SECURITIES AND EXCHANGE COMMISSION
                           Washington, D. C. 20549


                                  FORM 10-Q


         /X/  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
              THE SECURITIES EXCHANGE ACT OF 1934

              For the quarterly period ended March 31, 1997

              OR

        / /   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
              THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

                        _____________________________

                        Commission File Number 1-4393
                        _____________________________


                           PUGET SOUND ENERGY, INC.
            (Exact name of registrant as specified in its charter)

            Washington                                 91-0374630
            (State or other                      (IRS Employer
            jurisdiction of                   Identification No.)
            incorporation or
            organization)

           411 - 108th Avenue N.E., Bellevue, Washington 98004-5515
                   (Address of principal executive offices)

                                (206) 454-6363
             (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file for such reports), and (2) has been
subject to such filing requirements for the past 90 days.

                        Yes /X/        No / /

The number of shares of registrant's common stock outstanding at April 30,
1997 was 84,561,103.
Part I - FINANCIAL INFORMATION
Item 1 - Financial Statements

                          PUGET SOUND ENERGY, INC.
                      CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended March 31                                             1996
(Thousands except shares and per share amounts)            1997     Restated
-------------------------------------------------     ---------    ---------
                                                            (Unaudited)
OPERATING REVENUES:
  Electric                                           $  299,569   $  331,009
  Gas                                                   156,488      148,673
  Other                                                   7,262        7,402
                                                      ---------    ---------
    Total operating revenue                             463,319      487,084
                                                      ---------    ---------
OPERATING EXPENSES:
Energy costs:
  Purchased electricity                                 128,987      121,783
  Purchased gas                                          71,961       69,465
Utility operations and maintenance                       74,112       70,829
Other operations and maintenance                          5,977        7,165
Depreciation and amortization                            38,423       36,586
Merger and related costs                                 55,789           --
Taxes other than federal income taxes                    46,147       45,507
Federal income taxes                                    (14,905)      41,403
                                                      ---------    ---------
    Total operating expenses                            406,491      392,738
                                                      ---------    ---------

OPERATING INCOME                                         56,828       94,346

OTHER INCOME                                              4,884        1,822
                                                      ---------    ---------
INCOME BEFORE INTEREST CHARGES                           61,712       96,168

INTEREST CHARGES                                         29,104       29,552
                                                      ---------    ---------
INCOME FROM CONTINUING OPERATIONS                        32,608       66,616

DISCONTINUED OPERATIONS                                  (2,622)        (419)
                                                      ---------    ---------
NET INCOME                                               29,986       66,197
Less: Preferred stock dividends accrual                  (5,549)      (5,498)
                                                      ---------    ---------
INCOME FOR COMMON STOCK                              $   24,437   $   60,699
                                                      =========    =========
COMMON SHARES OUTSTANDING - WEIGHTED AVERAGE         84,453,754   84,401,330
                                                     ==========   ==========
EARNINGS (LOSS) PER COMMON SHARE:
    From continuing operations                       $     0.32   $     0.72
    From discontinued operations                          (0.03)          --
                                                      ---------    ---------
EARNINGS  PER COMMON SHARE                           $     0.29   $     0.72
                                                      =========    =========

The accompanying notes are an integral part of the financial statements.
<PAGE>
                          PUGET SOUND ENERGY, INC.
                          CONSOLIDATED BALANCE SHEETS

                                            ASSETS

                                                                 December 31
                                                      March 31          1996
(Dollars in Thousands)                                    1997      Restated
-------------------------------------------------    ---------     ---------
                                                           (Unaudited)
UTILITY PLANT:
  Electric                                           $3,508,814   $3,479,652
  Gas                                                 1,175,573    1,129,849
Less: Accumulated depreciation and amortization      (1,522,328)  (1,482,555)
                                                      ---------    ---------
    Net utility plant                                 3,162,059    3,126,946
                                                      ---------    ---------

OTHER PROPERTY AND INVESTMENTS:
  Investment in Bonneville Exchange Power Contract       84,840       86,772
  Investment in Cabot                                    70,506       69,352
  Subsidiary properties and investments                  85,786       80,770
  Other                                                  28,265       32,636
                                                      ---------    ---------
    Total other property and investments                269,397      269,530
                                                      ---------    ---------

CURRENT ASSETS:
  Cash                                                      878        4,335
  Accounts receivable                                   312,031      254,774
  Less: Allowance for doubtful accounts                  (2,775)      (1,700)
  Materials and supplies, at average cost                50,228       61,638
  Prepayments and other                                   5,159       17,510
  PRAM accrued revenues                                     --        40,470
                                                      ---------    ---------
    Total current assets                                365,521      377,027
                                                      ---------    ---------

LONG-TERM ASSETS:
  Regulatory asset for deferred income taxes            275,672      242,454
  Unamortized energy conservation charges                43,563       50,796
  Other                                                 152,168      159,771
                                                      ---------    ---------
    Total long-term assets                              471,403      453,021
                                                      ---------    ---------
TOTAL ASSETS                                         $4,268,380   $4,226,524
                                                      =========    =========

The accompanying notes are an integral part of the financial statements.
<PAGE>
                          PUGET SOUND ENERGY, INC.
                          CONSOLIDATED BALANCE SHEETS

                        CAPITALIZATION AND LIABILITIES

                                                                 December 31
                                                      March 31          1996
(Dollars in Thousands)                                    1997      Restated
-------------------------------------------------    ---------     ---------
                                                           (Unaudited)

CAPITALIZATION:

  Common shareholders' investment:
    Common stock, $10 stated value,
    150,000,000 shares authorized,
    84,561,306 and 84,511,270 shares
    outstanding                                     $  845,613    $  845,113
  Additional paid-in capital                           447,446       446,909
  Earnings reinvested in the business                   87,714        86,355
                                                     ---------     ---------
                                                     1,380,773     1,378,377
Preferred stock not subject to
    mandatory redemption                               215,000       215,000
  Preferred stock subject to
    mandatory redemption                                86,640        87,839
  Long-term debt                                     1,165,595     1,165,584
                                                     ---------     ---------
    Total capitalization                             2,848,008     2,846,800
                                                     ---------     ---------
CURRENT LIABILITIES:
  Accounts payable                                      82,312        93,581
  Short-term debt                                      249,886       298,122
  Current maturities of long-term debt                  99,948       100,062
  Purchased gas liability                               23,366        41,368
  PRAM over-collections                                 17,000            --
  Accrued expenses:
    Taxes                                              116,422        60,677
    Salaries and wages                                  20,545        24,012
    Interest                                            30,101        21,878
    Other                                               70,102        80,110
                                                     ---------     ---------
    Total current liabilities                          709,682       719,810
                                                     ---------     ---------

DEFERRED INCOME TAXES                                  605,994       573,242
                                                     ---------     ---------
OTHER DEFERRED CREDITS                                 104,696        86,672
                                                     ---------     ---------
TOTAL CAPITALIZATION AND LIABILITIES                $4,268,380    $4,226,524
                                                     =========     =========

The accompanying notes are an integral part of the financial statements.
<PAGE>
                             PUGET SOUND ENERGY, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                 Three Months Ended March 31
                                                                        1996
(Dollars in Thousands)                                    1997      Restated
-------------------------------------------------    ---------     ---------
                                                           (Unaudited)
OPERATING ACTIVITIES:
--------------------
Net income                                            $ 29,986     $ 66,197
Adjustments to reconcile net income to
 net cash provided by operating activities:
  Pre-tax loss on writedown of coal properties           4,044           --
  Depreciation and amortization                         38,423       36,542
  Deferred income taxes and tax credits - net          (12,844)       7,828
  PRAM accrued revenues                                 57,470       24,938
  Other                                                 13,016       (8,112)
  Change in certain current assets
   and liabilities (Note c)                             (6,303)      64,147
---------------------------------------------------------------------------
    Net Cash Provided by Operating Activities          123,792      191,540
---------------------------------------------------------------------------

INVESTING ACTIVITIES:
--------------------
Construction expenditures - excluding equity AFUDC     (63,781)     (50,019)
Additions to energy conservation program                  (423)      (1,725)
Other                                                   14,193       (2,398)
---------------------------------------------------------------------------
    Net Cash Used by Investing Activities              (50,011)     (54,142)
---------------------------------------------------------------------------

FINANCING ACTIVITIES:
--------------------
Decrease in short-term debt                            (36,677)     (69,237)
Dividends paid                                         (39,463)     (40,846)
Redemption of bonds and notes                               --      (35,000)
Redemption of preferred stock                           (1,200)      (1,200)
Common stock issue                                          81          880
Issue costs of bonds and stock                             (18)          (6)
---------------------------------------------------------------------------
    Net Cash Used by  Financing Activities             (77,277)    (145,409)
---------------------------------------------------------------------------
Decrease in Cash                                        (3,496)      (8,011)
Cash at Beginning of Period                              4,335       21,813
Adjustment to conform fiscal year of WECo                   39       (1,623)
---------------------------------------------------------------------------
Cash at End of Period                                 $    878     $ 12,179
===========================================================================

The accompanying notes are an integral part of the financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS

(1)  SUMMARY OF CONSOLIDATION POLICY

The consolidated financial statements include the accounts of Puget Sound
Energy, Inc. ("the Company"), formerly Puget Sound Power & Light Company, and
its wholly-owned subsidiaries, after elimination of all significant
intercompany items and transactions.

The financial statements contained in this Form 10-Q are unaudited.  In the
opinion of management, all adjustments necessary for a fair presentation of
the results for the interim periods have been reflected and were of a normal
recurring nature other than as described in footnotes 2 & 5.

It is suggested that these condensed financial statements be read in
conjunction with the financial statements and the notes thereto contained in
the Annual Report to Stockholders and Form 10-K filed with the Securities and
Exchange Commission for the Company and Washington Energy Company ("WECo")
for the fiscal years ended December 31, 1996 and September 30, 1996,
respectively.

On February 10, 1997, the Company consummated its merger with WECo.  The
merger has been accounted for as a pooling of interests.  Accordingly, the
consolidated financial statements have been retroactively restated to include
the results of operations, financial position and cash flows of WECo for all
periods prior to consummation of the merger.

Effective with the merger, WECo's fiscal year-end was changed from September
30 to December 31 to conform to the Company's year-end.  Accordingly, WECo's
operations for the three months ended December 31, 1996, have been reported
as an adjustment of $10.8 million to consolidated retained earnings in the
first quarter of 1997.  WECo's revenues for the three months ended December
31, 1996, were $148.6 million, net income was $16.9 million, common stock
issued was $1.0 million and common stock dividends declared were $6.1 million
for the same period.

Included in consolidated results of operations for the month of January 1997
(the merger was effective February 10, 1997) and the three months ended March
31, 1996, are the following results of the previously separate companies for
those periods:
                                    MONTH ENDED JANUARY 31, 1997
                                       (Dollars in Thousands)
                            -----------------------------------------
                               Company          WECo     Consolidated
                            ----------     ---------     ------------
Revenues                      $123,051       $60,486         $183,537
Net Income                     $19,671        $9,378          $29,049
Common Dividends Declared      $29,244            --          $29,244

                                   THREE MONTHS ENDED MARCH 31, 1996
                                       (Dollars in Thousands)
                                 ------------------------------------
                               Company           WECo    Consolidated
                               -------        -------    ------------
Revenues                      $331,795       $155,289        $487,084
Net Income                     $46,419        $19,778         $66,197
Common Dividends Declared      $29,275             --         $29,275
<PAGE>
(2)  MERGER WITH WASHINGTON ENERGY COMPANY

On February 7, 1997, the Boards of Puget Sound Power & Light Company
("PSPL") and WECo approved the merger of their respective companies
effective February 10, 1997.  WECo and its wholly-owned subsidiary,
Washington Natural Gas Company ("WNG") were merged into PSPL which then
changed its name to Puget Sound Energy, Inc.  The Washington Utilities and
Transportation Commission ("Washington Commission") approved the merger on
February 5, 1997.  Shareholders of the Company and WECo, voting as separate
groups had, on March 20, 1996, already given their approval to an Agreement
and Plan of Merger ("Merger Agreement") between the two companies.

Pursuant to the Merger Agreement, each share of WECo common stock was
exchanged for 0.86 share of the Company's common stock (approximately
20,921,000 shares of Company stock were issued).  On February 10, 1997, the
Company increased the number of authorized shares to 150,000,000.  Based on
the capitalization of the Company and WECo on February 10, 1997, holders of
the Company's and WECo's common stock held approximately 75% and 25%
respectively, of the aggregate number of outstanding shares of the merged
company's common stock.  In accordance with the Merger Agreement, the
preferred stock of Washington Natural Gas Company, a wholly-owned subsidiary
of WECo, was converted into preferred shares of the merged company.  The
merger has been structured as a tax-free exchange of shares, and has been
accounted for as a pooling of interests for financial statement purposes.

The Merger Agreement approvorder approving the merger, issued by the
Washington Commission, contains a rate plan that is designed to provide a
five-year period of rate certainty for customers and provide the Company
with an opportunity to achieve a reasonable return on investment.  As
required under the stipulated settlement merger order, the Company filed
tariffs, effective February 8, 1997, that resulted in an average electric
rate decrease of 5.6% related to the termination of the Periodic Rate
Adjustment Mechanism ("PRAM"), and an increase in general rates of between
1.0% and 2.5%, depending on rate class.  The general rate increase has a
positive impact on earnings while the decrease related to the PRAM does not
affect earnings because all previously accrued PRAM revenues were fully
collected.  The net impact on customer rates was an average rate decrease of
3.7%, including a decrease in residential rates of 3.24%.  General electric
rates for residential and industrial customers will increase by 1.5% on
January 1 of each of the four following years, while those for small
commercial customers will increase by 1.0% in each of the following three
years.  General rates for all classes of natural gas customers will remain
unchanged until January 1, 1999, when they will decrease sufficiently to
reduce utility margin by 1 percent.

In connection with the merger, the Company recognized direct and indirect
merger-related expenses of $55.8 million during the three months ending
March 31, 1997.  The charge consisted primarily of severance costs of $15.5
million, benefit-related curtailment costs of $9.1 million, transaction
costs of $13.7 million, systems and facilities integration costs of $7.2
million and other costs.  The nonrecurring charge reduced net income by
approximately $36.3 million ($0.43 per share) for the three months ended
March 31, 1997.  In addition, merger related costs of $4.8 million were
recognized in the fourth quarter of 1996 by PSPL.

(3)  EARNINGS PER COMMON SHARE

Earnings per common share for the three months ended March 31, 1997 and 1996
have been computed by dividing income for common stock by the weighted
average number of common shares outstanding after adjusting WECo's historical
amounts for the conversion into .86 shares of the Company's common stock.

(4)  UNAMORTIZED ENERGY CONSERVATION COSTS

Certain of the Company's energy conservation expenditures are accumulated as
unamortized conservation charges.  These costs are amortized over various
future periods up to ten years at the direction of the Washington Commission.
Approximately $38 million of the conservation measures are included in rate
base.  The Company's total remaining unamortized conservation balance at
March 31, 1997, was $43.6 million.

(5)  DISCONTINUED OPERATIONS

On March 5, 1997, the Company conveyed its interests in undeveloped coal
properties through its wholly-owned subsidiary Thermal Energy, Inc. to Wesco
Resources, Inc. effective February 1, 1997.  In return for this conveyance,
Wesco Resources, Inc. agreed to assume future coal property obligations and
liabilities and to pay the Company a 2% royalty on coal mined from the
transferred coal properties now held by Wesco Resources, Inc.  In the
September 1996 consolidated financial statements of WECo these activities
were reflected as discontinued operations.  The Company has determined, based
on a report by mining consultants, that the development of the transferred
coal properties in the foreseeable future is speculative.  As a result, the
Company does not expect to receive any amounts under the 2% royalty
agreement.  Therefore, in March 1997, the Company's remaining $4.0 million
investment in Thermal Energy, Inc. was written off to expense and appears in
the consolidated financial statements as discontinued operations.  Prior
periods have been restated to include Thermal Energy, Inc. operations as
discontinued operations.

(6)  LIABILITY FOR ENVIRONMENTAL MATTERS

For a discussion of environmental matters related to the Company's electric
operations, see the Company's Form 10-K for the fiscal year ended December
31, 1996.

(a)  General

Five former WNG or predecessor companies manufactured gas plant ("MGP") sites
are currently undergoing investigation, remedial actions or monitoring
actions relating to environmental contamination:  1) Everett, Washington; 2)
"Gas Works Park" in Seattle, Washington; 3) "Tacoma 22nd and A St." Site in
Tacoma, Washington; 4) Chehalis, Washington; and 5) the "Tideflats" area of
Tacoma, Washington.

The financial statements reflect actual costs to date and management's
estimates of the costs to be incurred on an undiscounted basis, based on
known and available information with regard to the extent of contamination
and the potential methods of cleanup or containment believed to be feasible
at each site.  The Company is continually evaluating the progress at each
site and the cost estimates will be revised, if necessary, as new information
is available.  The financial statements reflect receivables for the expected
recovery, from third parties, of substantially all of the remediation costs
deferred pursuant to Washington Commission authorization.

 (b)  Everett

The Company is conducting an independent remedial action at the Everett site.
Current analysis indicates that the reserve for investigation and remediation
costs of $3,250,000, previously established, is currently sufficient to cover
the expected costs at the site, exclusive of remediation costs, if any, which
may arise in connection with the adjacent Snohomish River.  Investigation and
feasibility costs of $472,000 have been incurred through March 31, 1997.  The
Everett site was previously owned and operated by other companies who are
potentially liable parties ("PLPs") for the remediation of the site.  The
cost estimate reflects the total cost expected to remediate the site before
contributions by other PLPS.

(c)  Gas Works Park

The Company sold the site of a former manufactured gas plant at Lake Union,
now known as "Gas Works Park," to the City of Seattle in 1962.  The City of
Seattle, in a letter dated February 24, 1995, requested that the Company
participate in a cleanup of this site.  The Company believes that the
contract, by which it conveyed the land to the City of Seattle, presents
substantial defenses that mitigate its exposure for environmental remediation
costs which may be incurred at this site.

On July 15, 1996, the City of Seattle completed a preliminary study that
estimated that the remediation costs were in the range of $4.9 million to
$8.6 million exclusive of any remediation costs which may arise in connection
with the adjacent Lake Union.  The Company anticipates that in order to
resolve this matter with the City of Seattle, the potential cost may
approximate $3,200,000 which has been accrued.

(d)  Tacoma 22nd and A St. Site and Thea Foss Waterway

The Company was the former owner of land, located upland from the Thea Foss
Waterway in Tacoma, Washington where a MGP was operated by several other
companies.  This site ("22nd and A St.") was acquired after the plant was
closed.  The site was later sold in parcels to several buyers.  Five parties,
including the Company, have been designated as PLPs at this site.  In May
1996, a consultant to the PLPs estimated the cost of remediating the Tacoma
22nd and A St. site to be approximately $4,000,000, exclusive of any
remediation costs which may arise in connection with the adjacent Thea Foss
Waterway.  Because there are multiple PLPs, the Company believes, based on
currently available information, that its maximum exposure is approximately
$700,000, which has been recorded as a liability.

The City of Tacoma has undertaken an investigation study of contamination in
the Thea Foss Waterway.  The extent of the contamination related to possible
MGP operation is not currently known, but the Company has been designated a
Potentially Responsible Party ("PRP") by the U.S. Environmental Protection
Agency ("EPA").  During the quarter ended March 31, 1997, the Company
established a reserve of $1,500,000 to reflect the initial estimates of the
remediation costs the Company may incur at this site.

(e)  Chehalis

The Company has completed significant source control and installed
groundwater monitoring wells as part of an independent cleanup action.  In
1997, the Company expects to complete groundwater monitoring at the site, at
which time a determination will be made as to what, if any, additional
remedial measures are required.  As of March 31, 1997, the financial
statements include a reserve of $270,000, which is sufficient to cover
remaining costs at the site, assuming that further remedial measures are not
required.

(f)  Tideflats

The remediation activities at the Tideflats site were completed as of July
1995, and confirmed by the EPA in a letter dated September 28, 1995.  Ongoing
monitoring and maintenance costs are being expensed as incurred and are not
material.

In June 1991, a lawsuit was filed in Washington State Superior Court, King
County, Washington ("Superior Court"), against certain insurance companies
that provided insurance applicable to the Tideflats site at various times
dating back to the 1940's.  On June 10, 1994, the Superior Court entered a
final judgment in favor of the Company.  Under the terms of the final
judgment, the Company was entitled to collect its present and future
uncompensated reasonable and necessary costs in remediating the site from the
policies of certain insurer defendants in the action.  During 1995, the
Company settled its lawsuit with the insurance carriers in consideration of
their dismissal of the appeal of the Superior Court judgment regarding
coverage of the Tideflats remediation costs.  In September 1995, the Company
received approximately $29,000,000 in final settlement of all remaining
claims against insurance carriers regarding this site.  As a result of this
settlement and amounts previously received, the Company has recovered
substantially all the remediation costs which had been deferred.

(g)  Expected Recoveries

The Company's financial statements as of March 31, 1997, include
environmental receivables related to these MGP sites totaling $10,798,000
primarily for expected recoveries from insurance carriers, based upon the
successful litigation against its insurers regarding the Tideflats site, and
other PLPs.  Although the factual situations at the other sites differ in
some respects from the factual situation at the Tideflats site, the Company
believes, based on the precedents established in the Tideflats case and
discussion with legal counsel, that it is probable that it has insurance
coverage sufficient to recover costs not recovered from other PLPs.  In the
event that recoveries from insurance and other PLPs are not sufficient, the
Company, under an agreement with the Washington Commission, will seek
recovery of such unreimbursed costs in future customer rates.

Based on all known facts and analyses, the Company believes it is not likely
that the identified environmental liabilities will result in a material
adverse impact on the Company's financial position, operating results or cash
flow trends.

(7)  Consolidated Statements of Cash Flows

The following provides additional information concerning cash flow
activities:

Three Months Ended March 31                               1997        1996
--------------------------------------------------------------------------

Changes in current asset and current liabilities:
  Accounts receivable                                 $(27,979)   $  7,381
  Materials and supplies                                 7,511       9,889
  Prepayments and Other                                  5,773       1,833
  Purchased gas liability                              (12,476)     18,308
  Accounts payable                                     (35,455)    (12,417)
  Accrued expenses and Other                            56,323      39,153
--------------------------------------------------------------------------
Net change in current assets and current liabilities  $ (6,303)   $ 64,147
==========================================================================
Cash payments:
  Interest (net of capitalized interest)              $ 27,424    $ 29,084
  Income taxes                                        $(48,073)   $  1,000
--------------------------------------------------------------------------

(8)  Litigation

On September 6, 1994, Cost Management Services, Inc. ("Cost Management"), a
Mercer Island, Washington, company involved in the purchase and resale of
natural gas, filed an action against WNG in District Court. Cost Management
alleged that WNG monopolized or attempted to monopolize the market for the
sale of natural gas in central western Washington.  Cost Management also
alleged WNG failed to charge its customers in accordance with the prices,
terms and conditions set forth in tariffs filed by WNG with the Washington
Commission and that it wrongfully interfered with Cost Management's
relationships with its customers.  Cost Management sought injunctive relief
and damages in an unspecified amount.  WNG filed a motion to dismiss the
lawsuit, which was granted on May 5, 1995.  In dismissing Cost Management's
action the court ruled that the state action doctrine provides antitrust
immunity for conduct pursuant to a clearly articulated and actively
supervised state policy, where unfettered competition is replaced with
regulation.  In dismissing the federal antitrust claims, the court declined
to retain jurisdiction over Cost Management's state law claims, which were
dismissed without prejudice.  Cost Management then filed its state claims in
Superior Court.  That case was stayed by agreement of the parties, pending
resolution of the federal court action.  Cost Management filed an appeal of
the federal court dismissal in the Court of Appeals.  The parties on November
22, 1995, filed briefs with the Court of Appeals and arguments were presented
on August 8, 1996.  The Court of Appeals
issued a decision which reversed the District Court's dismissal of the case
and remanded the case to the District Court for rehearing.  The Court of
Appeals ruled if Cost Management's claims were assumed to be true for
purposes of the Appellate Review, the lower court's dismissal was improper.
No ruling was made on the merits of any of Cost Management's claims.  Neither
the outcome nor the financial exposure from this lawsuit can be predicted at
this time.

(9)  Other

In the first quarter of 1997, the Company recorded an income tax refund of
$57 million associated with the method of accounting for taxes related to
conservation expenditures for the years 1991-1994.  The benefit of the tax
refund, as a result of an agreement between the Company and the Washington
Commission, was passed on to retail customers as a $48.6 million reduction of
the PRAM accrued revenue balance.  The $48.6 million reduction in revenues
was offset by a $17 million decrease in federal income taxes related to the
reduction in PRAM revenues, a $26.5 million reduction in federal income taxes
as a result of the change in accounting for conservation expenditures, $4.6
million in interest income (net of tax) relating to the tax refund and a $.8
million reduction in other taxes.  The overall affect of recording the
conservation tax refund and the related PRAM entries was an increase to net
income of approximately $.3 million.

In February 1997 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 "Earnings Per Share" ("Statement No.
128").  Statement No. 128 simplifies the standards for computing earnings per
share.  The Company will adopt Statement No. 128 for the year ending December
31, 1997.  Management believes that it will not have a material impact on the
computation of earnings per share.
<PAGE>
ITEM 2

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion reflects the combined results of the Company,
formerly Puget Sound Power & Light Company, and Washington Energy Company.

Net income for the three months ended March 31, 1997, was $30 million on
operating revenues of $463.3 million, compared with net income of $66.2
million on operating revenues of $487.1 million for the same period in 1996.
Income for common stock was $24.4 million for the first quarter of 1997
compared to $60.7 million for the first quarter of 1996.  Earnings per share
were $0.29 for the first quarter of 1997 compared to $0.72 for the first
quarter of 1996 based on 84.5 million and 84.4 million weighted average
common shares outstanding, respectively.

The decrease in net income and earnings per share reflects an after-tax
charge of $36.3 million (43 cents per share) for costs related to the merger
including transaction expenses, employee separation and system and
facilities integration.  Net income also includes an after-tax charge of
$2.6 million (3 cents per share), to write off the Company's remaining
investment in undeveloped coal reserves and related activities in
southeastern Montana.  Excluding the impact of these charges, continuing
operations produced quarterly earnings of $.75 per share, a 4 percent
increase compared to combined earnings of $.72 per share for the Company and
WECo during the same quarter one year ago.

Total kilowatt-hour sales were 6.8 billion, including 1.1 billion in sales
to other utilities, for the first quarter of 1997, compared to 6.7 billion,
including 1.0 billion in sales to other utilities, for the first quarter of
1996.

Total gas volumes were 370.2 million therms, including 76.2 million therms
in transportation volumes for the three months ended March 31, 1997,
compared to 352.6 million therms, including 68.3 million therms of
transportation, for the same period in 1996.

The Company's operating revenues and associated expenses are not generated
evenly during the year.  Variations in energy usage by consumers do occur
from season to season and from month to month within a season, primarily as
a result of weather conditions.  The Company normally experiences its
highest energy sales in the first and fourth quarters of the year.  Electric
sales to other utilities also vary by quarter and year depending principally
upon water conditions for the generation of hydroelectric power, customer
usage and the energy requirements of other utilities.

Temperatures during the three months ended March 31, 1997, averaged 42.5
degrees, compared to a 30-year average of 43.1 degrees and an average of
43.1 degrees during the same period in 1996.

<PAGE>
                          Comparative Periods Ending
                       March 31, 1997 vs. March 31, 1996
                             Increase (Decrease)

                                                      Three Month Periods
                                                      -------------------
                                                         (In Millions)

Operating revenue changes
  PRAM revenues                                             $(86.2)
  BPA Residential Purchase & Sale Agreement                   (0.3)
  Sales to other utilities                                     4.7
  Load and other changes                                      50.2
  Gas revenue change                                           7.8
                                                              -----
    Total operating revenue change                           (23.8)

Operating expense changes
  Energy Costs:
    Purchased electricity                                      7.2
    Purchased gas                                              2.5
  Utility operations and maintenance                           3.3
  Other operations and maintenance                            (1.2)
  Depreciation and amortization                                1.8
  Merger costs                                                55.8
  Taxes other than federal income taxes                        0.7
  Federal income taxes                                       (56.3)
                                                              -----
    Total operating expense change                            13.8

Other income                                                   3.1

Interest charges                                              (0.5)
                                                              -----
  Income from continuing operations                         $(34.0)

Discontinued operations                                        2.2
                                                             -----
  Net income change                                         $(36.2)
                                                              ====

The following is additional information pertaining to the changes outlined
in the above table.

  Operating Revenues - Electric
  
  Operating revenues for the three months ended March 31, 1997 include a
  $48.6 reduction associated with 1991-1994 Conservation IRS tax refund and
  related interest received in the first quarter.  Based on the Company's
  agreement with the Washington Commission, the benefit of the tax refund
  was passed on to retail customers as a reduction of the PRAM accrued
  revenue balance.  The $48.6 million reduction in revenues was offset by
  reductions in federal and state taxes by a reduction in interest expense
  and an increase in interest income.
  
  PRAM revenues also decreased in the first quarter of 1997 compared to the
  prior year due to the elimination of the PRAM effective September 30,
  1996, under a stipulated negotiated settlement approved by the Washington
  Commission.  Overcollection of the PRAM which resulted from the pass-
  through of the tax refunds discussed above, will be refunded to customers
  in the second quarter of 1997.  Also, on September 30, 1996, the
  Washington Commission issued an order granting a joint motion by the
  Company and the Washington Commission Staff to transfer annual revenues of
  $165.5 million which were being collected in PRAM rates to the Company's
  permanent rate schedules.
  
  Revenues in 1997 and 1996 were reduced because of the credit that the
  Company received through the Residential Purchase and Sale Agreement with
  the Bonneville Power Administration ("BPA").  The agreement enables the
  Company's residential and small farm customers to receive the benefits of
  lower-cost federal power.  On January 29, 1997, the Company and BPA signed
  a Residential Exchange Termination Agreement.  The Agreement ends the
  Company's participation in the Residential Purchase and Sale agreement
  with BPA.  As part of the Termination Agreement, the Company will receive
  payments by the BPA of approximately $235 million over five years.  Under
  the rate plan approved by the Washington Commission in its merger order,
  the Company will continue to reflect, in customers' bills, the current
  level of Residential Exchange benefits.  Over the five year period, it is
  projected that the Company will credit customers approximately $250
  million more than it will receive from BPA.  The Company expects the
  difference will be made up through the general rate increase approved in
  the merger order and additional reductions in operating expenses.
  
  Revenues from kilowatt-hour sales, excluding PRAM, were higher in the
  first quarter of 1997 as compared to the same period in 1996 due to
  continued growth in the number of customers and slightly colder
  temperatures in the Company's service territory in the first quarter of
  1997 as compared to the same period in 1996.
  
  Operating Revenues - Gas
  
  Gas operating revenues for the quarter ended March 31, 1997 increased by
  $7.8 million from the prior year quarter. Total gas volumes increased 5%
  from 352.6 million therms to 370.2 million therms. During the quarter,
  there was some shifting of commercial and industrial customers from
  interruptible sales to transportation service.  This resulted in a
  decrease in interruptible gas sales revenue from $8.2 million to $6.7
  million. In the current rate design, the Company earns the same margin on
  transportation service as it does on large volume gas sales.  The primary
  reason for the increase in gas sales volumes and gas sales revenues in the
  quarter ended March 31, 1997, was increased load due to customer growth of
  approximately 20,000 compared to March 1996 and slightly colder
  temperatures in the Company's service territory in the first quarter of
  1997 as compared to the same period in 1996.
  
  Operating Expenses
  
  Purchased electricity expenses increased $7.2 million for the first
  quarter of 1997 compared to the same period in 1996.  The increase was due
  primarily to decreased credits of $9.7 million associated with the
  Residential Purchase and Sale Agreement with BPA.  The decrease in funding
  of these credits was partially offset by lower levels of firm purchased
  power expense.
  
  Purchased gas expenses increased $2.5 million for the first quarter of
  1997 compared to the first quarter of 1996 primarily due to increased
  volumes of purchases to serve increased customer growth.
  
  Operations and maintenance expenses increased $2.1 million in the first
  quarter of 1997 compared to the same period in 1996.  The increase was due
  primarily to a $0.8 million increase in amortization expense associated
  with the Company's  conservation program and a $1.0 million increase in
  electric distribution expenses related to storm damage restoration
  repairs.
  
  Depreciation and amortization expense increased $1.8 million for the first
  quarter of 1997 from the same period in 1996 due to the effects of new
  plant placed into service during the past year.
  
  Merger related costs recorded in the quarter were $55.8 million including
  amounts related to transaction expenses, employee separation and systems
  and facilities integration. On an after-tax basis the charge was $36.3
  million or 43 cents per share.  (See Footnote 2 to the Consolidated
  Financial Statements)
  
  Federal income taxes decreased $56.3 million for the first quarter of 1997
  from the same period in 1996 due to a number of factors.  An IRS tax
  refund related to the method of accounting for taxes on conservation
  expenditures decreased federal income taxes by $26.5 million.  In
  addition, there was a $17.0 million reduction associated with a decrease
  in PRAM revenues of $48.6 million.  Merger costs expensed in the first
  quarter further reduced federal income taxes by $19.3 million.  These
  decreases were partially offset by an increase of $6.1 million due to
  higher pre-tax operating income from continuing operations.
  
  AFUDC, which does not represent current cash income, is normally included
  in other income and as an offset to interest expense.  For the three month
  periods ending March 31, 1997 and March 31, 1996, AFUDC was $1.2 million
  and $1.5 million, respectively.
  
  Other Income
  
  Other income, net of federal income tax, increased $3.1 million in the
  first quarter of 1997 from the same period in 1996.  The increase was due
  primarily as a result of interest income from the IRS on the Conservation
  Tax Refund.
  
  Interest Charges
  
  Interest charges, which consist of interest and amortization on long-term
  debt and other interest, decreased $0.5 million for the first quarter of
  1997 compared to the same period in 1996 due to lower levels of
  outstanding short-term debt and lower short-term interest rates.
  
Construction expenditures (excluding AFUDC and AFUCE) for the first quarter
of 1997 were $63.8 million, including $.4 million of energy conservation
expenditures, compared to $50.0 million, including $1.7 million of energy
conservation expenditures, for the first quarter of 1996.  Construction
expenditures (excluding AFUDC and AFUCE) for 1997 and 1998 are expected to
be $247 million and $249 million, respectively.  Cash provided by operations
(net of dividends, AFUDC and AFUCE) as a percentage of construction
expenditures (excluding AFUDC and AFUCE) were 130% and 297% for the first
quarters of 1997 and 1996, respectively.  Construction expenditure estimates
are subject to periodic review and adjustment.

On March 31, 1997, the Company had available $401.5 million in lines of
credit with various banks, which provide credit support for outstanding
commercial paper of $249.9 million, effectively reducing the available
borrowing capacity under these lines of credit to $151.6 million.  In
addition, the Company has agreements with several banks to borrow on an
uncommitted, as available, basis at money-market rates quoted by the banks.
There are no costs, other than interest, for these arrangements.

In February 1997 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 "Earnings Per Share" ("Statement No.
128").  Statement No. 128 simplifies the standards for computing earnings per
share.  The Company will adopt Statement No. 128 for the year ending December
31, 1997.  Management believes that it will not have a material impact on the
computation of earnings per share.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1  - LEGAL PROCEEDINGS

Contingencies arising out of the normal course of the Company's business,
exist at March 31, 1997.  The ultimate resolution of these issues is not
expected to have a material adverse impact on the financial condition,
results of operations or liquidity of the Company.

Item 6.  Exhibits and Reports on Form 8-K

    (a)  The following exhibit is filed herewith:

         27    Financial Data Schedule

    (b)   Reports on Form 8-K

           1.  Form 8-K dated February 10, 1997, Item 2 - Acquisition or
               Disposition of Assets, announcing final approval by the
               Boards of Directors to merge Washington Energy Company and
               Puget Sound Power & Light Company following regulatory
               approval.  Also, announcing that public trading of Puget
               Sound Energy common stock would begin on Tuesday, February
               11, 1997 under the NYSE symbol, PSD.

           2.  Form 8-K dated February 25, 1997, Item 5 - Other Events,
               related to Puget Sound Energy, Inc. and the Montana Power
               Company signing agreements settling and dismissing a pending
               litigation matter and resolving two arbitrable disputes
               regarding coal prices.

<PAGE>
                               SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                           PUGET SOUND ENERGY, INC.


                                             James W. Eldredge
                                        _____________________________
                                             James W. Eldredge
                                        Corporate Secretary and Controller

Date: May 15, 1997                      Chief accounting officer and officer
                                        duly authorized to sign this report
                                        on behalf of the registrant