**EXHIBIT 10.110**

**CREDIT AGREEMENT**

**Dated as of December 18, 1996**

**among**

**PUGET SOUND ENERGY COMPANY**

(the new name of the corporation

surviving the merger of

WASHINGTON ENERGY COMPANY

and its wholly owned subsidiary

WASHINGTON NATURAL GAS COMPANY

into

PUGET SOUND POWER & LIGHT COMPANY),

**VARIOUS BANKS**,

**and**

BANK OF AMERICA NW, N.A. doing business as SEAFIRST BANK,

as Administrative Agent,

FIRST CHICAGO CAPITAL MARKETS, INC.,

as Syndication Agent, and

NATIONSBANK of TEXAS, N.A.,

as Documentation Agent

```
**TABLE OF CONTENTS**

                                                                                   Page
                                                                                   ----

SECTION 1             CERTAIN DEFINITIONS.........................................1

         "Adjustment Certificate".................................................1

         "Affected Bank"..........................................................1

         "Affiliate"..............................................................1

         "Administrative Agent"...................................................1

         "Agreement"..............................................................1

         "Applicable Law".........................................................1

         "Applicable Lending Office"..............................................2

         "Bank"   2

         "Base Rate"..............................................................2

         "Base Rate Margin".......................................................2

         "Business Day"...........................................................2

         "Commitment(s)"..........................................................2

         "Company"................................................................2

         "Consenting Bank(s)".....................................................2

         "Consolidated Subsidiary"................................................2

         "Domestic Office"........................................................3

         "Effective Date".........................................................3

         "Eligible Institution"...................................................3

         "Environmental Laws".....................................................3

         "ERISA"  3

         "Eurodollar Loan"........................................................3

         "Eurodollar Office"......................................................3

         "Eurodollar Rate"........................................................4

         "Eurodollar Reserve Percentage"..........................................4

         "Federal Funds Effective Rate"...........................................4

         "First Mortgage".........................................................4

         "First Mortgage Bond"....................................................4

         "Floating Rate"..........................................................5

         "Floating Rate Loan".....................................................5

         "Indebtedness"...........................................................5

         "Liability"..............................................................5

         "LIBOR"  5

         "LIBOR Margin"...........................................................6

         "Liens"  6

         "Loan(s)"................................................................6

         "Loan Period"............................................................6

         "Non-Consenting Bank(s)".................................................6

         "Note(s)"................................................................6

         "Parent" 6

         "Percentage".............................................................6

         "Permitted Liens"........................................................6

         "Person" 8

         "Plan"   ................................................................8

         "Public Utility Holding Company Act".....................................8

         "Puget"  8

         "Reference Rate".........................................................8

         "Regulatory Change"......................................................8

         "Replacement Bank(s)"....................................................9

         "Required Banks".........................................................9

         "Retiring Bank(s)".......................................................9

         "Secured Debt Rating"....................................................9

         "Significant Subsidiary".................................................9

         "Subsidiary"............................................................10

         "Substitute Loan(s)"....................................................10

         "Termination Date"......................................................10

         "Unmatured Event of Default"............................................10

         "WECO"   10

         "Wholly-Owned Subsidiary"...............................................10

SECTION 2             COMMITMENTS OF THE BANKS; TYPES OF LOANS;
                      PROCEDURES FOR BORROWING...................................10

         2.1      Commitments....................................................10

         2.2      Various Types of Loans.........................................11

         2.3      Borrowing Procedures...........................................11

         2.4      Extension of Termination Date..................................13

         2.5      Removal of Banks...............................................14

         2.6      Removal of Retiring Banks......................................14

         2.7      Representations and Warranty...................................16

SECTION 3             REPAYMENT OF LOANS; NOTES EVIDENCING LOANS...................
         16

         3.1      Repayment of Loans.............................................16

         3.2      Notes..........................................................16

SECTION 4             INTEREST...................................................17

         4.1      Interest Rates.................................................17

         4.2      Applicable Margin..............................................17

         4.3      Interest Payment Dates.........................................17

         4.4      Setting and Notice of Rates....................................17

         4.5      Computation of Interest........................................18

SECTION 5             COMMITMENT FEE.............................................18

SECTION 6             REDUCTION OF THE COMMITMENTS; PREPAYMENTS..................19

         6.1      Optional Reduction or Termination of the Commitments...........19

         6.2      Prepayments....................................................19

SECTION 7             MAKING AND PRORATION OF PAYMENTS; OFFSET.....................
         19

         7.1      Making of Payments.............................................19

         7.2      Application of Certain Payments................................20

         7.3      Proration of Payments..........................................20

         7.4      Payment on Non-Business Days...................................21

         7.5      Offset.........................................................21

SECTION 8         INCREASED COST PROVISIONS AND SPECIAL
                  PROVISIONS FOR EURODOLLAR LOANS................................21

         8.1      Increased Costs................................................21

         8.2      Basis for Determining Interest Rate Inadequate.................22

         8.3      Changes in Law Rendering Certain Loans Unlawful................23

         8.4      Eurodollar Reserve Requirements................................24

         8.5      Funding Losses.................................................24

         8.6      Right of Banks to Fund through Other Offices...................25

         8.7      Discretion of Banks as to Manner of Funding....................25

         8.8      Alternative Lenders............................................25

         8.9      Floating Rate Loans Substituted for Affected Eurodollar Loans..25

         8.10     Conclusiveness of Determination; Survival of Provisions........26

SECTION 9             REPRESENTATIONS AND WARRANTIES.............................26

         9.1      Organization, Etc..............................................26

         9.2      Authorization; No Conflict.....................................26

         9.3      Governmental Approvals.........................................26

         9.4      Validity and Binding Nature....................................27

         9.5      Financial Statements...........................................27

         9.6      Litigation.....................................................27

         9.7      Employee Benefit Plans.........................................27

         9.8      Regulation.....................................................28

         9.9      Public Utility Holding Company Act.............................28

         9.10     Investment Company Act.........................................28

         9.11     Environmental Matters..........................................28

         9.12     Information....................................................28

SECTION 10            CONDITIONS TO EFFECTIVE DATE; LENDING......................29

         10.1     Conditions Precedent to Effective Date.........................29

                  10.1.1   Approval Terms of Merger by WUTC/Banks................29

                  10.1.2   Merger Effected.......................................29

                  10.1.3   Termination of Other Credit Agreements................29

                  10.1.4   Must Occur Not Later Than March 31, 1997..............29

                  10.1.5   Warranties True.......................................30

         10.2     Initial Loan...................................................30

                  10.2.1   Note..................................................30

                  10.2.2   Resolutions and Incumbency............................30

                  10.2.3   Opinion of Counsel for the Company....................30

                  10.2.4   Regulatory Approval...................................31

                  10.2.5   Other.................................................31

         10.3     All Loans......................................................31

         10.4     New Money Loans................................................31

         10.5     Loans On or After Extension of Termination Date................32

                  10.5.1   Bring-Down Opinion....................................32

                  10.5.2   Confirmations.........................................32

SECTION 11            COMPANY'S COVENANTS........................................32

         11.1     Reports, Certificates and Other Information....................32

                  11.1.1   Annual Report.........................................32

                  11.1.2   Interim Reports.......................................33

                  11.1.3   Certificates..........................................33

                  11.1.4   Reports to SEC and to Shareholders....................33

                  11.1.5   Notice of Default and Litigation......................33

                  11.1.6   Other Information.....................................33

         11.2     Preservation of Corporate Existence, Etc.......................34

         11.3     Compliance with Laws, Etc......................................34

         11.4     Maintenance of Insurance.......................................34

         11.5     Visitation Rights..............................................35

         11.6     Keeping of Books...............................................35

         11.7     Maintenance of Properties......................................35

         11.8     Mergers, Etc...................................................35

         11.9     Sales, Etc. of Assets..........................................35

         11.10    Liens..........................................................36

         11.11    Compliance with ERISA..........................................36

         11.12    Use of Proceeds................................................37

         11.13    Scope of Business..............................................37

         11.14    Financial Covenant.............................................37

SECTION 12            EVENTS OF DEFAULT AND THEIR EFFECT.........................37

         12.1     Events of Default..............................................37

                  12.1.1   Non-Payment of Notes, Etc.............................37

                  12.1.2   Non-Payment of Other Indebtedness.....................37

                  12.1.3   Bankruptcy, Insolvency, Etc...........................38

                  12.1.4   Non-Compliance with This Agreement....................38

                  12.1.5   Warranties............................................38

                  12.1.6   Employee Benefit Plans................................38

         12.2     Effect of Event of Default.....................................38

SECTION 13               THE ADMINISTRATIVE AGENT................................39

         13.1     Appointment and Powers.........................................39

         13.2     Limitation on Administrative Agent's Liability.................39

         13.3     Events of Default and Unmatured Events of Default..............40

         13.4     Documentation and Syndication Agents...........................40

         13.5     Rights as a Bank...............................................40

         13.6     Indemnification................................................41

         13.7     Non-Reliance on Administrative Agent and Other Banks...........41

         13.8     Resignation/Removal of the Administrative Agent................42

         13.9     Appointment of Successor Agent.................................42

SECTION 14               GENERAL.................................................42

         14.1     Waiver; Amendments.............................................42

         14.2     Costs, Expenses and Taxes......................................43

         14.3     Notices........................................................43

         14.4     Governing Law..................................................44

         14.5     Counterparts...................................................44

         14.6     Effective Date.................................................44

         14.7     Assignments and Participations Granted by Banks................44

                  14.7.1   Participations........................................44

                  14.7.2   Assignments...........................................45

                  14.7.3   No Increased Costs....................................46

                  14.7.4   Share Information.....................................46

                  14.7.5   No Withholding Tax....................................46

                  14.7.6   Pledge to Federal Reserve Bank........................47

         14.8     Successors and Assigns.........................................47

         14.9     Indemnification of Banks and Agents............................47

         14.10    Waiver of Jury Trial...........................................47

         14.11    Entire Agreement...............................................47

         14.12    Severability...................................................47

         SCHEDULE I - Pricing Grid

         EXHIBITS

         Exhibit A - Form of Note
                           Schedule Attached to Note
         Exhibit B - Form of Adjustment Certificate
                           Annex I to Adjustment Certificate
         Exhibit C - Form of Assignment and Acceptance Agreement
                           Schedule 1 to Assignment and Acceptance Agreement
```

CREDIT AGREEMENT

     THIS AGREEMENT is by and betweenPUGET SOUND POWER & LIGHT COMPANY, a Washington corporation(“Puget”), and Washington Energy Company, a Washington corporation(“WECO”), both for themselves and for PUGET SOUND ENERGYCOMPANY, the new name of the Washington corporation which shall survive themerger of WECO into Puget (the “Company”), the undersignedbanks (collectively the “Initial Banks” and individually an“Initial Bank”) and BANK OF AMERICA NW, N.A. doing business asSeafirst Bank, as Administrative Agent, FIRST CHICAGO CAPITAL MARKETS, INC., asSyndication Agent, and NATIONSBANK OF TEXAS, N.A. as Documentation Agent(together the “Agents”): 

SECTION 1

CERTAIN DEFINITIONS

     When used herein the followingterms shall have the following meanings: 

     “AdjustmentCertificate” means a certificate substantially in the form ofExhibit B, with appropriate insertions, executed pursuant to Section2.6 by the applicable parties, together with Annex I thereto, to becompleted by the Administrative Agent. 

     “Affected Bank”has the meaning defined in Section 8.3. 

     “Affiliate” meanswith respect to a Person, any other Person that, directly or indirectly throughone or more intermediaries, controls, or is controlled by, or is under commoncontrol with, such first Person. 

     “AdministrativeAgent” means Bank of America NW, N.A. doing business as Seafirst Bankand any successor to Seafirst Bank as Administrative Agent for the Bankshereunder. 

     “Agreement” meansthis Agreement, including all schedules, annexes and exhibits hereto. 

     “Applicable Law”means, anything in Section 14.4 to the contrary notwithstanding, (i) allapplicable common law and principles of equity and (ii) all applicableprovisions of all (a) constitutions, statutes, rules, regulations, and orders ofgovernmental bodies, (b) Governmental Approvals and (c) orders, decisions,judgments, and decrees of all courts (whether at law or in equity or admiralty)and arbitrators. 

     “Applicable LendingOffice” means, with respect to any Bank, (i) in the case of itsFloating Rate Loans, its Domestic Office and (ii) in the case of itsEurodollar Loans, its Eurodollar Office. “Bank” means eachInitial Bank, Replacement Bank, Assignee in accordance with Section14.7.2 and any successor thereof. 

“Base Rate” means as of any day the greater of(a) the Reference Rate in effect on such day or (b) the sum of(i) the Federal Funds Effective Rate in effect on such day, plus(ii) 1/2 of 1% per annum. If for any reason the Administrative Agent shallhave determined (which determination shall be conclusive absent manifest error)that it is unable to ascertain the Federal Funds Effective Rate for any reason,the Base Rate shall be the Reference Rate until the circumstances giving rise tosuch inability no longer exist. “Base Rate Margin” means themargin applicable to Floating Rate Loans as determined in accordance withSection 4.2. 

“Business Day” means any day other than aSaturday or Sunday; (a) in the case of a Business Day which relates to aEurodollar Loan, any day of the year on which banks are open for business inSeattle and New York and on which dealings are carried on in the interbankeurodollar market, and (b) in the case of a Business Day which relates to aFloating Rate Loan, any day of the year on which banks are open for business inSeattle and New York. 

“Commitment(s)” means the commitments of theBanks to make Loans hereunder, and Commitment as to any Bank shall mean thecommitment of such Bank to make Loans hereunder. “Company”means Puget Sound Energy Company, the Washington corporation which shall survivethe merger of WECO and its subsidiary, Washington Natural Gas Company, intoPuget on or before the Effective Date hereof and which shall be renamed fromPuget Sound Power & Light Company to Puget Sound Energy Company as of thesame date, and to the extent permitted by the terms of this Agreement, itssuccessors and assigns. “Consenting Bank(s)” has the meaningdefined in Section 2.6. 

“Consolidated Subsidiary” means, with respectto the Company or if otherwise specified, any such specified Person, at anytime, any Subsidiary or other Person the accounts of which would be consolidatedwith those of the Company or such other specified first Person in itsconsolidated financial statements as of such time. “DomesticOffice” means with respect to any Bank the office of such Bankdesignated as such with its signature hereto or, with respect to any ReplacementBank, the office of such Replacement Bank designated as such with its signatureon the Adjustment Certificate executed by it as a Replacement Bank and,thereafter, such office as such Bank may designate as its Domestic Office bynotice to the Company and the Administrative Agent. 

“Effective Date” means the date specified bythe Administrative Agent, in a notice to the Company and the Banks, as the dateon which all of the conditions precedent to the Effective Date set forth inSection 10.1 shall have first been met. 

“Eligible Institution” means (i) a commercialbank organized under the laws of the United States, or any state thereof, andhaving a combined capital and surplus of at least $100,000,000; (ii) acommercial bank organized under the laws of any other country which is a memberof the Organization for Economic Cooperation and Development (the“OECD”), or a political subdivision of any such country, andhaving a combined capital and surplus of at least $100,000,000, provided thatsuch bank is acting through a branch or agency located in the country in whichit is organized or another country which is also a member of the OECD, or(iii) a Person that is primarily engaged in the business of commercialbanking and that is (A) a subsidiary of a Bank, (B) a subsidiary of a Person ofwhich a Bank is a subsidiary, or (C) a Person of which a Bank is a subsidiary. 

“Environmental Laws” means any and all federal,state, local and foreign statutes, laws, regulations, ordinances, rules,judgments, orders, decrees, permits, concessions, grants, franchises, licenses,agreements or other governmental restrictions relating to the environment or toemissions, discharges or releases of pollutants, contaminants, petroleum orpetroleum products, chemicals, toxic or hazardous substances or wastes into theenvironment including, without limitation, ambient air, surface water, groundwater, or land, or otherwise relating to the manufacture, processing,distribution, use, treatment, storage, disposal, transport or handling ofpollutants, contaminants, petroleum or petroleum products, chemicals, or toxicor hazardous substances or wastes or the clean-up or other remediation thereof.“ERISA” means the Employee Retirement Income Security Act of1974, as amended. “Eurodollar Loan” means any Loan which bearsinterest at a rate determined by reference to the Eurodollar Rate. 

“Eurodollar Office” means, with respect to anyBank, the office of such Bank designated as such from time to time by noticefrom such Bank to the Company and the Administrative Agent, which shall bemaking or maintaining the Eurodollar Loans of such Bank hereunder or such otheroffice or offices through which such Bank determines its LIBOR. 

“Eurodollar Rate” means with respect to aEurodollar Loan that per annum interest rate equal to the sum of the LIBORdetermined for the Loan Period of the Loan and the LIBOR Margin in effect fromtime to time during the Loan Period. 

“Eurodollar Reserve Percentage” means for anyday that percentage (expressed as a decimal) which is in effect on such day, asprescribed by the Board of Governors of the Federal Reserve System (or anysuccessor) for determining the maximum reserve requirement for a member bank ofthe Federal Reserve System in New York City with deposits exceeding five billiondollars in respect of “Eurocurrency liabilities” (or in respectof any other category of liabilities which includes deposits by reference towhich the interest rate on Eurodollar Loans is determined or any category ofextensions of credit or other assets which includes loans by a non-United Statesoffice of any Bank to United States residents). 

“Federal Funds Effective Rate” means for anyday the rate per annum (rounded upward, if necessary, to the nearest 1/100th of1%) equal to the weighted average of the rates on overnight Federal fundstransactions with members of the Federal Reserve System arranged by Federalfunds brokers on such day, as published by the Federal Reserve Bank of New York,on the Business Day next succeeding such day, provided that (i) if such dayis not a Business Day, the Federal Funds Effective Rate for such day shall besuch rate on such transactions on the next preceding Business Day as sopublished on the next succeeding Business Day, and (ii) if no such rate isso published on such next succeeding Business Day, the Federal Funds EffectiveRate for such day shall be the average of the quotations for such Business Dayon such transactions received by the Administrative Agent from three Federalfunds brokers of recognized standing selected by it. 

     “First Mortgage”means each of (i) that mortgage, dated as of June 2, 1924, as supplemented,between Puget and First National Bank of Boston, as successor trusteethereunder, (ii) that mortgage, dated as of April 1, 1957, between WECO’sWholly-Owned Subsidiary, Washington Natural Gas Company, and Harris Trust andSavings Bank, as trustee, as either or each may have been, or may hereafter be,amended, modified or supplemented from time to time, and (iii) that mortgage, ifany, dated on or after the Effective Date replacing either or both mortgagesdescribed in clauses (i) and (ii). 

     “First MortgageBond” means that margin applicable to Eurodollar Loans as determined inaccordance with Section 4.2. 

     “Liens” means anylien, security interest or other charge or encumbrance, or any other type ofpreferential arrangement, or assignment of any right to receive goods orpayment. 

     “Loan(s)” has themeaning defined in Section 2.1. 

     “Loan Period”means, with respect to any Eurodollar Loan, the period commencing on the datesuch Loan was made and ending one, two, three, or six months thereafter as theCompany may specify pursuant to Section 2.3; provided,however, that: 

     (a) if a Loan Period wouldotherwise end on a day which is not a Business Day, such Loan Period shall endon the next succeeding Business Day, unless such next succeeding Business Day isthe first Business Day of a calendar month, in which case such Loan Period shallend on the next preceding Business Day; 

   (b) no Loan Period may end later than the Termination Date in effect on thedate the Loan was made: and

     (c) if there exists no daynumerically corresponding to the day of such Loan in the month in which the lastday of such Loan Period would otherwise fall, such Loan Period shall end on thelast Business Day of such month. 

     “Non-ConsentingBank(s)” has the meaning defined in Section 2.4. 

     “Note(s)” has themeaning defined in Section 3.2. 

     “Parent” means,with respect to any Bank, any Person controlling such Bank. 

     “Percentage”means at any time as to any Bank the percentage that the amount of itsCommitment (as set forth opposite such Bank’s name in the column captioned“Amount of Commitment” in Table I referenced in Section2.1, or, if different, in Annex I to the most recently executed AdjustmentCertificate, if any) is of the then aggregate amount of the Commitments. 

 (a)      Liens for taxes, assessments or governmental charges which are not yet delinquent         or the amount or validity of which is being contested in good faith;

(b)      deposits or pledges to secure the payment of workmen's compensation, unemployment         insurance, old age pensions or other social security benefits or obligations;

(c)      mechanics,’ materialmen’s, warehousemen’s, carriers’ or          other like Liens arising in the ordinary course of business securing obligations          which are not overdue for more than 60 days, or which are being contested in          good faith;

(d)      Liens incurred or created in the ordinary course of business in connection with          or to secure the performance of bids, tenders, contracts (other than for the          payment of money), leases, statutory obligations, surety bonds or appeal bonds; 

(e)      Liens (i) which secure obligations not assumed by the Company or any Subsidiary,          (ii) on account of which the Company or any Subsidiary has not and does not          expect to pay interest directly or indirectly and (iii) which exist upon real          estate or rights in or relating to real estate in respect of which the Company          or any Subsidiary has a right-of-way or other easement for purposes of          substations, gate stations, regulator stations, or transmission or distribution          facilities; 
(f)      rights reserved to or vested in any federal, state or local governmental body or          agency by the terms of any right, power, franchise, grant, license, contract or          permit, or by any provision of law, to recapture or to purchase, or designate a          purchase of or order the sale of, any property of the Company or to terminate          any such right, power, franchise, grant, license, contract or permit before the          expiration thereof; 

(g)      Liens of judgments covered by insurance, or upon appeal and covered by bond, or if         not so covered not exceeding at one time $10,000,000 in aggregate amount;

(h)      easements or reservations in respect of any property of the Company and its          Subsidiaries for the purpose of roads and transmission and distribution          facilities and other rights-of-way, including overhead and underground          transmission and distribution lines, zoning ordinances, regulations,          reservations, restrictions, covenants, party wall agreements, conditions of          record and other encumbrances (other than to secure the payment of money), none          of which materially impairs the use of such property for the purposes for which          it is held by the Company or Subsidiary; 

(i)      any Liens, moneys sufficient for the discharge of which shall have been          deposited in trust with the trustee or mortgagee under the instrument evidencing          such Lien, with irrevocable authority of such trustee or mortgagee to apply such          moneys to the discharge of such Lien to the extent required for such purpose; 

(j)      rights reserved to or vested in any federal, state or local governmental body or          agency or other public authority to control or regulate any property of the          Company or Subsidiary, or to use such property in a manner which does not          materially impair the use of such property for the purposes for which it is held          by the Company or Subsidiary; 

(k)      with respect to any property which the Company or any Subsidiary may hereafter          acquire, any exceptions or reservations therefrom existing at the time of such          acquisition or any terms, conditions, agreements, covenants, exceptions and          reservations expressed or provided in the deeds of other instruments,          respectively, under and by virtue of which the Company or such Subsidiary shall          hereafter acquire the same, none of which materially impairs the use of such          property for the purposes for which it is acquired by the Company or such          Subsidiary. 

     “Person” meansany individual, sole proprietorship, corporation, limited liability company,general partnership, limited partnership, limited liability partnership, trust,unincorporated organization, mutual company, joint stock company, estate, union,employee organization, government or any agency or political subdivisionthereof. 

     “Plan” means, atany time, the rate of interest publicly announced from time to time by theAdministrative Agent as its reference rate, which rate, while sometimes referredto as the prime rate, is not necessarily its lowest rate of interest. 

     “RegulatoryChange” means any of the following occurring after the date hereof: theadoption of any applicable law, rule, regulation or treaty, or any changetherein, or any change in the interpretation, application or administrationthereof by any governmental authority, central bank or comparable agency chargedwith the interpretation, application or administration thereof, or compliance byany Bank (or any Applicable Lending office of such Bank) with any request ordirective (whether or not having the force of law) of any such authority,central bank, or comparable agency. 

     “ReplacementBank(s)” has the meaning defined in Section 2.6. 

     “Required Banks”means, at any time, Banks having an aggregate Percentage of 60% or more of theLoans outstanding or, if there are no Loans outstanding, an aggregate Percentageof 60% or more of the aggregate amount of the Commitments. 

     “RetiringBank(s)” has the meaning defined in Section 2.6. 

     “Secured DebtRating” means the Company’s First Mortgage Bond (or equivalentlong term secured debt) rating as determined by Standard & Poor’sCorporation and Moody’s Investors Service, Inc., any successor thereof orany other comparable rating service selected by the Company with the priorwritten consent of the Required Banks. If the Company’s rating is split bythe two rating services, the higher of the two ratings shall apply unless thesplit is by more than one level (i.e. double-split), in which case the median ofthe two ratings shall apply. In the event that either Moody’s InvestorsService, Inc., or Standard & Poor’s Corporation shall cease to existand shall not thereupon be succeeded by a successor entity performing similarfunctions, or (b) all such corporations (or any such successor entities)shall at any time cease to maintain a rating for the Company’s FirstMortgage Bonds or equivalent long term secured debt, the Company, each Bank, andthe Administrative Agent agree to enter into negotiations promptly thereafter ingood faith with a view toward amending this Agreement to provide for analternate mechanism (including, without limitation, providing for a replacementrating agency and range of ratings of the Company’s First Mortgage Bondsfor determining the respective margins (as set forth in Section 4.2)applicable to Eurodollar Loans and Floating Rate Loans so as to achieve, asnearly as possible, the same economic basis for determining such margins asexists on the Effective Date of this Agreement. 

     “SignificantSubsidiary” means, as at the time of determination, a Subsidiarymeeting any one of the following conditions: (a) the assets of suchSubsidiary, or the sum of (i) the investments in and advances to suchSubsidiary by the Company and the Company’s other Subsidiaries, if any,plus (ii)  the contingent obligations of the Company and the Company’sother Subsidiaries, if any, with respect to such Subsidiary, as at theCompany’s last fiscal quarter ending on or before the time ofdetermination, exceeded 10% of the assets of the Company and its ConsolidatedSubsidiaries as at the end of such fiscal quarter, or (b) the sales andoperating revenues of such Subsidiary for the fiscal year preceding the time ofdetermination exceeded 10% of the sales and operating revenues of the Companyand the Company’s Consolidated Subsidiaries for such fiscal year, or (c)such Subsidiary is the parent of one or more Subsidiaries and, together withsuch Subsidiaries would, if considered in the aggregate, constitute aSignificant Subsidiary. 

     “Subsidiary”means a corporation of which the Company and/or its other Subsidiaries own,directly or indirectly, such number of outstanding shares as have more than 50%of the ordinary voting power for the election of directors. 

     “SubstituteLoan(s)” has the meaning defined in Section 2.6. 

     “TerminationDate” means the fifth anniversary of the Effective Date and thereaftereach succeeding anniversary to which the Commitments shall have been extendedpursuant to Section 2.4. 

     “Unmatured Event ofDefault” means any event which, if it continues uncured or if it is notwaived, will, with lapse of time or notice or lapse of time and notice,constitute an Event of Default. 

     “WECO” meansWashington Energy Company, a Washington corporation. 

     “Wholly-OwnedSubsidiary” means any Subsidiary, all of the shares of voting capitalstock, together with any and all options, warrants or other securitiesconvertible into shares of voting capital stock, and all other ownershipinterests and rights to acquire ownership interests of which (exceptdirectors’ qualifying shares) are, directly or indirectly, owned orcontrolled by the Company and/or one or more other such Subsidiaries. 
SECTION 2COMMITMENTS OF THE BANKS; TYPES OF LOANS;PROCEDURES FOR BORROWING
     2.1 Commitments. Subject tothe terms and conditions of this Agreement, each of the Banks severally agreesto make loans (collectively the “Loans” and individually a“Loan”) from time to time on or after the Effective Date andprior to the Termination Date in such Bank’s Percentage of such aggregateamounts as the Company may from time to time request from all Banks;provided, however, that (i) the aggregate principal amount whichany Initial Bank shall be committed to have outstanding hereunder on loan to theCompany shall not at any one time exceed the amount set forth opposite suchBank’s name in the column captioned “Amount of Commitment”in Table I on the following page, or, if different, in the most recentlyexecuted Adjustment Certificate, if any (as such amount may be reduced from timeto time in accordance with this Agreement) and (ii) the aggregate principalamount which all Banks shall be committed to have outstanding hereunder on loanto the Company shall not at any one time exceed $400,000,000 (as such amountshall be reduced from time to time in accordance with paragraph (a) ofSection 2.6 or Section 6.1). The Company may borrow, repay (orprepay as permitted by Section 6.2), and reborrow in accordance with thisSection 2.1. 

     2.2 Various Types of Loans.Each Loan shall be either a Floating Rate Loan or a Eurodollar Loan (each a“type” of Loan), as the Company shall specify in the relatednotice of borrowing pursuant to Section 2.3. Floating Rate Loans andEurodollar Loans may be outstanding at the same time. Each borrowing under thisSection 2.2 shall be in a minimum aggregate amount of $5,000,000 or anintegral multiple of $1,000,000 in excess of such amount, or such lesser amountas shall result in the Commitments becoming fully drawn, as the Company shallrequest in the notice of borrowing. 
TABLE ICOMMITMENT OF EACH INITIAL BANK============================================== =====================Initial Bank                                   Amount of Commitment============================================== =====================Bank of America NW, N.A. dba Seafirst Bank     $ 50,000,000---------------------------------------------- ------------------------------------------------------------------- ---------------------The First National Bank of Chicago             $ 50,000,000---------------------------------------------- ------------------------------------------------------------------- ---------------------NationsBank of Texas, N.A.                     $ 50,000,000---------------------------------------------- ------------------------------------------------------------------- ---------------------The Bank of New York                           $ 25,000,000---------------------------------------------- ------------------------------------------------------------------- ---------------------The Industrial Bank of Japan, Limited          $ 25,000,000---------------------------------------------- ------------------------------------------------------------------- ---------------------U.S. Bank of Washington                        $ 25,000,000---------------------------------------------- ------------------------------------------------------------------- ---------------------ABN AMRO Bank, N.V.                            $ 25,000,000---------------------------------------------- ------------------------------------------------------------------- ---------------------Bank of Montreal                               $ 25,000,000---------------------------------------------- ------------------------------------------------------------------- ---------------------The Chase Manhattan Bank                       $ 25,000,000---------------------------------------------- ------------------------------------------------------------------- ---------------------Wells Fargo Bank, N.A.                         $ 25,000,000---------------------------------------------- ------------------------------------------------------------------- ---------------------CIBC Inc.                                      $ 15,000,000---------------------------------------------- ------------------------------------------------------------------- ---------------------Key Bank of Washington                         $ 15,000,000---------------------------------------------- ------------------------------------------------------------------- ---------------------Banca di Roma                                  $ 15,000,000---------------------------------------------- ------------------------------------------------------------------- ---------------------Comerica Bank                                  $ 15,000,000---------------------------------------------- ------------------------------------------------------------------- ---------------------Mellon Bank                                    $ 15,000,000============================================== =====================TOTAL                                          $ 400,000,000============================================== =====================
     2.3 Borrowing Procedures.(a) The Company shall give irrevocable notice to the Administrative Agentof each proposed borrowing by 11:00 A.M., Seattle time, on a day which inthe case of a Floating Rate Loan is at least one Business Day prior to theproposed date of such borrowing and in the case of a Eurodollar Loan is at leastthree Business Days prior to the proposed date of such borrowing. Each suchnotice shall be effective upon receipt by the Administrative Agent, shall be inwriting, and shall specify the date, amount and type of borrowing and, in thecase of a Eurodollar Loan borrowing, the Loan Period for such borrowing.Promptly upon receipt of such notice, the Administrative Agent shall advise eachBank thereof. Not later than 11:00 A.M., Seattle time, on the date of a proposedborrowing, each Bank shall provide the Administrative Agent at its principaloffice at 701 Fifth Avenue, Seattle, Washington 98104 with immediately availablefunds covering such Bank’s Percentage of the borrowing, and theAdministrative Agent shall pay over such funds to the Company on the requestedborrowing date. Except as otherwise permitted by Section 2.6 andSection 8.3, all borrowings and repayments shall be effected so thatafter giving effect thereto all types of Loans shall be prorataamong the Banks according to their respective Percentages. 

     (b) If any Bank makes a new Loanhereunder on a day on which the Company is to repay all or any part of anoutstanding Loan from such Bank, such Bank shall apply the proceeds of its newLoan to make such repayment and only an amount equal to the difference (if any)between the amount being borrowed and the amount being repaid shall be (i) madeavailable by such Bank to the Administrative Agent as provided in paragraph (a)if the borrowing exceeds the amount to be repaid or (ii) remitted by the Companyto the Administrative Agent as provided in Section 7.1, if the borrowingis less than the amount being repaid. 

     (c) Unless the AdministrativeAgent shall have received notice from a Bank prior to the date of any borrowingthat such Bank will not make available to the Administrative Agent an amountequal to such Bank’s Percentage of such borrowing, the Administrative Agentmay assume that such Bank has made an amount equal to such Bank’sPercentage of such borrowing available to the Agent on the date of suchborrowing in accordance with paragraphs (a) and (b) of this Section 2.3and the Administrative Agent may, in reliance upon such assumption, makeavailable to the Company on such date a corresponding amount. If and to theextent such Bank shall not have so made available to the Administrative Agentthe Loan requested to be made by such Bank on such date and the AdministrativeAgent shall have so made available to the Company a corresponding amount onbehalf of such Bank, such Bank shall, on demand, pay to the Administrative Agentsuch corresponding amount together with interest thereon, for each day from thedate such amount shall have been so made available by the Administrative Agentto the Company until the date such amount shall have been repaid to theAdministrative Agent, at the Federal Funds Effective Rate. If such Bank shallrepay to the Administrative Agent such corresponding amount, such amount sorepaid shall constitute such Bank’s Loan included in such borrowing forpurposes of this Agreement. If such Bank does not pay such amount promptly uponthe Administrative Agent’s demand therefor, the Administrative Agent shallpromptly notify the Company and the Company shall immediately repay suchcorresponding amount to the Administrative Agent together with accrued interestthereon at a rate per annum equal to the higher of the Federal Funds EffectiveRate and the interest rate applicable thereto pursuant to Section 4.1. 

     2.4 Extension of TerminationDate. (a) Provided no Event of Default or Unmatured Event of Defaulthas occurred and is continuing, at least 60 days but not more than 90 daysbefore each anniversary of the Effective Date (excluding however thatanniversary of the Effective Date which coincides with the then effectiveTermination Date), the Company may, by delivering a written request to theAdministrative Agent, request that each Bank extend for one year the TerminationDate with respect to such Bank’s Commitment. The Administrative Agentshall, upon receipt of such a request, promptly notify each Bank thereof, andrequest that each Bank advise the Administrative Agent of its approval orrejection of such request within 30 days of its receipt of such notification. 

     (b) Upon receipt of suchnotification from the Agent, each Bank may (but shall not be required to), inits sole and absolute discretion, consent to extend the Termination Date withrespect to its Commitment for a period of one year, and, should it agree to doso, shall so notify the Agent in writing of its consent no later than 30 daysfollowing the Administrative Agent’s notification of the Company’srequest. If any Bank shall not so notify the Administrative Agent within 30days, such Bank shall be deemed not to have consented to such request (the Banksnot so consenting or so failing to notify the Administrative Agent collectivelythe “Non-Consenting Banks” and individually a“Non-Consenting Bank”). The Termination Date will not beextended unless at least the Required Banks consent to the requested extensionpursuant to this paragraph (b). The Administrative Agent shall promptly notifythe Company as to the Banks, if any, that have not consented to such request. Ifthe requested extension fails to obtain the consent of the Required Banks, theAdministrative Agent shall promptly give written notice to the Company and eachBank stating that the Termination Date then in effect (and specifying such date)has not been extended. 

     (c) Provided at least the RequiredBanks have consented to the Company’s request for an extension,notwithstanding a notice given by the Administrative Agent to the Company that aBank has become a Non-Consenting Bank pursuant to paragraph (b) above, theTermination Date then in effect shall be extended for the requested additionalone-year period on the condition that the Company exercises one or more of theoptions set forth in paragraph (a) of Section 2.6 and the applicabletransactions are consummated within the time period specified in paragraph (b)of Section 2.6. 

     (d) If the conditions forextension of a Termination Date pursuant to paragraph (c) above are not met,promptly following the last day on which the Company could have exercised one ormore of the options to cause an extension of the Termination Date pursuant toparagraph (c) above (or sooner, if the Company informs the Administrative Agentthat it does not intend to do so), the Administrative Agent shall give writtennotice to the Company and each Bank stating that the Termination Date then ineffect (and specifying such date) has not been extended. 

     2.5 Removal of Banks.Provided no Event of Default has occurred and is continuing, the Company maygive written notice (with a copy to the Administrative Agent) (i) to any one ormore Banks without cause in any year, at least 90 days but not more than 120days before the anniversary of the Effective Date, or (ii) to any Bank failingto make a Loan pursuant to Section 2.3 within the thirty (30) daysfollowing such failure, that the Company does not desire that such Bank(s)continue to be a party to this Agreement. Any such Bank(s) may be removed as aparty to this Agreement if the Company exercises one or more of the options setforth in paragraph (a) of Section 2.6 and the applicable transactions areconsummated within the time period specified in paragraph (b) of Section2.6. 

     2.6 Removal of RetiringBanks. (a) Subject to the requirement that after giving effect to theconsummation of the events described in Section 2.6 (a)(i), (ii)and (iii), the entire Commitment of each Non-Consenting Bank or Bank towhich the Company has given notice pursuant to Section 2.5 (collectivelythe “Retiring Banks” and individually a “RetiringBank”) shall be either terminated in its entirety or assumed, and allamounts owing each Retiring Bank shall be paid on a date mutually acceptable tothe Retiring Bank, the Company and any Replacement or Consenting Bank within thetime period specified in paragraph (b) of Section 2.6, the Company mayexercise one or more of the following options to remove a Retiring Bank as aBank under this Agreement: 

     (i) The Company may permanentlyterminate the Commitment of each or any Retiring Bank and permanently reduce theaggregate amount of the Commitments by an amount equal to the aggregate amountof Commitments of Retiring Banks so terminated (without affecting the Commitmentof any other Bank). 

     (ii) The Company may request oneor more Banks that are not Retiring Banks to assume all, or any part, of each orany Retiring Bank’s Commitment and, if necessary, make substitute Loans foreach and any Retiring Bank’s outstanding Loans as provided in this clause(ii). If one or more of such Banks shall so agree (collectively the“Consenting Banks” and individually a “ConsentingBank”) (A) the Commitment of each such Consenting Bank shall beincreased by its respective share designated by the Company (and agreed to bysuch Consenting Bank) of the Commitment(s) of such Retiring Bank(s) beingassumed and (B) if there are any Loans outstanding the Consenting Banks shall,if necessary, make Floating Rate Loans to the Company prorataaccording to their respective designated shares, in the aggregate principalamount of the outstanding Floating Rate Loan(s) of such Retiring Bank(s) (each a“Substitute Loan”). If any Eurodollar Loan of a Retiring Bankis paid on any day other than the last day of the Loan Period for that Loanoccurring within the time period provided in Paragraph (b) below, the Companyshall pay the Retiring Bank’s funding losses as provided in Section8.5. 

     (iii) The Company may designateone or more banks or other financial institutions, which are not Banks but whichare reasonably acceptable to the Administrative Agent, to assume all, or anypart, of the Commitment of each or any Retiring Bank and, if necessary, to makeSubstitute Loans to the Company pursuant to this clause (iii) for each or anyRetiring Bank’s then outstanding Loan(s), if any. If one or more suchdesignated banks or financial institutions so agree (collectively the“Replacement Banks” and individually a “ReplacementBank”), (A) each such Replacement Bank shall assume its respectiveshare of the Commitment(s) of such Retiring Bank(s) being assumed, and (B) ifthere are any Loans outstanding, the Replacement Bank(s) shall, if necessary,make Floating Rate Loans to the Company prorata according totheir respective designated shares, in the aggregate principal amount of theportion of the outstanding Floating Rate Loan(s) of such Retiring Bank(s). Ifany Eurodollar Loan of a Retiring Bank is paid on any day other than the lastday of the Loan Period for that Loan occurring within the time period providedin Paragraph (b) below, the Company shall pay the Retiring Bank’s fundinglosses as provided in Section 8.5. Upon such assumption and prepayment,such Replacement Bank(s) shall be deemed a, “Bank” or“Banks” for all purposes of this Agreement. 

     (b) The transactions described inthe foregoing paragraph must be consummated not more than 180 days after theCompany’s notice to the Administrative Agent of its (i) request for anextension of the Termination Date pursuant to Section 2.4 or (ii) removalof a Bank pursuant to Section 2.5 (the “180 DayPeriod”). Further, from and after said notice until all Loans of theRetiring Bank are completely repaid, the Retiring Bank’s Commitment to makenew Loans shall continue, provided that until the earlier of the repayment ofthe Retiring Bank or the expiration of the 180 Day Period the Company may notrequest a Eurodollar Loan with a Loan Period extending beyond the end of the 180Day Period. Upon consummation of the applicable transactions, the applicableparties shall execute and deliver to the Administrative Agent an AdjustmentCertificate. The Administrative Agent shall distribute to the Company and theBanks copies of the executed Adjustment Certificate. If the transactions are notfully consummated within the 180 Day Period, the respective requested extensionof the Termination Date or removal of a Bank which triggered the commencement ofsaid Period shall be of no effect and void from and after the expiration of said180 Day Period. 

     (c) Immediately upon thetermination or assumption of its Commitment and the payment in, full of allamounts then owing to it under this Agreement pursuant to any of the clauses ofthe foregoing paragraph, each Retiring Bank shall cease to be a“Bank” for all purposes of this Agreement and shall no longerhave any obligations or rights hereunder or in connection herewith, other thanthe right to be reimbursed pursuant to this Agreement for costs and expensesattributable to events, acts or conditions occurring prior to such terminationor assumption and payment. If the Company has previously executed and deliveredNotes to the Banks pursuant to Section 3.2, the Company shall provide areplacement Note to each Consenting Bank (to reflect its increased Commitment)and/or Replacement Bank (to reflect the amount of its Commitment). 

     2.7 Representations andWarranty. Each notice of borrowing pursuant to Section 2.3 shallautomatically constitute a representation and warranty by the Company to theAdministrative Agent and each Bank to the effect that on the requested date ofsuch borrowing (a) the representations and warranties of the Company containedin Sections 9.1, 9.2, 9.3, 9.4, 9.7,9.8, 9.9, 9.10, 9.11 and 9.12, and, in thecase of borrowings described in Section 10.4, the warranties of theCompany contained in Sections 9.5 and 9.6, shall be true andcorrect as of such requested date as though made on the date thereof, and (b) noEvent of Default or Unmatured Event of Default shall have then occurred and becontinuing or will result therefrom. 
SECTION 3REPAYMENT OF LOANS; NOTES EVIDENCING LOANS
     3.1 Repayment of Loans. TheCompany hereby promises to pay the unpaid principal amount of each EurodollarLoan on the last day of the Loan Period for such Loan and all Floating RateLoans not later than the Termination Date. 

     3.2 Notes. The Loans ofeach Bank shall be evidenced by a promissory note substantially in the form setforth in Exhibit A, with appropriate insertions, dated the date of theinitial Loans or such earlier date as may be acceptable to the AdministrativeAgent and payable to the order of such Bank in the principal amount of theCommitment of such Bank (collectively the “Notes” andindividually a “Note”). Each Bank shall record in its records,or at its option on the schedule attached to its Note, the date and amount ofeach Loan made by such Bank, each repayment or prepayment thereof, and, in thecase of a Eurodollar loan, the dates on which the Loan Period for such Loanshall begin and end. The aggregate unpaid principal amount so recorded shall berebuttable presumptive evidence of the principal amount owing and unpaid on suchNote. The failure to so record any such amount or any error in so recording anysuch amount shall not, however, limit or otherwise affect the obligations of theCompany hereunder or under any Note to repay the principal amount of the Loanstogether with all interest accruing thereon. 
SECTION 4INTEREST
     4.1 Interest Rates. Withrespect to each Loan of each Bank, the Company hereby promises to pay intereston the unpaid principal amount thereof for the period commencing on the date ofsuch Loan until such Loan is paid in full as follows: 
 
     (a)          if such Loan is a Floating Rate Loan, at a rate per annum equal to the sum of          the Base Rate and the applicable Base Rate Margin from time to time in effect,          changing as the Base Rate and/or Base Rate Margin changes;