, directors,
employees and other agents may solicit proxies without compensation, except for
reimbursement of expenses. Puget Energy will pay all costs of solicitation of
proxies.

March 13, 2001

Bellevue, Washington

By Order of the Board of Directors

_________________

William S. Weaver

President and Chief Executive Officer

#### APPENDIX A

#### Puget Energy, Inc.

#### Audit Committee Charter

Purpose:

The primary purpose of the Audit
Committee (the Committee) shall be to monitor the integrity of the
Companys financial reporting by overseeing the participation of management
and the independent auditors in the financial reporting process.

Composition:

The Committee shall be composed of
three or more directors, as determined by the Board, each of whom shall meet the
independence requirements of the New York Stock Exchange. The Board shall
determine in its business judgment that each Committee member is financially
literate and that at least one Committee member has accounting or related
financial management expertise. In the absence of a member designated by the
Board to serve as chair, the members of the Committee may appoint from among
their number a person to preside at theirmeetings.

Responsibilities:

The Committee shall have the
following responsibilities:

o Recommend to the Board the selection
of the independent auditor, evaluate the independent auditor and, where
appropriate, recommend the replacement of the independent auditor, with the
understanding that the independent auditor shall be ultimately accountable to
the Committee and to the Board.

o Obtain and evaluate an annual
written statement from the independent auditor regarding the auditors
independence in accordance with Independence Standards Board Standard No. 1,
discuss with the auditor any independence issues raised by the matters disclosed
in such statement and, if so determined by the Committee, take or recommend that
the Board take appropriate action to satisfy itself as to the independence of
the auditor.

o     Discuss with the independent auditor the matters required to be discussed by Statement on Auditing Standards ("SAS")
          No. 61, Communications with Audit Committee, SAS No. 89, Audit Adjustments, and SAS No. 90, Audit Committee
          Communications, all as amended from time to time.

o Meet with management and the
independent auditor to review and discuss the annual financial statements and
the report of the independent auditor thereon and to discuss any significant
issues encountered in the course of the audit work, including restrictions on
the scope of activities, access to required information or the adequacy of
internal controls.

o Review the management letter
delivered by the independent auditor in connection with the audit and
managements responses to the letter.

o Following such reviews and
discussions, if so determined by the Committee, recommend to the Board that the
audited financial statements be included in the Companys annual report on
Form 10-K.

o Meet quarterly with management and the independent auditor to
review and discuss the quarterly financial statements.

o Meet at least once each year in
separate executive sessions with the internal auditor and the independent
auditor to discuss matters that the Committee or either of these groups believes
could significantly affect the financial statements and should be discussed
privately.

o Review significant changes to
the Companys accounting principles and practices proposed by the internal
auditor or management. Discuss these changes with the independent auditor.

o Review changes in promulgated
accounting and auditing standards that may materially affect the Companys
financial reporting practices.

o Review the responsibilities,
functions and performance of the Companys internal audit department,
including internal audit plans, budget, and the scope and results of internal
audits.

o Conduct or authorize such
inquiries into matters within the Committees scope of responsibility as
the Committee deems appropriate.

o As the Committee deems appropriate, retain independent counsel
and other professionals to assist the Committee.

o Provide minutes of Committee
meetings to the Board and report to the Board on any significant matters arising
from the Committees work.

o At least annually, review and reassess this charter and, if
appropriate, recommend proposed changes to the Board.

o Prepare the report required by
the rules of the Securities and Exchange Commission to be included in the
Companys annual proxy statement.

It is not the responsibility of
the Committee to plan or conduct audits, or to determine whether the
Companys financial statements are complete and accurate or in accordance
with generally accepted accounting principles.