--------------------------------------------------------------------------------

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


                                    FORM 10-Q

                  [X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
                               THE SECURITIES EXCHANGE ACT OF 1934
                               FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000

                                                             OR

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

                                (NO FEE REQUIRED)

                           FOR THE TRANSITION PERIOD FROM ________ TO _________

                          ----------------------------

                          COMMISSION FILE NUMBER 1-4393

                          ----------------------------



                            PUGET SOUND ENERGY, INC.

             (Exact name of registrant as specified in its charter)

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


            411 - 108TH AVENUE N.E., BELLEVUE, WASHINGTON 98004-5515
                    (Address of principal executive offices)

                                 (425) 454-6363
              (Registrant's telephone number, including area code)

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

The number of shares of registrant's  common stock outstanding at March 31, 2000
was 85,225,268.

--------------------------------------------------------------------------------
<PAGE>

                                TABLE OF CONTENTS

                                                                            Page
                                                                          Number
                                                                          ------
PART I.   FINANCIAL INFORMATION

          Item 1.     Financial Statements

              Consolidated Statements of Income - 3 month periods
                ended March 31, 2000 and 1999                                  3
              Consolidated Statements of Comprehensive Income -
                3 month periods ended March 31, 2000 and 1999                  4
              Consolidated Balance Sheets - March 31, 2000
                and December 31, 1999                                          5
              Consolidated Statements of Cash Flows - 3 month
                periods ended March 31, 2000 and 1999                          7
              Notes to Consolidated Financial Statements                       8

          Item 2.     Management's Discussion and Analysis of Financial
                        Condition and Results of Operations                   10

          Item 3.     Quantitative and Qualitative Disclosure About
                        Market Risk                                           15

PART II.  OTHER INFORMATION

          Item 1.     Legal Proceedings                                       16
          Item 6.     Exhibits and Reports on Form 8-K                        16

SIGNATURE                                                                     17

                                       2
<PAGE>

PART I        FINANCIAL INFORMATION
Item 1        FINANCIAL STATEMENTS
<TABLE>

                             PUGET SOUND ENERGY, INC
                        CONSOLIDATED STATEMENTS OF INCOME
                   For the Three Month Periods Ended March 31
                      (Thousands except per share amounts)
                                   (Unaudited)
<CAPTION>

                                                     2000              1999
                                              ------------      ------------
<S>                                           <C>               C>
OPERATING REVENUES:
     Electric                                 $   438,356       $   400,814
     Gas                                          205,469           170,843
     Other                                          3,398             3,675
                                              ------------      ------------
          Total operating revenue                 647,223           575,332
                                              ------------      ------------
OPERATING EXPENSES:
Energy costs:
     Purchased electricity                        196,203           185,156
     Purchased gas                                108,205            78,256
     Electric generation fuel                      20,749             9,877
     Residential Exchange                         (12,199)          (11,684)
Utility operations and maintenance                 54,878            60,831
Other operations and maintenance                    3,775             7,689
Depreciation and amortization                      45,885            42,621
Conservation amortization                           2,619             1,721
Taxes other than federal income taxes              58,485            50,614
Federal income taxes                               52,738            48,321
                                              ------------      ------------
          Total operating expenses                531,338           473,402
                                              ------------      ------------

OPERATING INCOME                                  115,885           101,930

OTHER INCOME                                        4,390             3,747
                                              ------------      ------------

INCOME BEFORE INTEREST CHARGES                    120,275           105,677

INTEREST CHARGES, net of AFUDC                     42,083            35,922
                                              ------------      ------------

NET INCOME                                         78,192            69,755
Less:  Preferred stock dividends accrual            2,303             2,876

INCOME FOR COMMON STOCK                       $    75,889        $   66,879
                                              ============      ============

COMMON SHARES OUTSTANDING - WEIGHTED AVERAGE       85,074            84,561
                                              ============      ============

BASIC & DILUTED EARNINGS PER COMMON SHARE:    $      0.89        $     0.79
                                              ============      ============
    The accompanying notes are an integral part of the financial statements.
</TABLE>

                                       3
<PAGE>

                            PUGET SOUND ENERGY, INC.
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                   For the Three Month Periods Ended March 31
                             (Dollars in Thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                         2000             1999
                                                 -------------    -------------
<S>                                              <C>              <C>
Net Income                                         $   78,192       $   69,755
Other comprehensive income, net of tax:
     Unrealized holding gains (losses)
        arising during period                            3,845            (780)
     Reclassification adjustment for gains
        included in net income                            (683)             --
                                                 --------------   -------------
        Other comprehensive income                      3,162            (780)
                                                 --------------   -------------
Comprehensive Income                               $   81,354       $   68,975
                                                 ==============   =============

    The accompanying notes are an integral part of the financial statements.
</TABLE>

                                       4
<PAGE>

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

                                     ASSETS
<TABLE>
<CAPTION>
                                                      March 31,     December 31,
                                                      ---------     ------------
                                                           2000             1999
                                                           ----             ----
<S>                                                  <C>            <C>
UTILITY PLANT: (at original cost, including
  construction work in progress of $299,339
  and $311,317 respectively)
     Electric                                     $   3,995,306   $   3,966,220


     Gas                                              1,387,283       1,371,589
     Common                                             333,181         314,770
     Less:  Accumulated depreciation
              and amortization                        1,943,926       1,901,658
                                                 ---------------  --------------

          Net utility plant                           3,771,844       3,750,921
                                                 ---------------  --------------

OTHER PROPERTY AND INVESTMENTS                          267,632         264,204
                                                 ---------------  --------------

CURRENT ASSETS:
     Cash                                                65,049          65,707
     Accounts receivable                                209,874         213,020
     Unbilled revenue                                    96,839         121,303
     Materials and supplies, at average cost             49,743          69,241
     Purchased gas receivable                            20,998          33,700
     Prepayments and other                               10,566           9,822
                                                 ---------------  --------------

          Total current assets                          453,069         512,793
                                                 ---------------  --------------

LONG-TERM ASSETS:
     Regulatory asset for deferred income taxes         225,216         228,454
     PURPA buyout costs                                 240,259         238,734
     Other                                              159,894         150,500
                                                 ---------------  --------------

          Total long-term assets                        625,369         617,688
                                                 ---------------  --------------

TOTAL ASSETS                                      $   5,117,914    $  5,145,606

                                                 ===============  ==============
</TABLE>
    The accompanying notes are an integral part of the financial statements.


                                       5
<PAGE>

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

                         CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>

                                                      March 31,     December 31,
                                                      ---------     ------------
                                                           2000            1999
                                                          -----            ----
<S>                                                   <C>           <C>
CAPITALIZATION:
    Common shareholders' investment:
       Common stock, $10 stated value,
       150,000,000 shares authorized,
       85,225,268 and 84,922,405 shares outstanding   $ 852,253       $ 849,224

    Additional paid-in capital                          459,854         454,982
    Earnings reinvested in the business                 102,124          66,019
    Accumulated other comprehensive income               12,010           8,848
    Preferred stock not subject to
      mandatory redemption                               60,000          60,000
    Preferred stock subject to
      mandatory redemption                               58,162          65,662
    Corporation obligated, mandatorily redeemable
      preferred securities of subsidiary
      trust holding solely junior subordinated
      debentures of the corporation                     100,000         100,000
    Long-term debt                                    1,914,783       1,783,139
                                                   -------------   -------------
           Total capitalization                       3,559,186       3,387,874
                                                   -------------   -------------

CURRENT LIABILITIES:
    Accounts Payable                                    130,666         178,218
    Short-term debt                                     421,113         604,712
    Current maturities of long-term debt                 25,000          47,620
    Accrued expenses:
      Taxes                                             137,199          72,688
      Salaries and wages                                 18,656          18,023
      Interest                                           34,402          43,955
    Other                                                28,649          24,129
                                                   -------------   -------------
          Total current liabilities                     795,685         989,345
                                                   -------------   -------------

DEFERRED INCOME TAXES                                   635,497         636,735
                                                   -------------   -------------
OTHER DEFERRED CREDITS                                  127,546         131,652
                                                   -------------   -------------
TOTAL CAPITALIZATION AND LIABILITIES                $ 5,117,914     $ 5,145,606
                                                   =============   =============

    The accompanying notes are an integral part of the financial statements.
</TABLE>

                                       6
<PAGE>



                            PUGET SOUND ENERGY, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   For the Three Month Periods Ended March 31
                             (Dollars in Thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                            2000         1999
                                                            ----         ----
<S>                                                    <C>          <C>
OPERATING ACTIVITIES:

Net Income                                             $  78,192    $  69,755
Adjustments to reconcile net income
  to net cash provided by operating activities:
     Depreciation and amortization                        45,885       42,621
     Deferred income taxes and tax credits - net           2,000        5,490
     Other                                                (7,249)        4,763
     Change in certain current assets
       and liabilities (Note 3)                           71,625       29,568
------------------------------------------------------------------------------
          Net Cash Provided by Operating Activities      190,453      152,197
------------------------------------------------------------------------------

INVESTING ACTIVITIES:

Construction expenditures - excluding equity AFUDC       (76,628)     (92,114)
Additions to energy conservation program                    (947)        (678)
Other                                                      4,222        2,620
------------------------------------------------------------------------------
          Net Cash Used by Investing Activities          (73,353)     (90,172)
------------------------------------------------------------------------------

FINANCING ACTIVITIES:

Change in short-term debt, net                          (183,599)    (224,962)
Dividends paid (net of newly issued shares totaling
     $6,720 in 2000)                                     (34,720)     (41,746)
Redemption of preferred stock                             (7,500)     (12,578)
Issuance of bonds                                        225,000      250,000
Redemption of bonds and notes                           (115,980)     (10,358)
Issue costs of bonds and stock                              (959)      (1,878)
------------------------------------------------------------------------------
          Net Cash Used by Financing Activities         (117,758)     (41,522)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Net Increase in cash                                        (658)      20,503
Cash at Beginning of year                                 65,707       28,216
------------------------------------------------------------------------------
Cash at End of Period                                 $   65,049   $   48,719
==============================================================================

    The accompanying notes are an integral part of the financial statements.
</TABLE>

                                       7
<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)      SUMMARY OF CONSOLIDATION POLICY

     The consolidated  financial  statements include the accounts of Puget Sound
Energy,   Inc.  ("the  Company")  and  its  wholly-owned   subsidiaries,   after
elimination of all  significant  intercompany  items and  transactions.  Certain
amounts previously  reported have been reclassified to conform with current year
presentations with no effect on total equity or net income.

     The  consolidated  financial  statements  contained  in this  Form 10-Q are
unaudited.  In the opinion of management,  all adjustments  necessary for a fair
presentation of the results for the interim periods have been reflected and were
of a normal recurring  nature.  These condensed  financial  statements should be
read in conjunction with the Company's annual report on Form 10-K.

(2)      EARNINGS PER COMMON SHARE

     Basic  earnings  per common  share  have been  computed  based on  weighted
average  common shares  outstanding  of 85,074,000  and 84,561,000 for the three
months ended March 31, 2000 and 1999, respectively.

     Diluted  earnings  per common  share have been  computed  based on weighted
average common shares  outstanding  of 85,291,000.  and 84,829,000 for the three
months ended March 31, 2000 and 1999,  respectively.  These  shares  include the
dilutive effect of securities related to long-term  employee  compensation plans
approved by shareholders.

(3)      CONSOLIDATED STATEMENTS OF CASH FLOWS

     The  following  provides  additional   information   concerning  cash  flow
activities:
<TABLE>
<CAPTION>
Three Months Ended March 31                               2000           1999
---------------------------                               ----           ----
<S>                                                   <C>           <C>
Changes in current asset and current liabilities:

  Accounts receivable and unbilled revenue            $ 27,610       $ 39,399
  Materials and supplies                                19,498         11,742
  Prepayments and Other                                   (744)        (3,660)
  Purchased gas receivable                              12,702            (99)
  Accounts payable                                     (47,552)       (68,552)
  Accrued expenses and Other                            60,111         50,738
--------------------------------------------------------------- --------------
Net change in current assets and current liabilities  $ 71,625       $ 29,568
==============================================================================
Cash payments:
  Interest (net of capitalized interest)               $52,917       $ 44,641
------------------------------------------------------------------------------
  Income taxes                                              --             --
------------------------------------------------------------------------------
</TABLE>

                                       8
<PAGE>

(4)      SEGMENT INFORMATION

       The Company primarily operates in one business segment, Regulated Utility
Operations.  The Company's regulated utility operation generates,  purchases and
sells electricity and purchases, transports and sells natural gas. The Company's
service  territory  covers  approximately  6,000  square  miles in the  state of
Washington.

       Principal  non-utility  lines of business include computer billing system
software,  real  estate  investment  and  development  and small  hydro-electric
project development. Reconciling items between segments are not material.

       Financial data for business segments are as follows:
<TABLE>
<CAPTION>
  (Dollars in Thousands)                    Regulated
         Three Months Ended March 31, 2000    Utility       Other         Total
--------------------------------------------------------------------------------
<S>                                         <C>           <C>         <C>

  Revenues                                  $ 643,827     $ 3,396     $ 647,223
  Net Income                                   76,357       1,835        78,192
  Total Assets                              4,965,512     152,402     5,117,914
--------------------------------------------------------------------------------

                                            Regulated
         Three Months Ended March 31, 1999    Utility       Other         Total
--------------------------------------------------------------------------------
  Revenues                                  $ 571,657     $ 3,675     $ 575,332
  Net Income                                   72,559     (2,804)        69,755
  Total Assets                              4,605,932     115,178     4,721,110
--------------------------------------------------------------------------------
</TABLE>

(5)      OTHER

         In September  1998,  the Company filed a  shelf-registration  statement
with the  Securities and Exchange  Commission for the offering,  on a delayed or
continuous basis, of up to $500 million principal amount of Senior Notes secured
by a pledge of First Mortgage  Bonds.  On March 9, 1999, the Company issued $250
million principal amount of Senior Medium-Term Notes,  Series B, which consisted
of $150 million  principal amount due March 9, 2009 at an interest rate of 6.46%
and $100 million principal amount due March 9, 2029 at an interest rate of 7.0%.
On February 22, 2000, the Company issued $225 million  principal amount of 7.96%
Senior Medium-Term Notes,  Series B due February 22, 2010. Proceeds were used to
redeem the Encogen  project debt of  approximately  $112 million  assumed by the
Company on  November 1, 1999 upon the  purchase  of the Encogen  project and pay
down a portion of the Company's short-term debt.


                                       9
<PAGE>

Item 2   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

         The  following  discussion  of the  Company's  business  includes  some
forward-looking  statements that involve risks and uncertainties.  Words such as
"estimates," "expects," "anticipates," "plans," and similar expressions identify
forward-looking  statements  involving risks and uncertainties.  Those risks and
uncertainties  include, but are not limited to, the ongoing restructuring of the
electric and gas industries and the outcome of regulatory proceedings related to
that restructuring.  The ultimate impacts of both increased  competition and the
changing  regulatory  environment  on  future  results  are  uncertain,  but are
expected to  fundamentally  change how the Company  conducts its  business.  The
outcome of these  changes and other  matters  discussed  below may cause  future
results to differ materially from historic results,  or from results or outcomes
currently expected or sought by the Company.

                              RESULTS OF OPERATIONS

         Net income for the three months ended March 31, 2000, was $78.2 million
on  operating  revenues  of $647.2  million,  compared  with net income of $69.8
million on  operating  revenues  of $575.3  million for the same period in 1999.
Income for common stock was $75.9 million for the first quarter of 2000 compared
to $66.9 million for the first quarter of 1999.  Basic and diluted  earnings per
share were $0.89 for the first  quarter of 2000  compared to $0.79 for the first
quarter of 1999.

         The increase in net income and earnings per share in the first  quarter
of 2000 compared to the first quarter of 1999, reflected continued growth in the
number of electric  and  natural gas  customers  served and  favorable  electric
wholesale prices.  These same factors  contributed to improved energy margins in
the  quarter  compared  to the  comparable  period one year ago.  First  quarter
utility O&M expenses  were $54.9  million  compared to $60.8 million in the same
period one year ago. A series of fierce wind storms in the first quarter of 1999
resulted in service  restoration  costs that were $7.4  million  higher than the
first quarter of 2000.

         Total  kilowatt-hour  electric  sales were 8.5 billion,  including  2.4
billion in sales to other  utilities  and  marketers,  for the first  quarter of
2000, compared to 8.7 billion, including 2.7 billion in sales to other utilities
and marketers, for the first quarter of 1999.

         Total gas volumes were 402.5  million  therms,  including  58.6 million
therms in  transportation  volumes for the three  months  ended March 31,  2000,
compared  to  392.3   million   therms,   including   69.1  million   therms  of
transportation, for the same period in 1999.

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

         Temperatures  based on  heating-degree-days  measured at Seattle-Tacoma
airport during the three month periods ended March 31, 1999 and 2000,  were near
normal.

                                       10
<PAGE>

                              Results of Operations
                     Comparative Three Month Periods Ending
                        March 31, 2000 vs. March 31, 1999
                               Increase (Decrease)
<TABLE>
<CAPTION>
                                                          Three Month Period
                                                             (In Millions)
                                                          ------------------
<S>                                                       <C>
Operating revenue changes

  General rate increase - electric                                    $4.1
  BPA Residential Purchase & Sale Agreement                           (0.3)
  Electric sales to wholesale customers                               15.0
  Electric load and other changes                                     18.8
  Gas revenue change                                                  34.6
  Other revenue changes                                               (0.3)
                                                           ----------------
          Total operating revenue change                              71.9
                                                           ----------------

Operating expense changes Energy costs:

          Purchased electricity                                       11.0
          Purchased gas                                               29.9
          Electric generation fuel                                    10.9
          Residential exchange credit                                 (0.5)
  Utility operations and maintenance                                  (6.0)
  Other operations and maintenance                                    (3.9)
  Depreciation and amortization                                        3.3
  Conservation amortization                                            0.9
  Taxes other than federal income taxes                                7.9
  Federal income taxes                                                 4.4
                                                           ----------------
          Total operating expense change                              57.9
                                                           ----------------

Other income                                                           0.6

Interest charges                                                       6.2

                                                           ----------------
          Net income change                                           $8.4
                                                           ================
</TABLE>

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


                                       11
<PAGE>

OPERATING REVENUES - ELECTRIC

         Electric  revenues  for the  quarter  ended  March 31, 2000 were $438.4
million,  up $37.5 million or 9.4% over the same period in 1999. Revenues in the
first quarter of 2000  increased  $4.1 million  compared to the first quarter of
1999 due to an average 1.2% general electric rate increase  effective January 1,
2000. A 1.8% increase in the number of electric  customers  served and favorable
electric wholesale prices also contributed to the increase in revenues.

         Revenues in 2000 and 1999 were  reduced  because of the credit that the
Company  received  through the Residential  Purchase and Sale Agreement with the
Bonneville Power  Administration  ("BPA").  The agreement  enables the Company's
residential  and small farm  customers  to receive the  benefits  of  lower-cost
federal  power.  On January 29, 1997,  the Company and BPA signed a  Residential
Exchange Termination Agreement.  The Agreement ends the Company's  participation
in the  Residential  Purchase  and  Sale  agreement  with  BPA.  As  part of the
Termination  Agreement,  the  Company  will  receive  payments  by  the  BPA  of
approximately  $235 million over an  approximately  five-year period ending June
2001.  These  payments  are  recorded as a reduction  of  purchased  electricity
expenses.  Under the rate plan  approved  by the  Washington  Commission  in its
merger  order,  the Company will continue to reflect in  customers'  bills,  the
level of Residential  Exchange benefits in place at the time of the merger. Over
the remainder of the Residential Exchange Termination  Agreement from April 2000
through  June 2001,  it is  projected  that the Company  will  credit  customers
approximately  $81.7  million  more than it will  receive  from BPA  during  the
following periods:

                              Credit to     Received from BPA   Excess Credits
      Period                  Customers      (in Millions)
   ----------------------- --------------- ------------------ -----------------
   April - December 2000         $73.9             $28.8             $45.1
   January - June 2001            63.6               27.0             36.6
                           --------------- ------------------ -----------------
                                 $137.5            $55.8             $81.7

         The allocation of future  benefits of low-cost  federal power,  for the
five-year BPA rate plan period 2002 to 2006 will be decided as part of a current
BPA rate case  process.  As part of its rate case,  the BPA has a  "subscription
plan" that  outlines how the agency  proposes to allocate  the low-cost  federal
power, or in some cases, the power's equivalent  monetary benefits.  Following a
public rate-hearing process, the BPA is expected to publish a record of decision
on final power rates and allocations in the latter part of 2000.

     Electric  sales to other  utilities  and  marketers in the first quarter of
2000  increased  $15.0 million or 32% over the same period in 1999 due primarily
to  favorable  hydroelectric  conditions  and  higher  wholesale  power  prices.
Wholesale  sales  generally  have small margins.  However,  there may be certain
times when the market  price of power may cause  margins to  fluctuate.  Related
power cost  expenses  for the period also  increased  as the price of  purchased
power for these sales increased.

OPERATING REVENUES - GAS

         Gas operating  revenues for the quarter ended March 31, 2000  increased
by $34.6 million from the prior year quarter.  Total gas volumes  increased 2.6%
from 392.3 million therms to 402.5 million therms.  Gas margin increased by $1.5
million,  or 2% in the first quarter of 2000 as compared to the first quarter of
1999.  The primary  reasons for the  increase  in gas sales  volumes,  gas sales
revenues and margin in the quarter  ended March 31, 2000 were the 4.8%  increase
in gas customers and a Purchased Gas Adjustment that became  effective  November
1, 1999.  As a result of the Purchased  Gas  Adjustment,  gas rates to all sales
customers increased by an average of 16.3% or $30.2 million in the first quarter
of 2000,  while  rates for gas  transportation  service  as well as gas  margins
remained unchanged.

                                       12
<PAGE>

OPERATING EXPENSES

         Purchased  electricity  expenses  increased $11.0 million for the first
quarter  of 2000  compared  to the same  period in 1999.  The  increase  was due
primarily to higher prices for secondary  power  purchases from other  utilities
and marketers to support wholesale sales as a part of the Company's energy price
risk management  policies and the increased load due to the increase in electric
customers  in the first  quarter of 2000  compared  to the same  period in 1999.
Purchased  electricity expenses were reduced in the first quarter of 2000 due to
the purchase of the Encogen electric  cogeneration  plant in November 1999. This
reduction in purchased  electricity  expenses was offset in part by increases in
fuel, operations and maintenance,  depreciation and interest expenses related to
Encogen.  Prior to the  purchase,  the Company was obligated to purchase the net
output of the plant under a 1990 power purchase contract.

         Purchased gas expenses increased $29.9 million for the first quarter of
2000  compared  to the first  quarter  of 1999  primarily  due to the  increased
volumes of purchases as a result of the increase in gas customers served and the
impact of the Purchased Gas Adjustment that was effective November 1, 1999.

         Fuel  expense  increased  $10.9  million  in the first  quarter of 2000
compared to the same period in 1999 as a result of a $9.4  million  Encogen fuel
expense  in the  first  quarter  of 2000 and a refund  from a coal  supplier  of
approximately  $0.8 million  which  reduced fuel expense in the first quarter of
1999. The Company's  acquisition of the 160 megawatt  Encogen natural  gas-fired
cogeneration plant was completed on November 1, 1999.

         Utility  operations and maintenance  expenses decreased $6.0 million in
the first  quarter  of 2000  compared  to the same  period in 1999.  A series of
fierce winter storms in first quarter 1999 resulted in service restoration costs
that were $7.4 million higher than the first quarter of 2000.  This decrease was
partially offset by a $0.8 million increase in vegetation management expense and
a $1.0 million  increase  related to the Encogen  plant in the first  quarter of
2000 compared to the same period in 1999.

         Other operations and maintenance expenses decreased $3.9 million in the
first  quarter of 2000  compared  to the first  quarter of 1999  primarily  as a
result of a wholly-owned  subsidiary exiting certain product lines in the second
quarter of 1999, thereby eliminating operations and maintenance expenses related
to these activities.

         Depreciation  and amortization  expense  increased $3.3 million for the
first  quarter of 2000 from the same period in 1999 due primarily to the effects
of new plant placed into  service  during the past year,  including  the Encogen
plant purchased in November 1999.

         Taxes other than  federal  income taxes  increased  $7.9 million in the
first  quarter of 2000  compared to the first  quarter of 1999  primarily due to
increases  in  municipal  and state  excise  taxes which are  revenue  based and
increased state property taxes.

     Federal  income taxes  increased $4.4 million for the first quarter of 2000
from the same period in 1999,  primarily due to higher pre-tax  operating income
for the quarter.

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OTHER INCOME

         Other income,  net of federal income tax, increased $0.6 million in the
first quarter of 2000 compared to the same period in 1999. Increased income from
subsidiaries  of $2.8 million in the first quarter of 2000 compared to the first
quarter of 1999 were partially offset by increased  non-utility expenses of $2.1
million.

INTEREST CHARGES

         Interest  charges,  which  consist  of  interest  and  amortization  on
long-term debt and other interest,  increased $6.2 million for the first quarter
of 2000  compared  to the same  period  in 1999  primarily  as a  result  of the
issuance of $250 million Senior Medium-Term  Notes,  Series B, in March 1999 and
$225  million  Senior  Medium-Term  Notes,  Series B, in  February  2000.  These
increases  were  partially  offset by the  repayment  of $107 million in Secured
Medium-Term  Notes since September 1999. Other interest  expense  increased $2.5
million for the three months ended March 31, 2000 compared to the same period in
1999 as a result of higher  weighted  average  interest rates and higher average
daily short-term borrowings.

              CAPITAL EXPENDITURES, CAPITAL RESOURCES AND LIQUIDITY

         Capital expenditures which include energy conservation expenditures and
exclude AFUDC for the first quarter of 2000 were $74.3  million,  including $0.9
million  of  energy  conservation  expenditures,   compared  to  $90.2  million,
including  $0.7  million  of  energy  conservation  expenditures,  for the first
quarter of 1999. Capital  expenditures for 2000 and 2001 are expected to be $269
million and $250 million,  respectively.  Cash  provided by  operations  (net of
dividends and AFUDC) as a percentage of capital  expenditures  (excluding AFUDC)
were  205% and 120%  for the  first  quarters  of 2000 and  1999,  respectively.
Capital expenditure estimates are subject to periodic review and adjustment.

         On March 31, 2000,  the Company had available  $375 million in lines of
credit with various banks,  which provide credit  support for  outstanding  bank
loans and commercial paper of $313 million,  effectively  reducing the available
borrowing capacity under these lines of credit to $62 million. In addition,  the
Company  has  agreements  with  several  banks to borrow on an  uncommitted,  as
available,  basis at money-market rates quoted by the banks. There are no costs,
other than interest, for these arrangements.  There was $108 million outstanding
under these arrangements at March 31, 2000.

                                      OTHER

     On May 5, 2000, the eight co-owners,  including the Company,  completed the
sale of the 1340 megawatt Centralia  coal-fired  generating project to TransAlta
Corporation  of  Calgary,  Canada.  The total  sales  price of the plant is $453
million.  Under the order issued by the  Washington  Commission,  the  Company's
shareholders  and customers  will divide a net after-tax  gain of  approximately
$13.5  million on the  Company's  7 percent  interest  in the  Centralia  plant.
Approximately $1 million of this gain will go to Company  shareholders and $12.5
million will be deferred for pass  through to electric  customers.  The deferred
gain will accrue  interest at 7.16% until  refunded to customers.  The Company's
share of proceeds, approximately $23 million after-tax, will be used to pay down
utility debt.


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Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

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

COMMODITY PRICE RISK

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

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

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

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

       The prices of energy commodities and transportation  services are subject
to fluctuations due to unpredictable  factors including weather,  transportation
congestion  and other  factors which impact  supply and demand.  This  commodity
price risk is a consequence  of purchasing  energy at fixed and variable  prices
and  providing  deliveries  at  different  tariff  and  variable  prices.  Costs
associated  with  ownership and operation of production  facilities  are another
component of this risk. The Company may use forward delivery  agreements,  swaps
and option contracts for the purpose of hedging commodity price risk. Unrealized
changes in the market value of these  derivatives  are  deferred and  recognized
upon settlement along with the underlying hedged transaction.  In addition,  the
Company  believes its current rate design,  including  its Optional  Large Power
Sales Rate,  various special contracts and the PGA mechanism  mitigate a portion
of this risk.

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

INTEREST RATE RISK

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


                                       15
<PAGE>

PART II       OTHER INFORMATION
Item 1        LEGAL PROCEEDINGS

         Contingencies  arising  out  of the  normal  course  of  the  Company's
business exist at March 31, 2000. The ultimate resolution of these issues is not
expected to have a material adverse impact on the financial  condition,  results
of operations or liquidity of the Company.

Item 6        EXHIBITS AND REPORTS ON FORM 8-K

      (a)     The following exhibits are filed herewith:

              12-a   Statement  setting forth  computation of ratios of earnings
                     to fixed  charges  (1995  through  1999 and 12 months ended
                     March 31, 2000)

              12-b   Statement  setting forth  computation of ratios of earnings
                     to combined  fixed  charges and preferred  stock  dividends
                     (1995 through 1999 and 12 months ended March 31, 2000)

              27     Financial Data Schedule

      (b)     Reports on Form 8-K

              None


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                                   SIGNATURES

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

                                          PUGET SOUND ENERGY, INC.

                                          JAMES W. ELDREDGE
                                          ------------------------------------

                                          JAMES W. ELDREDGE

                                          Corporate Secretary and Controller

Date: May 12, 2000                        Chief accounting officer and officer
                                          duly authorized to sign this report
                                          on behalf of the registrant


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