---

|UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D. C. 20549



FORM 10-Q
|------------------------------------------------------------------------------------

| | [X] |  | QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15 (d) OFTHE SECURITIES EXCHANGE ACT OF 1934For the
quarterly period ended June 30, 2000OR
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------

| | [_] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) ORTHE 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(State or other jurisdiction ofincorporation or organization) | 91-0374630
 (IRS Employer 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 June 30, 2000 was 85,364,349.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|Table of Contents
|-----------------

|                                                                                              | PageNumber
|--------------------------------------------------------------------------------------------- | ----------
|Part I.   Financial Information                                                               |           
|Item 1. Financial Statements                                                                  |           
|Consolidated Statements of Income - 3 month periods ended June 30, 2000 and 1999              |           
|Consolidated Statements of Income - 6 month periods ended June 30, 2000 and 1999              |           
|Consolidated Statements of Comprehensive Income - 3 month periods
ended June                  |           
|30, 2000 and 1999                                                                             |           
|Consolidated Statements of Comprehensive Income - 6 month periods
ended June                  |           
|30, 2000 and 1999                                                                             |           
|Consolidated Balance Sheets - June 30, 2000 and December 31, 1999                             |           
|Consolidated Statements of Cash Flows - 6 month periods ended June 30, 2000 and 1999          |           
|Notes to Consolidated Financial Statements                                                    |           
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |           
|Item 3. Quantitative and Qualitative Disclosure About Market Risk                             |           
|Part II.   Other Information                                                                  |           
|Item 1. Legal Proceedings                                                                     |           
|Item 4. Submission of Matters to a Vote of Security Holders                                   |           
|Item 6. Exhibits and Reports on Form 8-K                                                      |           
|Signature                                                                                     |           

---

|PART I   FINANCIAL
INFORMATIONItem 1 Financial Statements



PUGET SOUND ENERGY, INC
CONSOLIDATED STATEMENTS OF INCOMEFor the Three Month Periods Ended June 30(Thousands
except per share amounts)(Unaudited)
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                             | 2000 | 1999       
|-------------------------------------------- | ---- | -----------
|OPERATING REVENUES:                          |      |            
|Electric                                     |      | $437,491   
|Gas                                          |      | 98,017     
|Other                                        |      | 3,293      
|                                            
|Total operating revenue                      |      | 538,801    
|                                            
|OPERATING EXPENSES:                          |     
|Energy costs:                                |     
|Purchased electricity                        |      | 238,105    
|Purchased gas                                |      | 46,184     
|Electric generation fuel                     |      | 29,904     
|Residential Exchange                         |      | (9,073     
|Utility operations and maintenance           |      | 58,395     
|Other operations and maintenance             |      | 4,045      
|Depreciation and amortization                |      | 49,316     
|Conservation amortization                    |      | 1,380      
|Taxes other than federal income taxes        |      | 43,914     
|Federal income taxes                         |      | 13,512     
|                                            
|Total operating expenses                     |      | 475,682    
|                                            
|OPERATING INCOME                             |      | 63,119     
|OTHER INCOME                                 |      | 6,878      
|                                            
|INCOME BEFORE INTEREST CHARGES               |      | 69,997     
|INTEREST CHARGES, net of AFUDC               |      | 42,628     
|                                            
|NET INCOME                                   |      | 27,369     
|Less:  Preferred stock dividends accrual     |      | 2,229      
|                                            
|INCOME FOR COMMON STOCK                      |      | $  25,140  
|                                            
|COMMON SHARES OUTSTANDING - WEIGHTED AVERAGE |      | 85,295     
|                                            
|BASIC & DILUTED EARNINGS PER COMMON SHARE    |      | $      0.29
|                                            

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

---

|PUGET SOUND ENERGY, INC
CONSOLIDATED STATEMENTS OF INCOMEFor the Six Month Periods Ended June 30(Thousands
except per share amounts)(Unaudited)
|-----------------------------------------------------------------------------------------------------------------------------------------------

|                                             | 2000 | 1999        
|-------------------------------------------- | ---- | ------------
|OPERATING REVENUES:                          |      |             
|Electric                                     |      | $  875,847  
|Gas                                          |      | 303,487     
|Other                                        |      | 6,690       
|                                            
|Total operating revenue                      |      | 1,186,024   
|                                            
|OPERATING EXPENSES:                          |     
|Energy costs:                                |     
|Purchased electricity                        |      | 434,308     
|Purchased gas                                |      | 154,388     
|Electric generation fuel                     |      | 50,653      
|Residential Exchange                         |      | (21,272     
|Utility operations and maintenance           |      | 113,245     
|Other operations and maintenance             |      | 7,819       
|Depreciation and amortization                |      | 95,201      
|Conservation amortization                    |      | 3,999       
|Taxes other than federal income taxes        |      | 102,429     
|Federal income taxes                         |      | 66,250      
|                                            
|Total operating expenses                     |      | 1,007,020   
|                                            
|OPERATING INCOME                             |      | 179,004     
|OTHER INCOME                                 |      | 11,268      
|                                            
|INCOME BEFORE INTEREST CHARGES               |      | 190,272     
|INTEREST CHARGES, net of AFUDC               |      | 84,711      
|                                            
|NET INCOME                                   |      | 105,561     
|Less:  Preferred stock dividends accrual     |      | 4,532       
|                                            
|INCOME FOR COMMON STOCK                      |      | $  101,029  
|                                            
|COMMON SHARES OUTSTANDING - WEIGHTED AVERAGE |      | 85,178      
|                                            
|BASIC EARNINGS PER COMMON SHARE              |      | $       1.19
|                                            
|DILUTED EARNINGS PER COMMON SHARE            |      | $       1.18
|                                            

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

---

|PUGET SOUND ENERGY,
INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEFor the Three Month Periods Ended
June 30(Dollars in Thousands)(Unaudited)
|-------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                     | 2000 | 1999    
|-------------------------------------------------------------------- | ---- | --------
|Net Income                                                           |      | $ 27,369
|Other comprehensive income (loss), net of tax:                       |     
|Unrealized holding gains (losses) arising during period              |      | (1,580  
|Reclassification adjustment for gains included in net
        income |      | (2,477  
|                                                                    
|Other comprehensive income                                           |      | (4,057  
|                                                                    
|Comprehensive Income                                                 |      | $ 23,312
|                                                                    

|PUGET SOUND ENERGY,
INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEFor the Six Month Periods Ended June
30(Dollars in Thousands)(Unaudited)
|------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                     | 2000 | 1999     
|-------------------------------------------------------------------- | ---- | ---------
|Net Income                                                           |      | $ 105,561
|Other comprehensive income (loss), net of tax:                       |     
|Unrealized holding gains arising during period                       |      | 2,265    
|Reclassification adjustment for gains included in net
        income |      | (3,160   
|                                                                    
|Other comprehensive income                                           |      | (895     
|                                                                    
|Comprehensive Income                                                 |      | $ 104,666
|                                                                    

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

---

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


ASSETS
|----------------------------------------------------------------------------------------------

|                                                         | June 30,2000 | December 31,1999
|-------------------------------------------------------- | ------------ | ----------------
|UTILITY PLANT: (at original cost, including construction |              |                 
|work in progress of $214,191 and $311,317 respectively)  |             
|Electric                                                 |              | $3,997,417      
|Gas                                                      |              | 1,413,524       
|Common                                                   |              | 342,471         
|Less:  Accumulated depreciation and amortization         |              | 1,963,152       
|                                                        
|Net utility plant                                        |              | 3,790,260       
|                                                        
|OTHER PROPERTY AND INVESTMENTS                           |              | 214,019         
|                                                        
|CURRENT ASSETS:                                          |             
|Cash                                                     |              | 108,640         
|Accounts receivable                                      |              | 197,584         
|Unbilled revenue                                         |              | 86,637          
|Materials and supplies, at average cost                  |              | 65,853          
|Purchased gas receivable                                 |              | 35,842          
|Prepayments and other                                    |              | 9,502           
|                                                        
|Total current assets                                     |              | 504,058         
|                                                        
|LONG-TERM ASSETS:                                        |             
|Regulatory asset for deferred income taxes               |              | 220,514         
|Regulatory asset for PURPA buyout costs                  |              | 241,196         
|Other                                                    |              | 162,867         
|                                                        
|Total long-term assets                                   |              | 624,577         
|                                                        
|TOTAL ASSETS                                             |              | $5,132,914      
|                                                        

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

|                                              | June 30,2000 | December 31,1999
|--------------------------------------------- | ------------ | ----------------
|CAPITALIZATION:                               |              |                 
|Common shareholders investment:              |             
|Common stock, $10 stated value,               |             
|150,000,000 shares authorized,                |             
|85,364,349 and 84,922,405 shares outstanding  |              | $   853,643     
|Additional paid-in capital                    |              | 461,617         
|Earnings reinvested in the business           |              | 88,059          
|Accumulated other comprehensive income        |              | 7,953           
|Preferred stock not subject to                |             
|mandatory redemption                          |              | 60,000          
|Preferred stock subject to                    |             
|mandatory redemption                          |              | 58,162          
|Corporation obligated, mandatorily redeemable |             
|preferred securities of subsidiary            |             
|trust holding solely junior subordinated      |             
|debentures of the corporation                 |              | 100,000         
|Long-term debt                                |              | 1,914,788       
|                                             
|Total capitalization                          |              | 3,544,222       
|                                             
|CURRENT LIABILITIES:                          |             
|Accounts Payable                              |              | 153,811         
|Short-term debt                               |              | 458,287         
|Current maturities of long-term debt          |              | 25,000          
|Accrued expenses:                             |             
|Taxes                                         |              | 93,419          
|Salaries and wages                            |              | 18,039          
|Interest                                      |              | 40,807          
|Other                                         |              | 23,940          
|                                             
|Total current liabilities                     |              | 813,303         
|                                             
|DEFERRED INCOME TAXES                         |              | 623,669         
|                                             
|OTHER DEFERRED CREDITS                        |              | 151,720         
|                                             
|TOTAL CAPITALIZATION AND LIABILITIES          |              | $5,132,914      
|                                             

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

---

|PUGET SOUND ENERGY,
INC. CONSOLIDATED STATEMENTS OF CASH FLOWSFor the Six Month Periods Ended June 30
(Dollars in Thousands)(Unaudited)
|---------------------------------------------------------------------------------------------------------------------------------------

|                                                   | 2000 | 1999     
|-------------------------------------------------- | ---- | ---------
|OPERATING ACTIVITIES:                              |      |          
|Net Income                                         |      | $ 105,561
|Adjustments to reconcile net income                |     
|to net cash provided by operating activities:      |     
|Depreciation and amortization                      |      | 95,201   
|Deferred income taxes and tax credits - net        |      | (5,126   
|Gain from sale of investment in Cabot stock        |      |         
|Gain from sale of securities                       |      | (6,476   
|Other                                              |      | 3,918    
|Change in certain current assets                   |     
|and liabilities (Note 3)                           |      | 44,584   
|                                                  
|Net Cash Provided by Operating Activities          |      | 237,662  
|                                                  
|INVESTING ACTIVITIES:                              |     
|Construction expenditures - excluding equity AFUDC |      | (151,483 
|Additions to energy conservation program           |      | (2,732   
|Proceeds from sale of Centralia Plant              |      | 24,828   
|Proceeds from sale of investment in Cabot stock    |      | 51,463   
|Loans to Cellnet Data Services                     |      | (1,325   
|Proceeds from sale of securities                   |      | 6,757    
|Other                                              |      | (3,499   
|                                                  
|Net Cash Used by Investing Activities              |      | (75,991  
|                                                  
|FINANCING ACTIVITIES:                              |     
|Change in short-term debt, net                     |      | (146,425 
|Dividends paid                                     |      | (72,828  
|Redemption of preferred stock                      |      | (7,500   
|Issuance of bonds                                  |      | 225,000  
|Redemption of bonds and notes                      |      | (115,980 
|Issue costs of bonds and stock                     |      | (1,005   
|                                                  
|Net Cash Used by Financing Activities              |      | (118,738 
|                                                  
|Net Increase in cash                               |      | 42,933   
|Cash at Beginning of year                          |      | 65,707   
|                                                  
|Cash at End of Period                              |      | $ 108,640
|                                                  

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

---

|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 85,295,000 and 85,178,000 for the three and six months ended June 30, 2000
and 84,561,000 for the three and six months ended June 30, 1999.


Diluted
earnings per common share have been computed based on weighted average common shares
outstanding of 85,546,000 and 85,413,000 for the three and six months ended June 30,
2000, and 84,813,000 and 84,815,000 for the three and six months ended June 30, 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:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Six Months Ended June 30                             | 2000 | 1999    
|---------------------------------------------------- | ---- | --------
|                                                     |      |         
|Changes in current asset and current liabilities:    |     
|Accounts receivable and unbilled revenue             |      | $ 50,102
|Materials and supplies                               |      | 3,388   
|Prepayments and other                                |      | 364     
|Purchased gas receivable                             |      | (2,143  
|Accounts payable                                     |      | (24,406 
|Accrued expenses and Other                           |      | 17,279  
|                                                    
|Net change in current assets and current liabilities |      | $ 44,584
|                                                    
|Cash payments:                                       |     
|Interest (net of capitalized interest)               |      | $ 91,028
|Income taxes                                         |      | $ 48,100
|                                                    

---

|(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 development and marketing of customer information
and billing system software, specialized contracting services to utilities and
telecommunications companies (See Other below), 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:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                 |  |                  | 
|-------------------------------- |  | ---------------- | 
|(Dollars in Thousands)           |  |                  | 
|Three Months Ended June 30, 2000 |  | RegulatedUtility | 
|                                
|Revenues                         |  | $   535,508      | 
|Net Income                       |  | 25,952           | 
|Total Assets                     |  | 4,982,452        | 
|                                
|Three Months Ended June 30, 1999 |  | RegulatedUtility | 
|                                
|Revenues                         |  | $   431,068      | 
|Net Income                       |  | 22,357           | 
|Total Assets                     |  | 4,611,971        | 
|                                
|Six Months Ended June 30, 2000   |  | RegulatedUtility | 
|                                
|Revenues                         |  | $1,179,334       | 
|Net Income                       |  | 103,871          | 
|Total Assets                     |  | 4,982,452        | 
|                                
|Six Months Ended June 30, 1999   |  | RegulatedUtility | 
|                                
|Revenues                         |  | $1,002,726       | 
|Net Income                       |  | 94,917           | 
|Total Assets                     |  | 4,611,971        | 
|                                

|(5)   Other Investments


In the
second quarter of 2000, the Company sold all of its 1,134,000 shares of 6% convertible
redeemable preferred stock in Cabot Oil & Gas Corporation for $51.4 million, after
expenses. There was no significant gain or loss for accounting purposes on the transaction.
The sale resulted in approximately $40.8 million in after-tax cash proceeds.
In the second quarter of 1999, the Company sold all of its investment in common stock of Cabot Oil & Gas Corporation for
$37.4 million, resulting in a one-time after tax gain of $12.3 million. As a result of
these two transactions, the Company no longer holds any securities of Cabot Oil & Gas.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|(6)   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. Premiums and related expenses of approximately $4.7 million
associated with the redemption of the Encogen debt were capitalized and will be amortized
over nine years in conformance with an order issued by the Washington Commission.


On
August 1, 2000, InfrastruX Group Inc., a wholly-owned subsidiary of the Company,
purchased 88% of the outstanding shares of UTILX Corporation pursuant to a cash tender
offer. The remaining shares are expected to be acquired through a merger to be effected
in the third quarter. The total price for all the outstanding shares of UTILX is
approximately $50 million. UTILX is a provider of infrastructure construction services to
utilities and telecommunications providers in the United States and around the world. Its
primary business is installing, replacing and restoring underground cables and pipes. The
acquisition marks the Companys entry into the business of providing design, construction
and engineering services to the utility industry.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|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 June 30, 2000, was $27.4 million on operating revenues
of $538.8 million, compared with net income of $31.1 million on operating revenues of
$436.1 million for the same period in 1999. Income for common stock was $25.1 million for
the first quarter of 2000 compared to $28.1 million for the first quarter of 1999. Basic
and diluted earnings per share were $0.29 for the second quarter of 2000 compared to
$0.33 for the second quarter of 1999.


For
the first six months of 2000, net income was $105.6 million on operating revenues of
$1.186 billion, compared with net income of $100.8 million on operating revenues of
$1.011 billion for the corresponding period in 1999. Income for common stock was $101.0
million for the first half of 2000 and $94.9 million for the same period in 1999. Basic
and diluted earnings per common share were $1.19 and $1.18 for the six months ended June
30, 2000, and $1.12 for the same period in 1999.


Earnings
per share for the three months and six months ended June 30, 1999, were positively
impacted by approximately 10 cents per share, the result of a gain from the sale of the
Companys investment in common stock of Cabot Oil & Gas Corp., offset in part by costs
associated with a wholly-owned subsidiarys exiting certain product lines.


Total
kilowatt-hour electric sales were 7.7 billion, including 2.8 billion in sales to other
utilities and marketers, for the second quarter of 2000, compared to 7.6 billion,
including 2.7 billion in sales to other utilities and marketers, for the second quarter
of 1999. For the six month periods ended June 30, 2000 and 1999, total kilowatt-hour
sales were 16.2 billion, including 5.2 billion in sales to other utilities, and 16.3
billion, including 5.4 billion in sales to other utilities, respectively.


Total
gas volumes were 204.1 million therms, including 49.5 million therms in transportation
volumes for the three months ended June 30, 2000, compared to 228.2 million therms,
including 57.4 million therms of transportation, for the same period in 1999. For the six
months ended June 30, 2000, total gas volumes were 606.6 million therms, including 108.1
million therms of transportation, compared to 620.4 million therms, including 126.5
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.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|The
Company meets its forecasted electric and natural gas supply needs throughout the year
through company-owned electric generation and gas storage and by obtaining power through
long-term contracts, annual contracts and short-term markets. The Company also performs
risk management activities to optimize the value of energy supply assets and to ensure
that physical energy supply is available to meet the customer demand loads. The Company
also purchases energy when demand exceeds available supplies in its portfolio; likewise
the Company makes sales to other utilities and marketers when surplus energy is
available. These transactions are part of the Companys normal operations to meet retail
load. Electric sales to other utilities and marketers vary by quarter and year depending
principally upon water conditions for the generation of hydroelectric power, retail
customer usage, the energy requirements of other utilities and energy market conditions
in the Pacific Northwest.


Temperatures
based on heating-degree-days measured at Seattle-Tacoma airport during the three and six
month periods ended June 30, 2000 were near normal and 18% and 5% warmer than the
comparable periods in the prior year.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Results of Operations
Comparative Three & Six Month Periods EndingJune 30, 2000 vs. June 30, 1999Increase
(Decrease)
|--------------------------------------------------------------------------------------------------------------------

|                                          | Three Month Period | Six Month Period
|----------------------------------------- | ------------------ | ----------------
|                                          | (In Millions)     
|Operating revenue changes                 |                    |                 
|General rate tariff increase - electric   |                    | $     3.8       
|BPA Residential Purchase & Sale Agreement |                    | (0.2            
|Electric sales to wholesale customers     |                    | 73.4            
|Electric load and other changes           |                    | 23.6            
|Gas revenue change                        |                    | 3.8             
|Other revenue changes                     |                    | (1.7            
|                                         
|Total operating revenue change            |                    | 102.7           
|                                         
|Operating expense changes                 |                   
|Energy costs:                             |                   
|Purchased electricity                     |                    | 62.0            
|Purchased gas                             |                    | 7.4             
|Electric generation fuel                  |                    | 18.7            
|Residential exchange credit               |                    | (0.4            
|Utility operations and maintenance        |                    | 0.0             
|Other operations and maintenance          |                    | (5.6            
|Depreciation and amortization             |                    | 6.4             
|Conservation amortization                 |                    | (0.6            
|Taxes other than federal income taxes     |                    | 1.9             
|Federal income taxes                      |                    | 2.4             
|                                         
|Total operating expense change            |                    | 92.2            
|                                         
|Other income                              |                    | (8.5            
|Interest charges                          |                    | 5.7             
|                                         
|Net income change                         |                    | $  (3.7         
|                                         

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

---

|Operating Revenues -
Electric


Electric
revenues for the quarter ended June 30, 2000 were $437.5 million, up $100.6 million or
30.0% over the same period in 1999. Revenues in the second quarter of 2000 increased $3.8
million compared to the second 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.


Electric
revenues for the six months ended June 30, 2000, were $875.8 million, up $138.1 million
or 18.7% over the same period in 1999. Revenues in the first half of 2000 increased $7.9
million compared to the first half of 1999 due to a general electric rate increase that
averaged 1.2% 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 July
2000 through June 2001, it is projected that the Company will credit customers
approximately $65.3 million more than it will receive from BPA during the following
periods:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Period               | Credit toCustomers | Received from BPA(in Millions) | Excess Credits
|-------------------- | ------------------ | ------------------------------ | --------------
|July - December 2000 |                    | $  48.4                        |               
|January - June 2001  |                    | 63.6                           |               
|                    
|                     |                    | $112.0                         |               

|The
BPA published a record of decision on the allocation of future benefits of low-cost
federal power, for the five-year BPA rate plan period 2002 to 2006 in May 2000. BPA
allocated 1900 aMW among the investor-owned utilities in the Pacific Northwest. The
Companys share of these benefits is 700 aMW. The Company is working with BPA to bring
those benefits to the Companys residential and small farm customers. In a letter to
customers dated August 1, 2000, the BPA announced it will continue to negotiate contract
terms with customers but temporarily suspended signing additional subscription contracts
because of volatility and an upward trend in prices in the wholesale electricity market.
BPA is considering its options and intends to announce a proposed response in the third
quarter of 2000.


Electric
sales to other utilities and marketers increased $73.4 million and $88.4 million in the
quarter and six months ended June 30, 2000, respectively, over the same periods in 1999
due primarily to higher wholesale energy and capacity prices.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|Operating Revenues - Gas


Gas
operating revenues for the quarter ended June 30, 2000 increased by $3.8 million from the
prior year quarter. Total gas volumes decreased 10.6% from 228.2 million therms in 1999
to 204.1 million therms in 2000. Gas margin decreased by $3.9 million, or 8.7% in the
second quarter of 2000 as compared to the second quarter of 1999. The primary reason for
the increase in gas sales revenue, was higher natural gas prices which are passed through
to customers in the Purchased Gas Adjustment (PGA) that became effective November 1,
1999. As a result of the PGA, gas rates to all sales customers increased by an average of
16.3 %, while rates for gas transportation service as well as gas margins remained
unchanged. Partially offsetting the increase in revenue from higher gas prices were lower
sales volumes due to warmer temperatures in the three months ended June 30, 2000,
compared to the three month period ended June 30, 1999.


For
the six months ended June 30, 2000, gas operating revenues increased $38.5 million or
14.5% from $265.0 million in the six months ended June 30, 1999, to $303.5 million in the
six months ended June 30, 2000, while total gas volumes decreased 2.2%. The increase in
revenues in the period was primarily due to higher natural gas prices as previously
mentioned.


Operating Expenses


Purchased
electricity expenses increased $62.0 million and $73.0 million for the three and six
month periods ended June 30, 2000 compared to the same periods in 1999. The increases
were due primarily to higher prices for non-firm power purchases from other utilities and
marketers. The increases were partially offset by a reduction in purchased electricity
expenses related 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 $7.4 million and $37.3 million for the three and six month periods
ending June 30, 2000, respectively, compared to the same periods in 1999. The increases
were due primarily to the impact of increased gas costs which are passed through to
customers through the PGA.


Fuel
expense increased $18.7 million and $29.6 million for the three and six month periods
ending June 30, 2000, respectively, compared to the same period in 1999 as a result of
Encogen fuel expenses of $8.9 million in the second quarter of 2000 and $18.3 million in
the six month period ended June 30, 2000. The Companys acquisition of the 160 megawatt
Encogen natural gas-fired cogeneration plant was completed on November 1, 1999. In
addition, fuel expense in the second quarter of 2000 was approximately $13.4 million
higher than the comparable period in 1999 due to the Company generating more electricity
at Company-owned combustion turbines.


Utility
operations and maintenance expenses of $58.4 million were essentially flat in the second
quarter of 2000 compared to the same period a year ago. In the six month period ended
June 30, 2000, utility operations and maintenance expenses decreased $5.9 million due
primarily to storm-repair costs which were approximately $7.6 million less in the six
months ended June 30, 2000 compared to the same period last year.


Other
operations and maintenance expenses decreased $5.6 million and $9.5 million in the three
and six month period ended June 30, 2000, 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.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|Depreciation
and amortization expense increased $6.4 million and $9.7 million for the three and six
month periods ended June 30, 2000, compared to the same periods last year due primarily
to the effects of new plant placed into service during the past year, including the
Encogen plant purchased in November 1999, and the Companys ConsumerlinX customer
information and billing system in April 2000.


Taxes
other than federal income taxes increased $1.9 million and $9.8 million for the three and
six month periods ended June 30, 2000, respectively, compared to the same periods last
year primarily due to increases in municipal and state excise taxes which are revenue
based and increased state property taxes.


Federal
income taxes increased $2.4 million and $6.8 million for the three and six month periods
ended June 30, 2000, respectively, primarily due to higher pre-tax operating income for
the periods.


Other Income


Other
income, net of federal income tax, decreased $8.5 million and $7.9 million in the three
and six month periods ended June 30, 2000, respectively, compared to the same periods in
1999. The decrease was primarily due to the $12.3 after-tax gain from the sale of Cabot
common stock reported in the second quarter of 1999 which was partially offset by costs
associated with a wholly-owned subsidiarys exiting certain product lines.


Interest Charges


Interest
charges, which consist of interest and amortization on long-term debt and other interest,
increased $5.7 million and $11.9 million for the three and six month periods ended June
30, 2000 compared to the same periods in 1999 primarily as a result of the issuance of
$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 $3.5 million and $5.9 million for the
three and six month periods ended June 30, 2000 compared to the same periods 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
second quarter of 2000 were $74.3 million, compared to $70.8 million, for the second
quarter of 1999. Year to date capital expenditures were $148.5 million compared to $161.1
million for the same period in 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) was 9% and
51% for the second quarters of 2000 and 1999, respectively. Cash provided by operations
(net of dividends and AFUDC) as a percentage of capital expenditures (excluding AFUDC)
was 108% and 89% for the six month periods ended June 30, 2000 and 1999, respectively.
Capital expenditure estimates are subject to periodic review and adjustment.




The
Company issued common stock for the Companys Dividend Reinvestment Plan of $6,720,000
and $10,045,000 in the three and six months ended June 30, 2000, respectively. No new
Company stock was issued for the Dividend Reinvestment Plan for the comparable periods in
1999.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|On
June 30, 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
$267 million, effectively reducing the available borrowing capacity under these lines of
credit to $108 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 $191.3 million
outstanding under these arrangements at June 30, 2000.


Other


On May
5, 2000, the Company sold its 7% interest in the 1,340 MW Centralia coal-fired generating
project to TECWA Power, Inc., a subsidiary of TransAlta Corporation of Calgary, Canada.
The sales price of approximately $31.7 million is subject to certain adjustments and will
be finalized in the third quarter of 2000. 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 $1.2 million of this gain will go to Company shareholders and $12.3 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 $11.0 million after taxes and the allocation of the gain to electric
customers, will be used to pay down utility debt. The Company did not record a gain in
the second quarter of 2000 as the computation and allocation of any gain between electric
customers and shareholders is subject to final approval of the Washington Commission.


On
July 20, 2000, the Company and PPL Global, LLC (formerly PP&LGlobal, Inc.) terminated an
Asset Purchase Agreement dated as of November 1, 1998, under which PPL Global, LLC had
proposed purchasing the Companys 735 megawatt interest in the four-unit Colstrip power
plants and associated transmission capacity across Montana. As a result, the Company will
retain its 50 percent interest in Colstrip Units 1 & 2 and 25 percent interest in Colstrip
Units 3 & 4.


On
June 28, 2000, the Company filed a request with the Washington Commission to pass through
the rising costs of natural gas purchased for customers under terms of the long
established purchased gas adjustment (PGA) mechanism. The PGA mechanism passes through to
customers increases or decreases in the gas supply portion of the natural gas service
rates based upon changes in the price of natural gas purchased from producers and
wholesale marketers or changes in gas pipeline transportation costs. The Company does not
profit from changes under the PGA. The PGA is separate from the Companys general gas
service rates that have been under a rate stability plan since 1997. On July 31, 2000,
the Washington Commission approved the Companys request to increase rates by an overall
average of 28% to all natural gas customers effective August 1, 2000.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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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, generation outages, 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. The aggregate fair market value of these derivative commodity instruments at
June 30, 2000 was approximately $260,000. Approximately $130,000 of this amount relates
to the Companys core gas supplies (the cost of which is passed through to customers
through the PGA). Unrealized changes in the market value of these derivatives are
generally 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.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|PART II   OTHER INFORMATION



Item 1   Legal Proceedings


Contingencies
arising out of the normal course of the Companys business exist at June 30, 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 4   Submission of Matters to a
Vote of Security Holders


At the
annual meeting of shareholders held on May 16, 2000, the following proposals were adopted
by the margins indicated:


(a) To
elect three directors to hold office until the annual meeting of shareholders in 2003 or
until their successors are elected and qualified.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Number of Shares  
| |  | ------------------
|
| |  | Douglas P. Beighle
| |  | Tomio Moriguchi   
| |  | Craig W. Cole     

|There
were no broker non-votes.



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 June 30, 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 June 30, 2000)
| |  | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 27 | Financial
Data Schedule
| |  | -- | -----------------------

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

| |  |  | Form
8-K dated June 29, 2000, Item 5  Other Events, related to InfrastruX, a wholly-owned
subsidiary of the Company, acquiring UTILX Corporation.
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Form
8-K dated May 25, 2000, Item 5  Other Events, related to the Company selling Cabot Oil & Gas
preferred stock.
| |  |  | -------------------------------------------------------------------------------------------------------------------

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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.                                                                                                                                                                                                
|--------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                      |                                                                                                                                                                                                                         
|                      |                                                                                                                                                                                                                         
|                      |                                                                                                                                                                                                                         
|                      | Richard L. Hawley
                                                              Richard L. Hawley
                                                              Vice President & Chief Financial Officer
|                      |                                                                                                                                                                                                                         
|Date: August 14, 2000 | Prinicipal financial officer and officer duly authorized
to sign this report on behalf of the registrant                                                                                                                

---