| [X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|-----|-----------------------------------------------------------------------------------------|

| [  ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|----------------|------------------------------------------------------------------------------------------|

| Commission File Number | Exact name of registrant as specified in its charter, state of incorporation, address of principal executive offices, telephone number | I.R.S.EmployerIdentificationNumber |
|------------------------|----------------------------------------------------------------------------------------------------------------------------------------|------------------------------------|
|                   |                                                                                                                                   |                               |
| 1-16305                | PUGET ENERGY, INC.A Washington Corporation10885 NE 4th Street, Suite 1200Bellevue, Washington 98004-5591(425) 454-6363                 | 91-1969407                         |
|                   |                                                                                                                                   |                               |
| 1-4393                 | PUGET SOUND ENERGY, INC.A Washington Corporation10885 NE 4th Street, Suite 1200Bellevue, Washington 98004-5591(425) 454-6363           | 91-0374630                         |

| Puget Energy, Inc. | Yes | /  / | No | /X/ |   | Puget Sound Energy, Inc. | Yes | /X/ | No | /  / |
|--------------------|-----|----------------|----|-----|--------|--------------------------|-----|-----|----|----------------|

| Puget Energy, Inc. | Yes | /  / | No | /  / |   | Puget Sound Energy, Inc. | Yes | /  / | No | /  / |
|--------------------|-----|----------------|----|----------------|--------|--------------------------|-----|----------------|----|----------------|

| Puget Energy, Inc.       | Large accelerated filer | /  / | Accelerated filer | /  / | Non-accelerated filer | /X/ | Smaller reporting company | /  / |
|--------------------------|-------------------------|----------------|-------------------|----------------|-----------------------|-----|---------------------------|----------------|
| Puget Sound Energy, Inc. | Large accelerated filer | /  / | Accelerated filer | /  / | Non-accelerated filer | /X/ | Smaller reporting company | /  / |

| Puget Energy, Inc. | Yes | /  / | No | /X/ |   | Puget Sound Energy, Inc. | Yes | /  / | No | /X/ |
|--------------------|-----|----------------|----|-----|--------|--------------------------|-----|----------------|----|-----|

|                       |
|----------------------------|
| Definitions                |
| Filing Format              |
| Forward-Looking Statements |

| Part I.  | Financial Statements                                                                                                                                                                                   |
|----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|     |                                                                                                                                                                                                   |
|     | Puget Energy, Inc.                                                                                                                                                                                     |
|     | Consolidated Statements of Income – Three Months Ended September 30, 2010 and 2009                                                                                                               |
|     | Consolidated Statements of Income – Nine Months Ended September 30, 2010, February 6, 2009 to September 30, 2009 (Successor) and January 1, 2009 to February 5, 2009 (Predecessor)               |
|     | Consolidated Statements of Comprehensive Income – Three Months Ended September 30, 2010 and 2009                                                                                                 |
|     | Consolidated Statements of Comprehensive Income – Nine Months Ended September 30, 2010, February 6, 2009 to September 30, 2009 (Successor) and January 1, 2009 to February 5, 2009 (Predecessor) |
|     | Consolidated Balance Sheets – September 30, 2010 and December 31, 2009                                                                                                                           |
|     | Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2010, February 6, 2009 to September 30, 2009 (Successor) and January 1, 2009 to February 5, 2009 (Predecessor)      |
|     |                                                                                                                                                                                                   |
|     | Puget Sound Energy, Inc.                                                                                                                                                                               |
|     | Consolidated Statements of Income – Three and Nine Months Ended September 30, 2010 and 2009                                                                                                      |
|     | Consolidated Statements of Comprehensive Income – Three and Nine Months Ended September 30, 2010 and 2009                                                                                        |
|     | Consolidated Balance Sheets – September 30, 2010 and December 31, 2009                                                                                                                           |
|     | Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2010 and 2009                                                                                                            |
|     |                                                                                                                                                                                                   |
|     | Notes                                                                                                                                                                                                  |
|     | Combined Notes to Consolidated Financial Statements                                                                                                                                                    |
|     |                                                                                                                                                                                                   |
| Item 2.  | Management’s Discussion and Analysis of Financial Condition and Results of Operations                                                                                                            |
|     |                                                                                                                                                                                                   |
| Item 3.  | Quantitative and Qualitative Disclosure About Market Risk                                                                                                                                              |
|     |                                                                                                                                                                                                   |
| Item 4.  | Controls and Procedures                                                                                                                                                                                |
|     |                                                                                                                                                                                                   |
| Part II. | Other Information                                                                                                                                                                                      |
|     |                                                                                                                                                                                                   |
| Item 1.  | Legal Proceedings                                                                                                                                                                                      |
|     |                                                                                                                                                                                                   |
| Item 1A. | Risk Factors                                                                                                                                                                                           |
|     |                                                                                                                                                                                                   |
| Item 6.  | Exhibits                                                                                                                                                                                               |

| Signatures    |
|---------------|
|          |
| Exhibit Index |

DEFINITIONS

| AFUDC                 | Allowance for Funds Used During Construction                 |
|-----------------------|--------------------------------------------------------------|
| ASC                   | Accounting Standards Codification                            |
| ASU                   | Accounting Standards Update                                  |
| BPA                   | Bonneville Power Administration                              |
| EBITDA                | Earnings Before Interest, Tax, Depreciation and Amortization |
| FASB                  | Financial Accounting Standards Board                         |
| FERC                  | Federal Energy Regulatory Commission                         |
| GAAP                  | Generally Accepted Accounting Principles                     |
| IRP                   | Integrated Resource Plan                                     |
| IRS                   | Internal Revenue Service                                     |
| ISDA                  | International Swaps and Derivatives Association              |
| kW                    | Kilowatt                                                     |
| kWh                   | Kilowatt Hour                                                |
| LIBOR                 | London Interbank Offered Rate                                |
| MMBtus                | One Million British Thermal Units                            |
| MW                    | Megawatt (one MW equals one thousand kW)                     |
| MWh                   | Megawatt Hour (one MWh equals one thousand kWh)              |
| NAESB                 | North American Energy Standards Board                        |
| NPNS                  | Normal Purchase Normal Sale                                  |
| OCI                   | Other Comprehensive Income                                   |
| PCA                   | Power Cost Adjustment                                        |
| PGA                   | Purchased Gas Adjustment                                     |
| PSE                   | Puget Sound Energy, Inc.                                     |
| Puget Energy          | Puget Energy, Inc.                                           |
| Puget Equico          | Puget Equico LLC                                             |
| Puget Holdings        | Puget Holdings LLC                                           |
| PTC                   | Production Tax Credit                                        |
| PURPA                 | Public Utility Regulatory Policies Act                       |
| REC                   | Renewable Energy Credit                                      |
| REP                   | Residential Exchange Program                                 |
| SERP                  | Supplemental Executive Retirement Plan                       |
| VIE                   | Variable Interest Entity                                     |
| Washington Commission | Washington Utilities and Transportation Commission           |

FILING FORMAT

FORWARD-LOOKING STATEMENTS

| ·   | Governmental policies and regulatory actions, including those of the Federal Energy Regulatory Commission (FERC) and the Washington Utilities and Transportation Commission (Washington Commission), with respect to allowed rates of return, cost recovery, financings, industry and rate structures, transmission and generation business structures within PSE, acquisition and disposal of assets and facilities, operation, maintenance and construction of electric generating facilities, natural gas and electric distribution and transmission facilities, licensing of hydroelectric operations and natural gas storage facilities, recovery of other capital investments, recovery of power and natural gas costs, recovery of regulatory assets, implementation of energy efficiency programs and present or prospective wholesale and retail competition; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Failure of PSE to comply with FERC or Washington Commission standards and/or rules, which could result in penalties based on the discretion of either commission; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Findings of noncompliance with electric reliability standards developed by the North American Electric Reliability Corporation or the Western Electricity Coordinating Council for users, owners and operators of the power system, which could result in penalties; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Changes in, adoption of and compliance with laws and regulations, including decisions and policies concerning the environment, climate change, greenhouse gas or other emissions or byproducts of electric generation (including coal ash or other substances), natural resources, and fish and wildlife (including the Endangered Species Act) as well as the risk of litigation arising from such matters, whether involving public or private claimants or regulatory investigative or enforcement measures; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The ability to recover costs arising from changes in enacted federal, state or local tax laws in a timely manner; |
|--------------------|-------------------------------------------------------------------------------------------------------------------|

| ·   | Changes in tax law, related regulations or differing interpretation or enforcement of applicable law by the Internal Revenue Service (IRS) or other taxing jurisdiction; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Inability to realize deferred tax assets and use production tax credits due to insufficient future taxable income; |
|--------------------|--------------------------------------------------------------------------------------------------------------------|

| ·   | Accidents or natural disasters, such as hurricanes, windstorms, earthquakes, floods, fires and landslides, which can interrupt service and lead to lost revenue, cause temporary supply disruptions and/or price spikes in the cost of fuel and raw materials and impose extraordinary costs; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Commodity price risks associated with procuring natural gas and power in wholesale markets or counterparties extending credit to PSE without collateral posting requirements; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Wholesale market disruption, which may result in a deterioration of market liquidity, increase the risk of counterparty default, affect the regulatory and legislative process in unpredictable ways, negatively affect wholesale energy prices and/or impede PSE’s ability to manage its energy portfolio risks and procure energy supply, affect the availability and access to capital and credit markets and/or impact delivery of energy to PSE from its suppliers; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Financial difficulties of other energy companies and related events, which may affect the regulatory and legislative process in unpredictable ways, adversely affect the availability of and access to capital and credit markets and/or impact delivery of energy to PSE from its suppliers; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The effect of wholesale market structures (including, but not limited to, regional market designs or transmission organizations) or other related federal initiatives; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | PSE electric or natural gas distribution system failure, which may impact PSE’s ability to deliver energy supply to its customers; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Changes in climate or weather conditions in the Pacific Northwest, which could affect customer usage and PSE’s revenue and expenses; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Regional or national weather, which can have a potentially serious impact on PSE’s ability to procure adequate supplies of natural gas, fuel or purchased power to serve its customers and the cost of procuring such supplies; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Variable hydrological conditions, which can impact streamflow and PSE’s ability to generate electricity from hydroelectric facilities; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Electric plant generation and transmission system outages, which can have an adverse impact on PSE’s expenses with respect to repair costs, added costs to replace energy or higher costs associated with dispatching a more expensive generation resource; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The ability of a natural gas or electric plant to operate as intended; |
|--------------------|------------------------------------------------------------------------|

| ·   | The ability to renew contracts for electric and natural gas supply and the price of renewal; |
|--------------------|----------------------------------------------------------------------------------------------|

| ·   | Blackouts or large curtailments of transmission systems, whether PSE’s or others’, which can affect PSE’s ability to deliver power or natural gas to its customers and generating facilities; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The ability to restart generation following a regional transmission disruption; |
|--------------------|---------------------------------------------------------------------------------|

| ·   | The failure of the interstate natural gas pipeline delivering to PSE’s system, which may impact PSE’s ability to adequately deliver natural gas supply or electric power to its customers; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Industrial, commercial and residential growth and demographic patterns in the service territories of PSE; |
|--------------------|-----------------------------------------------------------------------------------------------------------|

| ·   | General economic conditions in the Pacific Northwest, which may impact customer consumption or affect PSE’s accounts receivable; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The loss of significant customers, changes in the business of significant customers or the condemnation of PSE’s facilities, which may result in changes in demand for PSE’s services; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The failure of information systems or the failure to secure information system data, which may impact the operations and cost of PSE’s customer service, generation, distribution and transmission; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The impact of acts of God, terrorism, flu pandemic or similar significant events; |
|--------------------|-----------------------------------------------------------------------------------|

| ·   | Capital market conditions, including changes in the availability of capital and interest rate fluctuations; |
|--------------------|-------------------------------------------------------------------------------------------------------------|

| ·   | Employee workforce factors, including strikes, work stoppages, availability of qualified employees or the loss of a key executive; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The ability to obtain insurance coverage and the cost of such insurance; |
|--------------------|--------------------------------------------------------------------------|

| ·   | The ability to maintain effective internal controls over financial reporting and operational processes; |
|--------------------|---------------------------------------------------------------------------------------------------------|

| ·   | Changes in Puget Energy’s or PSE’s credit ratings, which may have an adverse impact on the availability and cost of capital for Puget Energy or PSE generally, or the failure to comply with the covenants in Puget Energy’s or PSE’s credit facilities, which would limit the Companies’ ability to utilize such facilities for capital; and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Deteriorating values of the equity, fixed income and other markets which could significantly impact the value of investments of PSE’s retirement plan, post-retirement medical benefit plan trusts and the funding of obligations thereunder. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

PART I                      FINANCIAL INFORMATION

Item 1.                      Financial Statements

PUGET ENERGY, INC.

|                                                 |   | Three Months EndedSeptember 30, |    |
|------------------------------------------------------|--------|---------------------------------|---------|
|                                                 |   | 2010                            |    |   | 2009 |   |
| Operating revenue:                                   |   |                            |    |   |   |   |
| Electric                                             |   | $                               | 489,608 |   |   | $ | 449,658 |   |
| Gas                                                  |   |                            | 132,571 |   |   |   | 142,128 |   |
| Other                                                |   |                            | 650     |   |   |   | 840 |   |
| Total operating revenue                              |   |                            | 622,829 |   |   |   | 592,626 |   |
| Operating expenses:                                  |   |                            |    |   |   |   |   |   |
| Energy costs:                                        |   |                            |    |   |   |   |   |   |
| Purchased electricity                                |   |                            | 127,792 |   |   |   | 160,723 |   |
| Electric generation fuel                             |   |                            | 96,712  |   |   |   | 77,164 |   |
| Residential exchange                                 |   |                            | (15,173 | ) |   |   | (19,271 | ) |
| Purchased gas                                        |   |                            | 60,284  |   |   |   | 72,463 |   |
| Net unrealized (gain) loss on derivative instruments |   |                            | 63,275  |   |   |   | (74,831 | ) |
| Utility operations and maintenance                   |   |                            | 117,155 |   |   |   | 116,129 |   |
| Non-utility expense and other                        |   |                            | 4,207   |   |   |   | 4,542 |   |
| Depreciation                                         |   |                            | 73,111  |   |   |   | 66,932 |   |
| Amortization                                         |   |                            | 18,355  |   |   |   | 16,522 |   |
| Conservation amortization                            |   |                            | 20,392  |   |   |   | 12,836 |   |
| Taxes other than income taxes                        |   |                            | 58,903  |   |   |   | 57,785 |   |
| Total operating expenses                             |   |                            | 625,013 |   |   |   | 490,994 |   |
| Operating income (loss)                              |   |                            | (2,184  | ) |   |   | 101,632 |   |
| Other income (deductions):                           |   |                            |    |   |   |   |   |   |
| Other income                                         |   |                            | 11,073  |   |   |   | 13,272 |   |
| Other expense                                        |   |                            | (1,074  | ) |   |   | (1,299 | ) |
| Interest charges:                                    |   |                            |    |   |   |   |   |   |
| AFUDC                                                |   |                            | 3,924   |   |   |   | 2,661 |   |
| Interest expense                                     |   |                            | (84,473 | ) |   |   | (72,930 | ) |
| Income (loss) before income taxes                    |   |                            | (72,734 | ) |   |   | 43,336 |   |
| Income tax (benefit) expense                         |   |                            | (34,835 | ) |   |   | 18,829 |   |
| Net income (loss)                                    |   | $                               | (37,899 | ) |   | $ | 24,507 |   |

PUGET ENERGY, INC.

|                                                 |   | Successor                          |      |   | Predecessor                               |   |
|------------------------------------------------------|--------|------------------------------------|-----------|--------|-------------------------------------------|--------|
|                                                 |   | Nine Months EndedSeptember 30,2010 |      |   | February 6, 2009 –September 30,2009 |   |   | January 1, 2009 – February 5, 2009 |   |
| Operating revenue:                                   |   |                               |      |   |                                      |   |   |   |   |
| Electric                                             |   | $                                  | 1,507,549 |   |                                      | $      | 1,293,024 |   |   | $ | 213,618 |   |
| Gas                                                  |   |                               | 664,423   |   |                                      |   | 685,484 |   |   |   | 190,001 |   |
| Other                                                |   |                               | 2,350     |   |                                      |   | 4,597 |   |   |   | 94 |   |
| Total operating revenue                              |   |                               | 2,174,322 |   |                                      |   | 1,983,105 |   |   |   | 403,713 |   |
| Operating expenses:                                  |   |                               |      |   |                                      |   |   |   |   |   |   |   |
| Energy costs:                                        |   |                               |      |   |                                      |   |   |   |   |   |   |   |
| Purchased electricity                                |   |                               | 556,788   |   |                                      |   | 518,912 |   |   |   | 90,737 |   |
| Electric generation fuel                             |   |                               | 194,649   |   |                                      |   | 131,163 |   |   |   | 11,961 |   |
| Residential exchange                                 |   |                               | (54,510   | )      |                                      |   | (60,063 | ) |   |   | (12,542 | ) |
| Purchased gas                                        |   |                               | 343,779   |   |                                      |   | 403,741 |   |   |   | 120,925 |   |
| Net unrealized (gain) loss on derivative instruments |   |                               | 109,183   |   |                                      |   | (125,166 | ) |   |   | 3,867 |   |
| Utility operations and maintenance                   |   |                               | 355,569   |   |                                      |   | 315,479 |   |   |   | 37,650 |   |
| Non-utility expense and other                        |   |                               | 11,965    |   |                                      |   | 11,332 |   |   |   | 112 |   |
| Merger and related costs                             |   |                               | --        |   |                                      |   | 2,731 |   |   |   | 44,324 |   |
| Depreciation                                         |   |                               | 217,765   |   |                                      |   | 177,269 |   |   |   | 21,773 |   |
| Amortization                                         |   |                               | 53,011    |   |                                      |   | 43,113 |   |   |   | 4,969 |   |
| Conservation amortization                            |   |                               | 60,874    |   |                                      |   | 39,803 |   |   |   | 7,592 |   |
| Taxes other than income taxes                        |   |                               | 210,304   |   |                                      |   | 188,889 |   |   |   | 36,935 |   |
| Total operating expenses                             |   |                               | 2,059,377 |   |                                      |   | 1,647,203 |   |   |   | 368,303 |   |
| Operating income                                     |   |                               | 114,945   |   |                                      |   | 335,902 |   |   |   | 35,410 |   |
| Other income (deductions):                           |   |                               |      |   |                                      |   |   |   |   |   |   |   |
| Other income                                         |   |                               | 32,887    |   |                                      |   | 31,938 |   |   |   | 3,653 |   |
| Other expense                                        |   |                               | (4,147    | )      |                                      |   | (5,064 | ) |   |   | (369 | ) |
| Charitable foundation funding                        |   |                               | --        |   |                                      |   | (5,000 | ) |   |   | -- |   |
| Interest charges:                                    |   |                               |      |   |                                      |   |   |   |   |   |   |   |
| AFUDC                                                |   |                               | 9,832     |   |                                      |   | 6,210 |   |   |   | 350 |   |
| Interest expense                                     |   |                               | (244,839  | )      |                                      |   | (189,458 | ) |   |   | (17,291 | ) |
| Income (loss) before income taxes                    |   |                               | (91,322   | )      |                                      |   | 174,528 |   |   |   | 21,753 |   |
| Income tax (benefit) expense                         |   |                               | (37,895   | )      |                                      |   | 54,391 |   |   |   | 8,997 |   |
| Net income (loss)                                    |   | $                                  | (53,427   | )      |                                      | $      | 120,137 |   |   | $ | 12,756 |   |

PUGET ENERGY, INC.

|                                                                                                                                              |   | Three Months EndedSeptember 30, |    |
|---------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|---------|
|                                                                                                                                              |   | 2010                            |    |   | 2009 |   |
| Net income (loss)                                                                                                                                 |   | $                               | (37,899 | ) |   | $ | 24,507 |   |
| Other comprehensive loss:                                                                                                                         |   |                            |    |   |   |   |   |   |
| Net unrealized loss on interest rate swaps during the period, net of tax of $(10,640) and $(11,681), respectively                                 |   |                            | (19,761 | ) |   |   | (21,694 | ) |
| Reclassification of net unrealized loss on interest rate swaps during the period, net of tax of $3,024 and $2,959, respectively                   |   |                            | 5,614   |   |   |   | 5,495 |   |
| Net unrealized loss from pension and postretirement plans, net of tax of $(90) and $0, respectively                                               |   |                            | (166    | ) |   |   | -- |   |
| Net unrealized gain on energy derivative instruments during the period, net of tax of $0 and $16, respectively                                    |   |                            | --      |   |   |   | 30 |   |
| Reclassification of net unrealized loss on energy derivative instruments settled during the period, net of tax of $1,276 and $6,699, respectively |   |                            | 2,370   |   |   |   | 12,440 |   |
| Other comprehensive loss                                                                                                                          |   |                            | (11,943 | ) |   |   | (3,729 | ) |
| Comprehensive income (loss)                                                                                                                       |   | $                               | (49,842 | ) |   | $ | 20,778 |   |

|                                                                                                                                                      |   | Successor                          |    |   | Predecessor                               |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|---------|--------|-------------------------------------------|--------|
|                                                                                                                                                      |   | Nine Months EndedSeptember 30,2010 |    |   | February 6, 2009 –September 30,2009 |   |   | January 1, 2009 – February 5,2009 |   |
| Net income (loss)                                                                                                                                         |   | $                                  | (53,427 | )      |                                      | $      | 120,137 |   |   | $ | 12,756 |   |
| Other comprehensive loss:                                                                                                                                 |   |                               |    |   |                                      |   |   |   |   |   |   |   |
| Net unrealized loss on interest rate swaps during the period, net of tax of $(34,105), $(12,493) and $0, respectively                                     |   |                               | (63,338 | )      |                                      |   | (23,203 | ) |   |   | -- |   |
| Reclassification of net unrealized loss on interest rate swaps during the period, net of tax of $8,932, $7,178 and $0, respectively                       |   |                               | 16,588  |   |                                      |   | 13,330 |   |   |   | -- |   |
| Net unrealized gain (loss) from pension and postretirement plans, net of tax of $(91), $0 and $170, respectively                                          |   |                               | (169    | )      |                                      |   | -- |   |   |   | 315 |   |
| Net unrealized loss on energy derivative instruments during the period, net of tax of $0, $(14,120) and $(13,010), respectively                           |   |                               | --      |   |                                      |   | (26,222 | ) |   |   | (24,162 | ) |
| Reclassification of net unrealized loss on energy derivative instruments settled during the period, net of tax of $1,952, $7,824 and $2,428, respectively |   |                               | 3,625   |   |                                      |   | 14,531 |   |   |   | 4,509 |   |
| Amortization of financing cash flow hedge contracts to earnings, net of tax of $0, $0 and $15, respectively                                               |   |                               | --      |   |                                      |   | -- |   |   |   | 26 |   |
| Other comprehensive loss                                                                                                                                  |   |                               | (43,294 | )      |                                      |   | (21,564 | ) |   |   | (19,312 | ) |
| Comprehensive income (loss)                                                                                                                               |   | $                                  | (96,721 | )      |                                      | $      | 98,573 |   |   | $ | (6,556 | ) |

PUGET ENERGY, INC.

|                                                                                            |   | September 30,2010 |       |   | December 31, 2009 |   |
|-------------------------------------------------------------------------------------------------|--------|-------------------|------------|--------|-------------------|--------|
| Utility plant (including construction work in progress of $601,366 and $358,732, respectively): |   |              |       |   |              |   |
| Electric plant                                                                                  |   | $                 | 5,124,065  |   |              | $      | 4,705,900 |   |
| Gas plant                                                                                       |   |              | 2,097,944  |   |              |   | 1,995,219 |   |
| Common plant                                                                                    |   |              | 287,505    |   |              |   | 284,758 |   |
| Less: Accumulated depreciation and amortization                                                 |   |              | (375,034   | )      |              |   | (185,474 | ) |
|     Net utility plant                                                            |   |              | 7,134,480  |   |              |   | 6,800,403 |   |
| Other property and investments:                                                                 |   |              |       |   |              |   |   |   |
| Goodwill                                                                                        |   |              | 1,656,513  |   |              |   | 1,656,513 |   |
| Investment in Bonneville Exchange Power contract                                                |   |              | 23,805     |   |              |   | 26,450 |   |
| Other property and investments                                                                  |   |              | 123,899    |   |              |   | 127,073 |   |
|     Total other property and investments                                         |   |              | 1,804,217  |   |              |   | 1,810,036 |   |
| Current assets:                                                                                 |   |              |       |   |              |   |   |   |
| Cash and cash equivalents                                                                       |   |              | 86,316     |   |              |   | 78,527 |   |
| Restricted cash                                                                                 |   |              | 5,613      |   |              |   | 19,844 |   |
| Accounts receivable, net of allowance for doubtful accounts of $8,057 and $8,094, respectively  |   |              | 230,708    |   |              |   | 320,016 |   |
| Unbilled revenue                                                                                |   |              | 96,772     |   |              |   | 208,948 |   |
| Purchased gas adjustment receivable                                                             |   |              | 3,546      |   |              |   | -- |   |
| Materials and supplies, at average cost                                                         |   |              | 95,710     |   |              |   | 75,035 |   |
| Fuel and gas inventory, at average cost                                                         |   |              | 108,043    |   |              |   | 96,483 |   |
| Unrealized gain on derivative instruments                                                       |   |              | 8,082      |   |              |   | 14,948 |   |
| Income taxes                                                                                    |   |              | 72,627     |   |              |   | 134,617 |   |
| Prepaid expense and other                                                                       |   |              | 34,725     |   |              |   | 13,117 |   |
| Power contract acquisition adjustment gain                                                      |   |              | 173,860    |   |              |   | 169,171 |   |
| Deferred income taxes                                                                           |   |              | 81,685     |   |              |   | 39,977 |   |
|     Total current assets                                                         |   |              | 997,687    |   |              |   | 1,170,683 |   |
| Other long-term and regulatory assets:                                                          |   |              |       |   |              |   |   |   |
| Regulatory assets for deferred income taxes                                                     |   |              | 75,942     |   |              |   | 89,303 |   |
| Regulatory asset for PURPA buyout costs                                                         |   |              | 50,012     |   |              |   | 78,162 |   |
| Power cost adjustment mechanism                                                                 |   |              | 9,489      |   |              |   | 8,529 |   |
| Regulatory assets related to power contracts                                                    |   |              | 137,543    |   |              |   | 210,340 |   |
| Other regulatory assets                                                                         |   |              | 836,972    |   |              |   | 751,999 |   |
| Unrealized gain on derivative instruments                                                       |   |              | 4,550      |   |              |   | 25,459 |   |
| Power contract acquisition adjustment gain                                                      |   |              | 731,883    |   |              |   | 865,020 |   |
| Other                                                                                           |   |              | 111,347    |   |              |   | 90,206 |   |
|     Total other long-term and regulatory assets                                  |   |              | 1,957,738  |   |              |   | 2,119,018 |   |
| Total assets                                                                                    |   | $                 | 11,894,122 |   |              | $      | 11,900,140 |   |

|                                                                               |   | September 30,2010 |       |   | December 31,2009 |   |
|------------------------------------------------------------------------------------|--------|-------------------|------------|--------|------------------|--------|
| Capitalization:                                                                    |   |              |       |   |             |   |
| Common shareholder’s equity:                                                 |   |              |       |   |             |   |
| Common stock $0.01 par value, 1,000 shares authorized, 200 shares outstanding      |   | $                 | --         |   |             | $      | -- |   |
| Additional paid-in capital                                                         |   |              | 3,308,957  |   |             |   | 3,308,957 |   |
| Earnings (deficit) reinvested in the business                                      |   |              | (65,609    | )      |             |   | 91,024 |   |
| Accumulated other comprehensive income (loss) – net of tax                   |   |              | (19,807    | )      |             |   | 23,487 |   |
|         Total common shareholder’s equity |   |              | 3,223,541  |   |             |   | 3,423,468 |   |
| Long-term debt:                                                                    |   |              |       |   |             |   |   |   |
| PSE first mortgage bonds and senior notes                                          |   |              | 2,953,860  |   |             |   | 2,638,860 |   |
| PSE junior subordinated notes                                                      |   |              | 250,000    |   |             |   | 250,000 |   |
| Puget Energy long-term debt                                                        |   |              | 1,161,508  |   |             |   | 1,151,838 |   |
|         Total long-term debt                         |   |              | 4,365,368  |   |             |   | 4,040,698 |   |
|         Total capitalization                    |   |              | 7,588,909  |   |             |   | 7,464,166 |   |
| Current liabilities:                                                               |   |              |       |   |             |   |   |   |
| Accounts payable                                                                   |   |              | 303,701    |   |             |   | 321,287 |   |
| Short-term debt                                                                    |   |              | 77,000     |   |             |   | 105,000 |   |
| Current maturities of long-term debt                                               |   |              | 260,000    |   |             |   | 232,000 |   |
| Accrued expenses:                                                                  |   |              |       |   |             |   |   |   |
| Purchased gas adjustment liability                                                 |   |              | --         |   |             |   | 49,587 |   |
| Taxes                                                                              |   |              | 57,462     |   |             |   | 77,302 |   |
| Salaries and wages                                                                 |   |              | 29,622     |   |             |   | 30,654 |   |
| Interest                                                                           |   |              | 55,340     |   |             |   | 52,540 |   |
| Unrealized loss on derivative instruments                                          |   |              | 312,225    |   |             |   | 168,783 |   |
| Power contract acquisition adjustment loss                                         |   |              | 72,816     |   |             |   | 94,223 |   |
| Other                                                                              |   |              | 124,811    |   |             |   | 194,786 |   |
|         Total current liabilities                    |   |              | 1,292,977  |   |             |   | 1,326,162 |   |
| Long-term and regulatory liabilities:                                              |   |              |       |   |             |   |   |   |
| Deferred income taxes                                                              |   |              | 1,074,626  |   |             |   | 1,147,667 |   |
| Unrealized loss on derivative instruments                                          |   |              | 264,436    |   |             |   | 89,717 |   |
| Regulatory liabilities                                                             |   |              | 306,878    |   |             |   | 261,990 |   |
| Regulatory liabilities related to power contracts                                  |   |              | 905,743    |   |             |   | 1,034,192 |   |
| Power contract acquisition adjustment loss                                         |   |              | 65,449     |   |             |   | 117,272 |   |
| Other deferred credits                                                             |   |              | 395,104    |   |             |   | 458,974 |   |
|         Total long-term and regulatory liabilities   |   |              | 3,012,236  |   |             |   | 3,109,812 |   |
| Commitments and contingencies                                                      |   |              |       |   |             |   |   |   |
| Total capitalization and liabilities                                               |   | $                 | 11,894,122 |   |             | $      | 11,900,140 |   |

PUGET ENERGY, INC.

|                                                                                                      |   | Successor                          |     |   | Predecessor                               |   |
|-----------------------------------------------------------------------------------------------------------|--------|------------------------------------|----------|--------|-------------------------------------------|--------|
|                                                                                                      |   | Nine Months EndedSeptember 30,2010 |     |   | February 6, 2009 –September 30,2009 |   |   | January 1, 2009 – February 5, 2009 |   |
| Operating activities:                                                                                     |   |                               |     |   |                                      |   |   |   |   |
| Net income (loss)                                                                                         |   | $                                  | (53,427  | )      |                                      | $      | 120,137 |   |   | $ | 12,756 |   |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities:                  |   |                               |     |   |                                      |   |   |   |   |   |   |   |
| Depreciation                                                                                              |   |                               | 217,765  |   |                                      |   | 177,269 |   |   |   | 21,773 |   |
| Amortization                                                                                              |   |                               | 53,011   |   |                                      |   | 43,113 |   |   |   | 4,969 |   |
| Conservation amortization                                                                                 |   |                               | 60,874   |   |                                      |   | 39,803 |   |   |   | 7,592 |   |
| Deferred income taxes and tax credits, net                                                                |   |                               | (78,075  | )      |                                      |   | 203,757 |   |   |   | (512 | ) |
| Amortization of gas pipeline capacity assignment                                                          |   |                               | (6,474   | )      |                                      |   | (6,236 | ) |   |   | (791 | ) |
|     Carrying value adjustment related to California wholesale energy sale regulatory asset |   |                               | 17,763   |   |                                      |   | -- |   |   |   | -- |   |
| Non cash return on regulatory assets                                                                      |   |                               | (15,122  | )      |                                      |   | (18,431 | ) |   |   | (2,185 | ) |
| Net unrealized loss (gain) on derivative instruments                                                      |   |                               | 109,183  |   |                                      |   | (125,166 | ) |   |   | 3,867 |   |
| Power cost adjustment mechanism                                                                           |   |                               | (960     | )      |                                      |   | -- |   |   |   | (7 | ) |
| Deferred regulatory costs for generation facilities                                                       |   |                               | (3,169   | )      |                                      |   | 744 |   |   |   | (2,058 | ) |
| Renewable energy credit payments received                                                                 |   |                               | 33,296   |   |                                      |   | 22,090 |   |   |   | 942 |   |
| Pension funding                                                                                           |   |                               | (12,000  | )      |                                      |   | (18,000 | ) |   |   | -- |   |
| Change in residential exchange program                                                                    |   |                               | 1,077    |   |                                      |   | (634 | ) |   |   | 1,927 |   |
| Derivative contracts classified as financing activities due to merger                                     |   |                               | 279,073  |   |                                      |   | 349,695 |   |   |   | -- |   |
| Other                                                                                                     |   |                               | 10,061   |   |                                      |   | (30,065 | ) |   |   | 4,295 |   |
| Change in certain current assets and liabilities:                                                         |   |                               |     |   |                                      |   |   |   |   |   |   |   |
| Accounts receivable and unbilled revenue                                                                  |   |                               | 201,486  |   |                                      |   | 309,376 |   |   |   | (31,332 | ) |
| Materials and supplies                                                                                    |   |                               | (20,675  | )      |                                      |   | 1,522 |   |   |   | (3,388 | ) |
| Fuel and gas inventory                                                                                    |   |                               | (11,560  | )      |                                      |   | (14,681 | ) |   |   | 7,605 |   |
| Income taxes                                                                                              |   |                               | 61,990   |   |                                      |   | (163,246 | ) |   |   | 18,277 |   |
| Prepayments and other                                                                                     |   |                               | (22,127  | )      |                                      |   | (12,432 | ) |   |   | (3,295 | ) |
| Purchased gas adjustment                                                                                  |   |                               | (53,133  | )      |                                      |   | 59,748 |   |   |   | 1,711 |   |
| Accounts payable                                                                                          |   |                               | 7,958    |   |                                      |   | (181,082 | ) |   |   | (40,203 | ) |
| Taxes payable                                                                                             |   |                               | (19,840  | )      |                                      |   | 9,468 |   |   |   | (3,340 | ) |
| Accrued expenses and other                                                                                |   |                               | 10,881   |   |                                      |   | (39,599 | ) |   |   | 59,172 |   |
| Net cash provided by operating activities                                                                 |   |                               | 767,856  |   |                                      |   | 727,150 |   |   |   | 57,775 |   |
| Investing activities:                                                                                     |   |                               |     |   |                                      |   |   |   |   |   |   |   |
| Construction expenditures – excluding equity AFUDC                                                  |   |                               | (667,597 | )      |                                      |   | (537,027 | ) |   |   | (49,531 | ) |
| Energy efficiency expenditures                                                                            |   |                               | (67,165  | )      |                                      |   | (55,270 | ) |   |   | (4,918 | ) |
| Treasury grant payment received                                                                           |   |                               | 28,675   |   |                                      |   | -- |   |   |   | -- |   |
| Restricted cash                                                                                           |   |                               | 14,231   |   |                                      |   | 816 |   |   |   | (10 | ) |
| Other                                                                                                     |   |                               | 2,268    |   |                                      |   | 14,035 |   |   |   | 959 |   |
| Net cash used in investing activities                                                                     |   |                               | (689,588 | )      |                                      |   | (577,446 | ) |   |   | (53,500 | ) |
| Financing activities:                                                                                     |   |                               |     |   |                                      |   |   |   |   |   |   |   |
| Change in short-term debt and leases, net                                                                 |   |                               | (28,059  | )      |                                      |   | (61,191 | ) |   |   | (151,800 | ) |
| Dividends paid                                                                                            |   |                               | (103,206 | )      |                                      |   | (120,878 | ) |   |   | -- |   |
| Long-term notes and bonds issued                                                                          |   |                               | 575,000  |   |                                      |   | 400,211 |   |   |   | 250,000 |   |
| Redemption of preferred stock                                                                             |   |                               | --       |   |                                      |   | -- |   |   |   | (1,889 | ) |
| Redemption of bonds and notes                                                                             |   |                               | (232,000 | )      |                                      |   | (150,000 | ) |   |   | -- |   |
| Derivative contracts classified as financing activities due to merger                                     |   |                               | (279,073 | )      |                                      |   | (349,695 | ) |   |   | -- |   |
| Issuance cost of bonds and other                                                                          |   |                               | (3,141   | )      |                                      |   | (16,577 | ) |   |   | 7,133 |   |
| Net cash provided by (used in) financing activities                                                       |   |                               | (70,479  | )      |                                      |   | (298,130 | ) |   |   | 103,444 |   |
| Net increase (decrease) in cash and cash equivalents                                                      |   |                               | 7,789    |   |                                      |   | (148,426 | ) |   |   | 107,719 |   |
| Cash and cash equivalents at beginning of period                                                          |   |                               | 78,527   |   |                                      |   | 231,963 |   |   |   | 38,526 |   |
| Cash and cash equivalents at end of period                                                                |   | $                                  | 86,316   |   |                                      | $      | 83,537 |   |   | $ | 146,245 |   |
| Supplemental cash flow information:                                                                       |   |                               |     |   |                                      |   |   |   |   |   |   |   |
| Cash payments for interest (net of capitalized interest)                                                  |   | $                                  | 208,282  |   |                                      | $      | 177,839 |   |   | $ | 1,239 |   |
| Cash payments (refunds) for income taxes                                                                  |   |                               | (20,622  | )      |                                      |   | 129 |   |   |   | -- |   |

PUGET SOUND ENERGY, INC.

|                                                 |   | Three Months EndedSeptember 30, |    |   | Nine Months EndedSeptember 30, |   |
|------------------------------------------------------|--------|---------------------------------|---------|--------|--------------------------------|--------|
|                                                 |   | 2010                            |    |   | 2009                           |   |   | 2010 |   |   | 2009 |   |
| Operating revenue:                                   |   |                            |    |   |                           |   |   |   |   |   |   |   |
| Electric                                             |   | $                               | 489,608 |   |                           | $      | 449,658 |   |   | $ | 1,507,549 |   |   | $ | 1,506,642 |   |
| Gas                                                  |   |                            | 132,571 |   |                           |   | 142,128 |   |   |   | 664,423 |   |   |   | 875,485 |   |
| Other                                                |   |                            | 650     |   |                           |   | 840 |   |   |   | 2,350 |   |   |   | 4,333 |   |
| Total operating revenue                              |   |                            | 622,829 |   |                           |   | 592,626 |   |   |   | 2,174,322 |   |   |   | 2,386,460 |   |
| Operating expenses:                                  |   |                            |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Energy costs:                                        |   |                            |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Purchased electricity                                |   |                            | 127,936 |   |                           |   | 160,867 |   |   |   | 557,221 |   |   |   | 610,034 |   |
| Electric generation fuel                             |   |                            | 96,712  |   |                           |   | 77,164 |   |   |   | 194,649 |   |   |   | 143,124 |   |
| Residential exchange                                 |   |                            | (15,173 | )      |                           |   | (19,271 | ) |   |   | (54,510 | ) |   |   | (72,604 | ) |
| Purchased gas                                        |   |                            | 60,284  |   |                           |   | 72,463 |   |   |   | 343,779 |   |   |   | 524,666 |   |
| Net unrealized (gain) loss on derivative instruments |   |                            | 78,559  |   |                           |   | (27,144 | ) |   |   | 200,702 |   |   |   | (34,734 | ) |
| Utility operations and maintenance                   |   |                            | 117,155 |   |                           |   | 116,129 |   |   |   | 355,569 |   |   |   | 353,129 |   |
| Non-utility expense and other                        |   |                            | 3,188   |   |                           |   | 2,282 |   |   |   | 7,742 |   |   |   | 5,677 |   |
| Merger and related costs                             |   |                            | --      |   |                           |   | -- |   |   |   | -- |   |   |   | 23,908 |   |
| Depreciation                                         |   |                            | 73,111  |   |                           |   | 66,978 |   |   |   | 217,765 |   |   |   | 199,164 |   |
| Amortization                                         |   |                            | 18,355  |   |                           |   | 16,522 |   |   |   | 53,011 |   |   |   | 48,082 |   |
| Conservation amortization                            |   |                            | 20,392  |   |                           |   | 12,836 |   |   |   | 60,874 |   |   |   | 47,395 |   |
| Taxes other than income taxes                        |   |                            | 58,903  |   |                           |   | 57,785 |   |   |   | 210,304 |   |   |   | 225,824 |   |
| Total operating expenses                             |   |                            | 639,422 |   |                           |   | 536,611 |   |   |   | 2,147,106 |   |   |   | 2,073,665 |   |
| Operating income (loss)                              |   |                            | (16,593 | )      |                           |   | 56,015 |   |   |   | 27,216 |   |   |   | 312,795 |   |
| Other income (deductions):                           |   |                            |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Other income                                         |   |                            | 11,033  |   |                           |   | 13,272 |   |   |   | 32,846 |   |   |   | 35,591 |   |
| Other expense                                        |   |                            | (1,074  | )      |                           |   | (1,299 | ) |   |   | (4,147 | ) |   |   | (5,432 | ) |
| Interest charges:                                    |   |                            |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| AFUDC                                                |   |                            | 3,924   |   |                           |   | 2,661 |   |   |   | 9,832 |   |   |   | 6,560 |   |
| Interest expense                                     |   |                            | (61,620 | )      |                           |   | (52,900 | ) |   |   | (178,323 | ) |   |   | (155,904 | ) |
| Interest expense on Puget Energy note                |   |                            | (42     | )      |                           |   | (66 | ) |   |   | (152 | ) |   |   | (207 | ) |
| Income (loss) before income taxes                    |   |                            | (64,372 | )      |                           |   | 17,683 |   |   |   | (112,728 | ) |   |   | 193,403 |   |
| Income tax (benefit) expense                         |   |                            | (34,813 | )      |                           |   | 9,841 |   |   |   | (45,402 | ) |   |   | 56,806 |   |
| Net income (loss)                                    |   | $                               | (29,559 | )      |                           | $      | 7,842 |   |   | $ | (67,326 | ) |   | $ | 136,597 |   |

PUGET SOUND ENERGY, INC.

|                                                                                                                                                                 |   | Three Months Ended September 30, |    |   | Nine Months EndedSeptember 30, |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|---------|--------|--------------------------------|--------|
|                                                                                                                                                                 |   | 2010                             |    |   | 2009                           |   |   | 2010 |   |   | 2009 |   |
| Net income (loss)                                                                                                                                                    |   | $                                | (29,559 | )      |                           | $      | 7,842 |   |   | $ | (67,326 | ) |   | $ | 136,597 |   |
| Other comprehensive income:                                                                                                                                          |   |                             |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Net unrealized gain from pension and postretirement plans, net of tax of $596, $516, $2,189 and $284, respectively                                                   |   |                             | 1,107   |   |                           |   | 958 |   |   |   | 4,018 |   |   |   | 527 |   |
| Net unrealized gain (loss) on energy derivative instruments during the period, net of tax of $0, $167, $244 and $(33,542), respectively                              |   |                             | --      |   |                           |   | 310 |   |   |   | 453 |   |   |   | (62,293 | ) |
| Reclassification of net unrealized loss on energy derivative instruments settled during the period, net of tax of $6,598, $22,516, $20,414 and $34,454, respectively |   |                             | 12,253  |   |                           |   | 41,815 |   |   |   | 37,911 |   |   |   | 63,985 |   |
| Amortization of financing cash flow hedge contracts to earnings, net of tax of $43, $43, $128 and $128, respectively                                                 |   |                             | 79      |   |                           |   | 79 |   |   |   | 238 |   |   |   | 238 |   |
| Other comprehensive income                                                                                                                                           |   |                             | 13,439  |   |                           |   | 43,162 |   |   |   | 42,620 |   |   |   | 2,457 |   |
| Comprehensive income (loss)                                                                                                                                          |   | $                                | (16,120 | )      |                           | $      | 51,004 |   |   | $ | (24,706 | ) |   | $ | 139,054 |   |

PUGET SOUND ENERGY, INC.

|                                                                                                              |   | September 30,2010 |       |   | December 31, 2009 |   |
|-------------------------------------------------------------------------------------------------------------------|--------|-------------------|------------|--------|-------------------|--------|
| Utility plant (at original cost, including construction work in progress of $601,366 and $358,732, respectively): |   |              |       |   |              |   |
| Electric plant                                                                                                    |   | $                 | 7,464,484  |   |              | $      | 7,046,379 |   |
| Gas plant                                                                                                         |   |              | 2,730,448  |   |              |   | 2,637,003 |   |
| Common plant                                                                                                      |   |              | 397,209    |   |              |   | 539,296 |   |
| Less:  Accumulated depreciation and amortization                                                        |   |              | (3,476,967 | )      |              |   | (3,453,165 | ) |
| Net utility plant                                                                                                 |   |              | 7,115,174  |   |              |   | 6,769,513 |   |
| Other property and investments:                                                                                   |   |              |       |   |              |   |   |   |
| Investment in Bonneville Exchange Power contract                                                                  |   |              | 23,805     |   |              |   | 26,450 |   |
| Other property and investments                                                                                    |   |              | 113,038    |   |              |   | 116,267 |   |
| Total other property and investments                                                                              |   |              | 136,843    |   |              |   | 142,717 |   |
| Current assets:                                                                                                   |   |              |       |   |              |   |   |   |
| Cash and cash equivalents                                                                                         |   |              | 86,278     |   |              |   | 78,407 |   |
| Restricted cash                                                                                                   |   |              | 5,613      |   |              |   | 19,844 |   |
| Accounts receivable, net of allowance for doubtful accounts of $8,057 and $8,094, respectively                    |   |              | 230,835    |   |              |   | 320,065 |   |
| Unbilled revenue                                                                                                  |   |              | 96,772     |   |              |   | 208,948 |   |
| Purchased gas adjustment receivable                                                                               |   |              | 3,546      |   |              |   | -- |   |
| Materials and supplies, at average cost                                                                           |   |              | 86,642     |   |              |   | 64,604 |   |
| Fuel and gas inventory, at average cost                                                                           |   |              | 104,218    |   |              |   | 95,813 |   |
| Unrealized gain on derivative instruments                                                                         |   |              | 8,082      |   |              |   | 14,948 |   |
| Income taxes                                                                                                      |   |              | 58,908     |   |              |   | 99,948 |   |
| Prepaid expenses and other                                                                                        |   |              | 34,194     |   |              |   | 12,067 |   |
| Deferred income taxes                                                                                             |   |              | 93,293     |   |              |   | 38,781 |   |
| Total current assets                                                                                              |   |              | 808,381    |   |              |   | 953,425 |   |
| Other long-term and regulatory assets:                                                                            |   |              |       |   |              |   |   |   |
| Regulatory assets for deferred income taxes                                                                       |   |              | 75,942     |   |              |   | 89,303 |   |
| Regulatory asset for PURPA buyout costs                                                                           |   |              | 50,012     |   |              |   | 78,162 |   |
| Power cost adjustment mechanism                                                                                   |   |              | 9,489      |   |              |   | 8,529 |   |
| Other regulatory assets                                                                                           |   |              | 781,643    |   |              |   | 665,272 |   |
| Unrealized gain on derivative instruments                                                                         |   |              | 4,550      |   |              |   | 4,605 |   |
| Other                                                                                                             |   |              | 125,684    |   |              |   | 105,045 |   |
| Total other long-term and regulatory assets                                                                       |   |              | 1,047,320  |   |              |   | 950,916 |   |
| Total assets                                                                                                      |   | $                 | 9,107,718  |   |              | $      | 8,816,571 |   |

|                                                                                              |   | September 30,2010 |      |   | December 31, 2009 |   |
|---------------------------------------------------------------------------------------------------|--------|-------------------|-----------|--------|-------------------|--------|
| Capitalization:                                                                                   |   |              |      |   |              |   |
| Common shareholder’s equity:                                                                |   |              |      |   |              |   |
| Common stock $0.01 par value – 150,000,000 shares authorized, 85,903,791 shares outstanding |   | $                 | 859       |   |              | $      | 859 |   |
| Additional paid-in capital                                                                        |   |              | 2,959,205 |   |              |   | 2,959,205 |   |
| Earnings reinvested in the business                                                               |   |              | 99,718    |   |              |   | 333,128 |   |
| Accumulated other comprehensive loss – net of tax                                           |   |              | (167,500  | )      |              |   | (210,120 | ) |
| Total common shareholder’s equity                                                           |   |              | 2,892,282 |   |              |   | 3,083,072 |   |
| Long-term debt:                                                                                   |   |              |      |   |              |   |   |   |
| First mortgage bonds and senior notes                                                             |   |              | 2,953,860 |   |              |   | 2,638,860 |   |
| Junior subordinated notes                                                                         |   |              | 250,000   |   |              |   | 250,000 |   |
| Total long-term debt                                                                              |   |              | 3,203,860 |   |              |   | 2,888,860 |   |
| Total capitalization                                                                              |   |              | 6,096,142 |   |              |   | 5,971,932 |   |
| Current liabilities:                                                                              |   |              |      |   |              |   |   |   |
| Accounts payable                                                                                  |   |              | 305,074   |   |              |   | 321,287 |   |
| Short-term debt                                                                                   |   |              | 77,000    |   |              |   | 105,000 |   |
| Short-term note owed to Puget Energy                                                              |   |              | 22,898    |   |              |   | 22,898 |   |
| Current maturities of long-term debt                                                              |   |              | 260,000   |   |              |   | 232,000 |   |
| Accrued expenses:                                                                                 |   |              |      |   |              |   |   |   |
| Purchased gas adjustment liability                                                                |   |              | --        |   |              |   | 49,587 |   |
| Taxes                                                                                             |   |              | 57,462    |   |              |   | 77,302 |   |
| Salaries and wages                                                                                |   |              | 29,622    |   |              |   | 30,654 |   |
| Interest                                                                                          |   |              | 52,471    |   |              |   | 47,154 |   |
| Unrealized loss on derivative instruments                                                         |   |              | 281,784   |   |              |   | 137,530 |   |
| Other                                                                                             |   |              | 54,155    |   |              |   | 104,148 |   |
| Total current liabilities                                                                         |   |              | 1,140,466 |   |              |   | 1,127,560 |   |
| Long-term and regulatory liabilities:                                                             |   |              |      |   |              |   |   |   |
| Deferred income taxes                                                                             |   |              | 994,576   |   |              |   | 996,576 |   |
| Unrealized loss on derivative instruments                                                         |   |              | 216,964   |   |              |   | 89,717 |   |
| Regulatory liabilities                                                                            |   |              | 297,183   |   |              |   | 250,586 |   |
| Other deferred credits                                                                            |   |              | 362,387   |   |              |   | 380,200 |   |
| Total long-term and regulatory liabilities                                                        |   |              | 1,871,110 |   |              |   | 1,717,079 |   |
| Commitments and contingencies                                                                     |   |              |      |   |              |   |   |   |
| Total capitalization and liabilities                                                              |   | $                 | 9,107,718 |   |              | $      | 8,816,571 |   |

PUGET SOUND ENERGY, INC.

|                                                                                     |   | Nine Months EndedSeptember 30, |     |
|------------------------------------------------------------------------------------------|--------|--------------------------------|----------|
|                                                                                     |   | 2010                           |     |   | 2009 |   |
| Operating activities:                                                                    |   |                           |     |   |   |   |
| Net income (loss)                                                                        |   | $                              | (67,326  | ) |   | $ | 136,597 |   |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |   |                           |     |   |   |   |   |   |
| Depreciation                                                                             |   |                           | 217,765  |   |   |   | 199,164 |   |
| Amortization                                                                             |   |                           | 53,011   |   |   |   | 48,082 |   |
| Conservation amortization                                                                |   |                           | 60,874   |   |   |   | 47,395 |   |
| Deferred income taxes and tax credits, net                                               |   |                           | (66,126  | ) |   |   | 174,580 |   |
| Amortization of gas pipeline capacity assignment                                         |   |                           | (6,474   | ) |   |   | (7,027 | ) |
| Carrying value adjustment related to California wholesale energy sale regulatory asset   |   |                           | 17,763   |   |   |   | -- |   |
| Non cash return on regulatory assets                                                     |   |                           | (15,122  | ) |   |   | (20,515 | ) |
| Net unrealized loss (gain) on derivative instruments                                     |   |                           | 200,702  |   |   |   | (34,734 | ) |
| Power cost adjustment mechanism                                                          |   |                           | (960     | ) |   |   | -- |   |
| Deferred regulatory costs for generation facilities                                      |   |                           | (3,169   | ) |   |   | (1,414 | ) |
| Renewable energy credit payments received                                                |   |                           | 33,296   |   |   |   | 23,032 |   |
| Pension funding                                                                          |   |                           | (12,000  | ) |   |   | (18,000 | ) |
| Change in residential exchange program                                                   |   |                           | 1,077    |   |   |   | 1,292 |   |
| Other                                                                                    |   |                           | 3,768    |   |   |   | (35,073 | ) |
| Change in certain current assets and liabilities:                                        |   |                           |     |   |   |   |   |   |
| Accounts receivable and unbilled revenue                                                 |   |                           | 201,407  |   |   |   | 282,184 |   |
| Materials and supplies                                                                   |   |                           | (22,038  | ) |   |   | (3,926 | ) |
| Fuel and gas inventory                                                                   |   |                           | (8,405   | ) |   |   | 13,135 |   |
| Income taxes                                                                             |   |                           | 41,040   |   |   |   | (117,243 | ) |
| Prepayments and other                                                                    |   |                           | (22,127  | ) |   |   | (15,824 | ) |
| Purchased gas adjustment                                                                 |   |                           | (53,133  | ) |   |   | 61,459 |   |
| Accounts payable                                                                         |   |                           | 9,330    |   |   |   | (131,274 | ) |
| Taxes payable                                                                            |   |                           | (19,840  | ) |   |   | (10,099 | ) |
| Accrued expenses and other                                                               |   |                           | 8,430    |   |   |   | 2,341 |   |
| Net cash provided by operating activities                                                |   |                           | 551,743  |   |   |   | 594,132 |   |
| Investing activities:                                                                    |   |                           |     |   |   |   |   |   |
| Construction expenditures – excluding equity AFUDC                                 |   |                           | (667,597 | ) |   |   | (586,558 | ) |
| Energy efficiency expenditures                                                           |   |                           | (67,165  | ) |   |   | (60,188 | ) |
| Treasury grant payment received                                                          |   |                           | 28,675   |   |   |   | -- |   |
| Restricted cash                                                                          |   |                           | 14,231   |   |   |   | 806 |   |
| Other                                                                                    |   |                           | 2,268    |   |   |   | 14,994 |   |
| Net cash used in investing activities                                                    |   |                           | (689,588 | ) |   |   | (630,946 | ) |
| Financing activities:                                                                    |   |                           |     |   |   |   |   |   |
| Change in short-term debt and leases, net                                                |   |                           | (28,059  | ) |   |   | (212,991 | ) |
| Dividends paid                                                                           |   |                           | (166,084 | ) |   |   | (167,141 | ) |
| Long-term notes and bonds issued                                                         |   |                           | 575,000  |   |   |   | 600,000 |   |
| Loan payment to Puget Energy                                                             |   |                           | --       |   |   |   | (3,156 | ) |
| Redemption of preferred stock                                                            |   |                           | --       |   |   |   | (1,889 | ) |
| Redemption of bonds and notes                                                            |   |                           | (232,000 | ) |   |   | (150,000 | ) |
| Investment from parent                                                                   |   |                           | --       |   |   |   | 25,960 |   |
| Issuance cost of bonds and other                                                         |   |                           | (3,141   | ) |   |   | (8,933 | ) |
| Net cash provided by financing activities                                                |   |                           | 145,716  |   |   |   | 81,850 |   |
| Net increase in cash and cash equivalents                                                |   |                           | 7,871    |   |   |   | 45,036 |   |
| Cash and cash equivalents at beginning of period                                         |   |                           | 78,407   |   |   |   | 38,470 |   |
| Cash and cash equivalents at end of period                                               |   | $                              | 86,278   |   |   | $ | 83,506 |   |
| Supplemental cash flow information:                                                      |   |                           |     |   |   |   |   |   |
| Cash payments for interest (net of capitalized interest)                                 |   | $                              | 147,388  |   |   | $ | 132,277 |   |
| Cash payments (refunds) for income taxes                                                 |   |                           | (19,087  | ) |   |   | 129 |   |

COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

| (1)   | Summary of Consolidation Policy |
|-----------------|---------------------------------|

| Puget Energy(Dollars in Thousands)                          |   | September 30, 2010 |    |   | December 31,2009 |   |
|-------------------------------------------------------------|--------|--------------------|---------|--------|------------------|--------|
| Net unrealized loss on energy derivatives                   |   | $                  | (3,453  | )      |             | $      | (7,078 | ) |
| Net unrealized loss on interest rate swaps                  |   |               | (50,643 | )      |             |   | (3,893 | ) |
| Net unrealized gain and prior service cost on pension plans |   |               | 34,289  |   |             |   | 34,458 |   |
| Total Puget Energy, net of tax                              |   | $                  | (19,807 | )      |             | $      | 23,487 |   |

| Puget Sound Energy(Dollars in Thousands)                    |   | September 30,2010 |     |   | December 31,2009 |   |
|-------------------------------------------------------------|--------|-------------------|----------|--------|------------------|--------|
| Net unrealized loss on energy derivatives                   |   | $                 | (44,794  | )      |             | $      | (83,158 | ) |
| Settlement of cash flow hedge contracts                     |   |              | (7,336   | )      |             |   | (7,574 | ) |
| Net unrealized loss and prior service cost on pension plans |   |              | (115,370 | )      |             |   | (119,388 | ) |
| Total PSE, net of tax                                       |   | $                 | (167,500 | )      |             | $      | (210,120 | ) |

| (2)   | New Accounting Pronouncements |
|-----------------|-------------------------------|

| (3)   | Accounting for Derivative Instruments and Hedging Activities |
|-----------------|--------------------------------------------------------------|

| Derivatives Designated as Hedging Instruments |   |
|-----------------------------------------------|--------|
| Puget Energy                                  |   | September 30, 2010 |   |   | December 31, 2009 |   |
| (Dollars in Thousands)                        |   | Assets 1 |   |   | Liabilities 1 |   |   | Assets 1 |   |   | Liabilities 1 |   |
| Interest rate swaps:                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Current                                       |   | $ | -- |   |   | $ | 30,441 |   |   | $ | -- |   |   | $ | 26,844 |   |
| Long-term                                     |   |   | -- |   |   |   | 47,472 |   |   |   | 20,854 |   |   |   | -- |   |
| Total derivatives                             |   | $ | -- |   |   | $ | 77,913 |   |   | $ | 20,854 |   |   | $ | 26,844 |   |

| Derivatives Not Designated as Hedging Instruments |   |
|---------------------------------------------------|--------|
| Puget Energy                                      |   | September 30, 2010 |   |   | December 31, 2009 |   |
| (Dollars in Thousands)                            |   | Assets 1 |   |   | Liabilities 1 |   |   | Assets 1 |   |   | Liabilities 1 |   |
| Electric portfolio:                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Current                                           |   | $ | 3,504 |   |   | $ | 146,407 |   |   | $ | 4,137 |   |   | $ | 79,732 |   |
| Long-term                                         |   |   | 1,598 |   |   |   | 140,923 |   |   |   | 1,003 |   |   |   | 70,367 |   |
| Gas portfolio: 2                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current                                           |   |   | 4,578 |   |   |   | 135,377 |   |   |   | 10,811 |   |   |   | 62,207 |   |
| Long-term                                         |   |   | 2,952 |   |   |   | 76,041 |   |   |   | 3,602 |   |   |   | 19,350 |   |
| Total derivatives                                 |   | $ | 12,632 |   |   | $ | 498,748 |   |   | $ | 19,553 |   |   | $ | 231,656 |   |

| 1 | Balance sheet location: Unrealized (gain) loss on derivative instruments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2 | Puget Energy had a derivative liability and an offsetting regulatory asset of $203.9 million at September 30, 2010 and $67.1 million at December 31, 2009 related to financial contracts used to economically hedge the cost of physical gas purchased to serve natural gas customers.  All fair value adjustments on derivatives relating to the natural gas business have been reclassified to a deferred account in accordance with ASC 980, “Regulated Operations” (ASC 980), due to the Purchased Gas Adjustment (PGA) mechanism.  All increases and decreases in the cost of natural gas supply are passed on to customers with the PGA mechanism and the gains and losses on the hedges in future periods will be recorded as gas costs. |

| Derivatives Not Designated as Hedging Instruments |   |
|---------------------------------------------------|--------|
| Puget Sound Energy                                |   | September 30, 2010 |   |   | December 31, 2009 |   |
| (Dollars in Thousands)                            |   | Assets 1 |   |   | Liabilities 1 |   |   | Assets 1 |   |   | Liabilities 1 |   |
| Electric portfolio:                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Current                                           |   | $ | 3,504 |   |   | $ | 146,407 |   |   | $ | 4,137 |   |   | $ | 75,323 |   |
| Long-term                                         |   |   | 1,598 |   |   |   | 140,923 |   |   |   | 1,003 |   |   |   | 70,367 |   |
| Gas portfolio: 2                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current                                           |   |   | 4,578 |   |   |   | 135,377 |   |   |   | 10,811 |   |   |   | 62,207 |   |
| Long-term                                         |   |   | 2,952 |   |   |   | 76,041 |   |   |   | 3,602 |   |   |   | 19,350 |   |
| Total derivatives                                 |   | $ | 12,632 |   |   | $ | 498,748 |   |   | $ | 19,553 |   |   | $ | 227,247 |   |

| 1 | Balance sheet location: Unrealized (gain) loss on derivative instruments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2 | PSE had a derivative liability and an offsetting regulatory asset of $203.9 million at September 30, 2010 and $67.1 million at December 31, 2009 related to financial contracts used to economically hedge the cost of physical gas purchased to serve natural gas customers.  All fair value adjustments on derivatives relating to the natural gas business have been reclassified to a deferred account in accordance with ASC 980 due to the PGA mechanism.  All increases and decreases in the cost of natural gas supply are passed on to customers with the PGA mechanism and the gains and losses on the hedges in future periods will be recorded as gas costs. |

| Puget Energy                                               |   | Three Months EndedSeptember 30, |   |
|------------------------------------------------------------|--------|---------------------------------|--------|
| (Dollars in Thousands)                                     |   | 2010                            |   |   | 2009 |   |
| Gas / Power NPNS                                           |   | $                               | (78    | ) |   | $ | 1,538 |   |
| Gas for power generation                                   |   |                            | 18,232 |   |   |   | (62,219 | ) |
| Power exchange                                             |   |                            | (639   | ) |   |   | (163 | ) |
| Power                                                      |   |                            | 45,760 |   |   |   | (13,987 | ) |
| Total net unrealized (gain) loss on derivative instruments |   | $                               | 63,275 |   |   | $ | (74,831 | ) |

|                                                       |   | Successor                          |    |   | Predecessor                              |   |
|------------------------------------------------------------|--------|------------------------------------|---------|--------|------------------------------------------|--------|
| Puget Energy(Dollars in Thousands)                         |   | Nine Months EndedSeptember 30,2010 |    |   | February 6,2009 –September 30,2009 |   |   | January 1,2009 –February 5,2009 |   |
| Gas / Power NPNS                                           |   | $                                  | (33,662 | )      |                                     | $      | (34,215 | ) |   | $ | -- |   |
| Gas for power generation                                   |   |                               | 67,151  |   |                                     |   | (70,776 | ) |   |   | 3,696 |   |
| Power exchange                                             |   |                               | (2,096  | )      |                                     |   | (1,563 | ) |   |   | (588 | ) |
| Power                                                      |   |                               | 77,790  |   |                                     |   | (30,205 | ) |   |   | 759 |   |
| Credit reserve 1                                           |   |                               | --      |   |                                     |   | 11,593 |   |   |   | -- |   |
| Total net unrealized (gain) loss on derivative instruments |   | $                                  | 109,183 |   |                                     | $      | (125,166 | ) |   | $ | 3,867 |   |

| 1 | Beginning in the second quarter 2009, the credit reserve was incorporated as a component of the individual derivative value and not recorded separately. |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| Puget Sound Energy                                         |   | Three Months EndedSeptember 30, |   |   | Nine Months EndedSeptember 30, |   |
|------------------------------------------------------------|--------|---------------------------------|--------|--------|--------------------------------|--------|
| (Dollars in Thousands)                                     |   | 2010                            |   |   | 2009                           |   |   | 2010 |   |   | 2009 |   |
| Gas for power generation                                   |   | $                               | 31,801 |   |                           | $      | (21,743 | ) |   | $ | 109,523 |   |   | $ | (30,057 | ) |
| Power exchange                                             |   |                            | (639   | )      |                           |   | (163 | ) |   |   | (2,096 | ) |   |   | (2,138 | ) |
| Power                                                      |   |                            | 47,397 |   |                           |   | (5,238 | ) |   |   | 93,275 |   |   |   | (2,621 | ) |
| Credit reserve 1                                           |   |                            | --     |   |                           |   | -- |   |   |   | -- |   |   |   | 82 |   |
| Total net unrealized (gain) loss on derivative instruments |   | $                               | 78,559 |   |                           | $      | (27,144 | ) |   | $ | 200,702 |   |   | $ | (34,734 | ) |

| 1 | Beginning in the second quarter 2009, the credit reserve was incorporated as a component of the individual derivative value and not recorded separately. |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| Puget Energy(Dollars in Thousands)             |   | Three Months Ended September 30,                                    |    |
|------------------------------------------------|--------|---------------------------------------------------------------------|---------|
| Derivatives in Cash Flow Hedging Relationships |   | Gain (Loss) Recognized in OCI on Derivatives 1(Effective Portion 2) |    | Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion 3) |   | Gain (Loss) Recognized in Income on Derivatives(Ineffective Portion and Amount Excluded from Effectiveness Testing 3) |   |
|                                           |   | 2010                                                                |    |   | 2009 |   | Location |   | 2010 |   |   | 2009 |   | Location |   | 2010 |   |   | 2009 |   |
| Interest rate contracts:                       |   | $                                                                   | (19,761 | ) |   | $ | (21,694 | ) | Interest Expense |   | $ | (8,638 | ) |   | $ | (8,454 | ) |   |   | $ | -- |   |   | $ | -- |   |
| Commodity contracts:Electric derivatives:      |   |                                                                | --      |   |   |   | 30 |   | Electric generation fuel |   |   | (3,285 | ) |   |   | (18,361 | ) | Net unrealized gain on derivative instruments |   |   | -- |   |   |   | -- |   |
| Electric derivatives                           |   |                                                                | --      |   |   |   | -- |   | Purchased electricity |   |   | (361 | ) |   |   | (778 | ) | Net unrealized loss on derivative instruments |   |   | -- |   |   |   | -- |   |
| Total                                          |   | $                                                                   | (19,761 | ) |   | $ | (21,664 | ) |   |   | $ | (12,284 | ) |   | $ | (27,593 | ) |   |   | $ | -- |   |   | $ | -- |   |

| 1 | On July 1, 2009 all electric and gas related cash flow hedge relationships were de-designated.  Subsequent measurements of fair value are recorded through earnings, not OCI. |
|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2 | Changes in OCI are reported in after-tax dollars.                                                                                                                                       |
| 3 | A reclassification of a loss in OCI increases accumulated OCI and decreases earnings.  Amounts reported are in pre-tax dollars.                                               |

| Puget Energy(Dollars in Thousands)        |   | Nine Months Ended September 30, 2010                                 |    |
|------------------------------------------------|--------|----------------------------------------------------------------------|---------|
| Derivatives in Cash Flow Hedging Relationships |   | Gain (Loss) Recognized in OCI on Derivatives 1 (Effective Portion 2) |    | Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion 3) |   | Gain (Loss) Recognized in Income on Derivatives(Ineffective Portion and Amount Excluded from Effectiveness Testing 3) |   |
|                                           |   |                                                                 |    | Location |   |   |   | Location |   |   |   |
| Interest rate contracts:                       |   | $                                                                    | (63,338 | ) | Interest expense |   | $ | (25,520 | ) |   |   | $ | -- |   |
| Commodity contracts:Electric derivatives       |   |                                                                 | --      |   | Electric generation fuel |   |   | (3,407 | ) | Net unrealized gain on derivative instruments |   |   | -- |   |
| Electric derivatives                           |   |                                                                 | --      |   | Purchased electricity |   |   | (2,170 | ) | Net unrealized loss on derivative instruments |   |   | -- |   |
| Total                                          |   | $                                                                    | (63,338 | ) |   |   | $ | (31,097 | ) |   |   | $ | -- |   |

| 1 | On July 1, 2009 all electric and gas related cash flow hedge relationships were de-designated.  Subsequent measurements of fair value are recorded through earnings, not OCI. |
|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2 | Changes in OCI are reported in after-tax dollars.                                                                                                                                       |
| 3 | A reclassification of a loss in OCI increases accumulated OCI and decreases earnings.  Amounts reported are in pre-tax dollars.                                               |

| Puget Energy(Dollars in Thousands)        |   | Successor February 6, 2009 - September 30, 2009                      |    |
|------------------------------------------------|--------|---------------------------------------------------------------------------|---------|
| Derivatives in Cash Flow Hedging Relationships |   | Gain (Loss) Recognized in OCI on Derivatives 1 (Effective Portion 2) |    | Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion 3) |   | Gain (Loss) Recognized in Income on Derivatives(Ineffective Portion and Amount Excluded from Effectiveness Testing 3) |   |
|                                           |   |                                                                      |    | Location |   |   |   | Location |   |   |   |
| Interest rate contracts:                       |   | $                                                                         | (23,203 | ) | Interest expense |   | $ | (20,508 | ) |   |   | $ | -- |   |
| Commodity contracts:Electric derivatives       |   |                                                                      | (19,933 | ) | Electric generation fuel |   |   | (20,005 | ) | Net unrealized loss on derivative instruments |   |   | 325 |   |
| Electric derivatives                           |   |                                                                      | (6,289  | ) | Purchased electricity |   |   | (2,350 | ) | Net unrealized loss on derivative instruments |   |   | (2,897 | ) |
| Total                                          |   | $                                                                         | (49,425 | ) |   |   | $ | (42,863 | ) |   |   | $ | (2,572 | ) |

| 1 | On July 1, 2009 all electric and gas related cash flow hedge relationships were de-designated.  Subsequent measurements of fair value are recorded through earnings, not OCI. |
|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2 | Changes in OCI are reported in after-tax dollars.                                                                                                                                       |
| 3 | A reclassification of a loss in OCI increases accumulated OCI and decreases earnings.  Amounts reported are in pre-tax dollars.                                               |

| Puget Energy(Dollars in Thousands)        |   | Predecessor January 1, 2009 - February 5, 2009                 |    |
|------------------------------------------------|--------|---------------------------------------------------------------------|---------|
| Derivatives in Cash Flow Hedging Relationships |   | Gain(Loss) Recognized in OCI on Derivatives (Effective Portion 1,2) |    | Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion 3) |   | Gain(Loss) Recognized in Income on Derivatives(Ineffective Portion and Amount Excluded from Effectiveness Testing 3) |   |
|                                           |   |                                                                |    | Location |   |   |   | Location |   |   |   |
| Interest rate contracts:                       |   | $                                                                   | --      |   | Interest expense |   | $ | (41 | ) |   |   | $ | -- |   |
| Commodity contracts:Electric derivatives       |   |                                                                | (20,791 | ) | Electric generation fuel |   |   | (5,003 | ) | Net unrealized loss on derivative instruments |   |   | -- |   |
| Electric derivatives                           |   |                                                                | (3,371  | ) | Purchased electricity |   |   | (1,934 | ) | Net unrealized loss on derivative instruments |   |   | (986 | ) |
| Total                                          |   | $                                                                   | (24,162 | ) |   |   | $ | (6,978 | ) |   |   | $ | (986 | ) |

| 1 | Changes in OCI are reported in after-tax dollars.                                                                                                                                                                                      |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2 | The balances associated with the components of accumulated other comprehensive income (loss) on the Predecessor basis were eliminated as a result of push-down accounting effective February 6, 2009, when the Successor period began. |
| 3 | Amounts are reported in pre-tax dollars.                                                                                                                                                                                               |

| Puget Sound Energy(Dollars in Thousands)       |   | Three Months Ended September 30,                                    |   |
|------------------------------------------------|--------|---------------------------------------------------------------------|--------|
| Derivatives in Cash Flow Hedging Relationships |   | Gain (Loss) Recognized in OCI on Derivatives 1(Effective Portion 2) |   | Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion 3) |   | Gain (Loss) Recognized in Income on Derivatives(Ineffective Portion and Amount Excluded from Effectiveness Testing) |   |
|                                           |   | 2010                                                                |   |   | 2009 |   | Location |   | 2010 |   |   | 2009 |   | Location |   | 2010 |   |   | 2009 |   |
| Interest rate contracts:                       |   | $                                                                   | --     |   |   | $ | -- |   | Interest Expense |   | $ | (122 | ) |   | $ | (122 | ) |   |   | $ | -- |   |   | $ | -- |   |
| Commodity contracts:Electric derivatives:      |   |                                                                | --     |   |   |   | 438 |   | Electric generation fuel |   |   | (16,855 | ) |   |   | (58,480 | ) | Net unrealized gain on derivative instruments |   |   | -- |   |   |   | -- |   |
| Electric derivatives                           |   |                                                                | --     |   |   |   | (128 | ) | Purchased electricity |   |   | (1,996 | ) |   |   | (5,851 | ) | Net unrealized loss on derivative instruments |   |   | -- |   |   |   | -- |   |
| Total                                          |   | $                                                                   | --     |   |   | $ | 310 |   |   |   | $ | (18,973 | ) |   | $ | (64,453 | ) |   |   | $ | -- |   |   | $ | -- |   |

| 1 | On July 1, 2009 all electric and gas related cash flow hedge relationships were de-designated.  Subsequent measurements of fair value are recorded through earnings, not OCI. |
|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2 | Changes in OCI are reported in after-tax dollars.                                                                                                                                       |
| 3 | A reclassification of a loss in OCI increases accumulated OCI and decreases earnings.  Amounts reported are in pre-tax dollars.                                               |

| Puget Sound Energy(Dollars in Thousands)       |   | Nine Months Ended September 30,                                     |   |
|------------------------------------------------|--------|---------------------------------------------------------------------|--------|
| Derivatives in Cash Flow Hedging Relationships |   | Gain (Loss) Recognized in OCI on Derivatives 1(Effective Portion 2) |   | Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion 3) |   | Gain (Loss) Recognized in Income on Derivatives(Ineffective Portion and Amount Excluded from Effectiveness Testing 3) |   |
|                                           |   | 2010                                                                |   |   | 2009 |   | Location |   | 2010 |   |   | 2009 |   | Location |   | 2010 |   |   | 2009 |   |
| Interest rate contracts:                       |   | $                                                                   | --     |   |   | $ | -- |   | Interest Expense |   | $ | (366 | ) |   | $ | (366 | ) |   |   | $ | -- |   |   | $ | -- |   |
| Commodity contracts:Electric derivatives:      |   |                                                                | 453    |   |   |   | (50,864 | ) | Electric generation fuel |   |   | (45,081 | ) |   |   | (85,429 | ) | Net unrealized gain on derivative instruments |   |   | -- |   |   |   | -- |   |
| Electric derivatives                           |   |                                                                | --     |   |   |   | (11,429 | ) | Purchased electricity |   |   | (13,244 | ) |   |   | (13,010 | ) | Net unrealized loss on derivative instruments |   |   | -- |   |   |   | (2,749 | ) |
| Total                                          |   | $                                                                   | 453    |   |   | $ | (62,293 | ) |   |   | $ | (58,691 | ) |   | $ | (98,805 | ) |   |   | $ | -- |   |   | $ | (2,749 | ) |

| 1 | On July 1, 2009 all electric and gas related cash flow hedge relationships were de-designated.  Subsequent measurements of fair value are recorded through earnings, not OCI. |
|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2 | Changes in OCI are reported in after-tax dollars.                                                                                                                                       |
| 3 | A reclassification of a loss in OCI increases accumulated OCI and decreases earnings.  Amounts reported are in pre-tax dollars.                                               |

| Puget Energy                                          |                                                 |   | Three Months Ended September 30, |
|-------------------------------------------------------|------------------------------------------------------|--------|----------------------------------|
| (Dollars in Thousands)                                | Location                                             |   | 2010                             |   |   | 2009 |
| Commodity contracts:                                  |                                                 |   |                             |   |   |
| Electric derivatives                                  | Net unrealized gain (loss) on derivative instruments |   | $                                | (63,353 | ) 1 |   | $ | 76,369 | 2 |
|                                                  | Electric generation fuel                             |   |                             | (36,571 | ) |   |   | (45,887 | ) |
|                                                  | Purchased electricity                                |   |                             | (9,329 | ) |   |   | (6,747 | )  |
| Total gain (loss) recognized in income on derivatives |                                                 |   | $                                | (109,253 | ) |   | $ | 23,735 |   |

| 1 | Differs from the amount stated in the statements of income as it does not include $0.1 million of amortization expense related to contracts that were recorded at fair value at the time of the merger and subsequently designated as NPNS.   |
|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2 | Differs from the amount stated in the statements of income as it does not include $(1.5) million of amortization expense related to contracts that were recorded at fair value at the time of the merger and subsequently designated as NPNS. |

| Puget Energy                                          |                                                 |   | Nine MonthsEndedSeptember 30, |     |   | SuccessorFebruary 6, 2009 – September 30, |   |    | Predecessor January 1, 2009 – February 5, |   |
|-------------------------------------------------------|------------------------------------------------------|--------|-------------------------------|----------|--------|-------------------------------------------------|--------|---------|-------------------------------------------------|--------|
| (Dollars in Thousands)                                | Location                                             |   | 2010                          |     |   | 2009                                            |   |    | 2009                                            |   |
| Commodity contracts:                                  |                                                 |   |                          |     |   |                                            |   |    |                                            |   |
| Electric derivatives                                  | Net unrealized gain (loss) on derivative instruments |   | $                             | (142,846 | ) 1    |                                            | $      | 94,192  |  2                                         |   | $ | (2,881 | ) 3 |
|                                                  | Electric generation fuel                             |   |                          | (69,571  | )      |                                            |   | (56,891 | )                                          |   |   | (863 | ) |
|                                                  | Purchased electricity                                |   |                          | (27,529  | )      |                                            |   | (23,042 | )                                               |   |   | (243 | ) |
| Total gain (loss) recognized in income on derivatives |                                                 |   | $                             | (239,946 | )      |                                            | $      | 14,259  |                                            |   | $ | (3,987 | ) |

| 1 | Differs from the amount stated in the statements of income as it does not include $33.7 million of amortization expense related to contracts that were recorded at fair value at the time of the merger and subsequently designated as NPNS.                                                     |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2 | Differs from the amount stated in the statements of income as it does not include $33.5 million of amortization expense related to contracts that were recorded at fair value at the time of the merger and subsequently designated as NPNS and $(2.6) million related to hedge ineffectiveness. |
| 3 | Differs from the amount stated in the statements of income as it does not include $(1.0) million related to hedge ineffectiveness.                                                                                                                                                               |

| Puget Sound Energy                                    |                                                 |   | Three Months EndedSeptember 30, |     |   | Nine Months EndedSeptember 30, |   |
|-------------------------------------------------------|------------------------------------------------------|--------|---------------------------------|----------|--------|--------------------------------|--------|
|  (Dollars in Thousands)                          | Location                                             |   | 2010                            |     |   | 2009                           |   |   | 2010 |   |   | 2009 |   |
| Commodity contracts:                                  |                                                 |   |                            |     |   |                           |   |   |   |   |   |   |   |
| Electric derivatives                                  | Net unrealized gain (loss) on derivative instruments |   | $                               | (78,559  | )      |                           | $      | 27,144 |   |   | $ | (200,702 | ) |   | $ | 37,483 | 1 |
|                                                  | Electric generation fuel                             |   |                            | (36,571  | )      |                           |   | (45,887 | ) |   |   | (69,571 | ) |   |   | (57,962 | ) |
|                                                  | Purchased electricity                                |   |                            | (9,329   | )      |                           |   | (6,747 | ) |   |   | (27,529 | ) |   |   | (7,314 | ) |
| Total gain (loss) recognized in income on derivatives |                                                 |   | $                               | (124,459 | )      |                           | $      | (25,490 | ) |   | $ | (297,802 | ) |   | $ | (27,793 | ) |

| 1 | Differs from the amount stated in the statements of income as it does not include $(2.7) million related to hedge ineffectiveness. |
|---|------------------------------------------------------------------------------------------------------------------------------------|

| Puget Energyat September 30, 2010                  | Number of Units    |
|----------------------------------------------------|--------------------|
| Derivatives designated as hedging instruments:     |               |
| Interest rate swaps                                | $1.483 billion     |
| Derivatives not designated as hedging instruments: |               |
| Gas derivatives 1                                  | 412,179,273 MMBtus |
| Electric generation fuel                           | 97,230,500 MMBtus  |
| Purchased electricity                              | 8,941,405 MWhs     |

| Puget Sound Energyat September 30, 2010            | Number of Units    |
|----------------------------------------------------|--------------------|
| Derivatives not designated as hedging instruments: |               |
| Gas derivatives 1                                  | 412,179,273 MMBtus |
| Electric generation fuel                           | 97,230,500 MMBtus  |
| Purchased electricity                              | 8,941,405 MWhs     |

| 1 | Unrealized gains (losses) on gas derivatives are offset by a regulatory asset or liability in accordance with ASC 980 due to the PGA mechanism. |
|---|-------------------------------------------------------------------------------------------------------------------------------------------------|

| Puget Energy and Puget Sound EnergyContingent Feature(Dollars in Thousands) |   | Fair Value 1Liability |     |   | PostedCollateral |   |   | ContingentCollateral |   |
|-----------------------------------------------------------------------------|--------|-----------------------|----------|--------|------------------|--------|--------|----------------------|--------|
| Credit rating 2                                                             |   | $                     | (49,684  | )      |             | $      | --     |                 |   | $ | 49,684 |   |
| Requested credit for adequate assurance                                     |   |                  | (99,928  | )      |             |   | --     |                 |   |   | -- |   |
| Forward value of contract 3                                                 |   |                  | (21,965  | )      |             |   | --     |                 |   |   | -- |   |
| Total                                                                       |   | $                     | (171,577 | )      |             | $      | --     |                 |   | $ | 49,684 |   |

| 1 | Represents the derivative fair value of contracts with contingent features for counterparties in net derivative liability positions at September 30, 2010.  Excludes NPNS, accounts payable and accounts receivable liability. |
|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2 | Failure by PSE to maintain an investment grade credit rating from each of the major credit rating’s agencies provides counterparties a contractual right to demand collateral.                                                     |
| 3 | Collateral requirements may vary, based on changes in forward value of underlying transactions relative to contractually defined collateral thresholds.                                                                                  |

| (4)   | Fair Value Measurements |
|-----------------|-------------------------|

| Puget Energy                         |   | Fair Value Measurementat September 30, 2010 |   |   | Fair Value Measurementat December 31, 2009 |   |
|--------------------------------------|--------|---------------------------------------------|--------|--------|--------------------------------------------|--------|
| (Dollars in Thousands)               |   | Level 1                                     |   |   | Level 2                                    |   |   | Level 3 |   |   | Total |   |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |   | Total |   |
| Assets:                              |   |                                        |   |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Electric derivative instruments      |   | $                                           | --     |   |                                       | $      | 156 |   |   | $ | 4,946 |   |   | $ | 5,102 |   |   | $ | -- |   |   | $ | 2,469 |   |   | $ | 2,671 |   |   | $ | 5,140 |   |
| Gas derivative instruments           |   |                                        | --     |   |                                       |   | 3,091 |   |   |   | 4,439 |   |   |   | 7,530 |   |   |   | -- |   |   |   | 14,298 |   |   |   | 115 |   |   |   | 14,413 |   |
| Cash equivalents                     |   |                                        | 68,602 |   |                                       |   | 5,327 |   |   |   | -- |   |   |   | 73,929 |   |   |   | 38,835 |   |   |   | 5,465 |   |   |   | -- |   |   |   | 44,300 |   |
| Restricted cash                      |   |                                        | 3,387  |   |                                       |   | -- |   |   |   | -- |   |   |   | 3,387 |   |   |   | 3,305 |   |   |   | -- |   |   |   | -- |   |   |   | 3,305 |   |
| Interest rate derivative instruments |   |                                        | --     |   |                                       |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 20,854 |   |   |   | -- |   |   |   | 20,854 |   |
| Total assets                         |   | $                                           | 71,989 |   |                                       | $      | 8,574 |   |   | $ | 9,385 |   |   | $ | 89,948 |   |   | $ | 42,140 |   |   | $ | 43,086 |   |   | $ | 2,786 |   |   | $ | 88,012 |   |
| Liabilities:                         |   |                                        |   |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Electric derivative instruments      |   | $                                           | --     |   |                                       | $      | 167,083 |   |   | $ | 120,247 |   |   | $ | 287,330 |   |   | $ | -- |   |   | $ | 51,099 |   |   | $ | 99,000 |   |   | $ | 150,099 |   |
| Gas derivative instruments           |   |                                        | --     |   |                                       |   | 201,293 |   |   |   | 10,125 |   |   |   | 211,418 |   |   |   | -- |   |   |   | 77,438 |   |   |   | 4,119 |   |   |   | 81,557 |   |
| Interest rate derivative instruments |   |                                        | --     |   |                                       |   | 77,913 |   |   |   | -- |   |   |   | 77,913 |   |   |   | -- |   |   |   | 26,844 |   |   |   | -- |   |   |   | 26,844 |   |
| Total liabilities                    |   | $                                           | --     |   |                                       | $      | 446,289 |   |   | $ | 130,372 |   |   | $ | 576,661 |   |   | $ | -- |   |   | $ | 155,381 |   |   | $ | 103,119 |   |   | $ | 258,500 |   |

| Puget EnergyLevel 3 Roll-Forward Net (Liability) |   | Three Months Ended September 30, |     |
|--------------------------------------------------|--------|----------------------------------|----------|
| (Dollars in Thousands)                           |   | 2010                             |     |   | 2009 |   |
| Balance at beginning of period                   |   | $                                | (135,121 | ) |   | $ | (136,677 | ) |
| Changes during period:                           |   |                             |     |   |   |   |   |   |
| Realized and unrealized energy derivatives       |   |                             |     |   |   |   |   |   |
| - included in earnings                           |   |                             | (46,223  | ) |   |   | 14,987 |   |
| - included in other comprehensive income         |   |                             | --       |   |   |   | -- |   |
| - included in regulatory assets / liabilities    |   |                             | (1,017   | ) |   |   | (962 | ) |
| Purchases, issuances and settlements             |   |                             | 7,798    |   |   |   | 5,825 |   |
| Transferred into Level 3                         |   |                             | 761      |   |   |   | -- |   |
| Transferred out of Level 3                       |   |                             | 52,815   |   |   |   | 14,543 |   |
| Balance at end of period                         |   | $                                | (120,987 | ) |   | $ | (102,284 | ) |

|                                                                   |   | Successor                         |     |   | Predecessor                                |   |
|------------------------------------------------------------------------|--------|-----------------------------------|----------|--------|--------------------------------------------|--------|
| Puget EnergyLevel 3 Roll-Forward Net (Liability)(Dollars in Thousands) |   | Nine MonthsEndedSeptember 30,2010 |     |   | February 6,2009 –September 30,2009 1 |   |   | January 1,2009 –February 5,2009 |   |
| Balance at beginning of period                                         |   | $                                 | (100,333 | )      |                                       | $      | (185,813 | ) |   | $ | (132,256 | ) |
| Changes during period:                                                 |   |                              |     |   |                                       |   |   |   |   |   |   |   |
| Realized and unrealized energy derivatives                             |   |                              |     |   |                                       |   |   |   |   |   |   |   |
| - included in earnings                                                 |   |                              | (125,839 | )      |                                       |   | 5,241 |   |   |   | (627 | ) |
| - included in other comprehensive income                               |   |                              | --       |   |                                       |   | (17, 429 | ) |   |   | (14,821 | ) |
| - included in regulatory assets / liabilities                          |   |                              | (1,856   | )      |                                       |   | (3,404 | ) |   |   | (1,410 | ) |
| Purchases, issuances and settlements                                   |   |                              | 21,138   |   |                                       |   | 19,541 |   |   |   | 2,154 |   |
| Transferred into Level 3                                               |   |                              | 225      |   |                                       |   | (8,611 | ) |   |   | -- |   |
| Transferred out of Level 3                                             |   |                              | 85,678   |   |                                       |   | 88,191 |   |   |   | 8,560 |   |
| Balance end of period                                                  |   | $                                 | (120,987 | )      |                                       | $      | (102,284 | ) |   | $ | (138,400 | ) |

| 1 | The beginning balance for the Successor period was adjusted to reflect the impact of certain fair value adjustments from the merger transaction. |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------|

| Puget Sound Energy              |   | Fair Value Measurementat September 30, 2010 |   |   | Fair Value Measurementat December 31, 2009 |   |
|---------------------------------|--------|---------------------------------------------|--------|--------|--------------------------------------------|--------|
| (Dollars in Thousands)          |   | Level 1                                     |   |   | Level 2                                    |   |   | Level 3 |   |   | Total |   |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |   | Total |   |
| Assets:                         |   |                                        |   |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Electric derivative instruments |   | $                                           | --     |   |                                       | $      | 156 |   |   | $ | 4,946 |   |   | $ | 5,102 |   |   | $ | -- |   |   | $ | 2,469 |   |   | $ | 2,671 |   |   | $ | 5,140 |   |
| Gas derivative instruments      |   |                                        | --     |   |                                       |   | 3,091 |   |   |   | 4,439 |   |   |   | 7,530 |   |   |   | -- |   |   |   | 14,298 |   |   |   | 115 |   |   |   | 14,413 |   |
| Cash equivalents                |   |                                        | 68,602 |   |                                       |   | 5,327 |   |   |   | -- |   |   |   | 73,929 |   |   |   | 38,835 |   |   |   | 5,465 |   |   |   | -- |   |   |   | 44,300 |   |
| Restricted cash                 |   |                                        | 3,387  |   |                                       |   | -- |   |   |   | -- |   |   |   | 3,387 |   |   |   | 3,305 |   |   |   | -- |   |   |   | -- |   |   |   | 3,305 |   |
| Total assets                    |   | $                                           | 71,989 |   |                                       | $      | 8,574 |   |   | $ | 9,385 |   |   | $ | 89,948 |   |   | $ | 42,140 |   |   | $ | 22,232 |   |   | $ | 2,786 |   |   | $ | 67,158 |   |
| Liabilities:                    |   |                                        |   |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Electric derivative instruments |   | $                                           | --     |   |                                       | $      | 167,083 |   |   | $ | 120,247 |   |   | $ | 287,330 |   |   | $ | -- |   |   | $ | 46,690 |   |   | $ | 99,000 |   |   | $ | 145,690 |   |
| Gas derivative instruments      |   |                                        | --     |   |                                       |   | 201,293 |   |   |   | 10,125 |   |   |   | 211,418 |   |   |   | -- |   |   |   | 77,438 |   |   |   | 4,119 |   |   |   | 81,557 |   |
| Total liabilities               |   | $                                           | --     |   |                                       | $      | 368,376 |   |   | $ | 130,372 |   |   | $ | 498,748 |   |   | $ | -- |   |   | $ | 124,128 |   |   | $ | 103,119 |   |   | $ | 227,247 |   |

| Puget Sound EnergyLevel 3 Roll-Forward Net (Liability) |   | Three Months Ended September 30, |     |   | Nine Months Ended September 30, |   |
|--------------------------------------------------------|--------|----------------------------------|----------|--------|---------------------------------|--------|
| (Dollars in Thousands)                                 |   | 2010                             |     |   | 2009                            |   |   | 2010 |   |   | 2009 |   |
| Balance at beginning of period                         |   | $                                | (135,121 | )      |                            | $      | (136,677 | ) |   | $ | (100,333 | ) |   | $ | (132,256 | ) |
| Changes during period:                                 |   |                             |     |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Realized and unrealized energy derivatives             |   |                             |     |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| - included in earnings                                 |   |                             | (46,223  | )      |                            |   | 14,987 |   |   |   | (125,839 | ) |   |   | 19,270 |   |
| - included in other comprehensive income               |   |                             | --       |   |                            |   | -- |   |   |   | -- |   |   |   | (38,047 | ) |
| - included in regulatory assets / liabilities          |   |                             | (1,017   | )      |                            |   | (962 | ) |   |   | (1,856 | ) |   |   | (6,883 | ) |
| Purchases, issuances and settlements                   |   |                             | 7,798    |   |                            |   | 5,825 |   |   |   | 21,138 |   |   |   | 21,973 |   |
| Transferred into Level 3                               |   |                             | 761      |   |                            |   | -- |   |   |   | 225 |   |   |   | (6,778 | ) |
| Transferred out of Level 3                             |   |                             | 52,815   |   |                            |   | 14,543 |   |   |   | 85,678 |   |   |   | 40,437 |   |
| Balance at end of period                               |   | $                                | (120,987 | )      |                            | $      | (102,284 | ) |   | $ | (120,987 | ) |   | $ | (102,284 | ) |

| (5)   | Estimated Fair Value of Financial Instruments |
|-----------------|-----------------------------------------------|

|                                              |   | September 30, 2010 |      |   | December 31, 2009 |   |
|---------------------------------------------------|--------|--------------------|-----------|--------|-------------------|--------|
| (Dollars in Thousands)                            |   | CarryingAmount     |      |   | FairValue         |   |   | CarryingAmount |   |   | FairValue |   |
| Financial assets:                                 |   |               |      |   |              |   |   |   |   |   |   |   |
| Cash and cash equivalents                         |   | $                  | 86,316    |   |              | $      | 86,316 |   |   | $ | 78,527 |   |   | $ | 78,527 |   |
| Restricted cash                                   |   |               | 5,613     |   |              |   | 5,613 |   |   |   | 19,844 |   |   |   | 19,844 |   |
| Notes receivable and other                        |   |               | 70,889    |   |              |   | 70,889 |   |   |   | 74,063 |   |   |   | 74,063 |   |
| Electric derivatives                              |   |               | 5,102     |   |              |   | 5,102 |   |   |   | 5,140 |   |   |   | 5,140 |   |
| Gas derivatives                                   |   |               | 7,530     |   |              |   | 7,530 |   |   |   | 14,413 |   |   |   | 14,413 |   |
| Interest rate derivatives                         |   |               | --        |   |              |   | -- |   |   |   | 20,854 |   |   |   | 20,854 |   |
| Financial liabilities:                            |   |               |      |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Short-term debt                                   |   | $                  | 77,000    |   |              | $      | 77,000 |   |   | $ | 105,000 |   |   | $ | 105,000 |   |
| Junior subordinated notes                         |   |               | 250,000   |   |              |   | 234,341 |   |   |   | 250,000 |   |   |   | 232,684 |   |
| Current maturities of long-term debt (fixed-rate) |   |               | 260,000   |   |              |   | 266,027 |   |   |   | 232,000 |   |   |   | 234,632 |   |
| Long-term debt (fixed-rate)                       |   |               | 2,953,860 |   |              |   | 3,394,700 |   |   |   | 2,638,860 |   |   |   | 2,815,048 |   |
| Long-term debt (variable-rate)                    |   |               | 1,483,000 |   |              |   | 1,523,639 |   |   |   | 1,483,000 |   |   |   | 1,478,632 |   |
| Electric derivatives                              |   |               | 287,330   |   |              |   | 287,330 |   |   |   | 150,099 |   |   |   | 150,099 |   |
| Gas derivatives                                   |   |               | 211,418   |   |              |   | 211,418 |   |   |   | 81,557 |   |   |   | 81,557 |   |
| Interest rate derivatives                         |   |               | 77,913    |   |              |   | 77,913 |   |   |   | 26,844 |   |   |   | 26,844 |   |

|                                                  |   | September 30, 2010 |      |   | December 31, 2009 |   |
|-------------------------------------------------------|--------|--------------------|-----------|--------|-------------------|--------|
| (Dollars in Thousands)                                |   | CarryingAmount     |      |   | FairValue         |   |   | CarryingAmount |   |   | FairValue |   |
| Financial assets:                                     |   |               |      |   |              |   |   |   |   |   |   |   |
| Cash and cash equivalents                             |   | $                  | 86,278    |   |              | $      | 86,278 |   |   | $ | 78,407 |   |   | $ | 78,407 |   |
| Restricted cash                                       |   |               | 5,613     |   |              |   | 5,613 |   |   |   | 19,844 |   |   |   | 19,844 |   |
| Notes receivable and other                            |   |               | 70,889    |   |              |   | 70,889 |   |   |   | 74,063 |   |   |   | 74,063 |   |
| Electric derivatives                                  |   |               | 5,102     |   |              |   | 5,102 |   |   |   | 5,140 |   |   |   | 5,140 |   |
| Gas derivatives                                       |   |               | 7,530     |   |              |   | 7,530 |   |   |   | 14,413 |   |   |   | 14,413 |   |
| Financial liabilities:                                |   |               |      |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Short-term debt                                       |   | $                  | 77,000    |   |              | $      | 77,000 |   |   | $ | 105,000 |   |   | $ | 105,000 |   |
| Short-term debt owed by PSE to Puget Energy 1         |   |               | 22,898    |   |              |   | 22,898 |   |   |   | 22,898 |   |   |   | 22,898 |   |
| Junior subordinated notes                             |   |               | 250,000   |   |              |   | 234,341 |   |   |   | 250,000 |   |   |   | 232,684 |   |
| Current maturities of long-term debt (fixed-rate)     |   |               | 260,000   |   |              |   | 266,027 |   |   |   | 232,000 |   |   |   | 234,632 |   |
| Non-current maturities of long-term debt (fixed-rate) |   |               | 2,953,860 |   |              |   | 3,394,700 |   |   |   | 2,638,860 |   |   |   | 2,815,048 |   |
| Electric derivatives                                  |   |               | 287,330   |   |              |   | 287,330 |   |   |   | 145,690 |   |   |   | 145,690 |   |
| Gas derivatives                                       |   |               | 211,418   |   |              |   | 211,418 |   |   |   | 81,557 |   |   |   | 81,557 |   |

| 1 | Short-term debt owed by PSE to Puget Energy is eliminated upon consolidation of Puget Energy. |
|---|-----------------------------------------------------------------------------------------------|

| (6)   | Retirement Benefits |
|-----------------|---------------------|

|                                     |   | Three Months Ended September 30, |   |
|------------------------------------------|--------|----------------------------------|--------|
|                                     |   | QualifiedPension Benefits        |   |   | SERPPension Benefits |   |   | OtherBenefits |   |
| (Dollars in Thousands)                   |   | 2010                             |   |   | 2009 |   |   | 2010 |   |   | 2009 |   |   | 2010 |   |   | 2009 |   |
| Components of net periodic benefit cost: |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Service cost                             |   | $                                | 4,009  |   |   | $ | 3,401 |   |   | $ | 256 |   |   | $ | 259 |   |   | $ | 26 |   |   | $ | 31 |   |
| Interest cost                            |   |                             | 6,965  |   |   |   | 7,067 |   |   |   | 541 |   |   |   | 594 |   |   |   | 220 |   |   |   | 244 |   |
| Expected return on plan assets           |   |                             | (8,087 | ) |   |   | (7,523 | ) |   |   | -- |   |   |   | -- |   |   |   | (127 | ) |   |   | (103 | ) |
| Amortization of net gain                 |   |                             | --     |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | (17 | ) |   |   | -- |   |
| Net periodic benefit cost                |   | $                                | 2,887  |   |   | $ | 2,945 |   |   | $ | 797 |   |   | $ | 853 |   |   | $ | 102 |   |   | $ | 172 |   |

| Qualified Pension Benefits               |   | Successor                          |    |   | Predecessor                                 |   |
|------------------------------------------|--------|------------------------------------|---------|--------|---------------------------------------------|--------|
| (Dollars in Thousands)                   |   | Nine Months EndedSeptember 30,2010 |    |   | February 6, 2009 –September 30,2009 1 |   |   | January 1, 2009 – February 5, 2009 |   |
| Components of net periodic benefit cost: |   |                               |    |   |                                        |   |   |   |   |
| Service cost                             |   | $                                  | 12,083  |   |                                        | $      | 9,068 |   |   | $ | 1,090 |   |
| Interest cost                            |   |                               | 21,030  |   |                                        |   | 18,845 |   |   |   | 2,302 |   |
| Expected return on plan assets           |   |                               | (24,501 | )      |                                        |   | (20,060 | ) |   |   | (3,585 | ) |
| Amortization of prior service cost       |   |                               | --      |   |                                        |   | -- |   |   |   | 95 |   |
| Amortization of net loss                 |   |                               | --      |   |                                        |   | -- |   |   |   | 269 |   |
| Net periodic benefit cost                |   | $                                  | 8,612   |   |                                        | $      | 7,853 |   |   | $ | 171 |   |

| SERP Pension Benefits                    |   | Successor                          |   |   | Predecessor                                 |   |
|------------------------------------------|--------|------------------------------------|--------|--------|---------------------------------------------|--------|
| (Dollars in Thousands)                   |   | Nine Months EndedSeptember 30,2010 |   |   | February 6, 2009 –September 30,2009 1 |   |   | January 1, 2009 – February 5, 2009 |   |
| Components of net periodic benefit cost: |   |                               |   |   |                                        |   |   |   |   |
| Service cost                             |   | $                                  | 768    |   |                                        | $      | 692 |   |   | $ | 89 |   |
| Interest cost                            |   |                               | 1,624  |   |                                        |   | 1,584 |   |   |   | 193 |   |
| Amortization of prior service cost       |   |                               | --     |   |                                        |   | -- |   |   |   | 51 |   |
| Amortization of net loss (gain)          |   |                               | --     |   |                                        |   | -- |   |   |   | 74 |   |
| Net periodic benefit cost                |   | $                                  | 2,392  |   |                                        | $      | 2,276 |   |   | $ | 407 |   |

| 1 | The disclosed information is based on an initial January 31, 2009 measurement date, and as a result, the expense numbers are shown pro-rated for the second quarter 2009. |
|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Other Benefits                           |   | Successor                          |   |   | Predecessor                                 |   |
|------------------------------------------|--------|------------------------------------|--------|--------|---------------------------------------------|--------|
| (Dollars in Thousands)                   |   | Nine Months EndedSeptember 30,2010 |   |   | February 6, 2009 –September 30,2009 1 |   |   | January 1, 2009 – February 5, 2009 |   |
| Components of net periodic benefit cost: |   |                               |   |   |                                        |   |   |   |   |
| Service cost                             |   | $                                  | 79     |   |                                        | $      | 83 |   |   | $ | 11 |   |
| Interest cost                            |   |                               | 660    |   |                                        |   | 650 |   |   |   | 88 |   |
| Expected return on plan assets           |   |                               | (381   | )      |                                        |   | (275 | ) |   |   | (37 | ) |
| Amortization of prior service cost       |   |                               | --     |   |                                        |   | -- |   |   |   | 7 |   |
| Amortization of net gain                 |   |                               | (51    | )      |                                        |   | -- |   |   |   | (15 | ) |
| Amortization of transition obligation    |   |                               | --     |   |                                        |   | -- |   |   |   | 4 |   |
| Net periodic benefit cost                |   | $                                  | 307    |   |                                        | $      | 458 |   |   | $ | 58 |   |

| 1 | The disclosed information is based on an initial January 31, 2009 measurement date, and as a result, the expense numbers are shown pro-rated for the second quarter 2009. |
|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                      |   | QualifiedPension Benefits |    |   | SERPPension Benefits |   |    | OtherBenefits      |   |
|-------------------------------------------|--------|---------------------------|---------|--------|----------------------|--------|---------|--------------------|--------|
| (Dollars in Thousands)                    |   | September 30, 2010        |    |   | December 31, 2009    |   |    | September 30, 2010 |   |   | December 31, 2009 |   |   | September 30, 2010 |   |   | December 31, 2009 |   |
| Change in benefit obligation:             |   |                      |    |   |                 |   |    |               |   |   |   |   |   |   |   |   |   |   |
| Benefit obligation at beginning of period |   | $                         | 504,786 |   |                 | $      | 453,731 |               |   | $ | 39,152 |   |   | $ | 38,750 |   |   | $ | 15,953 |   |   | $ | 15,807 |   |
| Beginning of year remeasurement           |   |                      | 456     |   |                 |   | --      |               |   |   | -- |   |   |   | -- |   |   |   | 86 |   |   |   | -- |   |
| Service cost                              |   |                      | 12,083  |   |                 |   | 12,469  |               |   |   | 768 |   |   |   | 951 |   |   |   | 79 |   |   |   | 114 |   |
| Interest cost                             |   |                      | 21,030  |   |                 |   | 25,912  |               |   |   | 1,624 |   |   |   | 2,178 |   |   |   | 660 |   |   |   | 894 |   |
| Actuarial loss                            |   |                      | --      |   |                 |   | 33,458  |               |   |   | -- |   |   |   | 1,433 |   |   |   | -- |   |   |   | 770 |   |
| Benefits paid                             |   |                      | (26,400 | )      |                 |   | (20,784 | )                  |   |   | (1,262 | ) |   |   | (4,160 | ) |   |   | (1,413 | ) |   |   | (2,050 | ) |
| Medicare part D subsidy received          |   |                      | --      |   |                 |   | --      |               |   |   | -- |   |   |   | -- |   |   |   | 803 |   |   |   | 418 |   |
| Benefit obligation at end of period       |   | $                         | 511,955 |   |                 | $      | 504,786 |               |   | $ | 40,282 |   |   | $ | 39,152 |   |   | $ | 16,168 |   |   | $ | 15,953 |   |

|                                     |   | Three Months Ended September 30, |    |
|------------------------------------------|--------|----------------------------------|---------|
|                                     |   | QualifiedPension Benefits        |    |   | SERPPension Benefits |   |   | OtherBenefits |   |
| (Dollars in Thousands)                   |   | 2010                             |    |   | 2009 |   |   | 2010 |   |   | 2009 |   |   | 2010 |   |   | 2009 |   |
| Components of net periodic benefit cost: |   |                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Service cost                             |   | $                                | 4,009   |   |   | $ | 3,535 |   |   | $ | 256 |   |   | $ | 267 |   |   | $ | 26 |   |   | $ | 31 |   |
| Interest cost                            |   |                             | 6,965   |   |   |   | 6,934 |   |   |   | 541 |   |   |   | 579 |   |   |   | 220 |   |   |   | 240 |   |
| Expected return on plan assets           |   |                             | (10,875 | ) |   |   | (10,863 | ) |   |   | -- |   |   |   | -- |   |   |   | (127 | ) |   |   | (114 | ) |
| Amortization of prior service cost       |   |                             | 185     |   |   |   | 283 |   |   |   | 141 |   |   |   | 154 |   |   |   | 33 |   |   |   | 21 |   |
| Amortization of net loss (gain)          |   |                             | 1,781   |   |   |   | 925 |   |   |   | 192 |   |   |   | 221 |   |   |   | (138 | ) |   |   | (115 | ) |
| Amortization of transition obligation    |   |                             | --      |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 12 |   |   |   | 13 |   |
| Net periodic benefit cost                |   | $                                | 2,065   |   |   | $ | 814 |   |   | $ | 1,130 |   |   | $ | 1,221 |   |   | $ | 26 |   |   | $ | 76 |   |

|                                     |   | Nine Months Ended September 30, |    |
|------------------------------------------|--------|---------------------------------|---------|
|                                     |   | QualifiedPension Benefits       |    |   | SERPPension Benefits |   |   | OtherBenefits |   |
| (Dollars in Thousands)                   |   | 2010                            |    |   | 2009 |   |   | 2010 |   |   | 2009 |   |   | 2010 |   |   | 2009 |   |
| Components of net periodic benefit cost: |   |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Service cost                             |   | $                               | 12,083  |   |   | $ | 10,605 |   |   | $ | 768 |   |   | $ | 801 |   |   | $ | 79 |   |   | $ | 94 |   |
| Interest cost                            |   |                            | 21,030  |   |   |   | 20,801 |   |   |   | 1,624 |   |   |   | 1,736 |   |   |   | 660 |   |   |   | 720 |   |
| Expected return on plan assets           |   |                            | (32,864 | ) |   |   | (32,590 | ) |   |   | -- |   |   |   | -- |   |   |   | (381 | ) |   |   | (341 | ) |
| Amortization of prior service cost       |   |                            | 555     |   |   |   | 850 |   |   |   | 422 |   |   |   | 462 |   |   |   | 99 |   |   |   | 62 |   |
| Amortization of net loss (gain)          |   |                            | 5,193   |   |   |   | 2,777 |   |   |   | 576 |   |   |   | 664 |   |   |   | (414 | ) |   |   | (345 | ) |
| Amortization of transition obligation    |   |                            | --      |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 36 |   |   |   | 37 |   |
| Net periodic benefit cost                |   | $                               | 5,997   |   |   | $ | 2,443 |   |   | $ | 3,390 |   |   | $ | 3,663 |   |   | $ | 79 |   |   | $ | 227 |   |

|                                      |   | QualifiedPension Benefits |    |   | SERPPension Benefits |   |    | OtherBenefits      |   |
|-------------------------------------------|--------|---------------------------|---------|--------|----------------------|--------|---------|--------------------|--------|
| (Dollars in Thousands)                    |   | September 30, 2010        |    |   | December 31, 2009    |   |    | September 30, 2010 |   |   | December 31, 2009 |   |   | September 30, 2010 |   |   | December 31, 2009 |   |
| Change in benefit obligation:             |   |                      |    |   |                 |   |    |               |   |   |   |   |   |   |   |   |   |   |
| Benefit obligation at beginning of period |   | $                         | 504,786 |   |                 | $      | 460,586 |               |   | $ | 39,152 |   |   | $ | 39,348 |   |   | $ | 15,953 |   |   | $ | 18,088 |   |
| Beginning of year remeasurement           |   |                      | 456     |   |                 |   | --      |               |   |   | -- |   |   |   | -- |   |   |   | 86 |   |   |   | -- |   |
| Service cost                              |   |                      | 12,083  |   |                 |   | 14,141  |               |   |   | 768 |   |   |   | 1,068 |   |   |   | 79 |   |   |   | 125 |   |
| Interest cost                             |   |                      | 21,030  |   |                 |   | 27,734  |               |   |   | 1,624 |   |   |   | 2,315 |   |   |   | 660 |   |   |   | 960 |   |
| Actuarial loss (gain)                     |   |                      | --      |   |                 |   | 25,094  |               |   |   | -- |   |   |   | 707 |   |   |   | -- |   |   |   | (1,296 | ) |
| Benefits paid                             |   |                      | (26,400 | )      |                 |   | (22,769 | )                  |   |   | (1,262 | ) |   |   | (4,286 | ) |   |   | (1,413 | ) |   |   | (2,342 | ) |
| Medicare part D subsidiary received       |   |                      | --      |   |                 |   | --      |               |   |   | -- |   |   |   | -- |   |   |   | 803 |   |   |   | 418 |   |
| Benefit obligation at end of period       |   | $                         | 511,955 |   |                 | $      | 504,786 |               |   | $ | 40,282 |   |   | $ | 39,152 |   |   | $ | 16,168 |   |   | $ | 15,953 |   |

| (7)   | Regulation and Rates |
|-----------------|----------------------|

| (8)   | Litigation |
|-----------------|------------|

| (9)   | Variable Interest Entities |
|-----------------|----------------------------|

| (10)   | Other |
|------------------|-------|

| (11)   | Income Taxes |
|------------------|--------------|

Item 2.              Management’s Discussion and Analysis of Financial Condition and Results of Operations

| ·   | The rates PSE is allowed to charge for its services; |
|--------------------|------------------------------------------------------|

| ·   | Weather conditions, including snow-pack affecting hydrological conditions; |
|--------------------|----------------------------------------------------------------------------|

| ·   | Demand for electricity and natural gas among customers in PSE’s service territory; |
|--------------------|------------------------------------------------------------------------------------------|

| ·   | Regulatory decisions allowing PSE to recover costs, including purchased power and fuel costs, on a timely basis; |
|--------------------|------------------------------------------------------------------------------------------------------------------|

| ·   | PSE’s ability to supply electricity and natural gas, either through company-owned generation, purchase power contracts or by procuring natural gas or electricity in wholesale markets; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Availability and access to capital and the cost of capital; |
|--------------------|-------------------------------------------------------------|

| ·   | Regulatory compliance costs, including those related to new and developing federal regulations of electric system reliability, state regulations of natural gas pipelines and federal and state environmental standards; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The impact of energy efficiency programs on sales and margins; and |
|--------------------|--------------------------------------------------------------------|

| ·   | Wholesale commodity prices of electricity and natural gas. |
|--------------------|------------------------------------------------------------|

| Annual Power Cost Variability  | Customers’Share | Company’sShare  |
|--------------------------------|-----------------------|-----------------------|
| +/- $20 million                |   0%             | 100%                  |
| +/- $20 million - $40 million  | 50%                   |   50%            |
| +/- $40 million - $120 million | 90%                   |   10%            |
| +/- $120 + million             | 95%                   |     5% |

| Type of RateAdjustment     | EffectiveDate | Average Percentage Increasein Rates | Annual Increase in Revenue (Dollars in Millions) |
|----------------------------|---------------|-------------------------------------|--------------------------------------------------|
| Electric General Rate Case | April 8, 2010 | 3.7%                                | $  74.1                                |

| Type of RateAdjustment   | EffectiveDate                          | Average Percentage Increase (Decrease)in Rates | Annual Increase (Decrease) in Revenue (Dollars in Millions) |
|--------------------------|----------------------------------------|------------------------------------------------|-------------------------------------------------------------|
| Gas General Rate Case    | April 8, 2010                          | 0.8%                                           | $     10.1                         |
| Purchased Gas Adjustment | October 1, 2009                        | (17.1)                                         | (198.1)                                                     |
| Purchased Gas Adjustment | June 1, 2009 -  May 31, 2010 | (1.8)                                          | (21.2)                                                      |

|                                                 | Three Months Ended September 30, |    |   |   |          | Nine Months EndedSeptember 30, |   |   |   |
|------------------------------------------------------|----------------------------------|---------|--------|--------|---------------|--------------------------------|--------|--------|--------|
| Puget Sound Energy(Dollars in Thousands)             | 2010                             |    | 2009   |   | PercentChange |                           |   | 2010   |   | 2009 |   | Percent Change |   |
| Operating revenue:                                   |                             |    |   |   |          |                           |   |   |   |   |   |   |   |
| Electric                                             |                             |    |   |   |          |                           |   |   |   |   |   |   |   |
| Residential sales                                    | $                                | 215,651 |   | $      | 195,589       |                           | 10.3   | %      |   | $ | 790,457 |   | $ | 794,782 |   | (0.5 | )% |
| Commercial sales                                     |                             | 205,240 |   |   | 199,289       |                           | 3.0    |   |   |   | 620,193 |   |   | 628,832 |   | (1.4 | ) |
| Industrial sales                                     |                             | 26,429  |   |   | 23,959        |                           | 10.3   |   |   |   | 76,466 |   |   | 74,408 |   | 2.8 |   |
| Other retail sales, including unbilled revenue       |                             | 10,736  |   |   | 12,847        |                           | (16.4  | )      |   |   | (35,818 | ) |   | (42,249 | ) | (15.2 | ) |
| Total retail sales                                   |                             | 458,056 |   |   | 431,684       |                           | 6.1    |   |   |   | 1,451,298 |   |   | 1,455,773 |   | (0.3 | ) |
| Transportation sales                                 |                             | 2,594   |   |   | 3,076         |                           | (15.7  | )      |   |   | 8,477 |   |   | 7,919 |   | 7.0 |   |
| Sales to other utilities and marketers               |                             | 31,963  |   |   | 33,177        |                           | (3.7   | )      |   |   | 45,878 |   |   | 53,416 |   | (14.1 | ) |
| Other                                                |                             | (3,005  | )      |   | (18,279       | )                              | (83.6  | )      |   |   | 1,896 |   |   | (10,466 | ) | (118.1 | ) |
| Total electric operating revenue                     |                             | 489,608 |   |   | 449,658       |                           | 8.9    |   |   |   | 1,507,549 |   |   | 1,506,642 |   | 0.1 |   |
| Gas                                                  |                             |    |   |   |          |                           |   |   |   |   |   |   |   |   |   |   |   |
| Residential sales                                    |                             | 73,817  |   |   | 77,184        |                           | (4.4   | )      |   |   | 418,770 |   |   | 563,525 |   | (25.7 | ) |
| Commercial sales                                     |                             | 45,595  |   |   | 50,281        |                           | (9.3   | )      |   |   | 201,204 |   |   | 257,855 |   | (22.0 | ) |
| Industrial sales                                     |                             | 6,158   |   |   | 6,619         |                           | (7.0   | )      |   |   | 22,610 |   |   | 29,638 |   | (23.7 | ) |
| Total retail sales                                   |                             | 125,570 |   |   | 134,084       |                           | (6.3   | )      |   |   | 642,584 |   |   | 851,018 |   | (24.5 | ) |
| Transportation sales                                 |                             | 3,474   |   |   | 3,304         |                           | 5.1    |   |   |   | 10,516 |   |   | 9,554 |   | 10.1 |   |
| Other                                                |                             | 3,527   |   |   | 4,740         |                           | (25.6  | )      |   |   | 11,323 |   |   | 14,913 |   | (24.1 | ) |
| Total gas operating revenue                          |                             | 132,571 |   |   | 142,128       |                           | (6.7   | )      |   |   | 664,423 |   |   | 875,485 |   | (24.1 | ) |
| Non-utility operating revenue                        |                             | 650     |   |   | 840           |                           | (22.6  | )      |   |   | 2,350 |   |   | 4,333 |   | (45.8 | ) |
| Total operating revenue                              |                             | 622,829 |   |   | 592,626       |                           | 5.1    |   |   |   | 2,174,322 |   |   | 2,386,460 |   | (8.9 | ) |
| Operating expenses:                                  |                             |    |   |   |          |                           |   |   |   |   |   |   |   |   |   |   |   |
| Energy costs:                                        |                             |    |   |   |          |                           |   |   |   |   |   |   |   |   |   |   |   |
| Purchased electricity                                |                             | 127,936 |   |   | 160,867       |                           | 20.5   |   |   |   | 557,221 |   |   | 610,034 |   | 8.7 |   |
| Electric generation fuel                             |                             | 96,712  |   |   | 77,164        |                           | (25.3  | )      |   |   | 194,649 |   |   | 143,124 |   | (36.0 | ) |
| Residential exchange                                 |                             | (15,173 | )      |   | (19,271       | )                              | 21.3   |   |   |   | (54,510 | ) |   | (72,604 | ) | 24.9 |   |
| Purchased gas                                        |                             | 60,284  |   |   | 72,463        |                           | 16.8   |   |   |   | 343,779 |   |   | 524,666 |   | 34.5 |   |
| Net unrealized (gain) loss on derivative instruments |                             | 78,559  |   |   | (27,144       | )                              | *      |   |   |   | 200,702 |   |   | (34,734 | ) | * |   |
| Utility operations and maintenance                   |                             | 117,155 |   |   | 116,129       |                           | (0.9   | )      |   |   | 355,569 |   |   | 353,129 |   | (0.7 | ) |
| Non-utility expense and other                        |                             | 3,188   |   |   | 2,282         |                           | (39.7  | )      |   |   | 7,742 |   |   | 5,677 |   | (36.4 | ) |
| Merger and related costs                             |                             | --      |   |   | --            |                           | --     |   |   |   | -- |   |   | 23,908 |   | * |   |
| Depreciation                                         |                             | 73,111  |   |   | 66,978        |                           | (9.2   | )      |   |   | 217,765 |   |   | 199,164 |   | (9.3 | ) |
| Amortization                                         |                             | 18,355  |   |   | 16,522        |                           | (11.1  | )      |   |   | 53,011 |   |   | 48,082 |   | (10.3 | ) |
| Conservation amortization                            |                             | 20,392  |   |   | 12,836        |                           | (58.9  | )      |   |   | 60,874 |   |   | 47,395 |   | (28.4 | ) |
| Taxes other than income taxes                        |                             | 58,903  |   |   | 57,785        |                           | (1.9   | )      |   |   | 210,304 |   |   | 225,824 |   | 6.9 |   |
| Total operating expenses                             |                             | 639,422 |   |   | 536,611       |                           | (19.2  | )      |   |   | 2,147,106 |   |   | 2,073,665 |   | (3.5 | ) |
| Operating income (loss)                              |                             | (16,593 | )      |   | 56,015        |                           | (129.6 | )      |   |   | 27,216 |   |   | 312,795 |   | (91.3 | ) |
| Other income                                         |                             | 11,033  |   |   | 13,272        |                           | (16.9  | )      |   |   | 32,846 |   |   | 35,591 |   | (7.7 | ) |
| Other expense                                        |                             | (1,074  | )      |   | (1,299        | )                              | (17.3  | )      |   |   | (4,147 | ) |   | (5,432 | ) | (23.7 | ) |
| Interest expense                                     |                             | (57,738 | )      |   | (50,305       | )                              | 14.8   |   |   |   | (168,643 | ) |   | (149,551 | ) | 12.8 |   |
| Income (loss) before income taxes                    |                             | (64,372 | )      |   | 17,683        |                           | *      |   |   |   | (112,728 | ) |   | 193,403 |   | (158.3 | ) |
| Income tax (benefit) expense                         |                             | (34,813 | )      |   | 9,841         |                           | *      |   |   |   | (45,402 | ) |   | 56,806 |   | 179.9 |   |
| Net income (loss)                                    | $                                | (29,559 | )      | $      | 7,842         |                           | *      | %      |   | $ | (67,326 | ) | $ | 136,597 |   | (149.3 | )% |

| * | Not meaningful |
|---|----------------|

| ·   | Increase in net unrealized loss on derivative instruments of $105.7 million primarily due to falling forward market prices of electricity, natural gas on de-designation cash flow hedges and for derivative contracts initiated after July 1, 2009 related to PSE’s energy contracts.  PSE discontinued cash flow hedge accounting on July 1, 2009. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Increase in interest expense of $7.4 million primarily due to increased expense on long-term bonds and interest on regulatory liability associated with RECs. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Decrease in purchased electricity and electric generation fuel of $13.4 million primarily due to a 2.4% reduction in electric customer retail sales volumes, lower wholesale costs and higher hydroelectric and wind generation. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Increase in depreciation expense of $6.1 million primarily due to additional capital expenditures that were placed in service. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------|

| ·   | Increase in net unrealized loss on derivative instruments of $235.4 million primarily due to falling forward market prices of electricity, natural gas on de-designation cash flow hedges and for derivative contracts initiated after July 1, 2009 related to PSE’s energy contracts.  PSE discontinued cash flow hedge accounting on July 1, 2009. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Increase in interest expense of $19.1 million primarily due to a write off of a regulatory asset for deferred interest paid to the Internal Revenue Service (IRS) related to the Simplified Service Cost Method deduction in prior years which was disallowed for the rate of recovery in the general rate case order of April 2, 2010, increase in long-term bonds and interest on regulatory liability associated with RECs. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Increase in depreciation expense of $18.6 million primarily due to additional capital expenditures that were placed in service. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------|

| ·   | The above increases were partially offset by a decrease from one-time merger costs of $23.9 million related to the merger of Puget Energy with Puget Holdings.  These costs were primarily related to PSE employee compensation triggered by Puget Energy’s change of control, credit agreement related expenses and the impact of increases in the deferred compensation related liability. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                          | Three Months EndedSeptember 30, |    |   |   |
|-----------------------------------------------|---------------------------------|---------|--------|--------|
| Benefit/(Expense)(Dollars in Thousands)       | 2010                            |    | 2009   |   | PercentChange |   |
| PSE net income (loss)                         | $                               | (29,559 | )      | $      | 7,842 |   | * | % |
| Purchased electricity                         |                            | 144     |   |   | 144 |   | -- |   |
| Net unrealized gain on derivative instruments |                            | 15,284  |   |   | 47,687 |   | (67.9 | ) |
| Non-utility expense and other                 |                            | (1,019  | )      |   | (2,260 | ) | 54.9 |   |
| Depreciation and amortization                 |                            | --      |   |   | 46 |   | * |   |
| Interest income/expense 1                     |                            | (22,771 | )      |   | (19,964 | ) | (14.1 | ) |
| Income tax benefit (expense)                  |                            | 22      |   |   | (8,988 | ) | * |   |
| Puget Energy net income (loss)                | $                               | (37,899 | )      | $      | 24,507 |   | * | % |

| * | Not meaningful                                                                                                      |
|---|---------------------------------------------------------------------------------------------------------------------|
| 1 | Puget Energy’s interest expense includes elimination adjustments of intercompany interest on short-term debt. |

|                                          |                               |    | Successor                                 |   | Predecessor                              |   |
|-----------------------------------------------|------------------------------------|---------|-------------------------------------------|--------|------------------------------------------|--------|
| Benefit/(Expense)(Dollars in Thousands)       | Nine Months EndedSeptember 30,2010 |    | February 6, 2009 –September 30,2009 |   | January 1, 2009 – February 5, 2009 |   | 2009Combined |   | PercentChange |   |
| PSE net income (loss)                         | $                                  | (67,326 | )                                         | $      | 104,986                                  |   | $ | 31,611 |   | $ | 136,597 |   | (149.3 | )% |
| Other operating revenue                       |                               | --      |                                      |   | 358                                      |   |   | -- |   |   | 358 |   | * |   |
| Purchased electricity                         |                               | 433     |                                      |   | 385                                      |   |   | -- |   |   | 385 |   | 12.5 |   |
| Net unrealized gain on derivative instruments |                               | 91,519  |                                      |   | 86,565                                   |   |   | -- |   |   | 86,565 |   | 5.7 |   |
| Non-utility expense and other                 |                               | (4,223  | )                                         |   | (5,763                                   | )      |   | (4 | ) |   | (5,767 | ) | 26.8 |   |
| Merger and related costs                      |                               | --      |                                      |   | (2,731                                   | )      |   | (20,416 | ) |   | (23,147 | ) | * |   |
| Depreciation and amortization                 |                               | --      |                                      |   | 122                                      |   |   | -- |   |   | 122 |   | * |   |
| Charitable contribution expense               |                               | --      |                                      |   | (5,000                                   | )      |   | -- |   |   | (5,000 | ) | * |   |
| Interest income/expense 1                     |                               | (66,323 | )                                         |   | (50,663                                  | )      |   | 25 |   |   | (50,638 | ) | (31.0 | ) |
| Income tax benefit (expense)                  |                               | (7,507  | )                                         |   | (8,122                                   | )      |   | 1,540 |   |   | (6,582 | ) | (14.1 | ) |
| Puget Energy net income (loss)                | $                                  | (53,427 | )                                         | $      | 120,137                                  |   | $ | 12,756 |   | $ | 132,893 |   | (140.2 | )% |

| * | Not meaningful                                                                                                      |
|---|---------------------------------------------------------------------------------------------------------------------|
| 1 | Puget Energy’s interest expense includes elimination adjustments of intercompany interest on short-term debt. |

| ·   | Puget Energy’s net income for the three months ended September 30, 2010 was negatively impacted by $32.4 million change in net unrealized gain on derivative instruments as a result of the required recognition of all contracts at fair value as part of purchase accounting, including derivative contracts previously designated as Normal Purchase Normal Sale (NPNS).  Certain of these contracts were subsequently redesignated as NPNS.  The unrealized gain represents amortization of the fair value recorded.  Also Puget Energy’s net loss was favorably impacted by a $9.0 million change in income tax. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Puget Energy’s net loss for the nine months ended September 30, 2010, as compared to net income for the same period in 2009, was positively impacted by a $5.0 million change in net unrealized gain on derivative instruments as a result of the required recognition of all contracts at fair value as part of purchase accounting, including derivative contracts previously designated as NPNS.  Certain of these contracts were subsequently redesignated as NPNS.  The unrealized gain represents amortization of the fair value recorded.  Puget Energy’s net income for the same period was negatively impacted by $15.7 million of interest income/expense due to the long-term debt at Puget Energy, business combination fair value amortization of PSE’s debt and PSE’s deferred debt costs. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Capital Expenditure Projections(Dollars in Millions) | 2010   |   | 2011   |   | 2012  |   |
|------------------------------------------------------|--------|--------|--------|--------|-------|--------|
| Energy delivery, technology and facilities           | $      | 550    |   | $      | 637   |   | $ | 672 |   |
| New resources                                        |   | 307    |   |   | 386   |   |   | 46 |   |
| Total expenditures                                   | $      | 857    |   | $      | 1,023 |   | $ | 718 |   |

| ·   | Accounts receivable and unbilled revenue decreased $201.4 million during the first nine months of 2010 compared to a decrease of $282.2 million during the same period in 2009, causing an operating cash flow decrease of $80.8 million. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | PGA mechanism provided $53.1 million payment to customers related to overcollection of prior year plan related rates during the first nine months of 2010 compared to an overrecovery from customers of $61.5 million during the same period in 2009, which decreased cash flow from operating activities by $114.6 million. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | PSE’s deferred taxes decreased $66.1 million in 2010 compared to tax savings in 2009 of $174.6 million due to bonus depreciation and repair allowance deductions. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Net purchases of $9.3 million on accounts payable during the first nine months of 2010 compared to net payments of $131.3 million during the same period in 2009, due to the timing of payments resulting in an increase in operating cash flows of $140.6 million. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | A decrease in prepaid income taxes of $41.0 million during the first nine months of 2010 compared to an increase of $117.2 million during the same period in 2009, causing an increase in cash from operations of $158.2 million. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Cash received from the sale of renewable energy credits of $33.3 million during the first nine months of 2010 compared to payments received of $23.0 million during the same period in 2009, causing an increase in cash from operations of $10.3 million. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Pension funding of $12.0 million during the first nine months of 2010 compared to funding of $18.0 million during the same period in 2009, causing an increase in cash from operations of $6.0 million. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | PSE received tax refunds of $19.1 million during the first nine months of 2010 compared to tax payments of $0.1 million during the same period in 2009, causing an increase of $19.2 million. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | As a result of the merger, $279.1 million in derivative settlement payments were reclassified to financing activities during the first nine months of 2010 compared to $349.7 million during the same period in 2009, resulting in a decrease in operating cash flows of $70.6 million.  These contracts represent proceeds received from derivative instruments that included financing elements at the merger date. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Puget Energy made $88.6 million less net payments on accounts payable during the first nine months of 2010 compared to the same period in 2009, causing an increase in cash from operations. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | approximately $1.4 billion of additional first mortgage bonds under PSE’s electric mortgage indenture based on approximately $2.3 billion of electric bondable property available for issuance, subject to an interest coverage ratio limitation of 2.0 times net earnings available for interest (as defined in the electric utility mortgage), which PSE exceeded at September 30, 2010; and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | no additional first mortgage bonds under PSE’s natural gas mortgage indenture until it meets the required net earnings available for interest coverage test.  Although PSE had approximately $384.2 million of gas bondable property available for issuance, the Company is subject to a combined gas and electric interest coverage test of 1.75 times net earnings available for interest and a gas interest coverage test of 2.0 times net earnings available for interest (as defined in the natural gas utility mortgage).  At September 30, 2010, PSE exceeded the gas 2.0 times net earnings test, but did not meet the combined 1.75 times test primarily as a result of lower energy sales and higher net power costs due to warmer than normal temperatures and lower than normal hydroelectric and wind generation.  The company expects to meet this test by December 2010 as it collects additional revenue from the April 8, 2010 rate increase for electric and natural gas customers. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

Item 3.                      Quantitative and Qualitative Disclosure about Market Risk

| ·   | Ensure physical energy supplies are available to reliably and cost-effectively serve retail load; |
|--------------------|---------------------------------------------------------------------------------------------------|

| ·   | Manage the energy portfolio prudently to serve retail load at overall least cost and limit undesired impacts on PSE’s customers and shareholders; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Reduce power costs by extracting the value of PSE’s assets; and |
|--------------------|-----------------------------------------------------------------------|

| ·   | Meet the credit, liquidity, financing, tax and accounting requirements of PSE. |
|--------------------|--------------------------------------------------------------------------------|

|                                                   | Energy Derivatives |   |
|--------------------------------------------------------|--------------------|--------|
| Puget EnergyDerivative Portfolio(Dollars in thousands) | September 30, 2010 |   | December 31, 2009 |   |
|                                                   | Assets             |   | Liabilities |   | Assets |   | Liabilities |   |
| Electric portfolio:                                    |               |   |   |   |   |   |   |   |
| Current                                                | $                  | 3,504  |   | $ | 146,407 |   | $ | 4,137 |   | $ | 79,732 |   |
| Long-term                                              |               | 1,598  |   |   | 140,923 |   |   | 1,003 |   |   | 70,367 |   |
| Total electric derivatives                             | $                  | 5,102  |   | $ | 287,330 |   | $ | 5,140 |   | $ | 150,099 |   |
| Gas portfolio:                                         |               |   |   |   |   |   |   |   |   |   |   |   |
| Current                                                | $                  | 4,578  |   | $ | 135,377 |   | $ | 10,811 |   | $ | 62,207 |   |
| Long-term                                              |               | 2,952  |   |   | 76,041 |   |   | 3,602 |   |   | 19,350 |   |
| Total gas derivatives                                  | $                  | 7,530  |   | $ | 211,418 |   | $ | 14,413 |   | $ | 81,557 |   |
| Total derivatives                                      | $                  | 12,632 |   | $ | 498,748 |   | $ | 19,553 |   | $ | 231,656 |   |

|                                                         | Energy Derivatives |   |
|--------------------------------------------------------------|--------------------|--------|
| Puget Sound EnergyDerivative Portfolio(Dollars in thousands) | September 30, 2010 |   | December 31, 2009 |   |
|                                                         | Assets             |   | Liabilities |   | Assets |   | Liabilities |   |
| Electric portfolio:                                          |               |   |   |   |   |   |   |   |
| Current                                                      | $                  | 3,504  |   | $ | 146,407 |   | $ | 4,137 |   | $ | 75,323 |   |
| Long-term                                                    |               | 1,598  |   |   | 140,923 |   |   | 1,003 |   |   | 70,367 |   |
| Total electric derivatives                                   | $                  | 5,102  |   | $ | 287,330 |   | $ | 5,140 |   | $ | 145,690 |   |
| Gas portfolio:                                               |               |   |   |   |   |   |   |   |   |   |   |   |
| Current                                                      | $                  | 4,578  |   | $ | 135,377 |   | $ | 10,811 |   | $ | 62,207 |   |
| Long-term                                                    |               | 2,952  |   |   | 76,041 |   |   | 3,602 |   |   | 19,350 |   |
| Total gas derivatives                                        | $                  | 7,530  |   | $ | 211,418 |   | $ | 14,413 |   | $ | 81,557 |   |
| Total derivatives                                            | $                  | 12,632 |   | $ | 498,748 |   | $ | 19,553 |   | $ | 227,247 |   |

| Puget EnergyDerivative Portfolio(Dollars in Thousands) | September 30, 2010 |   | December 31, 2009 |   |
|--------------------------------------------------------|--------------------|--------|-------------------|--------|
| Interest Rate Swaps                                    | Assets             |   | Liabilities       |   | Assets |   | Liabilities |   |
| Current                                                | $                  | --     |              | $      | 30,441 |   | $ | -- |   | $ | 26,844 |   |
| Long-term                                              |               | --     |              |   | 47,472 |   |   | 20,854 |   |   | -- |   |
| Total                                                  | $                  | --     |              | $      | 77,913 |   | $ | 20,854 |   | $ | 26,844 |   |

Item 4.                      Controls and Procedures

Part II                      Other Information

Item 1.                      Legal Proceedings

Item 1A.                   Risk Factors

Item 6.                      Exhibits

SIGNATURES

|                              | PUGET ENERGY, INC.PUGET SOUND ENERGY, INC.                                                            |
|-----------------------------------|-------------------------------------------------------------------------------------------------------|
|                              |  /s/ James W. Eldredge                                                                           |
|                              | James W. EldredgeVice President, Controller and Chief Accounting Officer                              |
| Date:  November 2, 2010 | Chief Accounting Officer and Officer duly authorized to sign this report on behalf of each registrant |
|                              |                                                                                                  |

EXHIBIT INDEX

| 12.1 | Statement setting forth computation of ratios of earnings to fixed charges (2005 through 2008, January 1, 2009 – February 5, 2009 (Predecessor) and February 6, 2009 – December 31, 2009 and 12 months ended September 30, 2010 (Successor)) for Puget Energy. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 12.2 | Statement setting forth computation of ratios of earnings to fixed charges (2005 through 2009 and 12 months ended September 30, 2010) for Puget Sound Energy.                                                                                                              |
| 31.1 | Chief Executive Officer certification of Puget Energy pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                            |
| 31.2 | Chief Financial Officer certification of Puget Energy pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                            |
| 31.3 | Chief Executive Officer certification of Puget Sound Energy pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                      |
| 31.4 | Chief Financial Officer certification of Puget Sound Energy pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                      |
| 32.1 | Chief Executive Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                            |
| 32.2 | Chief Financial Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                            |