----

| [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 March 31, 2010, February 6, 2009 to March 31, 2009 (Successor) and January 1, 2009 to February 5, 2009 (Predecessor)               |   |
|     | Consolidated Statements of Comprehensive Income – Three Months Ended March 31, 2010, February 6, 2009 to March 31, 2009 (Successor) and January 1, 2009 to February 5, 2009 (Predecessor) |   |
|     | Consolidated Balance Sheets – March 31, 2010 and December 31, 2009                                                                                                                        |   |
|     | Consolidated Statement of Cash Flows – Three Months Ended March 31, 2010, February 6, 2009 to March 31, 2009 (Successor) and January 1, 2009 to February 5, 2009 (Predecessor)            |   |
|     |                                                                                                                                                                                            |   |
|     | Puget Sound Energy, Inc.                                                                                                                                                                        |   |
|     | Consolidated Statements of Income – Three Months Ended March 31, 2010 and 2009                                                                                                            |   |
|     | Consolidated Statements of Comprehensive Income – Three Months Ended March 31, 2010 and 2009                                                                                              |   |
|     | Consolidated Balance Sheets – March 31, 2010 and December 31, 2009                                                                                                                        |   |
|     | Consolidated Statement of Cash Flows – Three Months Ended March 31, 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                                     |
| 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                        |
| NERC                  | North American Electric Reliability Corporation              |
| Ninth Circuit         | United States Court of Appeals for the Ninth Circuit         |
| 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                                           |
| PURPA                 | Public Utility Regulatory Policies Act                       |
| REP                   | Residential Exchange Program                                 |
| VIE                   | Variable Interest Entity                                     |
| Washington Commission | Washington Utilities and Transportation Commission           |
| WSPP                  | Western System Power Pool                                    |

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, operation, maintenance and construction of 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 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 (NERC) or the Western Electricity Coordinating Council (WECC) 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 revenues, 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 delivery energy supply to its customers; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Changes in climate or weather conditions in the Pacific Northwest, which could have effects on customer usage and PSE’s revenues 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 on the cost of procuring such supplies; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Variable hydrologic 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 PSE or Puget Energy 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

PUGET ENERGY, INC.

|                                                  | Successor                       |    |                                   | Predecessor |    |
|-------------------------------------------------------|---------------------------------|---------|----------------------------------------|-------------|---------|
|                                                  | Three Months EndedMarch 31,2010 |    | February 6, 2009 –March 31, 2009 |        |    | January 1, 2009 –February 5, 2009 |   |
| Operating revenues:                                   |                            |    |                                   |        |    |   |   |
| Electric                                              | $                               | 554,635 |                                   | $           | 386,612 |   |   | $ | 213,618 |   |
| Gas                                                   |                            | 322,405 |                                   |        | 316,435 |   |   |   | 190,001 |   |
| Other                                                 |                            | 1,166   |                                   |        | 795     |   |   |   | 94 |   |
| Total operating revenues                              |                            | 878,206 |                                   |        | 703,842 |   |   |   | 403,713 |   |
| Operating expenses:                                   |                            |    |                                   |        |    |   |   |   |   |   |
| Energy costs:                                         |                            |    |                                   |        |    |   |   |   |   |   |
| Purchased electricity                                 |                            | 254,163 |                                   |        | 169,416 |   |   |   | 90,737 |   |
| Electric generation fuel                              |                            | 56,245  |                                   |        | 36,166  |   |   |   | 11,961 |   |
| Residential exchange                                  |                            | (22,462 | )                                      |        | (19,862 | ) |   |   | (12,542 | ) |
| Purchased gas                                         |                            | 176,864 |                                   |        | 199,138 |   |   |   | 120,925 |   |
| Net unrealized (gain) loss on derivative instruments  |                            | 60,648  |                                   |        | (12,118 | ) |   |   | 3,867 |   |
| Utility operations and maintenance                    |                            | 116,179 |                                   |        | 77,243  |   |   |   | 37,650 |   |
| Non-utility expense and other                         |                            | 3,602   |                                   |        | 2,471   |   |   |   | 112 |   |
| Merger and related costs                              |                            | --      |                                   |        | 2,479   |   |   |   | 44,324 |   |
| Depreciation                                          |                            | 70,528  |                                   |        | 44,222  |   |   |   | 21,773 |   |
| Amortization                                          |                            | 15,468  |                                   |        | 10,397  |   |   |   | 4,969 |   |
| Conservation amortization                             |                            | 18,153  |                                   |        | 13,237  |   |   |   | 7,592 |   |
| Taxes other than income taxes                         |                            | 83,415  |                                   |        | 64,407  |   |   |   | 36,935 |   |
| Total operating expenses                              |                            | 832,803 |                                   |        | 587,196 |   |   |   | 368,303 |   |
| Operating income                                      |                            | 45,403  |                                   |        | 116,646 |   |   |   | 35,410 |   |
| Other income (deductions):                            |                            |    |                                   |        |    |   |   |   |   |   |
| Other income                                          |                            | 12,000  |                                   |        | 6,279   |   |   |   | 3,653 |   |
| Other expense                                         |                            | (989    | )                                      |        | (7,073  | ) |   |   | (369 | ) |
| Interest charges:                                     |                            |    |                                   |        |    |   |   |   |   |   |
| AFUDC                                                 |                            | 2,750   |                                   |        | 1,331   |   |   |   | 350 |   |
| Interest expense                                      |                            | (82,713 | )                                      |        | (43,151 | ) |   |   | (17,291 | ) |
| Income from continuing operations before income taxes |                            | (23,549 | )                                      |        | 74,032  |   |   |   | 21,753 |   |
| Income tax (benefit) expense                          |                            | (4,358  | )                                      |        | 21,972  |   |   |   | 8,997 |   |
| Net income (loss)                                     | $                               | (19,191 | )                                      | $           | 52,060  |   |   | $ | 12,756 |   |

PUGET ENERGY, INC.

|                                                                                                                                                  | Successor                        |    |                                  | Predecessor |    |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------|---------|---------------------------------------|-------------|---------|
|                                                                                                                                                  | Three Months EndedMarch 31, 2010 |    | February 6, 2009 –March 31,2009 |        |    | January 1, 2009 – February 5,2009 |   |
| Net income (loss)                                                                                                                                     | $                                | (19,191 | )                                     | $           | 52,060  |   |   | $ | 12,756 |   |
| Other comprehensive income:                                                                                                                           |                             |    |                                  |        |    |   |   |   |   |   |
| Net unrealized loss on interest rate swaps during the period, net of tax of $(9,394), $(14,438) and $0, respectively                                  |                             | (17,446 | )                                     |        | (26,813 | ) |   |   | -- |   |
| Reclassification of net unrealized loss on interest rate swaps during the period, net of tax of $2,987, $1,720 and $0, respectively                   |                             | 5,547   |                                  |        | 3,194   |   |   |   | -- |   |
| Net unrealized gain (loss) from pension and postretirement plans, net of tax of $(453), $0 and $170, respectively                                     |                             | (841    | )                                     |        | --      |   |   |   | 315 |   |
| Net unrealized loss on energy derivative instruments during the period, net of tax of $0, $(16,060) and $(13,010), respectively                       |                             | --      |                                  |        | (29,826 | ) |   |   | (24,162 | ) |
| Reclassification of net unrealized loss on energy derivative instruments settled during the period, net of tax of $531, $434 and $2,428, respectively |                             | 987     |                                  |        | 805     |   |   |   | 4,509 |   |
| Amortization of financing cash flow hedge contracts to earnings, net of tax of $0, $0 and $15, respectively                                           |                             | --      |                                  |        | --      |   |   |   | 26 |   |
| Other comprehensive income (loss)                                                                                                                     |                             | (11,753 | )                                     |        | (52,640 | ) |   |   | (19,312 | ) |
| Comprehensive income (loss)                                                                                                                           | $                                | (30,944 | )                                     | $           | (580    | ) |   | $ | (6,556 | ) |

PUGET ENERGY, INC.

|                                                                                            |   | March 31,2010 |       | December 31, 2009 |   |
|-------------------------------------------------------------------------------------------------|--------|---------------|------------|-------------------|--------|
| Utility plant (including construction work in progress of $358,322 and $358,732, respectively): |   |          |       |              |   |
| Electric plant                                                                                  |   | $             | 4,746,181  |              | $      | 4,705,900 |   |
| Gas plant                                                                                       |   |          | 2,025,278  |              |   | 1,995,219 |   |
| Common plant                                                                                    |   |          | 302,525    |              |   | 284,758 |   |
| Less: Accumulated depreciation and amortization                                                 |   |          | (283,603   | )                 |   | (185,474 | ) |
| Net utility plant                                                                               |   |          | 6,790,381  |              |   | 6,800,403 |   |
| Other property and investments:                                                                 |   |          |       |              |   |   |   |
| Goodwill                                                                                        |   |          | 1,656,513  |              |   | 1,656,513 |   |
| Investment in Bonneville Exchange Power contract                                                |   |          | 25,568     |              |   | 26,450 |   |
| Other property and investments                                                                  |   |          | 126,605    |              |   | 127,073 |   |
| Total other property and investments                                                            |   |          | 1,808,686  |              |   | 1,810,036 |   |
| Current assets:                                                                                 |   |          |       |              |   |   |   |
| Cash and cash equivalents                                                                       |   |          | 78,507     |              |   | 78,527 |   |
| Restricted cash                                                                                 |   |          | 17,343     |              |   | 19,844 |   |
| Accounts receivable, net of allowance for doubtful accounts                                     |   |          | 291,911    |              |   | 320,016 |   |
| Unbilled revenues                                                                               |   |          | 138,663    |              |   | 208,948 |   |
| Materials and supplies, at average cost                                                         |   |          | 87,421     |              |   | 75,035 |   |
| Fuel and gas inventory, at average cost                                                         |   |          | 81,749     |              |   | 96,483 |   |
| Unrealized gain on derivative instruments                                                       |   |          | 16,548     |              |   | 14,948 |   |
| Income taxes                                                                                    |   |          | 112,320    |              |   | 134,617 |   |
| Prepaid expense and other                                                                       |   |          | 12,740     |              |   | 13,117 |   |
| Power contract acquisition adjustment gain                                                      |   |          | 173,101    |              |   | 169,171 |   |
| Deferred income taxes                                                                           |   |          | 64,505     |              |   | 39,977 |   |
| Total current assets                                                                            |   |          | 1,074,808  |              |   | 1,170,683 |   |
| Other long-term and regulatory assets:                                                          |   |          |       |              |   |   |   |
| Regulatory assets for deferred income taxes                                                     |   |          | 85,226     |              |   | 89,303 |   |
| Regulatory asset for PURPA buyout costs                                                         |   |          | 68,779     |              |   | 78,162 |   |
| Power cost adjustment mechanism                                                                 |   |          | 15,824     |              |   | 8,529 |   |
| Regulatory assets related to power contracts                                                    |   |          | 179,767    |              |   | 210,340 |   |
| Other regulatory assets                                                                         |   |          | 812,005    |              |   | 751,999 |   |
| Unrealized gain on derivative instruments                                                       |   |          | 5,074      |              |   | 25,459 |   |
| Power contract acquisition adjustment gain                                                      |   |          | 811,717    |              |   | 865,020 |   |
| Other                                                                                           |   |          | 91,994     |              |   | 90,206 |   |
| Total other long-term and regulatory assets                                                     |   |          | 2,070,386  |              |   | 2,119,018 |   |
| Total assets                                                                                    |   | $             | 11,744,261 |              | $      | 11,900,140 |   |

|                                                                          |   | March 31,2010 |       | 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 reinvested in the business                                           |   |          | 17,603     |             |   | 91,024 |   |
| Accumulated other comprehensive income (loss) – net of tax              |   |          | 11,734     |             |   | 23,487 |   |
| Total common shareholder’s equity                                       |   |          | 3,338,294  |             |   | 3,423,468 |   |
| Long-term debt:                                                               |   |          |       |             |   |   |   |
| PSE first mortgage bonds and senior notes                                     |   |          | 2,703,860  |             |   | 2,638,860 |   |
| PSE junior subordinated notes                                                 |   |          | 250,000    |             |   | 250,000 |   |
| Puget Energy long-term debt                                                   |   |          | 1,154,270  |             |   | 1,151,838 |   |
| Total long-term debt                                                          |   |          | 4,108,130  |             |   | 4,040,698 |   |
| Total capitalization                                                          |   |          | 7,446,424  |             |   | 7,464,166 |   |
| Current liabilities:                                                          |   |          |       |             |   |   |   |
| Accounts payable                                                              |   |          | 253,039    |             |   | 321,287 |   |
| Short-term debt                                                               |   |          | 40,000     |             |   | 105,000 |   |
| Current maturities of long-term debt                                          |   |          | 267,000    |             |   | 232,000 |   |
| Accrued expenses:                                                             |   |          |       |             |   |   |   |
| Purchased gas liability                                                       |   |          | 7,823      |             |   | 49,587 |   |
| Taxes                                                                         |   |          | 83,243     |             |   | 77,302 |   |
| Salaries and wages                                                            |   |          | 21,626     |             |   | 30,654 |   |
| Interest                                                                      |   |          | 53,847     |             |   | 52,540 |   |
| Unrealized loss on derivative instruments                                     |   |          | 261,561    |             |   | 168,783 |   |
| Power contract acquisition adjustment loss                                    |   |          | 84,641     |             |   | 94,223 |   |
| Other                                                                         |   |          | 131,633    |             |   | 194,786 |   |
| Total current liabilities                                                     |   |          | 1,204,413  |             |   | 1,326,162 |   |
| Long-term and regulatory liabilities:                                         |   |          |       |             |   |   |   |
| Deferred income taxes                                                         |   |          | 1,160,323  |             |   | 1,147,667 |   |
| Unrealized loss on derivative instruments                                     |   |          | 142,826    |             |   | 89,717 |   |
| Regulatory liabilities                                                        |   |          | 280,345    |             |   | 261,990 |   |
| Regulatory liabilities related to power contracts                             |   |          | 984,818    |             |   | 1,034,192 |   |
| Power contract acquisition adjustment loss                                    |   |          | 96,137     |             |   | 117,272 |   |
| Other deferred credits                                                        |   |          | 428,975    |             |   | 458,974 |   |
| Total long-term and regulatory liabilities                                    |   |          | 3,093,424  |             |   | 3,109,812 |   |
| Commitments and contingencies                                                 |   |          |       |             |   |   |   |
| Total capitalization and liabilities                                          |   | $             | 11,744,261 |             | $      | 11,900,140 |   |

PUGET ENERGY, INC.

|                                                                              | Successor                       |     |                                   | Predecessor |     |
|-----------------------------------------------------------------------------------|---------------------------------|----------|----------------------------------------|-------------|----------|
|                                                                              | Three Months EndedMarch 31,2010 |     | February 6, 2009 –March 31, 2009 |        |     | January 1, 2009 – February 5, 2009 |   |
| Operating activities:                                                             |                            |     |                                   |        |     |   |   |
| Net income                                                                        | $                               | (19,191  | )                                      | $           | 52,060   |   |   | $ | 12,756 |   |
| Adjustments to reconcile net income to net cash provided by operating activities: |                            |     |                                   |        |     |   |   |   |   |   |
| Depreciation                                                                      |                            | 70,528   |                                   |        | 44,222   |   |   |   | 21,773 |   |
| Amortization                                                                      |                            | 15,468   |                                   |        | 10,397   |   |   |   | 4,969 |   |
| Conservation amortization                                                         |                            | 18,153   |                                   |        | 13,237   |   |   |   | 7,592 |   |
| Deferred income taxes and tax credits, net                                        |                            | (2,758   | )                                      |        | 26,085   |   |   |   | (512 | ) |
| Amortization of gas pipeline capacity assignment                                  |                            | (2,129   | )                                      |        | (1,517   | ) |   |   | (791 | ) |
| Non cash return on regulatory assets                                              |                            | (2,396   | )                                      |        | (1,579   | ) |   |   | (800 | ) |
| Net unrealized loss (gain) on derivative instruments                              |                            | 60,648   |                                   |        | (12,118  | ) |   |   | 3,867 |   |
| Power cost adjustment mechanism                                                   |                            | (7,295   | )                                      |        | (13      | ) |   |   | (7 | ) |
| Deferred regulatory costs for generation facilities                               |                            | (9,084   | )                                      |        | (2,006   | ) |   |   | (3,443 | ) |
| Pension funding                                                                   |                            | (6,500   | )                                      |        | --       |   |   |   | -- |   |
| Change in residential exchange program                                            |                            | 1,773    |                                   |        | 4,403    |   |   |   | 1,927 |   |
| Derivative contracts classified as financing activities due to merger             |                            | 158,770  |                                   |        | 147,704  |   |   |   | -- |   |
| Other                                                                             |                            | 23,796   |                                   |        | 31,669   |   |   |   | 5,237 |   |
| Change in certain current assets and liabilities:                                 |                            |     |                                   |        |     |   |   |   |   |   |
| Accounts receivable and unbilled revenue                                          |                            | 98,391   |                                   |        | 74,465   |   |   |   | (31,332 | ) |
| Materials and supplies                                                            |                            | (12,386  | )                                      |        | 117      |   |   |   | (3,388 | ) |
| Fuel and gas inventory                                                            |                            | 14,733   |                                   |        | 24,866   |   |   |   | 7,605 |   |
| Income taxes                                                                      |                            | 22,297   |                                   |        | (19,639  | ) |   |   | 18,277 |   |
| Prepayments and other                                                             |                            | 26       |                                   |        | (19,319  | ) |   |   | (3,295 | ) |
| Purchased gas payable                                                             |                            | (41,764  | )                                      |        | 19,121   |   |   |   | 1,711 |   |
| Accounts payable                                                                  |                            | (33,780  | )                                      |        | (152,305 | ) |   |   | (40,203 | ) |
| Taxes payable                                                                     |                            | 5,941    |                                   |        | 22,795   |   |   |   | (3,340 | ) |
| Accrued expenses and other                                                        |                            | (1,548   | )                                      |        | (43,432  | ) |   |   | 59,172 |   |
| Net cash provided by operating activities                                         |                            | 351,693  |                                   |        | 219,213  |   |   |   | 57,775 |   |
| Investing activities:                                                             |                            |     |                                   |        |     |   |   |   |   |   |
| Construction expenditures – excluding equity AFUDC                          |                            | (184,424 | )                                      |        | (129,777 | ) |   |   | (49,531 | ) |
| Energy efficiency expenditures                                                    |                            | (25,686  | )                                      |        | (11,652  | ) |   |   | (4,918 | ) |
| Treasury grant payment received                                                   |                            | 28,675   |                                   |        | --       |   |   |   | -- |   |
| Restricted cash                                                                   |                            | 2,501    |                                   |        | 2,911    |   |   |   | (10 | ) |
| Other                                                                             |                            | 2,927    |                                   |        | 4,001    |   |   |   | 959 |   |
| Net cash used in investing activities                                             |                            | (176,007 | )                                      |        | (134,517 | ) |   |   | (53,500 | ) |
| Financing activities:                                                             |                            |     |                                   |        |     |   |   |   |   |   |
| Change in short-term debt and leases, net                                         |                            | (65,059  | )                                      |        | 113,809  |   |   |   | (151,800 | ) |
| Dividends paid                                                                    |                            | (54,230  | )                                      |        | (68,594  | ) |   |   | -- |   |
| Long-term notes and bonds issued                                                  |                            | 325,000  |                                   |        | 50,211   |   |   |   | 250,000 |   |
| Redemption of preferred stock                                                     |                            | --       |                                   |        | --       |   |   |   | (1,889 | ) |
| Redemption of bonds and notes                                                     |                            | (225,000 | )                                      |        | (150,000 | ) |   |   | -- |   |
| Derivative contracts classified as financing activities due to merger             |                            | (158,770 | )                                      |        | (147,704 | ) |   |   | -- |   |
| Issuance costs of bonds and other                                                 |                            | 2,353    |                                   |        | (13,337  | ) |   |   | 7,133 |   |
| Net cash (used in) provided by financing activities                               |                            | (175,706 | )                                      |        | (215,615 | ) |   |   | 103,444 |   |
| Net increase (decrease) in cash and cash equivalents                              |                            | (20      | )                                      |        | (130,919 | ) |   |   | 107,719 |   |
| Cash and cash equivalents at beginning of year                                    |                            | 78,527   |                                   |        | 231,961  |   |   |   | 38,526 |   |
| Cash and cash equivalents at end of year                                          | $                               | 78,507   |                                   | $           | 101,042  |   |   | $ | 146,245 |   |
| Supplemental cash flow information:                                               |                            |     |                                   |        |     |   |   |   |   |   |
| Cash payments for interest (net of capitalized interest)                          | $                               | 66,345   |                                   | $           | 44,286   |   |   | $ | 1,239 |   |
| Cash payments (refunds) for income taxes                                          |                            | (22,513  | )                                      |        | (271     | ) |   |   | -- |   |

PUGET SOUND ENERGY, INC.

|                                                 | Three Months EndedMarch 31 |    |
|------------------------------------------------------|----------------------------|---------|
|                                                 | 2010                       |    | 2009 |   |
| Operating revenues:                                  |                       |    |   |   |
| Electric                                             | $                          | 554,635 |   | $ | 600,230 |   |
| Gas                                                  |                       | 322,405 |   |   | 506,436 |   |
| Other                                                |                       | 1,166   |   |   | 889 |   |
| Total operating revenues                             |                       | 878,206 |   |   | 1,107,555 |   |
| Operating expenses:                                  |                       |    |   |   |   |   |
| Energy costs:                                        |                       |    |   |   |   |   |
| Purchased electricity                                |                       | 254,307 |   |   | 260,249 |   |
| Electric generation fuel                             |                       | 56,245  |   |   | 48,127 |   |
| Residential exchange                                 |                       | (22,462 | ) |   | (32,404 | ) |
| Purchased gas                                        |                       | 176,864 |   |   | 320,063 |   |
| Net unrealized (gain) loss on derivative instruments |                       | 113,017 |   |   | 2,330 |   |
| Utility operations and maintenance                   |                       | 116,179 |   |   | 114,893 |   |
| Non-utility expense and other                        |                       | 1,476   |   |   | 1,307 |   |
| Merger and related costs                             |                       | --      |   |   | 27,563 |   |
| Depreciation                                         |                       | 70,528  |   |   | 65,995 |   |
| Amortization                                         |                       | 15,468  |   |   | 15,366 |   |
| Conservation amortization                            |                       | 18,153  |   |   | 20,829 |   |
| Taxes other than income taxes                        |                       | 83,415  |   |   | 101,343 |   |
| Total operating expenses                             |                       | 883,190 |   |   | 945,661 |   |
| Operating income:                                    |                       | (4,984  | ) |   | 161,894 |   |
| Other income (deductions):                           |                       |    |   |   |   |   |
| Other income                                         |                       | 12,000  |   |   | 9,932 |   |
| Other expense                                        |                       | (989    | ) |   | (2,443 | ) |
| Interest charges:                                    |                       |    |   |   |   |   |
| AFUDC                                                |                       | 2,750   |   |   | 1,681 |   |
| Interest expense                                     |                       | (61,622 | ) |   | (52,576 | ) |
| Interest expense on Puget Energy note                |                       | (62     | ) |   | (73 | ) |
| Income before income taxes                           |                       | (52,907 | ) |   | 118,415 |   |
| Income tax (benefit) expense                         |                       | (14,633 | ) |   | 33,438 |   |
| Net income (loss)                                    | $                          | (38,274 | ) | $ | 84,977 |   |

PUGET SOUND ENERGY, INC.

|                                                                                                                                               | Three Months EndedMarch 31 |    |
|----------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------|---------|
|                                                                                                                                               | 2010                       |    | 2009 |   |
| Net income (loss)                                                                                                                                  | $                          | (38,274 | ) | $ | 84,977 |   |
| Other comprehensive income (loss):                                                                                                                 |                       |    |   |   |   |   |
| Net unrealized gain from pension and postretirement plans, net of tax of $291 and $509, respectively                                               |                       | 539     |   |   | 945 |   |
| Net unrealized gain (loss) on energy derivative instruments during the period, net of tax of $26 and $(36,911), respectively                       |                       | 49      |   |   | (68,549 | ) |
| Reclassification of net unrealized loss on energy derivative instruments settled during the period, net of tax of $10,238 and $7,521, respectively |                       | 19,014  |   |   | 13,967 |   |
| Amortization of financing cash flow hedge contracts to earnings, net of tax of $43 and $43, respectively                                           |                       | 80      |   |   | 80 |   |
| Other comprehensive income (loss)                                                                                                                  |                       | 19,682  |   |   | (53,557 | ) |
| Comprehensive income (loss)                                                                                                                        | $                          | (18,592 | ) | $ | 31,420 |   |

PUGET SOUND ENERGY, INC.

|                                                                                                              | March 31,2010 |       | December 31, 2009 |   |
|-------------------------------------------------------------------------------------------------------------------|---------------|------------|-------------------|--------|
| Utility plant: (at original cost, including construction work in progress of $358,322 and $358,732, respectively) |          |       |              |   |
| Electric plant                                                                                                    | $             | 7,090,363  |              | $      | 7,046,379 |   |
| Gas plant                                                                                                         |          | 2,660,819  |              |   | 2,637,003 |   |
| Common plant                                                                                                      |          | 548,694    |              |   | 539,296 |   |
| Less:  Accumulated depreciation and amortization                                                        |          | (3,536,523 | )                 |   | (3,453,165 | ) |
| Net utility plant                                                                                                 |          | 6,763,353  |              |   | 6,769,513 |   |
| Other property and investments:                                                                                   |          |       |              |   |   |   |
| Investment in Bonneville Exchange Power contract                                                                  |          | 25,568     |              |   | 26,450 |   |
| Other property and investments                                                                                    |          | 115,744    |              |   | 116,267 |   |
| Total other property and investments                                                                              |          | 141,312    |              |   | 142,717 |   |
| Current assets:                                                                                                   |          |       |              |   |   |   |
| Cash and cash equivalents                                                                                         |          | 78,428     |              |   | 78,407 |   |
| Restricted cash                                                                                                   |          | 17,343     |              |   | 19,844 |   |
| Accounts receivable, net of allowance for doubtful accounts                                                       |          | 292,019    |              |   | 320,065 |   |
| Unbilled revenues                                                                                                 |          | 138,663    |              |   | 208,948 |   |
| Materials and supplies, at average cost                                                                           |          | 78,348     |              |   | 64,604 |   |
| Fuel and gas inventory, at average cost                                                                           |          | 78,071     |              |   | 95,813 |   |
| Unrealized gain on derivative instruments                                                                         |          | 16,548     |              |   | 14,948 |   |
| Income taxes                                                                                                      |          | 69,556     |              |   | 99,948 |   |
| Prepaid expenses and other                                                                                        |          | 12,042     |              |   | 12,067 |   |
| Deferred income taxes                                                                                             |          | 72,515     |              |   | 38,781 |   |
| Total current assets                                                                                              |          | 853,533    |              |   | 953,425 |   |
| Other long-term and regulatory assets                                                                             |          |       |              |   |   |   |
| Regulatory asset for deferred income taxes                                                                        |          | 85,226     |              |   | 89,303 |   |
| Regulatory asset for PURPA buyout costs                                                                           |          | 68,779     |              |   | 78,162 |   |
| Power cost adjustment mechanism                                                                                   |          | 15,824     |              |   | 8,529 |   |
| Other regulatory assets                                                                                           |          | 738,494    |              |   | 665,272 |   |
| Unrealized gain on derivative instruments                                                                         |          | 1,027      |              |   | 4,605 |   |
| Other                                                                                                             |          | 107,040    |              |   | 105,045 |   |
| Total other long-term and regulatory assets                                                                       |          | 1,016,390  |              |   | 950,916 |   |
| Total assets                                                                                                      | $             | 8,774,588  |              | $      | 8,816,571 |   |

|                                                                                                | March 31,2010 |      | 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                                                                 |          | 219,332   |              |   | 333,128 |   |
| Accumulated other comprehensive income (loss) – net of tax                                    |          | (190,438  | )                 |   | (210,120 | ) |
| Total common shareholder’s equity                                                             |          | 2,988,958 |              |   | 3,083,072 |   |
| Long-term debt:                                                                                     |          |      |              |   |   |   |
| First mortgage bonds and senior notes                                                               |          | 2,703,860 |              |   | 2,638,860 |   |
| Junior subordinated notes                                                                           |          | 250,000   |              |   | 250,000 |   |
| Total long-term debt                                                                                |          | 2,953,860 |              |   | 2,888,860 |   |
| Total capitalization                                                                                |          | 5,942,818 |              |   | 5,971,932 |   |
| Current liabilities:                                                                                |          |      |              |   |   |   |
| Accounts payable                                                                                    |          | 253,039   |              |   | 321,287 |   |
| Short-term debt                                                                                     |          | 40,000    |              |   | 105,000 |   |
| Short-term note owed to Puget Energy                                                                |          | 22,898    |              |   | 22,898 |   |
| Current maturities of long-term debt                                                                |          | 267,000   |              |   | 232,000 |   |
| Accrued expenses:                                                                                   |          |      |              |   |   |   |
| Purchased gas liability                                                                             |          | 7,823     |              |   | 49,587 |   |
| Taxes                                                                                               |          | 83,243    |              |   | 77,302 |   |
| Salaries and wages                                                                                  |          | 21,626    |              |   | 30,654 |   |
| Interest                                                                                            |          | 50,353    |              |   | 47,154 |   |
| Unrealized loss on derivative instruments                                                           |          | 227,769   |              |   | 137,530 |   |
| Other                                                                                               |          | 58,885    |              |   | 104,148 |   |
| Total current liabilities                                                                           |          | 1,032,636 |              |   | 1,127,560 |   |
| Long-term liabilities and regulatory liabilities:                                                   |          |      |              |   |   |   |
| Deferred income taxes                                                                               |          | 1,016,913 |              |   | 996,576 |   |
| Unrealized loss on derivative instruments                                                           |          | 142,826   |              |   | 89,717 |   |
| Regulatory liabilities                                                                              |          | 269,669   |              |   | 250,586 |   |
| Other deferred credits                                                                              |          | 369,726   |              |   | 380,200 |   |
| Total long-term liabilities and regulatory liabilities                                              |          | 1,799,134 |              |   | 1,717,079 |   |
| Commitments and contingencies                                                                       |          |      |              |   |   |   |
| Total capitalization and liabilities                                                                | $             | 8,774,588 |              | $      | 8,816,571 |   |

PUGET SOUND ENERGY, INC.

|                                                                              | Three Months EndedMarch 31 |     |
|-----------------------------------------------------------------------------------|----------------------------|----------|
|                                                                              | 2010                       |     |   | 2009 |   |
| Operating activities:                                                             |                       |     |   |   |   |
| Net income                                                                        | $                          | (38,274  | ) |   | $ | 84,977 |   |
| Adjustments to reconcile net income to net cash provided by operating activities: |                       |     |   |   |   |   |   |
| Depreciation                                                                      |                       | 70,528   |   |   |   | 65,995 |   |
| Amortization                                                                      |                       | 15,468   |   |   |   | 15,366 |   |
| Conservation amortization                                                         |                       | 18,153   |   |   |   | 20,829 |   |
| Deferred income taxes and tax credits, net                                        |                       | (21,237  | ) |   |   | 26,408 |   |
| Amortization of gas pipeline capacity assignment                                  |                       | (2,129   | ) |   |   | (2,308 | ) |
| Non cash return on regulatory assets                                              |                       | (2,396   | ) |   |   | (2,397 | ) |
| Net unrealized loss (gain) on derivative instruments                              |                       | 113,017  |   |   |   | 2,330 |   |
| Power cost adjustment mechanism                                                   |                       | (7,295   | ) |   |   | (20 | ) |
| Deferred regulatory costs for generation facilities                               |                       | (9,084   | ) |   |   | (5,449 | ) |
| Pension funding                                                                   |                       | (6,500   | ) |   |   | -- |   |
| Change in residential exchange program                                            |                       | 1,773    |   |   |   | 6,330 |   |
| Other                                                                             |                       | 20,333   |   |   |   | (16,610 | ) |
| Counterparty collateral deposit                                                   |                       | --       |   |   |   | (5,268 | ) |
| Change in certain current assets and liabilities:                                 |                       |     |   |   |   |   |   |
| Accounts receivable and unbilled revenue                                          |                       | 98,331   |   |   |   | 46,949 |   |
| Materials and supplies                                                            |                       | (13,744  | ) |   |   | (4,693 | ) |
| Fuel and gas inventory                                                            |                       | 17,742   |   |   |   | 46,938 |   |
| Income taxes                                                                      |                       | 30,391   |   |   |   | 7,046 |   |
| Prepayments and other                                                             |                       | 26       |   |   |   | (9,865 | ) |
| Purchased gas payable                                                             |                       | (41,764  | ) |   |   | 20,833 |   |
| Accounts payable                                                                  |                       | (33,780  | ) |   |   | (101,670 | ) |
| Taxes payable                                                                     |                       | 5,941    |   |   |   | 11,530 |   |
| Accrued expenses and other                                                        |                       | (1,244   | ) |   |   | 6,654 |   |
| Net cash provided by operating activities                                         |                       | 214,256  |   |   |   | 213,905 |   |
| Investing activities:                                                             |                       |     |   |   |   |   |   |
| Construction expenditures – excluding equity AFUDC                          |                       | (184,424 | ) |   |   | (179,308 | ) |
| Energy efficiency expenditures                                                    |                       | (25,686  | ) |   |   | (16,570 | ) |
| Treasury grant payment received                                                   |                       | 28,675   |   |   |   | -- |   |
| Restricted cash                                                                   |                       | 2,501    |   |   |   | 2,901 |   |
| Other                                                                             |                       | 2,927    |   |   |   | 4,960 |   |
| Net cash used in investing activities                                             |                       | (176,007 | ) |   |   | (188,017 | ) |
| Financing activities:                                                             |                       |     |   |   |   |   |   |
| Change in short-term debt and leases, net                                         |                       | (65,059  | ) |   |   | (10,376 | ) |
| Dividends paid                                                                    |                       | (75,522  | ) |   |   | (67,871 | ) |
| Issuance of bonds and notes                                                       |                       | 325,000  |   |   |   | 250,000 |   |
| Loan from (payment to) Puget Energy                                               |                       | --       |   |   |   | (6,610 | ) |
| Redemption of trust preferred stock                                               |                       | --       |   |   |   | (1,889 | ) |
| Redemption of bonds and notes                                                     |                       | (225,000 | ) |   |   | (150,000 | ) |
| Investment from parent                                                            |                       | --       |   |   |   | 29,616 |   |
| Issuance cost of bonds and other                                                  |                       | 2,353    |   |   |   | (6,199 | ) |
| Net cash provided by (used in) financing activities                               |                       | (38,228  | ) |   |   | 36,671 |   |
| Net increase (decrease) in cash and cash equivalents                              |                       | 21       |   |   |   | 62,559 |   |
| Cash and cash equivalents at beginning of year                                    |                       | 78,407   |   |   |   | 38,470 |   |
| Cash and cash equivalents at end of period                                        | $                          | 78,428   |   |   | $ | 101,029 |   |
| Supplemental cash flow information:                                               |                       |     |   |   |   |   |   |
| Cash payments for interest (net of capitalized interest)                          | $                          | 53,690   |   |   | $ | 39,709 |   |
| Cash payments (refunds) for income taxes                                          |                       | (22,404  | ) |   |   | (271 | ) |

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

| Puget Energy(Dollars in Thousands)                          | March 31, 2010 |    |   | December 31,2009 |   |
|-------------------------------------------------------------|----------------|---------|--------|------------------|--------|
| Net unrealized loss on energy derivatives during the period | $              | (6,091  | )      |             | $      | (7,078 | ) |
| Net unrealized loss on interest rate swaps                  |           | (15,792 | )      |             |   | (3,893 | ) |
| Net unrealized gain and prior service cost on pension plans |           | 33,617  |   |             |   | 34,458 |   |
| Total Puget Energy, net of tax                              | $              | 11,734  |   |             | $      | 23,487 |   |

| Puget Sound Energy(Dollars in Thousands)                    | March 31, 2010 |     |   | December 31,2009 |   |
|-------------------------------------------------------------|----------------|----------|--------|------------------|--------|
| Net unrealized loss on energy derivatives during the period | $              | (64,094  | )      |             | $      | (83,158 | ) |
| Settlement of cash flow hedge contract                      |           | (7,496   | )      |             |   | (7,574 | ) |
| Net unrealized loss and prior service cost on pension plans |           | (118,848 | )      |             |   | (119,388 | ) |
| Total PSE, net of tax                                       | $              | (190,438 | )      |             | $      | (210,120 | ) |

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

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

| Derivatives Designated as Hedging Instruments |                |
|-----------------------------------------------|---------------------|
|                                          | at March 31, 2010   |   | at December 31, 2009 |   |
| Puget Energy(Dollars in Thousands)            | Asset Derivatives 1 |   | Liability Derivatives 2 |   | Asset Derivatives 1 |   | Liability Derivatives 2 |   |
| Interest rate swaps:                          |                |   |   |   |   |   |   |   |
| Current                                       | $                   | -- |   | $ | 28,344 |   | $ | -- |   | $ | 26,844 |   |
| Long-term                                     |                | 4,047 |   |   | -- |   |   | 20,854 |   |   | -- |   |
| Total derivatives                             | $                   | 4,047 |   | $ | 28,344 |   | $ | 20,854 |   | $ | 26,844 |   |

| Derivatives Not Designated as Hedging Instruments |                |
|---------------------------------------------------|---------------------|
|                                              | at March 31, 2010   |   | at December 31, 2009 |   |
| Puget Energy(Dollars in Thousands)                | Asset Derivatives 1 |   | Liability Derivatives 2 |   | Asset Derivatives 1 |   | Liability Derivatives 2 |   |
| Electric portfolio:                               |                |   |   |   |   |   |   |   |
| Current                                           | $                   | 2,789 |   | $ | 128,121 |   | $ | 4,137 |   | $ | 79,732 |   |
| Long-term                                         |                | 341 |   |   | 104,696 |   |   | 1,003 |   |   | 70,367 |   |
| Gas portfolio: 3                                  |                |   |   |   |   |   |   |   |   |   |   |   |
| Current                                           |                | 13,759 |   |   | 105,096 |   |   | 10,811 |   |   | 62,207 |   |
| Long-term                                         |                | 686 |   |   | 38,130 |   |   | 3,602 |   |   | 19,350 |   |
| Total derivatives                                 | $                   | 17,575 |   | $ | 376,043 |   | $ | 19,553 |   | $ | 231,656 |   |

| 1 | Balance sheet location: Unrealized gain on derivative instruments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2 | Balance sheet location: Unrealized loss on derivative instruments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 3 | Puget Energy had a derivative liability and an offsetting regulatory asset of $128.8 million at March 31, 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 PGA mechanism.  All increases and decreases in the cost of natural gas supply are passed on to customers with the PGA mechanism.  As the gains and losses on the hedges are realized in future periods, they will be recorded as gas costs under the PGA mechanism. |

| Derivatives Not Designated as Hedging Instruments |                |
|---------------------------------------------------|---------------------|
|                                              | at March 31, 2010   |   | at December 31, 2009 |   |
| Puget Sound Energy(Dollars in Thousands)          | Asset Derivatives 1 |   | Liability Derivatives 2 |   | Asset Derivatives 1 |   | Liability Derivatives 2 |   |
| Electric portfolio:                               |                |   |   |   |   |   |   |   |
| Current                                           | $                   | 2,789 |   | $ | 122,673 |   | $ | 4,137 |   | $ | 75,323 |   |
| Long-term                                         |                | 341 |   |   | 104,696 |   |   | 1,003 |   |   | 70,367 |   |
| Gas portfolio: 3                                  |                |   |   |   |   |   |   |   |   |   |   |   |
| Current                                           |                | 13,759 |   |   | 105,096 |   |   | 10,811 |   |   | 62,207 |   |
| Long-term                                         |                | 686 |   |   | 38,130 |   |   | 3,602 |   |   | 19,350 |   |
| Total derivatives                                 | $                   | 17,575 |   | $ | 370,595 |   | $ | 19,553 |   | $ | 227,247 |   |

| 1 | Balance sheet location: Unrealizedgain on derivative instruments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2 | Balance sheet location: Unrealized loss on derivative instruments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 3 | PSE had a derivative liability and an offsetting regulatory asset of $128.8 million at March 31, 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.  As the gains and losses on the hedges are realized in future periods, they will be recorded as gas costs under the PGA mechanism. |

|                               |                      |    | Successor                            |   |    | Predecessor                           |   |
|------------------------------------|---------------------------|---------|--------------------------------------|--------|---------|---------------------------------------|--------|
|                               | March 31,2010             |    | February 6,2009 –March 31,2009 |   |    | January 1,2009 –February 5,2009 |   |
| Puget Energy(Dollars in Thousands) | Net Unrealized(Gain)/Loss |    | Net Unrealized(Gain)/Loss            |   |    | Net Unrealized(Gain)/Loss             |   |
| Gas / Power NPNS                   | $                         | (25,599 | )                                    | $      | (20,583 | )                                     |   | $ | -- |   |
| Gas for power                      |                      | 48,990  |                                 |   | 5,986   |                                  |   |   | 3,696 |   |
| Power exchange                     |                      | (927    | )                                    |   | (894    | )                                     |   |   | (588 | ) |
| Power                              |                      | 38,184  |                                 |   | 4,518   |                                  |   |   | 759 |   |
| Credit reserve                     |                      | --      |                                 |   | (1,145  | )                                     |   |   | -- |   |
| Total unrealized (gain)/loss       | $                         | 60,648  |                                 | $      | (12,118 | )                                     |   | $ | 3,867 |   |

|                                     | March 31,2010             |    | March 31,2009             |   |
|------------------------------------------|---------------------------|---------|---------------------------|--------|
| Puget Sound Energy(Dollars in Thousands) | Net Unrealized(Gain)/Loss |    | Net Unrealized(Gain)/Loss |   |
| Gas for power                            | $                         | 72,205  |                      | $      | 654 |   |
| Power exchange                           |                      | (927    | )                         |   | (1,463 | ) |
| Power                                    |                      | 41,739  |                      |   | 3,106 |   |
| Credit reserve                           |                      | --      |                      |   | 33 |   |
| Total unrealized (gain)/loss             | $                         | 113,017 |                      | $      | 2,330 |   |

| Puget EnergyThree Month EndedMarch 31, 2010(Dollars in Thousands) | Amount of Gain/(Loss) Recognized in OCI on Derivatives 1 |    | Location of Gain/(Loss) Reclassified from Accumulated OCI into Income | Amount of Gain/(Loss) Reclassified from Accumulated OCI into Income |                                                                 | Location of Gain/(Loss) Recognized in Income on Derivatives | Amount of Gain/(Loss) Recognized in Income on Derivatives |                                                 |
|-------------------------------------------------------------------|----------------------------------------------------------|---------|-----------------------------------------------------------------------|---------------------------------------------------------------------|----------------------------------------------------------------------|-------------------------------------------------------------|-----------------------------------------------------------|------------------------------------------------------|
| Derivatives in Cash Flow Hedging Relationships                    | Effective Portion 2                                      |    | Effective Portion 3                                                   |                                                                | Ineffective Portion and Amount Excluded from Effectiveness Testing 3 |                                                        |
| Interest rate contracts:                                          | $                                                        | (17,446 | )                                                                     | Interest expense                                                    | $                                                                    | 8,534                                                       |                                                      |                                                 | $ | -- |   |
| Commodity contracts:  Electric derivatives                   |                                                     | --      |                                                                  | Electric generation fuel                                            |                                                                 | 122                                                         |                                                      | Net unrealized gain   on derivative instruments |   | -- |   |
|   Electric derivatives                                       |                                                     | --      |                                                                  | Purchase electricity                                                |                                                                 | 1,396                                                       |                                                      | Net unrealized loss   on derivative instruments |   | -- |   |
| Total                                                             | $                                                        | (17,446 | )                                                                     |                                                                | $                                                                    | 10,052                                                      |                                                      |                                                 | $ | -- |   |

| 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.                                               |

| Successor February 6, 2009 - March 31, 2009(Dollars in Thousands) | Amount of Gain/(Loss) Recognized in OCI on Derivatives |    | Location of Gain/(loss) Reclassified from Accumulated OCI into Income | Amount of Gain/(Loss) Reclassified from Accumulated OCI into Income |                                                                    | Location ofGain/(Loss)Recognizedin Income on Derivatives | Amount of Gain/(Loss) Recognized in Income on Derivatives |                                                 |
|-------------------------------------------------------------------|--------------------------------------------------------|---------|----------------------------------------------------------------------------|---------------------------------------------------------------------|-------------------------------------------------------------------------|----------------------------------------------------------|-----------------------------------------------------------|------------------------------------------------------|
| Derivatives in Cash Flow Hedging Relationships                    | Effective Portion 1,4                                  |    | Effective Portion 2                                                        |                                                                | Ineffective Portion and Amount Excluded from Effectiveness Testing 2, 3 |                                                     |
| Interest rate contracts:                                          | $                                                      | (23,619 | )                                                                          | Interest expense                                                    | $                                                                       | (4,914                                                   | )                                                         |                                                 | $ | -- |   |
| Commodity contracts:Electric derivatives                          |                                                   | (15,378 | )                                                                          | Electric generation fuel                                            |                                                                    | (715                                                     | )                                                         | Net unrealized loss   on derivative instruments |   | (85 | ) |
| Electric derivatives                                              |                                                   | (13,669 | )                                                                          | Purchased electricity                                               |                                                                    | (524                                                     | )                                                         | Net unrealized loss  on derivative instruments  |   | (4,408 | ) |
| Gas derivatives                                                   |                                                   | --      |                                                                       | Purchased gas                                                       |                                                                    | --                                                       |                                                      | Net unrealized loss   on derivative instruments |   | -- |   |
| Total                                                             | $                                                      | (52,666 | )                                                                          |                                                                | $                                                                       | (6,153                                                   | )                                                         |                                                 | $ | (4,493 | ) |

| Predecessor January 1, 2009 - February 5, 2009(Dollars in Thousands) | Amount of Gain/(Loss) Recognized in OCI on Derivatives |    | Location of Gain/(Loss) Reclassified from Accumulated OCI into Income | Amount of Gain/(Loss) Reclassified from Accumulated OCI into Income |                                                                    | Location ofGain/(Loss)Recognizedin Income on Derivatives | Amount of Gain/(Loss) Recognizedin Income on Derivatives |                                                 |
|----------------------------------------------------------------------|--------------------------------------------------------|---------|-----------------------------------------------------------------------|---------------------------------------------------------------------|-------------------------------------------------------------------------|----------------------------------------------------------|----------------------------------------------------------|------------------------------------------------------|
| Derivatives in Cash Flow Hedging Relationships                       | Effective Portion 1,4                                  |    | Effective Portion 2                                                   |                                                                | Ineffective Portion and Amount Excluded from Effectiveness Testing 2, 3 |                                                     |
| 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 | ) |
| Gas derivatives                                                      |                                                   | --      |                                                                  | Purchased gas                                                       |                                                                    | --                                                       |                                                     | Net unrealized loss   on derivative instruments |   | -- |   |
| Total                                                                | $                                                      | (24,162 | )                                                                     |                                                                | $                                                                       | (6,978                                                   | )                                                        |                                                 | $ | (986 | ) |

| 1 | Changes in OCI are reported in after tax dollars.                                                                                                                                                                                  |
|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2 | Losses are reported in pre-tax dollars.                                                                                                                                                                                            |
| 3 | Ineffective portion of long-term power supply contracts that are designated as cash flow hedges.                                                                                                                                   |
| 4 | The balances associated with the components of accumulated other comprehensive income (loss) on Predecessor basis were eliminated as a result of push-down accounting effective February 6, 2009, when the Successor period began. |

| Puget Sound EnergyThree Months EndedMarch 31, 2010(Dollars in Thousands) | Amount of Gain/(Loss) Recognized in OCI on Derivatives 1 |   | Location of Gain/(Loss) Reclassified from Accumulated OCI into Income | Amount of Gain/(Loss) Reclassified from Accumulated OCI into Income |                                                                 | Location of Gain/(Loss) Recognized in Income on Derivatives | Amount of Gain/(Loss) Recognized in Income on Derivatives |                                          |
|--------------------------------------------------------------------------|----------------------------------------------------------|--------|-----------------------------------------------------------------------|---------------------------------------------------------------------|----------------------------------------------------------------------|-------------------------------------------------------------|-----------------------------------------------------------|-----------------------------------------------|
| Derivatives in Cash Flow Hedging Relationships                           | Effective Portion 2                                      |   | Effective Portion 3                                                   |                                                                | Ineffective Portion and Amount Excluded from Effectiveness Testing 3 |                                                        |
| Interest rate contracts:                                                 | $                                                        | --     |                                                                  | Interest expense                                                    | $                                                                    | (123                                                        | )                                                         |                                          | $ | -- |   |
| Commodity contracts:Electric derivatives                                 |                                                     | 49     |                                                                  | Electric generation fuel                                            |                                                                 | 23,262                                                      |                                                      | Net unrealized gain on derivative instruments |   | -- |   |
| Electric derivatives                                                     |                                                     | --     |                                                                  | Purchase electricity                                                |                                                                 | 5,990                                                       |                                                      | Net unrealized loss on derivative instruments |   | -- |   |
| Total                                                                    | $                                                        | 49     |                                                                  |                                                                | $                                                                    | 29,129                                                      |                                                      |                                          | $ | -- |   |

| 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 EnergyThree Months EndedMarch 31, 2009 (Dollars in Thousands) |   | Amount of Gain/(Loss) Recognized in OCI on Derivatives |   |   Location of Gain/(Loss) Reclassified from Accumulated OCI into Income |   | Amount of Gain/(Loss) Reclassified from Accumulated OCI into Income            |   |   Location of Gain/(Loss) Recognized in Income on Derivatives |   | Amount of Gain/(Loss) Recognized in Income on Derivatives |   |
|---------------------------------------------------------------------------|--------|--------------------------------------------------------|--------|------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------|--------|--------------------------------------------------------------------|--------|-----------------------------------------------------------|--------|
| Derivatives in Cash Flow Hedging  Relationships                 |   | Effective Portion 1                                    |   |  Effective Portion 2                                                    |   |   Ineffective Portion and Amount Excluded from Effectiveness Testing 2, 3 |   |
| Interest rate contracts:                                                  | $      | --                                                     |   | Interest expense                                                             | $      | (123                                                                           | )      |                                                               | $      | --                                                        |   |
| Commodity contracts:Electric derivatives                                  |   | (48,487                                                | )      | Electric generation fuel                                                     |   | (21,488                                                                        | )      | Net unrealized loss on derivative instruments                      |   | --                                                        |   |
| Electric derivatives                                                      |   | (19,490                                                | )      | Purchased electricity                                                        |   | --                                                                             |   | Net unrealized loss on derivative instruments                      |   | (3,238                                                    | )      |
| Gas derivatives                                                           |   | --                                                     |   | Purchased gas                                                                |   | --                                                                             |   | Net unrealized loss on derivative instruments                      |   | --                                                        |   |
| Total                                                                     | $      | (67,977                                                | )      |                                                                         | $      | (21,611                                                                        | )      |                                                               | $      | (3,238                                                    | )      |

| 1 | Changes in OCI are reported in after tax dollars.                                                |
|---|--------------------------------------------------------------------------------------------------|
| 2 | Losses are reported in pre-tax dollars.                                                          |
| 3 | Ineffective portion of long-term power supply contracts that are designated as cash flow hedges. |

|                               |                                                 | Three Months EndedMarch 31,2010                          |     | SuccessorFebruary 6, 2009 -March 31, 2009 |   |    | Predecessor January 1, 2009 – February 5, 2009 |   |
|------------------------------------|------------------------------------------------------|----------------------------------------------------------|----------|-------------------------------------------|--------|---------|------------------------------------------------------|--------|
| Puget Energy(Dollars in Thousands) | Location of Gain/(Loss) in Income on Derivatives     | Amount of Gain/(Loss)Recognized in Income on Derivatives |     |
| Commodity contracts:               |                                                 |                                                     |     |                                      |   |    |                                                 |   |
| Electric derivatives               | Net unrealized gain/(loss) on derivative instruments | $                                                        | (86,247  | )                                         | $      | (3,303  | )                                                    |   | $ | (2,881 | ) |
|                               | Electric generation fuel                             |                                                     | (24,656  | )                                         |   | (6,028  | )                                                    |   |   | (863 | ) |
|                               | Purchased electricity                                |                                                     | (6,723   | )                                         |   | (4,910  | )                                                    |   |   | (243 | ) |
| Total                              |                                                 | $                                                        | (117,626 | )                                         | $      | (14,241 | )                                                    |   | $ | (3,987 | ) |

| 1 | Differs from the amount stated in the statements of income as it does not include $25.6 million of amortization expense related to contracts that were recorded at fair value at the time of the merger and subsequently designated as NPNS. |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                     |                                                 | Three Months EndedMarch 31, 2010                          |     | Three Months EndedMarch 31, 2009 |   |
|------------------------------------------|------------------------------------------------------|-----------------------------------------------------------|----------|----------------------------------|--------|
| Puget Sound Energy(Dollars in Thousands) | Location of Gain/(Loss) in Income on Derivatives     | Amount of Gain/(Loss) Recognized in Income on Derivatives |     |
| Commodity contracts:                     |                                                 |                                                      |     |                             |   |
| Electric derivatives                     | Net unrealized gain/(loss) on derivative instruments | $                                                         | (113,017 | )                                | $      | -- |   |
|                                     | Electric generation fuel                             |                                                      | (24,656  | )                                |   | 908 |   |
|                                     | Purchased electricity                                |                                                      | (6,723   | )                                |   | -- |   |
| Total                                    |                                                 | $                                                         | (144,396 | )                                | $      | 908 |   |

| Puget Energyat March 31, 2010                      | Number of Units    |
|----------------------------------------------------|--------------------|
| Derivatives designated as hedging instruments:     |               |
| Interest rate swaps                                | $1.483 billion     |
| Derivatives not designated as hedging instruments: |               |
| Gas derivatives                                    | 287,325,265 MMBtus |
| Electric generation fuel                           | 90,425,000 MMBtus  |
| Purchased electricity                              | 6,968,021 MWh      |

| Puget Sound Energyat March 31, 2010                | Number of Units    |
|----------------------------------------------------|--------------------|
| Derivatives not designated as hedging instruments: |               |
| Gas derivatives 1                                  | 287,325,265 MMBtus |
| Electric generation fuel                           | 90,425,000 MMBtus  |
| Purchased electricity 2                            | 6,742,621 MWh      |

| 1 | Gas derivatives are deferred in accordance with ASC 980 due to the PGA mechanism.                                                                                                                      |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2 | As of March 31, 2010, there were eight forward contracts in Puget Energy’s portfolio that were not in PSE’s portfolio as a result of the revaluation of NPNS contracts at the merger date. |

| Puget EnergyContingent Feature(Dollars in Thousands) | Fair Value 1Liability |     |   | PostedCollateral |   | ContingentCollateral |   |
|------------------------------------------------------|-----------------------|----------|--------|------------------|--------|----------------------|--------|
| Credit rating 2                                      | $                     | (41,975  | )      |             | $      | --                   |   | $ | 41,975 |   |
| Reasonable grounds for adequate assurance            |                  | (71,908  | )      |             |   | --                   |   |   | -- |   |
| Forward value of contract 3                          |                  | (21,262  | )      |             |   | --                   |   |   | -- |   |
| Total                                                | $                     | (135,145 | )      |             | $      | --                   |   | $ | 41,975 |   |

| Puget Sound EnergyContingent Feature(Dollars in Thousands) | Fair Value 1Liability |     |   | PostedCollateral |   | ContingentCollateral |   |
|------------------------------------------------------------|-----------------------|----------|--------|------------------|--------|----------------------|--------|
| Credit rating 2                                            | $                     | (36,527  | )      |             | $      | --                   |   | $ | 36,527 |   |
| Reasonable grounds for adequate assurance                  |                  | (71,908  | )      |             |   | --                   |   |   | -- |   |
| Forward value of contract 3                                |                  | (21,262  | )      |             |   | --                   |   |   | -- |   |
| Total                                                      | $                     | (129,697 | )      |             | $      | --                   |   | $ | 36,527 |   |

| 1 | Represents derivative fair values of contracts with contingent features for counterparties in net derivative liability positions at March 31, 2010.  Excludes NPNS, accounts payable and accounts receivable liability. |
|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2 | PSE is required to maintain an investment grade credit rating from each of the major credit rating agencies.                                                                                                                      |
| 3 | Collateral requirements may vary, based on changes in forward value of underlying transactions.                                                                                                                                   |

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

| Puget EnergyRecurring Fair Value Measures |   | at Fair Valueas of March 31, 2010 |   |   | at Fair Valueas of 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 |   |   | $ | 2,974 |   |   | $ | 3,130 |   |   | $ | -- |   |   | $ | 2,469 |   |   | $ | 2,671 |   |   | $ | 5,140 |   |
| Gas derivative instruments                |   |                              | --     |   |                                 |   | 13,470 |   |   |   | 975 |   |   |   | 14,445 |   |   |   | -- |   |   |   | 14,298 |   |   |   | 115 |   |   |   | 14,413 |   |
| Cash equivalents                          |   |                              | 49,380 |   |                                 |   | 5,467 |   |   |   | -- |   |   |   | 54,847 |   |   |   | 38,835 |   |   |   | 5,465 |   |   |   | -- |   |   |   | 44,300 |   |
| Restricted cash                           |   |                              | 713    |   |                                 |   | -- |   |   |   | -- |   |   |   | 713 |   |   |   | 3,305 |   |   |   | -- |   |   |   | -- |   |   |   | 3,305 |   |
| Interest rate derivative instruments      |   |                              | --     |   |                                 |   | 4,047 |   |   |   | -- |   |   |   | 4,047 |   |   |   | -- |   |   |   | 20,854 |   |   |   | -- |   |   |   | 20,854 |   |
| Total assets                              |   | $                                 | 50,093 |   |                                 | $      | 23,140 |   |   | $ | 3,949 |   |   | $ | 77,182 |   |   | $ | 42,140 |   |   | $ | 43,086 |   |   | $ | 2,786 |   |   | $ | 88,012 |   |
| Liabilities:                              |   |                              |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Electric derivative instruments           |   | $                                 | --     |   |                                 | $      | 105,198 |   |   | $ | 127,619 |   |   | $ | 232,817 |   |   | $ | -- |   |   | $ | 51,099 |   |   | $ | 99,000 |   |   | $ | 150,099 |   |
| Gas derivative instruments                |   |                              | --     |   |                                 |   | 138,061 |   |   |   | 5,165 |   |   |   | 143,226 |   |   |   | -- |   |   |   | 77,438 |   |   |   | 4,119 |   |   |   | 81,557 |   |
| Interest rate derivative instruments      |   |                              | --     |   |                                 |   | 28,344 |   |   |   | -- |   |   |   | 28,344 |   |   |   | -- |   |   |   | 26,844 |   |   |   | -- |   |   |   | 26,844 |   |
| Total liabilities                         |   | $                                 | --     |   |                                 | $      | 271,603 |   |   | $ | 132,784 |   |   | $ | 404,387 |   |   | $ | -- |   |   | $ | 155,381 |   |   | $ | 103,119 |   |   | $ | 258,500 |   |

|                                                                   |                           |     |   | Successor                                                  |   |     | Predecessor                                               |   |
|------------------------------------------------------------------------|--------------------------------|----------|--------|------------------------------------------------------------|--------|----------|-----------------------------------------------------------|--------|
| Puget EnergyLevel 3 Roll-Forward Net (Liability)(Dollars in Thousands) | Three MonthsEndedMarch 31,2010 |     |   | For the Period EndedFebruary 6,2009 –March 31,2009 1 |   |     | For the Period EndedJanuary 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                                                 |                           | (69,598  | )      |                                                       |   | (16,379  | )                                                         |   |   | (627 | ) |
| - included in other comprehensive income                               |                           | --       |   |                                                       |   | (27,702  | )                                                         |   |   | (14,821 | ) |
| - included in regulatory assets / liabilities                          |                           | (196     | )      |                                                       |   | (3,182   | )                                                         |   |   | (1,410 | ) |
| Purchases, issuances and settlements                                   |                           | 7,828    |   |                                                       |   | 5,788    |                                                      |   |   | 2,154 |   |
| Transferred into Level 3                                               |                           | --       |   |                                                       |   | (8,610   | )                                                         |   |   | -- |   |
| Transferred out of Level 3                                             |                           | 33,464   |   |                                                       |   | 65,467   |                                                      |   |   | 8,560 |   |
| Balance at end of period                                               | $                              | (128,835 | )      |                                                       | $      | (170,431 | )                                                         |   | $ | (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 EnergyRecurring Fair Value Measures |   | at Fair Valueas of March 31, 2010 |   |   | at Fair Valueas of 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 |   |   | $ | 2,974 |   |   | $ | 3,130 |   |   | $ | -- |   |   | $ | 2,469 |   |   | $ | 2,671 |   |   | $ | 5,140 |   |
| Gas derivative instruments                      |   |                              | --     |   |                                 |   | 13,470 |   |   |   | 975 |   |   |   | 14,445 |   |   |   | -- |   |   |   | 14,298 |   |   |   | 115 |   |   |   | 14,413 |   |
| Cash equivalents                                |   |                              | 49,380 |   |                                 |   | 5,467 |   |   |   | -- |   |   |   | 54,847 |   |   |   | 38,835 |   |   |   | 5,465 |   |   |   | -- |   |   |   | 44,300 |   |
| Restricted cash                                 |   |                              | 713    |   |                                 |   | -- |   |   |   | -- |   |   |   | 713 |   |   |   | 3,305 |   |   |   | -- |   |   |   | -- |   |   |   | 3,305 |   |
| Total assets                                    |   | $                                 | 50,093 |   |                                 | $      | 19,093 |   |   | $ | 3,949 |   |   | $ | 73,135 |   |   | $ | 42,140 |   |   | $ | 22,232 |   |   | $ | 2,786 |   |   | $ | 67,158 |   |
| Liabilities:                                    |   |                              |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Electric derivative instruments                 |   | $                                 | --     |   |                                 | $      | 99,749 |   |   | $ | 127,620 |   |   | $ | 227,369 |   |   | $ | -- |   |   | $ | 46,690 |   |   | $ | 99,000 |   |   | $ | 145,690 |   |
| Gas derivative instruments                      |   |                              | --     |   |                                 |   | 138,062 |   |   |   | 5,164 |   |   |   | 143,226 |   |   |   | -- |   |   |   | 77,438 |   |   |   | 4,119 |   |   |   | 81,557 |   |
| Total liabilities                               |   | $                                 | --     |   |                                 | $      | 237,811 |   |   | $ | 132,784 |   |   | $ | 370,595 |   |   | $ | -- |   |   | $ | 124,128 |   |   | $ | 103,119 |   |   | $ | 227,247 |   |

| Puget Sound EnergyLevel 3 Roll-Forward Net (Liability)(Dollars in Thousands)Three Months Ended March 31 |   | 2010   |     |   | 2009   |   |
|---------------------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|
| Balance at beginning of period                                                                          |   | $      | (100,333 | )      |   | $      | (132,256 | ) |
| Changes during period:                                                                                  |   |   |     |   |   |   |   |   |
| Realized and unrealized energy derivatives                                                              |   |   |     |   |   |   |   |   |
| - included in earnings                                                                                  |   |   | (69,598  | )      |   |   | (2,350 | ) |
| - included in other comprehensive income                                                                |   |   | --       |   |   |   | (53,142 | ) |
| - included in regulatory assets / liabilities                                                           |   |   | (196     | )      |   |   | (7,434 | ) |
| Purchases, issuances and settlements                                                                    |   |   | 7,828    |   |   |   | 8,144 |   |
| Transferred into Level 3                                                                                |   |   | --       |   |   |   | (3,068 | ) |
| Transferred out of Level 3                                                                              |   |   | 33,464   |   |   |   | 13,884 |   |
| Balance at end of period                                                                                |   | $      | (128,835 | )      |   | $      | (176,222 | ) |

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

|                                              |   | March 31, 2010 |      |   | December 31, 2009 |   |
|---------------------------------------------------|--------|----------------|-----------|--------|-------------------|--------|
| (Dollars in Thousands)                            |   | CarryingAmount |      |   | FairValue         |   |   | CarryingAmount |   |   | FairValue |   |
| Financial assets:                                 |   |           |      |   |              |   |   |   |   |   |   |   |
| Cash and cash equivalents                         |   | $              | 78,507    |   |              | $      | 78,507 |   |   | $ | 78,527 |   |   | $ | 78,527 |   |
| Restricted cash                                   |   |           | 17,343    |   |              |   | 17,343 |   |   |   | 19,844 |   |   |   | 19,844 |   |
| Notes receivable and other                        |   |           | 74,072    |   |              |   | 74,072 |   |   |   | 74,063 |   |   |   | 74,063 |   |
| Electric derivatives                              |   |           | 3,130     |   |              |   | 3,130 |   |   |   | 5,140 |   |   |   | 5,140 |   |
| Gas derivatives                                   |   |           | 14,445    |   |              |   | 14,445 |   |   |   | 14,413 |   |   |   | 14,413 |   |
| Interest rate derivatives                         |   |           | 4,047     |   |              |   | 4,047 |   |   |   | 20,854 |   |   |   | 20,854 |   |
| Financial liabilities:                            |   |           |      |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Short-term debt                                   |   | $              | 40,000    |   |              | $      | 40,000 |   |   | $ | 105,000 |   |   | $ | 105,000 |   |
| Junior subordinated notes                         |   |           | 250,000   |   |              |   | 226,155 |   |   |   | 250,000 |   |   |   | 232,684 |   |
| Current maturities of long-term debt (fixed-rate) |   |           | 267,000   |   |              |   | 282,154 |   |   |   | 232,000 |   |   |   | 234,632 |   |
| Long-term debt (fixed-rate)                       |   |           | 2,703,860 |   |              |   | 2,873,956 |   |   |   | 2,638,860 |   |   |   | 2,815,048 |   |
| Long-term debt (variable-rate)                    |   |           | 1,483,000 |   |              |   | 1,493,797 |   |   |   | 1,483,000 |   |   |   | 1,478,632 |   |
| Electric derivatives                              |   |           | 232,817   |   |              |   | 232,817 |   |   |   | 150,099 |   |   |   | 150,099 |   |
| Gas derivatives                                   |   |           | 143,226   |   |              |   | 143,226 |   |   |   | 81,557 |   |   |   | 81,557 |   |
| Interest rate derivatives                         |   |           | 28,344    |   |              |   | 28,344 |   |   |   | 26,844 |   |   |   | 26,844 |   |

|                                                  |   | March 31, 2010 |      |   | December 31, 2009 |   |
|-------------------------------------------------------|--------|----------------|-----------|--------|-------------------|--------|
| (Dollars in Thousands)                                |   | CarryingAmount |      |   | FairValue         |   |   | CarryingAmount |   |   | FairValue |   |
| Financial assets:                                     |   |           |      |   |              |   |   |   |   |   |   |   |
| Cash and cash equivalents                             |   | $              | 78,428    |   |              | $      | 78,428 |   |   | $ | 78,407 |   |   | $ | 78,407 |   |
| Restricted cash                                       |   |           | 17,343    |   |              |   | 17,343 |   |   |   | 19,844 |   |   |   | 19,844 |   |
| Notes receivable and other                            |   |           | 74,072    |   |              |   | 74,072 |   |   |   | 74,063 |   |   |   | 74,063 |   |
| Electric derivatives                                  |   |           | 3,130     |   |              |   | 3,130 |   |   |   | 5,140 |   |   |   | 5,140 |   |
| Gas derivatives                                       |   |           | 14,445    |   |              |   | 14,445 |   |   |   | 14,413 |   |   |   | 14,413 |   |
| Financial liabilities:                                |   |           |      |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Short-term debt                                       |   | $              | 40,000    |   |              | $      | 40,000 |   |   | $ | 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   |   |              |   | 226,155 |   |   |   | 250,000 |   |   |   | 232,684 |   |
| Current maturities of long-term debt (fixed-rate)     |   |           | 267,000   |   |              |   | 282,154 |   |   |   | 232,000 |   |   |   | 234,632 |   |
| Non-current maturities of long-term debt (fixed-rate) |   |           | 2,703,860 |   |              |   | 2,873,956 |   |   |   | 2,638,860 |   |   |   | 2,815,048 |   |
| Electric derivatives                                  |   |           | 227,369   |   |              |   | 227,369 |   |   |   | 145,690 |   |   |   | 145,690 |   |
| Gas derivatives                                       |   |           | 143,226   |   |              |   | 143,226 |   |   |   | 81,557 |   |   |   | 81,557 |   |

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

| (6)   | Financing Arrangements |
|-----------------|------------------------|

| (7)   | Retirement Benefits |
|-----------------|---------------------|

| Qualified Pension Benefits               |                             |   | Successor                              |   |   | Predecessor                              |   |
|------------------------------------------|----------------------------------|--------|----------------------------------------|--------|--------|------------------------------------------|--------|
| (Dollars in Thousands)                   | Three Months EndedMarch 31, 2010 |   | February 6, 2009 –March 31, 2009 |   |   | January 1, 2009 – February 5, 2009 |   |
| Components of net periodic benefit cost: |                             |   |                                   |   |   |                                     |   |
| Service cost                             | $                                | 4,037  |                                   | $      | 2,267  |                                     |   | $ | 1,090 |   |
| Interest cost                            |                             | 7,032  |                                   |   | 4,711  |                                     |   |   | 2,302 |   |
| Expected return on plan assets           |                             | (8,206 | )                                      |   | (5,015 | )                                        |   |   | (3,585 | ) |
| Amortization of prior service cost       |                             | --     |                                   |   | --     |                                     |   |   | 95 |   |
| Amortization of net loss (gain)          |                             | --     |                                   |   | --     |                                     |   |   | 269 |   |
| Net periodic benefit cost (income)       | $                                | 2,863  |                                   | $      | 1,963  |                                     |   | $ | 171 |   |

| SERP Pension Benefits                    |                             |   | Successor                              |   |   | Predecessor                              |   |
|------------------------------------------|----------------------------------|--------|----------------------------------------|--------|--------|------------------------------------------|--------|
| (Dollars in Thousands)                   | Three Months EndedMarch 31, 2010 |   | February 6, 2009 –March 31, 2009 |   |   | January 1, 2009 – February 5, 2009 |   |
| Components of net periodic benefit cost: |                             |   |                                   |   |   |                                     |   |
| Service cost                             | $                                | 256    |                                   | $      | 173    |                                     |   | $ | 89 |   |
| Interest cost                            |                             | 541    |                                   |   | 396    |                                     |   |   | 193 |   |
| Amortization of prior service cost       |                             | --     |                                   |   | --     |                                     |   |   | 51 |   |
| Amortization of net loss (gain)          |                             | --     |                                   |   | --     |                                     |   |   | 74 |   |
| Net periodic benefit cost (income)       | $                                | 797    |                                   | $      | 569    |                                     |   | $ | 407 |   |

| Other Benefits                           |                             |   | Successor                              |   |   | Predecessor                              |   |
|------------------------------------------|----------------------------------|--------|----------------------------------------|--------|--------|------------------------------------------|--------|
| (Dollars in Thousands)                   | Three Months EndedMarch 31, 2010 |   | February 6, 2009 –March 31, 2009 |   |   | January 1, 2009 – February 5, 2009 |   |
| Components of net periodic benefit cost: |                             |   |                                   |   |   |                                     |   |
| Service cost                             | $                                | 30     |                                   | $      | 21     |                                     |   | $ | 11 |   |
| Interest cost                            |                             | 218    |                                   |   | 162    |                                     |   |   | 88 |   |
| Expected return on plan assets           |                             | (124   | )                                      |   | (69    | )                                        |   |   | (37 | ) |
| Amortization of prior service cost       |                             | --     |                                   |   | --     |                                     |   |   | 7 |   |
| Amortization of net loss (gain)          |                             | (2     | )                                      |   | --     |                                     |   |   | (15 | ) |
| Amortization of transition obligation    |                             | --     |                                   |   | --     |                                     |   |   | 4 |   |
| Net periodic benefit cost (income)       | $                                | 122    |                                   | $      | 114    |                                     |   | $ | 58 |   |

|                                     |   | Qualified Pension Benefits |    |   | SERP Pension Benefits |   |    | OtherBenefits |   |
|------------------------------------------|--------|----------------------------|---------|--------|-----------------------|--------|---------|---------------|--------|
| (Dollars in Thousands)                   |   | 2010                       |    |   | 2009                  |   |    | 2010          |   |   | 2009 |   |   | 2010 |   |   | 2009 |   |
| Components of net periodic benefit cost: |   |                       |    |   |                  |   |    |          |   |   |   |   |   |   |   |   |   |   |
| Service cost                             |   | $                          | 4,037   |   |                  | $      | 3,271   |          |   | $ | 256 |   |   | $ | 267 |   |   | $ | 30 |   |   | $ | 32 |   |
| Interest cost                            |   |                       | 7,032   |   |                  |   | 6,905   |          |   |   | 541 |   |   |   | 579 |   |   |   | 218 |   |   |   | 266 |   |
| Expected return on plan assets           |   |                       | (10,994 | )      |                  |   | (10,755 | )             |   |   | -- |   |   |   | -- |   |   |   | (124 | ) |   |   | (111 | ) |
| Amortization of prior service cost       |   |                       | 185     |   |                  |   | 283     |          |   |   | 141 |   |   |   | 154 |   |   |   | 33 |   |   |   | 21 |   |
| Amortization of net loss (gain)          |   |                       | 1,706   |   |                  |   | 808     |          |   |   | 192 |   |   |   | 221 |   |   |   | (119 | ) |   |   | (46 | ) |
| Amortization of transition obligation    |   |                       | --      |   |                  |   | --      |          |   |   | -- |   |   |   | -- |   |   |   | 12 |   |   |   | 13 |   |
| Net periodic benefit cost (income)       |   | $                          | 1,966   |   |                  | $      | 512     |          |   | $ | 1,130 |   |   | $ | 1,221 |   |   | $ | 50 |   |   | $ | 175 |   |

| (8)   | Regulation and Rates |
|-----------------|----------------------|

| (9)   | Litigation |
|-----------------|------------|

| (10)   | Variable Interest Entities |
|------------------|----------------------------|

| (11)   | Other |
|------------------|-------|

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; |
|--------------------|---------------------|

| ·   | 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; and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| 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 Increase (Decrease)in Rates |   | Annual Increase (Decrease) in Revenues (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 Revenues (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    |                                           | (1.8   | )                                                            |   | (21.2 | ) |

| Puget Sound Energy(Dollars in Thousands)Three Month Ended March 31 |   | 2010   |    |   | 2009   |   |      | PercentChange |   |
|--------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|-----------|---------------|--------|
| Operating revenues:                                                |   |   |    |   |   |   |      |          |   |
| Electric                                                           |   |   |    |   |   |   |      |          |   |
| Residential sales                                                  |   | $      | 322,242 |   |   | $      | 358,784   |          |   |   | (10.2 | )% |
| Commercial sales                                                   |   |   | 216,202 |   |   |   | 231,562   |          |   |   | (6.6 | ) |
| Industrial sales                                                   |   |   | 25,443  |   |   |   | 26,551    |          |   |   | (4.2 | ) |
| Other retail sales, including unbilled revenues                    |   |   | (29,047 | )      |   |   | (29,388   | )             |   |   | (1.2 | ) |
| Total retail sales                                                 |   |   | 534,840 |   |   |   | 587,509   |          |   |   | (9.0 | ) |
| Transportation sales                                               |   |   | 3,127   |   |   |   | 2,503     |          |   |   | 24.9 |   |
| Sales to other utilities and marketers                             |   |   | 17,208  |   |   |   | 9,351     |          |   |   | 84.0 |   |
| Other                                                              |   |   | (540    | )      |   |   | 867       |          |   |   | (162.3 | ) |
| Total electric operating revenues                                  |   |   | 554,635 |   |   |   | 600,230   |          |   |   | (7.6 | ) |
| Gas                                                                |   |   |    |   |   |   |      |          |   |   |   |   |
| Residential sales                                                  |   |   | 214,165 |   |   |   | 344,218   |          |   |   | (37.8 | ) |
| Commercial sales                                                   |   |   | 91,590  |   |   |   | 139,431   |          |   |   | (34.3 | ) |
| Industrial sales                                                   |   |   | 9,219   |   |   |   | 14,740    |          |   |   | (37.5 | ) |
| Total retail sales                                                 |   |   | 314,974 |   |   |   | 498,389   |          |   |   | (36.8 | ) |
| Transportation sales                                               |   |   | 3,375   |   |   |   | 3,109     |          |   |   | 8.6 |   |
| Other                                                              |   |   | 4,056   |   |   |   | 4,938     |          |   |   | (17.9 | ) |
| Total gas operating revenues                                       |   |   | 322,405 |   |   |   | 506,436   |          |   |   | (36.3 | ) |
| Non-utility operating revenues                                     |   |   | 1,166   |   |   |   | 889       |          |   |   | 31.2 |   |
| Total operating revenues                                           |   |   | 878,206 |   |   |   | 1,107,555 |          |   |   | (20.7 | ) |
| Operating expenses:                                                |   |   |    |   |   |   |      |          |   |   |   |   |
| Energy costs:                                                      |   |   |    |   |   |   |      |          |   |   |   |   |
| Purchased electricity                                              |   |   | 254,307 |   |   |   | 260,249   |          |   |   | 2.3 |   |
| Electric generation fuel                                           |   |   | 56,245  |   |   |   | 48,127    |          |   |   | (16.9 | ) |
| Residential exchange                                               |   |   | (22,462 | )      |   |   | (32,404   | )             |   |   | 30.7 |   |
| Purchased gas                                                      |   |   | 176,864 |   |   |   | 320,063   |          |   |   | 44.7 |   |
| Net unrealized (gain) loss on derivative instruments               |   |   | 113,017 |   |   |   | 2,330     |          |   |   | * |   |
| Utility operations and maintenance                                 |   |   | 116,179 |   |   |   | 114,893   |          |   |   | (1.1 | ) |
| Non-utility expense and other                                      |   |   | 1,476   |   |   |   | 1,307     |          |   |   | (12.9 | ) |
| Merger and related costs                                           |   |   | --      |   |   |   | 27,563    |          |   |   | 100.0 |   |
| Depreciation                                                       |   |   | 70,528  |   |   |   | 65,995    |          |   |   | (6.9 | ) |
| Amortization                                                       |   |   | 15,468  |   |   |   | 15,366    |          |   |   | * |   |
| Conservation amortization                                          |   |   | 18,153  |   |   |   | 20,829    |          |   |   | 12.8 |   |
| Taxes other than income taxes                                      |   |   | 83,415  |   |   |   | 101,343   |          |   |   | 17.7 |   |
| Total operating expenses                                           |   |   | 883,190 |   |   |   | 945,661   |          |   |   | 6.6 |   |
| Operating income                                                   |   |   | (4,984  | )      |   |   | 161,894   |          |   |   | (103.1 | ) |
| Other income                                                       |   |   | 12,000  |   |   |   | 9,932     |          |   |   | 20.8 |   |
| Other expense                                                      |   |   | (989    | )      |   |   | (2,443    | )             |   |   | 59.5 |   |
| Interest expense                                                   |   |   | (58,934 | )      |   |   | (50,968   | )             |   |   | 15.6 |   |
| Income before income taxes                                         |   |   | (52,907 | )      |   |   | 118,415   |          |   |   | (144.7 | ) |
| Income tax expense                                                 |   |   | (14,633 | )      |   |   | 33,438    |          |   |   | 143.8 |   |
| Net income                                                         |   | $      | (38,274 | )      |   | $      | 84,977    |          |   |   | (145.0 | )% |

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

| ·   | Increase in purchased electricity and electric generation fuel of $2.2 million despite a 9.6% reduction in electric customer retail sales volumes due primarily to warmer temperatures in the Pacific Northwest.  The increase in power costs is due to lower hydroelectric and wind generation which caused an increase of $13.3 million.  Additionally, PSE increased the generation from combustion turbines which resulted in increased natural gas fuel costs. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Increase in residential exchange credits for power costs of $9.9 million from the Bonneville Power Administration (BPA), which was a pass-through to PSE customers, reflected as a reduction in PSE electric operating revenues. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Increase in net unrealized loss on derivative instruments of $110.7 million primarily due to falling forward market prices of electricity and natural gas on de-designation cash flow hedges related to PSE’s energy contracts.  PSE discontinued cash flow hedge accounting July 1, 2009. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Increase in interest expense of $8.0 million primarily due to a $6.9 million write off of a regulatory asset for deferred interest paid to the 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. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (Dollars in Thousands)                        |                             |    | Successor                               |   |   | Predecessor                              |   |
|-----------------------------------------------|----------------------------------|---------|-----------------------------------------|--------|--------|------------------------------------------|--------|
| Benefit/(Expense)                             | Three Months EndedMarch 31, 2010 |    | February 6, 2009 – March 31, 2009 |   |   | January 1, 2009 – February 5, 2009 |   | 2009Combined |   | PercentChange |   |
| PSE reported net income                       | $                                | (38,274 | )                                       | $      | 53,366 |                                     |   | $ | 31,611 |   | $ | 84,977 |   |   | 145.0 | % |
| Other operating revenue                       |                             | --      |                                    |   | --     |                                     |   |   | -- |   |   | -- |   |   | -- |   |
| Purchased electricity                         |                             | 145     |                                    |   | 95     |                                     |   |   | -- |   |   | 95 |   |   | 52.6 |   |
| Net unrealized gain on derivative instruments |                             | 52,369  |                                    |   | 10,581 |                                     |   |   | -- |   |   | 10,581 |   |   | * |   |
| Non-utility expense and other                 |                             | (2,126  | )                                       |   | (1,272 | )                                        |   |   | (4 | ) |   | (1,276 | ) |   | 66.6 |   |
| Merger and related costs                      |                             | --      |                                    |   | 1,177  |                                     |   |   | (20,416 | ) |   | (19,239 | ) |   | 100.0 |   |
| Depreciation and amortization                 |                             | --      |                                    |   | --     |                                     |   |   | -- |   |   | -- |   |   | -- |   |
| Charitable contribution expense               |                             | --      |                                    |   | (5,000 | )                                        |   |   | -- |   |   | (5,000 | ) |   | 100.0 |   |
| Interest expense 1                            |                             | (21,029 | )                                       |   | (7,816 | )                                        |   |   | 25 |   |   | (7,791 | ) |   | * |   |
| Income tax expense                            |                             | (10,276 | )                                       |   | 929    |                                     |   |   | 1,540 |   |   | 2,469 |   |   | * |   |
| Puget Energy net income                       | $                                | (19,191 | )                                       | $      | 52,060 |                                     |   | $ | 12,756 |   | $ | 64,816 |   |   | (129.6 | )% |

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

| ·   | Puget Energy’s net income was positively impacted by $41.8 million representing a 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 values recorded. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | These increases were partially offset by one-time merger costs of $19.2 million recorded in 2009 related to the merger of Puget Energy with Puget Holdings.  These costs were primarily related to real estate excise tax, legal fees, transaction advisory services and stock options. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Net income was impacted by an increase in interest expense of $13.2 million primarily related to the issuance of debt at the time of the merger. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|

| Capital Expenditure Projections(Dollars in Millions) |   | 2010   |   |   | 2011   |   |   | 2012   |   |
|------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Energy delivery, technology and facilities           |   | $      | 657    |   |   | $      | 596    |   |   | $ | 591 |   |
| New resources                                        |   |   | 369    |   |   |   | 524    |   |   |   | 513 |   |
| Total expenditures                                   |   | $      | 1,026  |   |   | $      | 1,120  |   |   | $ | 1,104 |   |

| ·   | Accounts receivable and unbilled revenue decreased $98.3 million during the first three months of 2010 compared to a decrease of $46.9 million during the same period in 2009 due to a reduction in sales and lower natural gas PGA rates causing an operating cash flow increase of $51.4 million. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Net payments of $33.8 million on accounts payable during the first three months of 2010 compared to net payments of $101.7 million during the same period in 2009 due to the timing of payments, which resulted in an increase in operating cash flows of $67.9 million. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | A decrease in prepaid income taxes of $30.4 million during the first three months of 2010 compared to a decrease of $7.0 million during the same period in 2009, causing an increase in cash from operations of $23.4 million. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Fuel and gas inventory decreased $17.7 million during the first three months of 2010 compared to a decrease of $46.9 million during the same period in 2009, which resulted in a decrease in cash from operations of $29.2 million.  The decrease is due to lower customer usage in 2010 which caused a delay in recovery of the winter inventory levels. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | PSE’s deferred taxes decreased $21.2 million in 2010 due to energy derivatives that are non-cash items as compared to tax savings in 2009 of $26.4 million due to bonus depreciation and repair allowance deductions. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | PGA mechanism provided $41.8 million payment to customers related to overcollection of prior year plan related rates during the first three months of 2010 compared to an overrecovery from customers of $20.8 million during the same period in 2009, which decreased cash flow from operating activities by $62.6 million. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | As a result of the merger, $158.8 million in derivative settlement payments reclassified to financing activities during the first three months of 2010, compared to $147.7 million during the same period in 2009, resulting in an increase in operating cash flows of $11.1 million.  These contracts represent proceeds received from derivative instruments that included financing elements at the merger date. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Puget Energy recognized $19.3 million greater net deferred income taxes and tax credits during 2010 as compared to 2009 than PSE over the same period. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | approximately $1.2 billion of additional first mortgage bonds under PSE’s electric mortgage indenture based on approximately $2.1 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 March 31, 2010; and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | approximately $315.0 million of additional first mortgage bonds under PSE’s natural gas mortgage indenture based on approximately $525.0 million of gas bondable property available for issuance, subject to interest coverage ratio limitations of 1.75 times and 2.0 times net earnings available for interest (as defined in the natural gas utility mortgage), which PSE exceeded at March 31, 2010. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                           | Ratings |
|--------------------------------|---------|
|                           | S&P | Moody’s |
| Puget Sound Energy, Inc.       |    |   |
| Corporate credit/issuer rating | BBB     | Baa3 |
| Senior secured debt            | A-      | Baa1 |
| Junior subordinated notes      | BB+     | Ba1 |
| Commercial paper               | A-2     | P-3 |
| Bank facilities                | BBB     | Baa3 |
| Ratings outlook                | Stable  | Stable |
| Puget Energy, Inc.             |    |   |
| Corporate credit/issuer rating | BB+     | Ba2 |
| Bank facilities                | BB+     | Ba2 |
| Ratings outlook                | Stable  | Stable |

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 Sound EnergyDerivative Portfolio(Dollars in thousands) |   | March 31, 2010     |   |   | December 31, 2009 |   |
|                                                         |   | Assets             |   |   | Liabilities |   |   | Assets |   |   | Liabilities |   |
| Electric portfolio                                           |   |               |   |   |   |   |   |   |   |   |   |   |
| Current                                                      |   | $                  | 2,789  |   |   | $ | 122,673 |   |   | $ | 4,137 |   |   | $ | 75,323 |   |
| Long-term                                                    |   |               | 341    |   |   |   | 104,696 |   |   |   | 1,003 |   |   |   | 70,367 |   |
| Total electric derivatives                                   |   | $                  | 3,130  |   |   | $ | 227,369 |   |   | $ | 5,140 |   |   | $ | 145,690 |   |
| Gas portfolio                                                |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current                                                      |   | $                  | 13,759 |   |   | $ | 105,096 |   |   | $ | 10,811 |   |   | $ | 62,207 |   |
| Long-term                                                    |   |               | 686    |   |   |   | 38,130 |   |   |   | 3,602 |   |   |   | 19,350 |   |
| Total gas derivatives                                        |   | $                  | 14,445 |   |   | $ | 143,226 |   |   | $ | 14,413 |   |   | $ | 81,557 |   |
| Total derivatives                                            |   | $                  | 17,575 |   |   | $ | 370,595 |   |   | $ | 19,553 |   |   | $ | 227,247 |   |

|                                                   |   | Energy Derivatives |   |
|--------------------------------------------------------|--------|--------------------|--------|
| Puget EnergyDerivative Portfolio(Dollars in thousands) |   | March 31, 2010     |   |   | December 31, 2009 |   |
|                                                   |   | Assets             |   |   | Liabilities |   |   | Assets |   |   | Liabilities |   |
| Electric portfolio                                     |   |               |   |   |   |   |   |   |   |   |   |   |
| Current                                                |   | $                  | 2,789  |   |   | $ | 128,121 |   |   | $ | 4,137 |   |   | $ | 79,732 |   |
| Long-term                                              |   |               | 341    |   |   |   | 104,696 |   |   |   | 1,003 |   |   |   | 70,367 |   |
| Total electric derivatives                             |   | $                  | 3,130  |   |   | $ | 232,817 |   |   | $ | 5,140 |   |   | $ | 150,099 |   |
| Gas portfolio                                          |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current                                                |   | $                  | 13,759 |   |   | $ | 105,096 |   |   | $ | 10,811 |   |   | $ | 62,207 |   |
| Long-term                                              |   |               | 686    |   |   |   | 38,130 |   |   |   | 3,602 |   |   |   | 19,350 |   |
| Total gas derivatives                                  |   | $                  | 14,445 |   |   | $ | 143,226 |   |   | $ | 14,413 |   |   | $ | 81,557 |   |
| Total derivatives                                      |   | $                  | 17,575 |   |   | $ | 376,043 |   |   | $ | 19,553 |   |   | $ | 231,656 |   |

| Puget EnergyDerivative Portfolio(Dollars in Thousands) | March 31, 2010 |   | December 31, 2009 |   |
|--------------------------------------------------------|----------------|--------|-------------------|--------|
| Interest Rate Swaps                                    | Assets         |   | Liabilities       |   | Assets |   | Liabilities |   |
| Current                                                | $              | --     |              | $      | 28,344 |   | $ | -- |   | $ | 26,844 |   |
| Long-term                                              |           | 4,047  |              |   | -- |   |   | 20,854 |   |   | -- |   |
| Total                                                  | $              | 4,047  |              | $      | 28,344 |   | $ | 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:  May 4, 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 March 31, 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 March 31, 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.                                                                                                                        |