### UNITED STATES
                                             SECURITIES AND EXCHANGE COMMISSION
                                                   Washington, D. C. 20549

# FORM 10-Q

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

For the quarterly period ended March 31, 2002

OR

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

For the transition period from __________ to __________

|            | Exact name of registrant as specified   | I.R.S.        
|----------- | --------------------------------------- | --------------
|            | in its charter, state of incorporation, | Employer      
|Commission  | address of principal executive offices, | Identification
|File Number | Telephone Number                        |               

|1-16305 | PUGET ENERGY, INC.              | 91-1969407
|------- | ------------------------------- | ----------
|        | A Washington Corporation.       |           
|        | 411 - 108th Avenue N.E.         |           
|        | Bellevue, Washington 98004-5515 |           
|        | (425) 454-6363                  |           

|1-4393 | PUGET SOUND ENERGY, INC.        | 91-0374630
|------ | ------------------------------- | ----------
|       | A Washington Corporation.       |           
|       | 411 - 108th Avenue N.E.         |           
|       | Bellevue, Washington 98004-5515 |           
|       | (425) 454-6363                  |           

Indicate by check mark whether the registrant  (1) has filed all reports  required to be filed by Section 13 or 15(d) of the Securities
Exchange  Act of 1934 during the  preceding  12 months (or for such shorter  period that the  registrant  was required to file for such
reports), and (2) has been subject to such filing requirements for the past 90 days.   
 Yes X       No ____

As of March 31, 2002, (i)
the number of shares of Puget Energy, Inc. (Puget Energy) common stock
outstanding was 87,327,323 ($.01 par value) and (ii) all of the outstanding
shares of Puget Sound Energy, Inc. (PSE) common stock were held by Puget Energy.

# Table of
Contents

|              | 
|------------- | 
|Filing Format | 

|Forward-Looking Statements | 
|-------------------------- | 

|Part I. |  | Financial Information | 
|------- |  | --------------------- | 
|Item I. |  | Financial Statements  | 

| | Puget Energy, Inc. | 
| | ------------------ | 

| | Consolidated Statements of Income  3 months ended March 31, 2002 and 2001               | 
| | ---------------------------------------------------------------------------------------- | 
| | Consolidated Statements of Comprehensive Income  3 months ended March
31, 2002 and 2001 | 
| | Consolidated Balance Sheets  March 31, 2002 and
December 31, 2001                       | 
| | Consolidated Statements of Cash Flows  3 months ended
March 31, 2002 and 2001           | 

| | Puget Sound Energy, Inc. (PSE) | 
| | ------------------------------ | 

| | Consolidated Statements of Income  3 months ended March 31, 2002 and 2001               | 
| | ---------------------------------------------------------------------------------------- | 
| | Consolidated Statements of Comprehensive Income  3 months ended March
31, 2002 and 2001 | 
| | Consolidated Balance Sheets  March 31, 2002 and
December 31, 2001                       | 
| | Consolidated Statements of Cash Flows  3 months ended
March 31, 2002 and 2001           | 

| | 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 | 
|------- |  | --------------------------------------------------------- | 

|Part II |  | Other Information                | 
|------- |  | -------------------------------- | 
|Item 1. |  | Legal Proceedings                | 
|Item 6. |  | Exhibits and Reports on Form 8-K | 

|Signature     |  |  | 
|------------- |  |  | 
|Exhibit Index |  |  | 

## Filing Format

This Quarterly  Report on Form 10-Q is a combined  quarterly report being filed  separately by two different  registrants  Puget
Energy and PSE. Any references in this report to the "Company" are to Puget Energy and PSE  collectively.  PSE makes no  representation
as to the  information  contained in this report  relating to Puget Energy and the  subsidiaries of Puget Energy other than PSE and its
subsidiaries.

FORWARD-LOOKING
STATEMENTS

             Puget  Energy and PSE are  including  the  following  cautionary  statement in this Form 10-Q to make  applicable  and to take
advantage of the safe harbor  provisions of the Private  Securities  Litigation Reform Act of 1995 for any  forward-looking  statements
made by or on behalf of Puget Energy or PSE. This report includes  forward-looking  statements,  which are statements of  expectations,
beliefs,  plans,  objectives,  assumptions  or future  events or  performance.  Words or  phrases  such as  "anticipates,"  "believes,"
"estimates,"  "expects,"  "intends,"  "plans,"  "predicts,"  "projects,"  "will likely result," "will continue" or similar  expressions
identify forward-looking statements.

              Forward-looking  statements involve risks and uncertainties  which could cause actual results or outcomes to differ materially
from those expressed.  Puget Energy's and PSE's  expectations,  beliefs and projections are expressed in good faith and are believed by
Puget Energy and PSE, as applicable,  to have a reasonable basis, including without limitation,  management's examination of historical
operating  trends,  data contained in records and other data  available  from third  parties,  but there can be no assurance that Puget
Energy's and PSE's expectations, beliefs or projections will be achieved or accomplished.

              In addition to other factors and matters  discussed  elsewhere in this report,  some important factors that could cause actual
results or outcomes for Puget Energy and PSE to differ materially from those discussed in forward-looking statements include:

- the outcome and timing of general rate cases filed by PSE with the Washington Commission on  November 26, 2001,  which request
     electric and gas rate increases;
- governmental policies and regulatory actions, including those of the FERC and
the Washington Commission, with respect to allowed rates of return, financings,
industry and rate structures, acquisition and disposal of assets and facilities,
operation and construction of plant facilities, recovery of purchased energy and
other capital investments, and present or prospective wholesale and retail
competition;
- the recent bankruptcy filing by Enron Corporation and related events, which may affect the regulatory and legislative process in unpredictable ways;
- weather, which can have a potentially serious impact on PSEs ability to
procure adequate supplies of gas, fuel or purchased power to serve its customers
and on the cost of procuring such supplies;
- hydroelectric  conditions,  which can have a  potentially  serious  impact on electric  capacity and PSE's ability to generate
     electricity;
- wholesale energy prices, including the effect of price controls promulgated in
June 2001 by FERC on the availability and price of wholesale energy purchases
and sales in the western United States;
- effect of wholesale and
retail competition (including, but not limited to, electric retail wheeling and
transmission costs);
- changes in, and compliance with, environmental and
endangered species laws and policies;
- industrial, commercial and residential
growth and demographic patterns in the service territories of PSE;
- the loss of
any significant customer, or changes in the business of a major customer that
may result in changes in demand
     for services of PSE;
- the impact of significant events, such as the attack on September 11, 2001;
- the ability of Puget Energy and PSE to access the capital markets to support
requirements for working capital, construction costs and the repayment of
maturing debt;
- capital market
conditions, including changes in the availability of capital or interest rate
fluctuations;
- the impact of the bankruptcy filing by Enron on capital market conditions of the utility
industry, including the availability and cost of capital;
- changes in Puget Energys or PSEs credit ratings,
which may have an adverse impact on the availability and cost of capital;
- legal and regulatory proceedings; and
- employee workforce factors, including
strikes, work stoppages or the loss of a key executive.

Any  forward-looking  statement  speaks only as of the date on which such statement is made,  and,  except as required by law,
Puget Energy and PSE undertake no obligation  to update any  forward-looking  statement to reflect  events or  circumstances  after the
date on which such statement is made or to reflect the  occurrence of  unanticipated  events.  New factors emerge from time to time and
it is not possible for  management to predict all such factors,  nor can it assess the impact of any such factor on the business or the
extent  to which any  factor,  or  combination  of  factors,  may cause  results  to differ  materially  from  those  contained  in any
forward-looking statement.

PART I     
FINANCIAL INFORMATIONItem 1.        Financial Statements

PUGET ENERGY, INC.
                                                   CONSOLIDATED STATEMENTS OF INCOME
                                                  For the Three Months Ended March 31
                                                 (Thousands except per share amounts)
                                                              (Unaudited)

`2002                  2001
                                                                                       ---------------        --------------
Operating Revenues:
     Electric                                                                                $381,534              $765,007
     Gas                                                                                      314,491               304,270
     Other                                                                                     61,320                50,587
----------------------------------------------------------------------------------------------------------------------------
          Total operating revenues                                                            757,345             1,119,864
----------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Energy costs:
     Purchased electricity                                                                    200,272               390,216
     Purchased gas                                                                            204,798               216,609
     Electric generation fuel                                                                  65,180               102,384
     Residential Exchange                                                                     (42,747)              (16,741)
     Unrealized (gain) loss on derivative instruments                                         (11,497)               26,466
Utility operations and maintenance                                                             65,941                61,179
Other operations and maintenance                                                               54,621                30,140
Depreciation and amortization                                                                  55,949                53,128
Conservation amortization                                                                       2,165                 1,601
Taxes other than federal income taxes                                                          65,602                70,081
Federal income taxes                                                                           20,490                54,260
----------------------------------------------------------------------------------------------------------------------------

          Total operating expenses                                                            680,774               989,323
----------------------------------------------------------------------------------------------------------------------------
Operating Income                                                                               76,571               130,541
Other income                                                                                      384                 1,941
----------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges and Minority Interest                                           76,955               132,482
Interest charges, net of AFUDC                                                                 50,398                45,435
Minority interest in earnings of consolidated subsidiary                                           79                    --
----------------------------------------------------------------------------------------------------------------------------
Income Before Cumulative Effect of Accounting Change                                           26,478                87,047
Cumulative effect of implementation of FAS-133 derivative instruments
     and hedge activities, net of tax                                                              --                14,749
----------------------------------------------------------------------------------------------------------------------------
Net Income                                                                                     26,478                72,298
Less:  preferred stock dividends accrual                                                        2,012                 2,157
----------------------------------------------------------------------------------------------------------------------------
Income for Common Stock                                                                      $ 24,466              $ 70,141
============================================================================================================================
Basic common shares outstanding - weighted average                                             87,175                86,036
Diluted common shares outstanding - weighted average                                           87,408                86,417
============================================================================================================================
Basic earnings per share before cumulative effect of accounting change                          $0.28                 $0.99
Cumulative effect of accounting change                                                             --                 (0.17)
----------------------------------------------------------------------------------------------------------------------------
Basic earnings per share                                                                        $0.28                 $0.82
============================================================================================================================
Diluted earnings per share before cumulative effect of accounting change                        $0.28                 $0.98
Cumulative effect of accounting change                                                             --                 (0.17)
----------------------------------------------------------------------------------------------------------------------------
Diluted earnings per share                                                                      $0.28                 $0.81
=====================================================================================================================================`

The accompanying notes are an integral part of the financial statements.

PUGET ENERGY, INC.
                                            CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                                  For the Three Months Ended March 31
                                                        (Dollars in Thousands)
                                                              (Unaudited)

`2002                    2001
                                                                               --------------       ---------------

Net Income                                                                       $ 26,478                  $72,298
-------------------------------------------------------------------------------------------------------------------
Other comprehensive income, net of tax:
     Unrealized holding losses arising on marketable securities
         during the period                                                           (149)                   (796)
     Reclassification adjustment for realized gains on marketable
         securities included in net income                                           (724)                     --
     Foreign currency translation adjustment                                         (212)                     --
     Transition adjustment for unrealized gain on derivative
         instruments at January 1, 2001                                                --                 286,928
     Unrealized gains on derivative instruments during the period                   1,410                 128,739
     Reversal of unrealized gains (losses) on derivative instruments
         settled during the period                                                 31,487                (106,068)
-------------------------------------------------------------------------------------------------------------------
        Other comprehensive income                                                 31,812                 308,803
------------------------------------------------------------------------------------------------------------------
Comprehensive Income                                                             $ 58,290                $381,101
==================================================================================================================`

The accompanying notes are an integral part of the financial statements.

PUGET ENERGY, INC.
                                                      CONSOLIDATED BALANCE SHEETS
                                                        (Dollars in Thousands)
                                                              (Unaudited)

# ASSETS

`2002                     2001
                                                                              -------------     --------------------
Utility Plant: (at original cost, including construction work in progress of
$117,044 and $123,307 respectively)
     Electric                                                                   $4,178,325               $4,167,920
     Gas                                                                         1,568,431                1,551,439
     Common                                                                        366,134                  362,670
     Less:  Accumulated depreciation and amortization                           (2,227,125)              (2,194,048)
---------------------------------------------------------------------------------------------------------------------
          Net utility plant                                                      3,885,765                3,887,981
--------------------------------------------------------------------------------------------------------------------

Other Property and Investments:
     Goodwill, net                                                                 124,552                  102,151
     Intangibles, net                                                               16,191                   15,589
     Other assets                                                                  212,012                  199,509
--------------------------------------------------------------------------------------------------------------------
          Total other property and investments                                     352,755                  317,249
--------------------------------------------------------------------------------------------------------------------

Current Assets:
     Cash                                                                           82,006                   92,356
     Restricted cash                                                                 1,096                       --
     Accounts receivable, net                                                      337,704                  279,321
     Unbilled revenue                                                              120,776                  147,008
     Materials and supplies, at average cost                                        48,299                   90,333
     Purchased gas receivable                                                           --                   37,228
     Current portion of unrealized gain on derivative instruments                    2,910                    3,315
     Prepayments and other                                                           9,558                   11,277
--------------------------------------------------------------------------------------------------------------------

          Total current assets                                                     602,349                  660,838
--------------------------------------------------------------------------------------------------------------------

Other Long-Term Assets:
     Regulatory asset for deferred income taxes                                    187,933                  193,016
     Regulatory asset for PURPA buyout costs                                       244,376                  244,635
     Unrealized gain on derivative instruments                                       5,530                    3,317
     Other                                                                         252,362                  239,941
--------------------------------------------------------------------------------------------------------------------

          Total other long-term assets                                             690,201                  680,909
--------------------------------------------------------------------------------------------------------------------

Total Assets                                                                    $5,531,070               $5,546,977
==========================================================================================================================`

The accompanying notes are an integral part of the financial statements.

PUGET ENERGY, INC.
                                                      CONSOLIDATED BALANCE SHEETS
                                                        (Dollars in Thousands)
                                                              (Unaudited)

# CAPITALIZATION
AND LIABILITIES

`2002                      2001
                                                                           ---------------     ---------------------
Capitalization:
    Common shareholders' investment:
       Common stock $0.01 par value, 250,000,000 shares
       authorized, 87,327,323 shares and 87,023,210 outstanding                   $   873                   $   870
       Additional paid-in capital                                               1,358,967                 1,358,946
       Earnings reinvested in the business                                         16,466                    32,229
       Accumulated other comprehensive income (loss)                                2,491                   (29,321)
    Preferred stock not subject to mandatory redemption                            60,000                    60,000
    Preferred stock subject to mandatory redemption                                43,162                    50,662
    Corporation obligated, mandatorily redeemable preferred
       securities of subsidiary trust holding solely junior
       subordinated debentures of the corporation                                 300,000                   300,000
    Long-term debt                                                              2,185,928                 2,127,054
--------------------------------------------------------------------------------------------------------------------
           Total capitalization                                                 3,967,887                 3,900,440
--------------------------------------------------------------------------------------------------------------------

Minority interest in equity of a consolidated subsidiary                            8,716                        --
--------------------------------------------------------------------------------------------------------------------

Current Liabilities:
    Accounts payable                                                              173,748                   167,426
    Short-term debt                                                               157,225                   348,577
    Current maturities of long-term debt                                          151,066                   119,523
    Purchased gas liability                                                        56,683                        --
    Accrued expenses:
      Taxes                                                                        84,771                    70,708
      Salaries and wages                                                           13,422                    14,746
      Interest                                                                     54,309                    42,505
    Current portion of unrealized loss on derivative instruments                      268                    35,145
    Other                                                                          43,387                    46,178
--------------------------------------------------------------------------------------------------------------------
          Total current liabilities                                               734,879                   844,808
--------------------------------------------------------------------------------------------------------------------

Long-Term Liabilities:
    Deferred income taxes                                                         612,813                   605,315
    Other deferred credits                                                        206,712                   196,339
    Unrealized loss on derivative instruments                                          63                        75
--------------------------------------------------------------------------------------------------------------------
          Total long-term liabilities                                             819,588                   801,729
--------------------------------------------------------------------------------------------------------------------

Total Capitalization and Liabilities                                           $5,531,070                $5,546,977
==========================================================================================================================`

The accompanying notes are an integral part of the financial statements.

PUGET ENERGY, INC.
                                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                  For the Three Months Ended March 31
                                                        (Dollars in Thousands)
                                                              (Unaudited)

`2002              2001
                                                                                   -----------------------------------
Operating Activities:
---------------------
Net Income                                                                                    $26,478          $72,298
Adjustments to reconcile net income to net cash provided
   by operating activities:
     Depreciation and amortization                                                             55,949           53,128
     Deferred federal and state income taxes and tax credits - net                             12,581          (10,797)
     Net unrealized (gains) losses on derivative instruments                                  (11,497)          49,157
     Other                                                                                     10,409             (795)
Change in certain current assets and current liabilities:
     Accounts receivable and unbilled revenue                                                 (25,050)          37,539
     Materials and supplies                                                                    43,362           37,288
     Prepayments and other                                                                      2,559            2,334
     Purchase gas receivable/liability                                                         93,911          (47,999)
     Accounts payable                                                                           3,170         (167,897)
     Accrued expenses and other                                                                25,740          104,744
-----------------------------------------------------------------------------------------------------------------------
          Net Cash Provided by Operating Activities                                           237,612          129,000
-----------------------------------------------------------------------------------------------------------------------

Investing Activities:
---------------------
     Construction and capital expenditures-excluding equity AFUDC                             (66,262)         (99,056)
     Additions to energy conservation program                                                  (2,065)          (1,808)
     Acquisitions by InfrastruX, net of cash acquired                                         (29,181)         (32,987)
     Other                                                                                     (4,882)          (3,358)
------------------------------------------------------------------------------------------------------------------------
          Net Cash Used by Investing Activities                                              (102,390)        (137,209)
------------------------------------------------------------------------------------------------------------------------

Financing Activities:
---------------------
     Change in short-term debt - net                                                         (191,352)          71,131
     Dividends paid                                                                           (35,664)         (35,324)
     Redemption of preferred stock                                                             (7,500)          (7,500)
     Issuance of bonds and long term debt                                                      98,928               --
     Redemption of bonds and notes                                                            (10,000)              --
     Other                                                                                         16              (88)
-----------------------------------------------------------------------------------------------------------------------
          Net Cash Provided (Used) by Financing Activities                                   (145,572)          28,219
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash                                                               (10,350)          20,010
Cash at Beginning of Year                                                                      92,356           36,383
-----------------------------------------------------------------------------------------------------------------------
Cash at End of Period                                                                         $82,006          $56,393
=======================================================================================================================
Supplemental Cash Flow Information:
-----------------------------------
Cash payments for:
     Interest (net of capitalized interest)                                                   $38,698          $38,125
     Income taxes                                                                                (778)          14,500
=======================================================================================================================`

The accompanying notes are an integral part of the financial statements.

PUGET SOUND ENERGY, INC.
                                                   CONSOLIDATED STATEMENTS OF INCOME
                                                  For the Three Months Ended March 31
                                                        (Dollars in Thousands)
                                                              (Unaudited)

`2002                   2001
                                                                                -----------------     ------------------
Operating Revenues:
     Electric                                                                           $381,534               $765,007
     Gas                                                                                 314,491                304,270
     Other                                                                                   559                 22,047
------------------------------------------------------------------------------------------------------------------------
          Total operating revenues                                                       696,584              1,091,324
------------------------------------------------------------------------------------------------------------------------
Operating Expenses:
Energy costs:
     Purchased electricity                                                               200,272                390,216
     Purchased gas                                                                       204,798                216,609
     Electric generation fuel                                                             65,180                102,384
     Residential Exchange                                                                (42,747)               (16,741)
     Unrealized (gain) loss on derivative instruments                                    (11,497)                26,466
Utility operations and maintenance                                                        65,941                 61,179
Other operations and maintenance                                                             454                  3,122
Depreciation and amortization                                                             53,678                 51,485
Conservation amortization                                                                  2,165                  1,601
Taxes other than federal income taxes                                                     63,565                 70,081
Federal income taxes                                                                      20,043                 54,811

-----------------------------------------------------------------------------------------------------------------------
          Total operating expenses                                                       621,852                961,213
------------------------------------------------------------------------------------------------------------------------
Operating Income                                                                          74,732                130,111
Other income                                                                                 309                  2,843
------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges                                                            75,041                132,954
Interest charges, net of AFUDC                                                            49,343                 45,326
------------------------------------------------------------------------------------------------------------------------
Income Before Cumulative Effect of Accounting Change                                      25,698                 87,628
Cumulative effect of implementation of FAS-133 derivative instruments
     and hedge activities, net of tax                                                         --                 14,749
------------------------------------------------------------------------------------------------------------------------
Net Income                                                                                25,698                 72,879
Less: preferred stock dividends accrual                                                    2,012                  2,157
------------------------------------------------------------------------------------------------------------------------
Income for Common Stock                                                                  $23,686                $70,722
========================================================================================================================`

The accompanying notes are an integral part of the financial statements.

PUGET SOUND ENERGY, INC. 

                                            CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                                  For the Three Months Ended March 31
                                                        (Dollars in Thousands)
                                                              (Unaudited)

`2002               2001
                                                                              ------------      --------------

Net Income                                                                        $25,698             $72,879
--------------------------------------------------------------------------------------------------------------
Other comprehensive income, net of tax:
     Unrealized holding losses on marketable securities arising
         during the period                                                           (149)              (796)
     Reclassification adjustment for realized gains on marketable
         securities included in net income                                           (724)                --
     Transition adjustment for unrealized gain on derivative
         instruments at January 1, 2001                                                --            286,928
     Unrealized gains on derivative instruments during the period                   1,410            128,739
     Reversal of unrealized gains (losses) on derivative instruments
         settled during the period                                                 31,487           (106,068)
-------------------------------------------------------------------------------------------------------------
        Other comprehensive income                                                 32,024            308,803
-------------------------------------------------------------------------------------------------------------
Comprehensive Income                                                              $57,722           $381,682
=============================================================================================================`

The accompanying notes are an integral part of the financial statements.

PUGET SOUND ENERGY, INC.
                                                      CONSOLIDATED BALANCE SHEETS
                                                        (Dollars in Thousands)
                                                              (Unaudited)

# ASSETS

`2002                      2001
                                                                                ----------------     ---------------------
Utility Plant: (at original cost, including construction work in progress of
$117,044 and $123,307 respectively)
     Electric                                                                        $4,178,325                $4,167,920
     Gas                                                                              1,568,431                 1,551,439
     Common                                                                             366,134                   362,670
     Less:  Accumulated depreciation and amortization                                (2,227,125)               (2,194,048)
---------------------------------------------------------------------------------------------------------------------------
          Net utility plant                                                           3,885,765                 3,887,981
--------------------------------------------------------------------------------------------------------------------------

Other Property and Investments                                                          154,905                   150,530
--------------------------------------------------------------------------------------------------------------------------

Current Assets:
     Cash                                                                                72,938                    82,708
     Restricted cash                                                                      1,096                        --
     Accounts receivable, net                                                           279,665                   235,348
     Unbilled revenue                                                                   120,776                   147,008
     Materials and supplies, at average cost                                             41,965                    85,318
     Purchased gas receivable                                                                --                    37,228
     Current portion of unrealized gain on derivative instruments                         2,910                     3,315
     Prepayments and other                                                                4,222                     7,405
--------------------------------------------------------------------------------------------------------------------------
          Total current assets                                                          523,572                   598,330
--------------------------------------------------------------------------------------------------------------------------

Other Long-Term Assets:
     Regulatory asset for deferred income taxes                                         187,933                   193,016
     Regulatory asset for PURPA buyout costs                                            244,376                   244,635
     Unrealized gain on derivative instruments                                            5,530                     3,317
     Other                                                                              252,362                   239,941
--------------------------------------------------------------------------------------------------------------------------
          Total other long-term assets                                                  690,201                   680,909
--------------------------------------------------------------------------------------------------------------------------

Total Assets                                                                         $5,254,443                $5,317,750
==========================================================================================================================`

The accompanying notes are an integral part of the financial statements.

PUGET SOUND ENERGY, INC.
                                                      CONSOLIDATED BALANCE SHEETS
                                                        (Dollars in Thousands)
                                                              (Unaudited)

# CAPITALIZATION
AND LIABILITIES

`2002                      2001
                                                                           -----------------     ---------------------
Capitalization:
    Common shareholders' investment:
       Common stock, $10 stated value, 150,000,000 shares
       authorized, 85,903,791 shares outstanding                                   $859,038                  $859,038
       Additional paid-in capital                                                   382,592                   382,592
       Earnings reinvested in the business                                           45,379                    55,345
       Accumulated other comprehensive income (loss)                                  2,703                   (29,321)
    Preferred stock not subject to mandatory redemption                              60,000                    60,000
    Preferred stock subject to mandatory redemption                                  43,162                    50,662
    Corporation obligated, mandatorily redeemable preferred
        securities of subsidiary trust holding solely junior
        subordinated debentures of the corporation                                  300,000                   300,000
    Long-term debt                                                                2,063,819                 2,053,815
----------------------------------------------------------------------------------------------------------------------
           Total capitalization                                                   3,756,693                 3,732,131
----------------------------------------------------------------------------------------------------------------------

Current Liabilities:
    Accounts payable                                                                161,359                   154,600
    Short-term debt                                                                 155,355                   338,168
    Current maturities of long-term debt                                            137,000                   117,000
    Purchased gas liability                                                          56,683                        --
    Accrued expenses:
      Taxes                                                                          85,152                    70,210
      Salaries and wages                                                             13,422                    14,746
      Interest                                                                       54,309                    42,505
    Current portion of unrealized loss on derivative instruments                        268                    35,145
    Other                                                                            26,237                    25,178
----------------------------------------------------------------------------------------------------------------------
          Total current liabilities                                                 689,785                   797,552
----------------------------------------------------------------------------------------------------------------------

Long-Term Liabilities:
    Deferred income taxes                                                           606,199                   601,001
    Other deferred credits                                                          201,703                   186,991
    Unrealized loss on derivative instruments                                            63                        75
----------------------------------------------------------------------------------------------------------------------
           Total long-term liabilities                                              807,965                   788,067
----------------------------------------------------------------------------------------------------------------------

Total Capitalization and Liabilities                                             $5,254,443                $5,317,750
======================================================================================================================`

The accompanying notes are an integral part of the financial statements.

PUGET SOUND ENERGY, INC.
                                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                  For the Three Months Ended March 31
                                                        (Dollars in Thousands)
                                                              (Unaudited)

`Operating Activities:                                                          2002                     2001
-------------------------------------------------------------------------------------------------------------
Net Income                                                                     $25,698               $72,879
Adjustments to reconcile net income
  to net cash provided by operating activities:
     Depreciation and amortization                                              53,678                51,485
     Deferred federal income taxes and tax credits - net                        10,281               (10,797)
     Net unrealized (gains) losses on derivative instruments                   (11,497)               49,157
     Other                                                                      15,005               (19,678)
Change in certain current assets and current liabilities:
     Accounts receivable and unbilled revenue                                  (18,086)               70,117
     Materials and supplies                                                     42,688                42,797
     Prepayments and other                                                       3,862                 3,352
     Purchased gas receivable/liability                                         93,911               (47,999)
     Accounts payable                                                            6,622              (176,378)
     Accrued expenses and other                                                 32,150                94,372
-------------------------------------------------------------------------------------------------------------
          Net Cash Provided by Operating Activities                            254,312               129,307
-------------------------------------------------------------------------------------------------------------

Investing Activities:
---------------------
     Construction expenditures - excluding equity AFUDC                        (61,302)              (98,558)
     Additions to energy conservation program                                   (2,065)               (1,808)
     Other                                                                      (4,653)               (3,358)
--------------------------------------------------------------------------------------------------------------
          Net Cash Used by Investing Activities                                (68,020)             (103,724)
--------------------------------------------------------------------------------------------------------------

Financing Activities:
---------------------
     Change in short-term debt - net                                          (182,813)               32,581
     Dividends paid                                                            (35,664)              (35,324)
     Redemption of preferred stock                                              (7,500)               (7,500)
     Issuance of bonds                                                          40,000                    --
     Redemption of bonds and notes                                             (10,000)                   --
     Other                                                                         (85)                  213
-------------------------------------------------------------------------------------------------------------
          Net Cash Used by Financing Activities                               (196,062)              (10,030)
--------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash                                                 (9,770)               15,553
Cash at Beginning of Year                                                       82,708                36,383
-------------------------------------------------------------------------------------------------------------
Cash at End of Period                                                          $72,938               $51,936
=============================================================================================================
Supplemental Cash Flow Information:
-----------------------------------
Cash payments for:
      Interest (net of capitalized interest)                                   $37,295               $38,125
      Income taxes (net of refunds)                                               (778)               14,500
==============================================================================================================`

The accompanying notes are an integral part of the financial statements.

# COMBINED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## (1) Summary of
Consolidation Policy

The  consolidated  financial  statements  of Puget Energy  include the accounts of Puget  Energy and its  subsidiaries,  PSE and
InfrastruX  Group,  Inc.  (InfrastruX).  Puget Energy holds all the shares of PSE, holds a majority interest in InfrastruX and presents
their results on a consolidated  basis.  PSE's  consolidated  financial  statements  include the accounts of PSE and its  subsidiaries.
Puget Energy and PSE are collectively  referred to herein as "the Company".  The consolidated  financial statements are presented after
elimination of all  significant  intercompany  items and  transactions.  Minority  interests in operating  results are reflected in the
consolidated  financial  statements.  Certain  amounts  previously  reported  have been  reclassified  to  conform  with  current  year
presentations with no effect on total equity or net income.

      The consolidated  financial statements contained in this Form 10-Q are unaudited.  In the respective opinions of the managements
of Puget Energy and PSE, all adjustments  necessary for a fair  presentation of the results for the interim periods have been reflected
and were of a normal recurring nature.  These condensed  financial  statements should be read in conjunction with the audited financial
statements  (and the Combined  Notes  thereto)  included in the combined  Puget Energy and PSE annual  report on Form 10-K for the year
ended  December 31, 2001,  which is available at the  Securities  and Exchange  Commission  website at www.sec.gov or at Puget Energy's
website at www.pse.com.

## (2)      Earnings per Common Share (Puget Energy Only)

Puget  Energy's  basic  earnings per common share have been computed  based on weighted  average  common shares  outstanding  of
87,175,000 and 86,036,000 for the three months ended March 31, 2002 and 2001, respectively.

      Puget  Energy's  diluted  earnings per common share have been computed based on weighted  average  common shares  outstanding of
87,408,000 and 86,417,000 for the three months ended March 31, 2002 and 2001,  respectively.  These shares include the dilutive  effect
of securities related to employee and director equity plans. The difference between the number of basic common shares and diluted common shares is
immaterial.

## (3)      Segment Information (Puget Energy Only)

Puget Energy  operates in primarily  two business  segments:  Regulated  Utility  Operations,  or PSE, and Utility  Support,  or
InfrastruX.  Puget Energy's  regulated utility operation  generates,  purchases,  transports and sells electricity and natural gas. The
service territory of PSE covers  approximately 6,000 square miles in Washington state.  InfrastruX  specializes in contracting services
to other gas and electric utilities primarily in the Mid-West, Texas and the Eastern United States.

      The other  principal  non-utility  line of business,  which is a PSE  subsidiary,  is a real estate  investment and  development
company. The assets of ConneXt,  the developer and marketer of customer  information and billing system software,  were sold during the
third quarter of 2001. Reconciling items between segments are not material.

Financial data for business segments are as follows:

`(Dollars in Thousands)
  Three Months Ended March 31, 2002                         PSE           InfrastruX          Other             Total
---------------------------------------------------------------------------------------------------------------------------
  Revenues                                                   $696,025         $ 60,761             $ 559          $757,345
  Depreciation and amortization                                53,674            2,271                 4            55,949
  Federal income tax                                           19,753              526               211            20,490
  Operating income                                             74,474            1,986               111            76,571
  Interest charges, net of AFUDC                               49,343            1,055                --            50,398
  Net income                                                   25,619            1,005              (146)           26,478
  Total assets                                              5,132,987          279,030           119,053         5,531,070
---------------------------------------------------------------------------------------------------------------------------


  Three Months Ended March 31, 2001                         PSE           InfrastruX          Other             Total
---------------------------------------------------------------------------------------------------------------------------
  Revenues                                                 $1,069,276         $ 28,541          $ 22,047        $1,119,864
  Depreciation and amortization                                51,482            1,643                 3            53,128
  Federal income tax                                           48,232             (543)            6,571            54,260
  Operating income                                            117,828              444            12,269           130,541
  Interest charges, net of AFUDC                               45,220              109               106            45,435
  Net income                                                   60,419             (567)           12,446            72,298
  Total assets                                              5,655,740          154,569           137,246         5,947,555
---------------------------------------------------------------------------------------------------------------------------`

## (4) Accounting for
Derivative Instruments and Hedging Activities

On January 1, 2001,  the Company  adopted  Statement  of Financial  Accounting  Standards  Statement  No. 133, "Accounting  for
Derivative  Instruments  and Hedging  Activities" (Statement No. 133), as amended by Statement  No. 138.  Statement  No. 133 requires  that all  contracts
considered to be derivative  instruments  be recorded on the balance sheet at their fair value.  The Company  enters into both physical
and financial  contracts to manage its energy resource portfolio including forward physical and financial  contracts,  option contracts
and swaps. The majority of these contracts qualify for the normal purchase and normal sale exception.

      On January 1, 2001, the Company  recognized the cumulative effect of adopting  Statement No. 133 by recording a liability and an
offsetting  after-tax decrease to current earnings of approximately  $14.7 million for the fair value of electric  derivatives that did
not  meet  hedge  criteria.  The  Company  also  recorded  an  asset  and an  offsetting  increase  to other  comprehensive  income  of
approximately $286.9 million for the fair value of derivative instruments which did meet hedge criteria on the implementation date.

      During the three months ended March 31,  2002,  the Company  recorded an increase in earnings for the change in the market value
of derivative  instruments  not meeting cash flow hedge criteria of  approximately  $11.5 million  pre-tax ($7.5 million  after-tax) as
compared to a decrease in earnings of $26.5 million pre-tax ($17.2 million after-tax) for the same period in 2001.

      At October 15, 2001, the Company had recorded a deferred  liability of approximately  $26.9 million  after-tax for financial gas
contracts to be used for electric  production that until October 15, 2001 were  designated as qualifying  cash flow hedges.  Changes in
the market values of these  de-designated  contracts  subsequent  to October 15, 2001 were  recorded as a loss of $7.8 million  pre-tax
($5.1 million  after-tax) to earnings  through  December 31, 2001.  During the three months ended March 31, 2002 all of these contracts
were settled or terminated, resulting in the loss being reversed during the three months ended March 31, 2002.

      During 2001, the Financial  Accounting  Standards Board's Derivative  Implementation Group for Statement No. 133 issued guidance
under Issue C16 - "Applying  the Normal  Purchases  and Normal  Sales  Exception to  Contracts  that  Combine a Forward  Contract and a
Purchased  Option  Contract".  Issue C16 indicates that fuel supply  contracts that combine a forward  contract and a purchased  option
cannot  qualify for the normal  purchase and normal sales  exception  because of the  optionality  regarding the quantity of fuel to be
delivered  under the  contract.  Issue C16 is  effective  April 1, 2002 for PSE.  As a result,  any  contracts  under Issue C16 will be
required to be  marked-to-market  through  earnings.  The Company has reviewed its fuel supply  contracts and has  determined  that two
electric  generating  fuel supply  contracts will no longer qualify as normal  purchase and normal sales contracts under Issue C16. The
Company intends to restructure  these two existing  electric  generation fuel supply  contracts in the second quarter of 2002 by either
separating or terminating the optionality provisions of these contracts.

## (5)     Acquisitions (Puget Energy Only)

During the first  quarter of 2002,  InfrastruX,  a  majority-owned  subsidiary of Puget Energy,  acquired  Chapman  Construction
Company,  an electric  utility  construction  company  based in Texas.  During 2001,  InfrastruX  acquired  six utility  infrastructure
companies throughout the Eastern United States,  Mid-West and Texas. These companies provide utility  infrastructure  services such as:
installing,  replacing and restoring underground cables and pipes for utilities;  transmission and distribution pipeline  construction,
maintenance  and  rehabilitation  services for the natural gas and  petroleum  industries,  including  directional  drilling and vacuum
excavation; and transmission and distribution overhead electric construction services to electric utilities and cooperatives.

      The above  acquisitions  were accounted for using the purchase method of accounting and,  accordingly,  the operating results of
these  companies have been included in Puget  Energy's  consolidated  financial  statements  since their  acquisition  dates.  Goodwill
representing  the excess of cost over the net tangible and  identifiable  intangible  assets of the business was  approximately  $128.7
million at the time of purchase.  During 2001,  goodwill was being amortized on a  straight-line  basis using a 30-year life except for
goodwill on three acquisitions made after June 30, 2001,  which was not amortized per Statement of Financial  Accounting  Standards No. 142 - "Goodwill
and Other Intangible  Assets" (Statement No. 142).  With the  implementation  of Statement No. 142 in January 2002, Puget Energy has
discontinued  amortizing  goodwill and has also reclassified $5.2 million of intangible assets that no longer meet the criteria of identifiable intangible assets to goodwill.
In lieu of the amortization, Puget Energy is performing an initial impairment review of goodwill to determine
if it should be written down and will perform an annual impairment review thereafter. The initial review will be completed during the first
half of 2002 as required by Statement No. 142 and it is anticipated that Puget Energy will not record an impairment charge upon completion
of the initial impairment review.

     The income statement effects of discontinuing amortization of goodwill for the comparative periods are as
follows for Puget Energy:

`(Dollars in thousands)
   For the Three Months Ended March 31                         2002         2001
   ------------------------------------------------------ ------------ ------------
Reported net income for common                              $24,466      $70,141
Add back goodwill amortization                                   --          758
                                                        ------------ ------------
Adjusted net income for common                              $24,466      $70,899
                                                        ============ ============

Basic earnings per share
  Reported net income for common                              $0.28        $0.82
  Add back goodwill amortization                                 --           --
                                                        ------------ ------------
  Adjusted net income for common                              $0.28        $0.82
                                                        ============ ============
Diluted earnings per share
  Reported net income for common                              $0.28        $0.81
  Add back goodwill amortization                                 --           --
                                                        -------------------------
  Adjusted net income for common                              $0.28        $0.81
                                                        ============ ============`

Identifiable  intangible  assets  acquired as a result of acquisitions of companies are amortized over the
expected useful lives of the assets which range from five to 20 years.  As  InfrastruX  acquires  more  companies  the total  amortization
amount in future periods will change. Identifiable intangible assets are as follows:

`March 31, 2002                                     December 31, 2001
                           ---------------------------------------------------    ----------------------------------------------
                                 Gross          Accumulated          Net               Gross       Accumulated         Net
 (Dollars in thousands)       Intangibles       Amortization     Intangibles        Intangibles    Amortization    Intangibles
------------------------------------------------------------------------------    ----------------------------------------------
 Covenant not to compete           $3,717            $534          $3,183              $  2,768         $   364       $  2,404
 In process R&D                       260             260               -                   260             260              -
 Developed technology              14,190           1,182          13,008                14,190           1,005         13,185
--------------------------------------------------------------------------------------------------------------------------------
 Total                          $  18,167        $  1,976        $ 16,191              $ 17,218         $ 1,629       $ 15,589
                           =====================================================================================================`

The identifiable  intangible amortization expense for the quarter ended March 31, 2002 was $0.3 million compared to $0.2 million
for the same period of 2001. The expected amortization of identifiable intangible assets for future periods is:

`(Dollars in thousands)                     2002           2003           2004          2005         2006          2007
----------------------------------------------------------------------------------------------------------------------------
Future Intangible Amortization          $ 1,556        $ 1,459        $ 1,459       $ 1,443      $ 1,111        $  731`

## (6) New
Accounting Pronouncements

In August 2001, the Financial Accounting Standards Board issued Statement No. 143 - "Accounting for Asset Retirement
Obligations" (Statement No. 143).  Statement No. 143 requires companies to record the fair value of a liability for an asset
retirement obligation in the period in which the obligation is incurred.  When the liability is initially recorded, the company will
capitalize the cost as part of the asset's carrying amount and expense the retirement obligation over the asset's useful life. The
adoption of this statement is for fiscal years beginning after June 15, 2002, although earlier adoption is encouraged.  The Company
is in the process of determining the impacts of this statement.

## (7) Other

On March 28, 2002,  the  Washington  Commission  approved the  settlement  agreement on the  Company's  interim and general rate
proceeding  that was announced on March 20, 2002.  As a result,  an interim  electric  rate  surcharge of $25 million will be in effect
for the period April 1, 2002 through June 30, 2002. In addition,  three important  financial  issues were resolved for the general rate
case which  include the equity  capital  ratio,  the return on equity and  adoption of an electric  power cost tracker  mechanism.  The
settlement  also creates a fast track  collaborative  process for  completion of any  adjustments  to the Company's  requested  revenue
requirement  for the electric  general  rate case by July 1, 2002 and the gas general  rate case by September 1, 2002,  which is months
earlier than the previous  November 1, 2002  completion  date for both cases.  If the  collaborative  process  fails to produce a total
settlement, the parties have agreed that the electric general rate case will be concluded no later than September 1, 2002.

      As part of the settlement,  the Washington State Attorney  General's  Public Counsel section  dismissed its complaint filed with
the  Washington  Commission  that sought to reduce PSE rates as a result of a disputed  interpretation  of  provisions of the Company's
1997 WUTC merger order relating to a Bonneville Power Administration residential exchange credit.

      On May 6, 2002,  PSE filed a request with the Washington  Commission to lower natural gas rates by ending a temporary  surcharge
that went into effect  September 1, 2001 as part of the Purchase Gas  Adjustment  mechanism.  The requested  decrease of 22% in natural
gas rates would be effective  June 1, 2002, if approved by the  Washington  Commission.  The PGA mechanism  passes through to customers
increases or decreases in the gas supply  portion of the natural gas service  rates based upon changes in the prices.  PSE's gas margin
and net income will not be affected by the change in gas rates.

      In October 2000, the Company filed a shelf-registration  statement with the Securities and Exchange Commission for the offering,
on a delayed or continuous  basis, of up to $500 million  principal amount of Senior Notes secured by a pledge of First Mortgage Bonds,
Subordinated  Debentures or Trust Preferred  Securities.  On January 16, 2002, the Company issued $40 million principal amount of 6.25%
Senior Medium-Term Notes, Series C which effectively completed the shelf-registration. The Notes are due January 16, 2004.

      In February  2002,  the Company  filed a  shelf-registration  statement  with the  Securities  and Exchange  Commission  for the
offering,  on a delayed or  continuous  basis,  of up to $500  million  principal  amount of any  combination  of common stock of Puget
Energy,  principal  amount of Senior Notes of PSE secured by a pledge of First  Mortgage  Bonds,  Unsecured  Debentures of PSE or Trust
Preferred Securities of PSE.

      In June 2001,  InfrastruX signed a credit agreement with several banks to provide up to $150 million in financing.  Puget Energy
is the  guarantor of the line of credit.  In addition,  InfrastruX's  subsidiaries  have $21.1 million in lines of credits with various
banks.  Short-term  borrowings  available  for  InfrastruX  are  used  to fund  working  capital  requirements  of  InfrastruX  and its
subsidiaries.  At March 31, 2002,  InfrastruX and its subsidiaries had outstanding  loans of $130.1 million,  effectively  reducing the
available borrowing capacity under these lines of credit to $41.0 million.

The following  discussion of the Company's  financial condition and results of operations  contains  forward-looking  statements
that involve risks and uncertainties,  such as statements of the Company's plans, objectives,  expectations and intentions.  Words such
as "anticipate,"  "believe," "expect," "future" and "intend" and similar expressions are used to identify  forward-looking  statements.
However,  these  words are not the  exclusive  means of  identifying  such  statements.  In  addition,  any  statements  that  refer to
expectations,  projections or other characterizations of future events or circumstances are forward-looking  statements.  The Company's
actual results could differ  materially  from those  anticipated in these  forward-looking  statements for many reasons,  including the
factors  described  below and under the caption  "Forward-Looking  Statements"  at the  beginning of this report.  You should not place
undue reliance on these forward-looking statements, which apply only as of the date of this Form 10-Q.

Puget Energy  Results of Operations

All of the operations of Puget Energy are conducted through its subsidiaries,  PSE and InfrastruX. Puget Energy's net income for
the three months ended March 31, 2002 was $26.5  million on operating  revenues of $757.3  million,  compared  with net income of $72.3
million on  operating  revenues  of $1.1  billion for the same period in 2001.  Net income for common  stock was $24.5  million for the
first  quarter of 2002  compared to $70.1  million for the first  quarter of 2001.  Basic  earnings  per share were $0.28 for the first
quarter of 2002  compared to $0.82 for the first quarter of 2001.  Diluted  earnings per share were $0.28 for the first quarter of 2002
compared  to $0.81 for the first  quarter of 2001.  First  quarter  results of 2001 are net of a charge to  earnings of $0.17 per basic
and diluted share associated with the adoption of Statement No. 133.
         Total kilowatt-hour  energy sales to retail consumers in the first quarter of 2002 were 5.5 billion compared with 5.7 billion in
2001.  Kilowatt-hours  transported to transportation  customers under a new tariff  established in the third quarter of 2001 were 553.9
million in the first quarter of 2002.  Those  transport  customers were served under a retail full service  industrial  tariff in 2001.
Kilowatt-hour  sales to wholesale  customers  were 1.4 billion in the first quarter of 2002 compared to 1.8 billion in 2001.  Total gas
sales to retail  consumers in the first quarter of 2002 were 346.9 million  therms  compared with 320.4 million  therms in 2001.  Total
gas sales to transportation customers in the first quarter of 2002 were 54.7 million therms compared with 49.0 million therms in 2001.

      The Company's utility operating revenues and associated expenses are not generated evenly during the year.  Variations in energy
usage by  consumers  do occur  from  season  to  season  and from  month to month  within a season,  primarily  as a result of  weather
conditions.  The Company  normally  experiences its highest retail energy sales in the first and fourth  quarters of the year.  Varying
wholesale  electric  prices and the amount of  hydroelectric  energy  supplies  available to the Company  also make  quarter-to-quarter
comparisons  difficult.  In addition,  operating  revenues and  associated  expenses of  InfrastruX  vary  quarter-to-quarter  with its
highest revenues in the second and third quarters, excluding the effects of any new acquisitions during the year.

      The Company meets its forecasted  electric supply needs throughout the year through  Company-controlled  electric generation and
by obtaining power through long-term  contracts,  annual contracts and short-term markets. The Company meets its forecasted natural gas
supply needs throughout the year through  Company-owned gas storage and by purchasing gas supplies through long-term contracts,  annual
contracts and  short-term  markets.  The Company also performs  risk  management  activities to optimize the value of energy supply and
transmission  assets and to ensure that  physical  energy  supply is  available  to meet the customer  demand  loads.  The Company also
purchases  energy when demand  exceeds  available  supplies in its portfolio;  likewise the Company makes sales to other  utilities and
marketers  when surplus  energy is  available.  These  transactions  are part of the Company's  normal  operations to meet retail load.
Electric  sales to other  utilities  and  marketers  vary by quarter  and year  depending  principally  upon water  conditions  for the
generation of hydroelectric  power,  retail customer usage, the energy  requirements of other utilities and energy market conditions in
the Pacific  Northwest.  The April 18, 2002 seasonal water supply forecast  published by the National  Weather  Service  indicated that
the total  forecasted  runoff into the Grand Coulee  reservoir  for the period April  through  September  2002 would be 103% of normal.
This compares to 63% of normal for the same period in 2001.  Although runoff  conditions are near normal,  PSE expects hydro generation
from the  Mid-Columbia  projects  will be slightly  below normal due to the  refilling of the  reservoirs  that were drawn down by last
year's drought conditions.

      Temperatures based on heating-degree-days  measured at Seattle-Tacoma airport during the three month period ended March 31, 2002
were 6% cooler than normal as compared to heating-degree-days being near normal during the three month period ended March 31, 2001.

`Results of Operations of Puget Energy
                                                    Comparative Three Months Ended
                                                   March 31, 2002 vs. March 31, 2001
                                                          Increase (Decrease)
                                                         (Dollars in Millions)

Operating revenue changes:
 Electric revenue sold at index rates                                                   $(90.1)
 Electric revenue sold to conservation trust                                               6.1
 Residential Exchange Credit                                                             (10.8)
 Electric load and other                                                                  12.3
 Electric sales to other utilities and marketers                                        (301.0)
                                                                            -------------------
     Total electric revenue change                                                      (383.5)
 Gas revenue                                                                              10.2
 InfrastruX revenue                                                                       32.2
 Other revenue                                                                           (21.4)
                                                                            -------------------
     Total operating revenue change                                                     (362.5)

Operating expense changes:
 Energy costs:
     Purchased electricity                                                              (189.9)
     Residential exchange power cost credit                                              (26.0)
     Purchased gas                                                                       (11.8)
     Electric generation fuel                                                            (37.2)
     Unrealized (gain) loss on derivative instruments                                    (38.0)
 Utility operations and maintenance:
     Production operations and maintenance                                                 0.7
     Personal energy management                                                           (0.1)
     Other utility operations and maintenance                                              4.2
 Other operations and maintenance
     InfrastruX operations and maintenance                                                26.9
     Other operations and maintenance                                                     (2.5)
 Depreciation and amortization                                                             2.8
 Conservation amortization                                                                 0.6
 Taxes other than federal income taxes                                                    (4.5)
 Federal income taxes                                                                    (33.7)
                                                                            -------------------
     Total operating expense change                                                     (308.5)

Other income (net of tax) change                                                          (1.5)
Interest charges change                                                                    4.9
Minority Interest in earnings of consolidated subsidiary change                            0.1
FAS-133 transition adjustment loss (net of tax) change                                   (14.7)
                                                                            -------------------
     Net income change                                                                  $(45.8)
                                                                            ===================`

## Operating
Revenues - Electric

Electric  revenues for the three months ended March 31, 2002 were $381.5 million,  a decrease of $383.5 million  compared to the
same period in 2001.  Retail kWh sales  volumes  declined  2.9% from 5.7 billion kWh in 2001 to 5.5 billion kWh in 2002.  Retail  sales
revenue  decreased  15.9% as a result of lower  rates  paid by  industrial  customers  on market  index  rates and  several  index rate
customers  switching to transportation  rate tariffs beginning in July 2001 as allowed by a Washington  Commission order dated April 5,
2001  authorizing the  establishment of a transportation  tariff.  Transportation  revenues were $3.6 million in the three months ended
March 31, 2002.  Electric sales to other  utilities and marketers in the western  wholesale  market,  including the Pacific  Northwest,
decreased  $301.0  million in the three months ended March 31, 2002 compared to the same period in 2001 due to decreased  prices in the
wholesale  electricity  market.  Wholesale  sales  volumes  declined by 476.8  million kWh or 26.1% in the three months ended March 31,
2002 compared to the same period in 2001.

      On April 25, 2001, the Washington  Commission  approved  "time-of-day"  rates for approximately  300,000  residential  electric
customers for the period May 1, 2001 through  September  30, 2001. On September 26, 2001,  the  Washington  Commission  authorized  the
extension of the "time-of-day"  rates pilot program for residential  customers through May 31, 2002 and to allow  approximately  20,000
business  customers to participate in a "time-of-day"  rates program from October 1, 2001 through  September 30, 2002. In the order, if
the  cumulative  revenues  collected  under  "time-of-day"  tariffs  during the  beginning  through the end of the programs  exceed the
revenues that would have been collected under the original tariffs,  PSE must defer any  overcollection  and refund it to participating
customers.  Through March 31, 2002,  revenues billed under the  "time-of-day"  tariff have been slightly less than the original tariffs
by an immaterial  amount,  thus no deferred  liability was  established at March 31, 2002.  Personal  Energy  Management consumption
information  is available to all classes of  customers.  Customers are able to monitor their energy usage and shift usage to low-demand
off-peak periods. This program reduces the demand for peak power generation.

      Revenues  from  electric  customers  in the first three months of 2001 and 2002 were  reduced by a  Residential  and Farm Energy
Exchange  credit  tariff in place from  October 1, 1995  through  June 30,  2001 and an amended  Residential  Purchase  and Farm Energy
Exchange credit in place since July 1, 2001. On June 13, 2001, the Washington  Commission approved an amended Residential  Purchase and
Sale Agreement  between PSE and BPA, under which PSE's  residential and small farm customers  would receive  benefits of federal power.
Completion of this agreement enables PSE to continue to provide,  and in fact increase,  effective January 1, 2002, the Residential and
Farm Energy  Exchange  credit.  Under the amended  settlement  agreement,  PSE receives  cash  payments  during the period July 1, 2001
through  September  30, 2006 and benefits in the form of power  and/or cash  equivalent  to  approximately  648 annual  average MW from
October 1, 2006 through  September 30, 2011. The level and form of any federal  benefits to be received by PSE's  residential and small
farm  customers may vary,  depending on the outcome of  regulatory  and legal  proceedings  and reviews.  As of July 1, 2001,  the cash
payments received from BPA by PSE are  passed-through to eligible  residential and small farm customers,  with an offsetting  reduction
in Purchased  Electricity  Expense  recorded.  PSE expects  payments  from BPA spread  monthly in the amount of $127.3  million for the
period January 2002 through September 2002 and  $702.2 million for the period October 2002 through September 2006.

      On October 17, 2001, the Public Counsel  Section of the Washington  State Attorney  General's  Office filed a complaint with the
Washington  Commission  stating PSE violated the Washington  Commission's  1997 merger order. The Public Counsel's  complaint  position
was that PSE's  residential  and small farm  customers  should  receive both the reduction in rates equal to the  residential  exchange
credit in place prior to July 1, 2001, and in addition,  the benefits of the amended  agreement for residential and small farm benefits
received from BPA  subsequent to July 1, 2001.  As part of the interim and general rate case  settlement  approved on March 28, 2002 by
the Washington Commission, Public Counsel's complaint has been dismissed.

      To meet  customer  demand,  PSE's power supply  portfolio  includes net  purchases of power under  long-term  supply  contracts.
However,  depending  principally upon streamflow  available for hydroelectric  generation and weather effects on customer demand,  from
time to time,  PSE may have surplus power  available for sale to wholesale  customers.  PSE manages its core energy  portfolio  through
short and  intermediate-term  purchases,  sales,  arbitrage and other risk  management  techniques.  PSE also  operates its  combustion
turbine  plants  located in Western  Washington  when it is  cost-effective  to do so.  During the first three months of 2001,  PSE had
operated its combustion  turbine plants  extensively  to meet retail load  requirements  compared to the same period in 2002. As energy
prices moderated in the fourth quarter of 2001 and the first quarter of 2002, PSE reduced  operations of its combustion  turbine plants
which reduced  electric  generation  fuel expenses  compared to the first three months of 2001. In addition,  the moderate  electricity
prices have reduced  electric sales to other utilities and marketers as well as purchased  electricity  costs in the first three months
of 2002 compared to the same period in 2001. PSE's Risk Management Committee oversees energy price risk matters.

      PSE operates within the western wholesale market and has made sales into the California energy market.  During the first quarter
of 2001, PSE received  partial  payments for sales made in the fourth quarter of 2000. At December 31, 2001,  PSE's receivable from the
California  Independent System Operators (CAISO) and other  counter-parties,  net of reserves,  was $26.6 million. PSE has not received
any further payments on the receivable in 2002.

## Operating Revenues
- Gas

Gas  operating  revenues  for the three months  ended March 31, 2002  increased  by $10.2  million from the same period in 2001,
including  transportation  of gas for  customers.  Total retail gas sales volumes  increased  8.3% from 320.4 million therms in 2001 to
346.9 million  therms in 2002 due primarily to cooler  temperatures.  Offsetting the increase in retail sales volume were lower natural
gas prices that are passed through to customers in the Purchased Gas Adjustment (PGA).

      On July 24,  2001,  PSE filed a request  with the  Washington  Commission  to lower  gas  rates due to lower  natural  gas costs
purchased for customers  under terms of the Purchased Gas Adjustment  (PGA)  mechanism.  On August 29, 2001, the Washington  Commission
approved a decrease in PSE natural gas rates of 8.9 % effective  September  1, 2001.  The PGA  mechanism  passes  through to  customers
increases  or  decreases  in the gas supply  portion of the natural gas  service  rates based upon  changes in the price of natural gas
purchased  from  producers and wholesale  marketers or changes in gas pipeline  transportation  costs.  PSE's gas margin and net income
are not affected by changes under the PGA.

## Operating
Revenues - Other

Other  operating  revenues for the three months  ended March 31, 2002  increased by $10.8  million from the same period in 2001.
This increase was due primarily to the  acquisitions of several  companies by InfrastruX in 2001, which  contributed  $32.2 million for
the three  months  ended  March 31,  2002.  Offsetting  this is a decrease of $21.4  million in  property  sales from PSE's real estate
development subsidiary Puget Western, Inc.

## Operating Expenses

Purchased  electricity  expenses  decreased $189.9 million for the three months ended March 31, 2002 compared to the same period
in 2001. The three-month  period decrease reflects the dramatic decline of wholesale  electricity  prices since June 2001. In addition,
PSE  experienced  an 83-day  unplanned  outage of one of PSE's 104 MW  combustion  turbine  electric  generating  units  located at its
Fredonia  generating  station from  February 21, 2001 to May 14, 2001,  resulting  in higher  purchased  electricity  costs during that
period.

      Purchased  gas expenses  decreased  $11.8 million for the three months ended March 31, 2002 compared to the same period in 2001.
The decrease was due primarily to the impact of decreased gas costs,  which are passed through to customers  through the PGA mechanism.
The PGA allows PSE to recover  expected gas costs.  PSE defers,  as a receivable or liability,  any gas costs that exceed or fall short
of the amount in PGA rates and accrues  interest  under the PGA. The PGA balance was a receivable  at March 31, 2001 of $144.0  million
while the balance at March 31, 2002 was a liability of $56.3 million.

      Electric  generation fuel expense  decreased $37.2 million for the three months ended March 31, 2002 compared to the same period
in 2001 as a result of decreased  generation costs at PSE-controlled  combustion turbine facilities.  These facilities operated at much
higher  levels  during  the three  months  ended  March 31,  2001  compared  to the same  period in 2002 due to  adverse  hydroelectric
conditions in 2001.

      Residential  exchange  credits  associated with the Residential  Purchase and Sale Agreement with BPA increased $26.0 million in
2002 when compared to 2001, due to the amended  Residential  Purchase and Sale Agreement  between PSE and BPA as discussed in Operating
Revenues - Electric.  As of July 2001,  all  residential  exchange  credits are passed through to eligible  residential  and small farm
customers by a corresponding reduction in revenues.

      Unrealized  losses on derivative  instruments  decreased $38.0 million in 2002 compared to 2001, due to changes in market prices
on forward  contracts.  Statement  No. 133 was  adopted on January 1,  2001,  and as a result,  a $14.7  million  after-tax  transition
adjustment loss was recorded in 2001 resulting from  recognizing  the cumulative  effect of this change in accounting  principle.  (For
further discussion see Note 4).

      Other utility  operations  and  maintenance  costs  increased $4.2 million for the three months ended March 31, 2002 compared to
the same period in 2001 due  primarily to PSE employee  severance  costs  totaling  $4.0 million  related to strategic  outsourcing  of
operations work to service  providers.  In addition,  PSE recorded an estimated net  curtailment  gain of $2.2 million for Statement of
Financial  Accounting  Standards No. 88 - "Employers'  Accounting for Settlement and  Curtailment of Defined  Benefit Pension Plans and
for  Termination  Benefits"  and  Statement of Financial  Accounting  Standards No. 106 -  "Employers'  Accounting  for  Postretirement
Benefits Other than Pensions" in 2002 as calculated by PSE's actuary.

      InfrastruX  operation and maintenance  expenses  increased $26.9 million for the three months ended March 31, 2002 when compared
to the same period in 2001 due primarily to the acquisition of companies  acquired during 2001.  PSE's other operations and maintenance
expenses  decreased $2.5 million in 2002 compared to 2001 primarily due to a decrease in operating  expenses at ConneXt,  the assets of
which were sold in the third quarter of 2001.

      Depreciation  and  amortization  expense  increased  $2.8 million for the three months ended March 31, 2002 compared to the same
period in 2001 due primarily to the effects of new plant placed into service during the past year.  Also  contributing  to the increase
are the acquisitions by InfrastruX which increased depreciation and amortization by $1.1 million for the three month period.

      Taxes other than federal  income  taxes  decreased  $4.5 million for the three months ended March 31, 2002  compared to the same
period in 2001 primarily due to municipal and state excise taxes which are revenue based.

## Interest
Charges

Interest  charges,  which consist of interest and amortization on long-term debt and other interest,  increased $4.9 million for
the three months ended March 31, 2002 compared to the same period in 2001.  Interest on long-term  debt  increased  $4.2 million in the
three  months  ended  March 31,  2002  compared to the same  period in 2001 as a result of the  issuance  of $200  million  8.40% Trust
Preferred  Securities in May, 2001. In addition,  InfrastruX  borrowings increased interest charges by $0.9 million in the three months
ended March 31, 2002  compared to the same period in 2001.  Other  interest  expense  decreased  $0.2 million in the three months ended
March 31, 2002  compared to the same period in 2001 due  primarily to lower  weighted  average  interest  rates and lower average daily
short-term borrowings.

# Capital
Expenditures, Capital Resources and Liquidity

## Capital
Requirements

## Contractual
Obligations and Commercial Commitments

Puget Energy. The following are Puget Energy's  aggregate  consolidated  (including PSE) contractual and commercial  commitments
as of March 31, 2002:

|Puget Energy | Payments Due Per Period
|------------ | -----------------------

---

|Contracutal Obligations(in millions) | Total | 2002 | 2003-2004 | 2005-2006 | 2007 and Thereafter
|------------------------------------ | ----- | ---- | --------- | --------- | -------------------

|Long-term debt                         | $2,337.0 | $120.7 | $331.8   | $113.2 | $1,771.3
|-------------------------------------- | -------- | ------ | -------- | ------ | --------
|Short-term debt                        | 157.2    | 157.2  | --       | --     | --      
|Trust preferred securities (1)         | 300.02   | --     | --       | --     | 300.0   
|Preferred dividends (2)                | 1.1      | 1.1    | --       | --     | --      
|Service contract obligations           | 210.4    | 14.4   | 40.5     | 43.2   | 112.3   
|Capital lease obligations              | 6.0      | 2.1    | 2.7      | 1.2    | --      
|Non-cancelable operating leases        | 58.4     | 13.7   | 28.5     | 11.0   | 5.2     
|Fredonia combustion turbines lease (3) | 79.2     | 3.7    | 9.7      | 9.3    | 56.5    
|Energy purchase obligations            | 4,496.3  | 396.5  | 971.2    | 812.1  | 2,316.5 
|Financial hedge obligations            | (8.4)    | (5.6)  | 2.5      | (3.4)  | (1.9)   
|Total contractual cash obligations     | $7,637.2 | $703.8 | $1,386.9 | $986.6 | $4,559.9

| | Amount of CommitmentExpiration Per Period
| | -----------------------------------------

---

|Commercial Commitments  (in millions) | Total  | 2002 | 2003-2004 | 2005-2006 | 2007 and Thereafter
|------------------------------------- | ------ | ---- | --------- | --------- | -------------------
|Guarantees (4)                        | $117.0 | --   | $117.0    | --        | --                 
|Lines of credit - available (5)       | 260.6  | 7.5  | 253.1     | --        | --                 
|Total commercial commitments          | $377.6 | $7.5 | $370.1    | --        | --                 

1. In 1997 and 2001,  PSE formed Puget Sound Energy Capital Trust I and Puget Sound Energy  Capital Trust II,  respectively,  for
     the sole  purpose of issuing and selling  preferred  securities  (Trust  Securities)  and issuing  common  securities  to PSE. The
     proceeds from the sale of Trust Securities were used by the Trusts to purchase Junior  Subordinated  Debentures  (Debentures) from
     PSE. The Debentures are the sole assets of the Trusts and PSE owns all common securities of the Trusts.
2. On January  7,  2002,  the Board of  Directors  of PSE  declared  a  dividend  payable  on April 1, 2002 for  preferred  stock
     outstanding on March 14, 2002.
3. In April 2001,  PSE entered  into a lease line of up to $70 million with a financial  institution,  under which PSE leases two
     combustion  turbines for its Fredonia 3 and 4 electric  generation  facility.  The lease has a term  expiring in 2011,  but can be
     cancelled by PSE after three years.  Lease  payments and  amortization  under the lease include  interest equal to 1.20% above the
     London  inter-bank  offered rate (LIBOR).  At March 31, 2002,  PSE's  outstanding  balance under the lease was $61.8 million.  For
     purposes of the table,  lease payments assume a LIBOR of 1.87%.  The expected  residual value under the lease is the lesser of $36
     million or 60% of the cost of the  equipment.  In the event the equipment is sold to a third party upon  termination  of the lease
     and the aggregate  sales proceeds are less than 87% of the  unamortized  value of the equipment,  PSE would be required to pay the
     lessor an amount equal to the deficiency.
4. In June 2001,  InfrastruX  signed a credit agreement with several banks to provide up to $150 million in financing.  Under the
     credit agreement, Puget Energy is the guarantor of the line of credit.
5. At March 31,  2002,  PSE had $375  million in lines of credit  with  various  banks,  which  provide  credit  support  for the
     outstanding bank loans and commercial paper of $155.4 million,  effectively  reducing the available borrowing capacity under these
     lines of credit to $219.6  million.  InfrastruX  had $171.1  million in lines of credits  with various  banks,  which fund capital
     requirements  of InfrastruX and its  subsidiaries.  InfrastruX  and its  subsidiaries  had  outstanding  loans of $130.1  million,
     effectively reducing the available borrowing capacity under these lines of credit to $41.0 million.

Puget Sound Energy.  The following are PSE's aggregate contractual and commercial commitments as of March 31, 2002:

|Puget Sound Energy | Payments Due Per Period
|------------------ | -----------------------

---

|Contracutal Obligations(in millions) | Total | 2002 | 2003-2004 | 2005-2006 | 2007 and Thereafter
|------------------------------------ | ----- | ---- | --------- | --------- | -------------------

|Long-term debt                         | $2,200.85 | $107.0 | $210.5   | $112.0 | $1,771.3
|-------------------------------------- | --------- | ------ | -------- | ------ | --------
|Short-term debt                        | 155.4     | 155.4  | --       | --     | --      
|Trust preferred securities (1)         | 300.0     | --     | --       | --     | 300.0   
|Preferred dividends (2)                | 1.1       | 1.1    | --       | --     | --      
|Service contract obligations           | 210.4     | 14.4   | 40.5     | 43.2   | 112.3   
|Non-cancelable operating leases        | 42.7      | 9.2    | 20.2     | 8.2    | 5.1     
|Fredonia combustion turbines lease (3) | 79.2      | 3.7    | 9.7      | 9.3    | 56.5    
|Energy purchase obligations            | 4,496.3   | 396.5  | 971.2    | 812.1  | 2,316.5 
|Financial hedge obligations            | (8.4)     | (5.6)  | 2.5      | (3.4)  | (1.9)   
|Total contractual cash obligations     | $7,477.5  | $681.7 | $1,254.6 | $981.4 | $4,559.8

| | Amount of CommitmentExpiration Per Period
| | -----------------------------------------

---

|Commercial Commitments  (in millions) | Total  | 2002 | 2003-2004 | 2005-2006 | 2007 and Thereafter
|------------------------------------- | ------ | ---- | --------- | --------- | -------------------
|Lines of credit - available (4)       | $219.6 | --   | $219.6    | --        | --                 

---

|(1) |  | See note (1) above.                    
|--- |  | ---------------------------------------
|(2) |  | See note (2) above.                    
|(3) |  | See note (3) above.                    
|(4) |  | See note (5) above with respect to PSE.

In 1995 and  1997,  PSE sold a stream  of  future  electric  revenues  associated  with  $237.7  million  of its  investment  in
conservation  assets in its electric  general rate tariff to two grantor trusts.  As a result of this sale, PSE collects these revenues
from its electric  customers  and remits them to the trusts.  During the three months ended March 31, 2002,  PSE collected and remitted
$3.1 million to the trusts as compared to $9.2 million for the same period in 2001.  The  remaining  principal  amounts  expected to be
collected on behalf of the trusts are $26.3 million at March 31, 2002.

Utility Construction Program. Current utility construction  expenditures for generation,  transmission and distribution are designed to
meet continuing  customer growth and to improve  efficiencies of PSE's energy delivery systems.  Construction  expenditures,  excluding
equity  Allowance  for Funds Used During  Construction  (AFUDC),  were $61.3  million for the three months  ended March 31,  2002.  PSE
expects  construction  expenditures will be approximately  $227.0 million in 2002.  Construction  expenditure  estimates are subject to
periodic review and adjustment in light of changing economic, regulatory, environmental and conservation factors.

Other  Additions. Other  property,  plant and equipment  additions were $5.0 million for the three months ended March 31, 2002.  Puget
Energy expects  InfrastruX's  capital  additions to be $11.5 million in 2002.  InfrastruX will continue to acquire companies related to
utility infrastructure services with its available line of credit and cash.

Capital Resources

Cash From  Operations.  Cash generated from  operations  (net of dividends and AFUDC) totaled $201.5 million for the three months ended
March 31,  2002,  and  provided  296.8% of the $67.9  million of utility  construction  expenditures  (net of AFUDC) and other  capital
expenditure requirements for that period.

      Cash from operations (net of dividends and AFUDC) during 2002 is projected to be approximately 132.4% of estimated  construction
expenditures  (excluding  AFUDC) and other capital  expenditure  requirements  assuming  PSE's general rate  increase  settlements  are
approved in full.  Puget Energy and PSE expect to continue  financing the utility  construction  program and other capital  expenditure
requirements with internally generated funds.

Financing  Program.  Financing utility  construction  requirements and operational needs is dependent upon the cost and availability of
external  funds through  capital  markets and from  financial  institutions.  Access to funds is dependent upon factors such as general
economic  conditions,  regulatory  authorizations  and policies,  and Puget Energy's and PSE's credit  ratings.  The Company expects to
meet capital and  operational  needs for the balance of 2002 with cash generated from  operations and short-term  borrowings  under its
committed bank lines.  The Company does not plan to issue long-term debt or preferred stock.

Restrictive  Covenants.  In determining the type and amount of future  financing,  PSE may be limited by restrictions  contained in its
electric and gas mortgage  indentures,  articles of  incorporation  and certain loan agreements.  Under the most restrictive  tests, at
March 31, 2002, PSE could issue:

- no additional first mortgage bonds;
- no additional preferred stock; and
- approximately $239.1 million of unsecured long-term debt.

Credit  Ratings.  Neither Puget Energy nor PSE has any rating  downgrade  triggers that would  accelerate  the maturity  dates of their
debt.  However,  a downgrade in the senior secured credit ratings could adversely affect the companies'  ability to renew existing,  or
obtain access to new, credit  facilities and could increase the cost of such  facilities.  For example,  under PSE's  revolving  credit
facility,  the spreads over the index and  commitment  fee increase as PSE's  secured  long term debt ratings  decline.  A downgrade in
commercial  paper  ratings  could  preclude  PSE's  ability to issue  commercial  paper under its current  programs.  In addition,  any
downgrade below investment grade of the senior secured debt could allow  counterparties  in the wholesale  electric,  wholesale gas and
financial derivative markets to require PSE to post a letter of credit or other collateral,  make cash prepayments,  obtain a guarantee
agreement or provide other mutually agreeable security.

      On April 1, 2002,  Moody's Investors Service downgraded Puget Energy's corporate credit rating to Ba1 from Baa3 and PSE's senior
secured  debt to Baa2 from  Baa1.  The  downgrades  concluded  Moody's  review of  possible  downgrades  from  October 9, 2001 when the
Washington Commission initially denied PSE's interim electric rate request.

      The current ratings of Puget Energy and Puget Sound Energy, as of April 30, 2002, are:

|                          | Standard & Poor's Ratings | Moody's Ratings
|------------------------- | ------------------------- | ---------------
|Puget Energy              |                           |                
|Corporate credit rating   | BBB-                      | Bal            
|Senior secured debt       | BBB-                      | *              
|Puget Sound Energy        |                           |                
|Corporate credit rating   | BBB-                      | Baa2           
|Senior secured debt       | BBB                       | Baa2           
|Shelf debt senior secured | BBB                       | *              
|Senior unsecured          | BB+                       | Baa2           
|Preferred stock           | BB                        | Bal            
|Commercial paper          | A-3                       | P-2            
|Subordinate               | *                         | Baa3           

---

Shelf  Registrations.  In October 2000, PSE filed a  shelf-registration  statement with the Securities and Exchange  Commission for the
offering,  on a delayed or continuous  basis, of up to $500 million principal amount of senior notes secured by a pledge of PSE's first
mortgage bonds,  unsecured debentures or trust preferred securities.  On May 24, 2001, PSE issued $200 million principal amount of 8.4%
trust  preferred  securities  due June 30,  2041.  On January  16,  2002,  PSE  issued $40  million  principal  amount of 6.25%  Senior
Medium-Term Notes, Series C, due January 16, 2004, which completed the shelf registration.

      In February 2002, Puget Energy and PSE filed a shelf registration  statement with the Securities and Exchange Commission for the
offering, on a delayed or continuous basis, of up to $500 million principal amount of:

- common stock of Puget Energy,
- senior notes of PSE, secured by a pledge of PSE's first mortgage bonds,
- unsecured debentures of PSE, and
- trust preferred securities of Puget Sound Energy Capital Trust III.

Short-term  Borrowings  and Commercial  Paper.  PSE's  short-term  borrowings  from banks and the sale of commercial  paper are used to
provide  working  capital for the utility  construction  program.  At March 31, 2002, PSE had available $375 million in lines of credit
with various banks,  which provide credit support for  outstanding  commercial  paper of $85.4 million and $70.0 million of outstanding
short-term borrowing, effectively reducing the available borrowing capacity under these lines of credit to $219.6 million.

      In June 2001,  InfrastruX signed a credit agreement with several banks to provide up to $150 million in financing.  Puget Energy
is the  guarantor of the line of credit.  In addition,  InfrastruX's  subsidiaries  have $21.1  million in lines of credit with various
banks.  Short-term  borrowings  available  for  InfrastruX  are  used  to fund  working  capital  requirements  of  InfrastruX  and its
subsidiaries.  At March 31, 2002,  InfrastruX and its subsidiaries had outstanding  loans of $130.1 million,  effectively  reducing the
available borrowing capacity under these lines of credit to $41.0 million.

Stock  Purchase and Dividend  Reinvestment  Plan.  Puget Energy has a stock purchase and dividend  reinvestment  plan pursuant to which
existing  shareholders  and residents of the State of Washington may invest cash and cash dividends in shares of Puget Energy's  common
stock.  Since new shares of common stock may be  purchased  directly  from Puget  Energy,  Puget  Energy may receive  funds for general
corporate  purposes  through the program.  Puget Energy has registered  5,000,000 shares of common stock for sale pursuant to the plan.
For the three months ended March 31, 2002 and 2001, Puget Energy issued 304,114 shares and 263,462 shares,  respectively,  resulting in
proceeds of $6.5 million and $6.4 million.

      In April 2002,  Puget Energy filed an amendment to the plan with the Securities  and Exchange  Commission to increase the number
of shares  registered  under the plan to  10,000,000,  and to permit any interested  investor,  even if the investor is not an existing
shareholder  or  resident  of the State of  Washington  to invest  cash in shares of Puget  Energy's  common  stock.  The  registration
statement relating to the amendment has not yet been declared effective by the Securities and Exchange Commission.

General and Interim Rate Proceedings.  On March 28, 2002, the Washington  Commission approved the settlement agreement on the Company's
interim and general rate  proceeding  that was announced on March 20, 2002.  As a result,  an interim  electric  rate  surcharge of $25
million  will be in effect for the period April 1, 2002 through June 30, 2002.  In  addition,  three  important  financial  issues were
resolved for the general  rate case which  include the equity  capital  ratio,  the return on equity and adoption of an electric  power
cost tracker  mechanism.  The  settlement  also creates a fast track  collaborative  process for  completion of any  adjustments to the
Company's  requested revenue  requirement for the electric general rate case by July 1, 2002 and the gas general rate case by September
1, 2002,  months earlier than the previous  November 1, 2002  completion  date for both cases.  If the  collaborative  process fails to
produce a total  settlement,  the parties have agreed that the electric  general rate case will be concluded no later than September 1,
2002.

      As part of the settlement, the Washington State Attorney General's Public Counsel section has agreed to dismiss its complaint
filed with the Washington Commission that sought to reduce PSE rates as a result of a disputed interpretation of provisions of the
Company's 1997 WUTC merger order relating to a Bonneville Power Administration residential exchange credit.

      The Company expects the settlement will enable it to finance its operations in 2002 within the limits of its existing $375
million bank line of credit.

Other

On May 6, 2002,  PSE filed a request with the Washington  Commission to lower natural gas rates by ending a temporary  surcharge
that went into effect  September  1, 2001.  The  requested  decrease of 22% in natural gas rates would be  effective  June 1, 2002,  if
approved by the Washington Commission. PSE's gas margin and net income will not be affected by the change in gas rates.

Item 3.Quantitative and Qualitative Disclosure About Market Risk

The Company is exposed to market risks, including changes in commodity prices and interest rates.

Commodity Price Risk. The Company's energy related businesses are exposed to risks related to changes in commodity prices. As part of
its business, the Company markets power to wholesale customers by entering into contracts to purchase or supply electric energy or
natural gas at specified delivery points and at specified future delivery dates. The Company's energy risk management function
manages its core electric and gas supply portfolio.

      The Company manages its energy supply portfolio to achieve three primary objectives:

1. Ensure that physical energy supplies are available to serve retail customer requirements;
2. Manage portfolio risks to limit undesired impacts on the Company's financial results; and
3. Optimize the value of the Company's energy supply assets.

The portfolio is subject to major sources of  variability  (e.g.,  hydro  generation,  temperature-sensitive  retail sales,  and
market prices for gas and power).  At certain times,  these sources of variability can mitigate  portfolio  imbalances;  at other times
they can exacerbate portfolio imbalances.

      Hedging strategies for the Company's energy supply portfolio interact with portfolio  optimization  activities.  Some hedges can
be implemented in ways that retain the Company's ability to use its energy supply portfolio to produce  additional value;  other hedges
can only be achieved by forgoing optimization opportunities.

      The prices of energy commodities are subject to fluctuations due to unpredictable factors including weather,  generation outages
and other  factors  that impact  supply and demand.  This  commodity  price risk is a  consequence  of  purchasing  energy at fixed and
variable prices and providing  deliveries at different  tariff and variable  prices.  Costs  associated with ownership and operation of
production  facilities are another component of this risk. The Company may use forward delivery agreements,  swaps and option contracts
for the purpose of hedging commodity price risk.  Unrealized  changes in the market value of these  derivatives are generally  deferred
and  recognized  upon  settlement  along with the  underlying  hedged  transaction.  Effective  January 1, 2001,  pursuant to Financial
Accounting  Standards Board  Statement No. 133,  "Accounting for Derivative  Instruments  and Hedging  Activities",  which requires all
derivative  instruments to be recorded on the balance sheet at fair value, changes in the fair value of the Company's  derivatives will
be recorded  each period in current  earnings or other  comprehensive  income,  depending on whether the  derivative is designated as a
qualifying  hedge  under the  statement.  The Company  does not  consider  its  current  operation  to meet the  definition  of trading
activities as described by the Emerging  Issues Task Force of the Financial  Accounting  Standards  Board Issue No. 98-10,  "Accounting
for Contracts Involved in Energy Trading and Risk Management Activities".

      At March 31, 2002,  the Company had an after-tax  net asset of  approximately  $5.8 million of energy  contracts  designated  as
qualifying as cash flow hedges and a corresponding  amount in other  comprehensive  income.  The Company also had energy contracts that
were  marked-to-market  through  current  earnings for the three month periods of $7.5 million  after-tax  ($11.5 million  pre-tax).  A
hypothetical  10% increase in the market prices of natural gas and electricity  prices would increase the fair value of qualifying cash
flow hedges by  approximately  $5.3 million  after-tax  and would have an  immaterial  impact on current  earnings for those  contracts
marked-to-market in earnings.

      In addition,  PSE believes its current rate design,  including the various  special  contracts and the PGA mechanism  mitigate a
portion of the  commodity  price risk.  With the  announcement  in March 2002 of a  settlement  in the current  electric  general  rate
proceeding, the proposed electric power cost tracker mechanism will also reduce the commodity price risk.

      Market risk is managed subject to parameters  established by the Board of Directors.  A Risk Management  Committee separate from
the units that manage these risks monitors compliance with the Company's policies and procedures.  In addition,  the Audit Committee of
the Company's Board of Directors has oversight of the Risk Management Committee.

Interest  Rate  Risk.  The  Company  believes  interest  rate risk of the  Company  primarily  relates  to the use of  short-term  debt
instruments and new long-term debt financing  needed to fund capital  requirements.  The Company manages its interest rate risk through
the issuance of mostly fixed-rate debt of various  maturities.  The Company does utilize bank borrowings,  commercial paper and line of
credit facilities to meet short-term cash requirements.  These short-term  obligations are commonly refinanced with fixed rate bonds or
notes when  needed and when  interest  rates are  considered  favorable.  The  Company  may enter into swap  instruments  to manage the
interest rate risk associated with these debts.

PART II       OTHER INFORMATIONItem 1.Legal Proceedings

In connection  with PSE's interim and general rate case  settlement  approved by the Washington  Commission on March 28, 2002,
the Washington  Commission  dismissed the complaint  filed by the Public Counsel  Section of the  Washington  State Attorney  General's
Office regarding the Residential and Farm Energy Exchange credit under which  residential and small farm customers  receive benefits of
federal  power.  As reported in PSE's  Annual  Report on Form 10-K for the year ended  December  31, 2001,  the  Washington  Commission
approved an amended  agreement  between PSE and  Bonneville  Power  Administration  in June of 2001.  Public Counsel had contended that
PSE's customers  should received the benefits of the agreement that were in place prior to July 1, 2001, as well as the benefits of the
amended agreement.

              Contingencies  arising out of the normal course of the Company's business exist at March 31, 2002. The ultimate  resolution of
these issues is not expected to have a material  adverse impact on the financial  condition,  results of operations or liquidity of the
Company.

|Item 6. |  | Exhibits and Reports on Form 8-K
|------- |  | --------------------------------

|(a) |  | See Exhibit Index for list of exhibits.
|--- |  | ---------------------------------------

|(b) |  | Reports on Form 8-K
|--- |  | -------------------

| |  | Filed by Puget Energy & Puget Sound Energy:
| |  | -------------------------------------------

| |  | Form 8-K dated  January  4,  2002,  Item 5 - Other  Events,  related  to the  issuance  of an  accounting  order by the
              Washington  Commission  to grant  deferral of projected  under  recovered  power costs as part of Puget Sound  Energy's
              interim rate proceeding.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Form 8-K dated January 31, 2002, Item 5 - Other Events,  related to testimony filed by Washington  Commission Staff and
              Washington State Attorney General's Public Counsel section in regards to Puget Sound Energy's interim rate proceeding.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Form 8-K dated February 8, 2002, Item 5 - Other Events, related to release of year-end earnings.
| |  | ------------------------------------------------------------------------------------------------

| |  | Form 8-K dated February 13, 2002, Item 5 - Other Events,  related to Puget Sound Energy's testimony on its interim rate
              proceeding.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Form 8-K dated March 20, 2002,  Item 5 - Other Events,  related to Puget Sound  Energy's  settlement of its interim and
              parts of its general rate case proceedings.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | PUGET ENERGY, INC.      
| | ------------------------
| | PUGET SOUND ENERGY, INC.

| | /s/ James W. Eldredge                           
| | ------------------------------------------------
| | James W. Eldredge                               
| | Corporate Secretary and Chief Accounting Officer

|Date: May 15, 2002 | Chief accounting officer and officer duly authorized to sign this report
|------------------ | ------------------------------------------------------------------------
|                   | on behalf of each registrant                                            

EXHIBIT INDEX

The following exhibits are filed herewith:

| | 12-1 | Statement  setting forth  computation  of ratios of earnings to fixed charges (1997 through 2001 and
                     12 months ended March 31, 2002) for Puget Energy.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 12-2 | Statement  setting forth  computation  of ratios of earnings to fixed charges (1997 through 2001 and
                     12 months ended March 31, 2002) for PSE.