---

#### 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 September 30, 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                        | Numbers       

|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 September 30, 2002, (i)
the number of shares of Puget Energy, Inc. (Puget Energy) common stock
outstanding was 87,692,857 ($.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 1. |  | Financial Statements  | 

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

| | Consolidated Statements of Income  3 months ended September 30, 2002 and 2001               | 
| | -------------------------------------------------------------------------------------------- | 
| | Consolidated Statements of Income  9 months ended September 30, 2002 and 2001               | 
| | Consolidated Statements of Comprehensive Income  3 months ended September
30, 2002 and 2001 | 
| | Consolidated Statements of Comprehensive Income  9 months ended September
30, 2002 and 2001 | 
| | Consolidated Balance Sheets  September 30, 2002 and
December 31, 2001                       | 
| | Consolidated Statements of Cash Flows  9 months ended
September 30, 2002 and 2001           | 

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

| | Consolidated Statements of Income  3 months ended September 30, 2002 and 2001               | 
| | -------------------------------------------------------------------------------------------- | 
| | Consolidated Statements of Income  9 months ended September 30, 2002 and 2001               | 
| | Consolidated Statements of Comprehensive Income  3 months ended September
30, 2002 and 2001 | 
| | Consolidated Statements of Comprehensive Income  9 months ended September
30, 2002 and 2001 | 
| | Consolidated Balance Sheets  September 30, 2002 and
December 31, 2001                       | 
| | Consolidated Statements of Cash Flows  9 months ended
September 30, 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 | 
|------- |  | --------------------------------------------------------- | 

|Item 4. |  | Controls and Procedures | 
|------- |  | ----------------------- | 

|Part II |  | Other Information                | 
|------- |  | -------------------------------- | 
|Item 1. |  | Legal Proceedings                | 
|Item 5. |  | Other Information                | 
|Item 6. |  | Exhibits and Reports on Form 8-K | 

|Signatures                          
|------------------------------------
|Certifications of Puget Energy      
|Certifications of Puget Sound Energy
|Exhibit Index                       

---

- governmental  policies and regulatory  actions,  including those of the Federal Energy  Regulatory  Commission  (FERC) and the
Washington
Utilities and Transportation Commission (Washington Commission), with respect to
allowed rates of return, financings, industry and rate structures, acquisition
and disposal of assets and facilities, operation and construction of hydro,
distribution and transmission facilities, recovery of purchased energy and other
capital investments, and present or prospective wholesale and retail competition;
- the bankruptcy filing by Enron Corporation, financial difficulties by other
energy companies and related events, which may affect the regulatory and
legislative process in unpredictable ways and also adversely affect the
availability of and access to capital and credit markets;
- weather, which can have a potentially serious impact on PSEs revenues and
its 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;
- the stability and liquidity of wholesale energy markets generally, 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;
- the effect of wholesale and retail  competition  (including,  but not limited to, electric  retail  wheeling and  transmission
     costs);
- the amount of collection,
if any, of PSEs receivable from the California Independent System Operator
(CAISO);
- changes in, and compliance with, environmental and endangered species
laws, regulations, decisions, 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;
- general economic conditions in the Pacific Northwest;
- 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;
- default by counterparties in the wholesale natural gas and
electricity markets that owe PSE money or energy;
- continued deterioration of
liquidity in the forward markets in which PSE transacts hedges to manage its
energy portfolio risks which can limit PSEs ability to enter into financial contracts and,
therefore, its ability to manage its portfolio risks;
- 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.

|PART IItem 1. | FINANCIAL INFORMATIONFinancial Statements
|------------- | -----------------------------------------

PUGET ENERGY, INC.
                                                    CONSOLIDATED STATEMENTS OF INCOME
                                                For the Three Months Ended September 30
                                                 (Thousands except per share amounts)
                                                              (Unaudited)

| | 2002 |  | 2001
| | ---- |  | ----

|Operating Revenues:
   Electric
   Gas
   Other
      Total operating revenues
Operating Expenses:
Energy costs:
   Purchased electricity
   Purchased gas
   Electric generation fuel
   Residential Exchange
   Unrealized (gain) loss on derivative instruments
Utility operations and maintenance
Other operations and maintenance
Depreciation and amortization
Conservation amortization
Taxes other than federal income taxes
Federal income taxes
      Total operating expenses
Operating Income
Other income
Income Before Interest Charges and Minority Interest
Interest charges, net of AFUDC
Minority interest in earnings of consolidated subsidiary
Net Income
Less:  preferred stock dividends accrual
Income for Common Stock
Basic common shares outstanding - weighted average
Diluted common shares outstanding - weighted average
Basic earnings per share
Diluted earnings per share | $ 299,443 
65,788 
93,245 
458,476 
 
 
132,820 
31,126 
16,856 
(26,427)
(335)
68,933 
76,316 
57,190 
4,216 
42,226 
(1,543)
401,378 
57,098 
230 
57,328 
48,439 
377 
8,512 
1,940 

$6,572 
87,618 
87,975 
$ 0.07 
$ 0.07 |  | $ 333,615 
91,778 
53,573 
478,966 
 
 
120,444 
50,976 
67,949 
(19,270)
567 
64,213 
47,881 
54,195 
1,440 
38,671 
6,144 
433,210 
45,756 
7,892 
53,648 
46,839 
- 
6,809 
2,085 

$ 4,724 
86,571 
86,995 
$ 0.06 
$ 0.05 | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | 

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

PUGET ENERGY, INC.
                                                   CONSOLIDATED STATEMENTS OF INCOME
                                                For the Nine Months Ended September 30
                                                 (Thousands except per share amounts)
                                                              (Unaudited)

| | 2002 |  | 2001
| | ---- |  | ----

|Operating Revenues:
   Electric
   Gas
   Other
      Total operating revenues
Operating Expenses:
Energy costs:
   Purchased electricity
   Purchased gas
   Electric generation fuel
   Residential Exchange
   Unrealized gain on derivative instruments
Utility operations and maintenance
Other operations and maintenance
Depreciation and amortization
Conservation amortization
Taxes other than federal income taxes
Federal income taxes
      Total operating expenses
Operating Income
Other income
Income Before Interest Charges and Minority Interest
Interest charges, net of AFUDC
Minority interest in earnings of consolidated subsidiary
Income Before Cumulative Effect of Accounting Change
Cumulative effect of implementation of FAS-133 derivative
   instruments and hedge activities, net of tax
Net Income
Less:  preferred stock dividends accrual
Income for Common Stock
Basic common shares outstanding - weighted average
Diluted common shares outstanding - weighted average
Basic earnings per share before cumulative effect of
   accounting change
Cumulative effect of accounting change
Basic earnings per share
Diluted earnings per share before cumulative effect of
   accounting change
Cumulative effect of accounting change
Diluted earnings per share | $ 978,814 
524,663 
234,878 
1,738,355 
442,731 
324,444 
96,716 
(100,139)
(12,083)
208,505 
193,025 
170,495 
9,985 
162,412 
31,763 
1,527,854 
210,501 
4,055 
214,556 
147,518 
679 
66,359 
- 
 
66,359 
5,892 
$ 60,467 
87,388 
87,737 
$ 0.69 
 
- 
$ 0.69 
$ 0.69 
 
- 
$ 0.69 |  | $ 1,497,563 
559,061 
156,872 
2,213,496 
725,184 
371,769 
233,467 
(46,315)
(14,494)
190,806 
119,492 
160,258 
4,645 
154,057 
72,260 
1,971,129 
242,367 
11,402 
253,769 
140,448 
- 
113,321 
14,749 
 
98,572 
6,328 
$ 92,244 
86,303 
86,717 
$ 1.24 
 
(0.17)
$1.07 
$ 1.23 
 
(0.17)
$ 1.06 | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | 

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

PUGET ENERGY,INC.
                                            CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                                For the Three Months Ended September 30
                                                        (Dollars in Thousands)
                                                              (Unaudited)

| | 2002 |  | 2001
| | ---- |  | ----

|Net Income
Other comprehensive income, net of tax:
   Unrealized holding losses arising on marketable securities
      during the period
   Reclassification adjustment for realized gains on marketable
      securities included in net income
   Foreign currency translation adjustment
   Unrealized gains (losses) on derivative instruments during the
      period
   Reversal of unrealized gains on derivative instruments
     settled during the period
    Other comprehensive income (loss)
Comprehensive Income (Loss) | $ 8,512 
 
(439)
 
- 
 
154 
5,515 
 
(1,309)
 
3,921 
$ 12,433 |  | $ 6,809 
 
(1,762)
 
(5)
 
- 
(31,863)
 
(4,481)
 
(38,111)
$ (31,302)
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------- |  | ----------------------------------------------------------------------

PUGET ENERGY,INC.
                                            CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                                For the Nine Months Ended September 30
                                                        (Dollars in Thousands)
                                                              (Unaudited)

| | 2002 |  | 2001
| | ---- |  | ----

|Net Income
Other comprehensive income, net of tax:
   Unrealized holding losses arising on marketable securities
      during the period
   Reclassification adjustment for realized gains on marketable
      securities included in net income
   Foreign currency translation adjustment
   Transition adjustment for unrealized gain on derivative
     instruments at January 1, 2001
   Unrealized gains (losses) on derivative instruments during the 
      period
   Reversal of unrealized (gains) losses on derivative instruments
      settled during the period
    Other comprehensive income (loss)
Comprehensive Income | $ 66,359 
 
(966)
 
(724)
 
38 
- 
 
3,413 
 
31,525 
 
33,286 
$ 99,645 |  | $ 98,572 
 
(3,169) 
 
(5)
 
- 
286,928 
 
(181,241)
 
(147,816)
 
(45,303) 
$ 53,269
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------ |  | -------------------------------------------------------------------------------------

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

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

| | September 30,2002 |  | December 31,2001
| | ----------------- |  | ----------------

|Utility Plant: (at original cost, including construction work in
progress of $132,630 and $123,307 respectively)
   Electric
   Gas
   Common
   Less: Accumulated Depreciation and amortization
      Net utility plant
Other Property and Investments:
   Goodwill, net
   Intangibles, net
   Non-utility property and equipment, net
   Other
      Total other property and investments
Current Assets:
   Cash
   Restricted cash
   Accounts receivable, net
   Unbilled revenue
   Materials and supplies, at average cost
   Purchased gas receivable
   Current portion of unrealized gain on derivative instruments
   Taxes receivable
   Prepayments and other
      Total current assets
Other Long-Term Assets:
   Regulatory asset for deferred income taxes
   Regulatory asset for PURPA buyout costs
   Unrealized gain on derivative instruments
   Other
      Total other long-term assets
Total Assets | $ 4,216,391 
1,613,009 
376,943 
(2,309,062)
3,897,281 
130,635 
19,157 
74,992 
157,307 
382,091
 
96,559 
20,872 
232,116 
71,586 
70,788 
- 
1,678 
2,675 
13,824 
510,098 
 
180,744 
243,854 
12,951 
279,131 
716,680 
$ 5,506,150 |  | $ 4,167,920 
1,551,439 
362,670 
(2,194,048)
3,887,981 
102,151 
16,059 
48,369 
150,670 
317,249
 
92,356 
- 
279,321 
147,008 
90,333 
37,228 
3,315 
- 
11,277 
660,838 
 
193,016 
244,635 
3,317 
239,941 
680,909 
$ 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

| | September 30,2002 |  | December 31,2001
| | ----------------- |  | ----------------

|Capitalization:
  Common shareholders' investment:
    Common stock $0.01 par value, 250,000,000 shares
       authorized, 87,692,857 and 87,023,210 shares outstanding
    Additional paid-in capital
    Earnings reinvested in the business
    Accumulated other comprehensive income (loss)
  Preferred stock not subject to mandatory redemption
  Preferred stock subject to mandatory redemption
  Corporation obligated, mandatorily redeemable preferred
    securities of subsidiary trust holding solely junior
    subordinated debentures of the corporation
  Long-term debt
      Total capitalization
Minority interest in equity of a consolidated subsidiary
Current Liabilities:
  Accounts payable
  Short-term debt
  Current maturities of long-term debt
  Purchased gas liability
  Accrued expenses:
    Taxes
    Salaries and wages
    Interest
  Current portion of unrealized on derivative instruments
  Other
      Total current liabilities
Long-Term Liabilities:
  Deferred income taxes
  Other deferred credits
  Unrealized loss on derivative instruments
      Total long-term liabilities
Total Capitalization and Liabilities | $ 877 
 
1,365,622 
8,737 
3,965 
60,000 
43,162 
 
 
300,000 
2,162,841 
3,945,204 
 
10,338 
 
151,985 
138,331 
88,092 
98,584 
 
- 
12,148 
46,051 
7,095 
47,191 
589,477 
 
695,117 
266,014 
- 
961,131 
$5,506,150 |  | $ 870 
 
1,358,946 
32,229 
(29,321)
60,000 
50,662 
 
 
300,000 
2,127,054 
3,900,440 
 
- 
 
167,426 
348,577 
119,523 
- 
 
70,708 
14,746 
42,505 
35,145 
46,178 
844,808 
 
605,315 
196,339 
75 
801,729 
$5,546,977
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

PUGET ENERGY, INC.
                                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                For the Nine Months Ended September 30
                                                        (Dollars in Thousands)
                                                              (Unaudited)

| | 2002 |  | 2001
| | ---- |  | ----

|Operating Activities:
Net Income
Adjustment to reconcile net income to net cash provided
  by operating activities:
   Depreciation and amortization
   Deferred federal and state income taxes and tax credits - net
   Net unrealized (gains) losses on derivative instruments
   Other
Cash collateral received from energy supplier
Change in certain current assets and current liabilities:
   Accounts receivable and unbilled revenue
   Materials and supplies
   Prepayments and other
   Purchases gas receivable/liability
   Accounts payable
   Taxes payable
   Accrued expenses and other
      Net Cash Provided by Operating ActivitiesInvesting Activities:
   Construction and capital expenditures-excluding
      equity AFUDC
   Additions to energy conservation program
   Acquisitions by InfrastruX, net of cash acquired
   Restricted cash
   Repayment of loans from Schlumberger
   Other
      Net Cash Used by Investing ActivitiesFinancing Activities
   Change in short-term debt - net
   Dividends paid
   Issuance of trust preferred stock
   Redemption of preferred stock
   Issuance of bonds and long term debt
   Redemption of bonds and notes
   Other
      Net Cash Provided (Used) by Financing Activities
Net Increase in Cash
Cash at Beginning of Year
Cash at End of PeriodSupplemental Cash Flow Information:
Cash payments for:
   Interest (net of capitalized interest)
   Income taxes | $ 66,359 
 
170,495 
102,073 
(12,083)
31,487 
13,990 
 
134,634 
21,538 
(5,058)
135,812
(19,298)
(71,902)
(1,304)
566,743 
 
(192,177)
 
(7,708)
(39,807)
(20,872)
- 
(9,635)
(270,199)
 
(210,246)
(76,730)
- 
(7,500)
94,197 
(92,000)
(62)
(292,341)
4,203 
92,356 
$ 96,559 
 
 
$ 143,882 
(5,049) |  | $ 98,572 
 
160,258 
7,534 
8,197 
224 
- 
 
271,004 
(9,149)
(10,187)
(17,205)
(264,423)
(38,376)
18,320 
224,769 
 
(194,883)
 
(6,241)
(63,510)
- 
51,948 
(10,382)
(223,068)
 
(67,753)
(106,147)
200,000 
(7,500)
52,470 
- 
(6,793)
64,277 
65,978 
36,383 
$ 102,361 
 
 
$ 128,961 
62,900
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

PUGET SOUND ENERGY, INC.
                                                   CONSOLIDATED STATEMENTS OF INCOME
                                                For the Three Months Ended September 30
                                                        (Dollars in Thousands)
                                                              (Unaudited)

| | 2002 |  | 2001
| | ---- |  | ----

|Operating Revenues:
   Electric
   Gas
   Other
      Total operating revenues
Operating Expenses:
Energy costs:
   Purchased electricity
   Purchased gas
   Electric generation fuel
   Residential Exchange
   Unrealized (gain) loss on derivative instruments
Utility operations and maintenance
Other operations and maintenance
Depreciation and amortization
Conservation amortization
Taxes other than federal income taxes
Federal income taxes
      Total operating expenses
Operating Income
Other income
Income Before Interest Charges
Interest charges, net of AFUDC
Net Income
Less:  preferred stock dividends accrual
Income for Common Stock | $ 299,443 
65,788 
872 
366,103 
 
 
132,820 
31,126 
16,856 
(26,427)
(335)
68,933 
287 
53,406 
4,216 
37,922 
(4,068)
314,736 
51,367 
210 
51,577 
46,876 
4,701 
1,940 
$ 2,761 |  | $ 333,615 
91,778 
802 
426,195 
 
 
120,444 
50,976 
67,949 
(19,270)
567 
64,213 
1,423 
52,060 
1,440 
38,671 
5,362 
383,835 
42,360 
8,885 
51,245 
45,771 
5,474 
2,085 
$ 3,389
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

PUGET SOUND ENERGY, INC.
                                                   CONSOLIDATED STATEMENTS OF INCOME
                                                For the Nine Months Ended September 30
                                                        (Dollars in Thousands)
                                                              (Unaudited)

| | 2002 |  | 2001
| | ---- |  | ----

|Operating Revenues:
   Electric
   Gas
   Other
      Total operating revenues
Operating Expenses:
Energy costs:
   Purchased electricity
   Purchased gas
   Electric generation fuel
   Residential Exchange
   Unrealized gain on derivative instruments
Utility operations and maintenance
Other operations and maintenance
Depreciation and amortization
Conservation amortization
Taxes other than federal income taxes
Federal income taxes
      Total operating expenses
Operating Income
Other income
Income Before Interest Charges
Interest charges, net of AFUDC
Income Before Cumulative Effect of Accounting Change
Cumulative effect of implementation of FAS-133 derivative
   instruments and hedge activities, net of tax
Net Income
Less:  preferred stock dividends accrual
Income for Common Stock | $ 978,814 
524,663 
5,622 
1,509,099 
 
 
442,731 
324,444 
96,716 
(100,139)
(12,083)
208,505 
1,102 
161,187 
9,985 
150,825 
27,002 
1,310,275 
198,824 
3,974 
202,798 
143,559 
59,239 
- 
 
59,239 
5,892 
$ 53,347 |  | $ 1,497,563 
559,061 
30,092 
2,086,716 
 
 
725,184 
371,769 
233,467 
(46,315)
(14,494)
190,806 
8,042 
155,063 
4,645 
154,057 
70,394 
1,852,618 
234,098 
14,214 
248,312 
137,936 
110,376 
14,749 
 
95,627 
6,328 
$ 89,299
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 September 30
                                                        (Dollars in Thousands)
                                                              (Unaudited)

| | 2002 |  | 2001
| | ---- |  | ----

|Net Income
Other comprehensive income, net of tax:
   Unrealized holding losses arising on marketable securities
      during the period
   Reclassification adjustment for realized gains on marketable
      securities included in net income
   Unrealized gains (losses) on derivative instruments during the
      period
   Reversal of unrealized gains on derivative instruments
     settled during the period
    Other comprehensive income (loss)
Comprehensive Income (Loss) | $ 4,701 
 
(439)
 
- 
 
5,515 
 
(1,309)
 
3,767 
$ 8,468 |  | $ 5,474 
 
(1,762)
 
(5)
 
(31,863)
 
(4,481)
 
(38,111)
$ (32,637)
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------- |  | -------------------------------------------------------------------

PUGET SOUND ENERGY, INC.
                                            CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                                For the Nine Months Ended September 30
                                                        (Dollars in Thousands)
                                                              (Unaudited)

| | 2002 |  | 2001
| | ---- |  | ----

|Net Income
Other comprehensive income, net of tax:
   Unrealized holding losses arising on marketable securities
      during the period
   Reclassification adjustment for realized gains on marketable
      securities included in net income
   Transition adjustment for unrealized gain on derivative
     instruments at January 1, 2001
   Unrealized gains (losses) on derivative instruments during the 
      period
   Reversal of unrealized (gains) losses on derivative instruments
      settled during the period
    Other comprehensive income (loss)
Comprehensive Income | $ 59,239 
 
(966)
 
(724)
 
- 
 
3,413 
 
31,525 
 
33,248 
$ 92,487 |  | $ 95,627 
 
(3,169) 
 
(5)
 
286,928 
 
(181,241)
 
(147,816)
 
(45,303) 
$ 50,324
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------

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

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

| | September 30,2002 |  | December 31,2001
| | ----------------- |  | ----------------

|Utility Plant: (at original cost, including construction work in
progress of $132,630 and $123,307 respectively)
   Electric
   Gas
   Common
   Less: Accumulated depreciation and amortization
      Net utility plant
Other Property and Investments
Current Assets:
   Cash
   Restricted cash
   Accounts receivable, net
   Unbilled revenue
   Materials and supplies, at average cost
   Purchased gas receivable
   Taxes receivable
   Current portion of unrealized gain on derivative instruments
   Prepayment and other
      Total current assets
Other Long-Term Assets:
   Regulatory asset for deferred income taxes
   Regulatory asset for PURPA buyout costs
   Unrealized gain on derivative instruments
   Other
      Total other long-term assets
Total Assets | $ 4,216,391 
1,613,009 
376,943 
(2,309,062)
3,897,281 
158,915 
 
76,888 
20,872 
163,521 
71,586 
65,676 
- 
4,766 
1,678 
9,953 
414,940 
 
180,744 
243,854 
12,951 
279,131 
716,680 
$ 5,187,816 |  | $ 4,167,920 
1,551,439 
362,670 
(2,194,048)
3,887,981 
150,530 
 
82,708 
- 
235,348 
147,008 
85,318 
37,228 
- 
3,315 
7,405 
598,330 
 
193,016 
244,635 
3,317 
239,941 
680,909 
$ 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

| | September 30,2002 |  | December 31,2001
| | ----------------- |  | ----------------

|Capitalization:
  Common shareholders' investment:
    Common stock $10 stated value, 150,000,000 shares
    authorized, 85,903,791 shares outstanding
    Additional paid-in capital
    Earnings reinvested in the business
    Accumulated other comprehensive income (loss)
  Preferred stock not subject to mandatory redemption
  Preferred stock subject to mandatory redemption
  Corporation obligated, mandatorily redeemable preferred
    securities of subsidiary trust holding solely junior
    subordinated debentures of the corporation
  Long-term debt
      Total capitalization
Current Liabilities:
  Accounts payable
  Short-term debt
  Current maturities of long-term debt
  Purchased gas liability
  Accrued expenses:
    Taxes
    Salaries and wages
    Interest
  Current portion of unrealized loss on derivative instruments
  Other
      Total current liabilities
Long-Term Liabilities:
  Deferred income taxes
  Other deferred credits
  Unrealized loss on derivative instruments
      Total long-term liabilities
Total Capitalization and Liabilities | $ 859,038 
382,600 
37,853 
3,927 
60,000 
43,162 
 
 
300,000 
2,035,828 
3,722,408 
 
140,130 
121,214 
83,000 
98,584 
 
- 
12,148 
46,051 
7,095 
23,379 
531,601 
 
684,238 
249,569 
- 
933,807 
$ 5,187,816 |  | $ 859,038 
382,592 
55,345 
(29,321)
60,000 
50,662 
 
 
300,000 
2,053,815 
3,732,131 
 
154,600 
338,168 
117,000 
- 
 
70,210 
14,746 
42,505 
35,145 
25,178 
797,552 
 
601,001 
186,991 
75 
788,067 
$ 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 Nine Months Ended September 30
                                                        (Dollars in Thousands)
                                                              (Unaudited)

| | 2002 |  | 2001
| | ---- |  | ----

|Operating Activities:
Net Income
Adjustment to reconcile net income
  to net cash provided by operating activities:
   Depreciation and amortization
   Deferred federal income taxes and tax credits - net
   Net unrealized (gains) losses on derivative instruments
   Other
Cash collateral received from energy supplier
Change in certain current assets and current liabilities:
   Accounts receivable and unbilled revenue
   Materials and supplies
   Prepayments and other
   Purchases gas receivable/liability
   Accounts payable
   Taxes payable
   Accrued expenses and other
      Net Cash Provided by Operating ActivitiesInvesting Activities:
   Construction expenditures-excluding equity AFUDC
   Additions to energy conservation program
   Restricted cash
   Repayment of loans from Schlumberger
   Other
      Net Cash Used by Investing ActivitiesFinancing Activities
   Change in short-term debt - net
   Dividends paid
   Issuance of trust preferred stock
   Redemption of preferred stock
   Redemption of bonds and notes
   Other
      Net Cash Used by Financing Activities
Net Increase (Decrease) in Cash
Cash at Beginning of Year
Cash at End of PeriodSupplemental Cash Flow Information:
Cash payments for:
   Interest (net of capitalized interest)
   Income taxes (net of refunds) | $ 59,239 
 
 
161,187 
95,509 
(12,083)
25,222 
13,900 
 
147,249 
19,642 
(7,314)
135,812 
(14,607)
(69,263)
(1,800)
552,783 
 
(168,744)
(7,708)
(20,872)
- 
(7,987)
(205,311)
 
(216,954)
(76,730)
- 
(7,500)
(52,000)
(108)
(353,292)
(5,820)
82,708 
$ 76,888 
 
 
$ 139,574 
(5,537) |  | $ 95,627 
 
 
155,063 
11,611 
8,197 
11,315 
- 
 
278,366 
(11,131)
(8,089)
(17,205)
(256,494)
(40,349)
6,524 
233,435 
 
(194,883)
(6,241)
- 
51,948 
(10,382)
(159,558)
 
(75,442)
(106,147)
200,000 
(7,500)
(14,619)
(6,539)
(10,247)
63,630 
36,383 
$ 100,013 
 
 
$ 126,448 
61,445
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

# COMBINED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## (1)       Summary of
Consolidation Policy

Financial data for business segments are as follows:

|(Dollars in Thousands)
Three Months Ended
September 30, 2002 | PSE       | InfrastruX | Other   | Total    
|------------------------------------------------------------ | --------- | ---------- | ------- | ---------
|Revenues                                                     | $ 365,232 | $ 92,372   | $ 872   | $ 458,476
|Depreciation and amortization                                | 53,351    | 3,784      | 55      | 57,190   
|Federal income taxes                                         | (4,198)   | 2,602      | 53      | (1,543)  
|Operating income                                             | 51,002    | 5,871      | 225     | 57,098   
|Interest charges, net of AFUDC                               | 46,876    | 1,563      | -       | 48,439   
|Net income                                                   | 4,335     | 3,952      | 225     | 8,512    
|Goodwill, net                                                | -         | 130,635    | -       | 130,635  
|Total assets                                                 | 5,059,109 | 320,755    | 126,286 | 5,506,150

|Three Months Ended 
September 30, 2001 | PSE       | InfrastruX | Other | Total    
|-------------------------------------- | --------- | ---------- | ----- | ---------
|Revenues                               | $ 425,393 | $ 52,771   | $ 802 | $ 478,966
|Depreciation and amortization          | 52,057    | 2,134      | 4     | 54,195   
|Federal income taxes                   | 5,177     | 783        | 184   | 6,144    
|Operating income                       | 43,229    | 3,398      | (871) | 45,756   
|Interest charges, net of AFUDC         | 45,710    | 1,068      | 61    | 46,839   
|Net income                             | (3,207)   | 1,337      | 8,679 | 6,809    

|Nine Months Ended
September 30, 2002 | PSE         | InfrastruX | Other   | Total      
|------------------------------------ | ----------- | ---------- | ------- | -----------
|Revenues                             | $ 1,503,478 | $ 229,255  | $ 5,622 | $ 1,738,355
|Depreciation and amortization        | 161,024     | 9,308      | 163     | 170,495    
|Federal income taxes                 | 25,095      | 4,952      | 1,716   | 31,763     
|Operating income                     | 196,021     | 12,034     | 2,446   | 210,501    
|Interest charges, net of AFUDC       | 143,558     | 3,960      | -       | 147,518    
|Net income                           | 56,616      | 7,476      | 2,267   | 66,359     

|Nine Months Ended
September 30, 2001 | PSE         | InfrastruX | Other    | Total      
|------------------------------------ | ----------- | ---------- | -------- | -----------
|Revenues                             | $ 2,056,624 | $ 126,780  | $ 30,092 | $ 2,213,496
|Depreciation and amortization        | 155,052     | 5,195      | 11       | 160,258    
|Federal income taxes                 | 62,364      | 1,894      | 8,002    | 72,260     
|Operating income                     | 220,267     | 8,322      | 13,778   | 242,367    
|Interest charges, net of AFUDC       | 137,661     | 2,513      | 274      | 140,448    
|Net income                           | 72,168      | 2,998      | 23,406   | 98,572     

|
|

|Goodwill, net at December 31, 2001 | -         | $ 102,151 | -       | $ 102,151
|---------------------------------- | --------- | --------- | ------- | ---------
|Total assets at December 31, 2001  | 5,178,601 | 229,125   | 139,251 | 5,546,977

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

| | Three Months Ended | Nine Months Ended
| | ------------------ | -----------------
| | September 30       | September 30     

|(Dollars in Thousands) | 2002 | 2001 | 2002 | 2001
|---------------------- | ---- | ---- | ---- | ----

|Reported net income for common | $ 6,572 | $ 4,724 | $ 60,467 | $ 92,244
|------------------------------ | ------- | ------- | -------- | --------

|Add back goodwill amortization | - | 639 | - | 1,943
|------------------------------ | - | --- | - | -----

|Adjusted net income for common | $ 6,572 | $ 5,363 | $ 60,467 | $ 94,187
|------------------------------ | ------- | ------- | -------- | --------

|Basic earnings per share |  |  |  | 
|------------------------ |  |  |  | 

|Reported net income for common | $ 0.07 | $ 0.06 | $ 0.69 | $ 1.07
|------------------------------ | ------ | ------ | ------ | ------

|Add back goodwill amortization | - | 0.01 | - | 0.02
|------------------------------ | - | ---- | - | ----

|Adjusted net income for common | $ 0.07 | $ 0.07 | $ 0.69 | $ 1.09
|------------------------------ | ------ | ------ | ------ | ------

|Diluted earnings per share |  |  |  | 
|-------------------------- |  |  |  | 

|Reported net income for common | $ 0.07 | $ 0.05 | $ 0.69 | $ 1.06
|------------------------------ | ------ | ------ | ------ | ------

|Add back goodwill amortization | - | 0.01 | - | 0.02
|------------------------------ | - | ---- | - | ----

|Adjusted net income for common | $ 0.07 | $ 0.06 | $ 0.69 | $ 1.08
|------------------------------ | ------ | ------ | ------ | ------

| |                                             |                  |                         |                | 
| | ------------------------------------------- | ---------------- | ----------------------- | -------------- | 
| | At September 30, 2002(Dollars in Thousands) | GrossIntangibles | AccumulatedAmortization | NetIntangibles | 

| | Covenant not to compete
Developed technology
Contractual customer relationships
Patents
  Total | $ 4,061
14,190
2,800
636
$ 21,687 |  | $ 920
1,567
-
43
$ 2,530 |  | $ 3,141
12,623
2,800
593
$ 19,157 |  | 
| | ----------------------------------------------------------------------------------------------- | --------------------------------- |  | ------------------------ |  | --------------------------------- |  | 

| |                                            |                  |                         |                | 
| | ------------------------------------------ | ---------------- | ----------------------- | -------------- | 
| | At December 31, 2001(Dollars in Thousands) | GrossIntangibles | AccumulatedAmortization | NetIntangibles | 

| | Covenant not to compete
Developed technology
Patents
  Total | $ 2,768
14,190
470
$ 17,428 |  | $ 364
1,005
-
$ 1,369 |  | $ 2,404
13,185
470
$ 16,059 |  | 
| | ------------------------------------------------------------ | --------------------------- |  | --------------------- |  | --------------------------- |  | 

|(Dollars in Thousands) | 2002 | 2003 | 2004 | 2005 | 2006 | 2007
|---------------------- | ---- | ---- | ---- | ---- | ---- | ----

|Future Intangible Amortization | $ 487 | $ 1,877 | $ 1,877 | $ 1,861 | $ 1,532 | $ 1,115
|------------------------------ | ----- | ------- | ------- | ------- | ------- | -------

| |  | Three Months Ended | Nine Months Ended | 
| |  | ------------------ | ----------------- | 
| |  | September 30       | September 30      | 

| | (Dollars in Thousands) | 2002 | 2001 | 2002 | 2001 | 
| | ---------------------- | ---- | ---- | ---- | ---- | 

| | Optimization sales | $ 15,430 | $ 133,220 | $ 49,723 | $ 466,818 | 
| | ------------------ | -------- | --------- | -------- | --------- | 

| | Optimization purchases | 15,132 | 140,704 | 47,621 | 461,457 | 
| | ---------------------- | ------ | ------- | ------ | ------- | 

| | Net margin on optimization transactions | $ 298 | $ (7,484) | $ 2,102 | $ 5,361 | 
| | --------------------------------------- | ----- | --------- | ------- | ------- | 

| | Annual Power | 
| | ------------ | 

| | Cost Variability | Customers' Share | Company's Share (1) | 
| | ---------------- | ---------------- | ------------------- | 

| | +/- $20 million | 0% | 100% | 
| | --------------- | -- | ---- | 

| | +/- $20-$40 million | 50% | 50% | 
| | ------------------- | --- | --- | 

| | +/- $40-$120 million | 90% | 10% | 
| | -------------------- | --- | --- | 

| | +/- $120+ million | 95% | 5% | 
| | ----------------- | --- | -- | 

| | (1)
Over the four year period July 1, 2002 through June 30, 2006, the Companys
share of pre-tax power cost variations is capped at a cumulative $40 million plus
1% of the excess.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

## Puget Energy
Results of Operations

Results of Operations of Puget Energy
                                                           Comparative Three and Nine Months Ended
                                                        September 30, 2002 vs. September 30, 2001
                                                           Increase (Decrease)
                                                           (Dollars in Millions)

| | Three MonthPeriod |  | Nine MonthPeriod
| | ----------------- |  | ----------------

|Operating revenue changes: |  |  | 
|-------------------------- |  |  | 

|Electric revenue sold at index rates | $ (23.5) |  | $ (176.1)
|------------------------------------ | -------- |  | ---------

|Electric conservation trust credit | 4.7 |  | 16.3
|---------------------------------- | --- |  | ----

|Residential exchange credit | (8.5) |  | (31.2)
|--------------------------- | ----- |  | ------

|Interim electric rate increase April - June 2002 | - |  | 25.0
|------------------------------------------------ | - |  | ----

|General electric rate increase effective July 2002 | 14.7 |  | 14.7
|-------------------------------------------------- | ---- |  | ----

|Electric load and other | 51.1 |  | 60.2
|----------------------- | ---- |  | ----

|Electric transportation revenue | 4.4 |  | 12.6
|------------------------------- | --- |  | ----

|Electric sales to other utilities and marketers | (84.9) |  | (436.9)
|----------------------------------------------- | ------ |  | -------

|Optimization sales and purchases to other
     utilities and marketers(net) | 7.8 |  | (3.3)
|--------------------------------------------------------------------------- | --- |  | -----

|Total electric revenue change | (34.2) |  | (518.7)
|----------------------------- | ------ |  | -------

|Retail gas revenue | (27.2) |  | (36.5)
|------------------ | ------ |  | ------

|General gas rate increase effective September 2002 | 1.2 |  | 1.2
|-------------------------------------------------- | --- |  | ---

|Gas transportation revenue and other | - |  | 0.9
|------------------------------------ | - |  | ---

|Total gas revenue change | (26.0) |  | (34.4)
|------------------------ | ------ |  | ------

|InfrastruX revenue | 39.6 |  | 102.5
|------------------ | ---- |  | -----

|Other revenue | 0.1 |  | (24.5)
|------------- | --- |  | ------

|Total operating revenue change | (20.5) |  | (475.1)
|------------------------------ | ------ |  | -------

|Operating expense changes: |  |  | 
|-------------------------- |  |  | 

|Energy costs: |  |  | 
|------------- |  |  | 

|Purchased electricity | 12.4 |  | (282.5)
|--------------------- | ---- |  | -------

|Residential exchange credit | (7.2) |  | (53.8)
|--------------------------- | ----- |  | ------

|Purchased gas | (19.9) |  | (47.3)
|------------- | ------ |  | ------

|Electric generation fuel | (51.1) |  | (136.7)
|------------------------ | ------ |  | -------

|Unrealized (gain) loss on derivative instruments | (0.9) |  | 2.4
|------------------------------------------------ | ----- |  | ---

|Utility operations and maintenance: |  |  | 
|----------------------------------- |  |  | 

|Production operations and maintenance | (1.2) |  | 5.9
|------------------------------------- | ----- |  | ---

|Personal energy management | (2.1) |  | (3.6)
|-------------------------- | ----- |  | -----

|Other utility operations and maintenance | 8.0 |  | 15.4
|---------------------------------------- | --- |  | ----

|Other operations and maintenance |  |  | 
|-------------------------------- |  |  | 

|InfrastruX operations and maintenance | 29.4 |  | 80.0
|------------------------------------- | ---- |  | ----

|Other operations and maintenance | (0.9) |  | (6.5)
|-------------------------------- | ----- |  | -----

|Depreciation and amortization | 3.0 |  | 10.2
|----------------------------- | --- |  | ----

|Conservation amortization | 2.8 |  | 5.3
|------------------------- | --- |  | ---

|Taxes other than federal income taxes | 3.6 |  | 8.4
|------------------------------------- | --- |  | ---

|Federal income taxes | (7.7) |  | (40.5)
|-------------------- | ----- |  | ------

|Total operating expense change | (31.8) |  | (443.3)
|------------------------------ | ------ |  | -------

|Other income (net of tax) change | (7.6) |  | (7.3)
|-------------------------------- | ----- |  | -----

|Interest charges change | 1.6 |  | 7.1
|----------------------- | --- |  | ---

|Minority interest in earnings of consolidated   subsidiary change | 0.4 |  | 0.7
|----------------------------------------------------------------- | --- |  | ---

|FAS-133 transition loss (net of tax) change | - |  | (14.7)
|------------------------------------------- | - |  | ------

|Net income change | $ 1.7 |  | $ (32.2)
|----------------- | ----- |  | --------

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

## Operating
Revenues  Electric

## Operating Revenues
 Gas

## Operating
Revenues  Other

## Operating Expenses

## Interest
Charges

| | Interest Charges Increase (Decrease) |  | Three Month |  | Nine Month
| | ------------------------------------ |  | ----------- |  | ----------

| | (Dollars in Millions) |  | Period |  | Period
| | --------------------- |  | ------ |  | ------

| | PSE long-term debt interest | $ (1.1) |  | $ 5.3
| | --------------------------- | ------- |  | -----

| | PSE other interest | 2.2 |  | 0.4
| | ------------------ | --- |  | ---

| | PSE total interest charges change | 1.1 |  | 5.7
| | --------------------------------- | --- |  | ---

| | InfrastruX interest charges change | 0.5 |  | 1.4
| | ---------------------------------- | --- |  | ---

| | PE interest charges change | $ 1.6 |  | $ 7.1
| | -------------------------- | ----- |  | -----

# Capital
Expenditures, Capital Resources and Liquidity

## Capital
Requirements

## Contractual
Obligations and Commercial Commitments

|PUGET ENERGY | Payments Due Per Period
|------------ | -----------------------

|Contractual Obligations(in millions) | Total | 2002 | 2003-2004 | 2005-2006 | 2007 andThereafter
|------------------------------------ | ----- | ---- | --------- | --------- | ------------------

|Long-term debt | $ 2,281.3 | $ 26.6 | $ 364.5 | $ 117.6 | $ 1,772.6
|-------------- | --------- | ------ | ------- | ------- | ---------

|Short-term debt | 138.3 | 138.3 | - | - | -
|--------------- | ----- | ----- | - | - | -

|Trust preferred securities (1) | 300.0 | - | - | - | 300.0
|------------------------------ | ----- | - | - | - | -----

|Preferred dividends (2) | 1.1 | 1.1 | - | - | -
|----------------------- | --- | --- | - | - | -

|Service contract obligations | 200.6 | 4.6 | 40.5 | 43.2 | 112.3
|---------------------------- | ----- | --- | ---- | ---- | -----

|Capital lease obligations | 8.3 | 0.6 | 3.5 | 2.6 | 1.6
|------------------------- | --- | --- | --- | --- | ---

|Non-cancelable operating leases | 54.0 | 6.9 | 29.8 | 11.7 | 5.6
|------------------------------- | ---- | --- | ---- | ---- | ---

|Fredonia combustion turbines
    lease (3) | 77.3 | 1.3 | 9.9 | 9.6 | 56.5
|------------------------------------------ | ---- | --- | --- | --- | ----

|Energy purchase obligations | 4,823.3 | 262.9 | 1,307.4 | 839.0 | 2,414.0
|--------------------------- | ------- | ----- | ------- | ----- | -------

|Financial hedge obligations | (22.2) | 0.2 | (8.5) | (8.5) | (5.4)
|--------------------------- | ------ | --- | ----- | ----- | -----

|Total contractual cash
     obligations | $ 7,862.0 | $ 442.5 | $ 1,747.1 | $ 1,015.2 | $ 4,657.2
|--------------------------------------- | --------- | ------- | --------- | --------- | ---------

| | Amount of Commitment
                              Expiration Per Period
| | ------------------------------------------------------------------------

|Commercial Commitments(in millions) | Total | 2002 | 2003-2004 | 2005-2006 | 2007 andThereafter
|----------------------------------- | ----- | ---- | --------- | --------- | ------------------

|Guarantees (4) | $ 125.5 | - | $ 125.5 | - | -
|-------------- | ------- | - | ------- | - | -

|Lines of credit - available (5) | 291.8 | - | 291.8 | - | -
|------------------------------- | ----- | - | ----- | - | -

|Energy operations letter of credit (6) | 0.5 | - | 0.5 | - | -
|-------------------------------------- | --- | - | --- | - | -

|Total commercial commitments | $ 417.8 | - | $ 417.8 | - | -
|---------------------------- | ------- | - | ------- | - | -

---

|(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 July 9, 2002, the Board of Directors of PSE declared a dividend payable on
October 1, 2002 for preferred stock outstanding on September 13, 2002.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | In April 2001, PSE entered into a master operating lease of up to $70 million
plus interest 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 September 30, 2002,
PSEs outstanding balance under the lease was $62.2 million. For purposes
of the table, lease payments assume a LIBOR of 1.81%. 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 three-year 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. Certain InfrastruX subsidiaries
also have certain borrowing capacities for working capital purposes of which
Puget Energy is not the guarantor.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | At September 30, 2002, PSE had available a $375 million line of credit with various
banks, which provides credit support for the outstanding bank loans and
commercial paper totaling $116.2 million, thereby effectively reducing the
available borrowing capacity under this line of credit to $258.8 million. The
line of credit will expire on February 13, 2003. The Company plans to replace it
with an accounts receivable securitization facility and a new bank line, both of which are expected to close by year end.
InfrastruX had $179.5 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
$146.5 million, effectively reducing the available borrowing capacity under
these lines of credit to $33.0 million.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | In May 2002, PSE provided an energy trading counterparty a letter of credit in
the amount of $0.5 million to satisfy the counterpartys credit
requirements following PSEs senior unsecured debt downgrade in October
2001. The letter of credit expires on May 7, 2003.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Payments Due Per Period
| | -----------------------

|PUGET SOUND ENERGYContractual Obligations(in millions) | Total | 2002 | 2003-2004 | 2005-2006 | 2007 andThereafter
|------------------------------------------------------ | ----- | ---- | --------- | --------- | ------------------

|Long-term debt | $ 2,118.9 | $ 25.0 | $ 210.5 | $ 112.0 | $ 1,771.4
|-------------- | --------- | ------ | ------- | ------- | ---------

|Short-term debt | 121.2 | 121.2 | - | - | -
|--------------- | ----- | ----- | - | - | -

|Trust preferred securities (1) | 300.0 | - | - | - | 300.0
|------------------------------ | ----- | - | - | - | -----

|Preferred dividends (2) | 1.1 | 1.1 | - | - | -
|----------------------- | --- | --- | - | - | -

|Service contract obligations | 200.6 | 4.6 | 40.5 | 43.2 | 112.3
|---------------------------- | ----- | --- | ---- | ---- | -----

|Non-cancelable operating leases | 38.7 | 5.2 | 20.2 | 8.2 | 5.1
|------------------------------- | ---- | --- | ---- | --- | ---

|Fredonia combustion turbines
   lease (3) | 77.3 | 1.3 | 9.9 | 9.6 | 56.5
|----------------------------------------- | ---- | --- | --- | --- | ----

|Energy purchase obligations | 4,823.3 | 262.9 | 1,307.4 | 839.0 | 2,414.0
|--------------------------- | ------- | ----- | ------- | ----- | -------

|Financial hedge obligations | (22.2) | 0.2 | (8.5) | (8.5) | (5.4)
|--------------------------- | ------ | --- | ----- | ----- | -----

|Total contractual cash
     obligations | $ 7,658.9 | $ 421.5 | $ 1,580.0 | $ 1,003.5 | $ 4,653.9
|--------------------------------------- | --------- | ------- | --------- | --------- | ---------

| | Amount of Commitment
                              Expiration Per Period
| | ------------------------------------------------------------------------

|Commercial Commitments(in millions) | Total | 2002 | 2003-2004 | 2005-2006 | 2007 andThereafter
|----------------------------------- | ----- | ---- | --------- | --------- | ------------------

|Lines of credit - available (4) | $ 258.8 | - | $ 258.8 | - | -
|------------------------------- | ------- | - | ------- | - | -

|Energy operations letter of credit (5) | 0.5 | - | 0.5 | - | -
|-------------------------------------- | --- | - | --- | - | -

|Total Commercial Committments | $ 259.3 | - | $ 259.3 | - | -
|----------------------------- | ------- | - | ------- | - | -

---

|(1) | See note (1) above.                    
|--- | ---------------------------------------
|(2) | See note (2) above.                    
|(3) | See note (3) above.                    
|(4) | See note (5) above with respect to PSE.
|(5) | See note (6) above.                    

- no additional  first  mortgage  bonds due to the interest  coverage  ratio being
below the 2.0 times net earnings available for interest limit (1.93 at September
30, 2002). The shortfall of interest  coverage is due to under recovery of power
costs prior to receiving the electric  interim rate relief in the second quarter
of 2002. With the interim and general rate relief,  the Company expects to be in
position  to meet the  interest  coverage  ratio that would allow the Company to
issue up to approximately $386 million of ten year first  mortgage  bonds by the end of 2002, if  necessary.  The Company has
approximately  $996.3 million of electric and gas bondable property available to
use for issuance of up to $597.8 million of first mortgage bonds, subject to the
interest coverage ratio limitation;
- no additional preferred stock due to the
interest  coverage  ratio being below 1.5 times  income  available  for interest
charges (1.37 at September 30, 2002);  and
- approximately  $225.8 million of
unsecured long-term debt.

| |                                | Standard & Poor's Ratings |  | Moody's Ratings
| | ------------------------------ | ------------------------- |  | ---------------
| | Puget Energy                   |                           |  |                
| | Corporate credit/issuer rating | BBB-                      |  | Bal            
| | Puget Sound Energy             |                           |  |                

| | Corporate credit/issuer rating | BBB- |  | Baa3
| | ------------------------------ | ---- |  | ----

| | Senior secured debt | BBB |  | Baa2
| | ------------------- | --- |  | ----

| | Shelf debt senior secured | BBB |  | Baa2
| | ------------------------- | --- |  | ----

| | Senior unsecured | BB+ |  | Baa3
| | ---------------- | --- |  | ----

| | Preferred stock | BB |  | Ba2
| | --------------- | -- |  | ---

| | Commercial paper | A-3 |  | P-2
| | ---------------- | --- |  | ---

| | Subordinate | * |  | Ba1
| | ----------- | - |  | ---

| | Revolving Credit Facility | * |  | Baa3
| | ------------------------- | - |  | ----

| | Ratings Outlook | Negative |  | Negative
| | --------------- | -------- |  | --------

|
|

- 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.

| | Annual Power | 
| | ------------ | 

| | Cost Variability | Customers' Share | Company's Share(1) | 
| | ---------------- | ---------------- | ------------------ | 

| | +/- $20 million | 0% | 100% | 
| | --------------- | -- | ---- | 

| | +/- $20-$40 million | 50% | 50% | 
| | ------------------- | --- | --- | 

| | +/- $40-$120 million | 90% | 10% | 
| | -------------------- | --- | --- | 

| | +/- $120+ million | 95% | 5% | 
| | ----------------- | --- | -- | 

| | (1) Over the four year period July 1, 2002 through June 30, 2006, the
Companys share of pre-tax power cost variations is capped at a cumulative
$40 million plus 1% of the excess.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Purchased Gas Adjustment
(PGA) Mechanism.
On May 24, 2002, the Washington Commission allowed a PGA
rate reduction that was filed on May 6, 2002, effective June 1, 2002, lowering
natural gas rates by 21.2%. This ended a temporary surcharge that went into
effect September 1, 2001. The Washington Commission also approved on August 28,
2002 a 7.3% PGA rate reduction with the new gas general rates which went into
effect on September 1, 2002. 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 is
not affected by the change in PGA rates.
       On September 30, 2002 PSE filed a proposal with the  Washington  Commission to reduce natural gas supply rates under the PGA for
a third time in 2002. The Washington Commission approved the proposal on October 30, 2002 and PSE lowered gas rates through the PGA by approximately  12.5%  effective  November 1,
2002.

# Other

# Proceedings
Relating to the Western Power Market

- that the CAISO owes PSE $61.9 million, for sales made by PSE during the fourth quarter of 2000 through the CAISO,
- that PSE owes the CAISO a refund of $26.3 million from those sales, and
- that the CAISO owes PSE a net of $35.6 million.

| | (i)   |  | Ensure that reliable
physical energy supplies are available to serve retail customer requirements;                 
| | ----- |  | -------------------------------------------------------------------------------------------------------------------
| | (ii)  |  | Manage portfolio risks to limit undesired impacts on the Companys
financial results and to stabilize earnings; and
| | (iii) |  | Optimize the value of the Companys energy supply assets.                                                          

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.

Evaluation of disclosure
controls and procedures. Under the supervision and with the participation of
Puget Energys and PSEs management, including the companies
Chief Executive Officer and Chief Financial Officer, Puget Energy and PSE have
evaluated the effectiveness of the companies disclosure controls and
procedures (as defined in Rule 13a-14(c) under the Securities Exchange Act of
1934) within 90 days of the filing date of this quarterly report. Based upon
that evaluation, the Chief Executive Officer and Chief Financial Officer of
Puget Energy and PSE concluded that these disclosure controls and procedures are
effective.

Changes in internal
controls.There have been no significant changes in Puget Energys or
PSEs internal controls or in other factors that could significantly affect
internal controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.PART IIOTHER
INFORMATION
Item 1.Legal Proceedings
See the section titled
Proceedings Relating to the Western Power Market under Item 2 -
Managements Discussion and Analysis of Financial Conditions and Results of
Operations of this Quarterly Report on Form 10-Q. Contingencies arising out of
the normal course of the Companys business exist at September 30, 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 5. Other
Information

       Puget Energy and PSE announced that Mr. John D. Durbin  resigned from the Boards
of Directors of both companies,  effective  September 17, 2002, in order to
devote all of his efforts to his role as Chairman and Chief Executive  Officer of InfrastruX,  as the business becomes larger and more
significant.  Mr. Durbin became Chief  Executive  Officer of InfrastruX at its inception in 2000 at the request of Puget Energy.  Under
his leadership,  InfrastruX has made 10 acquisitions  and grown to $276.3 million in revenues for the twelve months ended September 30,
2002.  Mr. Durbin served as a valuable  member of the Board of Puget Energy since its  incorporation  in 1999 and of Puget Sound Energy
since 1984.

|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:
| |  | ----------------------

| |  | Form 8-K dated August 12, 2002, Item 9 -  Regulation FD Disclosure, related to sworn
statements to SEC by principal exectuive officer and principal financial officer.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| |  | Form 8-K dated July 18, 2002, Item 5 -  Other Events, related to second quarter earnings.
| |  | -----------------------------------------------------------------------------------------

| |  | Form 8-K dated August 16, 2002, Item 5 -  Other Events, related to negotiated settlement of remaining gas general rate
case issues with key customer groups.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------

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: November 8, 2002 | Chief accounting officer and officer duly authorized to sign this report on behalf of each registrant
|---------------------- | -----------------------------------------------------------------------------------------------------

# CERTIFICATIONS
OF PUGET ENERGY

|1. | I have reviewed this quarterly report on Form 10-Q of Puget Energy;
|-- | -------------------------------------------------------------------

|2. | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | Based on my knowledge, the financial statements, and other financial information
included in this quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this quarterly report;
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | a) | designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b) | evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | c) | presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | a) | all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b) | any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrants internal controls; and
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------

|6. | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | /s/ Stephen P. Reynolds              
| | -------------------------------------
| | Stephen P. Reynolds                  
| | President and Chief Executive Officer

|1. | I have reviewed this quarterly report on Form 10-Q of Puget Energy;
|-- | -------------------------------------------------------------------

|2. | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | Based on my knowledge, the financial statements, and other financial information
included in this quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this quarterly report;
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | a) | designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b) | evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | c) | presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | a) | all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b) | any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrants internal controls; and
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------

|6. | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | /s/ Stephen A. McKeon               
| | ------------------------------------
| | Stephen A. McKeon                   
| | Sr. Vice President Legal and Finance
| | Chief Financial Officer             

# CERTIFICATIONS
OF PUGET SOUND ENERGY

|1. | I have reviewed this quarterly report on Form 10-Q of Puget Sound Energy;
|-- | -------------------------------------------------------------------------

|2. | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | Based on my knowledge, the financial statements, and other financial information
included in this quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this quarterly report;
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | a) | designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b) | evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | c) | presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | a) | all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b) | any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrants internal controls; and
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------

|6. | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | /s/ Stephen P. Reynolds              
| | -------------------------------------
| | Stephen P. Reynolds                  
| | President and Chief Executive Officer

|1. | I have reviewed this quarterly report on Form 10-Q of Puget Sound Energy;
|-- | -------------------------------------------------------------------------

|2. | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | Based on my knowledge, the financial statements, and other financial information
included in this quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this quarterly report;
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | a) | designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b) | evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | c) | presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | a) | all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b) | any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrants internal controls; and
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------

|6. | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | /s/ Stephen A. McKeon               
| | ------------------------------------
| | Stephen A. McKeon                   
| | Sr. Vice President Legal and Finance
| | Chief Financial Officer             

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 September 30, 2002) for Puget Energy.
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------

|12-2 |  | Statement setting forth computation of ratios of earnings to fixed charges (1997
through 2001 and 12 months ended September 30, 2002) for PSE.
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------

|99-1 |  | Chief  Executive  Officer  certification  pursuant  to 18 U.S.C.  section  1350,  as adopted  pursuant  to section  906 of the
 Sarbanes-Oxley Act of 2002.
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------

|99-2 |  | Chief  Financial  Officer  certification  pursuant  to 18 U.S.C.  section  1350,  as adopted  pursuant  to section  906 of the
Sarbanes-Oxley Act of 2002.
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------